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What changed in LAKELAND FINANCIAL CORP's 10-K — 2024 vs 2025

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Paragraph-level year-over-year comparison of LAKELAND FINANCIAL CORP's 2024 and 2025 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2025 report.

+470 added−474 removedSource: 10-K (2026-02-25) vs 10-K (2025-02-19)

Top changes in LAKELAND FINANCIAL CORP's 2025 10-K

470 paragraphs added · 474 removed · 383 edited across 8 sections

Item 1. Business

Business — how the company describes what it does

134 edited+36 added−43 removed38 unchanged
Biggest changeActual results could differ materially from those addressed in the forward-looking statements as a result of numerous factors, including, without limitation: • the effects of economic, business and market conditions and changes, particularly in our Indiana market area, including prevailing interest rates and the rate of inflation; • governmental monetary and fiscal policies; • the risks of changes in interest rates on the levels, composition and costs of deposits, loan demand and the values and liquidity of loan collateral, securities and other interest sensitive assets and liabilities; • changes in borrowers’ credit risks and payment behaviors; • the failure of assumptions and estimates used in our reviews of our loan portfolio, underlying the establishment of reserves for possible credit losses, our analysis of our capital position and other estimates; • the performance of our commercial real estate loan portfolio, including the effects of the elevated interest rate environment, the strength of the commercial real estate market in our Indiana markets, and changes in retail and office usage patterns; • risk of cybersecurity attacks that could result in damage to the Company's or third-party service providers' networks or data of the Company; • the impact of labor shortages, and changes in trade policy and tariffs; • the timing and scope of any legislative and regulatory changes, including changes in tax, banking and securities laws and regulations and their application by our regulators; • the effects of competition from a wide variety of local, regional, national and other providers of financial, investment and insurance services; • the effects of war or other conflicts, acts of terrorism or other catastrophic events, including storms, droughts, tornados and flooding, that may affect general economic conditions, including agricultural production and demand and prices for agricultural goods and land used for agricultural purposes, generally and in our markets; • the effects of disruption and volatility in capital markets on the value of our investment portfolio; • changes in the prices, values and sales volumes of residential and multi-family real estate; • changes in the scope and cost of FDIC insurance, the state of Indiana’s Public Deposit Insurance Fund and other coverages; • the impact of litigation and other claims we may be subject to from time to time; • the effects of fraud by or affecting employees, customers or third parties; • changes in the availability and cost of credit and capital in the financial markets; • changes in technology, including the use of artificial intelligence, or products that may be more difficult, more costly, or less effective than anticipated; • changes in accounting policies, rules and practices; • the risks related to mergers, acquisitions and divestitures, including, without limitation, the related time and costs of implementing such transactions, integrating operations as part of these transactions and possible failures to achieve expected gains, revenue growth and/or expense savings from such transactions; and 6 Table of Contents • the risks noted in the Risk Factors discussed under Item 1A of Part 1 of this Annual Report on Form 10-K, as well as other risks and uncertainties set forth from time to time in the Company’s other filings with the Securities and Exchange Commission (the "SEC").
Biggest changeActual results could differ materially from those addressed in the forward-looking statements as a result of numerous factors, including, without limitation: • the effects of future economic, business and market conditions and changes, particularly in our Indiana market area, including prevailing interest rates and the rate of inflation; • governmental trade, monetary, tax and fiscal policies, including the policy decisions of the Federal Reserve; • the risks of changes in interest rates on the levels, composition and costs of deposits, loan demand and the values and liquidity of loan collateral, securities and other interest sensitive assets and liabilities; • changes in borrowers’ credit risks and payment behaviors; • the failure of assumptions and estimates used in our reviews of our loan portfolio, underlying the establishment of reserves for possible credit losses, our analysis of our capital position and other estimates; • the performance of our commercial real estate loan portfolio, including the effects of the elevated interest rate environment, and the strength of the commercial real estate market in our Indiana markets; • risk of cybersecurity attacks that could result in damage to the Company's or third-party service providers' networks or data of the Company; • technological changes implemented by us and other parties, including our third-party vendors, which may have unforeseen consequences to us and our customers, including the development and implementation of tools incorporating artificial intelligence; • the timing and scope of any legislative and regulatory changes, including changes in banking, securities and tax laws and regulations and their application by our regulators; • increased competition in the financial services sector, including from non-bank competitors such as credit unions and fintech companies, and the inability to attract new customers; • the effects of war or other conflicts, acts of terrorism or other catastrophic events, including storms, droughts, tornados and flooding, that may affect general economic conditions, including agricultural production and demand and prices for agricultural goods and land used for agricultural purposes, generally and in our markets; • the effects of fraud by or affecting employees, customers or third parties; • the effects of disruption and volatility in capital markets on the value of our investment portfolio; • changes in the prices, values and sales volumes of residential real estate; • changes in the scope and cost of FDIC insurance, the state of Indiana’s Public Deposit Insurance Fund and other coverages; • the impact of litigation and other claims we may be subject to from time to time; 5 Table of Contents • changes in the availability and cost of credit and capital in the financial markets; • the loss of key executives and employees, talent shortages and employee turnover; • changes in technology or products that may be more difficult or costly to implement, or less effective than anticipated; • changes in accounting policies, rules and practices; • the risks related to mergers, acquisitions and divestitures, including, without limitation, the related time and costs of implementing such transactions, integrating operations as part of these transactions and possible failures to achieve expected gains, revenue growth and/or expense savings from such transactions; and • the risks noted in the Risk Factors discussed under Item 1A of Part 1 of this Annual Report on Form 10-K, as well as other risks and uncertainties set forth from time to time in the Company’s other filings with the Securities and Exchange Commission (the "SEC").
We have elected to operate as a financial holding company. In order to maintain our status as a financial holding company, the Company and the Bank must be well-capitalized, well-managed and the Bank must have at least a satisfactory Community Reinvestment Act "CRA") rating.
We have elected to operate as a financial holding company. In order to maintain our status as a financial holding company, the Company and the Bank must be well capitalized and well managed, and the Bank must maintain at least a satisfactory Community Reinvestment Act ("CRA") rating.
Certain limitations and reporting requirements are also placed on extensions of credit by the Bank to its directors and officers, to directors and officers of the Company and its subsidiaries, to principal shareholders of the Company and to "related interests" of such directors, officers and principal shareholders under state and federal law.
Certain limitations and reporting requirements also are placed on extensions of credit by the Bank to its directors and officers, to directors and officers of the Company and its subsidiaries, to principal shareholders of the Company and to "related interests" of such directors, officers and principal shareholders under state and federal law.
Federal Home Loan Bank System. The Bank is a member of a Federal Home Loan Bank (“FHLB”), which serves as a central credit facility for its members. The FHLB is funded primarily from proceeds from the sale of obligations of the FHLB system. It makes loans to member banks in the form of FHLB advances.
The Bank is a member of a Federal Home Loan Bank (“FHLB”), which serves as a central credit facility for its members. The FHLB is funded primarily from proceeds from the sale of obligations of the FHLB system. It makes loans to member banks in the form of FHLB advances.
Depending upon the capital category to which a banking organization is assigned, the regulators’ corrective powers include: (i) requiring the institution to submit a capital restoration plan; (ii) limiting the institution’s asset growth and restricting its activities; (iii) requiring the institution to issue additional capital stock (including additional voting stock) or to sell itself; (iv) restricting transactions between the institution and its affiliates; (v) restricting the interest rate that the institution may pay on deposits; (vi) ordering a new election of directors of the institution; (vii) requiring that senior executive officers or directors be dismissed; (viii) prohibiting the institution from accepting deposits from correspondent banks; (ix) requiring the institution to divest certain subsidiaries; (x) prohibiting the payment of principal or interest on subordinated debt; and (xi) ultimately, appointing a receiver for the institution.
Depending upon the capital category to which a banking organization is assigned, the agencies' corrective powers include: (i) requiring the institution to submit a capital restoration plan; (ii) limiting the institution’s asset growth and restricting its activities; (iii) requiring the institution to issue additional capital stock (including additional voting stock) or to sell itself; (iv) restricting transactions between the institution and its affiliates; (v) restricting the interest rate that the institution may pay on deposits; (vi) ordering a new election of directors of the institution; (vii) requiring that senior executive officers or directors be dismissed; (viii) prohibiting the institution from accepting deposits from correspondent banks; (ix) requiring the institution to divest certain subsidiaries; (x) prohibiting the payment of principal or interest on subordinated debt; and (xi) ultimately, appointing a receiver for the institution.
Furthermore, taxation laws administered by the Internal Revenue Service and state taxing authorities, accounting rules developed by the Financial Accounting Standards Board, securities laws administered by the SEC and state securities authorities, and anti-money laundering laws enforced by the U.S. Department of the Treasury ("Treasury") have an impact on our business.
Furthermore, taxation laws administered by the Internal Revenue Service and state taxing authorities, accounting rules developed by the Financial Accounting Standards Board, securities laws administered by the SEC and state securities authorities, and anti-money laundering and sanctions laws enforced by the U.S. Department of the Treasury ("Treasury") have an impact on our business.
Further, any banking organization experiencing or anticipating significant growth would be expected to maintain capital ratios, including tangible capital positions ( i.e. , Tier 1 Capital less all intangible assets), well above the minimum levels.
Further, any banking organization experiencing or anticipating significant growth would be expected to maintain capital ratios, including tangible capital positions ( i.e. , Tier 1 Capital less all intangible assets), well above the minimum regulatory levels.
These laws, and the regulations of the banking agencies issued under them, affect, among other things, the scope of our business, the kinds and amounts of investments that we may make, required capital levels relative to our assets, the nature and amount of collateral for loans, the establishment of branches, our ability to merge, consolidate and acquire, dealings with our insiders and affiliates and our payment of dividends.
These laws, and the regulations of the banking agencies issued under them, affect, among other considerations, the scope of our business, the kinds and amounts of investments that we may make, required capital levels relative to our assets, the nature and amount of collateral for loans, the establishment of branches, our ability to merge, consolidate and acquire, dealings with our insiders, and affiliates and our payment of dividends.
Although capital has historically been one of the key measures of the financial health of both bank holding companies and banks, its role became fundamentally more important in the wake of the global financial crisis, as the banking regulators recognized that the amount and quality of capital held by banking organizations prior to that crisis was insufficient to absorb losses during periods of severe stress.
Although capital has historically been one of the key measures of the financial health of both bank holding companies and banks, its role became fundamentally more important in the wake of the global financial crisis, as the banking agencies recognized that the amount and quality of capital held by banking organizations prior to that crisis was insufficient to absorb losses during periods of severe stress.
As a result, our growth and earnings performance may be affected not only by management decisions and general economic conditions, but also by the requirements of federal and state statutes and by the regulations and policies of various banking agencies, including the Indiana Department of Financial Institutions (the "DFI"), the Board of Governors of the Federal Reserve System (the "Federal Reserve"), the FDIC and the Consumer Financial Protection Bureau (the "CFPB").
As a result, our growth and earnings performance may be affected not only by management decisions and general economic conditions, but also by the requirements of federal and state statutes and by the regulations and policies of various banking agencies, including the Indiana Department of Financial Institutions (the "DFI"), the Board of Governors of the Federal Reserve System (the "Federal Reserve"), the FDIC, and the federal and state consumer financial protection agencies.
The capital guidelines for U.S. banks beginning in 1989 have been based upon international capital accords (known as the "Basel" accords) adopted by the Basel Committee on Banking Supervision, a committee of central banks and bank supervisors that acts as the primary global standard-setter for prudential regulation, as implemented by the U.S. federal banking agencies on an interagency basis.
The capital guidelines for U.S. banking organizations beginning in 1989 have been based upon international capital accords (known as the "Basel" accords) adopted by the Basel Committee on Banking Supervision, a committee of central banks and bank supervisors that acts as the primary global standard-setter for prudential regulation, as interpreted and implemented by the U.S. federal banking agencies on an interagency basis.
It increased shareholder influence over boards of directors by requiring companies to give stockholders a nonbinding vote on executive compensation and so-called "golden parachute" payments, and authorizing the SEC to promulgate rules that would allow shareholders to nominate and solicit voters for their own candidates using a company’s proxy materials.
It increased shareholder influence over boards of directors by requiring companies to give stockholders a nonbinding vote on executive compensation and so-called "golden parachute" payments, and authorized the SEC to promulgate rules that would allow shareholders to nominate and solicit voters for their own candidates using a company’s proxy materials.
The Bank’s deposits are insured by the Federal Deposit Insurance Corporation (the "FDIC") to the maximum extent provided under federal law and FDIC regulations. The Bank’s activities cover all traditional facets of commercial banking, including deposit products, commercial and consumer lending, retail and merchant credit card services, corporate treasury management services, and wealth advisory, trust and brokerage services.
The Bank’s deposits are insured by the Federal Deposit Insurance Corporation (the "FDIC") to the maximum extent provided under federal law and FDIC regulations. The Bank’s activities cover all traditional facets of community banking, including deposit products, commercial and consumer lending, retail and merchant credit card services, corporate treasury management services, private banking, and wealth advisory, trust and brokerage services.
If the Federal Reserve determines that a financial holding company or any bank subsidiary is not well-capitalized or well-managed, the Federal Reserve will provide a period of time in which to achieve compliance with those requirements, but, during the period of noncompliance, the Federal Reserve may place any additional limitations on the financial holding company that it deems appropriate.
If the Federal Reserve determines that a financial holding company or any bank subsidiary is not well capitalized or well managed, the Federal Reserve will provide a period of time in which to achieve compliance with those requirements once again, but, during the period of noncompliance, the Federal Reserve may place any additional limitations on the financial holding company that it deems appropriate.
As described above, the Bank exceeded its minimum capital requirements under applicable guidelines as of December 31, 2024. Notwithstanding the availability of funds for dividends, however, the Federal Reserve and the DFI may prohibit the payment of dividends by the Bank if either or both determine such payment would constitute an unsafe or unsound practice.
As described above, the Bank exceeded its minimum capital requirements under applicable guidelines as of December 31, 2025. Notwithstanding the availability of funds for dividends, however, the Federal Reserve and the DFI may prohibit the payment of dividends by the Bank if either or both determine such payment would constitute an unsafe or unsound practice.
These restrictions have not had, and are not currently expected to have, a material impact on the operations of the Bank. The Bank may be required to seek approval from the DFI and the Federal Reserve (or in some cases, the FDIC) before engaging in certain acquisitions or mergers under applicable state and federal law.
These restrictions have not had, and are not currently expected to have, a material impact on the operations of the Bank. The Bank may be required to obtain approval from the DFI and the Federal Reserve (or in some cases, the FDIC) before engaging in certain acquisitions or mergers under applicable state and federal law.
The principal exception allows bank holding companies to engage in, and to own shares of companies engaged in, certain businesses found by the Federal Reserve prior to November 11, 1999, to be "so closely related to banking ... as to be a proper incident thereto." This authority would permit us to engage in a variety of banking-related businesses, including the ownership and operation of a savings association, or any entity engaged in consumer finance, equipment leasing, the operation of a computer service bureau (including software development) and mortgage banking and brokerage services.
The principal exception allows bank holding companies to engage in, and to own shares of companies engaged in, certain businesses found by the Federal Reserve prior to November 11, 1999, to be "so closely related to banking ... as to be a proper incident thereto." This authority permits us to engage in a variety of banking-related businesses, including the ownership and operation of a savings association, or any entity engaged in consumer finance, equipment leasing, the operation of a computer service bureau (including software development) and mortgage banking and brokerage services.
The concept of a banking organization being "well-capitalized" is part of a regulatory enforcement regime that provides the federal banking agencies with broad power to take "prompt corrective action" to resolve the problems of depository institutions based on the capital level of each particular institution.
The concept of a banking organization being "adequately capitalized" or "well capitalized" is part of a regulatory enforcement regime that provides the federal banking agencies with broad power to take "prompt corrective action" to resolve the problems of depository institutions based on the capital level of each particular institution.
In addition, federal law and regulations may affect the terms upon which any person who is a director or officer of the Company or the Bank, or a principal shareholder of the Company, may obtain credit from banks with which the Bank maintains a correspondent relationship. Safety and Soundness Standards/Risk Management.
In addition, federal law and regulations may govern the terms upon which any person who is a director or officer of the Company or the Bank, or a principal shareholder of the Company, may obtain credit from banks with which the Bank maintains a correspondent relationship. Safety and Soundness Standards/Risk Management.
