LAKELAND FINANCIAL CORP

Previous wording

Net income in the first three months of 2025 was $20.1 million, which decreased $3.3 million, or 14.2%, from $23.4 million for the comparable period of 2024. Diluted income per common share was $0.78 in the first three months of 2025, a decrease of 14.3% from $0.91 in the comparable period of 2024. The decrease in net income for 2025 wasprimarily due to an increase in the provision for credit losses of $5.3 million, or 347.4%, an increase in noninterest expense of $2.1 million, or 6.7%, and a decrease in noninterest income of $1.7 million, or 13.4%. Offsetting these effects was an increase to net interest income of $5.5 million, or 11.5%. Pretax pre-provision earnings, a non-GAAP measure calculated by adding net interest income to noninterest income and subtracting noninterest expense, were $31.0 million in the first three months of 2025, an increase of $1.7 million, or 5.9%, compared to $29.3 million for the comparable period of 2024.

Current wording

Net income in the first six months of 2025 was $47.1 million, which increased $1.1 million, or 2.4%, from $46.0 million for the comparable period of 2024. Diluted income per common share was $1.82 in the first six months of 2025, an increase of 2.2% from $1.78 in the comparable period of 2024. The increase in net income for 2025 wasprimarily due to an increase to net interest income of $12.0 million, or 12.6%, a decrease in noninterest expense of $843,000, or 1.3%, and a decrease in the provision for credit losses of $0.2 million, or 2.0%. Offsetting these positive contributions to net income was a decrease in noninterest income of $10.6 million, or 32.2%. Pretax pre-provision earnings, a non-GAAP measure calculated by adding net interest income to noninterest income and subtracting noninterest expense, were $67.0 million in the first six months of 2025, an increase of $2.2 million, or 3.5%, compared to $64.7 million for the comparable period of 2024. Core operational profitability, a non-GAAP measure that excludes the impact of certain non-routine operating events that occurred during 2024, improved by$5.2 million, or 12.5%, from $41.8 million to $47.1 million for the six months ended June 30, 2024 and 2025, respectively.

Previous wording

Annualized return on average total equity was 11.70% in the first three months of 2025 versus 14.59% in the comparable period of 2024. Annualized return on average total assets was 1.20% in the first three months of 2025 versus 1.44% for the comparable period of 2024. The Company's average equity to average assets ratio was 10.29% in the first three months of 2025 versus 9.84% in the comparable period of 2024.

Current wording

Annualized return on average total equity was 13.62% in the first six months of 2025 versus 14.39% in the comparable period of 2024. Annualized return on average total assets was 1.39% in the first six months of 2025 versus 1.40% for the comparable period of 2024. The Company's average equity to average assets ratio was 10.19% in the first six months of 2025 versus 9.73% in the comparable period of 2024.

Previous wording

The Company’s tangible common equity to tangible assets ratio, which is a non-GAAP financial measure, was 10.09% at March 31, 2025, compared to 9.80% at March 31, 2024 and 10.19% at December 31, 2024. Unrealized losses from available-for-sale investment securities were $188.3 million at March 31, 2025, compared to $189.9 million at March 31, 2024 and $191.1 million at December 31, 2024. When excluding the impact of accumulated other comprehensive income (loss) ("AOCI") on tangible common equity and tangible assets, the Company's adjusted tangible common equity to adjusted tangible assets ratio, which is a non-GAAP financial measure, was 12.19% at March 31, 2025, compared to 12.03% at March 31, 2024 and 12.37% at December 31, 2024.

Current wording

The Company’s tangible common equity to tangible assets ratio, which is a non-GAAP financial measure, was 10.15% at June 30, 2025, compared to 9.91% at June 30, 2024 and 10.19% at December 31, 2024. Unrealized losses from available-for-sale investment securities were $185.3 million at June 30, 2025, compared to $194.9 million at June 30, 2024 and $191.1 million at December 31, 2024. When excluding the impact of accumulated other comprehensive income (loss) ("AOCI") on tangible common equity and tangible assets, the Company's adjusted tangible common equity to adjusted tangible assets ratio, which is a non-GAAP financial measure, was 12.17% at June 30, 2025, compared to 12.18% at June 30, 2024 and 12.37% at December 31, 2024.

Previous wording

Total assets were $6.851 billion as of March 31, 2025 versus $6.678 billion as of December 31, 2024, an increase of $172.8 million, or 2.6%. Balance sheet expansion was driven by increases to total loans, net of the allowance for credit losses, which increased $98.8 million, or 2.0%, cash and cash equivalents, which increased $67.0 million, or 39.8%, and available-for-sale securities, which increased $9.4 million, or 1.0%. Funding the balance sheet expansion between December 31, 2024 and March 31, 2025 were total deposits, which increased $59.2 million, or 1.0%, and total borrowings, which increased $108.2 million. Total equity increased $10.6 million, or 1.5%, from $683.9 million at December 31, 2024 to $694.5 million at March 31, 2025. Retained earnings increased $7.2 million, or 1.0%, primarily as a result of net income of $20.1 million and reduced by dividends declared and paid of $12.8 million.

Current wording

Total assets were $6.964 billion as of June 30, 2025 versus $6.678 billion as of December 31, 2024, an increase of $285.9 million, or 4.3%. Balance sheet expansion was driven by increases to total loans, net of the allowance for credit losses, which increased $128.3 million, or 2.5%, cash and cash equivalents, which increased $142.0 million, or 84.4%, and available-for-sale securities, which increased $5.5 million, or 0.6%. The balance sheet expansion from December 31, 2024 to June 30, 2025 was funded by an increase in total deposits of $275.9 million, or 4.7%. Total equity increased $26.1 million, or 3.8%, from $683.9 million at December 31, 2024 to $710.0 million at June 30, 2025. Retained earnings increased $21.3 million, or 2.9%, primarily as a result of net income of $47.1 million and reduced by dividends declared and paid of $25.7 million.

