LAKELAND FINANCIAL CORP

Previous wording

Net income in the first nine months of 2025 was $73.5 million, which increased $4.2 million, or 6.0%, from $69.3 million for the comparable period of 2024. Diluted earnings per common share was $2.85 in the first nine months of 2025, an increase of 5.9% from $2.69 in the comparable period of 2024. The increase in net income for 2025 wasprimarily due to an increase to net interest income of $18.8 million, or 13.0%, and a decrease in the provision for credit losses of $1.3 million, or 9.6%. Offsetting these positive contributions was a decrease in noninterest income of $9.6 million, or 21.3%, and an increase in noninterest expense of $3.7 million, or 3.9%. Pretax pre-provision earnings, a non-GAAP measure calculated by adding net interest income to noninterest income and subtracting noninterest expense, were $101.0 million in the first nine months of 2025, an increase of $5.5 million, or 5.8%, compared to $95.5 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$8.3 million, or 12.7%, from $65.2 million to $73.5 million for the nine months ended September 30, 2024 and 2025, respectively.

Current wording

Net income in the first three months of 2026 was $26.5 million, which increased $6.4 million, or 31.8%, from $20.1 million for the comparable period of 2025. Diluted earnings per common share was $1.04 in the first three months of 2026, an increase of 33.3% from $0.78 in the comparable period of 2025. The increase in net income for 2026 wasprimarily due to an increase to net interest income of $3.9 million, or 7.4%, an increase in noninterest income of $2.0 million, or 18.3%, and a decrease in the provision for credit losses of $4.8 million, or 70.6%. Offsetting these positive contributions was an increase in noninterest expense of $2.4 million, or 7.3%, and an increase to income tax expense of $1.9 million, or 46.3%. Pretax pre-provision earnings, a non-GAAP measure calculated by adding net interest income to noninterest income and subtracting noninterest expense, were $34.6 million in the first three months of 2026, an increase of $3.5 million, or 11.3%, compared to $31.0 million for the comparable period of 2025.

Previous wording

Return on average total equity was 13.96% in the first nine months of 2025 versus 14.21% in the comparable period of 2024. Return on average total assets was 1.44% in the first nine months of 2025 versus 1.40% for the comparable period of 2024. The Company's average equity to average assets ratio was 10.29% in the first nine months of 2025 versus 9.84% in the comparable period of 2024.

Current wording

Return on average total equity was 13.89% in the first three months of 2026 versus 11.70% in the comparable period of 2025. Return on average total assets was 1.52% in the first three months of 2026 versus 1.20% for the comparable period of 2025. The Company's average equity to average assets ratio was 10.91% in the first three months of 2026 versus 10.29% in the comparable period of 2025.

Previous wording

The Company’s tangible common equity to tangible assets ratio, which is a non-GAAP financial measure, was 10.79% at September 30, 2025, improved from 10.47% at September 30, 2024 and 10.19% at December 31, 2024. Unrealized losses from available-for-sale investment securities were $159.9 million at September 30, 2025, compared to $154.5 million at September 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 12.57% at September 30, 2025, improved from 12.29% at September 30, 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 10.53% at March 31, 2026, compared to 10.09% at March 31, 2025 and 10.86% at December 31, 2025. Unrealized losses from available-for-sale investment securities were $154.5 million at March 31, 2026, compared to $188.3 million at March 31, 2025 and $143.3 million at December 31, 2025. 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 12.20% at March 31, 2026, compared to 12.19% at March 31, 2025 and 12.45% at December 31, 2025.

Previous wording

Total assets were $6.895 billion as of September 30, 2025 versus $6.678 billion as of December 31, 2024, an increase of $216.7 million, or 3.2%. Balance sheet expansion was driven by increases to total loans, net of the allowance for credit losses, which increased $148.5 million, or 3.0%, available-for-sale securities, which increased $40.5 million, or 4.1%, and cash and cash equivalents, which increased $24.6 million, or 14.6%. The balance sheet expansion from December 31, 2024 to September 30, 2025 was funded by an increase in total deposits of $123.4 million, or 2.1% and borrowings of $56.2 million. The increase in total deposits was driven by an increase in interest bearing deposits of $152.6 million, or 3.3%, and was offset by a decrease in noninterest bearing deposits of $29.2 million, or 2.3%. Total equity increased $63.6 million, or 9.3%, from $683.9 million at December 31, 2024 to $747.5 million at September 30, 2025. Retained earnings increased $34.9 million, or 4.7%, as a result of net income of $73.5 million less dividends declared and paid of $38.6 million and an improvement in accumulated other comprehensive income (loss) of $25.8 million.