The Company's website is not incorporated by reference into this Annual Report on Form 10-K. SUPERVISION AND REGULATION General FDIC-insured institutions, like the Bank, their holding companies and their affiliates are extensively regulated under federal and state law.
The Company's website is not incorporated by reference into this Annual Report on Form 10-K. SUPERVISION AND REGULATION General FDIC-insured institutions, like the Bank, together with their holding companies and affiliates, are extensively regulated under federal and state law.
The Basel III Rule is applicable to all banking organizations that are subject to minimum capital requirements, including national and state banks and savings and loan associations, as well as to bank and savings and loan holding companies, other than "small bank holding companies" (generally holding companies with consolidated assets of less than $3 8 Table of Contents billion) and certain qualifying banking organizations that may elect a simplified framework (which we have not done).
The Basel III Rule is applicable to all banking organizations that are subject to minimum capital requirements, including national and state banks and savings and loan associations, as well as to bank and savings and loan holding companies, other than "small bank holding companies" (generally holding companies with consolidated assets of less than $3 billion) and certain qualifying banking organizations that may elect a simplified framework (which we have not done).
In addition, as a part of its operational risk mitigation, the Bank is required to implement a comprehensive information security program that includes administrative, technical and physical safeguards to ensure the security and confidentiality of customer records and information and to require the same of its service providers.
In addition, as part of its operational risk mitigation, the Bank is required to implement a comprehensive information security program that includes administrative, technical and physical safeguards to protect the security and confidentiality of customer records and information, and to require the same of its service providers.
As of December 31, 2024, the Company had regulatory capital in excess of the Federal Reserve’s requirements and met the Basel III Rule requirements to be well-capitalized. We are also in compliance with the capital conservation buffer. Prompt Corrective Action .
As of December 31, 2025, the Company had regulatory capital in excess of the Federal Reserve’s requirements and met the Basel III Rule requirements to be well capitalized. We are also in compliance with the capital conservation buffer. Prompt Corrective Action .
The Federal Reserve regularly assesses the Bank’s record of meeting the credit needs of its communities. The Bank's CRA ratings derived from these examinations can have significant impacts on the activities in which the Bank and the Company may engage.
The Federal Reserve regularly assesses the Bank’s record of meeting the credit needs of its communities through periodic CRA examinations. The Bank's CRA ratings derived from these examinations can have significant impacts on the activities in which the Bank and the Company may engage.
Based on the Bank’s loan portfolio as of December 31, 2024, it did not exceed the 300% guideline for commercial real estate loans nor did it exceed the 100% guideline for construction and land development loans. Consumer Financial Services.
Based on the Bank’s loan portfolio as of December 31, 2025, it did not exceed the 300% guideline for commercial real estate loans nor did it exceed the 100% guideline for construction and land development loans. Consumer Financial Services.
The CFPB has broad rule-making authority for a wide range of consumer protection laws that apply to all providers of consumer products and services, including the Bank, as well as the authority to prohibit "unfair, deceptive or abusive" acts and practices. The CFPB has examination and enforcement authority over providers with more than $10 billion in assets.
The CFPB has broad rulemaking authority for a wide range of consumer protection laws that apply to all providers of consumer products and services, including the Bank, as well as the authority to prohibit "unfair, deceptive or abusive" acts and practices. The CFPB has examination and enforcement authority over providers with more than $10 billion in assets.
In reaction to the global financial crisis and particularly following passage of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (the "Dodd-Frank Act"), we experienced heightened regulatory requirements and scrutiny.
In response to the global financial crisis and particularly following the passage of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (the "Dodd-Frank Act"), we experienced heightened regulatory requirements and scrutiny.
For example, a banking organization that is well-capitalized may: (i) qualify for exemptions from prior notice or application requirements otherwise applicable to certain types of activities; (ii) qualify for expedited processing of other required notices or applications; and (iii) accept, roll-over or renew brokered deposits.
For example, a well capitalized banking organization may: (i) qualify for exemptions from prior notice or application requirements otherwise applicable to certain types of activities; (ii) receive expedited processing of other required notices or applications; and (iii) accept, roll-over or renew brokered deposits.
FDIC-insured institutions with $10 billion or less in assets, like the Bank, continue to be examined by their applicable bank regulators, but must comply with applicable regulations promulgated by the CFPB.
FDIC-insured institutions with $10 billion or less in assets, like the Bank, continue to be examined by their applicable bank agencies, but must comply with applicable regulations promulgated by the CFPB.
Under the capital regulations of the Federal Reserve, in order to be well-capitalized, a banking organization must maintain: • A Common Equity Tier 1 Capital ratio to risk-weighted assets of 6.5% or more; • A ratio of Tier 1 Capital to total risk-weighted assets of 8% or more; • A ratio of Total Capital to total risk-weighted assets of 10% or more; and • A leverage ratio of Tier 1 Capital to total adjusted average quarterly assets of 5% or greater.
Under the capital regulations of the Federal Reserve, in order to be well capitalized, a banking organization must maintain: • A CET1 ratio to risk-weighted assets of 6.5% or more; • A ratio of Tier 1 Capital to total risk-weighted assets of 8% or more; • A ratio of Total Capital to total risk-weighted assets of 10% or more; and • A leverage ratio of Tier 1 Capital to total adjusted average quarterly assets of 5% or greater.
Although the Company and the Bank are subject to the FDIC's special assessment as a banking organization with assets of $5 billion or more, the Company does not have to pay the special assessment. 12 Table of Contents Supervisory Assessments . All Indiana banks are required to pay supervisory assessments to the DFI to fund the operations of that agency.
Although the Company and the Bank are subject to the FDIC's special assessment as a banking organization with assets of $5 billion or more, the Company does not have to pay the special assessment. Supervisory Assessments . All Indiana banks are required to pay supervisory assessments to the DFI to fund the operations of that agency.
Community Bank Capital Simplification . Community banking organizations have long raised concerns with federal bank agencies about the regulatory burden, complexity and costs associated with certain provisions of the Basel III Rule. In response, the U.S. Congress provided an "off-ramp" for institutions, like us, with total consolidated assets of less than $10 billion as part of the Regulatory Relief Act.
Community Bank Capital Simplification . Community banking organizations have long raised concerns with federal banking agencies about the regulatory burden, complexity and costs associated with certain provisions of the Basel III Rule. In response, Congress provided an "off-ramp" for institutions, like ours, with total consolidated assets of less than $10 billion as part of the Regulatory Relief Act.
Additionally, four of our 11 board members identify as women or people of color. Employee Engagement and Development. A positive workplace culture is vital to the Bank’s success. By supporting, respecting, engaging, and appreciating employees, the Bank has built a team well-equipped to show the same commitment to its customers.
Additionally, five of our 13 board members identify as women or people of color. Employee Engagement and Development. A positive workplace culture is vital to the Bank’s success. By supporting, respecting, engaging, and appreciating employees, the Bank has built a team well-equipped to show the same commitment to its customers.
The Bank offers employees a comprehensive health benefits package, a 401(k) match of up to 6% of an employee’s salary to encourage retirement savings, and tuition reimbursement that 22 employees used in 2024. The Bank also structures its bonus program for officers to create meaningful performance-based incentives.
The Bank offers employees a comprehensive health benefits package, a 401(k) match of up to 6% of an employee’s salary to encourage retirement savings, and tuition reimbursement that 23 employees used in 2025. The Bank also structures its bonus program for officers to create meaningful performance-based incentives.
The Company is not dependent upon any single industry or customer. At December 31, 2024, Lakeland Financial had consolidated total assets of $6.7 billion. Company’s Business . Lakeland Financial is a bank holding company as defined in the Bank Holding Company Act of 1956, as amended.
The Company is not dependent upon any single industry or customer. At December 31, 2025, Lakeland Financial had consolidated total assets of $7.0 billion. Company’s Business . Lakeland Financial is a bank holding company as defined in the Bank Holding Company Act of 1956, as amended.
Not only did the Basel III Rule increase most of the required minimum capital ratios in effect prior to January 1, 2015, but, in requiring that forms of capital be of higher quality to absorb loss, it introduced the concept of Common Equity Tier 1 Capital, which consists primarily of common stock, related surplus (net of Treasury stock), retained earnings and Common Equity Tier 1 minority interests subject to certain regulatory adjustments.
Not only did the Basel III Rule increase most of the required minimum capital ratios in effect prior to 2015, but, by requiring that capital instruments be of higher quality to absorb loss, it introduced the concept of Common Equity Tier 1 Capital ("CET1"), which consists primarily of common stock, related surplus (net of Treasury stock), retained earnings and CET1 minority interests, subject to certain regulatory adjustments and deductions.
As a bank holding company, we are registered with, and subject to regulation, supervision and enforcement by, the Federal Reserve under the Bank Holding Company Act of 1956, as amended ("BHCA").
The Company, as the sole shareholder of the Bank, is a bank holding company. As a bank holding company, we are registered with, and subject to regulation, supervision and enforcement by, the Federal Reserve under the Bank Holding Company Act of 1956, as amended ("BHCA").
The Company has primarily targeted growth in the larger cities located in Northern Indiana and the Indianapolis market in Central Indiana and areas that are within two hours from a Lake City Bank branch. The Company believes these areas offer above average growth potential with attractive demographics and potential for commercial lending and deposit gathering opportunities.
The Company has primarily targeted growth in the larger cities located in Northern Indiana and the Indianapolis market in Central Indiana and areas that are within three hours from an existing Lake City Bank branch. The Company believes these areas offer above-average growth potential with attractive demographics and potential for commercial lending and deposit gathering opportunities.
For institutions like the Bank that are not considered large and highly complex banking organizations, assessments are based on examination ratings and financial ratios. The total base assessment rates, effective as of January 1, 2023, currently range from 2.5 basis points to 32 basis points for institutions that are not considered large and highly complex banking organizations.
For institutions like the Bank that are not considered large and highly complex banking organizations, assessments are based on examination ratings and financial ratios. The total base assessment rates, effective as of January 1, 2023, currently range from 2.5 basis points (for the lowest risk institutions) to 32 basis points or beyond (for higher risk institutions).
The Bank operates as a community-based financial services organization augmented by experienced, centralized support in select critical areas. The Bank’s local market orientation is reflected in its regional management, which divides the Bank’s market area into five distinct geographic regions, each headed by a retail and commercial regional manager.
The Bank operates as a community-based financial services organization augmented by experienced, centralized support in select critical areas. The Bank’s local market orientation is reflected in its regional management, which divides the Bank’s market area into five distinct geographic regions, that are led by a retail and commercial regional manager.
Many of these competitors enjoy fewer regulatory constraints and some may have lower cost structures. Human Capital . The Bank is committed to being the acknowledged and recognized leader in Indiana community banking. We achieve this mission only through the hard work and dedication of our employees.
Many of these competitors enjoy fewer regulatory constraints and some may have lower cost structures. Human Capital . The Bank is committed to becoming the acknowledged and recognized leader in Midwest community banking. We believe we achieve this mission only through the hard work and dedication of our employees.
As an Indiana-chartered FDIC-insured member bank, the Bank is subject to the examination, supervision, reporting and enforcement requirements of the DFI, the chartering authority for Indiana banks, the Federal Reserve, as the primary federal regulator of member banks, and the FDIC, as administrator of the DIF. Deposit Insurance .
As an Indiana-chartered FDIC-insured member bank, the Bank is subject to the examination, supervision, reporting and enforcement requirements of the DFI, its chartering authority, the Federal Reserve, as the primary federal regulator of state member banks, and the FDIC, as administrator of the DIF. Deposit Insurance Assessments .
The extent of the regulators' powers depends on whether the institution in question is "adequately capitalized," "undercapitalized," "significantly undercapitalized" or "critically undercapitalized" in each case as defined by regulation.
The extent of the banking agencies' powers depends on whether the institution in question is "adequately capitalized," "undercapitalized," "significantly undercapitalized," or "critically undercapitalized" in each case as defined by regulation.
Under the final rule, a community banking organization is eligible to elect the new framework if it has: (i) less than $10 billion in total consolidated assets, (ii) limited amounts of certain assets and off-balance sheet exposures, and (iii) a CBLR greater than 9%.
Under the final rule implementing this section of the Regulatory Relief Act, a community banking organization is eligible to elect the new CBLR framework if it has: (i) less than $10 billion in total consolidated assets, (ii) limited amounts of certain assets and off-balance sheet exposures, and (iii) a CBLR greater than 9%.
Noncompliance with safety and soundness may also constitute grounds for other enforcement action by the federal banking agencies, including cease and desist orders and civil money penalty assessments. During the past decade, the banking agencies have increasingly emphasized the importance of sound risk management processes and strong internal controls when evaluating the activities of the FDIC-insured institutions that they supervise.
Noncompliance with safety and soundness also may constitute grounds for other enforcement action by the federal banking agencies, including cease and desist orders and civil money penalty assessments. The federal banking agencies have emphasized the importance of sound risk management processes and strong internal controls when evaluating the activities of the FDIC-insured institutions.
The banking agencies also have released specific risk management guidance on certain topics, including third-party relationships, in response to the proliferation of relationships between banking organizations and financial technology companies (although the guidance applies more broadly).
Additionally, the banking agencies have issued guidance on specific risk management topics, including third-party relationships, in response to the proliferation of relationships between banking organizations and financial technology companies (although the guidance applies more broadly).
In 2024, 161 employees were promoted and 153 employees were hired externally, demonstrating a commitment to the professional development of Lake City Bank employees. In addition to the substantial investment in employee professional development, the Bank’s benefit and compensation programs are designed to ensure we recruit and retain top talent.
In 2025, 176 employees were promoted and 132 employees were hired externally, demonstrating a commitment to the professional development of Lake City Bank employees. In addition to the substantial investment in employee professional development, the Bank’s benefit and compensation programs are designed to ensure we recruit and retain top talent.
The deposit accounts of the Bank are insured by the FDIC's Deposit Insurance Fund ("DIF") to the maximum extent provided under federal law and FDIC regulations, currently $250,000 per insured depositor category. The Bank is also a member of the Federal Reserve System (a "member bank").
The Bank is an Indiana-chartered bank that is a member of the Federal Reserve System (a "member bank"). The deposit accounts of the Bank are insured by the FDIC's Deposit Insurance Fund ("DIF") to the maximum extent provided under federal law and FDIC regulations, currently $250,000, per insured depositor, per ownership category.
The Bank was originally organized in 1872 and has continuously operated under the laws of the State of Indiana since its organization. As of December 31, 2024, the Bank had 54 offices in fifteen counties, including 46 offices in Northern Indiana and eight offices in Central Indiana, in the Indianapolis market.
The Bank was originally organized in 1872 and has continuously operated under the laws of the State of Indiana since its organization. As of December 31, 2025, the Bank had 55 offices in fifteen counties, including 46 offices in Northern Indiana and nine offices in Central Indiana, in the Indianapolis market.
The banking agencies generally have broad discretion to impose restrictions and limitations on the operations of a regulated entity where the agencies determine, among other things, that such operations are unsafe or unsound, fail to comply with applicable law or are otherwise inconsistent with laws and regulations or with the supervisory policies of these agencies.
The banking agencies generally have broad discretion to impose restrictions and limitations on the operations of a regulated entity when the agencies determine, among other factors, that such operations are unsafe or unsound, violate applicable law, or are otherwise inconsistent with laws and regulations or with the supervisory policies of these agencies.
Without Federal Reserve approval, a state member bank may not pay dividends in any calendar year that, in the aggregate, exceed that bank's calendar year-to-date net income plus the bank's retained net income for the two preceding calendar years.
Without prior approval from the Federal Reserve, a state member bank may not pay dividends in any calendar year that, in total, exceed the sum of the bank's year-to-date net income, plus the bank's retained net income for the two preceding calendar years.
The purpose of the conservation buffer is to ensure that banking institutions maintain a buffer of capital that can be used to absorb losses during periods of financial and economic stress. Factoring in the conservation buffer increases the minimum ratios depicted above to 7% for Common Equity Tier 1 Capital, 8.5% for Tier 1 Capital and 10.5% for Total Capital.
The purpose of the conservation buffer is to ensure that banking organizations maintain a cushion of capital that can be used to absorb losses during periods of financial and economic stress. Factoring in the capital conservation buffer increases the minimum ratios described above to 7% for CET1, 8.5% for Tier 1 Capital and 10.5% for Total Capital.
