GERMAN AMERICAN BANCORP, INC.

Previous wording

The first quarter of 2025 results of operations included acquisition-related expenses of $5,932,000 ($4,620,000, on an after tax basis) and also included Day 2 provision for credit losses under the CECL model of $16,200,000 ($12,150,000, on an after tax basis). On an adjusted basis, net income for first quarter 2025 was $27,287,000 or $0.79 per share, compared to $23,365,000, or $0.79 per share, for fourth quarter 2024. Adjusted net income and adjusted earnings per share are non-GAAP financial measures. Refer to “Use of Non-GAAP Financial Measures” contained in this Management’s Discussion and Analysis for additional information, including a reconciliation of non-GAAP financial measures to the most directly comparable GAAP financial measures.

Current wording

On an adjusted basis, net income for the second quarter of 2025 was $32,058,000, or $0.86 per share, compared with the adjusted second quarter 2024 net income of $20,351000, or $0.69 per share. Net income, on an adjusted basis, for the six months ended June 30, 2025, was $59,345,000, or $1.64 per share, compared with the adjusted six months ended June 30, 2024 net income of $39,373,000, or $1.33 per share. Adjusted net income and adjusted earnings per share are non-GAAP financial measures. Refer to “Use of Non-GAAP Financial Measures” contained in this Management’s Discussion and Analysis for additional information, including a reconciliation of non-GAAP financial measures to the most directly comparable GAAP financial measures.

Previous wording

At March 31, 2025, the Company changed its method for estimating the allowance for credit losses to the discounted cash flow model on a prospective basis for all loan segments except for the credit card loan segment. Prior to March 31, 2025, the Company utilized the static pool methodology in determining future credit losses. While both methodologies permit the Company to develop reasonable and supportable forecasts, by utilizing the discounted cash flow method, the Company has the ability to better evaluate multiple economic scenarios by capturing macroeconomic conditions within the model assumptions and calculations. This change in methodology resulted in a decline of $1,674,000 to the allowance.

Current wording

At March 31, 2025, the Company changed its method for estimating the allowance for credit losses to the discounted cash flow model on a prospective basis for all loan segments except for the credit card loan segment. Prior to March 31, 2025, the Company utilized the static pool methodology in determining future credit losses. While both methodologies permit the Company to develop reasonable and supportable forecasts, by utilizing the discounted cash flow method, the Company has the ability to better evaluate multiple economic scenarios by capturing macroeconomic conditions within the model assumptions and calculations. This change in methodology had an insignificant impact on the allowance in 2025.

Previous wording

Available-for-sale debt securities in unrealized loss positions are evaluated for impairment related to credit losses at least quarterly. For available-for-sale debt securities in an unrealized loss position, the Company assesses whether we intend to sell, or it is more likely than not that we will be required to sell the security before recovery of its amortized cost basis. If either of the criteria regarding intent or requirement to sell is met, the security’s amortized cost basis is written down to fair value through income. For available-for sale debt securities that do not meet the criteria, the Company evaluates whether the decline in fair value has resulted from credit losses or other factors. In making this assessment, management considers the extent to which fair value is less than amortized cost, any changes to the rating of the security by a rating agency, and adverse conditions specifically related to the security and the issuer, among other factors. If this assessment indicates that a credit loss exists, the Company compares the present value of cash flows expected to be collected from the security with the amortized cost basis of the security. If the present value of cash flows expected to be collected is less than the amortized cost basis for the security, a credit loss exists and an allowance for credit losses is recorded, limited to the amount that the fair value of the security is less than its amortized cost basis. Any impairment that has not been recorded through an allowance for credit losses is recognized in other comprehensive income, net of applicable taxes. No allowance for credit losses for available-for-sale debt securities was needed at March 31, 2025. Accrued interest receivable on available-for-sale debt securities is excluded from the estimate of credit losses. As of March 31, 2025, gross unrealized gains on the securities available-for-sale portfolio totaled approximately $7,702,000 and gross unrealized losses totaled approximately $267,767,000. The net amount of these two items, net of applicable taxes, is included in other comprehensive income (loss).

Current wording

Available-for-sale debt securities in unrealized loss positions are evaluated for impairment related to credit losses at least quarterly. For available-for-sale debt securities in an unrealized loss position, the Company assesses whether we intend to sell, or it is more likely than not that we will be required to sell the security before recovery of its amortized cost basis. If either of the criteria regarding intent or requirement to sell is met, the security’s amortized cost basis is written down to fair value through income. For available-for sale debt securities that do not meet the criteria, the Company evaluates whether the decline in fair value has resulted from credit losses or other factors. In making this assessment, management considers the extent to which fair value is less than amortized cost, any changes to the rating of the security by a rating agency, and adverse conditions specifically related to the security and the issuer, among other factors. If this assessment indicates that a credit loss exists, the Company compares the present value of cash flows expected to be collected from the security with the amortized cost basis of the security. If the present value of cash flows expected to be collected is less than the amortized cost basis for the security, a credit loss exists and an allowance for credit losses is recorded, limited to the amount that the fair value of the security is less than its amortized cost basis. Any impairment that has not been recorded through an allowance for credit losses is recognized in other comprehensive income, net of applicable taxes. No allowance for credit losses for available-for-sale debt securities was needed at June 30, 2025. Accrued interest receivable on available-for-sale debt securities is excluded from the estimate of credit losses. As of June 30, 2025, gross unrealized gains on the securities available-for-sale portfolio totaled approximately $3,888,000 and gross unrealized losses totaled approximately $266,251,000. The net amount of these two items, net of applicable taxes, is included in other comprehensive income (loss).

