Finward Bancorp

To the Stockholders, Board of Directors, and Audit Committee

Finward Bancorp

Munster, Indiana

Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated balance sheets of Finward Bancorp (the “Company”) as of December 31, 2024 and 2023, the related consolidated statements of income, comprehensive income, changes in stockholders’ equity, and cash flows for each of the years then ended, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2024 and 2023, and the results of its operations and its cash flows for each of the years then ended in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits.

We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures include examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Allowance for Credit Losses

As discussed in Note 1 to the consolidated financial statements, the Company’s loan portfolio totaled $1.5 billion as of December 31, 2024, and the associated allowance for credit losses (“ACL”) on loans was $16.9 million. As discussed in Notes 1 and 3 to the consolidated financial statements, the Company measures expected credit losses for loans on a collective pooled basis when similar risk characteristics exist using relevant available information, from internal and external sources, relating to past events, current conditions, reasonable and supportable forecasts. Historical peer provides the basis for the estimation of expected credit losses. Management also considers further adjustments to historical loss information for current conditions and reasonable and supportable forecasts that differ from the conditions that exist for the period over which historical information is evaluated as well as other changes in qualitative factors not inherently considered in the quantitative analyses. The resulting qualitative adjustments are applied to the relevant collectively evaluated loan pools.

We have identified the ACL, and more specifically the qualitative adjustments applied in the ACL, as a critical audit matter. The principal consideration for our determination is the high degree of judgment and subjectivity in auditing the assumptions utilized by management in calculating the qualitative reserve component. This required a high degree of judgement due to the nature and extent of audit evidence and effort required to address this matter.

The primary procedures we performed related to this critical audit matter included:

/s/Forvis Mazars, LLP

We have served as the Company’s auditor since 2021.

Indianapolis, Indiana

March 31, 2025

See accompanying notes to consolidated financial statements.

Consolidated Statements of Changes in Stockholders’*** Equity***

Notes to Consolidated Financial Statements

Years ended December 31, 2024 and 2023

**NOTE1 -**Summary of Significant Accounting Policies

Principles of Consolidation – The consolidated financial statements include Finward Bancorp (the “Company”) and Peoples Bank (the “Bank”), and the Bank’s wholly owned subsidiaries, Peoples Service Corporation, NWIN, LLC, NWIN Funding, Incorporated, and Columbia Development Company, LLC. The Company’s business activities include being a holding company for the Bank. The Company’s earnings are dependent upon the earnings of the Bank. Peoples Service Corporation provides insurance and annuity investments to the Bank’s wealth management customers. NWIN, LLC is located in Las Vegas, Nevada and serves as the Bank’s investment subsidiary and parent of a real estate investment trust, NWIN Funding, Inc. NWIN Funding, Inc. was formed as an Indiana Real Estate Investment Trust. The formation of NWIN Funding, Inc. provides the Company with a vehicle that maybe used to raise capital utilizing portfolio mortgages as collateral, without diluting stock ownership. In addition, NWIN Funding, Inc. receives favorable state tax treatment for income generated by its operations. Columbia Development Company is a limited liability company that serves to hold certain real estate properties that are acquired through foreclosure. All significant inter-company accounts and transactions have been eliminated in consolidation.

Use of Estimates– Preparing financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period, as well as the disclosures provided. Actual results could differ from those estimates. Estimates associated with the allowance for credit losses are particularly susceptible to material change in the near term.

Concentrations of Credit Risk– The Company grants residential, commercial real estate, commercial business and installment loans to customers primarily in Lake County, in northwest Indiana, and Cook County, in northeast Illinois. The Company is also an active lender in Porter County, and to a lesser extent, LaPorte, Newton and Jasper counties in Indiana; and DuPage, Lake, and Will counties in Illinois. Substantially all loans are secured by specific items of collateral including residences, commercial real estate, land development, business assets and consumer assets.

Cash Flow Reporting– For purposes of the statements of cash flows, the Company considers cash on hand, noninterest bearing deposits in other financial institutions, all interest bearing deposits in other financial institutions with original maturities of90 days or less, and federal funds sold to be cash and cash equivalents. The Company reports net cash flows for customer loan and deposit transactions and short-term borrowings with maturities of90 days or less.

Securities– The Company classifies securities into held-to-maturity, available-for-sale, or trading categories. Held- to-maturity securities are those which management has the positive intent and the Company has the ability to hold to maturity, and are reported at amortized cost. Available-for-sale securities are those the Company* maydecide to sell if needed for liquidity, asset-liability management or other reasons. Available-for-sale securities are reported at fair value, with unrealized gains and losses reported in other comprehensive (loss) income, net of tax. At December 31, 2024,and2023,* all of the Company’s securities were classified as available-for-sale. The Company doesnot have a held to maturity or trading portfolio. Realized gains and losses resulting from the sale of securities recorded on the trade date are computed by the specific identification method. Interest and dividend income, adjusted by amortization of premiums or discounts on a level yield method, are included in earnings.

The full amount of the loss will be charged to earnings if the Company intends to sell an impaired security or it is more likely thannot that the Company would be required to sell an impaired security before recovering its amortized cost basis. Changes in the allowance for credit losses would be recorded as a provision for credit losses. Losses would be charged against the allowance when management believes the security is uncollectible or management intends to sell or is required to sell the security. See Note2—Securities for additional information.

Loans Held-for-Sale – Mortgage loans originated and intended for sale in the secondary market are carried at the lower of aggregate cost or fair value, as determined by outstanding commitments from investors. Net unrealized losses, if any, are recorded as a valuation allowance and charged to earnings.

Mortgage loans held-for-sale can be sold with servicing rights retained or released. The carrying value of mortgage loans sold is reduced by the amount allocated to the servicing rights. Gains and losses on sales of mortgage loans are based on the difference between the selling price and the carrying value of the related loan sold.

Loans and Loan Interest Income – Loans that management has the intent and ability to hold for the foreseeable future or until maturity or payoff are reported at the principal balance outstanding, net of unearned interest, and net deferred loan fees and costs. Interest income is accrued on the unpaid principal balance. Loan origination fees, net of certain direct origination costs, are deferred and recognized in interest income using the level-yield method without anticipating prepayments. The accrual of interest income on mortgage and commercial loans is discontinued at the time the loan is90 days delinquent unless the loan is well-secured and in process of collection. Consumer loans are typically charged-offno later than when they reach120 days past due. Past due status is based on the contractual terms of the loan. In all cases, loans are placed on non-accrual status or charged-off at an earlier date if collection of principal or interest is considered doubtful.

69

Generally, interest accrued butnot received for loans placed on non-accrual status is reversed against interest income. Interest received on such loans is accounted for on the cash-basis or cost-recovery method, until qualifying for return to accrual. Loans are returned to accrual status when all the principal and interest amounts contractually due are brought current and future payments are reasonably assured.

Allowance for credit losses – The allowance for credit losses is a valuation account that is deducted from the loans’ amortized cost basis to present the net amount expected to be collected on the loans. Loans are charged off against the allowance when management believes uncollectability of the loan is confirmed. Expected recoveries donot exceed the aggregate of amounts previously charged off and expected to be charged off.

Management estimates the allowance balance using relevant available information, from internal and external sources, relating to past events, current conditions, and reasonable and supportable forecasts. The allowance for credit losses is measured on a collective (segment) basis when similar risk characteristics exist. Segments generally reflect underlying collateral categories as well taking into consideration the risk ratings and unguaranteed balance of small business loans. Management considers various economic scenarios in its forecast when evaluating economic indicators and weighs the various scenarios to arrive at the forecast that most reflects management’s expectation of future conditions. After atwo-year forecast period, atwo-year reversion period adjusts loss experience to the historical average on a straight-line basis. Model results are supplemented by qualitative adjustments for risk factors relevant in assessing the expected credit losses within the portfolio segments. These adjustments* may*increase or decrease the estimate of expected credit losses based upon the assessed level of risk for each qualitative factor.