The Basel III Rule also changed the definition of capital by establishing more stringent criteria that instruments must meet to be considered Additional Tier 1 Capital (primarily non-cumulative perpetual preferred stock that meets certain requirements) and Tier 2 Capital (primarily other types of preferred stock and subordinated debt, subject to limitations).
The Basel III Rule also changed the definition of regulatory capital by establishing more stringent criteria for instruments to qualify as Additional Tier 1 Capital (primarily non-cumulative perpetual preferred stock that meets certain requirements) and Tier 2 Capital (primarily other types of preferred stock and subordinated debt, subject to limitations).
The BHCA does not place territorial restrictions on the domestic activities of nonbank subsidiaries of bank holding companies. 10 Table of Contents Additionally, bank holding companies that meet certain eligibility requirements prescribed by the BHCA and elect to operate as financial holding companies may engage in, or own shares in companies engaged in, a wider range of nonbanking activities, including securities and insurance underwriting and sales, merchant banking and any other activity that the Federal Reserve, in consultation with the Secretary of the Treasury, determines by regulation or order is financial in nature or incidental to any such financial activity or that the Federal Reserve determines by order to be complementary to any such financial activity and does not pose a substantial risk to the safety or soundness of FDIC-insured institutions or the financial system generally.
Bank holding companies that meet certain BHCA eligibility requirements and elect to operate as financial holding companies may engage in, or own shares in companies engaged in, a wider range of nonbanking activities, including securities and insurance underwriting and sales, merchant banking and any other activity that (i) the Federal Reserve, in consultation with the Secretary of the Treasury, determines by regulation or order is financial in nature or incidental to any such financial activity; or (ii) the Federal Reserve determines by order to be complementary to any such financial activity, as long as the activity does not pose a substantial risk to the safety or soundness of FDIC-insured institutions or the financial system generally.
These security and privacy policies and procedures are in effect across all business lines and geographic locations. The Bank and the Company also are subject to a number of federal and state laws and regulations requiring notifications and disclosures regarding certain cybersecurity incidents.
These security and privacy policies and procedures are applied consistently across all business lines and geographic locations. The Bank and the Company also are subject to federal and state laws and regulations requiring notifications and disclosures regarding certain cybersecurity incidents.
In general, the safety and soundness standards prescribe the goals to be achieved in each area, and each institution is responsible for establishing its own procedures to achieve those goals.
These standards generally prescribe the goals to be achieved in each area, and each institution is responsible for establishing its own procedures to achieve those goals.
Well-Capitalized Requirements . The ratios described above are minimum standards for banking organizations to be considered "adequately capitalized." Banking agencies uniformly encourage banks to hold more capital and be "well-capitalized" and, to that end, federal law and regulations provide various incentives for banking organizations to maintain regulatory capital at levels in excess of minimum regulatory requirements.
The ratios described above represent minimum standards for banking organizations to be considered "adequately capitalized." Banking agencies uniformly encourage banking organizations to maintain capital at levels above these minimums and to be classified as "well capitalized." To that end, federal law and regulations provide various incentives for banking organizations to maintain regulatory capital in excess of minimum regulatory requirements.
In recent years, the federal banking agencies have issued statements to reinforce prudent risk-management practices related to CRE lending, having observed substantial growth in many CRE asset and lending markets, increased competitive pressures, rising CRE concentrations in banks and an easing of CRE underwriting standards.
In recent years, the federal banking agencies issued statements to reinforce prudent risk-management practices related to CRE lending, in response to observed growth in CRE markets, increased competitive pressures, rising CRE concentrations in banking organizations, and an easing of CRE underwriting standards.
The Bank team is 683 people strong, including 632 full-time, 33 part-time, and 18 seasonal/temporary employees as of December 31, 2024. Diversity and Inclusiveness. The Bank is committed to social and governance responsibility, and in 2020, the management team added "inclusivity" as the eighth core value defining our organizational culture.
The Bank team is 701 people strong, including 655 full-time, 20 part-time, and 26 seasonal/temporary employees as of December 31, 2025. Diversity and Inclusiveness. The Bank is committed to social and governance responsibility, and in 2020, the management team added "inclusivity" as the eighth core value defining our organizational culture.
The amount of the assessment is calculated on the basis of the Bank’s total assets. During the year ended December 31, 2024, the Bank paid supervisory assessments to the DFI totaling approximately $318,000. Capital Requirements. Banks are generally required to maintain capital levels in excess of other businesses. For a discussion of capital requirements, see "The Role of Capital" above.
The amount of the assessment is calculated on the basis of the Bank’s total assets. During the year ended December 31, 2025, the Bank paid supervisory assessments to the DFI totaling approximately $324,000. Capital Requirements. Banks are generally required to maintain capital levels in excess of other businesses.
Under the BHCA, we are subject to periodic examination by the Federal Reserve and are required to file with the Federal Reserve periodic reports of our operations and such additional information regarding us and the Bank as the Federal Reserve may require. Acquisitions, Activities and Financial Holding Company Election .
Under the BHCA, we are subject to periodic examination by the Federal Reserve and are required to file with the Federal Reserve periodic reports of our operations and such additional information regarding us and the Bank as the Federal Reserve may require. Acquisitions and Activities . The primary purpose of a bank holding company is to control and manage banks.
Because of the risks attendant to their business, FDIC-insured institutions, such as banks, as well as their holding companies (i.e. banking organizations) are generally required to hold more capital than other businesses, which directly affects our earnings capabilities.
The Role of Capital Regulatory capital represents the net assets of a banking organization available to absorb losses. Because of the risks attendant to their business, FDIC-insured institutions, such as banks, as well as their holding companies (i.e., banking organizations) generally are required to hold more capital than other businesses, which directly affects our earnings capabilities.
These means are used in varying combinations to influence overall growth and distribution of bank loans, investments and deposits, and their use may affect interest rates charged on loans or paid on deposits, which may impact our business and operations. Federal Securities Regulation. Our common stock is registered with the SEC under the Exchange Act.
These means are used in varying combinations to influence overall growth and distribution of bank loans, investments and deposits, and their use may affect interest rates charged on loans or paid on deposits, which may impact our business and operations. Federal Securities Regulation.
Building and strengthening this positive workplace culture starts with Lake City University. Founded in 1999, Lake City University is dedicated to helping employees thrive professionally and personally. In 2024, the Bank employees averaged 24.6 hours of instruction per employee through the program.
Building and strengthening this positive workplace culture starts with Lake City University. Founded in 1999, Lake City University is dedicated to helping employees thrive professionally and personally. In 2025, the Bank employees averaged 21 hours of instructor-led learning per employee through the program.
Federal law also prohibits FDIC-insured state banks and their subsidiaries, subject to certain exceptions, from engaging as principal in any activity that is not permitted for a national bank unless the bank meets, and continues to meet, its minimum regulatory capital requirements and the FDIC determines that the activity would not pose a 13 Table of Contents significant risk to the DIF.
Federal law also prohibits FDIC-insured state banks and their subsidiaries from engaging as principal in any activity that is not permitted for a national bank unless such banks meet, and continue to meet, minimum regulatory capital requirements, and the FDIC determines that the activity would not pose a significant risk to the DIF.
The BHCA generally prohibits us from acquiring direct or indirect ownership or control of more than 5% of the voting shares of any company that is not a bank and from engaging in any business other than that of banking, managing and controlling banks or furnishing services to banks and their subsidiaries.
The BHCA generally prohibits us from acquiring direct or indirect ownership or control of more than 5% of the outstanding voting shares of any nonbanking entity, and from engaging in any business other than that of banking, managing and controlling banks or furnishing services to banks and their subsidiaries. This general prohibition is subject to a number of exceptions.
In its October 2024 semiannual update, the FDIC stated that the reserve ratio likely will reach the statutory minimum by the September 30, 2028 deadline, and no adjustments to the base assessment rates is currently projected.
In its May 2025 report, the FDIC stated that the reserve ratio likely will reach the statutory minimum by the September 30, 2028 deadline, and no adjustments to the base assessment rates are currently projected.
All advances from the FHLB are required to be fully collateralized as determined by the FHLB. Community Reinvestment Act Requirements. The CRA requires the Bank to have a continuing and affirmative obligation in a safe and sound manner to help meet the credit needs of the entire community, including low- and moderate-income neighborhoods.
All advances from the FHLB are required to be fully collateralized as determined by the FHLB. Community Reinvestment Act Requirements. The CRA imposes on the Bank a continuing and affirmative obligation, consistent with safe and sound operations, to help meet the credit needs of the entire communities that it serves, including low- and moderate-income neighborhoods.
On July 22, 2024, the Bank opened its 54 th branch in Carmel on the north side of Indianapolis. The Bank’s business strategy is focused on building long-term relationships with its customers based on in person, top-quality service, high ethical standards and safe and sound lending.
On September 2, 2025, the Bank opened its 55 th branch in Westfield, Indiana, north of Indianapolis. The Bank’s business strategy is focused on building long-term relationships with its customers based on in person, top-quality service, high ethical standards and safe and sound lending.
While our strategy encompasses all phases of traditional community banking, including consumer lending and wealth advisory and trust services, we focus on building expansive commercial relationships and developing retail and commercial deposit gathering strategies through relationship-based client services. Substantially all of the Bank’s assets and income are located in and derived from the United States.
While our strategy encompasses all phases of traditional community banking, including consumer lending and wealth advisory and trust services, we focus on building expansive commercial relationships and developing retail and commercial deposit gathering strategies through relationship-based client services.
The Dodd-Frank Act also directed the Federal Reserve, together with the other federal banking and financial services agencies, to promulgate rules prohibiting excessive compensation paid to executives of bank holding companies, regardless of whether such companies are publicly traded. Supervision and Regulation of the Bank General. The Bank is an Indiana-chartered bank.
The Dodd-Frank Act also directed the Federal Reserve, in coordination with the other federal banking and financial services agencies, to promulgate rules prohibiting excessive incentive-based compensation paid to executives of bank holding companies, regardless of whether such companies are publicly traded.
"Control" is conclusively presumed to exist upon the acquisition of 25% or more of the outstanding voting securities of a bank or bank holding company, but may arise under certain circumstances between 10% and 24.99% ownership. Capital Requirements. As a bank holding company, we are required to maintain capital in accordance with Federal Reserve capital adequacy requirements.
"Control" is conclusively determined to exist upon the acquisition of 25% or more of the outstanding voting securities of a bank or bank holding company, but may be presumed to arise under certain circumstances between 10% and 24.99% ownership. Capital Requirements.
Federal law permits state and national banks to merge with banks in other states subject to: (i) regulatory approval; (ii) federal and state deposit concentration limits; and (iii) state law limitations requiring the merging bank to have been in existence for a minimum period of time (not to exceed five years) prior to the merger.
With respect to interstate mergers and acquisitions, federal law permits state banks to merge with out-of-state banks subject to: (i) regulatory approval; (ii) federal and state deposit concentration limits; and (iii) state law requirements that the merging bank has been in existence for a minimum period of time (not to exceed five years), prior to the merger.
For a discussion of capital requirements, see "The Role of Capital" above. Dividend Payments. Our ability to pay dividends to our shareholders may be affected by both general corporate law considerations and policies of the Federal Reserve applicable to bank holding companies.
Our ability to pay dividends to our shareholders may be affected by both general corporate law considerations and policies of the Federal Reserve applicable to bank holding companies.
The Basel III Rule requires banking organizations to maintain minimum capital ratios as follows: • A ratio of minimum Common Equity Tier 1 Capital equal to 4.5% of risk-weighted assets; • A ratio of minimum Tier 1 Capital equal to 6% of risk-weighted assets; • A continuation of the minimum required amount of Total Capital (Tier 1 plus Tier 2) at 8% of risk-weighted assets; and • A minimum leverage ratio of Tier 1 Capital to total quarterly average assets equal to 4% in all circumstances.
The Basel III Rule requires banking organizations to maintain minimum capital ratios to be deemed "adequately capitalized" as follows: • A ratio of CET1 equal to 4.5% of risk-weighted assets; • A ratio of Tier 1 Capital equal to 6% of risk-weighted assets; • A ratio of Total Capital (Tier 1 plus Tier 2 Capital) equal to 8% of risk-weighted assets; and • A leverage ratio of Tier 1 Capital to total quarterly average assets equal to 4% of risk-weighted assets.
Higher capital levels could also be required if warranted by the particular circumstances or risk profiles of individual banking organizations. For example, the Federal Reserve’s capital guidelines contemplate that additional capital may be required to take adequate account of, among other things, interest rate risk, or the risks posed by concentrations of credit, nontraditional activities or securities trading activities.
For example, the Federal Reserve’s capital guidelines contemplate that additional capital may be required to take adequate account of, among other things, interest 8 Table of Contents rate risk, or the risks posed by concentrations of credit, nontraditional activities or securities trading activities.
The FDIC will continue to collect special assessments for an anticipated total of eight quarterly assessment periods. The base for the special assessment is equal to an insured depository institution’s estimated uninsured deposits for the December 31, 2022 reporting period, adjusted to exclude the first $5 billion in estimated uninsured deposits.
The quarterly special assessment rate is applied to the special assessment base equal to an FDIC-insured-institution's estimated uninsured deposits for the December 31, 2022 reporting period, adjusted to exclude the first $5 billion in estimated uninsured deposits.
The Bank is subject to certain restrictions imposed by federal law on "covered transactions" between the Bank and its "affiliates." The Company is an affiliate of the Bank for purposes of these restrictions, and covered transactions subject to the restrictions include extensions of credit to the Company, investments in the stock or other securities of the Company and the acceptance of the stock or other securities of the Company as collateral for loans made by the Bank.
Covered transactions subject to these restrictions include extensions of credit to the Company, investments in the stock or other securities of the Company and the acceptance of the stock or other securities of the Company as collateral for loans made by the Bank.
For example, a low CRA rating may impact the review of applications for acquisitions by the Bank, or the Company's financial holding company status. On October 24, 2023, the banking agencies issued a final rule to strengthen and modernize the CRA regulations (the "CRA Rule").
For example, a low CRA rating may impact the review of applications for acquisitions by the Bank, or the Company's financial holding company status. In October 2023, the federal banking agencies issued a final rule intended to strengthen and modernize the CRA regulations (the "CRA Rule"). The CRA Rule was subsequently challenged in court, which prevented it from taking effect.
At present, women represent 60% of the Bank’s officers (288 officers – 174 women), 42% (10 of 24 members) of the Senior Leadership Council (which includes those with the title of "Senior Vice President" and above) and 56% (5 of 9 members) of the executive Management Committee.
As of December 31, 2025, women represent 60% of the Bank’s officers (310 officers – 186 women), 38% (9 of 24 members) of the Senior Leadership Council (which includes those with the title of "Senior Vice President" and above) and 56% (5 of 9 members) of the executive Management Committee.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeLabor shortages and failure to attract and retain qualified employees could negatively impact our business, results of operations and financial condition . A number of factors may adversely affect the labor force available to us or increase labor costs, including high employment levels, and decreased labor force size and participation rates.
Biggest changeA number of factors may adversely affect the labor force available to us or increase labor costs, including high employment levels, and decreased labor force size and participation rates. Although we have not experienced any material labor shortages to date, we have continued to experience a competitive local labor market, especially for commercial lenders.
The Company, on a consolidated basis, and the Bank, on a stand-alone basis, must meet certain regulatory capital requirements and maintain sufficient liquidity. We face significant capital and other regulatory requirements as a financial institution, which were heightened with the implementation of the Basel III Rule and the phase-in of capital conservation buffer requirement.
The Company, on a consolidated basis, and the Bank, on a stand-alone basis, must meet certain regulatory capital requirements and maintain sufficient liquidity. We face significant capital and other regulatory requirements as a financial institution, which were heightened with the implementation of the Basel III Rule and the phase-in of the capital conservation buffer requirement.
From time to time, the FASB and the SEC change the financial accounting and reporting standards or the interpretation of those standards that govern the preparation of our external financial statements. These changes are beyond our control, can be difficult to predict and could materially impact how we report our financial condition and results of operations.
From time to time, the Financial Accounting Standards Board ("FASB") and the SEC change the financial accounting and reporting standards or the interpretation of those standards that govern the preparation of our external financial statements. These changes are beyond our control, can be difficult to predict and could materially impact how we report our financial condition and results of operations.
