1ST SOURCE CORP
For the period ended Mar 31, 2026. Filed Apr 23, 2026.
View on SEC.govAbout this filing
A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Mar 31, 2026 · Filed Apr 23, 2026
SRCE$86.94-0.5%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2025-09-30; filed 2025-10-23.
0000034782-25-000109
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2026-03-31; filed 2026-04-23.
0000034782-26-000032
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 82 previous paragraphs and 76 current paragraphs.
31 unchanged; 40 reworded; 5 added; 10 removed; 1 previous and 0 current paragraphs rearranged.
Tables are not compared: 10 previous and 9 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (5)
Current report
The provision for credit losses for the three months ended March 31, 2026, was driven primarily by changes in forward-looking forecast assumptions, along with modest loan growth during the period. We increased our forecast adjustment as the outlook for several primary economic factors modestly deteriorated from the prior quarter’s analysis, with adverse effects expected over the two-year forecast horizon. Key risks include heightened global geopolitical uncertainty, increased volatility and higher energy prices, firming inflationary expectations, ever-changing trade policies, and overall macroeconomic uncertainty. Reserves for assets individually evaluated total $0.64 million this quarter, consisting of accounts in our commercial and agricultural and construction equipment portfolios.
Current report
We remain attentive to potential risks within the small business segment of the commercial and agricultural portfolio as domestic trade proposals increase the potential for pricing instability and shifting demand dynamics impact our customers. The agricultural portion of this portfolio remains under stress as grain producers struggle with higher input costs and low commodity prices. Within the auto and light truck portfolio, borrowers continue to contend with lower rental rates, higher fleet carrying costs, and industry overcapacity. Charge-offs recognized during the quarter increased historical loss rates for this portfolio, resulting in modest offsetting reductions to certain qualitative factors, as quantitative loss experience more fully reflects current portfolio risk characteristics. The medium and heavy duty truck portfolio is managing through a prolonged industry downturn, where sharply increasing fuel prices are an additional concern. Consumer financial stress indicators remain elevated, economic imbalances persist, and overall consumer confidence remains subdued. The impact from higher energy prices, should they persist, is expected to be widespread. Volatile energy prices represent a meaningful headwind across multiple portfolios.
Current report
We modestly adjusted an economic uncertainty qualitative factor to reflect the current environment’s heightened geopolitical uncertainty. We continually evaluate risks that may impact our loan portfolios including an uncertain domestic and global economic outlook influenced by evolving trade policies and the Federal Reserve’s efforts to balance inflation, interest rate considerations, and labor market conditions in support of overall economic stability. Downside economic risks have increased and fragile growth prospects raise the potential for adverse outcomes in both domestic and global markets. Uncertainty is pervasive. Ongoing macroeconomic instability and higher interest rates may contribute to increased volatility in asset prices and place downward pressure on the values of collateral securing our loans.
Current report
Debit card income increased during the three months ended March 31, 2026, compared to the same period a year ago. The increase during this period was due to higher transaction volumes along with changes in client transaction behavior and merchant network routing patterns.
Current report
Mortgage banking income increased for the three months ended March 31, 2026 over the comparable period in 2025. The increase was due to higher production of loans originated for the secondary market compared to the first three months of 2025 resulting in increased income on loans sold into the secondary market. This increase was partially offset by a reduction in servicing income as the overall secondary servicing portfolio declined compared to the same period a year ago.
Removed paragraphs (10)
Previous report
Nine Months Ended September 30, 2025, compared to the Nine Months Ended September 30, 2024
Previous report
The taxable-equivalent net interest income for the nine months ended September 30, 2025, was $255.33 million, an increase of 15.07% over the same period in 2024. The net interest margin on a fully taxable-equivalent basis was 4.00% for the nine months ended September 30, 2025, compared to 3.59% for the same period in 2024.
Previous report
During the nine month period ended September 30, 2025, average earning assets increased $282.48 million, up 3.42% over the comparable period in 2024. Average interest-bearing liabilities increased $132.73 million or 2.27%. The yield on average earning assets increased 13 basis points to 5.98% from 5.85% 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 36 basis points to 2.83% from 3.19% as a result of repricing of interest-bearing deposits and lower interest expense on other short-term borrowings which is predominately short-term FHLB borrowings offset by higher rates on mandatorily redeemable securities. The result to the net interest margin, or the ratio of net interest income to average earning assets, was a net 41 basis point improvement.
Previous report
The largest contributors to the improved yield on average earning assets for the nine months ended September 30, 2025, compared to the nine months ended September 30, 2024, was an increase in average loan and lease balances and higher rates on investment securities. Average loans and leases increased $356.29 million, up 5.42%. Average investment securities decreased $77.85 million or 4.97% which represents the expected maturity of securities used to support liquidity and fund loan growth.
Previous report
Average interest-bearing deposits increased $268.21 million or 4.87% for the first nine months of 2025 over the same period in 2024, primarily due to increased interest-bearing demand, savings, and non-brokered time deposit balances. The effective rate paid on average interest-bearing deposits decreased 33 basis points to 2.74% from 3.07% mainly from Fed rate cuts during the second half of 2024. Average noninterest-bearing deposits declined $8.79 million or 0.55% for the first nine months of 2025 over the same period in 2024, primarily due to persistent rate competition for deposits and greater utilization of excess funds by our business customers.