Current wording

Total assets were $7.084 billion as of March 31, 2026 versus $6.990 billion as of December 31, 2025, an increase of $93.7 million, or 1.3%. Balance sheet expansion was driven by increases to total loans, net of the allowance for credit losses, which increased $98.1 million, or 1.8%, and cash and cash equivalents, which increased $10.0 million, or 7.1%. These increases were offset by a decrease to available-for-sale securities of $25.1 million, or 2.4% The balance sheet expansion from December 31, 2025 to March 31, 2026 was funded by an increase in total deposits of $216.9 million, or 3.6%, and was offset by a decrease in borrowings of $116.0 million, or 63.0%. Total equity decreased $13.5 million, or 1.8%, from $762.5 million at December 31, 2025 to $749.0 million at March 31, 2026. The decrease to total equity was primarily attributable to an increase in treasury stock of $19.3 million, or 53.8%, driven by the Company's utilization of the share repurchase program, and a decrease in accumulated other comprehensive income (loss) of $8.5 million, contributed further to the decline in total equity. Offsetting these reductions to total equity was an increase in retained earnings of $13.3 million, or 1.7%, primarily as a result of net income of $26.5 million less dividends declared and paid of $13.2 million. The combined effect of the repurchase activity under the share repurchase program and dividends paid during the quarter represented a total return of capital to Company shareholders of $32.4 million.

Previous wording

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

Current wording

Selected income statement information for the three months ended March 31, 2026 and 2025 is presented in the following table:

Previous wording

(3)Non-GAAP financial measure. Calculated by removing the fair market value adjustment impact of the available-for-sale investment securities portfolio included in accumulated other comprehensive income (loss) ("AOCI") from tangible equity and tangible assets. Management believes this is an important measure because it provides better comparability to periods preceding the recent increase in prevailing interest rates and demonstrates long-term trends capital strength. See reconciliation on the following pages.

Current wording

(3)Non-GAAP financial measure. Calculated by removing the fair market value adjustment impact of the available-for-sale investment securities portfolio included in accumulated other comprehensive income (loss) ("AOCI") from tangible equity and tangible assets. Management believes this is an important measure because it provides better comparability to periods preceding the cycle of monetary policy tightening from 2022 and 2023 and demonstrates the Company's longer-term trend in capital strength. See reconciliation on the following pages.

Previous wording

Net income was $73.5 million in the first nine months of 2025, which increased $4.2 million, or 6.0%, from $69.3 million for the comparable period of 2024. Diluted earnings per common share was $2.85 in the first nine months of 2025, an increase of 5.9% from $2.69 in the comparable period of 2024. The increase in net income for the first nine months of 2025 wasprimarily due to an increase to net interest income of $18.8 million, or 13.0%, and a decrease in the provision for credit losses of $1.3 million, or 9.6%. Offsetting these positive contributions was a decrease to noninterest income of $9.6 million, or 21.3%, and an increase in noninterest expense of $3.7 million, or 3.9%. Core operational profitability, a non-GAAP measure that excludes the impact of certain non-routine operating events that occurred during 2024, improved by$8.3 million, or 12.7%, from $65.2 million to $73.5 million for the nine months ended September 30, 2024 and 2025, respectively.

Current wording

Net income was $26.5 million in the first three months of 2026, which increased $6.4 million, or 31.8%, from $20.1 million for the comparable period of 2025. Diluted earnings per common share was $1.04 in the first three months of 2026, an increase of 33.3% from $0.78 in the comparable period of 2025. The increase in net income for the first three months of 2026 wasprimarily due to an increase to net interest income of $3.9 million, or 7.4%, an increase to noninterest income of $2.0 million, or 18.3%, and a decrease in the provision for credit losses of $4.8 million, or 70.6%. Offsetting these positive contributions was an increase in noninterest expense of $2.4 million, or 7.3%, and an increase to income tax expense of $1.9 million, or 46.3%.

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 $1.1 million in the three-month periods ended September 30, 2025 and September 30, 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 adjustment was $1.1 million for the three-month periods ended March 31, 2026 and 2025.

Previous wording

Net interest income, on a fully tax equivalent basis, increased by $6.8 million, or 13.5%, for the three months ended September 30, 2025 as compared to the three months ended September 30, 2024. The increase in net interest income on a fully tax equivalent basis was driven bya decrease in deposit interest expense of$7.1 million, or 15.6%, from$45.6 million to$38.4 million. Securities interest income increased $573,000, or 7.3%, from $7.8 million to $8.4 million between the two periods. A decline in loan interest income negatively impacted fully tax equivalent net interest income, decreasing $640,000, or 0.7%, from $86.5 million to $85.8 million. Borrowings expense increased $179,000, or 94.7%, from $189,000 to $368,000.