Given the complex factors affecting the strength of the U.S. economy, including uncertainties regarding the persistence of inflation, international geopolitical developments, developments in the global energy market, labor market conditions and the impact of higher rates on consumers and businesses, there is a meaningful risk that the Federal Reserve and other central banks may underestimate the impact of their tightening policies and potentially cause an economic recession.
Given the complex factors affecting the strength of the U.S. economy, including uncertainties regarding the persistence of inflation, international geopolitical developments, developments in the global energy market, labor market conditions and the impact of higher rates on consumers and businesses, there is a meaningful risk that the Federal Reserve and other central banks may underestimate the impact of their monetary policies and potentially cause an economic recession.
The inability to maintain these public funds on deposit could result in a material adverse effect on the Bank’s liquidity and could materially impact our ability to grow and remain profitable. 21 Table of Contents Declines in asset values may result in impairment charges and adversely affect the value of our investment securities, financial performance and capital.
The inability to maintain these public funds on deposit could result in a material, adverse effect on the Bank’s liquidity and could materially impact our ability to grow and remain profitable. 20 Table of Contents Declines in asset values may result in impairment charges and adversely affect the value of our investment securities, financial performance and capital.
Although our agriculture portfolio is well-diversified, the risks, specific to the agricultural industry, include decreases in livestock and crop prices, increases in labor and input prices, increase in stockpiles of agricultural commodities, the strength of the U.S. dollar, the potential impact of tariffs and other trade restrictions on commodities and the nature of climate and weather conditions.
Although our agriculture portfolio is well-diversified, the risks, specific to the agricultural industry, include decreases in livestock and crop prices, increases in labor and input prices, increase in stockpiles of agricultural commodities, the strength of the U.S. dollar, the potential changes in tariffs and other trade restrictions on commodities and the nature of climate and weather conditions.
If we fail to receive the appropriate regulatory approvals, we will not be able to consummate an acquisition that we believe is in our best interests. Among other things, our regulators consider our capital, liquidity, profitability, regulatory compliance and levels of goodwill and intangibles when considering acquisition and expansion proposals.
If we fail to receive the appropriate regulatory approvals, we will not be able to consummate an acquisition that we believe is in our best interests. Among other factors, our regulators consider our capital, liquidity, profitability, regulatory compliance, and levels of goodwill and intangibles when considering acquisition and expansion proposals.
Our future success will depend in part upon our ability to address the needs of our customers by using technology to provide products and services that will satisfy customer demands for convenience as well as to create additional efficiencies in our operations as we continue to grow and expand our market areas.
Our future success will depend in part upon our ability to address the needs of our customers by using technology and artificial intelligence to provide products and services that will satisfy customer demands for convenience as well as to create additional efficiencies in our operations as we continue to grow and expand our market areas.
To the extent these or other factors affect the performance or financial condition of our agri-business borrowers, such as the Avian bird flu, our results of operations and financial performance could suffer. 20 Table of Contents Our consumer loans generally have a higher degree of risk of default than our other loans.
To the extent these or other factors affect the performance or financial condition of our agri-business borrowers, such as the Avian bird flu, our results of operations and financial performance could suffer. 19 Table of Contents Our consumer loans generally have a higher degree of risk of default than our other loans.
If we cannot raise additional capital when needed, our financial condition and our ability to further expand our operations through organic growth or acquisitions could be materially impaired. We may experience difficulties in managing our growth, and our growth strategy involves risks that may negatively impact our net income.
If we cannot raise additional capital when needed, our financial condition and our ability to further expand our operations through organic growth or acquisitions could be materially impacted. We may experience difficulties in managing our growth, and our growth strategy involves risks that may negatively impact our net income.
While our deposit base primarily consists of a stable mix of retail, commercial and public fund deposits, we cannot be assured that unusual deposit withdrawal activity will not affect banks generally or the Company specifically in the future.
While our deposit base primarily consists of a stable mix of commercial, public funds, and retail deposits, we cannot be assured that unusual deposit withdrawal activity will not affect banks generally or the Company specifically in the future.
Our competitors include large national, regional and local community banks, credit unions, fintech and nonbank financial service providers, securities and brokerage companies, mortgage companies, insurance companies, finance companies, money market mutual funds and farm 22 Table of Contents credit services.
Our competitors include large national, regional and local community banks, credit unions, fintech and nonbank financial service providers, securities and brokerage companies, mortgage companies, insurance companies, finance companies, money market mutual funds and farm 21 Table of Contents credit services.
While we did not experience any abnormal changes in our total outstanding deposit balances following these bank closure events, we experienced changes in deposit balances resulting from typical seasonal fluctuations due to the nature of our business.
While we did not experience any abnormal changes in our total outstanding deposit balances following bank closure events of 2023, we experienced changes in deposit balances resulting from typical seasonal fluctuations due to the nature of our business.
Moreover, we rely on deposits to be a low-cost source of funding, and a loss in our deposit base could cause us to incur higher funding costs from wholesale funding sources. The financial services industry is constantly undergoing rapid technological changes with frequent introductions of new technology-driven products and services.
Moreover, we rely on deposits to be a low-cost source of funding, and a loss in our deposit base could cause us to incur higher funding costs from wholesale funding sources. The financial services industry is constantly undergoing rapid technological changes with frequent introductions of new technology-driven products and services, including artificial intelligence.
For example, the cumulative effects of changes in the economy and overall business environment, impact of tariffs, labor availability shortages and supply chain constraints have adversely affected commercial and industrial loans, and we expect this trend to continue for certain portions of our loan portfolio, particularly if general economic conditions worsen.
For example, the cumulative effects of changes in the economy and overall business environment, impact of tariffs, and labor availability shortages have adversely affected commercial and industrial loans, and we expect this trend to continue for certain portions of our loan portfolio, particularly if general economic conditions worsen.
If LCB Funding, Inc. fails to meet any of the required provisions for real estate investment trusts, it could no longer qualify as a real estate investment trust and the resulting tax consequences would increase our effective tax rate or cause us to have a tax liability for 24 Table of Contents prior years.
If LCB Funding, Inc. fails to meet any of the required provisions for real estate investment trusts, it could no longer qualify as a real estate investment trust and the resulting tax consequences would increase our effective tax rate or cause us to have a tax liability for prior years.
If any events or circumstances occur which could undermine our reputation, there can be no assurance that the additional costs and expenses we may incur as a result would not have an adverse impact on our business. 25 Table of Contents We have a continuing need to adapt to technological change and we may not have the resources to effectively implement new technology.
If any events or circumstances occur which could undermine our reputation, there can be no assurance that the additional costs and expenses we may incur as a result would not have an adverse impact on our business. We have a continuing need to adapt to technological change and we may not have the resources to effectively implement new technology.
Should our internal controls fail to prevent or detect an occurrence, or if any resulting loss is not insured or exceeds applicable insurance limits, it could have a material adverse effect on our business, results of operations and financial condition.
Should we fail to prevent or detect an occurrence, or if any resulting loss is not insured or exceeds applicable insurance limits, it could have a material adverse effect on our business, results of operations and financial condition.
Our ability to retain the executive officers, management teams, branch managers and loan officers at the Bank will continue to be important to the successful implementation of our strategy.
Our ability to retain the executive officers, management teams, branch managers, loan officers, and wealth advisors at the Bank will continue to be important to the successful implementation of our strategy.
Liquidity risks could affect operations and jeopardize our business, results of operations and financial condition. Liquidity is essential to our business. An inability to raise funds through deposits, borrowings, the sale of loans and other sources could have a substantial, negative effect on our liquidity.
Liquidity risks could affect operations and jeopardize our business, results of operations and financial condition. Liquidity is essential to our business. An inability to raise funds through deposits, borrowings, the sale of loans, investment securities, or other sources could have a substantial, negative effect on our liquidity.
The Company is not able to anticipate or implement effective preventive measures against all security breaches of these types, especially because the techniques used change frequently and because attacks can originate from a wide variety of sources.
The Company is not able to anticipate or implement effective preventive measures against all security breaches of these types, including deep fakes, especially because the techniques used change frequently and because attacks can originate from a wide variety of sources.
Because of the nature of our loan portfolio and our concentration in commercial and industrial loans and commercial real estate loans, which tend to be larger loans, the movement of a small number of loans to 19 Table of Contents nonperforming status can have a significant impact on these ratios.
Because of the nature of our loan portfolio and our concentration in commercial and industrial loans and commercial real estate loans, which tend to be larger loans, the movement of a small number of loans to nonperforming status can have a significant impact on these ratios.
The financial services industry is constantly undergoing rapid technological changes with frequent introductions of new technology-driven products and services. In addition to better serving customers, the effective use of technology increases efficiency and enables financial institutions to reduce costs.
The financial services industry is constantly undergoing rapid technological changes with frequent introductions of new technology-driven products and services. In addition to better serving customers, the effective use of technology increases 24 Table of Contents efficiency and enables financial institutions to reduce costs.
For example, elevated inflation harms consumer purchasing power, which could negatively affect our retail customers and the economic environment and, ultimately, many of our business customers, and could also negatively affect our levels of non-interest expense.
For example, elevated inflation harms consumer purchasing power, which could negatively affect our retail customers and the economic environment and, ultimately, many of our business customers, and could also negatively affect our levels of noninterest expense.
We cannot assure you that our loan application approval procedures, use of loan concentration limits, credit monitoring, use of independent reviews of outstanding loans or other procedures will reduce these credit risks.
We cannot assure you that our loan application approval procedures, use of loan concentration limits, credit monitoring, use of independent reviews of outstanding loans, use of third-party appraisals, or other procedures will reduce these credit risks.
At December 31, 2024 , appro ximately 31% of our deposit balances are concentrated in public funds from municipalities and government agencies located in the Bank’s geographic footprint. The five largest of which have operating and other deposit accounts that, collectively, represented approximately 18% of total deposits at December 31, 2024.
At December 31, 2025 , appro ximately 33.2% of our deposit balances are concentrated in public funds from municipalities and government agencies located in the Bank’s geographic footprint. The five largest of which have operating and other deposit accounts that, collectively, represented approximately 18.9% of total deposits at December 31, 2025.
These regulations affect our lending practices, capital structure, investment practices, dividend policy and growth, among other things.
These regulations affect our lending practices, capital structure, investment practices, dividend policy, and growth, among other considerations.
In the current environment, economic and business conditions are significantly affected by U.S. monetary policy, particularly the actions of the Federal Reserve to raise or lower short-term interest rates.
In the current environment, economic and business conditions are significantly affected by U.S. monetary policy, particularly the actions of the Federal Open Market Committee of the Federal Reserve ("FOMC") to raise or lower short-term interest rates.
At December 31, 2024, consumer loans totaled $104.0 million, or 2% of our total loan portfolio. Consumer loans typically have shorter terms and lower balances with higher yields as compared to commercial loans, but generally carry higher risks of default.
At December 31, 2025, consumer loans totaled $116.2 million , or 2.2% of our total loan portfolio. Consumer loans typically have shorter terms and lower balances with higher yields as compared to commercial loans, but generally carry higher risks of default.
The pivot in policy actions by the Federal Reserve to lower the target Federal Funds rate allowed the Company to reprice deposits faster than loans in the second half of 2024, which had a positive impact on net interest income.
The pivot in policy actions by the FOMC to lower the target Federal Funds rate allowed the Company to reprice deposits faster than loans in the second half of 2024 and into 2025, which had a positive impact on net interest income.
In addition, we may determine to sell securities in our available-for-sale investment securities portfolio, and any such sale could cause us to realize currently unrealized losses that resulted from the increases in the prevailing interest rates.
In addition, we may determine to sell securities in our available-for-sale investment securities portfolio, and any such sale could cause us to realize currently unrealized losses that resulted from the increases in the prevailing interest rates since the time these securities were purchased.
Economic conditions in the United States and our Indiana markets are affected by complex factors that are difficult to predict and beyond our control, including uncertainties regarding the persistence of inflation, U.S. trade policy, including the potential impact of tariffs, geopolitical developments, such as ongoing conflicts in the Middle East and Ukraine, disruptions in the global energy market, labor market conditions, the potential impact of deportation initiatives, the effects of bird flu or other potential infectious diseases, supply chain issues both domestically and internationally, and the potential effects of the new presidential administration and its actions with respect to the foregoing.
Economic conditions in the United States and our Indiana markets are affected by complex factors that are difficult to predict and beyond our control, including uncertainties regarding the persistence of inflation, U.S. trade policy, including the potential changes to tariffs, geopolitical developments, disruptions in the global energy market, labor market conditions, the potential impact of deportation initiatives, the effects of bird flu or other potential infectious diseases, supply chain issues both domestically and internationally, and the potential effects of the current presidential administration and its actions with respect to the foregoing.
The actual amount of credit losses is affected by changes in economic, operating and other conditions within our markets, which may be beyond our control, and such losses may exceed current estimates. At December 31, 2024, our allowance for credit losses as a percentage of total loans was 1.68% and as a percentage of total nonperforming loans was 152%.
The actual amount of credit losses is affected by changes in economic, operating and other conditions within our markets, which may be beyond our control, and such losses may exceed current estimates. At December 31, 2025, our allowance for credit losses as a percentage of total loans was 1.3% and as a percentage of total nonperforming loans was 330.5%.
We maintain an investment securities portfolio that includes, but is not limited to, mortgage-backed securities and municipal securities.
We maintain an investment securities portfolio that includes, but is not limited to, U.S. treasuries, mortgage-backed securities and municipal securities.
However, future changes by the Federal Reserve to adjust the target Federal Funds rate could have varying impacts on the Company's net interest margin. Additionally, a reduction in longer-term rates would positively impact the fair value of our investment securities portfolio, which had $191.1 million in unrealized losses in available-for-sale investment securities at December 31, 2024.
Future changes by the FOMC to adjust the target Federal Funds rate could have varying impacts on the Company's net interest margin. Additionally, a reduction in longer-term rates would positively impact the fair value of our investment securities portfolio, which had $143.3 million in unrealized losses in available-for-sale investment securities at December 31, 2025.
Any sale of investment securities that are held in an unrealized loss position by a financial institution for liquidity or other purposes will cause actual losses to be realized.
Any sale of investment securities that are held in an unrealized loss position by the Company for liquidity or other purposes will cause actual losses to be realized.
Credit losses in excess of our reserves may adversely affect our business, results of operations and financial condition. Commercial and industrial loans make up a significant portion of our loan portfolio. Commercial and industrial loans were $1.451 billion, or approximately 28% of our total loan portfolio, as of December 31, 2024.
Credit losses in excess of our reserves may adversely affect our business, results of operations and financial condition. 18 Table of Contents Commercial and industrial loans make up a significant portion of our loan portfolio. Commercial and industrial loans were $1.554 billion , or approximately 28.9% of our total loan portfolio, as of December 31, 2025.
Our loan portfolio has a notable concentration in agri-business, which has a higher level of uncontrolled risk. Our agri-business loans, which totaled $387.4 million, or approximately 8% of our total loan portfolio, as of December 31, 2024, are subject to risks outside of our or the borrower’s control.
Our loan portfolio has a notable concentration in agri-business, which has a higher level of uncontrolled risk. Our agri-business loans, which totaled $406.9 million , or approximately 7.6% of our total loan portfolio, as of December 31, 2025, are subject to risks outside of our or the borrower’s control.
Nonperforming assets take significant time to resolve and adversely affect our results of operations and financial condition and could result in further losses in the future. Our nonperforming assets adversely affect our net income in various ways.
Nonperforming assets take significant time to resolve and adversely affect our results of operations and financial condition and could result in further losses in the future. Our nonperforming assets, totaling $20.9 million at December 31, 2025, adversely affect our net income in various ways.
As a result of elevated interest rates and other factors, we have observed a corresponding decline in the value of commercial real estate securing these loans, substantially all of which are located within our Indiana markets.
Most often, this collateral is accounts receivable, inventory, machinery, or real estate. As a result of elevated interest rates and other factors, we have observed a corresponding decline in the value of commercial real estate securing these loans, substantially all of which are located within our Indiana markets.
Beginning in March of 2022, the Federal Reserve substantially increased the target Federal Funds rate in pursuit of its policy mandate to maintain maximum employment and achieve price stability and subsequently paused further rate raises starting in September 2023 as the rate of inflation had significantly subsided from levels experienced in 2022.
Beginning in March of 2022, the FOMC substantially tightened monetary policy by increasing the target Federal Funds rate in pursuit of its policy mandate to maintain maximum employment and achieve price stability. Further rate increases were paused starting in September 2023 as the rate of inflation had significantly subsided from levels experienced in 2022.
