Finward Bancorp

Previous wording

Finward Bancorp (the “Company”) is a financial holding company registered with the Board of Governors of the Federal Reserve System. Peoples Bank (“the Bank”), an Indiana commercial bank, is a wholly-owned subsidiary of the Company. The Company has no other business activity other than being a holding company for the Bank. The following management’s discussion and analysis presents information concerning our financial condition as of September 30, 2025 and December 31, 2024, and the results of operations for the three and nine months ending September 30, 2025 and September 30, 2024. This discussion should be read in conjunction with the condensed consolidated financial statements and other financial data presented elsewhere herein and with the condensed consolidated financial statements and other financial data, as well as the Management’s Discussion and Analysis of Financial Condition and Results of Operations, included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2024.

Current wording

Finward Bancorp is a financial holding company registered with the Board of Governors of the Federal Reserve System. Peoples Bank, an Indiana commercial bank, is a wholly-owned subsidiary of the Company. The Company has no other business activity other than being a holding company for the Bank. The following management’s discussion and analysis presents information concerning our financial condition as of March 31, 2026 and December 31, 2025, and the results of operations for the three months ending March 31, 2026 and March 31, 2025. This discussion should be read in conjunction with the condensed consolidated financial statements and other financial data presented elsewhere herein and with the condensed consolidated financial statements and other financial data, as well as the Management’s Discussion and Analysis of Financial Condition and Results of Operations, included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2025.

Previous wording

At September 30, 2025, the Company had total assets of $2.1 billion, loans receivable, net of deferred fees and costs, of $1.5 billion and total deposits of $1.8 billion. Stockholders' equity totaled $165.5 million or 8.1% of total assets, with a book value per share of $38.24. Net income for the three months ended September 30, 2025, was $3.5 million, or $0.81 earnings per diluted common share. For the three months ended September 30, 2025, the return on average assets (ROA) was 0.68%, while the return on average stockholders’ equity (ROE) was 8.96%. Net income for the nine months ended September 30, 2025, was $6.1 million, or $1.42 earnings per diluted common share. For the nine months ended September 30, 2025, the ROA was 0.40%, while the ROE was 5.27%.

Current wording

At March 31, 2026, the Company had total assets of $2.0 billion, loans receivable, net of deferred fees and costs, of $1.4 billion and total deposits of $1.7 billion. Stockholders' equity totaled $172.4 million or 8.6% of total assets, with a book value per share of $39.81. Net income for the three months ended March 31, 2026, was $2.2 million, or $0.52 earnings per diluted common share. For the three months ended March 31, 2026, the ROA was 0.44%, while the ROE was 5.00%.

Previous wording

On August 9, 2024, the Bank entered into a memorandum of understanding (“MOU”) with the FDIC and DFI. The MOU is an informal administrative agreement pursuant to which the Bank has agreed to take various actions and comply with certain requirements to enhance certain areas of the Bank’s operations. 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 and develop and implement certain plans regarding the Bank’s operations, capital, and strategy. The Bank will submit written quarterly progress reports to the FDIC and DFI detailing compliance with the MOU. The MOU will remain in effect until modified or terminated by the FDIC and DFI.

Current wording

On August 9, 2024, the Bank entered into a memorandum of understanding with the FDIC and DFI. The MOU is an informal administrative agreement pursuant to which the Bank has agreed to take various actions and comply with certain requirements to enhance certain areas of the Bank’s operations. 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 and develop and implement certain plans regarding the Bank’s operations, capital, and strategy. The Bank will submit written quarterly progress reports to the FDIC and DFI detailing compliance with the MOU. The MOU will remain in effect until modified or terminated by the FDIC and DFI.

Previous wording

Management does not expect the actions called for by these regulatory actions to have a substantial impact on the Company’s or the Bank’s ongoing day-to-day operations, although they may have the effect of limiting or delaying the Bancorp’s or the Bank’s ability or plans to expand and engage in business acquisitions.

Current wording

Management does not expect the actions called for by the MOU to have a substantial impact on the Company’s or the Bank’s ongoing day-to-day operations, although they may have the effect of limiting or delaying the Bancorp’s or the Bank’s ability or plans to expand and engage in business acquisitions.

Previous wording

During the nine months ended September 30, 2025, total assets decreased by $8.0 million (0.39%), with interest-earning assets decreasing by $1.6 million (0.08%). At both September 30, 2025 and December 31, 2024, interest-earning assets totaled $1.9 billion. Earning assets represented 92.6% of total assets at September 30, 2025 and 92.3% December 31, 2024.

Current wording

During the three months ended March 31, 2026, total assets decreased by $6.0 million (0.30%), with interest-earning assets decreasing by $2.2 million (0.12%). At both March 31, 2026 and December 31, 2025, interest-earning assets totaled $1.9 billion. Earning assets represented 92.9% of total assets at March 31, 2026 and 92.7% December 31, 2025.