Previous wording

The first quarter of 2025 results of operations included acquisition-related expenses of $5,932,000 ($4,620,000, on an after tax basis) and also included Day 2 provision for credit losses under the CECL model of $16,200,000 ($12,150,000, on an after tax basis). On an adjusted basis, net income for first quarter 2025 was $27,287,000 or $0.79 per share, compared to $23,365,000, or $0.79 per share, for fourth quarter 2024. Adjusted net income and adjusted earnings per share are non-GAAP financial measures. Refer to “Use of Non-GAAP Financial Measures” contained in this Management’s Discussion and Analysis for additional information, including a reconciliation of non-GAAP financial measures to the most directly comparable GAAP financial measures.

Current wording

On an adjusted basis, net income for the second quarter of 2025 was $32,058,000, or $0.86 per share, compared with the adjusted second quarter 2024 net income of $20,351,000, or $0.69 per share. Net income, on an adjusted basis, for the six months ended June 30, 2025, was $59,345,000, or $1.64 per share, compared with the adjusted six months ended June 30, 2024 net income of $39,373,000, or $1.33 per share. Adjusted net income and adjusted earnings per share are non-GAAP financial measures. Refer to “Use of Non-GAAP Financial Measures” contained in this Management’s Discussion and Analysis for additional information, including a reconciliation of non-GAAP financial measures to the most directly comparable GAAP financial measures.

Previous wording

During the first quarter of 2025, net interest income, on a non tax-equivalent basis, totaled $66,572,000, an increase of $21,578,000, or 48%, compared to the first quarter of 2024 net interest income of $44,994,000. The increase in net interest income during the first quarter of 2025 compared with the first quarter of 2024 was primarily attributable to a higher level of earning assets driven by the Heartland acquisition and expansion of the Company’s net interest margin.

Current wording

During the second quarter of 2025, net interest income, on a non tax-equivalent basis, totaled $73,155,000, an increase of $27,184,000, or 59% compared to the second quarter of 2024 net interest income of $45,971,000. During the first six months of 2025, net interest income, on a non tax-equivalent basis, totaled $139,727,000, an increase of $48,762,000, or 54%, compared to the first six months of 2024 net interest income of $90,965,000. The increase in net interest income for both periods presented for 2025 compared with the same periods of 2024 was primarily attributable to a higher level of earning assets driven by the Heartland acquisition and an improvement of the Company’s net interest margin.

Previous wording

The tax equivalent net interest margin for the quarter ended March 31, 2025 was 3.96% compared with 3.35% in the first quarter of 2024. The Company’s net interest margin and net interest income in both periods presented were impacted by accretion of loan discounts on acquired loans. Accretion of discounts on acquired loans totaled $4,192,000 during the first quarter of 2025 and $360,000 during the first quarter of 2024. Accretion of discounts on acquired loans contributed approximately 24 basis points to the net interest margin in the first quarter of 2025 and 3 basis points in the first quarter of 2024.

Current wording

The tax equivalent net interest margin for the quarter ended June 30, 2025 was 3.92% compared with 3.34% in the second quarter of 2024. The tax equivalent net interest margin for the six months ended June 30, 2025 was 3.94% compared with 3.34% in the same period of 2024. The Company’s net interest margin and net interest income in both periods presented were impacted by accretion of loan discounts on acquired loans. Accretion of discounts on acquired loans totaled $3,483,000 during the second quarter of 2025 and $293,000 during the second quarter of 2024. Accretion of discounts on acquired loans totaled $7,675,000 and $653,000 for the first half of 2025 and 2024, respectively. Accretion of discounts on acquired loans contributed approximately 18 basis points to the net interest margin in the second quarter of 2025 and 2 basis points in the second quarter of 2024. Accretion of loan discounts on acquired loans contributed approximately 21 basis points to the net interest margin in the first half of 2025 compared to 1 basis point in the first half of 2024.

Previous wording

The continued improvement in the net interest margin, excluding the accretion of discount on acquired loans, during the first quarter of 2025 compared with the first quarter 2024 was largely driven by an improved yield on earning assets and a lower cost of deposits (excluding Heartland’s deposit base). The lower cost of deposits was driven by the Federal Reserve’s lowering of the Federal Funds rates over the last several months of 2024 and the Company’s ability to correspondingly lower deposit costs.