Employee errors could also subject us to financial claims for negligence, among others. 26 Table of Contents In addi tion, as a bank, we are susceptible to fraudulent activity that may be committed against us, third parties or our clients, which may result in financial losses or increased costs to us or our clients, disclosure or misuse of our information or our client information, misappropriation of assets, privacy breaches against our clients, litigation or damage to our reputation.
In addi tion, as a bank, we are susceptible to fraudulent activity that may be committed against us, third parties or our clients, which may result in financial losses or increased costs to us or our clients, disclosure or misuse of our information or our client information, misappropriation of assets, privacy breaches against our clients, litigation or damage to our reputation.
Due to the larger average size of each commercial loan as compared with other loans such as residential loans, as well as collateral that is generally less readily-marketable, losses incurred on a small number of commercial loans could adversely affect our business, results of operations and growth prospects.
Due to the larger average size of each commercial loan as compared with consumer loans as well as collateral that is generally less readily-marketable, losses incurred on a small number of commercial loans could adversely affect our business, results of operations, and growth prospects. Historically, the Bank's largest charge offs have been in this segment of the loan portfolio.
A sustained labor shortage or increased turnover rates within our employee base could lead to increased costs, such as increased compensation expense to attract and retain employees.
As of December 31, 2025, Indiana's unemployment rate was 3.5%. A sustained labor shortage or increased turnover rates within our employee base could lead to increased costs, such as increased compensation expense to attract and retain employees.
It is not always possible to prevent employee errors and misconduct, and the precautions we take to prevent and detect this activity may not be effective in all cases.
It is not always possible to prevent employee errors and misconduct, and the precautions we take to prevent and detect this activity may not be effective in all cases. Employee errors could also subject us to financial claims for negligence, among others.
Our primary sources of funds consist of deposits, cash from operations and investment security maturities and sales. Additional liquidity is provided by brokered deposits, Certificate of Deposit Account Registry Service ("CDARS") deposits, American Financial Exchange overnight borrowings and IntraFi Network’s insured cash sweep program.
Our primary sources of funds consist of deposits, cash from operations, and investment security maturities and sales. Additional liquidity is provided by brokered time deposits, brokered money market deposits, IntraFi Network CDARS One-Way Buy and Insured Cash Sweep One-Way Buy program deposits, and American Financial Exchange overnight borrowings.
Restrictive monetary policies could limit economic growth and potentially cause an economic recession. As noted above, this could decrease loan demand, harm the credit characteristics of our existing loan portfolio and decrease the value of collateral securing loans in the portfolio. Continued elevated levels of inflation could adversely impact our business and results of operations.
Restrictive monetary policies could limit economic growth and potentially cause an economic recession, and accommodative monetary policy could lead to rapid and prolonged inflation. As noted above, this could decrease loan demand, harm the credit characteristics of our existing loan portfolio and decrease the value of collateral securing loans in the portfolio.
Negative economic trends can also harm the value of security for our commercial and industrial loans. These loans are primarily made based on the identified cash flow of the borrower and secondarily on the underlying collateral provided by the borrower. Most often, this collateral is accounts receivable, inventory, machinery or real estate.
Negative economic trends can also harm the value of security for our commercial and industrial loans. These loans are primarily made based on the identified cash flow of the borrower and secondarily on the underlying collateral provided by the borrower, and in many cases, personal guarantees provided by the business owners.
For example, the previous presidential administration announced a government-wide effort to eliminate "junk fees" which could subject our business practices to further scrutiny. The CFBP’s action on junk fees thus far has largely focused on fees associated with deposit products, such as "surprise" overdraft fees and non-sufficient funds fees. However, what constitutes a "junk fee" remains undefined.
The CFBP’s action on junk fees thus far has largely focused on fees associated with deposit products, such as "surprise" overdraft fees and non-sufficient funds fees. However, what constitutes a "junk fee" remains undefined.
Additionally, the cost of resolving recent bank failures may prompt the FDIC to charge higher deposit insurance premiums and/or impose special assessments on insured depository institutions, regardless of asset size.
Continued uncertainty or volatility in the banking industry could also adversely impact our estimate of our allowance for credit losses and related provision for credit losses. Additionally, the cost of resolving recent and future bank failures may prompt the FDIC to charge higher deposit insurance premiums and/or impose special assessments on insured depository institutions, regardless of asset size.
Shifts in short-term interest rates may reduce net interest income, which is the principal component of our earnings. Net interest income is the difference between the amounts received by us on our interest bearing assets and the interest paid by us on our interest bearing liabilities.
Net interest income is the difference between the amounts received by us on our interest bearing assets and the interest paid by us on our interest bearing liabilities.
We are able to borrow from several federal funds lines at correspondent banks and are eligible to borrow from the Federal Reserve and the Federal Home Loan Bank (the "FHLB") subject to collateral availability.
We are also able to borrow from several federal funds lines at correspondent banks and are eligible to borrow from the Federal Reserve and the Federal Home Loan Bank (the "FHLB"), subject to collateral availability. At December 31, 2025, available liquidity totaled $3.526 billion, with $436.2 million of unpledged loan collateral.
At December 31, 2024, $544.3 million of unpledged investment securities were eligible to serve as collateral for liquidity availability at the FHLB and the Federal Reserve Bank.
A portion of this available liquidity is comprised of $622.8 million of unpledged investment securities that were eligible to serve as collateral for liquidity availability at the FHLB and the Federal Reserve Bank.
In general, these risks have increased as a result of the recent increases in prevailing interest rates and uncertainties associated with inflation, which have potentially increased the risk of a near-term decline in growth or an economic downturn.
In general, these risks have remained elevated as a result of the current monetary policy and impact of tariffs, which have potentially increased the risk of a near-term decline in growth or an economic downturn.
An overall labor shortage, lack of skilled labor, increased turnover or labor inflation could have a material adverse impact on our operations, results of operations, liquidity or cash flows. Interest rate shifts may reduce net interest income and otherwise negatively impact our financial condition and results of operations.
An overall labor shortage, lack of skilled labor, increased turnover or labor inflation could have a material adverse impact on our operations, results of operations, liquidity or cash flows. Adverse developments or concerns affecting the financial services industry or specific financial institutions could adversely affect our financial condition and results of operations.
Adverse financial market and economic conditions can exert downward pressure on stock prices, security prices and credit availability for financial institutions without regard to their underlying financial strength. The volatility and economic disruption resulting from the failures of Silicon Valley Bank and Signature Bank particularly impacted the market valuation of securities issued by financial institutions.
Adverse financial market and economic conditions can exert downward pressure on stock prices, security prices and credit availability for financial institutions without regard to their underlying financial strength.
Historically, the Bank's largest charge offs have been in this segment of the loan portfolio. Our loan portfolio includes commercial real estate loans, which involve risks specific to real estate value. Commercial real estate loans were $2.593 billion, or approximately 51% of our total loan portfolio, as of December 31, 2024.
Our loan portfolio includes commercial real estate loans, which involve risks specific to real estate value. Commercial real estate loans were $2.667 billion , or approximately 49.5% of our total loan portfolio, as of December 31, 2025.
Other legislative initiatives could detrimentally impact our operations in the future. Governments and agencies may enact new laws or promulgate new regulations or view matters or interpret existing laws and regulations differently than they have in the past, including as a result of the new presidential administration, or commence investigations or inquiries into our business practices.
Governments and agencies may enact new laws or promulgate new regulations, or interpret existing laws and regulations differently than they have in the past, including as a result of the new presidential administration, or commence investigations or inquiries into our business practices. 22 Table of Contents For example, the previous presidential administration announced a government-wide effort to eliminate "junk fees" which could subject our business practices to further scrutiny.
Any enforcement actions or other rule-making in these areas could negatively affect our business and our ability to maintain or grow levels of noninterest income.
Further, the CFPB has historically had broad powers to supervise and enforce consumer protection laws, and additional consumer protection legislation may be enacted or pursued in the future. Any enforcement actions or other rule-making in these areas could negatively affect our business and our ability to maintain or grow levels of noninterest income.
Additionally, changes to the State of Indiana's current tax laws and regulations for real estate investment trust income disallowance could increase our effective tax rate or cause us to have a tax liability for prior years.
Additionally, changes to the State of Indiana's current tax laws and regulations for real estate investment trust income disallowance could increase our effective tax rate or cause us to have a tax liability for prior years. 23 Table of Contents Our accounting policies and methods are the basis for how we prepare our consolidated financial statements and how we report our financial condition and results of operations, and they require management to make estimates about matters that are inherently uncertain.
In September of 2024, the Federal Reserve cut the Federal Funds rate by 50 basis points and proceeded with two additional 25 basis point cuts in November and December of 2024. At their December 2024 meeting, the Federal Reserve indicated the possibility of further cut rates in 2025, depending on the economic data.
In September of 2024, the FOMC began easing monetary policy by cutting the Federal Funds rate by 50 basis points and proceeded with two additional 25 basis point cuts in November and December of 2024.
Our accounting policies and methods are the basis for how we prepare our consolidated financial statements and how we report our financial condition and results of operations, and they require management to make estimates about matters that are inherently uncertain. Our accounting policies and methods are fundamental to how we record and report our financial condition and results of operations.
Our accounting policies and methods are fundamental to how we record and report our financial condition and results of operations.
Thus, an increase in the amount of nonperforming assets would have an adverse impact on net interest income. Adverse developments or concerns affecting the financial services industry or specific financial institutions could adversely affect our financial condition and results of operations. The 2023 United States banking crisis could continue to have adverse effects on our business.
Thus, an increase in the amount of nonperforming assets would have an adverse impact on net interest income. Labor shortages and failure to attract and retain qualified employees could negatively impact our business, results of operations and financial condition .
Continued high 17 Table of Contents levels of inflation could have complex effects on our business and results of operations, some of which could be materially adverse.
Inflation pressures are currently expected to remain 16 Table of Contents elevated as the inflation rate remains above the Federal Reserve’s target rate of 2%, which is intended to help accomplish its policy. Continued high levels of inflation could have complex effects on our business and results of operations, some of which could be materially adverse.
For example, as previously disclosed in the second quarter of 2023, the Bank was the victim of international wire fraud resulting in an estimated loss of $18.1 million, prior to additional insurance and loss recoveries of $6.3 million in the fourth quarter of 2023.
Such fraudulent activity may take many forms, including check fraud, electronic fraud, wire fraud, phishing, social engineering 25 Table of Contents and other dishonest acts. For example, during 2023, the Bank was the victim of international wire fraud resulting in a loss of $18.1 million, prior to additional insurance and loss recoveries of $7.3 million.
The United States has recently experienced elevated levels of inflation, with the rate peaking in 2022 and moderating in 2023 and 2024, although still higher than 2%. Inflation pressures are currently expected to remain elevated as the inflation rate remains above the Federal Reserve’s target rate of 2%, which is intended to help accomplish its policy.
Continued elevated levels of inflation could adversely impact our business and results of operations. The United States has recently experienced elevated levels of inflation, with the rate peaking in mid-2022 and moderating in 2024 and 2025, although still above 2% at the end of 2025.
Removed
Although we have not experienced any material labor shortage to date, we have continued to experience a competitive local labor market, especially for commercial lenders. As of December 31, 2024, Indiana's unemployment rate was 4.5%.
Added
In 2025, the FOMC cut the Federal Funds rate by 75 basis points, with 25 basis point cuts in September, October and December, and signaled additional cuts may be warranted in 2026.
Removed
For example, the failures of Silicon Valley Bank and Signature Bank in March 2023 and First Republic Bank in May 2023 led to disruption and volatility, including deposit outflows and increased need for liquidity, at 18 Table of Contents certain banks.
Added
Interest rate shifts may reduce net interest income and otherwise negatively impact our financial condition and results of operations. Shifts in short-term interest rates may reduce net interest income, which is the principal component of our earnings.
Removed
Although depositors of these banks were largely protected, it is not certain that the Federal Reserve or FDIC will treat future bank failures similarly. Inflation and the rapid increases in interest rates have led to a decline in the trading value of previously issued debt securities with interest rates below current market interest rates.
Added
Additionally, we may be negatively affected by brand or reputational harm as a result of failures of other financial institutions. 17 Table of Contents The current interest rate environment has led to a decline in the trading value of previously issued debt securities with interest rates below current market interest rates.
Removed
Continued uncertainty regarding or worsening of the severity or duration of volatility in the banking industry could also adversely impact our estimate of our allowance for credit losses and related provision for credit losses.
Added
A portion of our owner-occupied commercial real estate loans represent the factories and businesses owned by our commercial and industrial borrowers discussed above, which are secured by real estate.
Removed
Further, the CFPB has broad powers to supervise and enforce consumer protection laws, and additional consumer protection legislation and regulatory activity is anticipated in the near future, including with respect to fees charged by banks and other financial companies.
Added
Other legislative initiatives could detrimentally impact our operations in the future.
Removed
The failures of Silicon Valley Bank and Signature Bank are expected to result in modifications to existing laws or the passage of additional laws and regulations governing banks and bank holding companies, including increasing capital 23 Table of Contents requirements, modifications to regulatory requirements with respect to liquidity risk management, deposit concentrations, capital adequacy, stress testing and contingency planning, safe and sound banking practices and enhanced supervisory or enforcement activities.
Removed
The CFPB is actively soliciting consumer input on fee practices associated with other consumer financial products or services, signaling that the "junk fee" initiative is likely to continue to broaden in scope.
Removed
Such fraudulent activity may take many forms, including check fraud, electronic fraud, wire fraud, phishing, social engineering and other dishonest acts.
Removed
We maintain a system of internal controls and insurance coverage to mitigate operational risks, including data processing system failures and errors, cyber-attacks, and customer or employee fraud.

Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeAccordingly, we have long devoted significant resources to assessing, identifying and managing risks associated with cybersecurity threats, including: • an internal information security team that is responsible for conducting regular assessments of our information systems, existing controls, vulnerabilities and potential improvements; • continuous monitoring tools that can detect and help respond to cybersecurity threats in real-time; • performing due diligence with respect to our third-party service providers, including their cybersecurity practices, and requiring contractual commitments from our service providers to take certain cybersecurity measures; 27 Table of Contents • third-party information security and cybersecurity consultants, who conduct periodic penetration testing, vulnerability assessments and other procedures to identify potential weaknesses in our systems and processes; and • ongoing cybersecurity training and phishing testing for our employees.
Biggest changeAccordingly, we have long devoted significant resources to assessing, identifying, and managing risks associated with cybersecurity threats, including: • an internal information security team that is responsible for conducting regular assessments of our information systems, existing controls, vulnerabilities, and potential improvements; • continuous monitoring tools that can detect and help respond to cybersecurity threats in real-time; • performing due diligence with respect to our third-party service providers, including their cybersecurity practices, and requiring contractual commitments from our service providers to take certain cybersecurity measures; • third-party information security and cybersecurity consultants, who conduct periodic penetration testing, vulnerability assessments, incident and response table top exercises, and other procedures to identify potential weaknesses in our systems and processes; and • ongoing cybersecurity training and phishing testing for our employees. 26 Table of Contents This information security program is a key part of our overall risk management system.
ITEM 1C. CYBERSECURITY We rely extensively on various information systems and other electronic resources to operate our business. In addition, nearly all of our customers, service providers and other business partners on whom we depend, including the providers of our online banking, mobile banking and accounting systems, use these systems and their own electronic information systems.
ITEM 1C. CYBERSECURITY We rely extensively on various information systems and other electronic resources to operate our business. In addition, nearly all of our customers, service providers and other business partners on whom we depend, including the providers of our online banking, mobile banking, fraud detection, and accounting systems, use these systems and their own electronic information systems.
This information security program is a key part of our overall risk management system. The program includes administrative, technical and physical safeguards to help ensure the security and confidentiality of customer records and information. These security and privacy policies and procedures are in effect across all of our businesses and geographic locations.
The program includes administrative, technical, and physical safeguards to help ensure the security and confidentiality of customer records and information. These security and privacy policies and procedures are in effect across all of our businesses and geographic locations.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeITEM 2. PROPERTIES The Company is headquartered in the main office building of the Bank at 202 E. Center Street, Warsaw, Indiana 46580. The Company operates in 61 locations, 52 of which are owned by the Bank and nine of which are leased from third parties. None of the Company’s real property assets are the subject of any material encumbrances.