Current wording

Net interest income, on a fully tax equivalent basis, increased $3.9 million, or 7.2%, to $57.9 million for the three months ended March 31, 2026, compared to $54.0 million for the first three months of 2025. The increase in net interest income on a fully tax equivalent basis was driven bya decrease in deposit interest expense of$3.0 million, or 8.3%, from$36.5 million to$33.4 million. Securities interest income contributed further to the increase in fully tax equivalent net interest income, increasing by$448,000, or 5.4%. Loan interest income increased by $1.4 million, or 1.7%, as an increase in average loans offset decreased average yields. Borrowings expense increased by$661,000, or 58.9%.

Previous wording

Total average earning assets were $6.498 billion for the nine months ended September 30, 2025, an increase of $217.6 million, or 3.5%, compared to $6.281 billion for the nine months ended September 30, 2024. Average loans outstanding drove the increase to total average earning assets, increasing $183.6 million, or 3.7%, to $5.207 billion from $5.024 billion for the nine months ended September 30, 2025 and 2024, respectively. Offsetting this increase was a decrease to average investment securities of $5.6 million, or 0.5%, to$1.130 billion from$1.135 billion between the respective periods. Total average interest bearing liabilities were $4.808 billion for the nine months ended September 30, 2025, an increase of $191.4 million, or 4.1%, from $4.616 billion for the nine months ended September 30, 2024. This increase was driven bygrowth in average interest bearing deposits of $224.4 million, or 5.0%, from $4.528 billion for the nine months ended September 30, 2024 to $4.752 billion for the nine months ended September 30, 2025. Offsetting the increase to average interest bearing deposits was a decrease in total average borrowings of $33.0 million, or 37.3%, to $55.6 million from $88.6 million for the nine months ended September 30, 2025 and 2024, respectively. Noninterest bearing demand deposits decreased $834,000, or 0.1%, to$1.249 billion from$1.250 billion between the two periods.

Current wording

Total average earning assets were $6.729 billion for the three months ended March 31, 2026, an increase of $298.6 million, or 4.6%, compared to $6.431 billion for the three months ended March 31, 2025. Average loans outstanding drove the increase to total average earning assets, increasing $255.0 million, or 4.9%, to $5.441 billion from $5.186 billion for the three months ended March 31, 2026 and 2025, respectively. Average investment securities increased $53.9 million, or 4.7%, to$1.190 billion from$1.136 billion between the respective periods. Total average interest bearing liabilities were $5.005 billion for the three months ended March 31, 2026, an increase of $288.2 million, or 6.1%, from $4.716 billion for the three months ended March 31, 2025. This increase was driven bygrowth in average interest bearing deposits of $204.6 million, or 4.4%, from $4.616 billion for the three months ended March 31, 2025 to $4.821 billion for the three months ended March 31, 2026. Average short-term borrowings increased by $82.6 million, or 82.7% between the respective periods. Noninterest bearing demand deposits decreased $23.8 million, or 1.9%, to$1.235 billion from$1.258 billion between the two periods.

Previous wording

The tax equivalent net interest margin was 3.44% for the nine months ended September 30, 2025, compared to 3.16% during the first nine months of 2024, representing a 28 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 2.38% for thenine months ended September 30, 2025, down from 2.87% for the comparable period of 2024, or a decrease of 49 basis points. This decline was attributable to a decrease in the rate for total interest bearing liabilities of 68 basis points from 3.90% to 3.22% between the respective periods. These decreases were driven by reduced costs associated with the repricing of the Company's interest bearing deposits and borrowings 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 66 basis points, from 3.87% to 3.21%. Contributing further to the reduction in the rate for interest bearing liabilities was a reduction in the average borrowings rate, which declined 107 basis points from 5.61% to 4.54%. The Company anticipates the cost of funds would continue to respond favorably to any further monetary policy easing by the Federal Reserve Bank.

Current wording

The tax equivalent net interest margin was 3.49% for the three months ended March 31, 2026, compared to 3.40% during the first three months of 2025, representing a 9 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 2.12% for thethree months ended March 31, 2026, down from 2.37% for the comparable period of 2025, or a decrease of 25 basis points. This decline was attributable to a decrease in the rate for total interest bearing liabilities of 38 basis points from 3.23% to 2.85% between the respective periods. These decreases were driven by reduced costs associated with the repricing of the Company's interest bearing deposits and borrowings as a result of monetary policy easing from the Federal Reserve Bank. Contributing further to the reduction in the rate for interest bearing liabilities was a reduction in the average borrowings rate, which declined 60 basis points from 4.54% to 3.94%.