Current wording

The continued improvement in the net interest margin, excluding the accretion of discount on acquired loans, during the second quarter of 2025 compared with the second quarter of 2024 as well as the first six months of 2025 compared with the first six months of 2024 was largely driven by an improved yield on earning assets and a lower cost of deposits (excluding Heartland’s deposit base). The lower cost of deposits was driven by the Federal Reserve’s lowering of the Federal Funds rates over the last several months of 2024 and the Company’s ability to correspondingly lower deposit costs.

Previous wording

The Company provides for credit losses through regular provisions to the allowance for credit losses. The provision is affected by net charge-offs on loans and changes in specific and general allocations of the allowance. During the quarter ended March 31, 2025, the Company recorded a provision for credit losses of $15,300,000 compared with a provision for credit losses of $900,000 during the first quarter of 2024. During the first quarter of 2025, the provision for credit losses included $16,200,000 for the Day 2 CECL addition to the allowance for credit loss related to the Heartland acquisition.

Current wording

The Company provides for credit losses through regular provisions to the allowance for credit losses. The provision is affected by net charge-offs on loans and changes in specific and general allocations of the allowance. During the quarter ended June 30, 2025, the Company recorded a provision for credit losses of $1,200,000 compared with a provision for credit losses of $625,000 during the second quarter of 2024. During the six months ended June 30, 2025, the Company recorded a provision for credit losses of $16,500,000 compared with a provision for credit losses of $1,525,000 for the first half of 2024. The first quarter of 2025 included a provision for credit losses of $16,200,000 related to the “Day 2” adjustment for the Heartland acquisition.

Previous wording

Net charge-offs totaled $486,000, or 4 basis points, on an annualized basis, of average loans outstanding during the first quarter of 2025 compared with $911,000, or 9 basis points, on an annualized basis, of average loans during the first quarter of 2024.

Current wording

Net charge-offs totaled $848,000, or 6 basis points, on an annualized basis, of average loans outstanding during the second quarter of 2025 compared with $433,000, or 4 basis points, on an annualized basis, of average loans during the second quarter of 2024. Net charge-offs totaled $1,334,000, or 5 basis points, on an annualized basis, of average loans outstanding during the six months ended June 30, 2025 compared with $1,344,000, or 7 basis points, on an annualized basis, of average loans during the same period of 2024.

Previous wording

The provision for credit losses made during the three months ended March 31, 2025 was made at a level deemed necessary by management to absorb expected losses in the loan portfolio. A detailed evaluation of the adequacy of the allowance for credit losses is completed quarterly by management, the results of which are used to determine provision for credit losses. Management estimates the allowance balance required using past loan loss experience, the nature and volume of the portfolio, information about specific borrower situations and estimated collateral values, economic conditions and reasonable and supportable forecasts along with other qualitative and quantitative factors.

Current wording

The provision for credit losses made during the three and six months ended June 30, 2025 was made at a level deemed necessary by management to absorb expected losses in the loan portfolio. A detailed evaluation of the adequacy of the allowance for credit losses is completed quarterly by management, the results of which are used to determine provision for credit losses. Management estimates the allowance balance required using past loan loss experience, the nature and volume of the portfolio, information about specific borrower situations and estimated collateral values, economic conditions and reasonable and supportable forecasts along with other qualitative and quantitative factors.

Previous wording

At March 31, 2025, the Company changed its method for estimating the allowance for credit losses to the discounted cash flow model on a prospective basis for all loan segments except for the credit card loan segment. Prior to March 31, 2025, the Company utilized the static pool methodology in determining future credit losses. This change in methodology resulted in a decline of $1,674,000 to the allowance.

Current wording

At March 31, 2025, the Company changed its method for estimating the allowance for credit losses to the discounted cash flow model on a prospective basis for all loan segments except for the credit card loan segment. Prior to March 31, 2025, the Company utilized the static pool methodology in determining future credit losses. This change in methodology resulted in a decline of $1,674,000 to the allowance in the first quarter of 2025.

Previous wording

During the quarter ended March 31, 2025, non-interest income totaled $14,840,000, a decline of $982,000, or 6%, compared with the first quarter of 2024. The decline in the first quarter of 2025 compared to the same period of 2024 was the result of the sale of the GAI assets during the second quarter of 2024 partially mitigated by the Heartland acquisition. On an adjusted basis, non-interest income for first quarter 2025 was $14,840,000 compared to $12,898,000 for first quarter 2024. Adjusted non-interest income is a non-GAAP financial measure. Refer to “Use of Non-GAAP Financial Measures” section in this Management’s Discussion and Analysis for additional information, including a reconciliation of non-GAAP financial measures to the most directly comparable GAAP financial measures.