Biggest changeITEM 2. PROPERTIES The Company is headquartered in the main office building of the Bank at 202 E. Center Street, Warsaw, Indiana 46580. The Company operates in 62 locations, 52 of which are owned by the Bank and ten of which are leased from third parties. None of the Company’s real property assets are the subject of any material encumbrances.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeITEM 3. LEGAL PROCEEDINGS There are no material pending legal proceedings, other than ordinary routine litigation incidental to the business of the Company, to which Lakeland Financial or the Bank is a party or to which any of their property is subject. ITEM 4. MINE SAFETY DISCLOSURES Not applicable. 28 Table of Contents PART II
Biggest changeITEM 3. LEGAL PROCEEDINGS There are no material pending legal proceedings, other than ordinary routine litigation incidental to the business of the Company, to which Lakeland Financial or the Bank is a party or to which any of their property is subject. ITEM 4. MINE SAFETY DISCLOSURES Not applicable. 27 Table of Contents PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeThere were no repurchases under this plan during the year ended December 31, 2024. 30 Table of Contents The following table provides information about purchases by the Company and its affiliates during the quarter ended December 31, 2024 of equity securities that are registered by the Company pursuant to Section 12 of the Exchange Act: Period Total Number of Shares Purchased (a) Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs Maximum Number (or Appropriate Dollar Value) of Shares that May Yet Be Purchased Under the Plans or Programs (b) 10/01/24 - 10/31/24 $ 0 $ 0.00 0 $ 30,000,000 11/01/24 - 11/30/24 1,306 65.71 0 30,000,000 12/01/24 - 12/31/24 0 0.00 0 30,000,000 Total $ 1,306 $ 65.71 0 $ 30,000,000 (a) The shares purchased during the quarter were credited to the deferred share accounts of non-employee directors under the Company’s directors’ deferred compensation plan.
Biggest changeThe following table provides information about purchases by the Company and its affiliates during the quarter ended December 31, 2025 of equity securities that are registered by the Company pursuant to Section 12 of the Exchange Act: Period Total Number of Shares Purchased (a) Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs Maximum Number (or Appropriate Dollar Value) of Shares that May Yet Be Purchased Under the Plans or Programs (b) October 1 - 31 49,573 $ 56.84 49,573 $ 25,487,123 November 1 - 30 69,525 56.82 68,017 21,624,464 December 1 - 31 190,000 59.11 190,000 10,393,930 Total 309,098 $ 58.23 307,590 $ 10,393,930 (a) A total of 1,508 of the shares purchased during November were credited to the deferred share accounts of non-employee directors under the Company's directors' deferred compensation plan.
Currently, the Company’s common stock is listed for trading on the Nasdaq Global Select Market under the symbol "LKFN." On February 11, 2025, the Company had approximately 278 stockholders of record. The Company paid dividends on its common stock as set forth in the table above.
Currently, the Company’s common stock is listed for trading on the Nasdaq Global Select Market under the symbol "LKFN." On February 19, 2026, the Company had approximately 272 stockholders of record. The Company paid dividends on its common stock as set forth in the table above.
Repurchases may be made in the open market, through block trades or otherwise, and in privately negotiated transactions. On April 11, 2023, the Company's board of directors reauthorized and extended the share repurchase program through April 30, 2025. As extended, the repurchase program has remaining aggregate purchase price authority of $30.0 million as of December 31, 2024.
Repurchases may be made in the open market, through block trades or otherwise, and in privately negotiated transactions. On April 8, 2025, the Company's board of directors reauthorized and extended the share repurchase program through April 30, 2027. As extended, the repurchase program has remaining aggregate purchase price authority of $10.4 million as of December 31, 2025.
(b) Following the renewal and extension of the Company's share repurchase program on April 11, 2023, the maximum dollar value of shares that may be repurchased under the program is $30.0 million as of December 31, 2024. The share repurchase program terminates April 30, 2025. ITEM 6. [Reserved] 31 Table of Contents
(b) Following the renewal and extension of the Company's share repurchase program on April 8, 2025, the maximum dollar value of shares that may be repurchased under the program is $10.4 million as of December 31, 2025. The share repurchase program terminates April 30, 2027. ITEM 6. [Reserved] 29 Table of Contents
MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES The quarterly high and low prices for the Company’s common stock and the cash dividends declared and paid on that common stock are set forth in the table below. 2024 2023 High Low Cash Dividend High Low Cash Dividend Fourth quarter $ 78.61 $ 61.10 $ 0.48 $ 67.88 $ 45.59 $ 0.46 Third quarter 72.25 57.45 0.48 57.00 44.47 0.46 Second quarter 66.62 57.59 0.48 62.71 43.05 0.46 First quarter 73.22 60.56 0.48 77.07 59.55 0.46 The common stock of the Company was first quoted on The Nasdaq Stock Market under the symbol "LKFN" on August 14, 1997.
MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES The quarterly high and low prices for the Company’s common stock and the cash dividends declared and paid on that common stock are set forth in the table below. 2025 2024 High Low Cash Dividend High Low Cash Dividend Fourth quarter $ 65.43 $ 56.04 $ 0.50 $ 78.61 $ 61.10 $ 0.48 Third quarter 69.40 59.08 0.50 72.25 57.45 0.48 Second quarter 62.39 50.00 0.50 66.62 57.59 0.48 First quarter 71.77 58.24 0.50 73.22 60.56 0.48 The common stock of the Company was first quoted on The Nasdaq Stock Market under the symbol "LKFN" on August 14, 1997.
The Company’s ability to pay dividends to stockholders is largely dependent upon the dividends it receives from the Bank, and the Bank is subject to regulatory limitations on the amount of cash dividends it may pay.
The Company’s ability to pay dividends to stockholders is largely dependent upon the dividends it receives from the Bank, and the Bank is subject to regulatory limitations on the amount of cash dividends it may pay. See "Supervision and Regulation of the Company – Dividend Payments" for additional information.
See "Supervision and Regulation of the Company – Dividend Payments" for additional information. 29 Table of Contents STOCK PRICE PERFORMANCE GRAPH The graph below compares the cumulative total return of the Company, the Nasdaq Market Index, the KBW Nasdaq Bank Index, and the S&P U.S. BMI Banks Index.
STOCK PRICE PERFORMANCE GRAPH The graph below compares the cumulative total return of the Company, the Nasdaq Market Index, the KBW Nasdaq Bank Index, and the S&P U.S. BMI Banks Index.
These shares are held in treasury stock of the Company and were purchased in the ordinary course of business and consistent with past practice.
The shares were purchased at a weighted average price per share of $58.19. These shares are held in treasury stock of the Company and were purchased in the ordinary course of business and consistent with prior practice.
The repurchase program does not obligate the Company to repurchase any dollar amount or number of shares, and the program may be extended, modified, suspended or discontinued at any time.
The repurchase program does not obligate the Company to repurchase any dollar amount or number of shares, and the program may be extended, modified, suspended or discontinued at any time. A total of 337,890 shares at a weighted average price per share of $58.03 were repurchased under this plan during the year ended December 31, 2025.
BMI Banks Index 100.00 87.24 118.61 98.38 107.32 143.68 The above returns assume that $100 was invested on December 31, 2019 and that all dividends were reinvested.
BMI Banks Index 100.00 135.97 112.77 123.02 164.70 211.47 The above returns assume that $100 was invested on December 31, 2020 and that all dividends were reinvested.
Removed
Lakeland Financial Corporation Period Ending Index 12/31/19 12/31/20 12/31/21 12/31/22 12/31/23 12/31/24 Lakeland Financial Corporation $ 100.00 $ 112.55 $ 171.90 $ 159.87 $ 147.44 $ 160.24 NASDAQ Composite Index 100.00 144.92 177.06 119.45 172.77 223.87 KBW NASDAQ Bank Index 100.00 89.69 124.06 97.52 96.65 132.60 S&P U.S.
Added
Lakeland Financial Corporation 28 Table of Contents Period Ending December 31, Index 2020 2021 2022 2023 2024 2025 Lakeland Financial Corporation $ 100.00 $ 152.73 $ 142.05 $ 131.00 $ 142.37 $ 122.08 NASDAQ Composite Index 100.00 122.18 82.43 119.22 154.48 187.14 KBW NASDAQ Bank Index 100.00 138.33 108.73 107.76 147.85 196.00 S&P U.S.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeTHREE YEAR AVERAGE BALANCE SHEET AND NET INTEREST ANALYSIS 2024 2023 2022 (fully tax equivalent basis, dollars in thousands) Average Balance Interest Income Yield (1)/ Rate Average Balance Interest Income Yield (1)/ Rate Average Balance Interest Income Yield (1)/ Rate Earning Assets Loans: Taxable (1)(2) $ 5,002,373 $ 335,639 6.71 % $ 4,755,341 $ 304,130 6.40 % $ 4,391,590 $ 202,004 4.60 % Tax exempt (2) 37,033 2,632 7.11 58,337 4,839 8.29 35,576 2,094 5.89 Investments: (2) Securities 1,134,979 31,940 2.81 1,184,659 33,907 2.86 1,432,287 38,882 2.71 Short-term investments 2,789 132 4.73 2,425 109 4.49 2,266 30 1.32 Interest bearing deposits 151,324 7,499 4.96 113,463 5,594 4.93 261,444 2,184 0.84 Total earning assets $ 6,328,498 $ 377,842 5.97 % $ 6,114,225 $ 348,579 5.70 % $ 6,123,163 $ 245,194 4.00 % Less: Allowance for credit losses (78,186) (72,222) (67,717) Nonearning Assets Cash and due from banks 66,208 70,941 72,302 Premises and equipment 59,105 58,633 58,894 Other nonearning assets 287,093 293,403 240,937 Total assets $ 6,662,718 $ 6,464,980 $ 6,427,579 Interest Bearing Liabilities Savings deposits $ 284,934 $ 184 0.06 % $ 347,009 $ 246 0.07 % $ 419,997 $ 327 0.08 % Interest bearing checking accounts 3,281,615 129,073 3.93 2,909,464 107,471 3.69 2,689,572 31,182 1.16 Time deposits: In denominations under $100,000 217,667 7,623 3.50 202,904 5,106 2.52 185,215 1,289 0.70 In denominations over $100,000 794,003 35,879 4.52 669,545 24,968 3.73 579,797 3,483 0.60 Miscellaneous short-term borrowings 66,334 3,720 5.61 166,821 8,441 5.06 6,559 272 4.15 Long-term borrowings 0 0 0.00 0 0 0.00 32,055 127 0.40 Total interest bearing liabilities $ 4,644,553 $ 176,479 3.80 % $ 4,295,743 $ 146,232 3.40 % $ 3,913,195 $ 36,680 0.94 % Noninterest Bearing Liabilities Demand deposits 1,257,806 1,475,306 1,842,777 Other liabilities 98,272 105,264 75,120 Stockholders' Equity 662,087 588,667 596,487 Total liabilities and stockholders' equity $ 6,662,718 $ 6,464,980 $ 6,427,579 Interest Margin Recap Interest income/average earning assets 377,842 5.97 % 348,579 5.70 % 245,194 4.00 % Interest expense/average earning assets 176,479 2.79 146,232 2.39 36,680 0.60 Net interest income and margin $ 201,363 3.18 % $ 202,347 3.31 % $ 208,514 3.40 % (1) Nonaccrual loans are included in the average balance of taxable loans.
Biggest changeTHREE YEAR AVERAGE BALANCE SHEET AND NET INTEREST ANALYSIS 2025 2024 2023 (fully tax equivalent basis, dollars in thousands) Average Balance Interest Income Yield (1)/ Rate Average Balance Interest Income Yield (1)/ Rate Average Balance Interest Income Yield (1)/ Rate Earning Assets Loans: Taxable (2)(3) $ 5,197,780 $ 335,856 6.46 % $ 5,002,373 $ 335,639 6.71 % $ 4,755,341 $ 304,130 6.40 % Tax exempt (1) 25,678 1,467 5.71 37,033 2,632 7.11 58,337 4,839 8.29 Investments: Securities (1) 1,141,189 33,865 2.97 1,134,979 31,940 2.81 1,184,659 33,907 2.86 Short-term investments 2,835 107 3.77 2,789 132 4.73 2,425 109 4.49 Interest bearing deposits 166,891 6,881 4.12 151,324 7,499 4.96 113,463 5,594 4.93 Total earning assets $ 6,534,373 $ 378,176 5.79 % $ 6,328,498 $ 377,842 5.97 % $ 6,114,225 $ 348,579 5.70 % Less: Allowance for credit losses (79,072) (78,186) (72,222) Nonearning Assets Cash and due from banks 67,233 66,208 70,941 Premises and equipment 62,797 59,105 58,633 Other nonearning assets 293,296 287,093 293,403 Total assets $ 6,878,627 $ 6,662,718 $ 6,464,980 Interest Bearing Liabilities Savings deposits $ 283,744 $ 167 0.06 % $ 284,934 $ 184 0.06 % $ 347,009 $ 246 0.07 % Interest bearing checking accounts 3,710,124 120,861 3.26 3,281,615 129,073 3.93 2,909,464 107,471 3.69 Time deposits: In denominations under $100,000 207,413 6,890 3.32 217,667 7,623 3.50 202,904 5,106 2.52 In denominations over $100,000 583,828 22,814 3.91 794,003 35,879 4.52 669,545 24,968 3.73 Short-term borrowings 43,022 1,986 4.62 66,334 3,720 5.61 166,821 8,441 5.06 Long-term borrowings 967 0 0.00 0 0 0.00 0 0 0.00 Total interest bearing liabilities $ 4,829,098 $ 152,718 3.16 % $ 4,644,553 $ 176,479 3.80 % $ 4,295,743 $ 146,232 3.40 % Noninterest Bearing Liabilities Demand deposits 1,254,712 1,257,806 1,475,306 Other liabilities 76,788 98,272 105,264 Stockholders' Equity 718,029 662,087 588,667 Total liabilities and stockholders' equity $ 6,878,627 $ 6,662,718 $ 6,464,980 Interest Margin Recap Interest income/average earning assets $ 378,176 5.79 % $ 377,842 5.97 % $ 348,579 5.70 % Interest expense/average earning assets 152,718 2.34 176,479 2.79 146,232 2.39 Net interest income and margin $ 225,458 3.45 % $ 201,363 3.18 % $ 202,347 3.31 % (1) Tax exempt income was converted to a fully taxable equivalent basis at a 21 percent tax rate.
Refer to the "Financial Condition - Loan Portfolio", "Financial Condition - Sources of Funds" and "Risk Management - Loan Portfolio" sections of this MD&A and to the Notes to Consolidated Financial Statements of this Form 10-K for the other required statistical disclosures.
Refer to the "Financial Condition - Loan Portfolio", "Financial Condition - Sources of Funds" and "Risk Management - Loan Portfolio" sections of this MD&A and to the Notes to Consolidated Financial Statements of this Form 10-K for other required statistical disclosures.
If a loan is individually analyzed, a portion of the allowance may be allocated so that the loan is reported, net, at the present value of estimated future cash flow or at the fair value of collateral if repayment is expected solely from the collateral.
If a loan is individually analyzed, a portion of the allowance may be specifically allocated so that the loan is reported, net, at the present value of estimated future cash flow or at the fair value of collateral if repayment is expected solely from the collateral.
The Company remains cautiously optimistic in regards to the credit quality of the loan portfolio given stable economic conditions within the Company's operating footprint and will continue to actively manage loan portfolio challenges.
The Company remains cautiously optimistic in regards to the credit quality of the loan portfolio given otherwise stable economic conditions within the Company's operating footprint and will continue to actively manage loan portfolio challenges.
It is also possible that these factors could include social, political, economic, and terrorist events or activities. All of these factors are subject to change, which may be significant. As a result of this detailed process, the allowance results in two forms of allocations, specific and general.
It is also possible that these factors could include social, political, economic, and terrorist events or activities. All of these factors are subject to change, which may be significant. As a result of this detailed process, the allowance results in two forms of allocations, specific and pooled.
All mortgage securities purchased by the Company in 2024 were within risk tolerances for price, prepayment, extension and original life risk characteristics contained in the Company’s investment policy. As of December 31, 2024, all mortgage-backed securities were performing in a manner consistent with management’s expectations at time of purchase.
All mortgage securities purchased by the Company in 2025 were within risk tolerances for price, prepayment, extension and original life risk characteristics contained in the Company’s investment policy. As of December 31, 2025, all mortgage-backed securities were performing in a manner consistent with management’s expectations at time of purchase.