Previous report
The provision for credit losses for the three months ended September 30, 2025, was principally driven by a decline in loan balances along with a slight decrease in special attention balances which are reserved at higher rates. The forecast adjustment was unchanged as the previous assumptions continue to be applicable to economic conditions expected during the forecast period. Risks include an unpredictable trade environment, an uncertain domestic GDP outlook, heightened geopolitical instability, a weakening labor market, and continued elevated levels of inflation and interest rates. We remain concerned about the potential risks in the small business portion of the commercial and agricultural portfolio, as domestic trade proposals increase the potential for pricing instability and shifting demand dynamics which may impact our customers. The agricultural portion of this portfolio remains under stress as financial performance has been adversely impacted by lower commodity prices. Clients in our auto and light truck portfolio are experiencing lower rental rates, higher fleet carrying costs, and overcapacity. Modest qualitative adjustments were made in the current quarter to account for higher special attention balances along with continued elevated delinquency rates in the auto rental portion of the portfolio. The medium and heavy duty truck portfolio is managing through a prolonged industry downturn. Consumers remain under stress, economic imbalances are prevalent, and confidence is waning. We modestly increased a qualitative factor related to consumer delinquency trends this quarter to account for higher delinquency rates in the portfolio. Reserves for assets individually evaluated total $1.16 million this quarter, consisting largely of accounts in our auto and light truck and medium and heavy duty truck portfolios.
Previous report
We continually evaluate risks which may impact our loan portfolios. Such risks include an uncertain economic outlook fueled by significant changes in domestic trade policy, ongoing conflicts around the world with the potential to impact commodity prices and shipping routes, and the Federal Reserve’s challenge of maintaining full employment, while balancing inflation and interest rate concerns in an effort to maintain overall economic stability. The possibility for a downside economic scenario is heightened as disruptive trade policy, geopolitical uncertainty, and fragile growth prospects raise the potential for adverse impacts in the domestic and global economies. The potential for trade disruption increases asset price volatility and higher interest rates apply downward pressure to asset values which collateralize our loans. Credit market conditions remain tightened, and uncertainty is pervasive. The growth outlook in the U.S. is uncertain and susceptible to disruption caused by global conflicts and an environment of heightened instability. Our domestic political environment is fraught with uncompromising partisanship. Political discord and corruption scandals are also an ever-present threat in our Latin American markets. Globally, there is an ongoing threat of terrorism.
Previous report
Debit card income decreased during the three and nine months ended September 30, 2025, compared to the same periods a year ago. The decrease during these periods was due to shifts in both client transaction behavior and the networks over which those merchants are routing transactions.
Previous report
Mortgage banking income decreased during the three and nine months ended September 30, 2025, compared to the same periods in 2024. The decrease was primarily 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.
Previous report
Losses on investment securities available-for-sale during 2025 were exclusively the result of repositioning the portfolio during the second and third quarters. In the repositioning, approximately $26 million of securities with a weighted average yield of 1.04% were sold and used to purchase approximately $26 million of securities with a weighted average yield of 4.18% in the second quarter and approximately $73 million of securities with a weighted average yield of 0.85% were sold and used to purchase approximately $73 million of securities with a weighted average yield of 3.52% in the third quarter.
Reworded paragraphs (40)
Previous wording
The following management’s discussion and analysis is presented to provide information concerning 1st Source Corporation and its subsidiaries’ (collectively referred to as “the Company”, “we”, and “our”) financial condition as of September 30, 2025, as compared to December 31, 2024, and the results of operations for the three and nine months ended September 30, 2025, and 2024. This discussion and analysis should be read in conjunction with our consolidated financial statements and the financial and statistical data appearing elsewhere in this report and our 2024 Annual Report.
Current wording
The following management’s discussion and analysis is presented to provide information concerning 1st Source Corporation and its subsidiaries’ (collectively referred to as “the Company”, “we”, and “our”) financial condition as of March 31, 2026, as compared to December 31, 2025, and the results of operations for the three months ended March 31, 2026, and 2025. This discussion and analysis should be read in conjunction with our consolidated financial statements and the financial and statistical data appearing elsewhere in this report and our 2025 Annual Report.
Previous wording
Our total assets at September 30, 2025, were $9.06 billion, an increase of $124.75 million or 1.40% from December 31, 2024. Total investment securities available-for-sale were $1.50 billion, a decrease of $41.18 million or 2.68% from December 31, 2024. The largest contributor to the decrease in investment securities available-for-sale was expected redemptions. Federal funds sold and interest bearing deposits with other banks were $138.94 million, an increase of $90.95 million or 189.53% from December 31, 2024. The increase in federal funds sold and interest bearing deposits with other banks was due to higher interest bearing deposits at other banks as a result of growth in deposit balances and the expected maturities of investment securities.
Current wording
Our total assets at March 31, 2026, were $9.11 billion, an increase of $58.16 million or 0.64% from December 31, 2025. Total investment securities available-for-sale were $1.53 billion, an increase of $7.11 million or 0.47% from December 31, 2025. The largest contributor to the increase in investment securities available-for-sale was driven by additional investments made during the period. Federal funds sold and interest bearing deposits with other banks were $51.14 million, an increase of $0.53 million or 1.04% from December 31, 2025. The increase in federal funds sold and interest bearing deposits with other banks was due to higher interest bearing deposits at other banks.