Previous wording

Loans receivable, net of deferred fees and costs totaled $1.5 billion at both September 30, 2025 and December 31, 2024. The loan portfolio, which is the Company’s largest asset, is the primary source of both interest and fee income. The Company’s lending strategy emphasizes quality loan growth, product diversification, and competitive and profitable pricing.

Current wording

Loans receivable, net of deferred fees and costs totaled $1.46 billion at March 31, 2026 and $1.45 billion at December 31, 2025. The loan portfolio, which is the Company’s largest asset, is the primary source of both interest and fee income. The Company’s lending strategy emphasizes quality loan growth, product diversification, and competitive and profitable pricing.

Previous wording

Our total commercial real estate portfolio (which includes but is not limited to loans secured by office space, medical office space, and mixed-use retail/office space) totaled $564.6 million as of September 30, 2025, compared to $551.7 million as of December 31, 2024. Given prevailing market conditions such as continued elevated interest rate levels, reduced occupancy as a result of the increase in hybrid work arrangements, we are carefully monitoring these loans for signs of deterioration in credit quality.

Current wording

Our total commercial real estate portfolio (which includes but is not limited to loans secured by office space, medical office space, and mixed-use retail/office space) totaled $564.6 million as of March 31, 2026, compared to $555.6 million as of December 31, 2025. Given prevailing market conditions such as continued elevated interest rate levels, reduced occupancy as a result of the increase in hybrid work arrangements, we are carefully monitoring these loans for signs of deterioration in credit quality.

Previous wording

Commercial real estate loans remained our largest loan segment and accounted for 38.4% of the total loan portfolio at September 30, 2025 and 36.6% at December 31, 2024. A further breakdown of the composition of the commercial real estate loan portfolio as of September 30, 2025 and December 31, 2024 is shown in the table below:

Current wording

Commercial real estate loans remained our largest loan segment and accounted for 38.8% of the total loan portfolio at March 31, 2026 and 38.3% at December 31, 2025. A further breakdown of the composition of the commercial real estate loan portfolio as of March 31, 2026 and December 31, 2025 is shown in the table below:

Previous wording

The Company is primarily a portfolio lender. Mortgage banking activities historically have been limited to the sale of fixed rate mortgage loans with contractual maturities greater than 15 years. These loans are identified as held for sale when originated and sold, on a loan-by-loan basis, in the secondary market. The Company will also retain fixed rate mortgage loans with a contractual maturity greater than 15 years on a limited basis. During the nine months ended September 30, 2025, the Company originated $29.3 million in new fixed rate mortgage loans for sale, compared to $22.5 million during the nine months ended September 30, 2024. Net gains realized from the mortgage loan sales totaled $873 thousand for the nine months ended September 30, 2025, compared to $810 thousand for the nine months ended September 30, 2024. At September 30, 2025, the Company had $2.6 million in loans that were classified as held for sale, compared to $1.3 million at December 31, 2024.

Current wording

The Company is primarily a portfolio lender. Mortgage banking activities historically have been limited to the sale of fixed rate mortgage loans with contractual maturities greater than 15 years. These loans are identified as held for sale when originated and sold, on a loan-by-loan basis, in the secondary market. The Company will also retain fixed rate mortgage loans with a contractual maturity greater than 15 years on a limited basis. During the three months ended March 31, 2026, the Company originated $9.4 million in new fixed rate mortgage loans for sale, compared to $9.6 million during the quarter ended March 31, 2025. Net gains realized from the mortgage loan sales totaled $257 thousand for the three months ended March 31, 2026, compared to $230 thousand for the quarter ended March 31, 2025. At March 31, 2026, the Company had no loans that were classified as held for sale, compared to $1.1 million at December 31, 2025.

Previous wording

The allowance for credit losses (ACL) is a valuation allowance for expected losses over the estimated life of loan portfolio, increased by the provision for credit losses, and decreased by charge-offs net of recoveries. A loan is charged off against the allowance by management as a loss when deemed uncollectible, although collection efforts continue and future recoveries may occur. The determination of the amounts of the ACL and provisions for credit losses is based on management’s current judgments about the credit quality of the loan portfolio with consideration given to all known relevant internal and external factors that affect loan collectability and reasonable and supportable forecasts as of the reporting date. The appropriateness of the current period provision and the overall adequacy of the ACL are determined through a disciplined and consistently applied quarterly process that reviews the Company’s current credit risk within the loan portfolio and identifies the required allowance for credit losses given the current risk estimates.