Loans that donot share risk characteristics are evaluated on an individual basis. Loans evaluated individually arenot also included in the collective evaluation. When management determines that foreclosure is probable, expected credit losses are based on the fair value of the collateral, adjusted for undiscounted selling costs as appropriate. When the discounted cash flow method is used to determine the allowance for credit losses, management doesnot adjust the effective interest rate used to discount expected cash flows to incorporate expected prepayments.

Expected credit losses are estimated over the contractual term of the loans, adjusted for expected prepayments when appropriate. The contractual term excludes expected extensions, renewals, and modifications unless either of the following applies: management has a reasonable expectation at the reporting date that a troubled debt restructuring will be executed with an individual borrower or the extension or renewal options are included in the original or modified contract at the reporting date and arenot unconditionally cancellable by the Company.

The Company also maintains an allowance for credit losses on off-balance sheet credit exposures for unfunded loan commitments. This allowance is reflected as a component of other liabilities which represents management’s current estimate of expected losses in the unfunded loan commitments. The estimate includes consideration of the likelihood that funding will occur and an estimate of expected credit losses on commitments expected to be funded over its estimated life based on management’s consideration of past events, current conditions and reasonable and supportable economic forecasts. Management tracks the level and trends in unused commitments and takes into consideration the same factors as those considered for purposes of the allowance for credit losses on outstanding loans.

A description of each segment of the loan portfolio, including the corresponding credit risk, is included below:

Residential real estate – We offer fixed and adjustable rate residential real estate loans with terms of up to 30 years. We also offer a variety of lot loan options to consumers to purchase the lot on which they intend to build their home. We also offer traditional home equity loans and lines of credit. Our underwriting criteria for, and the risk associated with, home equity loans and lines of credit are generally the same as those forfirst mortgage loans.

Home Equity – Home equity loans typically have terms of 20 years or less. We generally limit the extension of credit to 90% of the available equity of each property. These loans carry risk associated with local employment and declining real estate values.

Commercial real estate – Commercial real estate loans are extensions of credit secured by owner occupied and non-owner occupied collateral. Commercial real estate loans generally have terms of 10 years or less, although payments* maybe structured on a longer amortization basis. We attempt to reduce credit risk in the commercial real estate portfolio by emphasizing loans on owner-occupied industrial, office, and retail buildings where the loan-to-value ratio, established by independent appraisals, doesnot* generally exceed 80% of cost of appraised value. We also generally require that a borrower’s cash flow exceed 120% of monthly debt service obligations. Commercial real estate loans are generally viewed as having more risk of default than residential real estate loans. They are also typically larger than residential real estate loans and consumer loans and depend on cash flows from the owner’s business or the property to service the debt. Underwriting generally involves intensive analysis of the financial strength of the borrower and guarantor, liquidation value of the subject collateral, and any available secondary sources of repayment, with the greatest emphasis given to a borrower’s capacity to meet cash flow coverage requirements as set forth by Bank policies. Such repayment of owner occupied loans is commonly derived from the successful ongoing operations of the business occupying the property. These typically include small businesses and professional practices. Commercial real estate loans* may*also include government guaranteed loans secured by collateral in the form of residential real estate. Repayment of such loans generally comes from the generation of cash flow as the result of the borrower’s business operations.

Construction and land development – Construction and land development loans are generally limited to a term of 9 to 24 months, although payments* maybe structured on a longer amortization basis. Most loans will mature and require payment in full upon completion and either the sale of the property or refinance into a permanent loan. We believe that construction and land development loans generally carry a higher degree of risk than long-term financing of stabilized, rented, and owner-occupied properties because repayment depends on the ultimate completion of the project and usually on the subsequent sale of the property. We attempt to reduce risk associated with construction and land development loans by obtaining personal guaranties and by keeping the maximum loan to value ratio at or below 80% of the lesser of cost or appraised value, depending on the project type. Generally we donot* have interest reserves built into loan commitments but require periodic cash payments for interest from the borrower’s cash flow.

70

Multifamily – Multifamily loans are a subset of commercial real estate loans and generally carry similar terms and underwriting requirements. These loans are broken out as a separate segment due to unique risk characteristics that they exhibit. While similar in nature to other non-owner occupied commercial real estate, they are significantly impacted by the individual credit capacity of many more individual tenants than other commercial real estate as well as the condition and capacity of the local residential housing markets. The underlying real estate also has a lack of suitable alternative uses.

Commercial business – Commercial business loans are typically made to small and middle-market established businesses involved in professional services, accommodation and food services, health care, financial services, wholesale trade, manufacturing, distribution, retailing, and non-profits. Most clients are privately owned with markets that range from local to national in scope. Many of the loans to this segment are secured by liens on corporate assets and personal guarantees of the principals. The regional economic strength or weakness impacts the relative risk in this loan category. There is little concentration in anyone business sector, and loan risks are generally diversified among many borrowers. Risks associated with commercial and industrial loans include monitoring the condition of the collateral which often consists of inventory, accounts receivable, and other non-real estate assets. Declines in general economic conditions and other events can cause cash flows to fall to levels insufficient to service this debt.

Consumer – Consumer loans are underwritten based on the borrower’s income, current debt level, past credit history, and the availability and value of collateral. Consumer rates are both fixed and variable, with negotiable terms. Our installment loans typically amortize over periods up toseven years. Although we typically require monthly principal and interest payments on our loan products, we will offer consumer loans at interest only with a single maturity date when a specific source of repayment is available. Consumer loans are generally considered to have greater risk than ourfirst andsecond mortgages on real estate because they* maybe unsecured, or, or if they are secured, the value of the collateral may*be difficult to assess and more likely to decrease in value than real estate.

Manufactured homes – The Bancorp purchases fixed rate closed loans from athird party that are subject to Bancorp’s underwriting requirements and secured by manufactured homes. The maturity date on these loans can range up to 25 years. In addition, these loans have a reserve account held at the Bancorp.

Government– The Bancorp is permitted to purchase non-rated municipal securities, tax anticipation notes, and warrants within the local market area.

Troubled Loan Modifications – A troubled loan modification of a loan is undertaken to improve the likelihood that the loan will be repaid in full under the modified terms in accordance with a reasonable repayment schedule. All modified loans are evaluated to determine whether the loan should be reported as a troubled loan modification (TLM). A loan is a TLM when the Company, for economic or legal reasons related to the borrower's financial difficulties, grants a type of loan modification to the borrower by modifying or renewing a loan under terms that the Company wouldnot otherwise consider. To make this determination, the Company must determine whether (a) the borrower is experiencing financial difficulties and (b) the Company granted the borrower a modification for principal forgiveness, interest rate reduction, other-than-insignificant payment delay or other-than-insignificant term extension. This determination requires consideration of all of the facts and circumstances surrounding the modification. An overall general decline in the economy or some level of deterioration in a borrower's financial condition doesnot inherently mean the borrower is experiencing financial difficulties.

Some of the factors considered by management when determining whether a borrower is experiencing financial difficulties are: (1) is the borrower currently in default on any of its debts, (2) has the borrower declared or is the borrower in the process of declaring bankruptcy, and (3) is there doubt as to whether the borrower will continue to be a going concern based on factors including butnot limited to projections of insufficient cash flows to service debt in accordance with contractual terms and anticipated inability to obtain funding from other sources at a market rate.

Federal Home Loan Bank Stock–* The Bank is a member of the FHLB system. Members are required to own a certain amount of stock based on the level of borrowings and other factors, and may*invest in additional amounts. FHLB stock is carried at cost, classified as a restricted security, and periodically evaluated for impairment based on ultimate recovery of par value. Both cash and stock dividends are reported as income.

Transfers of Financial Assets– Transfers of financial assets are accounted for as sales when control over the assets has been surrendered. Control over transferred assets is deemed to be surrendered when (1) the assets have been isolated from the Company, (2) the transferee obtains the right (free of conditions that constrain it from taking advantage of the right) to pledge or exchange the transferred assets, and (3) the Company doesnot maintain effective control over the transferred assets through an agreement to repurchase them before their maturity.