Previous wording

Selected income statement information for the three months ended March 31, 2025 and 2024 is presented in the following table:

Current wording

Selected income statement information for the three and six months ended June 30, 2025 and 2024 is presented in the following table:

Previous wording

Adjusted core noninterest income, adjusted earnings before income taxes, core operational profitability, core operational diluted earnings per common share and adjusted core efficiency ratio are non-GAAP financial measures calculated based on GAAP amounts. These adjusted amounts are calculated by excluding the impact of insurance recoveries related to the 2023 wire fraud loss for the periods presented below. Management considers these measures of financial performance to be meaningful to understanding the company’s core business performance for these periods.

Current wording

Adjusted core noninterest income, adjusted core noninterest expense, adjusted earnings before income taxes, core operational profitability, core operational diluted earnings per common share and adjusted core efficiency ratio are non-GAAP financial measures calculated based on GAAP amounts. These adjusted amounts are calculated by excluding the impact of the net gain on Visa shares, legal accrual and insurance recovery for the periods presented below. Management considers these measures of financial performance to be meaningful to understanding the Company’s core business performance for these periods.

Previous wording

(1) Core operational profitability was $751,000 lower than reported net income for the three months ended March 31, 2024.

Current wording

(1)Core operational profitability was $3.4 million lower than reported net income for the three months ended June 30, 2024 and $4.1 million lower for the six months ended June 30, 2024.

Previous wording

Net income was $20.1 million in the first three months of 2025, which decreased $3.3 million, or 14.2%, from $23.4 million for the comparable period of 2024. Diluted income per common share was $0.78 in the first three months of 2025, a decrease of 14.3% from $0.91 in the comparable period of 2024. The decrease in net income for the first three months of 2025 wasprimarily due to an increase in the provision for credit losses of $5.3 million, or 347.4%, an increase in noninterest expense of $2.1 million, or 6.7%, and a decrease to noninterest income of $1.7 million, or 13.4%. Offsetting these effects was an increase to net interest income of $5.5 million, or 11.5%.

Current wording

Net income was $47.1 million in the first six months of 2025, which increased $1.1 million, or 2.4%, from $46.0 million for the comparable period of 2024. Diluted income per common share was $1.82 in the first six months of 2025, an increase of 2.2% from $1.78 in the comparable period of 2024. The increase in net income for the first six months of 2025 wasprimarily due to an increase to net interest income of $12.0 million, or 12.6%, a decrease in noninterest expense of $843,000, or 1.3%, and a decrease in the provision for credit losses of $200,000, or 2.0%. Offsetting these positive contributions to net income was a decrease to noninterest income of $10.6 million, or 32.2%. Core operational profitability, a non-GAAP measure that excludes the impact of certain non-routine operating events that occurred during 2024, improved by$5.2 million, or 12.5%, from $41.8 million to $47.1 million for the six months ended June 30, 2024 and 2025, respectively.

Previous wording

(1)Tax exempt income was converted to a fully taxable equivalent basis at a 21 percent tax rate. The tax equivalent rate for tax exempt loans and tax exempt securities acquired after January 1, 1983 included the Tax Equity and Fiscal Responsibility Act of 1982 (“TEFRA”) adjustment applicable to nondeductible interest expenses. Taxable equivalent basis adjustments were $1.1 million and$1.3 million for the three-month periods ended March 31, 2025 and March 31, 2024, respectively.

Current wording

(1)Tax exempt income was converted to a fully taxable equivalent basis at a 21 percent tax rate. The tax equivalent rate for tax exempt loans and tax exempt securities acquired after January 1, 1983 included the Tax Equity and Fiscal Responsibility Act of 1982 (“TEFRA”) adjustment applicable to nondeductible interest expenses. Taxable equivalent basis adjustments were $1.1 million and $1.2 million in the three-month periods ended June 30, 2025 and June 30, 2024, respectively.

Previous wording

Net interest income, on a fully tax equivalent basis, increased $5.3 million, or 10.9%, to $54.0 million for the three months ended March 31, 2025, compared to $48.7 million for the first three months of 2024. The increase in net interest income on a fully tax equivalent basis was driven bya decrease in deposit interest expense of$4.7 million, or 11.4%, from$41.2 million to$36.5 million. Borrowings expense declined by $1.3 million, or 54.3%. Securities interest income contributed further to the increase in fully tax equivalent net interest income, increasing by$303,000, or 3.8%. A decline in loan interest income negatively impacted fully tax equivalent net interest income, decreasing $1.1 million, or 1.3%, from $83.2 million to $82.1 million between the two periods.

Current wording

Net interest income, on a fully tax equivalent basis, increased $11.8 million, or 12.0%, to $110.0 million for the six months ended June 30, 2025, compared to $98.2 million for the first six months of 2024. The increase in net interest income on a fully tax equivalent basis was driven bya decrease in deposit interest expense of$10.0 million, or 11.6%, from$85.5 million to$75.6 million. Borrowings expense declined by$2.0 million, or 57.0%. Securities interest income contributed further to the increase in fully tax equivalent net interest income, increasing by$638,000, or 4.0%. A decline in loan interest income negatively impacted fully tax equivalent net interest income, decreasing $1.3 million, or 0.8%, from $168.2 million to $166.9 million between the two periods, due primarily to the decline in interest income from variable rate loans that resulted from the decline in interest rates.