Current wording

The ACL is a valuation allowance for expected losses over the estimated life of loan portfolio, increased by the provision for credit losses, and decreased by charge-offs net of recoveries. A loan is charged off against the allowance by management as a loss when deemed uncollectible, although collection efforts continue and future recoveries may occur. The determination of the amounts of the ACL and provisions for credit losses is based on management’s current judgments about the credit quality of the loan portfolio with consideration given to all known relevant internal and external factors that affect loan collectability and reasonable and supportable forecasts as of the reporting date. The appropriateness of the current period provision and the overall adequacy of the ACL are determined through a disciplined and consistently applied quarterly process that reviews the Company’s current credit risk within the loan portfolio and identifies the required allowance for credit losses given the current risk estimates.

Previous wording

The primary objective of the Company’s investment portfolio is to provide for the liquidity needs of the Company and to contribute to profitability by providing a stable flow of dependable earnings. Funds are generally invested in federal funds, interest bearing balances in other financial institutions, U.S. government securities, U.S. treasury securities, federal agency obligations, obligations of state and local municipalities, mortgage-backed securities, and corporate securities. The securities portfolio, all of which is designated as available-for-sale, totaled $335.2 million at September 30, 2025, compared to $333.6 million at December 31, 2024, an increase of $1.6 million (0.5%). The increase in securities available for sale from year end, was primarily due to an increase in the fair value of the overall portfolio. The yield on the securities portfolio was 2.40% for the nine months ended September 30, 2025 and 2.39% for the nine months ended September 30, 2024. Management did not execute any securities sale transactions during the quarter. At September 30, 2025, the securities portfolio represented 17.6% of interest-earning assets and 16.3% of total assets compared to 17.5% of interest-earning assets and 16.2% of total assets at December 31, 2024.

Current wording

The primary objective of the Company’s investment portfolio is to provide for the liquidity needs of the Company and to contribute to profitability by providing a stable flow of dependable earnings. Funds are generally invested in federal funds, interest bearing balances in other financial institutions, U.S. government agency securities, U.S. treasury securities, federal agency obligations, obligations of state and local municipalities, mortgage-backed securities, and corporate securities. The securities portfolio, all of which is designated as available-for-sale, totaled $307.7 million at March 31, 2026, compared to $316.2 million at December 31, 2025, a decrease of $8.5 million (2.7%). The decrease in securities available for sale from year end, was primarily due to an increase in the negative fair value adjustment to the portfolio. The yield on the securities portfolio was 2.22% for the three months ended March 31, 2026 and 2.38% for the quarter ended March 31, 2025. Management did not execute any securities sale transactions during the quarter. At March 31, 2026, the securities portfolio represented 16.4% of interest-earning assets and 15.3% of total assets compared to 16.9% of interest-earning assets and 15.6% of total assets at December 31, 2025.

Previous wording

As of September 30, 2025, deposits totaled $1.8 billion, a decrease of $9.9 million or 0.6% compared to December 31, 2024. Core deposits totaled $1.2 billion at September 30, 2025 compared to $1.2 billion on December 31, 2024. Core deposits include checking, savings, and money market accounts and represented 69.3% of the Company’s total deposits at September 30, 2025. On September 30, 2025, balances for certificates of deposit totaled $536.7 million, compared to $560.3 million on December 31, 2024, a decrease of $23.6 million or 4.2%. The decrease in deposits is primarily related to a reduction in depositor certificate of deposit activity and planned adjustments to deposit pricing.

Current wording

As of March 31, 2026, deposits totaled $1.72 billion, a decrease of $7.9 million or 0.5% compared to December 31, 2025. Core deposits totaled $1.2 billion at both March 31, 2026 and December 31, 2025. Core deposits include checking, savings, and money market accounts and represented 71.6% of the Company’s total deposits at March 31, 2026. On March 31, 2026, balances for certificates of deposit totaled $488.8 million, compared to $499.6 million on December 31, 2025, a decrease of $10.8 million or 2.2%. The decrease in deposits is primarily related to cyclical flows and continued planned adjustments to deposit pricing.

Previous wording

Checking account balances decreased $11.7 million and interest bearing savings account balances decreased $18.1 million from year end primarily due to decreases in personal statement savings account balances. Money market account balances increased by $43.5 million from year end due to business and retail consumer preferences. Certificates of deposits decreased by $23.6 million primarily reflecting customer prioritization of more liquid deposit products. We strive to maintain balances of personal and business checking and savings accounts through our focus on quality customer service, the desire of customers to deal with a local bank, the convenience of our branch network and the breadth and depth of our product line.

Current wording

Checking account balances decreased $4.6 million and interest bearing savings account balances decreased $0.6 million from year end primarily due to decreases in personal statement savings account balances. Money market account balances increased by $8.2 million from year end due to business and retail consumer preferences. Certificates of deposits decreased by $10.8 million primarily reflecting customer prioritization of more liquid deposit products. We strive to maintain balances of personal and business checking and savings accounts through our focus on quality customer service, the desire of customers to deal with a local bank, the convenience of our branch network and the breadth and depth of our product line.