Previous wording
Total loans and leases were $6.96 billion, an increase of $109.65 million or 1.60% from December 31, 2024. The largest contributors to the increase in loans and leases was growth in the renewable energy, residential real estate and home equity and commercial real estate portfolios, offset by decreases in the aircraft, auto and light truck and commercial and agricultural portfolios. Our foreign loan and lease balances, all denominated in U.S. dollars, were $321.78 million and $301.18 million as of September 30, 2025, and December 31, 2024, respectively. Foreign loans and leases are in aircraft financing. Loan and lease balances to borrowers in Brazil and Mexico were $135.87 million and $164.50 million as of September 30, 2025, respectively, compared to $129.12 million and $145.85 million as of December 31, 2024, respectively. As of September 30, 2025, and December 31, 2024, there was not a significant concentration in any other country.
Current wording
Total loans and leases were $7.08 billion, an increase of $36.86 million or 0.52% from December 31, 2025. The largest contributors to the increase in loans and leases was growth in the renewable energy, commercial real estate, and commercial and agricultural loan portfolios, offset by decreases in the auto and light truck, aircraft, and construction equipment portfolios. Our foreign loan and lease balances, all denominated in U.S. dollars, were $321.91 million and $319.93 million as of March 31, 2026, and December 31, 2025, respectively. Foreign loans and leases are in aircraft financing. Loan and lease balances to borrowers in Brazil and Mexico were $137.27 million and $167.83 million as of March 31, 2026, respectively, compared to $136.98 million and $163.70 million as of December 31, 2025, respectively. As of March 31, 2026, and December 31, 2025, there was not a significant concentration in any other country.
Previous wording
Equipment owned under operating leases was $7.65 million, a decrease of $3.83 million, or 33.39% compared to December 31, 2024. The largest contributors to the decrease in equipment owned under operating leases was reduced leasing volume primarily due to a change in customer preferences and continued competitive pricing pressure for new business.
Current wording
Equipment owned under operating leases was $6.60 million, a decrease of $0.36 million, or 5.18% compared to December 31, 2025. The largest contributors to the decrease in equipment owned under operating leases was reduced leasing volume primarily due to a change in customer preferences and continued competitive pricing pressure for new business.
Previous wording
Total deposits were $7.41 billion, an increase of $179.78 million or 2.49% from the end of 2024. The largest contributors to the increase in total deposits were higher savings and time deposits offset by a decrease in demand deposits. Rate competition for deposits persisted during the third quarter across our footprint from various sources, including traditional bank and credit union competitors, money market funds, bond markets, and other non-bank alternatives.
Current wording
Total deposits were $7.23 billion at March 31, 2026, relatively flat compared to the end of 2025. Changes to the mix in total deposits included higher noninterest-bearing demand deposits, brokered deposits, and savings deposits, offset by a decrease in interest-bearing demand deposits. Rate competition for deposits persisted during the first quarter across our footprint from various sources, including traditional bank and credit union competitors, money market funds, bond markets, and other non-bank alternatives.
Previous wording
Short-term borrowings were $73.57 million, a decrease of $175.62 million or 70.48% from December 31, 2024, due primarily to the maturity and pay off of $100 million in borrowings from the Federal Reserve’s Bank Term Funding Program and pay downs of short-term FHLB borrowings. Long-term debt and mandatorily redeemable securities were $42.23 million, an increase of $3.08 million or 7.86% from December 31, 2024, due primarily to an increase in mandatorily redeemable securities. Accrued expenses and other liabilities were $180.87 million, an increase of $7.59 million or 4.38% from December 31, 2024, mainly due to increased unfunded partnership commitments offset by decreases in accrued interest payable and accounts payable.
Current wording
Short-term borrowings were $289.18 million, an increase of $50.56 million or 21.19% from December 31, 2025, due primarily to an increase in federal funds purchased and short-term FHLB borrowings. Long-term debt and mandatorily redeemable securities were $35.51 million, a decrease of $7.82 million or 18.05% from December 31, 2025, due primarily to the maturity of a $10.00 million long-term borrowing. Accrued expenses and other liabilities were $181.54 million, an increase of $10.65 million or 6.23% from December 31, 2025, mainly due to increased unfunded partnership commitments offset by decreases due to annual incentive-related payments to employees.
Previous wording
The largest contributors to the decrease in accrued income and other assets from December 31, 2024, were decreases in accounts receivable (included in All Other Assets in the table above) and partnership investments.
Current wording
The largest contributor to the increase in accrued income and other assets from December 31, 2025, was an increase in partnership investments.
Previous wording
As of September 30, 2025, total shareholders’ equity was $1.24 billion, up $125.40 million, or 11.29% from the $1.11 billion at December 31, 2024. In addition to net income of $117.14 million, other significant changes in shareholders’ equity during the first nine months of 2025 included $27.54 million of dividends paid. The accumulated other comprehensive loss component of shareholders’ equity decreased to $45.86 million at September 30, 2025, compared to $87.23 million at December 31, 2024, due to changes in market conditions on our available-for-sale investment portfolio. Our shareholders’ equity-to-assets ratio was 13.65% as of September 30, 2025, compared to 12.44% at December 31, 2024. Book value per common share increased to $50.60 at September 30, 2025, from $45.31 at December 31, 2024, primarily due to increased retained earnings and decreased accumulated other comprehensive losses.