Previous wording

The improvement in interest expense as a percentage of average earning assets was offset by a 21 basis point reduction in interest income as a percentage of average earning assets, which declined from 6.03% to 5.82%. This decrease was primarily attributable to a decline in average loan yields, which decreased 28 basis points to 6.49% for the nine months ended September 30, 2025, down from 6.77% for the comparable period of 2024. This decrease was offset by an increase to investment securities yields, which increased 16 basis points from 2.82% to 2.98%. 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. During the nine months ended September 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 tax equivalent net interest margin by 1 basis point during the nine months ended September 30, 2025.

Current wording

The improvement in interest expense as a percentage of average earning assets was offset by a 16 basis point reduction in interest income as a percentage of average earning assets, which declined from 5.77% to 5.61%. This decrease was primarily attributable to a decline in average loan yields, which decreased 20 basis points to 6.22% for the three months ended March 31, 2026, down from 6.42% for the comparable period of 2025.

Previous wording

The Company recorded provision for credit losses expense of $11.8 million for the nine months ended September 30, 2025, compared to provision expense of $13.1 million during the comparable period of 2024, a decrease of $1.3 million, or 9.6%. Net charge-offs were $29.6 million during the nine month period ended September 30, 2025, compared to $1.4 million during the comparable period of 2024, an increase of $28.2 million. The increase in net charge offs between the respective periods was attributable to a partial charge off related to a previously disclosed nonperforming credit for an industrial company in Northern Indiana. This credit was reserved for prior to the partial charge off.

Current wording

The Company recorded provision for credit losses expense of $2.0 million for the three months ended March 31, 2026, compared to provision expense of $6.8 million during the comparable period of 2025, a decrease of $4.8 million, or 70.6%. Net charge-offs were $2.1 million during the three month period ended March 31, 2026, compared to $327,000 during the comparable period of 2025, an increase of $1.8 million. The decrease in provision expense between the respective periods was attributable to the allocation of reserves to a previously disclosed nonperforming credit during the first quarter of 2025.

Previous wording

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

Current wording

Noninterest income categories for the three months ended March 31, 2026 and 2025 are shown in the following tables:

Previous wording

The Company’s noninterest income increased $1.0 million, or 8.7%, to $13.0 million for the third quarter of 2025, compared to $11.9 million for the third quarter of 2024. Loan and service fees income increased $464,000, or 15.7%, wealth advisory fees increased $137,000, or 5.0%, and investment brokerage fees increased $119,000, or 27.2%. Bank owned life insurance income increased $499,000, or 46.7%, from increased income from additional general account policies purchased in 2025 and from improved market performance of the bank's variable owned life insurance policies, which correlate to returns in the equities markets. Offsetting these increases was a decrease to other income of $278,000, or 27.1%, primarily driven by reduced limited partnership investment income.

Current wording

Noninterest income increased $2.0 million, or 18.3%, to $12.9 million for the first quarter of 2026, compared to $10.9 million for the first quarter of 2025. Loan and service fees income increased $323,000, or 11.2%, driven by increased commercial loan fees. Wealth advisory fees increased $196,000, or 6.8%, driven by continued growth in customers and assets under management. Investment brokerage fees increased $72,000, or 15.9%, due to increased volume and commissions on product mix. Bank owned life insurance income increased $654,000, or 203.1%, from improved market performance of the Bank's variable owned life insurance policies, which reflect returns in the equity markets, as well as incremental income from policies purchased in 2025. Interest rate swap fee income was $701,000 for the first quarter of 2026, which is borrower and market driven. Offsetting these increases was a decrease to other income of $128,000, or 14.9%, primarily driven by reduced limited partnership investment income.

Previous wording

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

Current wording

Noninterest expense categories for the three months ended March 31, 2026 and 2025 are shown in the following tables:

Previous wording

The Company's income tax expense increased $2.6 million, or 19.7%, to $15.8 million in the nine months ended September 30, 2025, compared to $13.2 million for the same period in 2024. The effective tax rate was 17.7% in the nine months ended September 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.

Current wording

The Company's income tax expense increased $1.9 million, or 46.3%, to $6.1 million in the three months ended March 31, 2026, compared to $4.2 million for the same period in 2025. The effective tax rate was 18.7% in the three months ended March 31, 2026, compared to 17.1% for the comparable period of 2025, driven by lower tax-free interest income on loans.