Premises and Equipment– Owned land is carried at cost. Owned premises and equipment are carried at cost less accumulated depreciation. Premises and related components are depreciated using the straight-line method with useful lives ranging from 15 to 39 years. Furniture and equipment are depreciated using the straight-line method with useful lives ranging from 2 to 10 years. The Bank leasessix branches through long term lease agreements whereby the Bank is also responsible for insurance costs, real estate taxes, and maintenance and repairs for each of the properties. Lease right-of-use assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease.

**Foreclosed Real Estate– Assets acquired through or instead of loan foreclosure are initially recorded at fair value less estimated costs to sell when acquired, establishing a new cost basis. If fair value declines subsequent to foreclosure, a valuation allowance is recorded through expense. Operating costs after acquisition are expensed.

71

Long-term Assets– Premises and equipment and other long-term assets are reviewed for impairment when events indicate their carrying amount* may**not* be recoverable from future undiscounted cash flows. If impaired, the assets are recorded at fair value.

Bank Owned Life Insurance– The Company has purchased life insurance policies on certain key executives. In accordance with accounting for split-dollar life insurance, Bank owned life insurance is recorded at the amount that can be realized under the insurance contract at the balance sheet date, which is the cash surrender value adjusted for other charges or other amounts due that are probable at settlement.

Goodwill and Intangibles– The Company records the assets acquired, including identified intangible assets, and the liabilities assumed in acquisitions at their fair values. These fair values often involve estimates based onthird-party valuations, such as appraisals, or internal valuations based on discounted cash flow analyses or other valuation techniques that* may*include estimates of attrition, inflation, asset growth rates or other relevant factors. In addition, the determination of the useful lives over which an intangible asset will be amortized is subjective. Under the Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC)350, goodwill and indefinite-lived assets recorded are reviewed for impairment on an annual basis, as well as on an interim basis if events or changes indicate that the asset might be impaired. An impairment loss is recognized for any excess of carrying value over fair value of the goodwill or the indefinite-lived intangible asset.

Repurchase Agreements– Substantially all repurchase agreement liabilities represent amounts advanced by various customers that arenot covered by federal deposit insurance and are secured by securities owned by the Company.

Income Taxes– Income tax expense is the total of the current year income tax due or refundable and the change in deferred tax assets and liabilities. Deferred tax assets and liabilities are the expected future tax amounts for the temporary differences between carrying amounts and tax basis of assets and liabilities, computed using enacted tax rates. A valuation allowance, if needed, reduces deferred tax assets to the amount expected to be realized.

At* December 31, 2024and2023,* the Company evaluated tax positions taken for filing with the Internal Revenue Service and all state jurisdictions in which it operates. The Company believes that income tax filing positions will be sustained under examination and doesnot anticipate any adjustments that would result in a material adverse effect on the Company's financial condition, results of operations, or cash flows. Accordingly, the Company hasnot recorded any reserves or related accruals for interest and penalties for uncertain tax positions at* December 31, 2024and2023.*

Loan Commitments and Related Financial Instruments– Financial instruments include off-balance sheet credit instruments, such as commitments to make loans and standby letters of credit, issued to meet customer financing needs. The face amount for these items represents the exposure to loss, before considering customer collateral or ability to repay. Such financial instruments are recorded when they are funded.

As part of mortgage banking operations, the Company enters into commitments to originate loans whereby the interest rate on these loans is determined prior to funding (“interest rate lock commitments”). Similar to loans held for sale, the fair value of rate lock commitments is subject to change primarily due to changes in interest rates. The interest rate lock commitments on mortgage loans intended to be sold are recorded at fair value with changes in fair value recorded in current earnings as part of gain on sale of loans held-for-sale, net.

Earnings Per Common Share–* *Basic earnings per common share is net income divided by the weighted- average number of common shares outstanding during the period. The restricted shares issued provide for dividend and voting rights and are therefore considered participating securities. Accordingly, all restricted stock is included in basic earnings per share.

Comprehensive (Loss) Income–* *Comprehensive (loss) income consists of net income and other comprehensive (loss) income. Other comprehensive (loss) income includes unrealized gains and losses on securities available-for- sale.

Loss Contingencies– Loss contingencies, including claims and legal actions arising in the ordinary course of business, are recorded as liabilities when the likelihood of loss is probable and an amount or range of loss can be reasonably estimated. Management doesnot believe such matters currently exist that will have a material effect on the consolidated financial statements.

72

Restrictions on Cash– As part of derivative contracts entered into by the Company, cash balances of $5.1 million were pledged as collateral at* December 31, 2024.At December 31, 2024,the Company’s correspondent cash accounts exceeded federally insured limits by $6.8 million. Additionally, the Company had approximately $46.2 million of cash held by the FRB and the FHLB, which isnot* federally insured.

Fair Value of Financial Instruments– Fair values of financial instruments are estimated using relevant market information and other assumptions, as more fully disclosed in a separate note. Fair value estimates involve uncertainties and matters of significant judgment regarding interest rates, credit risk, prepayments and other factors, especially in the absence of broad markets for particular instruments. Changes in assumptions or in market conditions could significantly affect the estimates.

Operating Segments – The Company has identifiedone reporting unit andone operating segment, community banking, which encompasses commercial and consumer banking services to serve a similar base of clients utilizing company-wide offerings of similar products and services managed through similar processes and platforms offered to individuals, businesses, municipalities and other entities. See Note19 - Segment Reporting for more details.

.

Trust Assets– Assets of the Company’s wealth management department, other than cash on deposit at the Company, arenot included in these consolidated financial statements because they arenot assets of the Company.

Adoption of New Accounting Pronouncements–

In* June 2022,the FASB issued ASUNo.* 2022-03 “Fair Value Measurements (Topic820): Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions.” These amendments clarify that a contractual restriction on the sale of an equity security isnot considered part of the unit of account of the equity security and, therefore, isnot considered in measuring fair value. This guidance is effective for public business entities for fiscal years, including interim periods within those fiscal years, beginning after* December 15, 2023.Early adoption is permitted. ASU2022*-03 didnot have a material impact on our consolidated financial statements.

In* March 2023,the FASB issued Accounting Standards (ASU)No. 2023-02 “Investments Equity Method and Joint Ventures (Topic323*): Accounting for Investments in Tax Credit Structures Using the Proportional Amortization Method.” These amendments allow reporting entities to elect to account for qualifying tax equity investments using the proportional amortization method, regardless of the program giving rise to the related income tax credits. This guidance is effective for public business entities for fiscal years including interim periods within those fiscal years, beginning after* December 15, 2023.Early adoption is permitted in any interim period. ASU2023*-02 didnot have a material impact on our consolidated financial statements.

73

In* November 2023,the FASB issued ASU2023*-07, Segment Reporting (Topic280): Improvements to Reportable Segment Disclosures, which requires all public entities to provide enhanced disclosures about significant segment expenses. Provisions in the amendment include: (1) Requirement that a public entity disclose, on an annual and interim basis, significant segment expenses that are regularly provided to the chief operating decision maker ("CODM") and included within each reported measure of segment profit or loss (collectively referred to as the "significant expense principle"); (2) Requirement that a public entity disclose, on an annual and interim basis, an amount for other segment items by reportable segment and a description of its composition. The other segment items category is the difference between segment revenue less the segment expenses disclosed under the significant expense principle and each reported measure of segment profit or loss; (3) Requirement that a public entity provide all annual disclosures about a reportable segment's profit or loss and assets currently required by ASC280 in interim periods; (4) Clarification that if the CODM uses more thanone measure of a segment's profit or loss in assessing segment performance and deciding how to allocate resources, a public entity* mayreportone* or more of those additional measures of segment profit. However, at leastone of the reported segment profit or loss measures (or the single reported measure, if onlyone is disclosed) should be the measure that is most consistent with the measurement principles used in measuring the corresponding amounts in the public entity's consolidated financial statements; (5) Requirement that a public entity disclose the title and position of the CODM and explanation of how the CODM uses the reported measure(s) of segment profit or loss in assessing segment performance and deciding how to allocate resources; and (6) Requirement that a public entity that has a single reportable segment provide all the disclosures by the amendments in the update and all existing segment disclosures in ASC280.