Previous wording

Non-interest bearing demand accounts comprised 16.0% of total deposits at September 30, 2025 and 15.0% of total deposits at December 31, 2024. Interest bearing demand accounts, including money market and savings accounts, comprised 53.2% of total deposits at both September 30, 2025 and December 31, 2024. Time accounts as a percentage of total deposits were 30.7% at September 30, 2025 and 31.8% at December 31, 2024.

Current wording

Non-interest bearing demand accounts comprised 16.2% of total deposits at March 31, 2026 and 15.5% of total deposits at December 31, 2025. Interest bearing demand accounts, including money market and savings accounts, comprised 55.6% of total deposits at both March 31, 2026 and December 31, 2025. Time accounts as a percentage of total deposits were 28.4% at March 31, 2026 and 28.9% at December 31, 2025.

Previous wording

Deposit rates decreased in the three and nine months ended September 30, 2025 compared to same periods in 2024, primarily driven by a decrease in short-term market interest rates.

Current wording

Deposit rates decreased in the three months ended March 31, 2026 compared to same periods in 2025, primarily driven by a decrease in short-term market interest rates.

Previous wording

Borrowings and repurchase agreements totaled $103.4 million at September 30, 2025 compared to $105.1 million at December 31, 2024, a decrease of $1.7 million or 1.6%. The decrease in borrowings from December 31, 2024, was the result of the maturity of FHLB advances partially offset by additional repurchase agreement activity. As of September 30, 2025, 72% of our deposits are fully FDIC insured, and another 8% are further backed by the Indiana Public Deposit Insurance Fund. The Company’s liquidity position remains strong with solid core deposit customer relationships, excess cash, debt securities, and access to diversified borrowing sources. As of September 30, 2025, the Company had available liquidity of $737.1 million including borrowing capacity from the FHLB and Federal Reserve facilities.

Current wording

Borrowings, federal funds purchased, and repurchase agreements totaled $90.8 million at March 31, 2026 compared to $84.7 million at December 31, 2025, a decrease of $6.1 million or 7.2%. The increase in borrowings from December 31, 2025, was the result of new FHLB advances and additional repurchase agreement activity. As of March 31, 2026, 72% of our deposits are fully FDIC insured, and another 8% are further backed by the Indiana Public Deposit Insurance Fund. The Company’s liquidity position remains strong with solid core deposit customer relationships, excess cash, debt securities, and access to diversified borrowing sources. As of March 31, 2026, the Company had available liquidity of $555.0 million including borrowing capacity from the FHLB and Federal Reserve facilities.

Previous wording

Other assets totaled $37.8 million at September 30, 2025, compared to $43.9 million at December 31, 2024. The decrease in other assets is primarily related to decreased fair value of the Company’s interest rate swap contract derivative and a reduction in the deferred tax asset. Accrued expenses and other liabilities totaled $33.2 million at September 30, 2025, compared to $43.6 million at December 31, 2024. The decrease in accrued expenses and other liabilities is primarily the result of the decreased fair value of the Company's interest rate swap contract derivative, along with other activities such as a decrease in other collateral balances and ACH prefunding balances.

Current wording

Other assets totaled $35.1 million at March 31, 2026, compared to $34.9 million at December 31, 2025. The increase in other assets is primarily related an increase in the deferred tax asset. Accrued expenses and other liabilities totaled $32.9 million at March 31, 2026, compared to $34.8 million at December 31, 2025. The decrease in accrued expenses and other liabilities is primarily the result of decreased ACH prefunding balances.

Previous wording

The Company’s Board of Directors establishes broad policy limits with respect to interest rate risk. As part of this policy, the Asset Liability Committee, or ALCO, establishes specific operating guidelines within the parameters of the Board of Director’s policies. In general, the ALCO focuses on ensuring a stable and steadily increasing flow of net interest income through managing the size and mix of the balance sheet. The management of interest rate risk is an active process which encompasses monitoring loan and deposit flows complemented by investment and funding activities. Effective management of interest rate risk begins with understanding the dynamic characteristics of assets and liabilities and determining the appropriate interest rate risk posture given business forecasts, management objectives, market expectations, and policy constraints.

Current wording

The Company’s Board of Directors establishes broad policy limits with respect to interest rate risk. As part of this policy, ALCO establishes specific operating guidelines within the parameters of the Board of Director’s policies. In general, the ALCO focuses on ensuring a stable and steadily increasing flow of net interest income through managing the size and mix of the balance sheet. The management of interest rate risk is an active process which encompasses monitoring loan and deposit flows complemented by investment and funding activities. Effective management of interest rate risk begins with understanding the dynamic characteristics of assets and liabilities and determining the appropriate interest rate risk posture given business forecasts, management objectives, market expectations, and policy constraints.