Previous wording

Total assets were $6.895 billion as of September 30, 2025 versus $6.678 billion as of December 31, 2024, an increase of $216.7 million, or 3.2%. Balance sheet expansion was driven by increases to total loans, net of the allowance for credit losses, which increased $148.5 million, or 3.0%, available-for-sale securities, which increased $40.5 million, or 4.1%, and cash and cash equivalents, which increased $24.6 million, or 14.6%. The balance sheet expansion from December 31, 2024 to September 30, 2025 was funded by an increase in total deposits of $123.4 million, or 2.1%, and borrowings of $56.2 million. Total equity increased $63.6 million, or 9.3%, from $683.9 million at December 31, 2024 to $747.5 million at September 30, 2025. Retained earnings increased $34.9 million, or 4.7%, primarily as a result of net income of $73.5 million less dividends declared and paid of $38.6 million and an improvement in accumulated other comprehensive income (loss) of $25.8 million.

Current wording

Total assets were $7.084 billion as of March 31, 2026 versus $6.990 billion as of December 31, 2025, an increase of $93.7 million, or 1.3%. Balance sheet expansion was driven by increases to total loans, net of the allowance for credit losses, which increased $98.1 million, or 1.8%, and cash and cash equivalents, which increased $10.0 million, or 7.1%. These increases were offset by a decrease to available-for-sale securities of $25.1 million, or 2.4% The balance sheet expansion from December 31, 2025 to March 31, 2026 was funded by an increase in total deposits of $216.9 million, or 3.6%, and was offset by a decrease in borrowings of $116.0 million, or 63.0%. Total equity decreased $13.5 million, or 1.8%, from $762.5 million at December 31, 2025 to $749.0 million at March 31, 2026. The decrease to total equity was primarily attributable to an increase in treasury stock of $19.3 million, or 53.8%, driven by the Company's utilization of the share repurchase program. A decrease in accumulated other comprehensive income (loss) of $8.5 million contributed further to the decline in total equity. Offsetting these reductions to total equity was an increase in retained earnings of $13.3 million, or 1.7%, primarily as a result of net income of $26.5 million less dividends declared and paid of $13.2 million. The combined effect of the repurchase activity under the share repurchase program and dividends paid during the quarter represented a total return of capital to Company shareholders of $32.4 million.

Previous wording

Total cash and cash equivalents increased by $24.6 million, or 14.6%, to $192.8 million at September 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 September 30, 2025 was driven by an increase in interest bearing short-term investment accounts of $28.9 million, or 29.9%, which were deposited primarily at the Federal Reserve Bank of Chicago. Cash and due from banks decreased $4.2 million, or 5.9%.

Current wording

Total cash and cash equivalents increased by $10.0 million, or 7.1%, to $151.3 million at March 31, 2026, from $141.3 million at December 31, 2025. Cash and cash equivalents include short-term investments. The fluctuation in cash and cash equivalents at March 31, 2026 was driven by an increase in cash and due from banks of $8.6 million, or 15.0%, and an increase in interest bearing short-term investment accounts of $1.4 million, or 1.7%, which were deposited primarily at the Federal Reserve Bank of Chicago.

Previous wording

At September 30, 2025 and December 31, 2024, there were no holdings of securities of any one issuer, other than the U.S. government agencies and government sponsored entities, in an amount greater than 10% of stockholders’ equity. Management is aware that the directional change in the fair value of the available-for-sale investment securities portfolio is inversely related to the directional movement of the interest rate environment, with the resulting impact being reflected in the unrealized gain (loss) of the available-for-sale investment securities portfolio. Since the majority of the bonds in the investment portfolio are fixed-rate, with only a few adjustable-rate bonds, we would expect our investment portfolio to follow this market value pattern. This is taken into consideration when evaluating the gain or loss of investment securities in the portfolio and the potential for an allowance for credit losses.

Current wording

At March 31, 2026 and December 31, 2025, there were no holdings of securities of any one issuer, other than the U.S. government agencies and government sponsored entities, in an amount greater than 10% of stockholders’ equity. Management is aware that the directional change in the fair value of the available-for-sale investment securities portfolio is inversely related to the directional movement of the interest rate environment, with the resulting impact being reflected in the unrealized gain (loss) of the available-for-sale investment securities portfolio. Since the majority of the bonds in the investment portfolio are fixed-rate, with only a few adjustable-rate bonds, we would expect our investment portfolio to follow this market value pattern.