Current wording
As of March 31, 2026, total shareholders’ equity was $1.28 billion, up $2.99 million, or 0.23% from the $1.27 billion at December 31, 2025. In addition to net income of $39.96 million, other significant changes in shareholders’ equity during the first three months of 2026 included $23.35 million in common stock repurchased and $9.79 million of dividends paid. The accumulated other comprehensive loss component of shareholders’ equity increased to $40.90 million at March 31, 2026, compared to $34.78 million at December 31, 2025, due to changes in market conditions on our available-for-sale investment portfolio. Our shareholders’ equity-to-assets ratio was 14.02% as of March 31, 2026, compared to 14.08% at December 31, 2025. Book value per common share increased to $53.10 at March 31, 2026, from $52.32 at December 31, 2025, primarily due to increased retained earnings.
Previous wording
We declared and paid cash dividends per common share of $0.38 during the third quarter of 2025. The trailing four quarters dividend payout ratio, representing cash dividends per common share divided by diluted earnings per common share, was 24.63%. The dividend payout is continually reviewed by management and the Board of Directors subject to the Company’s capital and dividend policy.
Current wording
We declared and paid cash dividends per common share of $0.40 during the first quarter of 2026. The trailing four quarters dividend payout ratio, representing cash dividends per common share divided by diluted earnings per common share, was 23.93%. The dividend payout is continually reviewed by management and the Board of Directors subject to the Company’s capital and dividend policy.
Previous wording
External sources as listed in the table above are managed to approved guidelines by our Board of Directors. Total net available liquidity was $3.48 billion at September 30, 2025, which accounted for approximately 50% of total deposits net of brokered and listing services certificates of deposit.
Current wording
External sources as listed in the table above are managed to approved guidelines by our Board of Directors. Total net available liquidity was $3.52 billion at March 31, 2026, which accounted for approximately 50% of total deposits net of brokered and listing services certificates of deposit.
Previous wording
Our loan to asset ratio was 76.90% at September 30, 2025, compared to 76.74% at December 31, 2024 and 75.49% at September 30, 2024. Cash and cash equivalents totaled $214.26 million at September 30, 2025, compared to $124.83 million at December 31, 2024 and $169.36 million at September 30, 2024. The increase in cash and cash equivalents was primarily due to an increase in deposits and the expected redemptions of investment securities available-for-sale. At September 30, 2025, the Consolidated Statements of Financial Condition was rate sensitive by $459.66 million more liabilities than assets scheduled to reprice within one year, or approximately 0.90%. Management believes that the present funding sources provide adequate liquidity to meet our cash flow needs.
Current wording
Our loan to asset ratio was 77.73% at March 31, 2026, compared to 77.82% at December 31, 2025 and 76.57% at March 31, 2025. Cash and cash equivalents totaled $118.81 million at March 31, 2026, compared to $119.86 million at December 31, 2025 and $222.82 million at March 31, 2025. The decrease in cash and cash equivalents was primarily due to funding loan growth and purchases of investment securities available-for-sale. At March 31, 2026, the Consolidated Statements of Financial Condition was rate sensitive by $245.08 million more liabilities than assets scheduled to reprice within one year, or approximately 0.94%. Management believes that the present funding sources provide adequate liquidity to meet our cash flow needs.
Previous wording
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 $1.38 billion.
Current wording
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 $1.31 billion.
Previous wording
Net income available to common shareholders for the three and nine month periods ended September 30, 2025, was $42.30 million and $117.14 million, compared to $34.94 million and $101.19 million for the same periods in 2024. Diluted net income per common share was $1.71 and $4.74 for the three and nine month periods ended September 30, 2025, compared to $1.41 and $4.09 earned for the same periods in 2024. Return on average common shareholders’ equity was 13.24% for the nine months ended September 30, 2025, compared to 13.02% in 2024. The return on total average assets was 1.75% for the nine months ended September 30, 2025, compared to 1.55% in 2024.
Current wording
Net income available to common shareholders for the three month period ended March 31, 2026, was $39.96 million compared to $37.52 million for the same period in 2025. Diluted net income per common share was $1.63 for the three month period ended March 31, 2026, compared to $1.52 earned for the same period in 2025. Return on average common shareholders’ equity was 12.53% for the three months ended March 31, 2026, compared to 13.33% in 2025. The return on total average assets was 1.80% for the three months ended March 31, 2026, compared to 1.72% in 2025.
Previous wording
Net income increased for the nine months ended September 30, 2025, compared to the first nine months of 2024. Net interest income and noninterest income increased offset partially by an increase in the provision for credit losses and noninterest expense. Details of the changes in the various components of net income are discussed further below.
Current wording
Net income increased for the three months ended March 31, 2026, compared to the first three months of 2025. Net interest income increased offset partially by an increase in the provision for credit losses and noninterest expense. Details of the changes in the various components of net income are discussed further below.