Previous wording

We use income simulations, an analysis of core funding utilization, and economic value of equity (EVE) simulations as our primary tools in measuring and managing interest rate risk. These tools are utilized to quantify the potential earnings impact of changing interest rates over a 12-month simulation horizon (income simulations) as well as identify expected earnings trends given longer term rate cycles (long term simulations, core funding utilizations, and EVE simulation). A standard gap report and funding matrix will also be utilized to provide supporting detailed information on the expected timing of cashflow and repricing opportunities.

Current wording

We use income simulations, an analysis of core funding utilization, and EVE at Risk simulations as our primary tools in measuring and managing interest rate risk. These tools are utilized to quantify the potential earnings impact of changing interest rates over a 12-month simulation horizon (income simulations) as well as identify expected earnings trends given longer term rate cycles (long term simulations, core funding utilizations, and EVE at Risk simulation). A standard gap report and funding matrix will also be utilized to provide supporting detailed information on the expected timing of cashflow and repricing opportunities.

Previous wording

We utilize a simulation model as our primary tool to assess the direction and magnitude of variations in net interest income and EVE resulting from potential changes in market interest rates. Key assumptions in the model, which we believe are reasonable but which may have a significant impact on results, include: (i) the timing of changes in interest rates; (ii) shifts or rotations in the yield curve; (iii) re-pricing characteristics for market-rate-sensitive instruments; (iv) varying loan prepayment speeds for different interest rate scenarios; and (v) the overall growth and mix of assets and liabilities.

Current wording

We utilize a simulation model as our primary tool to assess the direction and magnitude of variations in net interest income and EVE at Risk resulting from potential changes in market interest rates. Key assumptions in the model, which we believe are reasonable but which may have a significant impact on results, include: (i) the timing of changes in interest rates; (ii) shifts or rotations in the yield curve; (iii) re-pricing characteristics for market-rate-sensitive instruments; (iv) varying loan prepayment speeds for different interest rate scenarios; and (v) the overall growth and mix of assets and liabilities.

Previous wording

We forecast the next twelve months of net interest income under an assumed environment of gradual changes in market interest rates under various scenarios. The resulting change in net interest income is an indication of the sensitivity of our earnings to directional changes in market interest rates. The simulation also measures the change in EVE, or the net present value of our assets and liabilities, under an immediate shift, or shock, in interest rates under various scenarios, as calculated by discounting the estimated future cash flows using market-based discount rates.

Current wording

We forecast the next twelve months of net interest income under an assumed environment of gradual changes in market interest rates under various scenarios. The resulting change in net interest income is an indication of the sensitivity of our earnings to directional changes in market interest rates. The simulation also measures the change in EVE at Risk, or the net present value of our assets and liabilities, under an immediate shift, or shock, in interest rates under various scenarios, as calculated by discounting the estimated future cash flows using market-based discount rates.

Previous wording

The following table shows the impact of changes in interest rates on net interest income over the next twelve months and EVE based on our balance sheet as of September 30, 2025 (dollars in millions):

Current wording

The following table shows the impact of changes in interest rates on net interest income over the next twelve months and EVE at Risk based on our balance sheet as of March 31, 2026 (dollars in millions):

Previous wording

If interest rates across the yield curve were to uniformly decrease, this analysis suggests the Bank may be positioned for relatively neutral to modestly negative changes in net interest income over the next twelve months. If interest rates across the yield curve were to uniformly increase by approximately 100 to 300 basis points, this analysis suggests we would experience positive impact to net interest income over the next twelve months. If interest rates across the yield curve were to uniformly increase by a more material amount (400 basis points and above), the analysis suggests we would shift into experiencing negative impacts to net interest income over the next twelve months.

Current wording

If interest rates across the yield curve were to uniformly decrease or increase up to 400 basis points, this analysis suggests the Bank maybe positioned for relatively neutral to modestly negative or positive changes in net interest income over the next twelve months.

Previous wording

Although customer deposits remain our preferred funding source, maintaining additional sources of liquidity is part of our prudent liquidity risk management practices. We have the ability to borrow from the FHLB. At September 30, 2025, we had five outstanding advances totaling $55 million and the ability to borrow up to $436.0 million from the FHLB. We also have the ability to borrow from the Federal Reserve Bank of Chicago. At September 30, 2025, we had no outstanding balance from the Federal Reserve Bank of Chicago. At September 30, 2025, cash and cash equivalents were $104.2 million and secured borrowing capacity at the Federal Reserve Bank totaled $260.2 million, providing total additional liquidity sources of $737.1 million (excluding brokered deposit capacity).