Current wording

During the quarter ended June 30, 2025, non-interest income totaled $16,733,000, a decline of $2,190,000, or 12%, compared with the second quarter of 2024. The decline in the second quarter of 2025 compared to the same period of 2024 was largely the result of the previously mentioned sale of the GAI assets during the second quarter of 2024 and securities portfolio restructuring transaction. On an adjusted basis, non-interest income for the second quarter of 2025 was $16,733,000 compared to $13,983,000 for the second quarter of 2024. Adjusted non-interest income is a non-GAAP financial measure. Refer to “Use of Non-GAAP Financial Measures” section in this Management’s Discussion and Analysis for additional information, including a reconciliation of non-GAAP financial measures to the most directly comparable GAAP financial measures.

Previous wording

Wealth management fees increased $470,000, or 14%, compared with the first quarter of 2024. The increase during the first quarter of 2025 compared with the first quarter of 2024 was largely attributable to increased assets under management driven by healthy capital markets throughout 2024 and continued strong new business growth in addition to the Heartland acquisition.

Current wording

Wealth management fees increased $382,000, or 10%, during the second quarter of 2025 compared with the second quarter of 2024. The increase during the second quarter of 2025 compared with the second quarter of 2024 was largely attributable to increased assets under management, driven by healthy capital markets throughout 2024 and continued strong new business results in 2025, including additions from the Heartland acquisition.

Previous wording

Service charges on deposit accounts increased $584,000, or 20%, compared with the first quarter of 2024. The increase during the first quarter of 2025 compared with the first quarter of 2024 was largely related to increased customer utilization of deposit services in addition to the Heartland acquisition.

Current wording

Service charges on deposit accounts increased $621,000, or 20%, during the quarter ended June 30, 2025 compared with the same period of 2024. The increase during the second quarter of 2025 compared with the second quarter of 2024 was largely attributable to the Heartland acquisition and increased customer utilization of deposit services.

Previous wording

No insurance revenues were recognized during the first quarter of 2025 as a result of the the sale of the assets of GAI effective June 1, 2024. Insurance revenues declined $2,878,000 during the first quarter of 2025, compared with the first quarter of 2024, due to the sale. For additional information on this sale, see Note 3 in the Notes to the Consolidated Financial Statements included in Item 1 of this Report.

Current wording

No insurance revenues were recognized during the second quarter of 2025 due to the sale of the GAI assets effective June 1, 2024. As a result, insurance revenues declined $1,506,000 during the second quarter of 2025, compared with the second quarter of 2024. As previously discussed, the sale of substantially all of the assets of GAI in June 2024 resulted in $38,323,000 in net proceeds. For additional information on this sale, see Note 3 in the Notes to the Consolidated Financial Statements included in Item 1 of this Report.

Previous wording

Other operating income increased $328,000, or 24%, compared with the first quarter of 2024. The increase during the first quarter of 2025 compared with the first quarter of 2024 was primarily attributable to the Heartland acquisition partially mitigated by a lower level of fees associated with interest rate swap transactions with loan customers.

Current wording

Other operating income increased $884,000, or 73%, in the second quarter of 2025 compared with the second quarter of 2024. The increase during the second quarter of 2025 compared with the second quarter of 2024 was primarily attributable to the Heartland acquisition.

Previous wording

Salaries and benefits increased $6,862,000, or 32%, compared with the first quarter of 2024. The increase in salaries and benefits during the first quarter of 2025 compared with the first quarter of 2024 was largely attributable to the Heartland acquisition completed on February 1, 2025. The first quarter of 2025 included approximately $1,843,000 of acquisition-related salary and benefit costs of a non-recurring nature, with the remainder of the increase due primarily to the salaries and benefits costs for the Heartland employee base.

Current wording

Salaries and benefits increased $5,681,000, or 27%, during the second quarter of 2025 compared with the second quarter of 2024. The increase in the second quarter of 2025 compared with the second quarter of 2024 was due primarily to the salaries and benefits costs for the Heartland employee base.

Previous wording

Occupancy, furniture and equipment expense increased $859,000, or 23%, compared to the first quarter of 2024. The increase during the first quarter of 2025 compared with the first quarter of 2024 was primarily attributable to the operating costs of the Heartland branch network.

Current wording

Occupancy, furniture and equipment expense increased $1,264,000, or 36%, for the three months ended June 30, 2025, compared to the same period of 2024. The increase during the three months ended June 30, 2025 compared with the same period of 2024 was primarily attributable to the operating costs of the Heartland branch network.

Previous wording

Data processing fees increased $2,684,000, or 95%, during the first quarter of 2025 compared with the first quarter of 2024. The increase during the first quarter of 2025 compared with the first quarter of 2024 was largely driven by operating costs of the existing Heartland systems and acquisition-related costs totaling approximately $1,323,000 during the first quarter of 2025.