The amendments in the update are effective for fiscal years beginning after* December 15, 2023,and interim periods within fiscal years beginning after December 15, 2024,with early adoption permitted. For public business entities, amendments in the update should be applied retrospectively to all periods presented in the financial statements, and upon transition the segment expense categories and amounts disclosed in the prior periods should be based on the significant segment expense categories identified and disclosed in the period of adoption. The Company adopted this standard effective January 1, 2024,and didnot* have a material impact on the consolidated financial statements.

Upcoming Accounting Pronouncements -

In* October 2023,the FASB issued ASU2023*-06, Disclosure Improvements: Codification Amendment in Response to the SEC’s Disclosure Update and Simplification Initiative. The ASU incorporates several disclosure and presentation requirements currently residing in the SEC Regulations S-X and S-K. The amendments will be applied prospectively and are effective when the SEC removes the related requirements from Regulations S-X or S-K. Any amendments the SEC doesnot remove by* June 30, 2027willnot* be effective. As we are currently subject to these SEC requirements, this ASU isnot expected to have a material impact on our consolidated financial statements or related disclosures.

Income Taxes. In* December 2023,the FASB issued ASU2023*-09, Income Taxes (Topic740): Improvements to Income Tax Disclosures, which enhances transparency about income tax information through improvements to income tax disclosures primarily related to the rate reconciliation and income taxes paid and to improve the effectiveness of income tax disclosures. This accounting standards update will be effective for us for fiscal year2025, with early adoption permitted. We are currently evaluating the impact of this accounting standard, but donot expect it to have a material impact on our consolidated financial statements.

In* November 2024,the FASB issued ASU2024*-03, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures, which requires public business entities disclose additional information about specific expense categories in the notes to financial statements at interim and annual reporting periods. The amendments in this update are effective for annual reporting periods beginning after* December 15, 2026,and interim reporting periods beginning after December 15, 2027.Early adoption is permitted. We are currently evaluating the impact of this accounting standard, but we donot* expect it to have a material impact on our consolidated financial statements.

In* November 2024,the FASB issued ASU2024*-04, Debt-Debt With Conversion and Other Options, which clarifies the requirements for determining whether certain settlements of convertible debt instruments, including convertible debt instruments with cash conversion features or convertible debt instruments that arenot currently convertible, should be accounted for as an induced conversion. The amendments are effective for annual reporting periods beginning after* December 15, 2025,and interim reporting periods within those annual reporting periods beginning after December 15, 2025.Early adoption is permitted. We are currently evaluating the impact of this accounting standard, but we donot* expect it to have a material impact on our consolidated financial statements.

NOTE2 – Securities

The estimated fair value of available-for-sale securities and the related gross unrealized gains and losses recognized in accumulated other comprehensive loss were as follows

The cost basis, estimated fair value of available-for-sale securities, and carrying amount, if different, at* December 31, 2024,by contractual maturity were as follows. Securitiesnot* due at a single maturity date, primarily mortgage-backed securities, are shown separately.

Sales of available-for-sale securities were as follows:

The tax benefits related to these net realized losses were approximately $127 thousand for2024. The tax benefits related to these net realized losses were approximately $11 thousand for2023.

Accumulated other comprehensive loss balances, net of tax, related to available-for-sale securities, were as follows:

Securities with carrying values of approximately $326.5 million and $324.1 million were pledged as of* December 31, 2024and2023,* respectively, as collateral for repurchase agreements, public funds, and for other purposes as permitted or required by law.

Securities with unrealized losses at* December 31, 2024,and2023,* not recognized in income are as follows:

Unrealized losses on securities havenot been recognized into income because the securities are of high credit quality or have undisrupted cash flows. Management has the intent and ability to hold those securities for the foreseeable future, and the decline in fair value is largely due to changes in interest rates and volatility in securities markets. The fair values are expected to recover as the securities approach maturity.

**NOTE3 – **Loans Receivable

Year end loans are summarized below:

The Company's age analysis of past due loans is summarized below:

77

The following table shows the amortized cost of loans, segregated by portfolio segment, credit quality rating and year of origination as of* December 31, 2024,and December 31, 2023and gross charge-offs for the year ended December 31, 2024and for the year ended December 31, 2023.*

78

79

The Company has established a standard loan grading system to assist management, lenders and review personnel in their analysis and supervision of the loan portfolio. The use and application of these grades by the Company is uniform and conforms to regulatory definitions. The loan grading system is as follows:

1 – Superior Quality

Loans in this category are substantially risk free. Loans fully collateralized by a Bank certificate of deposit or Bank deposits with a hold are substantially risk free.

2 – Excellent Quality

The borrower generates excellent and consistent cash flow for debt coverage, excellent average credit scores, excellent liquidity and net worth and are reputable operators with over15 years’ experience. Current and debt to tangible net worth ratios are excellent. Loan to value is substantially below policy and collateral condition is excellent.

3 – Great Quality

The borrower generates more than sufficient cash flow to fund debt service and cash flow is improving. Average credit scores are very strong. Operators are reputable with significant years of experience. Liquidity, net worth, current and debt to tangible net worth ratios are very strong. Loan to value is significantly below policy and collateral condition is significantly above average.

4 – Above Average Quality

The borrower generates more than sufficient cash flow to fund debt service but cash flow trends* may*be stable or slightly declining. Average credit scores are strong. The borrower is a reputable operator with many years of experience. Liquidity, net worth, current and debt to tangible net worth ratios are strong. Loan to value is below policy and collateral condition is above average.

5 – Average Quality

Borrowers are considered creditworthy and can repay the debt in the normal course of business, however, cash flow trends* may*be inconsistent or fluctuating. Average credit scores are satisfactory and years of experience is acceptable. Liquidity and net worth are satisfactory. Current and debt to tangible net worth ratios are average. Loan to value is slightly below policy and the collateral condition is slightly above average.

6 – Pass

Borrowers are considered credit worthy but financial condition* mayshow signs of weakness due to internal or external factors. Cash flow trends maybe declining annually. Average credit scores may*be low but remain acceptable. Borrower has limited years of experience. Liquidity, net worth, current and debt to tangible net worth ratios are below average. Loan to value is nearing policy limits and collateral condition is average.

7 – Special Mention

A special mention asset has identified weaknesses that deserve Management’s close attention. If left uncorrected, these weaknesses* mayresult in deterioration of the repayment prospects for the asset or in the Bank’s credit position at some future date. Special mention assets arenot* adversely classified and donot expose the Bank institution to sufficient risk to warrant adverse classification. There is still adequate protection by the current sound worth and paying capacity of the obligor or of the collateral pledged. The Special Mention rating is viewed as transitional and will be monitored closely.

Loans in this category* mayexhibit some of the following risk factors. Cash flow trends maybe consistently declining or maybe questionable. Debt coverage ratios maybe at or near1:1.* Average credit scores* maybe very weak or the borrower mayhave minimal years of experience. Liquidity, net worth, current and debt to tangible net worth ratios maybe very weak. Loan to value maybe at policy limits or mayexceed policy limits. Collateral condition may*be below average.

8 – Substandard

This classification consists of loans which are inadequately protected by the current sound worth and paying capacity of the obligor or of the collateral pledged. Financial statements normally reveal some or all of the following: poor trends, lack of earnings and cash flow, excessive debt, lack of liquidity, and the absence of creditor protection. Loans are still considered collectible, but due to increased risks and defined weaknesses of the credit, some loss could be incurred in collection if the deficiencies arenot corrected.

80

9 – Doubtful

Such loans have been placed on nonaccrual status and* may*be heavily dependent upon collateral possessing a value that is difficult to determine or based upon some near-term event which lacks clear certainty. These loans have all of the weaknesses of those classified as Substandard; however, based on existing conditions, these weaknesses make full collection of the principal balance highly improbable.

10 – Loss

Loans that are considered uncollectible and of such little value that continuing to carry them as assets isnot warranted.