General allocations of the allowance are determined by a historical loss rate based on the calculation of each pool’s probability of default-loss given default, subject to a floor. The length of the historical period for each pool is based on the average life of the pool. The historical loss rates are supplemented with consideration of economic conditions and portfolio trends.
Pooled allocations of the allowance are determined by a historical loss rate based on the calculation of each pool’s probability of default-loss given default, subject to a floor. The length of the historical period for each pool is based on the average life of the pool. The historical loss rates are supplemented with consideration of economic conditions and portfolio trends.
This asset category is subject to a high degree of variability depending on, among other things, recent mortgage loan rates and the quantity and timing of loan sales into the secondary market. The Company generally sells almost all of the conforming mortgage loans it originates in the secondary market.
This asset category is subject to a high degree of variability depending on, among other factors, recent mortgage loan rates and the quantity and timing of loan sales into the secondary market. The Company generally sells almost all of the conforming mortgage loans it originates in the secondary market.
Reserves are evaluated in total for smaller-balance loans of similar nature not in nonaccrual status such as residential mortgage, consumer, and credit card loans, and on an individual loan basis for other loans including material modifications made to borrowers experiencing financial difficulty.
Allocations are evaluated in total for smaller-balance loans of similar nature not in nonaccrual status such as residential mortgage, consumer, and credit card loans, and on an individual loan basis for other loans including material modifications made to borrowers experiencing financial difficulty.
Loans renegotiated as modifications to borrowers experiencing financial difficulty are those loans for which the Company modifies the terms of loans for borrowers experiencing financial distress by providing the following forms of relief: forgiveness of loan principal, extension of repayment terms, reduction of interest rate or an other than insignificant payment delay.
Renegotiated loans to borrowers experiencing financial difficulty are those loans for which the Company modifies the terms of loans for borrowers experiencing financial distress by providing the following forms of relief: forgiveness of loan principal, extension of repayment terms, reduction of interest rate or an other than insignificant payment delay.
The remaining portion of investments securities were designated as held-to-maturity. Management believes the majority of the securities in investment portfolio are of high quality and marketable. Approximately 48% of this portfolio is comprised of U.S. government agency securities or mortgage-backed securities directly or indirectly backed by the U.S. government.
The remaining portion of investments securities were designated as held-to-maturity. Management believes the majority of the securities in investment portfolio are of high quality and marketable. Approximately 49% of this portfolio is comprised of U.S. government agency securities or mortgage-backed securities directly or indirectly backed by the U.S. government.
Quarterly reports to management and the Board under the CFP include an early warning indicator matrix and pro forma cash flows for the various scenarios. The following table discloses information on the maturity of the Company’s contractual long-term obligations as of December 31, 2024.
Quarterly reports to management and the Board under the CFP include an early warning indicator matrix and pro forma cash flows for the various scenarios. The following table discloses information on the maturity of the Company’s contractual long-term obligations as of December 31, 2025.
The Company’s allowance for credit losses is subject to changes in the inputs to the model, including the following: the number of delinquent loans, nonaccrual loans, material modification due to a borrower experiencing financial difficulty, or charge offs; the levels of charge offs and recoveries; projected unemployment rates and other economic indicators; the 33 Table of Contents Company’s collateral position on adversely classified loans; or management’s qualitative judgment of the implication of trends in its loan portfolio or in the broader economy.
The Company’s allowance for credit losses is subject to changes in the inputs to the model, including the following: the number of delinquent loans, nonaccrual loans, material modification due to a borrower experiencing financial difficulty, or charge offs; the levels of charge offs and recoveries; projected unemployment rates and other economic indicators; the Company’s collateral position on adversely classified loans; or management’s qualitative judgment of the implication of trends in its loan portfolio or in the broader economy.
Increases in consumer loans during 2024 resulted from an increased focus on indirect lending to consumers and adjustable rate mortgages. The Bank generally sells conforming mortgage loans, which it originates locally, into the secondary market.
Increases in consumer loans during 2025 resulted from an increased focus on indirect lending to consumers and adjustable rate mortgages. The Bank generally sells conforming mortgage loans, which it originates locally, into the secondary market.
For a detailed analysis of the Company’s income taxes see "Note 12 – Income Taxes". 43 Table of Contents CERTAIN STATISTICAL DISCLOSURES BY BANK HOLDING COMPANIES We are required to provide certain statistical disclosures as a bank holding company. The following table provides certain of those disclosures.
For a detailed analysis of the Company’s income taxes see "Note 12 – Income Taxes". 41 Table of Contents CERTAIN STATISTICAL DISCLOSURES BY BANK HOLDING COMPANIES We are required to provide certain statistical disclosures as a bank holding company. The following table provides certain of those disclosures.
The allowance is an amount that management believes will be adequate for expected credit losses relating to specifically identified loans based on an evaluation of the loans by management, as well as other expected credit losses inherent in the loan portfolio.
The allowance is an amount that management believes will be adequate for expected credit losses relating to specifically identified loans based on an analysis of the loans by management, as well as other expected credit losses inherent in the loan portfolio.
The Company’s committed line of credit has availability up to $30.0 million, of which $0 was drawn upon as of December 31, 2024. Further, the CFP identifies CFP team members and expressly details their respective roles. Potential risk scenarios are identified and the plan includes multiple scenarios, including short-term and long-term funding crisis situations.
The Company’s committed line of credit has availability up to $30.0 million, of which $13.0 million was drawn upon as of December 31, 2025 . Further, the CFP identifies CFP team members and expressly details their respective roles. Potential risk scenarios are identified and the plan includes multiple scenarios, including short-term and long-term funding crisis situations.
The Bank is also a member of the American Financial Exchange ("AFX") where overnight fed funds purchased can be obtained from other banks on the exchange that have approved the Bank for an 55 Table of Contents unsecured, overnight line. These funds are only available if the approving banks have an "offer" out to sell that day.
The Bank is also a member of the American Financial Exchange ("AFX") where overnight fed funds purchased can be obtained from other banks on the exchange that have approved the Bank for an unsecured, overnight line. These funds are only available if the approving banks have an "offer" out to sell that day.
The Company’s practice is to establish a specific allowance for credit losses for any assets where management has identified conditions or circumstances that indicate an asset is nonperforming.
The Company’s practice is to establish a specific allocation within the allowance for credit losses for any assets where management has identified conditions or circumstances that indicate an asset is nonperforming.
The Company has an established process to determine the adequacy of the allowance for credit losses that generally includes consideration of changes in the nature and volume of the loan portfolio and overall portfolio quality, along with current and forecasted economic conditions that may affect borrowers’ ability to repay.
The Company has an established process to determine the adequacy of the allowance for credit losses that 30 Table of Contents generally includes consideration of changes in the nature and volume of the loan portfolio and overall portfolio quality, along with current and forecasted economic conditions that may affect borrowers’ ability to repay.
Consideration is not limited to these factors although they represent the most commonly cited factors. To determine the specific allocation levels for individual credits, management considers the current valuation of collateral and the amounts and timing of expected future cash flows as 32 Table of Contents the primary measures.
Consideration is not limited to these factors although they represent the most commonly cited factors. To determine the specific allocation levels for individual credits, management considers the current valuation of collateral and the amounts and timing of expected future cash flows as the primary measures.
The analysis indicated a negative 7.6% change in market value in the event of a 100 basis point upward, instantaneous rate shock and a positive 7.8% change in market value in the event of a 100 basis point downward, instantaneous rate shock.
The analysis indicated a negative 6.7% change in market value in the event of a 100 basis point upward, instantaneous rate shock and a positive 6.8% change in mark et value in the event of a 100 basis point downward, instantaneous rate shock.
The Company had $395.0 million of availability in federal funds lines with thirteen correspondent banks, of which none was drawn on as of December 31, 2024.
The Company had $395.0 million of availability in federal funds lines with thirteen correspondent banks, of which none was drawn on as of December 31, 2025.
In years of high inflation and high interest rates, intermediate and long-term interest rates tend to increase, thereby adversely impacting the market values of investment securities, mortgage loans and other long-term fixed rate loans. In addition, higher short-term interest rates caused by inflation tend to increase the cost of funds.
In years of high inflation and high interest rates, intermediate and long-term interest rates tend to increase, thereby adversely impacting the market values of investment securities, mortgage loans and other long-term fixed rate loans. In addition, higher short-term interest rates caused by inflation tend to increase the cost of funds. 55 Table of Contents
At December 31, 2024, 96% of municipal securities owned by the Company were AAA or AA rated with a diversified geography of state issuer. In addition, the Company has historically sold the majority of its originated mortgage loans on the secondary market to reduce interest rate risk and to create an additional source of funding.
At December 31, 2025, 93% of municipal securities owned by the Company were AAA or AA rated with a diversified geography of state issuer. In addition, the Company has historically sold the majority of its originated mortgage loans on the secondary market to reduce interest rate risk and to create an additional source of funding.
These grade assignments are performed independently of each other and a consensus is reached by credit administration and the loan officer. Specific allowances are established in cases where management has identified significant conditions or circumstances related to an individual credit that indicate it should be evaluated on an individual basis.
These grade assignments are performed independently of each other and a consensus is reached by credit administration and the loan officer. Specific allocations are established in cases where management has identified significant conditions or circumstances related to an individual credit that indicate it should be analyzed on an individual basis.
Municipal securities represented 52% of total investment securities fair value as of December 31, 2024 and were rated investment grade at the time of purchase and continue to be rated investment grade. The Company uses analytics provided by its third party portfolio advisor to evaluate and monitor credit risk for all investments on a quarterly basis.
Municipal securities represented 50% of total investment securities fair value as of December 31, 2025 and were rated investment grade at the time of purchase and continue to be rated investment grade. The Company uses analytics provided by its third party portfolio advisor to evaluate and monitor credit risk for all investments on a quarterly basis.
Borrowers’ ability to repay may also change due to the effects of government monetary or fiscal policy, which could affect the level of demand for borrowers’ products or services or the borrowers' ability to service their debt payments in the future.
Borrowers’ ability to 31 Table of Contents repay may also change due to the effects of government monetary or fiscal policy, which could affect the level of demand for borrowers’ products or services or the borrowers' ability to service their debt payments in the future.
Future changes in the net interest margin will be dependent upon multiple factors including further actions by the FOMC during 2025 in response to inflation, economic conditions and geopolitical concerns, the results of any of the administration’s changes to economic policy and laws, competitive pressures in the various markets served, and changes in the 57 Table of Contents structure of the balance sheet as a result of changes in customer demands for products and services.
Future changes in the net interest margin will be dependent upon multiple factors including further actions by the FOMC during 2026 in response to inflation, economic conditions and geopolitical concerns, the results of any of the administration’s changes to economic policy and laws, competitive pressures in the various markets served, and changes in the structure of the balance sheet as a result of changes in customer demands for products and services.
As of December 31, 2024, the Company’s investment in U.S government sponsored mortgage-backed securities represented approximately 38% of total investment securities fair value consisting of mortgage bonds issued by Ginnie Mae, Fannie Mae and Freddie Mac. Ginnie Mae, Fannie Mae and Freddie Mac securities are each guaranteed by their respective agencies as to principal and interest.
As of December 31, 2025, the Company’s investment in U.S government sponsored mortgage-backed securities represented approximately 39% of total investment securities fair value consisting of mortgage bonds issued by Ginnie Mae, Fannie Mae and Freddie Mac. Ginnie Mae, Fannie Mae and Freddie Mac securities are each guaranteed by their respective agencies as to principal and interest.
If an asset or portion thereof is classified as loss, the Company’s policy is to either establish specific allocations for credit losses in the amount of 100% of the portion of the asset classified loss or charge off such amount.
If an asset or portion thereof is classified as loss, the Company’s policy is to either establish a specific allocation for credit losses in the amount of 100% of the portion of the asset classified loss or charge off such amount.
Further, the Company had available capacity at the Federal Reserve Bank of Chicago of up to $1.364 billion given its current collateral structure at the Federal Reserve Bank discount window program and the terms of that facility at December 31, 2024, with no balances outstanding at December 31, 2024.
Further, the Company had available capacity at the Federal Reserve Bank of Chicago of up to $1.190 billion given its current collateral structure at the Federal Reserve Bank discount window program and the terms of that facility at December 31, 2025, with no balances outstanding at December 31, 2025.
The evaluations take into consideration such factors as changes in the nature and volume of the loan portfolio, overall portfolio quality, review of specific problem loans, and current and forecasted economic conditions that may affect the borrower’s ability to repay. Management also considers trends in adversely classified loans based upon a monthly review of those credits.
The analysis takes into consideration such factors as changes in the nature and volume of the loan portfolio, overall portfolio quality, review of individual problem loans, and current and forecasted economic conditions that may affect the borrower’s ability to repay. Management also considers trends in adversely classified loans based upon a monthly review of those credits.
As of December 31, 2024, the total amount approved for the Bank via AFX banks was $304.0 million and none was outstanding at year end. The Company h ad 90% of its securities, based upon fair market value, in the available-for-sale portfolio at December 31, 2024, allowing the Company extensive flexibility to sell securities to meet funding demands.
As of December 31, 2025, the total amount approved for the Bank via AFX banks was $312.0 million and none was outstanding at year end. 53 Table of Contents The Company h ad 90% of its securities, based upon fair market value, in the available-for-sale portfolio at December 31, 2025, allowing the Company extensive flexibility to sell securities to meet funding demands.
Our primary credit risks result from lending and to a lesser extent, investment activities. 49 Table of Contents Investment Portfolio The Company’s investment portfolio consists of government or government-sponsored entity securities and municipal bonds subject to an investment security policy that is approved annually by the board of directors.
Our primary credit risks result from lending and to a lesser extent, investment activities. Investment Portfolio The Company’s investment portfolio consists of U.S. treasuries, government or government-sponsored entity securities, and municipal bonds subject to an investment security policy that is approved annually by the board of directors.
Real Estate Mortgage Loans Held-For-Sale Real estate mortgages held-for-sale increased by $542,000 to $1.7 million at December 31, 2024 from $1.2 million at December 31, 2023 as a result of fluctuations in secondary market sales activity.
Real Estate Mortgage Loans Held-For-Sale Real estate mortgages held-for-sale increased by $1.0 million to $2.7 million at December 31, 2025 from $1.7 million at December 31, 2024 as a result of fluctuations in secondary market sales activity.
This loan segment is well diversified with loans to corn, soybean, poultry, dairy, swine, beef and egg growers. The residential construction and land development loans class included construction loans totaling $7.6 million and $1.0 million as of December 31, 2024 and 2023.
This loan segment is well diversified with loans to corn, soybean, poultry, dairy, swine, beef and egg operations. The residential construction and land development loans class included construction loans totaling $10.0 million and $7.6 million as of December 31, 2025 and December 31, 2024.
The Company has board of directors approval to borrow up to $800.0 million at the FHLB, but given the Company’s current collateral structure and outstanding borrowings as of December 31, 2024, the Company could have only borrowed up to $555.9 million under this authority.
The Company has board of directors approval to borrow up to $800.0 million at the FHLB, but given the Company’s current collateral structure and outstanding borrowings as of December 31, 2025, the Company could have only borrowed up to $473.6 million under this authority.
Based upon the table above, all loans due after one year which have a predetermined interest rate and loans due after one year which have floating or adjustable interest rates as of December 31, 2024 amounted to $2.178 billion and $1.205 billion, respectively.
Based upon the table above, all loans due after one year which have a predetermined interest rate and loans due after one year which have floating or adjustable interest rates as of December 31, 2025 amounted to $2.204 billion and $1.368 billion, respectively.
Accrual status is resumed when all contractually due payments are brought current and future payments are reasonably assured. 51 Table of Contents A loan is individually analyzed when full payment under the original loan terms is not expected or when the amount collected is expected to differ materially from the estimate that would be arrived at under the pooled method.
Accrual status is resumed when all contractually due payments are brought current and future payments are reasonably assured. 49 Table of Contents A loan is individually analyzed for a specific allocation within the allowance for credit losses when full payment under the original loan terms is not expected or when the amount collected is expected to differ materially from the estimate that would be arrived at under the pooled method.
A shift in funding away from public fund deposits could require the Company to execute alternative funding plans under the Contingency Funding Plan discussed in further detail under "Liquidity Risk". FHLB Advances and Other Borrowings During 2024, average total short-term borrowings decreased by $100.5 million to $66.3 million.