Current wording

During the second quarter of 2025, data processing fees increased $1,067,000, or 35%, compared with the second quarter of 2024. The increase during the second quarter of 2025 compared with the same period of 2024 was largely driven by operating costs of the existing Heartland systems and acquisition-related costs during the second quarter of 2025.

Previous wording

Professional fees increased $2,589,000, or 162%, in the first quarter of 2025 compared with the first quarter of 2024. The increase during the first quarter of 2025 compared to the first quarter of 2024 was due in large part to professional fees associated with the Heartland acquisition. Merger and acquisition related professional fees totaled approximately $2,661,000 during the first quarter of 2025 compared to no merger or acquisition related professional fees in the first quarter of 2024.

Current wording

Professional fees declined $1,350,000, or 39%, in the second quarter of 2025 compared with the second quarter of 2024. The decline during the second quarter of 2025 compared with the same period of 2024 was due in large part to professional fees associated with the GAI sale transaction. Professional fees related to merger and acquisition activities totaled approximately $222,000 during the second quarter of 2025 and approximately $1,971,000 during the second quarter of 2024, with both periods being impacted by the Heartland acquisition and second quarter 2024 also being impacted by the GAI asset sale.

Previous wording

Intangible amortization increased $1,492,000, or 258%, compared with the first quarter of 2024. The increase was attributable to the Heartland acquisition.

Current wording

Intangible amortization increased $2,271,000, or 427%, during the second quarter of 2025 compared with the second quarter of 2024. The increase was attributable to the Heartland acquisition.

Previous wording

Other operating expenses increased $1,071,000, or 22%, compared with the first quarter of 2024. The increase in the first quarter of 2025 compared to the first quarter of 2024 was largely attributable to operating costs of Heartland.

Current wording

Other operating expenses increased $3,412,000, or 36%, during the first six months of 2025 compared with the same period of 2024. The increase in the first six months of 2025 compared with the same period of 2024 was largely attributable to the operating costs of Heartland.

Previous wording

The Company’s effective income tax rate was 21.1% and 17.9%, respectively, during the three months ended March 31, 2025 and 2024. The increase in effective tax rate for the three months ended March 31, 2025 as compared to the same period of the prior year was primarily attributable to a lower level of tax-exempt investment income in the first quarter of 2025 compared to the same period of 2024 which was driven by the previously discussed securities restructuring that occurred in the second quarter of 2024. The effective tax rate in all periods presented was lower than the blended statutory rate resulting primarily from the Company’s tax-exempt investment income on securities, loans and company-owned life insurance, income tax credits generated from affordable housing projects, and income generated by subsidiaries domiciled in a state with no state or local income tax.

Current wording

The Company’s effective income tax rate was 19.94% and 22.81%, respectively, during the three months ended June 30, 2025 and 2024. The Company’s effective income tax rate was 20.2% and 20.5%, respectively, during the six months ended June 30, 2025 and 2024. The effective tax rate in all periods presented was lower than the blended statutory rate resulting primarily from the Company’s tax-exempt investment income on securities, loans and company-owned life insurance, income tax credits generated from affordable housing projects, and income generated by subsidiaries domiciled in a state with no state or local income tax.

Previous wording

Total assets for the Company totaled $8.420 billion at March 31, 2025, representing an increase of $2.124 billion compared with December 31, 2024. The increase in total assets at March 31, 2025 compared with year-end 2024 was in large part attributable to the Heartland acquisition.

Current wording

Total assets for the Company totaled $8.280 billion at June 30, 2025, representing an increase of $1.984 billion compared with December 31, 2024. The increase in total assets at June 30, 2025 compared with year-end 2024 was in large part attributable to the Heartland acquisition.

Previous wording

March 31, 2025 total loans increased $1.522 billion compared with December 31, 2024. The increase in total loans at March 31, 2025 compared with year-end 2024 was largely due to the acquisition of Heartland.

Current wording

June 30, 2025 total loans increased $1.615 billion compared with December 31, 2024. The increase in total loans at June 30, 2025 compared with year-end 2024 was largely due to the acquisition of Heartland and to a lesser extent organic loan growth from throughout the Company’s existing market areas.

Previous wording

Excluding loans acquired through the Heartland acquisition, total loans increased $16.8 million, or approximately 2% on an annualized basis, at March 31, 2025 compared with December 31, 2024. Commercial and industrial loans declined approximately $11.0 million, or 7% on an annualized basis, during the first quarter of 2025 compared with year-end 2024, and commercial real estate loans increased $54.7 million, or 10% on an annualized basis, while agricultural loans seasonally declined $22.4 million, or 21% on an annualized basis. During the first quarter of 2025 compared with year-end 2024, retail loans declined $4.5 million, or 2% on an annualized basis.