Loans with risk classifications of pass and special mention were part of the pooled loan ACL analysis. Loans classified as substandard or worse were individually evaluated for impairment and specific reserves were established, if applicable. Risk gradings for loans with balances greater than*$1* million are updated every12 months through analysis during origination, renewals, modifications, or regular annual review. Risk gradings for loans with balances less than*$1* million are updated primarily through analysis during origination, renewals, modifications, or periodic review. Risk gradings are also downgraded due to delinquency at month end. In particular,60 days past due are downgraded to Special Mention, while90 days past due are further downgraded to Substandard.

Modifications to Borrowers Experiencing Financial Difficulty

The allowance for credit losses incorporates an estimate of lifetime expected credit losses and is recorded on each asset upon origination. The starting point to estimate such credit losses is historical loss information. The Company uses a probability of default/loss given default model to determine the allowance for credit losses recorded at origination. Occasionally, the Company subsequently modifies loans for borrowers experiencing financial distress by providing the following forms of relief: principal forgiveness, term extension, payment delay, or interest rate reduction. In some cases, the Company provides multiple types of modifications onone loan. Because the effect of most modifications to borrowers experiencing financial difficulty is already included in the allowance for credit losses,no change to the allowance for credit losses is generally recorded for these modifications.

The following table shows the amortized cost of loans at* December 31, 2024,that were both experiencing financial difficulty and modified during the year ended December 31, 2024,*segregated by portfolio segment and type of modification. The percentage of the amortized cost of loans that were modified to borrowers in financial distress as compared to the amortized cost of each segment of financial receivable is also presented below.

The financial effects of payment delay modifications and term extension modifications were forbearance average offive months andfour months weighted average extension to life of loan, respectively. There wereno commitments to lend additional amounts to the borrowers included in the previous tables.

81

The Company closely monitors the performance of loans and leases that have been modified to borrowers experiencing financial difficulty to understand the effectiveness of its modification efforts. The performance of such modified loans is presented below.

Upon the Company’s determination that a modified loan has subsequently been deemed uncollectible, the loan is written off. Therefore, the amortized cost of the loan is reduced by the uncollectible amount and the allowance for credit losses is adjusted by the same amount. All modified loans are deemed collectible.

Foreclosures

There were $589 thousand in multifamily loans, $7 thousand in home equity loans and $736 thousand in residential loans in the process of foreclosure as of* December 31, 2024.*

Acquired Loan Purchase Discounts

As part of the fair value of loans receivable, there was a net fair value discount for loans acquired of $4.4 million at* December 31, 2024,compared to $5.2 million at December 31, 2023.*

Accretable yield, or income recorded for thetwelve months ended* December 31,*is as follows:

Accretable yield, or income expected to be recorded in the future is as follows:

Allowance for Credit Losses

The allowance for credit losses is established for current expected credit losses on the Company’s loan portfolio utilizing guidance in Accounting Standards Codification (ASC) Topic326.

The determination of the allowance requires significant judgment to estimate credit losses measured on a collective pool basis when similar risk characteristics exist, and for loans evaluated individually. In determining the allowance, the Company estimates expected future losses for the loan’s entire contractual term adjusted for expected payments when appropriate. The allowance estimate considers relevant available information, from internal and external sources relating to the historical loss experience, current conditions, and reasonable and supportable forecasts for the Company’s outstanding loan balances. The allowance is an estimation that reflects management’s evaluation of expected losses related to the Company’s financial assets measured at amortized cost. To ensure that the allowance is maintained at an adequate level, a detailed analysis is performed on a quarterly basis and an appropriate provision is made to adjust the allowance.

82

The Company categorizes the loan portfolio intonine segments based on similar risk characteristics. Loans within each segment are collectively evaluated using the probability of default (“PD”)/loss given default (“LGD”) methodology (PD/LGD). In creating the “current expected credit loss (CECL)” model as required under ASC326, the Company has established atwo-year reasonable and supportable forecast period with atwo-year straight line reversion to the long-term historical average. Due to its minimal loss history, the Company elected to use peer data for a more reasonable calculation.

The Bancorp's activity in the allowance for credit losses, by loan segment, is summarized below for the year ended* December 31, 2024:*

The Bancorp's activity in the allowance for credit losses, by loan segment, is summarized below for the year ended* December 31, 2023:*

A collateral dependent loan relies solely on the operation or sale of the collateral for repayment. In evaluating the overall risk associated with the loan, the Company considers character, overall financial condition and resources, and payment record of the borrower; the prospects for support from any financially responsible guarantors; and the nature and degree of protection provided by the cash flow and value of any underlying collateral. However, as other sources of repayment become inadequate over time, the significance of the collateral's value increases and the loan* may*become collateral dependent.

83

The table below presents the amortized cost basis and allowance for credit losses (“ACL”) allocated for collateral dependent loans in accordance with ASC326, which are individually evaluated to determine expected credit losses.

A deferred cost reserve is maintained for the portfolio of manufactured home loans that have been purchased. This reserve is available for use for manufactured home loan nonperformance and costs associated with nonperformance. If the segment performs in line with expectations, the deferred cost reserve is paid as a premium to thethird party originator of the loan. The unamortized balance of the deferred cost reserve totaled $3.2 million and $3.5 million as of* December 31, 2024,and December 31, 2023,*respectively, and is included in net deferred loan origination cost.

The following table presents non–accrual loans, and loans past due over90 days still on accrual by class of loans:

84

Accrued interest receivable on loans totaled $5.5 million as of* December 31, 2024and $5.7 million as of December 31, 2023and is excluded from the estimate of credit losses. The Company made the accounting policy election tonot* measure an ACL for accrued interest receivable. Accrued interest deemed uncollectible will be written off through interest income.

Liability for Credit Losses on Unfunded Loan Commitments

The liability for credit losses inherent in unfunded loan commitments is included in accrued expenses and other liabilities on the Consolidated Balance Sheet. The adequacy of the reserve for unfunded commitments is determined quarterly based on methodology similar to the methodology for determining the ACL. The following table shows the changes in the liability for credit losses on unfunded loan commitments.

**Note4 – **Premises and Equipment, Net

At year end, premises and equipment are summarized as follows:

Depreciation and amortization expense was approximately $2.8 million and $2.9 million for2024 and2023, respectively.

**Note5 – **Goodwill and Other Intangible Assets

At year end, goodwill and other intangible assets are summarized as follows:

Goodwill arising from business combinations represents the value attributable to unidentifiable intangible assets in the business acquired. The Company’s goodwill relates to the value inherent in the banking industry and that value is dependent upon the ability of the Company to provide quality, cost effective banking services in a competitive marketplace. Goodwill is tested periodically for impairment. If the implied fair value of goodwill is lower than its carrying amount, goodwill impairment is indicated and goodwill is written down to its implied fair value. There hasnot been any impairment of goodwill identified or recorded.

85

In addition to goodwill, a core deposit intangible was established from previous acquisitions. The Company had core deposit intangible balances of $1.9 million and $3.3 million as of* December 31, 2024,and2023,* respectively. The table below summarizes the annual amortization:

The amortization recorded for thenine months ended* December 31,*is as follows:

Amortization to be recorded in future periods, is as follows:

**Note6 – **Income Taxes

At year-end, components of income tax expense (benefit) consist of the following:

86

Effective tax rates differ from the federal statutory rate of 21% for2024 and2023 applied to income before income taxes due to the following:

87

At* December 31,*the components of the net deferred tax asset recorded in other assets in the consolidated balance sheets are as follows:

At* December 31, 2024,the Company has Indiana net operating loss carry forwards of approximately $3.6 million which will begin to expire in2038* ifnot used. The Company also has a state tax credit carry forward of approximately $63 thousand which expire from2024 to2034. Management has concluded that the state net operating losses will be fully utilized and thereforeno valuation allowance is necessary on the state net operating loss. A valuation allowance is in place on the state tax credit carryforward, as it isnot expected to be utilized before expiration. A valuation allowance of $63 thousand and $62 thousand was provided at* December 31, 2024and2023,* respectively for the state tax credits net of federal benefit.