Previous wording

Purchases of available-for-sale securities were $60.3 million in the first nine months of 2025. Investment securities represented 16.9% of total assets on September 30, 2025, compared to 16.8% of total assets on December 31, 2024. The Company anticipates receiving principal and interest cash flows of approximately $34.1 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 5.8 years at September 30, 2025 and 6.0 years at December 31, 2024. Paydowns from prepayments and scheduled payments of $48.1 million were received in the first nine months of 2025, and the amortization of premiums, net of the accretion of discounts, was $3.0 million. There were no sales of available-for-sale investment securities in the first nine months of 2025. No allowance for credit losses was recognized for available-for-sale or held-to-maturity securities as of September 30, 2025 and December 31, 2024.

Current wording

Purchases of available-for-sale securities were $5.1 million in the first three months of 2026. Investment securities represented 16.4% of total assets on March 31, 2026, compared to 17.0% of total assets on December 31, 2025. The Company anticipates receiving principal and interest cash flows of approximately $88.2 million during the remainder of 2026 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 6.0 years at March 31, 2026 and 5.9 years at December 31, 2025. Paydowns from prepayments and scheduled payments of $18.1 million were received in the first three months of 2026, and the amortization of premiums, net of the accretion of discounts, was $870,000. There were no sales of available-for-sale investment securities in the first three months of 2026. No allowance for credit losses was recognized for available-for-sale or held-to-maturity securities as of March 31, 2026 and December 31, 2025.

Previous wording

The fair value of the available-for-sale investment securities portfolio as of September 30, 2025 included net unrealized losses of $159.9 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 March 31, 2026 included net unrealized losses of $154.5 million, compared to net unrealized losses of $143.3 million as of December 31, 2025. Unrealized losses in the available-for-sale investment securities portfolio are generally attributable to market value declines experienced during the rate tightening cycle of 2022 and 2023. Increases in the 10-year Treasury rate during the first quarter of 2026 increased unrealized losses in the investment securities portfolio.

Previous wording

Real estate mortgage loans held-for-sale decreased by $975,000, or 57.4%, to $725,000 at September 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 $16.2 million in the first nine months of 2025, compared to $12.7 million in the first nine 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 $299.0 million and $313.0 million, as of September 30, 2025 and December 31, 2024, respectively.

Current wording

Real estate mortgage loans held-for-sale decreased by $1.6 million, or 59.9%, to $1.1 million at March 31, 2026, from $2.7 million at December 31, 2025. 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 $4.8 million in the first three months of 2026, compared to $3.0 million in the first three months of 2025. 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 $290.4 million and $294.5 million, as of March 31, 2026 and December 31, 2025, respectively.

Previous wording

Total net loans, excluding real estate mortgage loans held-for-sale, increased by $148.5 million, or 3.0%, to $5.180 billion at September 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.

Current wording

Total net loans, excluding real estate mortgage loans held-for-sale, increased by $98.1 million, or 1.8%, to $5.404 billion at March 31, 2026 from $5.306 billion at December 31, 2025. 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

The following table summarizes the Company’s non-performing assets as of September 30, 2025 and December 31, 2024:

Current wording

The following table summarizes the Company’s non-performing assets, excluding deferred fees and costs, as of March 31, 2026 and December 31, 2025:

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 decreased by $39.2 million, or 49.8%, to $39.5 million at September 30, 2025 from $78.6 million at December 31, 2024. The decrease to individually analyzed loans was primarily related to the previously disclosed partial loan charge off, which was fully allocated within the allowance for credit losses.

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 increased by $136,000, or 0.3%, to $43.2 million at March 31, 2026 from $43.0 million at December 31, 2025.

Previous wording

At September 30, 2025, the allowance for credit losses was 1.30% of total loans, a decrease of 38 basis points from 1.68% at December 31, 2024. The decline was primarily attributed to the previously disclosed charge-off. At September 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.

Current wording

At March 31, 2026, the allowance for credit losses was 1.26% of total loans, a decrease of 2 basis points from 1.28% at December 31, 2025. At March 31, 2026, 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 $107.4 million for this sector represented 2.1% of total loans at September 30, 2025. Additionally, commercial real estate loans secured by multi-family residential properties and secured by non-farm non-residential properties were approximately 213.1% of the Bank's risk-based capital at September 30, 2025. The Company continues to monitor the impact of tariffs on its borrowers.

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 $103.6 million for this sector represented 1.9% of total loans at March 31, 2026. Additionally, commercial real estate loans secured by multi-family residential properties and secured by non-farm non-residential properties were approximately 214.9% of the Bank's risk-based capital at March 31, 2026. The Company continues to monitor the impact of tariffs on its borrowers.

