1ST SOURCE CORP

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 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.

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 June 30, 2026, as compared to December 31, 2025, and the results of operations for the three and six months ended June 30, 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 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.

Current wording

Our total assets at June 30, 2026, were $9.26 billion, an increase of $207.90 million or 2.30% from December 31, 2025. Total investment securities available-for-sale were $1.53 billion, an increase of $5.20 million or 0.34% from December 31, 2025. Federal funds sold and interest bearing deposits with other banks were $59.81 million, an increase of $9.20 million or 18.17% 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 $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.

Current wording

Total loans and leases were $7.22 billion, an increase of $173.28 million or 2.46% from December 31, 2025. The largest contributors to the increase in loans and leases was growth in the renewable energy, commercial and agricultural, construction equipment, and commercial real estate portfolios, offset by decreases in the auto and light truck, aircraft, and consumer portfolios. Our foreign loan and lease balances, all denominated in U.S. dollars, were $305.31 million and $319.93 million as of June 30, 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 $139.15 million and $151.99 million as of June 30, 2026, respectively, compared to $136.98 million and $163.70 million as of December 31, 2025, respectively. As of June 30, 2026, and December 31, 2025, there was not a significant concentration in any other country.

Previous 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.

Current wording

Equipment owned under operating leases was $5.62 million, a decrease of $1.35 million, or 19.33% 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 $7.23 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.

Current wording

Total deposits were $7.43 billion at June 30, 2026, an increase of $206.67 million or 2.86% from December 31, 2025. Changes to the mix in total deposits included higher interest-bearing demand deposits, brokered deposits, time deposits, and savings deposits. Rate competition for deposits persisted during the second 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 $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.

Current wording

Short-term borrowings were $199.49 million, a decrease of $39.13 million or 16.40% from December 31, 2025, due primarily to a decrease in federal funds purchased. Long-term debt and mandatorily redeemable securities were $36.03 million, a decrease of $7.30 million or 16.86% from December 31, 2025, due primarily to the maturity of a $10.00 million long-term borrowing. Accrued expenses and other liabilities were $183.47 million, an increase of $12.58 million or 7.36% from December 31, 2025, mainly due to increased unfunded partnership commitments offset by decreased reserves for employee benefit plan contributions.

Previous 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.

Current wording

As of June 30, 2026, total shareholders’ equity was $1.31 billion, up $35.42 million, or 2.78% from the $1.27 billion at December 31, 2025. In addition to net income of $87.50 million, other significant changes in shareholders’ equity during the first six months of 2026 included $23.35 million in common stock repurchased and $20.18 million of dividends paid. The accumulated other comprehensive loss component of shareholders’ equity increased to $46.52 million at June 30, 2026, compared to $34.78 million at December 31, 2025, due to changes in interest rates, market spreads, and market conditions on our available-for-sale investment portfolio subsequent to purchase. Our shareholders’ equity-to-assets ratio was 14.15% as of June 30, 2026, compared to 14.08% at December 31, 2025. Book value per common share increased to $54.41 at June 30, 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 $0.40 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.

Current wording

We declared and paid cash dividends per common share of $0.43 during the second quarter of 2026. The trailing four quarters dividend payout ratio, representing cash dividends per common share divided by diluted earnings per common share, was 23.13%. 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 $3.52 billion at March 31, 2026, 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 $3.72 billion at June 30, 2026, which accounted for approximately 52% of total deposits net of brokered and listing services certificates of deposit.

Previous 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.