The Company acquired $3.3 million of federal net operating loss carryforwards and $7.2 million of Illinois net operating loss carryforwards with the acquisition of First Personal Financial Corp during2018 of which $2.2 million of the federal losses expire in years ranging from2029 to2035, $1.1 million of the federal losses donot expire, and the Illinois losses expire in years ranging from2028 to2036 Under Section382 of the Internal Revenue Code, the annual limitation on the use of the federal losses is $362 thousand for First Personal while there isno limitation on the use of the Illinois losses. Management has determined that all of the losses are more likely thannot to be utilized before expiration.

88

The Company acquired $7.2 million of federal net operating loss carryforwards and $11.4 million of Illinois net operating loss carryforwards with the acquisition of AJS Bancorp Inc. during2019 of which $3.6 million of the federal losses expire in years ranging from2030 to2037, $3.6 million of the federal losses donot expire, and the Illinois losses expire in years ranging from2029 to2037. Under Section382 of the Internal Revenue Code, the annual limitation on the use of the federal losses is $834 thousand for AJS, while there isno limitation on the use of the Illinois losses. Management has determined that all of the losses are more likely thannot to be utilized before expiration.

The Company acquired $3.3 million of federal net operating loss carryforwards and $57.4 million of Illinois net operating loss carryforwards with the acquisition of Royal Financial, Inc. during2022 of which $2.7 million of the federal losses expire in years ranging from2030 to2036, $623 thousand of the federal losses donot expire, and the Illinois losses expire in years ranging from2026 to2032. Under Section382 of the Internal Revenue Code, the annual limitation on the use of the federal losses is $755 thousand for Royal, while there isno limitation on the use of the Illinois losses. Management has determined that all of the losses are more likely thannot to be utilized before expiration.

At* December 31, 2024*$4.3 million of the federal loss carryforwards, $67.6 million of the Illinois loss carryforward remain and $3.6 million of Indiana loss carryforwards remain; the benefit of which is reflected in deferred tax assets.

The Company qualified under provisions of the Internal Revenue Code, to deduct from taxable income a provision for bad debts in excess of both the provision for such losses charged to income in the financial statements, if any. Accordingly, retained earnings at* December 31, 2024and2023* includes, approximately $14.5 million, for whichno provision for federal income taxes has been made. If, in the future this portion of retained earnings is used for any purpose other than to absorb bad debt losses, federal income taxes would be imposed at the then applicable rate. The unrecorded deferred income tax liability on the above amounts was approximately $3.8 million at* December 31, 2024and2023.*

The Company hadno unrecognized tax benefits at any time during2024 or2023 and doesnot anticipate any significant increase or decrease in unrecognized tax benefits during2025. Should the accrual of any interest or penalties relative to unrecognized tax benefits be necessary, it is the Company's policy to record such accruals through income tax accounts; no such accruals existed at any time during2024 or2023.

The Company and its subsidiaries are subject to US Federal income tax as well as income tax of the states of Indiana and Illinois. The Company isno longer subject to examination by taxing authorities for the years before2021.

**Note7 – **Deposits

The aggregate amount of retail and brokered certificates of deposit with a balance of*$250* thousand or more was approximately $141.4 million at* December 31, 2024and $137.1 million at December 31, 2023.*

At* December 31, 2024,*scheduled maturities of retail and brokered certificates of deposit were as follows:

The Company’s end-of-period deposit portfolio balances were as follows:

**Note8 – **Borrowed Funds

At* December 31, 2024and December 31, 2023,*borrowed funds and their outstanding rates are summarized below:

At* December 31, 2024,*scheduled maturities of borrowed funds were as follows:

On* March 12, 2023,the Federal Reserve Board announced the creation of a new Bank Term Funding Program (the “BTFP”). The BTFP offered loans of up toone* year to banks, savings associations, credit unions, and other eligible depository institutions pledging U.S. Treasury securities, agency debt and mortgage-backed securities, and other qualifying assets as collateral. These assets were valued at par for purposes of the collateral pledge under the BTFP. During thefirst quarter of2023, the Company participated in the BTFP by accessing $80 million of low-cost capital under the program. During the quarter ending* September 30, 2024,*the Company terminated its involvement in the Bank Term Funding Program (the “BTFP”) and paid off its outstanding balance of $60 million.

Fixed rate advances are payable at maturity, with a prepayment penalty. The advances were collateralized by mortgage loans with a carrying value totaling approximately $460.8 million at* December 31, 2024.FHLB retains puttable option to call some of these advances 6 to 12 months after issuance. The Bank had a balance of $65 million at December 31, 2024compared tono balance at December 31, 2023at FHLB. In addition to the fixed rate advances, the Bank maintains a $25.0 million line of credit with the Federal Home Loan Bank of Indianapolis. The Bank didnot have a balance on the line of credit at December 31, 2024or December 31, 2023.*

At* December 31, 2024,*the Bank had available approximately $687.4 million in credit lines with various money center banks, including the FHLB and Federal Reserve.

91

Repurchase agreements consist of variable rate sweeps which mature daily as well as fixed rate term agreements that generally mature within12 months. These repurchase agreements are secured by municipal securities and collateralized mortgage obligations and residential mortgage-backed securities, under the Bank’s control. At* December 31,*information concerning these retail repurchase agreements is summarized below:

Note9 – Employees’ Benefit Plans**

The Company maintains an Unqualified Deferred Compensation Plan (the “UDC Plan”). The purpose of the UDC Plan is to provide deferred compensation to key senior management employees of the Company in order to recognize their substantial contributions to the Bank and provide them with additional financial security as inducement to remain with the Bank. The Compensation Committee selects which persons shall be participants in the UDC Plan. Participants’ accounts are credited each year with an amount based on a formula involving the participant’s employer funded contributions under all qualified plans and the limitations imposed by Internal Revenue Code subsection401(a)(17) and Code section415. The unqualified deferred compensation plan liability at* December 31, 2024and2023* was approximately $229 thousand and $263 thousand, respectively. The UDC Plan expense amounted to approximately $12 thousand for2024 and $7 thousand for2023.

Directors have deferred some of their fees in consideration of future payments. Fee deferrals, including interest, totaled approximately $85 thousand and $52 thousand for2024 and2023, respectively. The deferred fee liability at both* December 31, 2024and2023* was approximately $1.4 million.

**Note10 – **Stock Based Compensation

The Company’s2015 Stock Option and Incentive Plan (the “Incentive Plan”), permits the grant of equity awards for up to 250,000 shares of common stock. Awards granted under the Incentive Plan* may*be in the form of incentive stock options, non-qualified stock options, restricted stock, unrestricted stock, performance shares, or performance units. The purposes of the Plan are (i) to align the personal interests of plan participants with those of the shareholders of the Company, (ii) to encourage key individuals to accept or continue employment or service with the Company and its subsidiaries, and (iii) to furnish incentives to such key individuals to improve operations and increase profits by providing such key individuals the opportunity to acquire common stock of the Company or to receive monetary payments based on the value of such common stock.

Restricted stock awards are generally granted with an award price equal to the market price of the Company’s common stock on the award date. Restricted stock awards have been issued with athree year cliff-vesting period. Forfeiture provisions exist for personnel that separate employment before the vesting period expires. Compensation expense related to restricted stock awards is recognized over the vesting period. Total compensation cost that has been charged to expense for those plans was approximately $565 thousand and $719 thousand for the years ended* December 31, 2024and2023,* respectively.

When awarded restricted shares vest, employees of the Bank can elect to surrender a portion of their vested shares back to the Company to cover the tax liability of their awards. Shares were surrendered with a total value of $86 thousand and $196 thousand for the years ended* December 31, 2024and2023,* respectively.

93

A summary of changes in the Company’s non-vested restricted stock for the year ended* December 31, 2024,*follows:

As of* December 31, 2024,*there was approximately $515 thousand of total unrecognized compensation cost related to non-vested restricted shares granted under the Incentive Plan. The cost is expected to be recognized over a weighted-average period of 1.7 years.