Previous wording

Total average earning assets were $6.431 billion for the three months ended March 31, 2025, an increase of $213.9 million, or 3.4%, compared to $6.217 billion for the three months ended March 31, 2024. Average loans outstanding drove the increase to total average earning assets, increasing $214.9 million, or 4.3%, to $5.186 billion from $4.971 billion for the three months ended March 31, 2025 and 2024, respectively. Offsetting this increase was a decrease to average investment securities of $22.1 million, or 1.9%, to$1.136 billion from$1.159 billion between the respective periods. Total average interest bearing liabilities were $4.716 billion for the three months ended March 31, 2025, an increase of $184.3 million, or 4.1%, from $4.532 billion for the three months ended March 31, 2024. This increase was driven by increased interest bearing deposits of $260.1 million, or 6.0%, from $4.356 billion for the three months ended March 31, 2024 to $4.616 billion for the three months ended March 31, 2025. Offsetting the increase to average interest bearing deposits was a decrease in total average borrowings of $75.7 million, or 43.1%, to $100.1 million from $175.8 million for the three months ended March 31, 2025 and 2024, respectively. Noninterest bearing demand deposits decreased $15.8 million, or 1.2%, to$1.258 billion from$1.274 billion between the two periods.

Current wording

Total average earning assets were $6.501 billion for the six months ended June 30, 2025, an increase of $245.0 million, or 3.9%, compared to $6.256 billion for the six months ended June 30, 2024. Average loans outstanding drove the increase to total average earning assets, increasing $205.0 million, or 4.1%, to $5.208 billion from $5.003 billion for the six months ended June 30, 2025 and 2024, respectively. Offsetting this increase was a decrease to average investment securities of $7.7 million, or 0.7%, to$1.131 billion from$1.139 billion between the respective periods. Total average interest bearing liabilities were $4.802 billion for the six months ended June 30, 2025, an increase of $203.0 million, or 4.4%, from $4.599 billion for the six months ended June 30, 2024. This increase was driven by increased interest bearing deposits of $262.4 million, or 5.9%, from $4.473 billion for the six months ended June 30, 2024 to $4.735 billion for the six months ended June 30, 2025. Offsetting the increase to average interest bearing deposits was a decrease in total average borrowings of $59.3 million, or 46.9%, to $67.1 million from $126.4 million for the six months ended June 30, 2025 and 2024, respectively. Noninterest bearing demand deposits decreased $1.3 million, or 0.1%, to$1.251 billion from$1.253 billion between the two periods.

Previous wording

The tax equivalent net interest margin was 3.40% for the three months ended March 31, 2025, compared to 3.15% during the first three months of 2024, representing a 25 basis point expansion between the two periods. The net interest margin increase was primarily driven by a decrease to interest expense as a percentage of average earning assets, which decreased to 2.37% for thethree months ended March 31, 2025, down from 2.82% for the comparable period of 2024, for a decrease of 45 basis points. This decline was attributable to a decrease in the rate for total interest bearing liabilities of 64 basis points from 3.87% to 3.23% between the respective periods. This decrease was driven by reduced costs associated with the repricing of the Company's interest bearing deposits as a result of monetary policy easing from the Federal Reserve Bank. The decrease in interest expense for interest bearing deposits was a result ofa decrease in the average rate for interest bearing deposits of 60 basis points, from 3.80% to 3.20%. Offsetting the decrease in average rate wasan increase in average interest bearing deposits of$260.1 million, or 6.0%, from $4.356 billion for the three months ended March 31, 2024 to $4.616 billion for thethree months ended March 31, 2025. The decline provided by the reduction in interest expense as a percentage of average earning assets was amplified further by reduced borrowings expense as compared to the prior year. The Company anticipates the cost of funds would continue to respond favorably to any further monetary policy easing by the Federal Reserve Bank. The improvement in interest expense as a percentage of average earning assets was offset by a 20 basis point decrease in interest income as a percentage of average earning assets, which declined from 5.97% to 5.77%. This decrease was attributable to a decline in average loan yields, which decreased 31 basis to 6.42% for the three months ended March 31, 2025, down from 6.73% for the comparable period of 2024. Offsetting the impact the decline in average yield had on interest income as a percentage of average earning assets was an increase in average loans of$214.9 million, or 4.3%, to$5.186 billion from$4.971 billion between the respective periods. The Company expects that any continued easing of monetary policy by the Federal Reserve Bank, which commenced in September 2024, would exert downward pressure on loan yields as variable rate commercial loans reprice lower; however, this decline may be countered by further reductions in deposit pricing.

Current wording

The tax equivalent net interest margin was 3.41% for the six months ended June 30, 2025, compared to 3.16% during the first six months of 2024, representing a 25 basis point expansion between the two periods. The net interest margin increase was primarily driven by a decrease to interest expense as a percentage of average earning assets, which decreased to 2.39% for thesix months ended June 30, 2025, down from 2.86% for the comparable period of 2024, or a decrease of 47 basis points. This decline was attributable to a decrease in the rate for total interest bearing liabilities of 65 basis points from 3.89% to 3.24% between the respective periods. These decreases were driven by reduced costs associated with the repricing of the Company's interest bearing deposits as a result of monetary policy easing from the Federal Reserve Bank. The decrease in the rate for interest bearing liabilities was driven bya decrease in the average rate for interest bearing deposits of 63 basis points, from 3.85% to 3.22%. Contributing further to the reduction in the rate for interest bearing liabilities was a reduction in the average borrowings rate, which declined 105 basis points from 5.62% to 4.57%. The Company anticipates the cost of funds would continue to respond favorably to any further monetary policy easing by the Federal Reserve Bank. The improvement in interest expense as a percentage of average earning assets was offset by a 22 basis point reduction in interest income as a percentage of average earning assets, which declined from 6.02% to 5.80%. This decrease was primarily attributable to a decline in average loan yields, which decreased 30 basis points to 6.46% for the six months ended June 30, 2025, down from 6.76% for the comparable period of 2024. This decrease was offset by an increase to investment securities yields, which increased 14 basis points from 2.85% to 2.99%. The Company expects that any continued easing of monetary policy by the Federal Reserve Bank, which commenced in September 2024, would exert downward pressure on loan yields as variable rate commercial loans reprice lower; however, this decline may be countered by further reductions in deposit pricing. During the six months ended June 30, 2025, the Company recorded a prepayment fee of $541,000 from the early payment of a fixed rate commercial loan, which was recorded as part of interest income. The prepayment fee benefited net interest margin by 1 basis point during the six months ended June 30, 2025. Excluding the impact of the prepayment fee, net interest margin increased by 24 basis points to 3.40%.