Previous wording
The taxable-equivalent net interest income for the three months ended September 30, 2025, was $88.90 million, an increase of 17.55% over the same period in 2024. The net interest margin on a fully taxable-equivalent basis was 4.09% for the three months ended September 30, 2025, compared to 3.64% for the three months ended September 30, 2024.
Current wording
The taxable-equivalent net interest income for the three months ended March 31, 2026, was $90.29 million, an increase of 11.36% over the same period in 2025. The net interest margin on a fully taxable-equivalent basis was 4.25% for the three months ended March 31, 2026, compared to 3.90% for the three months ended March 31, 2025.
Previous wording
During the three month period ended September 30, 2025, average earning assets increased $352.52 million, up 4.26% over the comparable period in 2024. Average interest-bearing liabilities increased $185.56 million or 3.20%. The yield on average earning assets increased 10 basis points to 6.03% from 5.93% at September 30, 2024, primarily due to higher loan and lease average balances and higher rates on investment securities. Total cost of average interest-bearing liabilities decreased 48 basis points to 2.79% from 3.27%, primarily as a result of lower rates on interest-bearing deposits and other short-term borrowings. The result to the tax-equivalent net interest margin, or the ratio of tax-equivalent net interest income to average earning assets, was an increase of 45 basis points.
Current wording
During the three month period ended March 31, 2026, average earning assets increased $183.82 million, up 2.18% over the comparable period in 2025. Average interest-bearing liabilities increased $10.51 million or 0.18%. The yield on average earning assets remained stable at 5.94% at March 31, 2026, unchanged from the same period in the prior year. Total cost of average interest-bearing liabilities decreased 44 basis points to 2.46% from 2.90%, primarily as a result of lower rates on interest-bearing deposits and decreased interest expense on mandatorily redeemable securities offset by increased short-term borrowing costs. The result to the tax-equivalent net interest margin, or the ratio of tax-equivalent net interest income to average earning assets, was an increase of 35 basis points.
Previous wording
The largest contributors to the improved yield on average earning assets for the three months ended September 30, 2025, compared to the three months ended September 30, 2024, was an increase in average loan and lease balances and higher rates on investments 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. The yield on loans and leases decreased 14 basis points, mainly from lower rates on loans during the quarter compared to the prior year third quarter. Average loans and leases increased $409.71 million or 6.20%, primarily in the renewable energy, commercial real estate, construction equipment, commercial and agricultural, and residential real estate and home equity portfolios. Net interest recoveries positively contributed four basis points to the yield on average loans and leases during the quarter and four basis points to the average loans and leases yield during the prior year third quarter. Average investment securities decreased $66.70 million or 4.33%, due to the expected redemption of securities used to fund loan growth and pay down short-term borrowings. Average other investments, primarily held at the Federal Reserve Bank, increased $8.75 million or 7.02%.
Current wording
The largest contributors to the improved yield on average earning assets for the three months ended March 31, 2026, compared to the three months ended March 31, 2025, was an increase in average loan and lease balances and improved yields on investments from portfolio repositioning trades executed during 2025 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. The yield on loans and leases decreased 23 basis points, mainly from lower rates on loans during the quarter compared to the prior year first quarter. Average loans and leases increased $223.81 million or 3.29%, primarily in the renewable energy, commercial real estate, residential real estate and home equity, commercial and agricultural, and construction equipment portfolios. Net interest recoveries positively contributed one basis point to the yield on average loans and leases during the quarter and nine basis points to the average loans and leases yield during the prior year first quarter. Average investment securities increased $7.89 million or 0.52%, driven by additional investments made during the period. Average other investments, primarily held at the Federal Reserve Bank, decreased $50.40 million or 44.11%.
Previous wording
Average interest-bearing deposits increased $282.93 million or 5.11% for the third quarter of 2025 over the same period in 2024 primarily in savings, interest-bearing demand and non-brokered time deposits. The effective rate on average interest-bearing deposits decreased 45 basis points to 2.70% from 3.15%, primarily as a result of Fed rate cuts during the second half of 2024 and third quarter of 2025. Average noninterest-bearing deposits increased $6.76 million or 0.42% for the third quarter of 2025 over the same period in 2024.
Current wording
Average interest-bearing deposits decreased $139.69 million or 2.43% for the first quarter of 2026 over the same period in 2025 primarily from lower brokered deposits, offset with an increase in savings deposits and interest-bearing demand deposits. The effective rate on average interest-bearing deposits decreased 45 basis points to 2.36% from 2.81%, primarily as a result of Fed rate cuts during 2025 and lower brokered deposit balances. Average noninterest-bearing deposits decreased $2.28 million or 0.14% for the first quarter of 2026 over the same period in 2025.
Previous wording
Average short-term borrowings decreased $99.89 million or 57.16% for the third quarter of 2025, compared to the same period in 2024. Interest on short-term borrowings decreased 181 basis points primarily due to the maturity and pay off of $100 million in borrowings from the Federal Reserve’s Bank Term Funding Program during the first quarter of this year along with lower rates on short-term FHLB borrowings. Interest on subordinated notes decreased 32 basis points during the third quarter of 2025 from the same period a year ago due to a variable rate decrease on one tranche. Average long-term debt and mandatorily redeemable securities balances increased $2.53 million or 6.46%. Interest on long-term debt and mandatorily redeemable securities decreased 311 basis points during the third quarter of 2025 from the same period in 2024, primarily due to lower imputed interest on mandatorily redeemable securities from a smaller increase in book value per share during the quarter compared to the previous year’s third quarter. Mandatorily redeemable securities 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.