Current wording

Our loan to asset ratio was 77.94% at June 30, 2026, compared to 77.82% at December 31, 2025 and 78.11% at June 30, 2025. Cash and cash equivalents totaled $127.30 million at June 30, 2026, compared to $119.86 million at December 31, 2025 and $149.11 million at June 30, 2025. The increase in cash and cash equivalents for the six month period ended June 30, 2026 was primarily due to an increase in deposits. The decrease in cash and cash equivalents compared to June 30, 2025, was primarily due to funding loan growth and purchases of investment securities available-for-sale. Management believes that the present funding sources provide adequate liquidity to meet our cash flow needs. At June 30, 2026, the Consolidated Statements of Financial Condition was rate sensitive by $175.37 million more liabilities than assets scheduled to reprice within one year, or approximately 0.96%. Management evaluates interest rate risk using multiple measures and analytical techniques, as each provides a different perspective on the Bank's exposure to changes in interest rates.

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 $1.31 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 $1.54 billion.

Previous 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.

Current wording

Net income available to common shareholders for the three and six month periods ended June 30, 2026, was $47.54 million and $87.50 million compared to $37.32 million and $74.84 million for the same periods in 2025. Diluted net income per common share was $1.95 and $3.58 for the three and six month periods ended June 30, 2026, compared to $1.51 and $3.02 earned for the same periods in 2025. Return on average common shareholders’ equity was 13.61% for the six months ended June 30, 2026, compared to 12.96% in 2025. The return on total average assets was 1.93% for the six months ended June 30, 2026, compared to 1.69% in 2025.

Previous 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.

Current wording

Net income increased for the six months ended June 30, 2026, compared to the first six months of 2025. Net interest income and noninterest income increased and the provision for credit losses decreased offset partially by an increase in 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 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.

Current wording

The taxable-equivalent net interest income for the three months ended June 30, 2026, was $93.30 million, an increase of 9.32% over the same period in 2025. The net interest margin on a fully taxable-equivalent basis was 4.24% for the three months ended June 30, 2026, compared to 4.01% for the three months ended June 30, 2025.

Previous 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.

Current wording

During the three month period ended June 30, 2026, average earning assets increased $285.77 million, up 3.34% over the comparable period in 2025. Average interest-bearing liabilities increased $151.65 million or 2.53%. The yield on average earning assets decreased to 5.96% at June 30, 2026, down two basis points from the same period in the prior year. Total cost of average interest-bearing liabilities decreased 34 basis points to 2.47% from 2.81%, primarily as a result of lower rates on interest-bearing deposits 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 23 basis points.

Previous 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%.

Current wording

The largest contributors to the reduced yield on average earning assets for the three months ended June 30, 2026, compared to the three months ended June 30, 2025, was a decrease in yields on net loans and leases mainly from Federal Reserve rate cuts during the second half of 2025 and 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 offset by improved yields on investments from portfolio repositioning trades executed during 2025. The yield on loans and leases decreased 19 basis points, mainly from Fed rate cuts during the second half of 2025. Average loans and leases increased $174.23 million or 2.50%, primarily in the renewable energy, commercial real estate, residential real estate and home equity, construction equipment, and commercial and agricultural portfolios. Net interest recoveries contributed three basis points to the yield on average loans and leases during the quarter and had no impact to the average loans and leases yield during the prior year second quarter. Average investment securities increased $52.55 million or 3.56%, driven by additional investments made during the period. Average other investments, primarily held at the Federal Reserve Bank, increased $58.25 million or 61.02%.

Previous 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.

Current wording

Average interest-bearing deposits increased $73.33 million or 1.27% for the second quarter of 2026 over the same period in 2025 primarily from higher savings deposits, interest-bearing demand deposits, and time deposits, offset by a decrease in brokered deposits. The effective rate on average interest-bearing deposits decreased 36 basis points to 2.36% from 2.72%, primarily as a result of Fed rate cuts during 2025 and lower brokered deposit balances. Average noninterest-bearing deposits increased $5.19 million or 0.33% for the second quarter of 2026 over the same period in 2025.

Previous 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.