Previous wording

As of September 30, 2025, based on management’s review of the loan portfolio, the Company had 97 credit relationships with principal balances totaling $157.2 million on the classified loan list versus 81 credit relationships with principal balances totaling $211.1 million as of December 31, 2024. As of September 30, 2025, the Company had $111.0 million of assets classified as Special Mention, $46.2 million classified as Substandard, $97,000 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 3.00% as of September 30, 2025, down 113 basis points from 4.13% at December 31, 2024. In addition to the previously disclosed partial loan charge off, net paydowns and upgrades to other watch list credits further contributed to the decrease in classified loans between December 31, 2024 and September 30, 2025.

Current wording

As of March 31, 2026, based on management’s review of the loan portfolio, the Company had 95 credit relationships with principal balances totaling $182.3 million on the classified loan list versus 96 credit relationships with principal balances totaling $184.0 million as of December 31, 2025. As of March 31, 2026, the Company $132.7 million of assets classified as Special Mention, $49.5 million classified as Substandard, $73,000 classified as Doubtful and $0 classified as Loss as compared to $134.0 million, $50.0 million, $74,000 and $0, respectively, at December 31, 2025. The amounts by grade in "Note 4 - Allowance for Credit Losses and Credit Quality" are reported at amortized cost and include deferred fees and costs. Watch list loans as a percentage of total loans were 3.33% as of March 31, 2026, down 9 basis points from 3.42% at December 31, 2025.

Previous wording

The allowance for credit losses decreased $17.8 million, or 20.7%, from $86.0 million at December 31, 2024 to $68.2 million at September 30, 2025. The decrease was primarily driven by net charge offs of $29.6 million, offset by provision for credit losses expense. Net charge offs for the nine months ended September 30, 2025 primarily consisted of the previously disclosed $28.6 million partial loan charge off. 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 $81,000, or 0.1%, from $69.0 million at December 31, 2025 to $68.9 million at March 31, 2026. The decrease was primarily driven by net charge offs of $2.1 million, offset by provision for credit losses of $2.0 million. Net charge offs for the three months ended March 31, 2026 were primarily driven by a $2.0 million charge off to one commercial credit. 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 September 30, 2025, the Company had access to $3.585 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 March 31, 2026, the Company had access to $3.312 billion in unused liquidity available from these aggregate sources as compared to $3.526 billion at December 31, 2025.

Previous wording

The average daily deposits and borrowings together with average rates paid on those deposits and borrowings for the nine months ended September 30, 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 three months ended March 31, 2026 and 2025 are summarized in the following table:

Previous wording

Average total deposits were $6.001 billion for the nine months ended September 30, 2025, an increase of $223.6 million, or 3.9%, from the comparable period in 2024. Average total borrowings were $55.6 million for the nine months ended September 30, 2025, a decrease of $33.0. million, or 37.3%, from the comparable period in 2024. Total average deposit costs decreased 49 basis points from 3.03% for the nine months ended September 30, 2024, to 2.54% for the nine months ended September 30, 2025. Total average borrowing costs decreased 107 basis points from 5.61% for the nine months ended September 30, 2024 to 4.54% for the nine months ended September 30, 2025. As a result, the total cost of funding sources decreased by 51 basis points from 3.07% for the nine months ended September 30, 2024, to 2.56% for the nine months ended September 30, 2025. The decrease in the cost of funding sources 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 $6.056 billion for the three months ended March 31, 2026, an increase of $180.8 million, or 3.1%, from the comparable period in 2025. Average total borrowings were $183.6 million for the three months ended March 31, 2026, an increase of $83.5 million, or 83.5%, from the comparable period in 2025. Total average deposit costs decreased 28 basis points from 2.52% for the three months ended March 31, 2025, to 2.24% for the three months ended March 31, 2026. Total average borrowing costs decreased 60 basis points from 4.54% for the three months ended March 31, 2025 to 3.94% for the three months ended March 31, 2026. As a result, the total cost of funding sources decreased by 26 basis points from 2.55% for the three months ended March 31, 2025, to 2.29% for the three months ended March 31, 2026. The decrease in the cost of funding sources 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 average rates for borrowings.

Previous wording

As of September 30, 2025, total deposits increased by $123.4 million, or 2.1%, from December 31, 2024. Core deposits, which excludes brokered deposits, decreased by $10.7 million, or 0.2%, to $5.849 billion as of September 30, 2025 from $5.859 billion as of December 31, 2024. Total brokered deposits were $175.6 million at September 30, 2025, compared to $41.6 million at December 31, 2024, an increase of $134.1 million, or 322.6%.