Current wording
Average short-term borrowings increased $150.36 million or 196.08% for the first quarter of 2026, compared to the same period in 2025. Interest on short-term borrowings increased 184 basis points primarily due to the increase in average balances in federal funds purchased and FHLB borrowings. Interest on subordinated notes decreased 13 basis points during the first quarter of 2026 from the same period a year ago due to a variable rate decrease on one tranche. Average long-term debt and mandatorily redeemable securities balances decreased $0.15 million or 0.39%. Interest on long-term debt and mandatorily redeemable securities decreased 582 basis points during the first quarter of 2026 from the same period in 2025, primarily due to lower imputed interest on mandatorily redeemable securities from a smaller increase in book value per share during the quarter compared to the previous year’s first quarter. Mandatorily redeemable securities 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.
Previous wording
The provision for credit losses for the three and nine months ended September 30, 2025, was $0.90 million and $11.85 million, compared to $1.72 million and $8.89 million during the three and nine months ended September 30, 2024. Net charge-offs of $1.88 million or 0.11% of average loans and leases were recorded for the third quarter of 2025, compared to $0.85 million or 0.05% of average loans and leases for the same quarter a year ago. Year-to-date net charge-offs of $3.93 million or 0.08% of average loans and leases have been recorded in 2025, compared to net charge-offs of $4.99 million or 0.10% of average loans and leases through September 30, 2024. Net charge-offs recognized in 2025 are principally concentrated in the commercial and agricultural, construction equipment, auto and light truck, and consumer portfolios.
Current wording
The provision for credit losses for the three months ended March 31, 2026, was $7.27 million, compared to $3.27 million during the three months ended March 31, 2025. Net charge-offs of $3.96 million or 0.23% of average loans and leases were recorded for the first quarter of 2026, compared to $0.18 million or 0.01% of average loans and leases for the same quarter a year ago. Net charge-offs recognized in 2026 are principally concentrated in the auto and light truck, construction equipment, and consumer portfolios offset by net recoveries in the commercial and agricultural portfolio. Charge-offs in the auto and light truck portfolio were primarily from two unique accounts who provide special trailer units serving the film industry.
Previous wording
Our aircraft portfolio exhibits collateral concentration and contains $321.78 million of foreign exposure at September 30, 2025, the majority of which is in Mexicoand Brazil. We review political and economic data for these countries on a regular basis to assess the impact the environment may have on our customers. We have recognized minimal credit losses in recent years in the aircraft portfolio and credit quality remains stable. However, historically, we have experienced brief periods of volatile and unanticipated losses in both foreign and domestic aircraft. Losses have been primarily attributable to unexpected declines in the value of specific aircraft collateral at a time when the borrower is experiencing financial difficulties. We review and assess aircraft values on an ongoing basis and use a tiered approach to establish advance rates and amortization schedules to limit collateral exposure. We continually monitor individual customer performance and assess risks in the overall portfolio.
Current wording
Our aircraft portfolio exhibits collateral concentration and contains $321.91 million of foreign exposure at March 31, 2026, the majority of which is in Mexicoand Brazil. We regularly review political and economic conditions in these markets to assess potential impact on borrower performance. Credit quality in the aircraft portfolio remains stable, and we have experienced minimal credit losses in recent years. However, the portfolio has historically experienced periods of elevated and unanticipated losses, primarily driven by abrupt declines in collateral values coinciding with borrower financial stress. We review and assess aircraft values on an ongoing basis utilizing a tiered approach to establishing advance rates and amortization schedules to limit collateral exposure with continuous monitoring of individual borrower performance and overall portfolio trends.
Previous wording
On September 30, 2025, 30 day and over loan and lease delinquency as a percentage of loan and lease balances was 0.76%, compared to 0.31% on September 30, 2024. The allowance for loan and lease losses as a percentage of loans and leases outstanding at the end of the period was 2.32%, compared to 2.30% one year ago. A summary of loan and lease loss experience during the three and nine months ended September 30, 2025, and 2024 is located in Note 5 of the Consolidated Financial Statements.
Current wording
On March 31, 2026, 30 day and over loan and lease delinquency as a percentage of loan and lease balances was 0.14%, compared to 0.09% on March 31, 2025. The allowance for loan and lease losses as a percentage of loans and leases outstanding at the end of the period was 2.33%, compared to 2.29% one year ago. A summary of loan and lease loss experience during the three months ended March 31, 2026, and 2025 is located in Note 5 of the Consolidated Financial Statements.
Previous wording
Nonperforming assets totaled $63.19 million at September 30, 2025, an increase of 101.67% from the $31.33 million reported at December 31, 2024, and a 104.59% increase from the $30.89 million reported at September 30, 2024. The increase in nonperforming assets during the first nine months of 2025 was primarily related to higher nonaccrual loans and leases. The increase in nonperforming assets as of September 30, 2025, from September 30, 2024, was also related to an increase in nonaccrual loans and leases. There is currently one property held in other real estate related to our residential real estate and home equity portfolio as of September 30, 2025.