Current wording

Excluding loans acquired through the Heartland acquisition, total loans increased $100.1 million, or approximately 5% on an annualized basis, at June 30, 2025 compared with December 31, 2024. From December 31, 2024 to June 30, 2025, excluding the acquired Heartland loans, commercial and industrial loans increased approximately $6.9 million, or 2% on an annualized basis, commercial real estate loans increased $88.3 million, or 8% on an annualized basis, and retail loans increased $4.5 million, or 5% on an annualized basis, while agricultural loans declined $5.8 million, or 3% on an annualized basis.

Previous wording

The composition of the loan portfolio has remained relatively stable and diversified over the past several years. The addition of the Heartland loan portfolio resulted in only modest changes to the overall portfolio composition, most notably in the residential mortgage loan segment. The portfolio is most heavily weighted in commercial real estate loans at 54% of the portfolio, followed by commercial and industrial loans at 14% of the portfolio, residential mortgage loans at 14% of the portfolio (up from 9% at year-end 2024), agricultural loans at 8% of the portfolio, and home equity loans at 7% of the portfolio. The Company’s commercial lending is extended to various industries, including multi-family housing and lodging, agribusiness and manufacturing, as well as health care, wholesale, and retail services.

Current wording

The composition of the loan portfolio has remained relatively stable and diversified over the past several years. The addition of the Heartland loan portfolio resulted in only modest changes to the overall portfolio composition, most notably in the residential mortgage loan segment. The portfolio is most heavily weighted in commercial real estate loans at 54% of the portfolio, followed by commercial and industrial loans at 14% of the portfolio, residential mortgage loans at 14% of the portfolio (up from 9% at year-end 2024), agricultural loans at 8% of the portfolio, and home equity loans at 8% of the portfolio. The Company’s commercial lending is extended to various industries, including multi-family housing and lodging, agribusiness and manufacturing, as well as health care, wholesale, and retail services.

Previous wording

The Company’s allowance for credit losses totaled $75.2 million at March 31, 2025 compared to $44.4 million at December 31, 2024. The allowance for credit losses represented 1.33% of period-end loans at March 31, 2025 compared with 1.08% at December 31, 2024. At March 31, 2025, the Company changed its estimate methodology for the allowance for credit losses from the static pool to the discounted cash flow method which resulted in minimal impact to the allowance.

Current wording

The Company’s allowance for credit losses totaled $75.5 million at June 30, 2025 compared to $44.4 million at December 31, 2024. The allowance for credit losses represented 1.32% of period-end loans at June 30, 2025 compared with 1.08% at December 31, 2024. At March 31, 2025, the Company changed its estimate methodology for the allowance for credit losses from the static pool to the discounted cash flow method which resulted in minimal impact to the allowance.

Previous wording

The Company added $32.1 million to the allowance for credit losses in conjunction with the closing of the Heartland acquisition on February 1, 2025, related to the Heartland loan portfolio. Of the increase in the allowance for credit losses for the Heartland portfolio, $16.2 million was recorded through the provision for credit losses on “Day 2” under the CECL model.

Current wording

The Company added $32.1 million to the allowance for credit losses in conjunction with the closing of the Heartland acquisition on February 1, 2025, related to the Heartland loan portfolio. Of the increase in the allowance for credit losses for the Heartland portfolio, $16.2 million was recorded through the provision for credit losses for the “Day 2” Adjustment under the CECL model.

Previous wording

Under the CECL model, certain acquired loans continue to carry a fair value discount as well as an allowance for credit losses. As of March 31, 2025, the Company held net discounts on acquired loans of $64.3 million, which included $61.8 million related to the Heartland loan portfolio.

Current wording

Under the CECL model, certain acquired loans continue to carry a fair value discount as well as an allowance for credit losses. As of June 30, 2025, the Company held net discounts on acquired loans of $60.9 million, which included $58.4 million related to the Heartland loan portfolio.

Previous wording

Non-performing assets totaled $18.6 million at March 31, 2025 compared to $11.1 million at December 31, 2024. Non-performing assets represented 0.22% of total assets at March 31, 2025 compared with 0.18% at year-end 2024. Non-performing loans totaled $18.6 million at March 31, 2025 compared to $11.1 million at December 31, 2024. Non-performing loans represented 0.33% of total loans at March 31, 2025 compared to 0.27% at December 31, 2024. The increase in non-performing assets was primarily attributable to the Heartland acquisition. As of March 31, 2025, non-performing assets from the Heartland acquisition totaled $5.4 million.

Current wording

Non-performing assets totaled $25.1 million at June 30, 2025 compared to $11.1 million at December 31, 2024. Non-performing assets represented 0.30% of total assets at June 30, 2025 compared with 0.18% at year-end 2024. Non-performing loans totaled $25.1 million at June 30, 2025 compared to $11.1 million at December 31, 2024. Non-performing loans represented 0.44% of total loans at June 30, 2025 compared to 0.27% at December 31, 2024.