Current wording

Although customer deposits remain our preferred funding source, maintaining additional sources of liquidity is part of our prudent liquidity risk management practices. We have the ability to borrow from the FHLB. At March 31, 2026, we had five outstanding advances totaling $50 million and the ability to borrow up to $269.5 million from the FHLB. We also have the ability to borrow from the Federal Reserve Bank of Chicago. At March 31, 2026, we had no outstanding balance from the Federal Reserve Bank of Chicago. At March 31, 2026, cash and cash equivalents were $118.8 million and secured borrowing capacity at the Federal Reserve Bank totaled $244.5 million, providing total additional liquidity sources of $555.0 million (excluding brokered deposit capacity).

Previous wording

During the nine months ended September 30, 2025, cash and cash equivalents increased by $33.6 million compared to a $14.4 million decrease for the nine months ended September 30, 2024. The primary sources of cash and cash equivalents were sales of loans originated for sale and the net change in loans receivable. The primary uses of cash and cash equivalents were loan originations and the net change in accrued expenses and other liabilities. Cash provided by operating activities totaled $2.2 million for the nine months ended September 30, 2025, compared to cash used of $1.0 million for the nine months ended September 30, 2024. Cash used in operating activities was primarily a result of net income and sale of loans originated for sale offset by loans originated for sale and net change in accrued expenses and other liabilities. Cash provided by investing activities totaled $44.2 million for the current period, compared to cash provided in investing activities of $43.0 million for the nine months ended September 30, 2024. Cash provided by investing activities for the current nine-month period was primarily related to net change in loans receivable and proceeds from maturities of securities. Cash used in financing activities totaled $12.8 million during the current period compared to net cash used in financing activities of $56.3 million for the nine months ended September 30, 2024. The net cash used in financing activities was primarily the result of net change in deposits offset by the change in repurchase agreements. On a cash basis, the Company paid dividends on common stock of $1.0 million for the nine months ended September 30, 2025, and $1.6 million for the nine months ended September 30, 2024.

Current wording

During the three months ended March 31, 2026, cash and cash equivalents decreased by $0.9 million compared to a $1.7 million increase for the quarter ended March 31, 2025. The primary sources of cash and cash equivalents were sales of loans originated for sale and the proceeds from borrowings. The primary uses of cash and cash equivalents were loan originations and the purchase of loans. Cash provided by operating activities totaled $3.6 million for the three months ended March 31, 2026, compared to cash used of $3.8 million for the quarter ended March 31, 2025. Cash used in operating activities was primarily a result of net income and sale of loans originated for sale offset by loans originated for sale. Cash used in investing activities totaled $2.2 million for the current period, compared to cash provided by investing activities of $19.7 million for the quarter ended March 31, 2025. Cash used in investing activities for the current three-month period was primarily related to the purchase of loans. Cash used in financing activities totaled $2.4 million during the current period compared to net cash used in financing activities of $14.1 million for the quarter ended March 31, 2025. The net cash used in financing activities was primarily the result of net change in deposits offset by the proceeds from borrowed funds. On a cash basis, the Company paid dividends on common stock of $520 thousand for the three months ended March 31, 2026, and $518 thousand for the quarter ended March 31, 2025.

Previous wording

At September 30, 2025, outstanding commitments to fund loans totaled $269.5 million. Approximately 60.9% of the commitments were at variable rates. Standby letters of credit, which are conditional commitments issued by the Company to guarantee the performance of a customer to a third-party, totaled $15.1 million at September 30, 2025. Management believes that the Company has sufficient cash flow and borrowing capacity to fund all outstanding commitments and letters of credit, while maintaining proper levels of liquidity.

Current wording

At March 31, 2026, outstanding commitments to fund loans totaled $267.9 million. Approximately 59.9% of the commitments were at variable rates. Standby letters of credit, which are conditional commitments issued by the Company to guarantee the performance of a customer to a third-party, totaled $15.0 million at March 31, 2026. Management believes that the Company has sufficient cash flow and borrowing capacity to fund all outstanding commitments and letters of credit, while maintaining proper levels of liquidity.

Previous wording

$1.0 million. On April 24, 2014, the Company’s Board of Directors authorized a stock repurchase program to repurchase up to 50,000 shares of the Company’s outstanding common stock, from time to time and subject to market conditions, on the open market or in privately negotiated transactions. The stock repurchase program does not expire and is only limited by the number of shares that can be purchased. The stock repurchase program will be reviewed annually by the Board of Directors. No shares were repurchased under the program during the first nine months of 2025 or 2024. During 2025, 17,253 restricted stock shares vested under the Incentive Plan outlined in Note 10 of the condensed consolidated financial statements, of which 5,328 of these shares were withheld in the form of a net surrender to cover the withholding tax obligations of the vesting employees. The repurchase of these surrendered shares is considered outside of the scope of the formal board approved stock repurchase program.