Current wording
Nonperforming assets totaled $73.42 million at March 31, 2026, a decrease of 5.12% from the $77.38 million reported at December 31, 2025, and a 70.45% increase from the $43.07 million reported at March 31, 2025. The decrease in nonperforming assets during the first three months of 2026 was primarily related to lower nonaccrual loans and leases. The increase in nonperforming assets as of March 31, 2026, from March 31, 2025, was related to an increase in nonaccrual loans and leases. There are currently no properties held in other real estate related to our residential real estate and home equity portfolio as of March 31, 2026.
Previous wording
The increase in nonaccrual loans and leases at September 30, 2025, from December 31, 2024, was predominantly in our auto and light truck portfolio as several large accounts were transferred to nonaccrual status during the year. A summary of nonaccrual loans and leases and past due aging for the periods ended September 30, 2025, and December 31, 2024, is located in Note 4 of the Consolidated Financial Statements.
Current wording
The decrease in nonaccrual loans and leases at March 31, 2026, from December 31, 2025, was predominantly related to charge-off activity in our auto and light truck portfolio during the quarter and payoffs in the commercial real estate portfolio. A summary of nonaccrual loans and leases and past due aging for the periods ended March 31, 2026, and December 31, 2025, is located in Note 4 of the Consolidated Financial Statements.
Previous wording
Repossessions consisted primarily of two loan relationships in the construction equipment portfolio, coupled with minimal amounts in our auto and light truck, and consumer portfolios at September 30, 2025. At the time of repossession, the recorded amount of the loan or lease is written down to the fair value of the equipment or vehicle by a charge to the allowance for loan and lease losses or other income, if a positive adjustment, unless the equipment is in the process of immediate sale. Any subsequent fair value write-downs or write-ups, to the extent of previous write-downs, are included in noninterest expense.
Current wording
Repossessions consisted primarily of three loan relationships in the construction equipment portfolio, coupled with minimal amounts in our commercial, auto and light truck, and consumer portfolios at March 31, 2026. At the time of repossession, the recorded amount of the loan or lease is written down to the fair value of the equipment or vehicle by a charge to the allowance for loan and lease losses or other income, if a positive adjustment, unless the equipment is in the process of immediate sale. Any subsequent fair value write-downs or write-ups, to the extent of previous write-downs, are included in noninterest expense.
Previous wording
Trust and wealth advisory fees (which include investment management fees, estate administration fees, mutual fund fees, annuity fees, and fiduciary fees) increased during the three and nine months ended September 30, 2025, compared with the same periods a year ago. 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 September 30, 2025, December 31, 2024, and September 30, 2024, was $6.07 billion, $5.97 billion, and $6.03 billion, respectively. Positive equity market returns during the first nine months of 2025 resulted in an increase in assets under management.
Current wording
Trust and wealth advisory fees (which include investment management fees, estate administration fees, mutual fund fees, annuity fees, and fiduciary fees) increased during the three months ended March 31, 2026, compared with the same period a year ago. 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 March 31, 2026, December 31, 2025, and March 31, 2025, was $6.28 billion, $6.28 billion, and $5.93 billion, respectively.
Previous wording
Service charges on deposit accounts increased for the three and nine months ended September 30, 2025, compared to the same periods in 2024. The increase in service charges on deposit accounts was the result of higher consumer nonsufficient fund and overdraft transactions.
Current wording
Service charges on deposit accounts increased for the three months ended March 31, 2026, compared to the same period in 2025. The increase in service charges on deposit accounts was the result of higher consumer nonsufficient fund and overdraft transactions.
Previous wording
Insurance commissions increased during the three and nine months ended September 30, 2025, compared to the same periods a year ago. The increase was mainly due to higher contingent commissions received and an increased book of business.
Current wording
Insurance commissions increased during the three months ended March 31, 2026, compared to the same period a year ago. The increase was mainly due to higher contingent commissions received and an increased book of business.
Previous wording
Equipment rental income decreased for the three and nine months ended September 30, 2025, over the comparable periods in 2024. The decline was the result of a reduction in the average equipment rental portfolio by 43.07% over the same period a year ago, due to changing customer preferences and competitive pricing pressures for new business.
Current wording
Equipment rental income decreased for the three months ended March 31, 2026, over the comparable period in 2025. The decline was the result of a reduction in the average equipment rental portfolio by 36.25% over the same period a year ago, due to changing customer preferences and competitive pricing pressures for new business.
Previous wording
Other income increased for the three and nine months ended September 30, 2025, compared to the same periods in 2024. The increase was primarily the result of increased partnership investment gains, higher brokerage and commission fees and increased customer interest rate swap fees.
Current wording
Other income decreased for the three months ended March 31, 2026, compared to the same period in 2025. The decrease was primarily the result of lower partnership investment gains, fewer customer interest rate swap fees, and reduced brokerage fees and commissions.
Previous wording
Salaries and employee benefits increased during the three and nine months ended September 30, 2025, compared to the same periods in 2024. Higher salaries and employee benefits were mainly a result of normal merit increases, increased incentive compensation as well as higher group insurance costs as a result of overall higher health insurance claims experienced during the first half of 2025.