Previous wording

March 31, 2025 total deposits increased $1.769 billion compared to year-end 2024. The increase in total deposits at March 31, 2025 compared with year-end 2024 was largely attributable to the Heartland acquisition. As of March 31, 2025, deposits from the Heartland acquisition totaled $1.755 billion. Excluding the deposits related to the acquisition, total deposits were relatively stable with an increase of $13.4 million, or 1% on an annualized basis, at March 31, 2025 compared with year-end 2024.

Current wording

June 30, 2025 total deposits increased $1.626 billion compared to year-end 2024. The increase in total deposits at June 30, 2025 compared with year-end 2024 was largely attributable to the Heartland acquisition. As of June 30, 2025, deposits from the Heartland acquisition totaled $1.608 billion. Excluding the deposits related to the acquisition, total deposits were relatively stable with an increase of $18.1 million, or approximately 1% on an annualized basis, at June 30, 2025 compared with year-end 2024.

Previous wording

As of March 31, 2025, shareholders’ equity increased by $331.0 million to $1.046 billion compared with $715.1 million at year-end 2024. The increase in shareholders’ equity was primarily attributable to the issuance of the Bancorp’s common shares in the acquisition of Heartland. Approximately 7.7 million shares were issued to Heartland shareholders, resulting in an increase to shareholders’ equity of $320.0 million.

Current wording

As of June 30, 2025, shareholders’ equity increased by $354.4 million to $1.070 billion compared with $715.1 million at year-end 2024. The increase in shareholders’ equity was primarily attributable to the issuance of approximately 7.7 million shares of the Bancorp’s common stock in the acquisition of Heartland, resulting in an increase to shareholders’ equity of $320.0 million.

Previous wording

Shareholders’ equity represented 12.4% of total assets at March 31, 2025 and 11.4% of total assets at December 31, 2024. Shareholders’ equity included $418.5 million of goodwill and other intangible assets at March 31, 2025 compared to $183.0 million of goodwill and other intangible assets at December 31, 2024.

Current wording

Shareholders’ equity represented 12.9% of total assets at June 30, 2025 and 11.4% of total assets at December 31, 2024. Shareholders’ equity included $417.1 million of goodwill and other intangible assets at June 30, 2025 compared to $183.0 million of goodwill and other intangible assets at December 31, 2024.

Previous wording

The Company adopted the CECL accounting standard under GAAP effective January 1, 2020. The regulatory capital rules applicable to the Company provided an optional three-year phase-in period for the day-one adverse regulatory capital effects of adopting CECL. In addition, as part of pandemic-related legislation enacted during 2020, banking organizations were further permitted to mitigate the estimated cumulative regulatory capital effects of CECL for up to an additional two years. As a result, on January 1, 2022, the Company began the required three-year phase-in by reflecting 25% of the previously deferred estimated capital impact of CECL in its regulatory capital. An additional 25% was phased in on each of January 1, 2023 and January 1,

Current wording

The Company adopted the CECL accounting standard under GAAP effective January 1, 2020. The regulatory capital rules applicable to the Company provided an optional three-year phase-in period for the day-one adverse regulatory capital effects of adopting CECL. In addition, as part of pandemic-related legislation enacted during 2020, banking organizations were further permitted to mitigate the estimated cumulative regulatory capital effects of CECL for up to an additional two years. As a result, on January 1, 2022, the Company began the required three-year phase-in by reflecting 25% of the previously deferred estimated capital impact of CECL in its regulatory capital. An additional 25% was phased in on each of January 1, 2023 and January 1, 2024, and January 1, 2025. As of January 1, 2025, the adverse cumulative effects of adopting CECL have been fully phased into our regulatory capital.

Previous wording

The Consolidated Statement of Cash Flows details the elements of changes in the Company’s consolidated cash and cash equivalents. Total cash and cash equivalents increased $253.5 million during the three months ended March 31, 2025 ending at $442.3 million. During the three months ended March 31, 2025, operating activities resulted in net cash inflows of $36.6 million. Investing activities resulted in net cash inflows of $213.0 million during the three months ended March 31, 2025. Financing activities resulted in net cash inflows for the three months ended March 31, 2025 of $3.9 million.

Current wording

The Consolidated Statement of Cash Flows details the elements of changes in the Company’s consolidated cash and cash equivalents. Total cash and cash equivalents increased $11.4 million during the six months ended June 30, 2025 ending at $200.1 million. During the six months ended June 30, 2025, operating activities resulted in net cash inflows of $64.8 million. Investing activities resulted in net cash inflows of $110.5 million during the six months ended June 30, 2025. Financing activities resulted in net cash outflows for the six months ended June 30, 2025 of $164.0 million.

Previous wording

The Company’s bank subsidiary is authorized by its Board to borrow up to $1.68 billion at the FHLB, but availability at March 31, 2025 was limited to approximately $389 million based on the then pledged collateral and outstanding borrowings. In addition, the Company had a borrowing capacity of approximately $649 million at the Federal Reserve Bank as of March 31, 2025, based on the then pledged collateral. The capacity for borrowings from the FHLB and the Federal Reserve Bank could be increased, in each case, by the Company pledging additional available collateral. The Company’s Asset/Liability Committee closely monitors the availability of these sources as part of its overall oversight and management of the bank subsidiary’s liquidity.