Current wording

Management strongly believes that maintaining a high level of capital enhances safety and soundness. During the three months ended March 31, 2026, stockholders' equity decreased by $2.3 million 1.3%. During the three months ended March 31, 2026, stockholders’ equity was primarily decreased by net income of $2.2 million and offset by other comprehensive income as the result of market value changes within the securities portfolio of $4.1 million and dividends declared of $520 thousand. On April 24, 2014, the Company’s Board of Directors authorized a stock repurchase program to repurchase up to 50,000 shares of the Company’s outstanding common stock, from time to time and subject to market conditions, on the open market or in privately negotiated transactions. The stock repurchase program does not expire and is only limited by the number of shares that can be purchased. The stock repurchase program will be reviewed annually by the Board of Directors. No shares were repurchased under the program during the first three months of 2026 or 2025. During 2025, 6,025 restricted stock shares vested under the Incentive Plan outlined in Note 10 of the condensed consolidated financial statements, of which 1,508 of these shares were withheld in the form of a net surrender to cover the withholding tax obligations of the vesting employees. The repurchase of these surrendered shares is considered outside of the scope of the formal board approved stock repurchase program.

Previous wording

During the nine months ended September 30, 2025, the Company’s and Bank’s risk weighted assets continued to be negatively impacted by regulatory requirements regarding collateralized debt obligations. The regulatory requirements state that for collateralized debt obligations that have been downgraded below investment grade by the rating agencies, increased risk-based asset weightings are required. The Company currently holds pooled collateralized debt obligations with a cost basis of $2.1 million. These investments currently have ratings that are below investment grade. As a result, approximately $1.6 million of risk-based assets are generated by the collateralized debt obligations in the Company’s and Bank’s total risk based capital calculation.

Current wording

During the three months ended March 31, 2026, the Company’s and Bank’s risk weighted assets continued to be negatively impacted by regulatory requirements regarding collateralized debt obligations. The regulatory requirements state that for collateralized debt obligations that have been downgraded below investment grade by the rating agencies, increased risk-based asset weightings are required. The Company currently holds pooled collateralized debt obligations with a cost basis of $2.1 million. These investments currently have ratings that are below investment grade. As a result, approximately $1.9 million of risk-based assets are generated by the collateralized debt obligations in the Company’s and Bank’s total risk based capital calculation.

Previous wording

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 may pay 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 previous two 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 of 1 or 2 as a result of the most recent federal or state examination; the proposed dividend would not result in a Tier 1 leverage ratio below 7.5%; and that the Bank not 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. See “– Recent Developments Regarding the Company and the Bank – Memorandum of Understanding” above. Moreover, the FDIC and the Federal Reserve Board may prohibit 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. Assuming receipt of regulatory approval for all cash dividends declared by the Bank under the terms of the MOU, the aggregate amount of dividends that the Bank is eligible to declare in 2025, without the need for qualifying for a further exemption or prior DFI approval under the terms of Indiana law described above, is its 2025 net income. On August 15, 2025, the Board of Directors of the Company declared the most recent quarterly dividend of $0.12 per share. The Company’s quarterly dividend was paid to shareholders on September 12, 2025 to shareholders of record on August 29, 2025.

Current wording

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 may pay 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 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 previous two 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 of 1 or 2 as a result of the most recent federal or state examination; the proposed dividend would not result in a Tier 1 leverage ratio below 7.5%; and that the Bank not 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. See “– Summary” above. Moreover, the FDIC and the Federal Reserve Board may prohibit 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. Assuming receipt of regulatory approval for all cash dividends declared by the Bank under the terms of the MOU, the aggregate amount of dividends that the Bank is eligible to declare in 2026, without the need for qualifying for a further exemption or prior DFI approval under the terms of Indiana law described above, is its 2026 net income. On March 2, 2026, the Board of Directors of the Company declared the most recent quarterly dividend of $0.12 per share. The Company’s quarterly dividend was paid to shareholders on March 31, 2026 to shareholders of record on March 16, 2026.

Previous wording

Results of Operations - Comparison of the Three Months Ended September 30, 2025 and September 30, 2024

Current wording

Results of Operations - Comparison of the Three Months Ended March 31, 2026 to March 31, 2025

Previous wording

For the nine months ended September 30, 2025, the Company reported net income of $6.1 million, a decrease of $3.9 million (39.1%) compared to $10.0 million for the nine months ended September 30, 2024. For the nine months ended September 30, 2025, the ROA was 0.40%, compared to 0.64% for the nine months ended September 30, 2024. The ROE was 5.27% for the nine months ended September 30, 2025, compared to 4.50% for the nine months ended September 30, 2024.

Current wording

For the three months ended March 31, 2026, the Company reported net income of $2.2 million, an increase of $1.8 million (392.7%) compared to $455 thousand for the quarter ended March 31, 2025. For the three months ended March 31, 2026, the ROA was 0.44%, compared to 0.09% for the quarter ended March 31, 2025. The ROE was 5.00% for the three months ended March 31, 2026, compared to 1.17% for the quarter ended March 31, 2025.