Current wording

Average short-term borrowings increased $117.06 million or 117.22% for the first six months of 2026, compared to the same period in 2025. Interest paid on short-term borrowings increased 90 basis points primarily due to an increase in average balances in FHLB borrowings and federal funds purchased. Interest paid on subordinated notes decreased 19 basis points during the first six months due to a variable rate decrease on one tranche. Average long-term debt and mandatorily redeemable securities balances decreased $3.00 million or 7.40%, primarily from the maturity of a $10.00 million long term borrowing. Interest paid on long-term debt and mandatorily redeemable securities decreased 270 basis points due to lower imputed interest on mandatorily redeemable securities from a smaller increase in book value per share during 2026. 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 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.

Current wording

The provision for credit losses for the three and six months ended June 30, 2026, was $1.54 million and $8.81 million, compared to $7.69 million and $10.96 million during the three and six months ended June 30, 2025. Net charge-offs of $0.52 million or 0.03% of average loans and leases were recorded for the second quarter of 2026, compared to $1.87 million or 0.11% of average loans and leases for the same quarter a year ago. Year-to-date net charge-offs of $4.48 million or 0.13% of average loans and leases have been recorded in 2026, compared to net charge-offs of $2.05 million or 0.06% of average loans and leases through June 30, 2025. Net charge-offs recognized in 2026 are principally concentrated in the auto and light truck, construction equipment, and consumer portfolios offset by modest net recoveries in the commercial and agricultural portfolio.

Previous wording

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 wording

The provision for credit losses for the three months ended June 30, 2026, was driven primarily by loan growth in our construction equipment, commercial and agricultural, and renewable energy portfolios during the period. We maintained our forecast adjustment as the prior quarter’s assumptions continue to be applicable to the forecast outlook. Key risks include heightened global geopolitical uncertainty, volatile energy prices, firming inflationary expectations, ever-changing trade policies, and overall macroeconomic uncertainty. Reserves for assets individually evaluated total $1.60 million this quarter, consisting of accounts in our commercial and agricultural, auto and light truck, construction equipment, and commercial real estate portfolios.

Previous wording

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 wording

We remain attentive to potential risks within the small business segment of the commercial and agricultural portfolio. Credit concerns are elevated for small business borrowers. The agricultural portion of this portfolio is under stress as grain producers struggle with higher input costs and low commodity prices. Within the auto and light truck portfolio, borrowers are contending with lower rental rates, higher fleet carrying costs, and industry overcapacity. The medium and heavy duty truck portfolio is emerging from a prolonged industry downturn as freight rates have improved with capacity reductions. However, overall freight demand remains soft. Consumer financial stress indicators remain elevated, economic imbalances persist, and overall consumer confidence remains subdued. The impact of volatile energy prices, should they persist, could result in a meaningful headwind across multiple portfolios.

Previous wording

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 wording

We continually evaluate risks that may impact our loan portfolios including an uncertain domestic and global economic outlook influenced by geopolitical instability, evolving trade policies, elevated interest rates, and ongoing efforts by the Federal Reserve to balance inflation and labor market conditions. While economic growth has remained generally resilient, downside risks persist and the operating environment remains fragile. 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.

Previous 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.

Current wording

Our aircraft portfolio exhibits collateral concentration and contains $305.31 million of foreign exposure at June 30, 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. In the past, the portfolio has 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 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.

Current wording

On June 30, 2026, 30 day and over loan and lease delinquency as a percentage of loan and lease balances was 0.09%, compared to 0.52% on June 30, 2025. The allowance for loan and lease losses as a percentage of loans and leases outstanding at the end of the period was 2.30%, compared to 2.30% one year ago. A summary of loan and lease loss experience during the three and six months ended June 30, 2026, and 2025 is located in Note 5 of the Consolidated Financial Statements.

Previous 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.

Current wording

Nonperforming assets totaled $73.12 million at June 30, 2026, a decrease of 5.51% from the $77.38 million reported at December 31, 2025, and a 3.21% decrease from the $75.54 million reported at June 30, 2025. The decrease in nonperforming assets during the first six months of 2026 was primarily related to lower nonaccrual loans and leases partially offset by an increase in repossessions. The decrease in nonperforming assets as of June 30, 2026, from June 30, 2025, was related to decreases in nonaccrual loans and leases and repossessions. There are three properties held in other real estate related to our residential real estate and home equity portfolio as of June 30, 2026.