Current wording

The Company’s bank subsidiary is authorized by its Board to borrow up to $1.66 billion at the FHLB, but availability at June 30, 2025 was limited to approximately $476 million based on the then pledged collateral and outstanding borrowings. In addition, the Company had a borrowing capacity of approximately $727 million at the Federal Reserve Bank as of June 30, 2025, based on the then pledged collateral. The capacity for borrowings from the FHLB and the Federal Reserve Bank could be increased, in each case, by the Company pledging additional available collateral. The Company’s Asset/Liability Committee closely monitors the availability of these sources as part of its overall oversight and management of the bank subsidiary’s liquidity.

Previous wording

The parent company is a corporation separate and distinct from its bank and other subsidiaries. The Company uses funds at the parent-company level to pay dividends to its shareholders, to acquire or make other investments in other businesses or their securities or assets, to repurchase its stock from time to time, and for other general corporate purposes including debt service. The parent company does not have access at the parent-company level to the deposits and certain other sources of funds that are available to its bank subsidiary to support its operations. Instead, the parent company has historically derived most of its revenues from dividends paid to the parent company by its bank subsidiary. The Company’s banking subsidiary is subject to statutory restrictions on its ability to pay dividends to the parent company. The parent company has, from time-to-time, supplemented the dividends received from its subsidiaries with borrowings. As of March 31, 2025, the parent company had approximately $88.7 million of cash and cash equivalents available to meet its cash flow needs.

Current wording

The parent company is a corporation separate and distinct from its bank and other subsidiaries. The Company uses funds at the parent-company level to pay dividends to its shareholders, to acquire or make other investments in other businesses or their securities or assets, to repurchase its stock from time to time, and for other general corporate purposes including debt service. The parent company does not have access at the parent-company level to the deposits and certain other sources of funds that are available to its bank subsidiary to support its operations. Instead, the parent company has historically derived most of its revenues from dividends paid to the parent company by its bank subsidiary. The Company’s banking subsidiary is subject to statutory restrictions on its ability to pay dividends to the parent company. The parent company has, from time-to-time, supplemented the dividends received from its subsidiaries with borrowings. As of June 30, 2025, the parent company had approximately $76.4 million of cash and cash equivalents available to meet its cash flow needs.

Previous wording

The accounting and reporting policies of the Company conform to GAAP and general practices within the banking industry. As a supplement to GAAP, the Company has provided certain, non-GAAP financial measures, which it believes are useful because they assist investors in assessing the Company’s operating performance. Specifically, the Company has presented its net income, earnings per share, provision for credit losses, non-interest expense, non-interest income, efficiency ratio, and net interest margin on an as adjusted basis for the periods set forth below to reflect the exclusion of the following items: (1) the CECL “Day 2” provision expense for acquired loans that have only insignificant credit deterioration (i.e., non-PCD loans) related to the Heartland merger; (2) non-recurring expenses related to the Heartland merger; and (3) the operating results for GAI, whose assets were sold effective June 1, 2024. Management believes excluding such items from these financial measures may be useful in assessing the Company’s underlying operational performance since the applicable transactions do not pertain to its core business operations and exclusion may facilitate better comparability between periods. In addition, management believes that by excluding such items the measures are useful to the Company, as well as analysts and investors, in assessing operating performance. Management also believes excluding these items may enhance comparability for peer comparison purposes.

Current wording

The accounting and reporting policies of the Company conform to GAAP and general practices within the banking industry. As a supplement to GAAP, the Company has provided certain, non-GAAP financial measures, which it believes are useful because they assist investors in assessing the Company’s operating performance. Specifically, the Company has presented its net income, earnings per share, provision for credit losses, non-interest expense, non-interest income, efficiency ratio, and net interest margin on an as adjusted basis for the periods set forth below to reflect the exclusion of the following items: (1) the CECL “Day 2” provision expense for acquired loans that have only insignificant credit deterioration (i.e., non-PCD loans) related to the Heartland merger; (2) non-recurring expenses related to the Heartland merger; (3) the operating results for GAI, whose assets were sold effective June 1, 2024; (4) the gain on the sale of GAI assets; and (5) the loss related to the securities portfolio restructuring transaction that occurred in the second quarter of 2024. Management believes excluding such items from these financial measures may be useful in assessing the Company’s underlying operational performance since the applicable transactions do not pertain to its core business operations and exclusion may facilitate better comparability between periods. In addition, management believes that by excluding such items the measures are useful to the Company, as well as analysts and investors, in assessing operating performance. Management also believes excluding these items may enhance comparability for peer comparison purposes.