Previous wording

Net interest income for the quarter ended September 30, 2025, was $14.4 million, an increase of $2.4 million (20.3%), compared to $12.0 million for the quarter ended September 30, 2024. The weighted-average yield on interest-earning assets was 4.91% for the quarter September 30, 2025, compared to 4.70% for the quarter ended September 30, 2024. The weighted-average cost of interest-bearing liabilities for the quarter ended September 30, 2025, was 2.25% compared to 2.63% for the quarter ended September 30, 2024. The impact of the 4.91% return on interest-earning assets and the 2.25% cost of interest-bearing liabilities resulted in an interest rate spread of 2.66% for the current quarter, an increase from the 2.07% spread for the quarter ended September 30, 2024. On a tax adjusted basis, the Company’s net interest margin was 3.18% for the quarter ended September 30, 2025, compared to 2.66% for the quarter ended September 30, 2024. The Company believes that it is a standard practice in the banking industry to present net interest margin and net interest income on a fully-taxable equivalent basis, as these measures provide useful information to make peer comparisons. Net interest margin on a tax-equivalent basis represents a non-GAAP financial measure. See the non-GAAP reconciliation table immediately below and the section captioned “Non-GAAP Financial Measures” for further disclosure regarding non-GAAP financial measures.

Current wording

Net interest income for the three months ended March 31, 2026, was $15.1 million, an increase of $1.8 million (13.2%), compared to $13.3 million for the quarter ended March 31, 2025. The weighted-average yield on interest-earning assets was 4.86% for the three months ended March 31, 2026 compared to 4.71% for the quarter ended March 31, 2025. The weighted-average cost of interest-bearing liabilities for the three months ended March 31, 2026, was 2.00% compared to 2.28% for the quarter ended March 31, 2025. The impact of the 4.86% return on interest-earning assets and the 2.00% cost of interest-bearing liabilities resulted in an interest rate spread of 2.86% for the three months ended March 31, 2026, an increase from the 2.43% spread for the quarter ended March 31, 2025. The Company’s net interest margin on a tax-equivalent basis was 3.35% for the three months ended March 31, 2026, compared to 2.95% for the quarter ended March 31, 2025. The Company believes that it is a standard practice in the banking industry to present net interest margin and net interest income on a fully-taxable equivalent basis, as these measures provide useful information to make peer comparisons. Tax adjusted net interest margin represents a non-GAAP financial measure. See the non-GAAP reconciliation table immediately below and the section captioned “Non-GAAP Financial Measures” for further disclosure regarding non-GAAP financial measures.

Previous wording

The increased net interest income and net interest margin for the nine months ended September 30, 2025, was primarily the result of reduced deposit and borrowing costs as a result of the Federal Reserve's reduction of federal funds rates year over year and increased loan yields as commercial loans mature and/or reprice.

Current wording

The increased net interest income and net interest margin for the three months ended March 31, 2026, was primarily the result of reduced deposit and borrowing costs.

Previous wording

The following table shows the change in non-interest expense for the three months ending September 30, 2025 and September 30, 2024.

Current wording

The following table shows the change in non-interest expense for the three months ended March 31, 2026, and March 31, 2025.

Previous wording

Decreases in non-interest expenses during the nine months ended September 30, 2025, were primarily attributable to non-recurring professional and outside service expenses occurring during 2024 which were associated with the implementation of the corrective actions set forth in the Consent Order and sale leaseback transaction, as well as lower technology costs in 2025. This decrease in non-interest expense was primarily offset by increases in compensation and benefit expense driven by annual merit-based increases.

Current wording

Increases in non-interest expenses during the three months ended March 31, 2026, were primarily attributable to planned increases in marketing expenses, due to seasonal promotion and planned business generation purposes, as well as compensation and benefit expense driven by annual merit-based increases.

Previous wording

The provision for income taxes was $189 thousand for the nine months ended September 30, 2025 as compared to the provision of $756 thousand for the nine months ended September 30, 2024. The effective tax rate was 3.0% for the nine months ended September 30, 2025, as compared to 7.0% for the nine months ended September 30, 2024. The Company’s year-to-date effective tax rate for the nine months ended September 30, 2025, decreased primarily due to a decrease in estimated full year 2025 tax accrual based on updated projected earnings levels.

Current wording

The provision for income taxes was $423 thousand for the three months ended March 31, 2026 as compared to the provision of $161 thousand for the quarter ended March 31, 2025. The effective tax rate was 15.9% for the three months ended March 31, 2026, as compared to 26.1% for the quarter ended March 31, 2025. The Company’s year-to-date effective tax rate for the three months ended March 31, 2026, decreased primarily due to lower levels of core income experienced during the three months ended March 31, 2025.