Current wording
Salaries and employee benefits increased during the three months ended March 31, 2026, compared to the same period in 2025. Higher salaries and employee benefits were mainly a result of normal merit increases.
Previous wording
Net occupancy expense increased during the three and nine months ended September 30, 2025, compared to the same periods in 2024. The increase was primarily due to higher building depreciation and increased premises expenses.
Current wording
Net occupancy expense increased during the three months ended March 31, 2026, compared to the same period in 2025. The increase was primarily due to increased snow removal costs from seasonal weather conditions.
Previous wording
Furniture and equipment expenses, including depreciation, increased during the three and nine months of 2025, compared to the same periods a year ago. The increase was mainly due to an increase in equipment repairs and maintenance and higher equipment depreciation.
Current wording
Furniture and equipment expenses, including depreciation, increased during the first three months of 2026, compared to the same period a year ago. The increase was mainly due to higher equipment depreciation and an increase in equipment repairs.
Previous wording
Data processing expense grew during the three and nine months ended September 30, 2025, compared to the same periods a year ago due primarily to higher computer processing charges and software maintenance expense on technology projects.
Current wording
Data processing expense grew during the three months ended March 31, 2026, compared to the same period a year ago due primarily to increased software maintenance expense on technology projects and higher computer processing charges.
Previous wording
Depreciation on leased equipment decreased for the three and nine months ended September 30, 2025, compared to the same periods in 2024. Depreciation on leased equipment correlates with the decrease in equipment rental income.
Current wording
Depreciation on leased equipment decreased for the three months ended March 31, 2026, compared to the same period in 2025. Depreciation on leased equipment correlates with the decrease in equipment rental income.
Previous wording
Professional fees were lower during the three and nine months ended September 30, 2025, compared to the same periods a year ago due primarily to lower professional consulting fees offset by an increase in legal and audit fees.
Current wording
Professional fees were lower during the three months ended March 31, 2026, compared to the same period a year ago due primarily to lower legal and professional consulting fees.
Previous wording
FDIC and other insurance remained flat during the three months ended September 30, 2025, and decreased during the nine months ended September 30, 2025, compared to the same periods in 2024. The decrease was the result of lower blanket bond insurance premiums due to a more cost effective policy renewal.
Current wording
FDIC and other insurance remained flat during the three months ended March 31, 2026, compared to the same period in 2025.
Previous wording
Business development and marketing expense increased during the three and nine months ended September 30, 2025, compared with the same periods in 2024. The increase was primarily due to a $1.00 million dollar charitable contribution, increased business development expenses, and marketing promotions.
Current wording
Business development and marketing expense decreased during the three months ended March 31, 2026, compared with the same period in 2025. The decrease was primarily due to lower business development and travel expenses offset by higher marketing promotions.
Previous wording
Other expenses were higher during the three and nine months of 2025, compared to the same periods a year ago. The increase was primarily the result of fewer gains related to the sale of fixed assets and off-lease equipment, increased fraud losses due to a recovery of check fraud losses during the first quarter last year, higher printing expenses, an increase in credit report and appraisal fees, and higher collection and repossession expenses.
Current wording
Other expenses were higher during the first three months of 2026, compared to the same period a year ago. The increase was primarily the result of higher collection and repossession expenses, increased foreclosure servicing expenses, a rise in debit card losses, and higher employee training and travel related expenses offset by lower check fraud losses.
Previous wording
The provision for income taxes for the three and nine month periods ended September 30, 2025, was $12.71 million and $33.69 million, compared to $10.47 million and $29.82 million for the same periods in 2024. The effective tax rate was 23.11% and 23.07% for the quarters ended September 30, 2025, and 2024, respectively, and 22.34% and 22.76% for the nine months ended September 30, 2025, and 2024, respectively. The decrease in the year-to-date effective tax rate was due to a one-time $0.74 million after-tax interest payment on federal tax refunds from tax credit carrybacks recorded in the first quarter of 2025.
Current wording
The provision for income taxes for the three month period ended March 31, 2026, was $11.39 million compared to $10.18 million for the same period in 2025. The effective tax rate was 22.18% and 21.34% for the quarters ended March 31, 2026, and 2025, respectively. The increase in the year-to-date effective tax rate was due to a one-time $0.74 million after-tax interest payment on federal tax refunds from tax credit carrybacks recorded in the first quarter of 2025.
Rearranged previous paragraphs (1)
Previous report — wording carried elsewhere
Average short-term borrowings decreased $134.74 million or 59.57% for the first nine months of 2025, compared to the same period in 2024. Interest paid on short-term borrowings decreased 203 basis points primarily due to the maturity and pay off of $100 million in borrowings from the Federal Reserve’s Bank Term Funding Program and lower short-term FHLB borrowings. Interest paid on subordinated notes decreased 32 basis points during the first nine months due to a variable rate decrease on one tranche. Average long-term debt and mandatorily redeemable securities balances decreased $0.74 million or 1.78%, primarily from maturity of long term debt. Interest paid on long-term debt and mandatorily redeemable securities increased 244 basis points due to higher imputed interest on mandatorily redeemable securities from a larger increase in book value per share during 2025. Mandatorily redeemable securities 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.