**Note11 – **Regulatory Capital

The Bank is subject to regulatory capital guidelines adopted by the FDIC. Capital adequacy guidelines and prompt corrective action regulations involve quantitative measures of assets, liabilities, and certain off-balance sheet items calculated under regulatory accounting practices. Capital amounts and classifications are also subject to qualitative judgments by regulators. Failure to meet various capital requirements can initiate regulatory action. Prompt corrective action regulations providefive classifications, including well capitalized, adequately capitalized, undercapitalized, significantly undercapitalized, and critically undercapitalized, although these terms arenot used to represent overall financial condition. If adequately capitalized, regulatory approval is required to accept brokered deposits. If undercapitalized, capital distributions are limited, as is asset growth and expansion, and capital restoration plans are required. At* December 31, 2024,and2023,* the most recent regulatory notifications categorized the Bank is well capitalized under the regulatory framework for prompt corrective action. There areno conditions or events since that notification that management believes have changed the Bank’s category.

In addition to establishing the minimum regulatory capital requirements, the regulations limit capital distributions by the institution and certain discretionary bonus payments to management if an institution doesnot hold a “capital conservation buffer” consisting of2.5% of common equity Tier1 capital to risk-weighted assets above the amount necessary to meet its minimum risk-based capital requirements.

In addition, the following table shows that, at* December 31, 2024,and2023,* the Bank’s capital exceeded all applicable regulatory capital requirements set forth in12 C.F.R. §324.

94

The Company’s ability to pay dividends to its shareholders is largely dependent upon the Bank’s ability to pay dividends to the Company. Under Indiana law, the Bank* maypay dividends from its undivided profits (generally, earnings less losses, bad debts, taxes and other operating expenses) as is considered expedient by the Bank’s Board of Directors. However, the Bank must obtain the approval of the Indiana Department of Financial Institutions (DFI) if the total of all dividends declared by the Bank during the current year, including the proposed dividend, would exceed the sum of retained net income for the year to date plus its retained net income for the previoustwo* years. For this purpose, “retained net income,” means net income as calculated for call report purposes, less all dividends declared for the applicable period. An exemption from DFI approval would require that the Bank have been assigned a composite uniform financial institutions rating of1 or2 as a result of the most recent federal or state examination; the proposed dividend wouldnot result in a Tier1 leverage ratio below 7.5%; and that the Banknot be subject to any corrective action, supervisory order, supervisory agreement, or board approved operating agreement. In addition, under the terms of the MOU, the Bank must seek regulatory approval prior to paying cash dividends. The MOU documents an understanding among the Bank, the FDIC, and DFI that, among other things, the Bank will: refrain from paying cash dividends without prior regulatory approval. The aggregate amount of dividends that the Bank was eligible to declare in2024, without the need for qualifying for an exemption or prior DFI approval, was its2024 net profit. Moreover, the FDIC and the Federal Reserve Board* mayprohibit the payment of dividends if it determines that the payment of dividends would constitute an unsafe or unsound practice in light of the financial condition of the Bank. On December 20, 2024,the Board of Directors of the Company declared afourth* quarter dividend of $0.12 per share. The Company’sfourth quarter dividend totaling $518 thousand was paid to shareholders on* February 3, 2025.*

**Note12 – **Earnings per Common Share

Earnings per common share is computed by dividing net income by the weighted-average number of common shares outstanding. A reconciliation of the numerators and denominators of the basic earnings per common share and diluted earnings per common share computations for2024 and2023 is presented below.

**Note13 – **Related Party Transactions

The Company had aggregate loans outstanding to directors and executive officers (with individual balances exceeding*$60* thousand) of approximately $4.4 million at* December 31, 2024,and approximately $4.8 million at December 31, 2023.For the year ended December 31, 2024,*the following activity occurred on these loans:

Deposits from directors and executive officers totaled approximately $3.8 million and $4.0 million at* December 31, 2024,and2023,* respectively.

**Note14 – **Commitments and Contingencies

The Company is a party to financial instruments in the normal course of business to meet the financing needs of its customers. These financial instruments, which include commitments to make loans and standby letters of credit, arenot reflected in the accompanying consolidated financial statements. Such financial instruments are recorded when they are funded.

The Company’s exposure to credit loss in the event of non-performance by the other party to the financial instrument for commitments to originate loans and standby letters of credit is represented by the contractual amount of those instruments. Commitments generally have fixed expiration dates or other termination clauses and* mayrequire the payment of a fee. The Company uses the same credit policy to make such commitments as it uses for on-balance sheet items. Since commitments to make loans mayexpire without being used, the amount doesnot* necessarily represent future cash commitments.

The following table represents the commitments to extend credit and standby letters of credit as of* December 31, 2024and December 31, 2023,*respectively:

**Note15 – **Derivative Financial Instruments

The Company uses derivative financial instruments to help manage exposure to interest rate risk and the effects that changes in interest rates* mayhave on net income and the fair value of assets and liabilities. The Company has certain interest rate derivative positions that arenot* designated as hedging instruments. Derivative assets and liabilities are recorded at fair value on the Consolidated Balance Sheet and donot take into account the effects of master netting agreements. Master netting agreements allow the Company to settle all derivative contracts held with a single counterparty on a net basis, and to offset net derivative positions with related collateral, where applicable. These derivative positions relate to transactions in which the Company enters into an interest rate swap with a client while at the same time entering into an offsetting interest rate swap with another financial institution. In connection with each transaction, the Company agrees to pay interest to the client on a notional amount at a variable interest rate and receive interest from the client on the same notional amount at a fixed interest rate. At the same time, the Company agrees to pay another financial institution the same fixed interest rate on the same notional amount and receive the same variable interest rate on the same notional amount. The transaction allows the client to effectively convert a variable rate loan to a fixed rate. Because the terms of the swaps with the customers and the other financial institutions offset each other, with the only difference being counterparty credit risk, changes in the fair value of the underlying derivative contracts arenot materially different and donot significantly impact the Company’s results of operations.

The Company enters into commitments to originate loans whereby the interest rate on the loan is determined prior to funding (i.e., interest rate lock commitment). The interest rate lock commitments are considered derivatives and are recorded on the accompanying consolidated balance sheets at fair value in accordance with FASB ASC815, Derivatives and Hedging.

96

The following table shows the amounts of non-hedging derivative financial instruments:

The following table shows the amounts included in the Statements of Income for non-hedging derivative financial instruments:

The following table shows the offsetting of financial assets and derivative assets:

97

The following table shows the offsetting of financial liabilities and derivative liabilities:

**Note16 – **Fair Values of Financial Instruments

The Fair Value Measurements Topic (the “Topic”) establishes a hierarchy that requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The Topic describesthree levels of inputs that* may*be used to measure fair value:

Level1: Quoted prices (unadjusted) for identical assets or liabilities in active markets that the entity has the ability to access as of the measurement date.

Level2: Significant other observable inputs other than Level1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that arenot active; or other inputs that are observable or can be corroborated by observable market data.

98

Level3: Significant unobservable inputs that reflect a reporting entity’s own assumptions about the assumptions that market participants would use in pricing an asset or liability.

The fair values of securities available for sale are determined on a recurring basis by obtaining quoted prices on nationally recognized securities exchanges or pricing models utilizing significant observable inputs such as matrix pricing, which is a mathematical technique widely used in the industry to value debt securities without relying exclusively on quoted prices for the specific securities, but rather by relying on the securities’ relationship to other benchmark quoted securities. Different judgments and assumptions used in pricing could result in different estimates of value. In certain cases where market data isnot readily available because of lack of market activity or little public disclosure, values* maybe based on unobservable inputs and classified in Level3* of the fair value hierarchy.