Previous wording

Additional factors considered by management included key loan quality metrics, reserve coverage of nonperforming loans, economic conditions in the Company’s markets, and changes in the facts and circumstances of watch list credits, which includes the security position of the borrower. Management’s overall view on current credit quality was also a factor in the determination of the provision for credit losses. The Company’s management continues to monitor the adequacy of the provision based on loan levels, asset quality, economic conditions and other factors that may influence the assessment of the collectability of loans.

Current wording

Additional factors considered by management in determining provision expense included key loan quality metrics, reserve coverage of nonperforming loans, economic conditions in the Company’s markets, and changes in the facts and circumstances of watch list credits, which includes the security position of the borrower. Management’s overall view on current credit quality was also a factor in the determination of the provision for credit losses. The Company’s management continues to monitor the adequacy of the provision based on loan levels, asset quality, economic conditions and other factors that may influence the assessment of the collectability of loans.

Previous wording

Noninterest income categories for the three months ended March 31, 2025 and 2024 are shown in the following tables:

Current wording

Noninterest income categories for the three and six months ended June 30, 2025 and 2024 are shown in the following tables:

Previous wording

Noninterest income decreased $1.7 million, or 13.4%, to $10.9 million for the first quarter of 2025, compared to $12.6 million for the first quarter of 2024. Adjusted core noninterest income, a non-GAAP financial measure that excludes the effect of the insurance recovery recorded during the first quarter of 2024, was $11.6 million for the first quarter of 2024, a decrease of $684,000, or 5.9%, compared to $10.9 million for the first quarter of 2025. Wealth advisory fees increased $412,000, or 16.8%, driven by growth in customers and assets under management. Deposit fees increased $83,000, or 3.1%, driven primarily by growth in our treasury management services. Other income decreased $1.3 million, or 60.8%. Other income during the first quarter of 2024 benefited from a $1.0 million insurance recovery related to the wire fraud loss from 2023 and death benefits received from the Company's bank owned life insurance program. Bank owned life insurance income decreased $714,000, or 68.9%, primarily due to a reduction in the market performance of the Company's variable bank owned life insurance policies, which are tied to the equity markets.

Current wording

Noninterest income decreased by $10.6 million, or 32.2%, to $22.4 million for the six months ended June 30, 2025, compared to $33.1 million for the prior year six-month period. Noninterest income was elevated during the first six months of 2024 as compared to the comparable period of 2025 primarily as a result of the net gain on Visa shares of $9.0 million and a $1.0 million insurance recovery. Adjusted core noninterest income, a non-GAAP financial measure that excludes the impact of these non-routine events, declined $626,000, or 2.7%, from $23.0 million for the six months ended June 30, 2024. Other income decreased $1.6 million, or 56.4%, as other income during the first six months of 2024 benefited from the $1.0 million insurance recovery. Reduced limited partnership investment income further contributed to the decline between the periods. Bank owned life insurance income decreased $564,000, or 29.3%, primarily as a result of reduced market performance from the Bank's variable bank owned life insurance policies, which correlate to returns in the equities markets. Offsetting these decreases were increases to wealth advisory fees of $482,000, or 9.5%, and service charges on deposit accounts of $104,000, or 1.9%. The increase in wealth advisory fees was primarily driven by continued growth in customers and assets under management.

Previous wording

Noninterest expense categories for the three months ended March 31, 2025 and 2024 are shown in the following tables:

Current wording

Noninterest expense categories for the three and six months ended June 30, 2025 and 2024 are shown in the following tables:

Previous wording

The Company's income tax expense decreased $247,000, or 5.6%, to $4.2 million in the three months ended March 31, 2025, compared to $4.4 million for the same period in 2024. The effective tax rate was 17.1% in the three months ended March 31, 2025, compared to 15.8% for the comparable period of 2024, driven by a reduction in the tax benefit recognized from stock-based compensation vesting of shares for plan participants.

Current wording

The Company's income tax expense increased $1.3 million, or 15.3%, to $10.1 million in the six months ended June 30, 2025, compared to $8.8 million for the same period in 2024. The effective tax rate was 17.7% in the six months ended June 30, 2025, compared to 16.0% for the comparable period of 2024, driven by a reduction in the tax benefit recognized from stock-based compensation vesting of shares for plan participants.

Previous wording

Total assets were $6.851 billion as of March 31, 2025 versus $6.678 billion as of December 31, 2024, an increase of $172.8 million, or 2.6%. Balance sheet expansion was driven by increases to total loans, net of the allowance for credit losses, which increased $98.8 million, or 2.0%, cash and cash equivalents, which increased $67.0 million, or 39.8%, and available-for-sale securities, which increased $9.4 million, or 1.0%. Funding the balance sheet expansion between December 31, 2024 and March 31, 2025 were increases to total deposits, which increased $59.2 million, or 1.0%, and total borrowings, which increased $108.2 million. The increase in total deposits was driven by an increase in interest bearing deposits of $59.8 million, or 1.3%, and was offset by a decrease in noninterest bearing deposits of $549,000. Total equity increased $10.6 million, or 1.5%, from $683.9 million at December 31, 2024 to $694.5 million at March 31, 2025. Retained earnings increased $7.2 million, or 1.0%, as a result of net income of $20.1 million but was reduced by dividends declared and paid of $12.8 million.