Previous 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.

Current wording

The decrease in nonaccrual loans and leases at June 30, 2026, from December 31, 2025, was predominantly related to defleeting activity and charge-offs in our auto and light truck portfolio and payoffs in the construction equipment portfolio during the period. A summary of nonaccrual loans and leases and past due aging for the periods ended June 30, 2026, and December 31, 2025, is located in Note 4 of the Consolidated Financial Statements.

Previous 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.

Current wording

Repossessions consisted primarily of one loan relationship in the aircraft portfolio, coupled with minimal amounts in our commercial and agricultural and consumer portfolios at June 30, 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 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.

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 and six months ended June 30, 2026, 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 June 30, 2026, December 31, 2025, and June 30, 2025, was $6.60 billion, $6.28 billion, and $5.94 billion, respectively. The increase in trust and wealth advisory fees included larger than usual estate administration fees primarily from one customer account in the process of settlement during the three months ended June 30, 2026.

Previous 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.

Current wording

Service charges on deposit accounts increased for the three and six months ended June 30, 2026, compared to the same periods in 2025. The increase in service charges on deposit accounts was mainly the result of higher consumer nonsufficient fund and overdraft transactions.

Previous wording

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 wording

Debit card income increased for both the three and six month periods ended June 30, 2026, compared to the same periods in the prior year. This growth was driven primarily by higher transaction and spending volumes, supported by consistent client transaction behavior and merchant network routing patterns.

Previous 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.

Current wording

Insurance commissions increased during the three and six months ended June 30, 2026, compared to the same periods a year ago. The increases were mainly due to higher contingent commissions received.

Previous 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.

Current wording

Equipment rental income decreased for the three and six months ended June 30, 2026, over the comparable periods in 2025. The decline was the result of a reduction in the average equipment rental portfolio by 34.58% over the same six month period a year ago, due to changing customer preferences and competitive pricing pressures for new business.

Previous 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.

Current wording

Other income decreased for the three and six months ended June 30, 2026, compared to the same periods in 2025. The decrease was primarily the result of lower partnership investment gains partially offset by increased brokerage commissions and fees.

Previous 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.

Current wording

Salaries and employee benefits increased during the three and six months ended June 30, 2026, compared to the same periods in 2025. Higher salaries and employee benefits were 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, and increased employee benefit plan contributions.

Previous 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.

Current wording

Net occupancy expense increased during the three and six months ended June 30, 2026, compared to the same periods in 2025. The increase was primarily due to increased snow removal costs from seasonal weather conditions during the first quarter and higher premises expenses and repairs.

Previous 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.

Current wording

Furniture and equipment expense, including depreciation, was relatively flat during the second quarter of 2026, compared to the same period in 2025, and increased year to date compared to the same time period a year ago. The increase was mainly due to higher equipment depreciation and equipment repairs partially offset by a decrease in equipment maintenance.

Previous 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.

Current wording

Data processing expense grew during the three and six months ended June 30, 2026, compared to the same periods a year ago due primarily to increased software maintenance expense on technology projects.

Previous 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.

Current wording

Depreciation on leased equipment decreased for the three and six months ended June 30, 2026, compared to the same periods in 2025. Depreciation on leased equipment correlates with the decrease in equipment rental income.

Previous 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.

Current wording

Professional fees were higher during the three and six months ended June 30, 2026, compared to the same periods a year ago due primarily to higher legal and professional consulting fees.

Previous wording

FDIC and other insurance remained flat during the three months ended March 31, 2026, compared to the same period in 2025.

Current wording

FDIC and other insurance remained flat during the three and six months ended June 30, 2026, compared to the same periods in 2025.