The Company evaluates AFS security impairment on a quarterly basis. ASC326 allows for prospective adoption of previously recorded credit impairment on AFS securities. This allows the Company to maintain the same amortized cost basis of the securities before and after adoption date. At adoption, the Company has $173 thousand of previously recorded credit impairment on collateralized debt obligations. The Company believes this continues to represent the expected credit losses of the amortized cost basis, therefore, has established an ACL for AFS debt securities. The ACL is monitored quarterly and is measured by evaluating the present value of cash flows as compared to the amortized cost basis of the security. To the extent that there are improvements in credit related to these securities, the ACL will be reduced to account for the improvements. If any improvements in credit exceed the amount of previously reduced amortized cost bases, recoveries will be recorded through the income statement in the period received. The allowance for collateralized debt credit losses was at $173 thousand at* December 31, 2024and December 31, 2023.*

The Company’s subordination for each collateralized debt obligation is calculated by taking the total performing collateral and subtracting the sum of the total collateral within the Company’s class and the total collateral within all senior classes, and then stating this result as a percentage of the total performing collateral. This measure is an indicator of the level of collateral that can default before potential cash flow disruptions* mayoccur. In addition, management calculates subordination assuming future collateral defaults by utilizing the default/deferral assumptions in the Company’s impairment analysis. Subordination assuming future default/deferral assumptions is calculated by deducting future defaults from the current performing collateral. At December 31, 2024and2023,* management reviewed the subordination levels for each security in context of the level of current collateral defaults and deferrals within each security; the potential for additional defaults and deferrals within each security; the length of time that the security has been in “payment in kind” status; and the Company’s class position within each security.

99

At* December 31, 2024and2023,* the collateralized debt obligations with a cost basis of $2.2 million have been placed in “payment in kind” status. The Company’s securities that are classified as “payment in kind” are a result ofnot receiving the scheduled quarterly interest payments. For the securities in “payment in kind” status, management anticipates to receive the unpaid contractual interest payments from the issuer, because of the self- correcting cash flow waterfall provisions within the structure of the securities. When a tranche senior to the Company’s position fails the coverage test, the Company’s interest cash flows are paid to the senior tranche and recorded as a reduction of principal. The coverage test represents an over collateralization target by stating the balance of the performing collateral as a percentage of the balance of the Company’s tranche, plus the balance of all senior tranches. The principal reduction in the senior tranche continues until the appropriate coverage test is passed. As a result of the principal reduction in the senior tranche, more cash is available for future payments to the Company’s tranche. Management willnot capitalize the “payment in kind” interest payments to the book value of the securities and will keep these securities in non-accrual status until the quarterly interest payments resume.

The fair value of the Company’s interest rate swap contracts, both assets and liabilities, are valued by athird- party pricing agent using an income approach and are classified within Level2 of the valuation hierarchy.

The fair value of the Company’s interest rate lock commitments is based on the price of the underlying loans expected to be sold to an investor while taking into consideration the probability the rate lock commitments will close and are classified within Level2 of the valuation hierarchy. The Company utilized athird party pricing service for classifying and valuing the fair value of collateralized debt obligations held. These securities were categorized as unobservable Level3 and priced using an Option-Adjusted Discounted Cash flow model to value these securities. The significant inputs to this model include yield, prepayment speed, default rate, and loss severity.

Assets and Liabilities Measured at Fair Values on a Recurring Basis

There wereno transfers to or from Levels1 and2 during the years ended* December 31, 2024and2023.* Changes in Level3 assets relate to the result of changes in estimated fair values, payments received, and sales of securities that have been classified as Level3 during all of2024 and2023. Assets measured at fair value on a recurring basis are summarized below:

100

A reconciliation of available-for-sale securities, which require significant adjustment based on unobservable data, is presented below:

101

Assets and Liabilities Measured at Fair Value on a Non-Recurring Basis

Assets and liabilities measured at fair value on a non-recurring basis are summarized below:

Significant (Level3) Inputs

The following tables present quantitative information about unobservable inputs used in recurring and nonrecurring Level3 fair value measurements.

102

The following table shows carrying values and related estimated fair values of financial instruments as of the dates indicated. Estimated fair values are further categorized by the inputs used to measure fair value. Items that arenot financial instruments arenot included.

The following methods were used to estimate the fair value of financial instruments presented in the preceding table for the periods ended* December 31, 2024and2023:*

Cash and cash equivalent carrying amounts approximate fair value. Loans held-for-sale comprise residential mortgages and are priced based on values established by the secondary mortgage markets (Level2). The estimated fair value for net loans receivable is based on the exit price notion which is the exchange price that would be received to transfer the loans at the most advantageous market price in an orderly transaction between market participants on the measurement date (Level3). Federal Home Loan Bank stock is estimated at book value due to restrictions that limit the sale or transfer of the security. Fair values of accrued interest receivable and payable approximate book value, as the carrying values are determined using the observable interest rate, balance, and last payment date.

Non-interest and interest bearing deposits, which include checking, savings, and money market deposits, are estimated to have fair values based on the amount payable as of the reporting date (Level1). The fair value of fixed-maturity certificates of deposit (included in interest bearing deposits) are based on estimates of the rate the Company would pay on similar deposits, applied for the time period until maturity (Level2). Estimated fair values for short-term repurchase agreements, which represent sweeps from demand deposits to accounts secured by pledged securities, are estimated based on the amount payable as of the reporting date (Level1). Longer-term repurchase agreements, with contractual maturity dates ofthree months or more, are based on estimates of the rate the Company would pay on similar deposits, applied for the time period until maturity (Level2). The fair value of FHLB Advances are estimated by discounting the future cash flows using quoted rates from the FHLB for similar advances with similar maturities (Level2). The estimated fair value of other financial instruments, and off- balance sheet loan commitments, approximate cost and arenot considered significant to this presentation.

**Note17 – **Parent Company Only Statements

104

Note18 – Leases

Under ASC842, operating lease expense is generally recognized on a straight-line basis over the term of the lease. On* February 22, 2024,*the Bank closed its previously announced sale-leaseback transaction with MountainSeed Real Estate Services, LLC (the “Buyer”), pursuant to which the Bank sold to the Buyer five properties owned and operated as branch locations (the “Properties”) for an aggregate purchase price of $17.2 million, including customary closing adjustments. Under the Sale Agreement, the Bank also entered into triple net lease agreements (the “Lease Agreements”) with the Buyer under which the Bank leases each of the Properties, and pursuant to which the Bank is responsible for the insurance, real estate taxes, and maintenance and repairs for each of the properties. Each of the Lease Agreements became effective upon the closing of the sale-leaseback transaction and have an initial term of 15 years. The Bank’s obligations under the Lease Agreements are guaranteed by the Company.

As the rate implicit in the leases generally isnot readily determinable for our operating leases, the discount rates used to determine the present value of our lease liability are based on our incremental borrowing rate at the lease commencement date and commensurate with the remaining lease term. Our incremental borrowing rate for a lease is the rate of interest we would have to pay to borrow on a collateralized basis over a similar term an amount equal to the lease payments in a similar economic environment. Leases with an initial term of12 months or less arenot recorded on the balance sheet and are excluded from our weighted-average remaining lease term.

The following table summarizes supplemental cash flow and other information related to our operating leases:

(1) Right of Use Asset Included in Premises and equipment on the consolidated balance sheet

(2) Included in Occupancy and equipment costs on the consolidated statements of income

The following table represents the maturity of the Company's operating lease liabilities as of* December 31, 2024:*

(3) Included in Other Liabilities on the consolidated balance sheet

**Note19 **–Segment Footnote

The Company's revenue is primarily derived from the business of banking. The Company's financial performance is monitored on a consolidated basis by the CEO, who is considered to be the Company's Chief Operating Decision Maker ("CODM"). This review is supported by the Chief Financial Officer, Chief Revenue Officer, and Chief Operating Officer. Financial performance is reported to the CODM monthly. The presentation of financial performance to the CODM is consistent with amounts and financial statement line items shown in the Company's consolidated balance sheets and consolidated statements of income. Additionally, the Company's significant expenses are adequately segmented by category and amount in the consolidated statements of income to include all significant items when considering both qualitative and quantitative factors. Significant expenses of the Company include compensation and benefits, net occupancy expense, equipment costs, data processing fees, and professional fees.

All of the Company’s financial results are similar and considered by management to be aggregated intoone reportable operating segment. The Company's revenue is primarily derived from the business of banking and the Company’s CODM evaluates financial performance on a Company-wide basis. Accordingly, all of the Company’s operations are considered by management to be aggregated inone reportable operating segment.