Current wording

Total assets were $6.964 billion as of June 30, 2025 versus $6.678 billion as of December 31, 2024, an increase of $285.9 million, or 4.3%. Balance sheet expansion was driven by increases to total loans, net of the allowance for credit losses, which increased $128.3 million, or 2.5%, cash and cash equivalents, which increased $142.0 million, or 84.4%, and available-for-sale securities, which increased $5.5 million, or 0.6%. The balance sheet expansion from December 31, 2024 to June 30, 2025 was funded by an increase in total deposits of $275.9 million, or 4.7%. The increase in total deposits was driven by an increase in interest bearing deposits of $311.6 million, or 6.8%, and was offset by a decrease in noninterest bearing deposits of $35.7 million, or 2.8%. Total equity increased $26.1 million, or 3.8%, from $683.9 million at December 31, 2024 to $710.0 million at June 30, 2025. Retained earnings increased $21.3 million, or 2.9%, as a result of net income of $47.1 million offset by dividends declared and paid of $25.7 million.

Previous wording

Total cash and cash equivalents increased by $67.0 million, or 39.8%, to $235.2 million at March 31, 2025, from $168.2 million at December 31, 2024. Cash and cash equivalents include short-term investments. The fluctuation in cash and cash equivalents at March 31, 2025 was driven by an increase in cash and due from banks of $17.6 million, or 24.5%, and an increase in interest bearing short-term investment accounts of $49.4 million, or 51.2%.

Current wording

Total cash and cash equivalents increased by $142.0 million, or 84.4%, to $310.2 million at June 30, 2025, from $168.2 million at December 31, 2024. Cash and cash equivalents include short-term investments. The fluctuation in cash and cash equivalents at June 30, 2025 was driven by an increase in cash and due from banks of $25.7 million, or 35.8%, and an increase in interest bearing short-term investment accounts of $116.3 million, or 120.5%, which were deposited primarily at the Federal Reserve Bank of Chicago.

Previous wording

Purchases of available-for-sale securities were $22.2 million in the first three months of 2025. Investment securities represented 16.5% of total assets on March 31, 2025, compared to 16.8% of total assets on December 31, 2024. The Company anticipates receiving principal and interest cash flows of approximately $82.3 million during the remainder of 2025 from the investment securities portfolio and plans to use that liquidity to fund loan growth and to reinvest cash flows into the investment securities portfolio. Tax equivalent adjusted effective duration for the investment securities portfolio was 5.9 years at March 31, 2025 and 6.0 years at December 31, 2024. Tax equivalent adjusted effective duration of the portfolio remains elevated as compared to 4.0 years at December 31, 2019. Paydowns from prepayments and scheduled payments of $14.7 million were received in the first three months of 2025, and the amortization of premiums, net of the accretion of discounts, was $1.0 million. There were no sales of available-for-sale investment securities in the first three months of 2025. No allowance for credit losses was recognized for available-for-sale or held-to-maturity securities as of March 31, 2025 and December 31, 2024.

Current wording

Purchases of available-for-sale securities were $32.8 million in the first six months of 2025. Investment securities represented 16.2% of total assets on June 30, 2025, compared to 16.8% of total assets on December 31, 2024. The Company anticipates receiving principal and interest cash flows of approximately $54.5 million during the remainder of 2025 from the investment securities portfolio and plans to use that liquidity to fund loan growth as well as to fund reinvestments to the investment securities portfolio. Tax equivalent adjusted effective duration for the investment securities portfolio was 5.9 years at June 30, 2025 and 6.0 years at December 31, 2024. Paydowns from prepayments and scheduled payments of $31.3 million were received in the first six months of 2025, and the amortization of premiums, net of the accretion of discounts, was $2.0 million. There were no sales of available-for-sale investment securities in the first six months of 2025. No allowance for credit losses was recognized for available-for-sale or held-to-maturity securities as of June 30, 2025 and December 31, 2024.

Previous wording

The fair value of the available-for-sale investment securities portfolio as of March 31, 2025 included net unrealized losses of $188.3 million, compared to net unrealized losses of $191.1 million as of December 31, 2024. Unrealized losses in the available-for-sale investment securities portfolio resulted from the declines in market values of the investment securities resulting from the rise in interest rates.

Current wording

The fair value of the available-for-sale investment securities portfolio as of June 30, 2025 included net unrealized losses of $185.3 million, compared to net unrealized losses of $191.1 million as of December 31, 2024. Unrealized losses in the available-for-sale investment securities portfolio resulted from the declines in market values of the investment securities resulting from the rise in interest rates.

Previous wording

Real estate mortgage loans held-for-sale decreased by $405,000, or 23.8%, to $1.3 million at March 31, 2025, from $1.7 million at December 31, 2024. The balance of this asset category is subject to a high degree of variability depending on, among other factors, recent mortgage loan rates and the timing of loan sales into the secondary market. The Company generally sells conforming qualifying mortgage loans it originates on the secondary market. Proceeds from sales of residential mortgages totaled $3.0 million in the first three months of 2025, compared to $4.1 million in the first three months of 2024. Management expects the volume of loans originated for sale in the secondary market to increase if long-term interest rates decline from current levels. Demand for mortgage loans has been impacted by limited housing inventory and existing home owners locked in at historically low rates. Mortgage loans serviced for others are not included in the accompanying consolidated balance sheets. The unpaid principal balances of loans serviced for others were $307.6 million and $313.0 million, as of March 31, 2025 and December 31, 2024, respectively.