Current wording

As of March 31, 2026, total deposits increased by $216.9 million, or 3.6%, from December 31, 2025. Core deposits, which excludes brokered deposits, decreased by $108.1 million, or 1.8%, to $5.815 billion as of March 31, 2026 from $5.923 billion as of December 31, 2025. Total brokered deposits were $375.6 million at March 31, 2026, compared to $50.6 million at December 31, 2025, an increase of $325.0 million, or 642.7%.

Previous wording

On September 30, 2025, commercial deposits represented 38.0% of total deposits versus 38.4% at December 31, 2024. Retail deposits represented 28.6% at September 30, 2025 versus 30.2% at December 31, 2024. Public Funds deposits represented 30.5% at September 30, 2025 versus 30.7% at December 31, 2024. Brokered deposits represented 2.9% of total deposits at September 30, 2025 versus 0.7% at December 31, 2024. Commercial deposits expanded $19.7 million, or 0.9%, from $2.269 billion at December 31, 2024 to $2.289 billion at September 30, 2025; public funds deposits expanded $25.4 million, or 1.4%, from $1.810 billion at December 31, 2024 to $1.835 billion at September 30, 2025, due to growth in public funds customers in our footprint; and retail deposits contracted $55.7 million, or 3.1%, from $1.781 billion at December 31, 2024 to $1.725 billion at September 30, 2025.

Current wording

On March 31, 2026, commercial deposits represented 34.5% of total deposits versus 36.5% at December 31, 2025. Retail deposits represented 29.1% at March 31, 2026 versus 29.5% at December 31, 2025. Public Funds deposits represented 30.3% at March 31, 2026 versus 33.2% at December 31, 2025. Brokered deposits represented 6.1% of total deposits at March 31, 2026 versus 0.8% at December 31, 2025. Commercial deposits contracted $43.6 million, or 2.0%, from $2.180 billion at December 31, 2025 to $2.136 billion at March 31, 2026; public funds deposits contracted $101.5 million, or 5.1%, from $1.979 billion at December 31, 2025 to $1.878 billion at March 31, 2026, due to seasonal fluctuations in public funds balances; and retail deposits expanded $37.0 million, or 2.1%, from $1.763 billion at December 31, 2025 to $1.800 billion at March 31, 2026.

Previous wording

Deposits not covered by FDIC deposit insurance were 57.0% as of September 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 27.0% of total deposits as of September 30, 2025, versus 32.3% as of December 31, 2024. As of September 30, 2025 and December 31, 2024, 97.9% and 98.0% of deposit accounts had deposit balances less than $250,000, respectively.

Current wording

Deposits not covered by FDIC deposit insurance were 55.1% as of March 31, 2026, versus 59.1% at December 31, 2025. Deposits not covered by FDIC deposit insurance or the Indiana Public Deposit Insurance Fund, which insures public fund deposits in Indiana, were 25.0% of total deposits as of March 31, 2026, versus 26.0% as of December 31, 2025. As of March 31, 2026 and December 31, 2025, 97.9% and 97.8% of deposit accounts had deposit balances less than $250,000, respectively.

Previous wording

•the effects of future economic, business and market conditions and changes, particularly in our Indiana market area, including prevailing interest rates and the rate of inflation;

Current wording

•the effects of future economic, business and market conditions and changes, particularly in but not limited to our Indiana market area, including prevailing interest rates, the rate of inflation, and energy price volatility;

Previous wording

•governmental trade, monetary, tax and fiscal policies, including effects of the ongoing shutdown of the federal government;

Current wording

•governmental foreign, trade, monetary, tax and fiscal policies, including the policy decisions of the Federal Reserve;

Previous wording

•the performance of our commercial real estate loan portfolio, including the effects of the elevated interest rate environment, the strength of the commercial real estate market in our Indiana markets, and recent changes in retail and office usage patterns;

Current wording

•the performance of our commercial real estate loan portfolio, including the effects of the elevated interest rate environment and the strength of the commercial real estate market in our Indiana markets;

Previous wording

•the effects of war or other conflicts, acts of terrorism or other catastrophic events, including storms, droughts, tornados and flooding, that may affect general economic conditions, including agricultural production and demand and prices for agricultural goods and land used for agricultural purposes, generally and in our markets;

Current wording

•the effects of war, geopolitical conflicts, acts of terrorism, or other catastrophic events, including storms, droughts, tornados and flooding, that may affect general economic conditions, including agricultural production and demand and prices for agricultural inputs, goods and land used for agricultural purposes, generally and in our markets;