Current wording

Real estate mortgage loans held-for-sale decreased by $63,000, or 3.7%, to $1.6 million at June 30, 2025, from $1.7 million at December 31, 2024. The balance of this asset category is subject to a high degree of variability depending on, among other factors, recent mortgage loan rates and the timing of loan sales into the secondary market. The Company generally sells conforming qualifying mortgage loans it originates on the secondary market. Proceeds from sales of residential mortgages totaled $8.7 million in the first six months of 2025, compared to $9.1 million in the first six months of 2024. Management expects the volume of loans originated for sale in the secondary market to increase if long-term interest rates decline from current levels. Demand for mortgage loans has been impacted by elevated interest rates, limited housing inventory and existing home owners locked in at historically low rates. Mortgage loans serviced for others are not included in the accompanying consolidated balance sheets. The unpaid principal balances of loans serviced for others were $302.6 million and $313.0 million, as of June 30, 2025 and December 31, 2024, respectively.

Previous wording

Total loans, excluding real estate mortgage loans held-for-sale and deferred fees, increased by $98.8 million, or 2.0%, to $5.131 billion at March 31, 2025 from $5.032 billion at December 31, 2024. The increase was primarily driven by originations of loans concentrated in the commercial and industrial loans, commercial real estate and multi-family residential loans and consumer 1-4 family mortgage loans categories and was offset by paydowns in the agri-business and agricultural loans segment which traditionally experiences seasonal fluctuations in activity.

Current wording

Total net loans, excluding real estate mortgage loans held-for-sale, increased by $128.3 million, or 2.5%, to $5.160 billion at June 30, 2025 from $5.032 billion at December 31, 2024. The increase was primarily driven by originations of loans concentrated in the commercial and industrial loans, commercial real estate and multi-family residential loans and consumer 1-4 family mortgage loans categories and was offset by paydowns in the agri-business and agricultural loans segment which traditionally experiences seasonal fluctuations in activity.

Previous wording

Total nonperforming assets increased by $1.0 million, or 1.7%, to $57.9 million during the three month period ended March 31, 2025. The ratio of nonperforming assets to total assets decreased 1 basis point from 0.85% at December 31, 2024 to 0.84% at March 31, 2025.

Current wording

Total nonperforming assets decreased by $25.8 million, or 45.3%, to $31.1 million during the six month period ended June 30, 2025. The ratio of nonperforming assets to total assets decreased 40 basis points from 0.85% at December 31, 2024 to

Previous wording

A loan is individually analyzed when full payment under the original loan terms is not expected. The analysis for smaller loans that are similar in nature and which are not in nonaccrual or modified status, such as residential mortgage, consumer, and credit card loans, is determined based on the class of loans. If a loan is individually analyzed, a portion of the allowance may be allocated so that the loan is reported, net, at the present value of estimated future cash flows or at the fair value of collateral if repayment is expected solely from the collateral. Total individually analyzed loans increased by $2.7 million, or 3.4%, to $81.3 million at March 31, 2025 from $78.6 million at December 31, 2024. The increase to individually analyzed loans was primarily related to the downgrade of one commercial relationship to nonperforming status, and a working capital credit line increase for an unrelated relationship currently on performing status.

Current wording

A loan is individually analyzed when full payment under the original loan terms is not expected. The analysis for smaller loans that are similar in nature and which are not in nonaccrual or modified status, such as residential mortgage, consumer, and credit card loans, is determined based on the class of loans. If a loan is individually analyzed, a portion of the allowance may be allocated so that the loan is reported, net, at the present value of estimated future cash flows or at the fair value of collateral if repayment is expected solely from the collateral. Total individually analyzed loans decreased by $26.6 million, or 33.8%, to $52.1 million at June 30, 2025 from $78.6 million at December 31, 2024. The decrease to individually analyzed loans was primarily related to the previously disclosed $28.6 million partial loan charge off, which was fully allocated for.

Previous wording

At March 31, 2025, the allowance for credit losses was 1.77% of total loans, an increase of 9 basis points from 1.68% at December 31, 2024. At March 31, 2025, management believed the allowance for credit losses was at a level commensurate with the overall risk exposure of the loan portfolio. However, if economic conditions deteriorate, certain borrowers may experience difficulty and the level of nonperforming loans, charge-offs and delinquencies could rise and require increases in the allowance for credit losses. The process of identifying credit losses is a subjective process.

Current wording

At June 30, 2025, the allowance for credit losses was 1.27% of total loans, a decrease of 41 basis points from 1.68% at December 31, 2024. At June 30, 2025, management believed the allowance for credit losses was at a level commensurate with the overall risk exposure of the loan portfolio. However, if economic conditions deteriorate, certain borrowers may experience difficulty and the level of nonperforming loans, charge-offs and delinquencies could rise and require increases in the allowance for credit losses. The process of identifying credit losses is a subjective process.

Previous wording

The Company has a relatively high percentage of commercial and commercial real estate loans, which are extended to businesses with a broad range of revenue and within a wide variety of industries. Traditionally, this type of lending may have more credit risk than other types of lending because of the size and diversity of the credits. The Company manages this risk by utilizing relatively conservative credit structures, by adjusting its pricing to the perceived risk of each individual credit and by diversifying the portfolio by customer, product, industry and market area. The Company has limited exposure to commercial office space borrowers, all of which are located in the Bank's Indiana markets. Loans totaling $100.6 million for this sector represented 1.9% of total loans at March 31, 2025. Additionally, commercial real estate loans secured by multi-family residential properties and secured by non-farm non-residential properties were approximately 214.0% of the Bank's risk-based capital at March 31, 2025.

Current wording

The Company has a relatively high percentage of commercial and commercial real estate loans, which are extended to businesses with a broad range of revenue and within a wide variety of industries. Traditionally, this type of lending may have more credit risk than other types of lending because of the size and diversity of the credits. The Company manages this risk by utilizing relatively conservative credit structures, by adjusting its pricing to the perceived risk of each individual credit and by diversifying the portfolio by customer, product, industry and market area. The Company has limited exposure to commercial office space borrowers, all of which are located in the Bank's Indiana markets. Loans totaling $106.9 million for this sector represented 2.1% of total loans at June 30, 2025. Additionally, commercial real estate loans secured by multi-family residential properties and secured by non-farm non-residential properties were approximately 221.0% of the Bank's risk-based capital at June 30, 2025. The Company continues to monitor the impact of tariffs on its borrowers.

Previous wording

As of March 31, 2025, based on management’s review of the loan portfolio, the Company had 82 credit relationships with principal balances totaling $215.6 million on the classified loan list versus 81 credit relationships with principal balances totaling $211.1 million as of December 31, 2024. As of March 31, 2025, the Company had $124.5 million of assets classified as Special Mention, $47.7 million classified as Substandard, $43.4 million classified as Doubtful and $0 classified as Loss as compared to $123.6 million, $44.0 million, $43.5 million and $0, respectively, at December 31, 2024. Watch list loans as a percentage of total loans were 4.13% as of March 31, 2025 and December 31, 2024.

Current wording

As of June 30, 2025, based on management’s review of the loan portfolio, the Company had 89 credit relationships with principal balances totaling $191.6 million on the classified loan list versus 81 credit relationships with principal balances totaling $211.1 million as of December 31, 2024. As of June 30, 2025, the Company had $132.5 million of assets classified as Special Mention, $44.3 million classified as Substandard, $14.8 million classified as Doubtful and $0 classified as Loss as compared to $123.6 million, $44.0 million, $43.5 million and $0, respectively, at December 31, 2024. Watch list loans as a percentage of total loans were 3.67% as of June 30, 2025, down 46 basis points from 4.13% at December 31, 2024.

Previous wording

The allowance for credit losses increased $6.5 million, or 7.5%, from $86.0 million at December 31, 2024 to $92.4 million at March 31, 2025. The increase was a result of provision expense of $6.8 million which was offset by net charge-offs of $327,000. Provision expense recorded during the three months ended March 31, 2025 was primarily attributable an increase in the specific allocation for the previously disclosed $43.3 million nonperforming credit to an industrial company in Northern Indiana. The remainder of the increase was attributable to the downgrade of an unrelated $1.0 million unsecured credit to nonperforming status and to loan growth between the two periods. As the bulk of the Company’s lending activity is concentrated in the commercial loan portfolio, which can result in overall asset quality being influenced by a small number of credits, management has historically considered growth and portfolio composition when determining credit loss allocations.

Current wording

The allowance for credit losses decreased $19.4 million, or 22.6%, from $86.0 million at December 31, 2024 to $66.6 million at June 30, 2025. The decrease was primarily driven by net charge offs of $29.2 million. Net charge offs for the six months ended June 30, 2025 primarily consisted of one $28.6 million partial loan charge off previously discussed. As the bulk of the Company’s lending activity is concentrated in the commercial loan portfolio, which can result in overall asset quality being influenced by a small number of credits, management has historically considered growth and portfolio composition when determining credit loss allocations.

Previous wording

The Company's sources of funds include a diversified deposit base gathered throughout the Company's footprint and includes a growing mix of commercial, retail and public funds deposit accounts. While the traditional base of core deposits represents the primary source of funding for the Company, the Company has access to a robust array of other liquidity sources, including secured borrowings available from the Federal Home Loan Bank and the Federal Reserve Bank Discount Window. In addition, the Company has access to unsecured borrowing capacity through long established relationships within the brokered deposit markets, Federal Funds lines from correspondent bank partners and Insured Cash Sweep (ICS) one-way buy funds available from the Intrafi network. As of March 31, 2025, the Company had access to $3.519 billion in unused liquidity available from these aggregate sources as compared to $3.681 billion at December 31, 2024.

Current wording

The Company's sources of funds include a diversified deposit base gathered throughout the Company's footprint and includes a growing mix of commercial, retail and public funds deposit accounts. While the traditional base of core deposits represents the primary source of funding for the Company, the Company has access to a robust array of other liquidity sources, including secured borrowings available from the Federal Home Loan Bank and the Federal Reserve Bank Discount Window. In addition, the Company has access to unsecured borrowing capacity through long established relationships within the brokered deposit markets, Federal Funds lines from correspondent bank partners and Insured Cash Sweep (ICS) one-way buy funds available from the Intrafi network. As of June 30, 2025, the Company had access to $3.678 billion in unused liquidity available from these aggregate sources as compared to $3.681 billion at December 31, 2024.

Previous wording

The average daily deposits and borrowings together with average rates paid on those deposits and borrowings for the three months ended March 31, 2025 and 2024 are summarized in the following table:

Current wording

The average daily deposits and borrowings together with average rates paid on those deposits and borrowings for the six months ended June 30, 2025 and 2024 are summarized in the following table:

Previous wording

Average total deposits were $5.875 billion for the three months ended March 31, 2025, an increase of $244.3 million, or 4.3%, from the comparable period in 2024. Average total borrowings were $100.1 million for the three months ended March 31, 2025, a decrease of $75.7 million, or 43.1%, from the comparable period in 2024. Total average deposit costs decreased 42 basis points from 2.94% for the three months ended March 31, 2024, to 2.52% for the three months ended March 31, 2025. Total average borrowing costs decreased 107 basis points from 5.61% for the three months ended March 31, 2024 to 4.54% for the three months ended March 31, 2025. As a result, total funding costs decreased by 47 basis points from 3.02% for the three months ended March 31, 2024, to 2.55% for the three months ended March 31, 2025. The decrease in funding costs between the two periods was attributable to easing of monetary policy by the Federal Reserve Bank which allowed deposit costs to reprice to lower levels and reduced the borrowings average rates.

Current wording

Average total deposits were $5.986 billion for the six months ended June 30, 2025, an increase of $261.0 million, or 4.6%, from the comparable period in 2024. Average total borrowings were $67.1 million for the six months ended June 30, 2025, a decrease of $59.3. million, or 46.9%, from the comparable period in 2024. Total average deposit costs decreased 45 basis points from 3.00% for the six months ended June 30, 2024, to 2.55% for the six months ended June 30, 2025. Total average borrowing costs decreased 105 basis points from 5.62% for the six months ended June 30, 2024 to 4.57% for the six months ended June 30, 2025. As a result, total funding costs decreased by 49 basis points from 3.06% for the six months ended June 30, 2024, to 2.57% for the six months ended June 30, 2025. The decrease in funding costs between the two periods was attributable to easing of monetary policy by the Federal Reserve Bank which allowed deposit costs to reprice to lower levels and reduced the borrowings average rates.

Previous wording

As of March 31, 2025, total deposits increased by $59.2 million, or 1.0%, from December 31, 2024. Core deposits, which excludes brokered deposits, decreased by $24.6 million, or 0.4%, to $5.835 billion as of March 31, 2025 from $5.859 billion as of December 31, 2024. Total brokered deposits were $125.4 million at March 31, 2025, compared to $41.6 million at December 31, 2024, an increase of $83.8 million, or 201.8%.

Current wording

As of June 30, 2025, total deposits increased by $275.9 million, or 4.7%, from December 31, 2024. Core deposits, which excludes brokered deposits, increased by $167.0 million, or 2.9%, to $6.026 billion as of June 30, 2025 from $5.859 billion as of December 31, 2024. Total brokered deposits were $150.4 million at June 30, 2025, compared to $41.6 million at December 31, 2024, an increase of $108.9 million, or 261.9%.

Previous wording

On March 31, 2025, commercial deposits represented 39.2% of total deposits versus 38.4% at December 31, 2024. Retail deposits represented 30.0% at March 31, 2025 versus 30.2% at December 31, 2024. Public Funds deposits represented 28.7% at March 31, 2025 versus 30.7% at December 31, 2024. Brokered deposits represented 2.1% of total deposits at March 31, 2025 versus 0.7% at December 31, 2024. Commercial deposits expanded $67.9 million, or 3.0%, from $2.269 billion at December 31, 2024 to $2.337 billion at March 31, 2025; retail deposits expanded $7.3 million, or 0.4%, from $1.781 billion at December 31, 2024 to $1.788 billion at March 31, 2025; and public funds deposits contracted $99.7 million, or 5.5%, from $1.810 billion at December 31, 2024 to $1.710 billion at March 31, 2025, due to seasonal activity.

Current wording

On June 30, 2025, commercial deposits represented 36.6% of total deposits versus 38.4% at December 31, 2024. Retail deposits represented 28.4% at June 30, 2025 versus 30.2% at December 31, 2024. Public Funds deposits represented 32.6% at June 30, 2025 versus 30.7% at December 31, 2024. Brokered deposits represented 2.4% of total deposits at June 30, 2025 versus 0.7% at December 31, 2024. Commercial deposits contracted $12.4 million, or 0.5%, from $2.269 billion at December 31, 2024 to $2.257 billion at June 30, 2025; retail deposits contracted $25.0 million, or 1.4%, from $1.781 billion at December 31, 2024 to $1.756 billion at June 30, 2025; and public funds deposits expanded $204.4 million, or 11.3%, from $1.810 billion at December 31, 2024 to $2.014 billion at June 30, 2025, due to growth in public funds customers and seasonal activity.

Previous wording

Deposits not covered by FDIC deposit insurance were 57.2% as of March 31, 2025, versus 62.1% at December 31, 2024. Deposits not covered by FDIC deposit insurance or the Indiana Public Deposit Insurance Fund (which insures public fund deposits in Indiana), were 28.9% of total deposits as of March 31, 2025, versus 32.3% as of December 31, 2024. As of March 31, 2025 and December 31, 2024, 97.8% and 98.0% of deposit accounts had deposit balances less than $250,000, respectively.

Current wording

Deposits not covered by FDIC deposit insurance were 59.4% as of June 30, 2025, versus 62.1% at December 31, 2024. Deposits not covered by FDIC deposit insurance or the Indiana Public Deposit Insurance Fund, which insures public fund deposits in Indiana, were 27.1% of total deposits as of June 30, 2025, versus 32.3% as of December 31, 2024. As of June 30, 2025 and December 31, 2024, 98.2% and 98.0% of deposit accounts had deposit balances less than $250,000, respectively.

Previous wording

As of March 31, 2025, total stockholders’ equity was $694.5 million, an increase of $10.6 million, or 1.5%, from $683.9 million at December 31, 2024. The increase to total stockholders' equity was driven by net income of $20.1 million and was reduced by dividends declared and paid of $12.8 million and an increase of $2.6 million in accumulated other comprehensive income (loss).

Current wording

As of June 30, 2025, total stockholders’ equity was $710.0 million, an increase of $26.1 million, or 3.8%, from $683.9 million at December 31, 2024. The increase to total stockholders' equity was driven by net income of $47.1 million and was reduced by dividends declared and paid of $25.7 million and improvement of $5.4 million in accumulated other comprehensive income (loss).

Previous wording

•governmental trade, monetary and fiscal policies;

Current wording

•governmental trade, monetary, tax and fiscal policies;