A shift in funding away from public fund deposits could require the Company to execute alternative funding plans under the Contingency Funding Plan discussed in further detail under "Liquidity Risk". FHLB Advances and Other Borrowings During 2025, average total short-term and other borrowings decreased by $23.3 million to $43.0 million.
Owner occupied commercial real estate loans represent in many instances the buildings and factories of our commercial and industrial borrowers. Commercial and industrial loans together with owner occupied commercial real estate loans represented 44.1% and 45.7% of total loans as of December 31, 2024 and 2023, respectively.
Owner occupied commercial real estate loans represent in many instances the buildings and factories of our commercial and industrial borrowers. Commercial and industrial loans together with owner occupied commercial real estate loans represented 43.9% and 44.1% of total loans as of December 31, 2025 and 2024, respectively.
Retail deposits decreased $139.8 million, or 7.2% and represented 31.4% and 35.4% of total deposits at December 31, 2023 and 2022, respectively. As previously noted, 30.7% of the Company’s deposit base is attributable to public fund entities which consist primarily of customers in the Company’s geographic footprint.
Retail deposits decreased $14.2 million, or 0.8% and represented 30.2% and 31.4% of total deposits at December 31, 2024 and 2023, respectively. As previously noted, 33.2% of the Company’s deposit base is attributable to public fund entities which consist primarily of customers in the Company’s geographic footprint.
The primary sources are increases in deposit accounts and cash flows from loan payments and the securities portfolio. The cash flow from the securities portfolio is expected to provide approximately $104.2 million of potential contingent funding in 2025.
The primary sources are increases in deposit accounts and cash flows from loan payments and the securities portfolio. The cash flow from the securities portfolio is expected to provide approximately $134.5 million of potential contingent funding in 2026.
The allowance for credit losses represented 1.68% of total loans as of December 31, 2024, versus 1.46% at December 31, 2023 and 1.54% at December 31, 2022. Net charge offs of $2.8 million, or 0.05% of average loans, and $6.5 million, or 0.13% of average loans, were recorded in 2024 and 2023, respectively.
The allowance for credit losses represented 1.28% of total loans as of December 31, 2025, versus 1.68% at December 31, 2024 and 1.46% at December 31, 2023. Net charge offs of $28.8 million, or 0.55% of average loans, and $2.8 million, or 0.05% of average loans, were recorded in 2025 and 2024, respectively.
When segmenting the Bank's loan portfolio as of December 31, 2024, the largest segments are multifamily housing, agriculture, industrial commercial real estate and the recreational vehicle industry which represented 13.1%, 8.7%, 4.9% and 4.2% of total loans, respectively. 50 Table of Contents The following is a summary of nonperforming loans on an amortized cost basis as of December 31, 2024 and 2023.
When segmenting the Bank's loan portfolio as of December 31, 2025, the largest segments are multifamily housing, agriculture, the recreational vehicle industry, and industrial commercial real estate which represented 13.6%, 8.8%, 4.5% and 4.0% of total loans, respectively. 48 Table of Contents The following is a summary of nonperforming loans on an amortized cost basis as of December 31, 2025 and 2024.
Year Ended (dollars in thousands, except per share data) Dec. 31, 2024 Dec. 31, 2023 Dec. 31, 2022 Noninterest Income $ 56,844 $ 49,858 $ 41,862 Less: Net (Gain) on Visa Shares (8,996) 0 0 Less: Insurance and Loss Recoveries (1,000) (6,300) 0 Adjusted Core Noninterest Income $ 46,848 $ 43,558 $ 41,862 Noninterest Expense $ 125,084 $ 130,710 $ 110,210 Less: Legal Accrual (4,537) 0 0 Less: Wire Fraud Loss 0 (18,058) 0 Plus: Salaries and Employee Benefits (1) 0 1,397 0 Adjusted Core Noninterest Expense $ 120,547 $ 114,049 $ 110,210 Earnings Before Income Taxes $ 111,689 $ 110,333 $ 125,164 Adjusted Core Impact: Noninterest Income (9,996) (6,300) 0 Noninterest Expense 4,537 16,661 0 Total Adjusted Core Impact (5,459) 10,361 0 Adjusted Earnings Before Income Taxes 106,230 120,694 125,164 Tax Effect (16,853) (19,119) (21,347) Core Operational Profitability (2) $ 89,377 $ 101,575 $ 103,817 Diluted Earnings Per Share $ 3.63 $ 3.65 $ 4.04 Impact of Wire Fraud Loss, Net of Recoveries (0.16) 0.30 0.00 Core Operational Diluted Earnings Per Common Share $ 3.47 $ 3.95 $ 4.04 Adjusted Core Efficiency Ratio 49.49 % 47.40 % 45.03 % (1) In 2023, long-term, incentive-based compensation accruals were reduced as a result of the wire fraud loss and associated insurance and loss recoveries.
Year Ended December 31, 2025 December 31, 2024 December 31, 2023 Noninterest Income $ 47,971 $ 56,844 $ 49,858 Less: Net Gain on Visa Shares 0 (8,996) 0 Less: Insurance Recovery 0 (1,000) (6,300) Adjusted Core Noninterest Income $ 47,971 $ 46,848 $ 43,558 Noninterest Expense $ 131,605 $ 125,084 $ 130,710 Less: Legal Accrual 0 (4,537) 0 Less: Wire Fraud Loss 0 0 (18,058) Plus: Salaries and Employee Benefits (1) 0 0 1,397 Adjusted Core Noninterest Expense $ 131,605 $ 120,547 $ 114,049 Earnings Before Income Taxes $ 125,583 $ 111,689 $ 110,333 Adjusted Core Impact: Noninterest Income 0 (9,996) (6,300) Noninterest Expense 0 4,537 16,661 Total Adjusted Core Impact 0 (5,459) 10,361 Adjusted Earnings Before Income Taxes 125,583 106,230 120,694 Tax Effect (22,222) (16,853) (19,119) Core Operational Profitability (2) $ 103,361 $ 89,377 $ 101,575 Diluted Earnings Per Common Share $ 4.01 $ 3.63 $ 3.65 Impact of Adjusted Core Items 0.00 (0.16) 0.30 Core Operational Diluted Earnings Per Common Share $ 4.01 $ 3.47 $ 3.95 Adjusted Core Efficiency Ratio 48.93 % 49.49 % 47.40 % (1) In 2023, long-term, incentive-based compensation accruals were reduced as a result of the wire fraud loss and associated insurance and loss recoveries.
The effective tax rate was 16.3% in 2024, compared to 15.0% in 2023 and 17.1% in 2022.
The effective tax rate was 17.7% in 2025, compared to 16.3% in 2024 and 15.0% in 2023.
The Company’s management continues to monitor the adequacy of the provision based on loan levels, asset quality, economic conditions including the impact of the increased interest rate environment, inflation levels, and other factors that may influence the assessment of the collectability of loans. 41 Table of Contents Noninterest Income The following table presents changes in the components of noninterest income for the years ended December 31, 2024, 2023 and 2022. % Change From Prior Year (dollars in thousands) 2024 2023 2022 2024 2023 Wealth advisory fees $ 10,469 $ 9,080 $ 8,636 15.3 % 5.1 % Investment brokerage fees 1,894 1,815 2,318 4.4 (21.7) Service charges on deposit accounts 11,157 10,773 11,595 3.6 (7.1) Loan and service fees 11,832 11,750 12,214 0.7 (3.8) Merchant and interchange fee income 3,542 3,651 3,560 (3.0) 2.6 Bank owned life insurance income 4,210 3,133 432 34.4 625.2 Interest rate swap fee income 0 794 579 (100.0) 37.1 Mortgage banking income (loss) 116 (254) 633 145.7 (140.1) Net securities gains (losses) (46) (25) 21 (84.0) (219.0) Net gain on Visa Shares 8,996 0 0 100.0 0.0 Other income 4,674 9,141 1,874 (48.9) 387.8 Total noninterest income $ 56,844 $ 49,858 $ 41,862 14.0 % 19.1 % Noninterest income to total revenue 22.4 % 20.2 % 17.1 % Noninterest income increased by $7.0 million, or 14.0%, to $56.8 million for the year ended December 31, 2024, compared to $49.9 million for the prior year.
The Company’s management continues to monitor the adequacy of the provision based on loan levels, asset quality, economic conditions including the impact of the current rate environment, inflation levels, and other factors that may influence the assessment of the collectability of loans. 39 Table of Contents Noninterest Income The following table presents changes in the components of noninterest income for the years ended December 31, 2025, 2024 and 2023. % Change From Prior Year (dollars in thousands) 2025 2024 2023 2025 2024 Wealth advisory fees $ 11,365 $ 10,469 $ 9,080 8.6 % 15.3 % Investment brokerage fees 2,198 1,894 1,815 16.1 4.4 Service charges on deposit accounts 11,474 11,157 10,773 2.8 3.6 Loan and service fees 12,294 11,832 11,750 3.9 0.7 Merchant and interchange fee income 3,416 3,542 3,651 (3.6) (3.0) Bank owned life insurance income 4,256 4,210 3,133 1.1 34.4 Interest rate swap fee income 83 0 794 100.0 (100.0) Mortgage banking income (loss) 134 116 (254) 15.5 145.7 Net securities gains (losses) 0 (46) (25) 100.0 (84.0) Net gain on Visa Shares 0 8,996 0 (100.0) 100.0 Other income 2,751 4,674 9,141 (41.1) (48.9) Total noninterest income $ 47,971 $ 56,844 $ 49,858 (15.6) % 14.0 % Noninterest income to total revenue 17.8 % 22.4 % 20.2 % Noninterest income decreased by $8.9 million, or 15.6%, to $48.0 million for the year ended December 31, 2025, compared to $56.8 million for the prior year.
RESULTS OF OPERATIONS Overview In 2024, the Company continued to expand its balance sheet organically, achieving average loan growth of 4.7% and average deposit growth of 4.1% in its geographic footprint of northern Indiana and in central Indiana in the Indianapolis market. The Company had 54 branches as of December 31, 2024.
RESULTS OF OPERATIONS Overview In 2025, the Company continued to expand its balance sheet organically, achieving average loan growth of 3.7% and average deposit growth of 3.5% in its geographic footprint of northern Indiana and in the Indianapolis market. The Company had 55 branches as of December 31, 2025.
(dollars in thousands, except per share data) 2024 2023 2022 Income Statement Summary: Net interest income (a) $ 196,679 $ 197,035 $ 202,887 Provision for credit losses 16,750 5,850 9,375 Noninterest income (b) 56,844 49,858 41,862 Adjusted Core Noninterest Income (1) 46,848 43,558 41,862 Noninterest expense (c) 125,084 130,710 110,210 Adjusted Core Noninterest Expense (1) 120,547 114,049 110,210 Other Data: Efficiency ratio (2) 49.34 % 52.94 % 45.03 % Adjusted Core Efficiency Ratio (1) 49.49 47.40 45.03 Dilutive EPS $ 3.63 $ 3.65 $ 4.04 Total equity 683,911 649,793 568,887 Tangible capital ratio (3) 10.19 % 9.91 % 8.79 % Adjusted tangible capital ratio (4) 12.37 11.99 11.38 Net charge offs to average loans 0.05 0.13 0.10 Net interest margin 3.18 3.31 3.40 Noninterest income to total revenue 22.42 20.19 17.10 Pretax Pre-Provision Earnings (5) $ 128,439 $ 116,183 $ 134,539 (1) Non-GAAP financial measure.
(dollars in thousands, except per share data) 2025 2024 2023 Income Statement Summary: Net interest income (a) $ 221,017 $ 196,679 $ 197,035 Provision for credit losses 11,800 16,750 5,850 Noninterest income (b) 47,971 56,844 49,858 Adjusted Core Noninterest Income (1) 47,971 46,848 43,558 Noninterest expense (c) 131,605 125,084 130,710 Adjusted Core Noninterest Expense (1) 131,605 120,547 114,049 Other Data: Efficiency ratio (2) 48.93 % 49.34 % 52.94 % Adjusted Core Efficiency Ratio (1) 48.93 49.49 47.40 Dilutive EPS $ 4.01 $ 3.63 $ 3.65 Total equity 762,492 683,911 649,793 Tangible capital ratio (3) 10.86 % 10.19 % 9.91 % Adjusted tangible capital ratio (4) 12.45 12.37 11.99 Net charge offs to average loans 0.55 0.05 0.13 Net interest margin 3.45 3.18 3.31 Noninterest income to total revenue 17.83 22.42 20.19 Pretax Pre-Provision Earnings (5) $ 137,383 $ 128,439 $ 116,183 (1) Non-GAAP financial measure.
These two components represent the total allowance for credit losses deemed adequate to cover expected losses inherent in the loan portfolio. The Company's allowance for credit losses balance was comprised of 32% specific reserves and 68% general reserves at December 31, 2024, compared to 11% specific reserves and 89% general reserves at December 31, 2023.
These two components represent the total allowance for credit losses deemed adequate to cover expected losses inherent in the loan portfolio. The Company's allowance for credit losses balance was comprised of 12% specific allocations and 88% pooled allocations at December 31, 2025, compared to 32% specific allocations and 68% pooled allocations at December 31, 2024.
Core operational profitability, a non-GAAP financial measure that excludes the impact of certain non-routine operating events, was $89.4 million for the year ended December 31, 2024, a decrease of 12.0%, or $12.2 million, compared to $101.6 million for the year ended December 31, 2023.
Core operational profitability, a non-GAAP financial measure that excludes the impact of certain aforementioned non-routine operating events, was $103.4 million for the year ended December 31, 2025, an increase $14.0 million, or 15.6%, compared to $89.4 million for the year ended December 31, 2024. Core operational profitability decreased $12.2 million, or 12.0%, in 2024 from $101.6 million in 2023.
Year ended December 31, 2024 2023 2022 Return on average assets 1.40 % 1.45 % 1.62 % Return on average equity 14.12 15.93 17.40 Average equity to average assets 9.94 9.11 9.28 Dividend payout ratio 52.89 50.41 39.60 Return on average assets is computed by dividing net income by average assets for each indicated fiscal year.
Years Ended December 31, 2025 2024 2023 Return on average assets 1.50 % 1.40 % 1.45 % Return on average equity 14.40 14.12 15.93 Average equity to average assets 10.44 9.94 9.11 Dividend payout ratio 49.88 52.89 50.41 Return on average assets is computed by dividing net income by average assets for each indicated fiscal year.
Total deposits increased $180.4 million, or 3.2%, from $5.721 billion at December 31, 2023, to $5.901 billion at December 31, 2024, driven by increased public funds deposits due to the addition of new customers and offset by net brokered and retail outflows.
Total deposits increased $72.4 million, or 1.2%, from $5.901 billion at December 31, 2024, to $5.973 billion at December 31, 2025, driven by increased public funds deposits due to the addition of new customers and offset by net retail and commercial outflows.
(2) Core operational profitability was $4.1 million lower and $7.8 million higher than reported net income for the years ended December 31, 2024 and 2023, respectively. 37 Table of Contents Net Income Net income was $93.5 million in 2024, a decrease of $289,000, versus net income of $93.8 million in 2023.
(2) Core operational profitability was $4.1 million lower than reported net income of $93.5 million and $7.8 million higher than reported net income of $93.8 million for the years ended December 31, 2024 and 2023, respectively. 35 Table of Contents Net Income Net income was $103.4 million in 2025, an increase of $9.9 million, versus net income of $93.5 million in 2024.
The Company has additional collateral that could be pledged to the FHLB of $179.6 million as of December 31, 2024 to generate additional liquidity.
The Company has additional collateral that could be pledged to the FHLB of $241.8 million as of December 31, 2025 to generate additional liquidity.
The balances reported in "Note 4 – Allowance for Credit Losses and Credit Quality" include deferred fees and costs. Included in the classified loan amounts above were loans receiving modifications due to financial difficulty experienced by the borrower. No borrowers in financial distress received a modification for the year ended December 31, 2024.
The balances reported in "Note 4 – Allowance for Credit Losses and Credit Quality" include deferred fees and costs. Included in the classified loan amounts above were loans receiving modifications due to financial difficulty experienced by the borrower.
The Bank had total available sources of liquidity totaling $3.681 billion at December 31, 2024 compared to $3.407 billion at December 31, 2023. The Company has approval of $3.723 billion in secondary funding sources available as of December 31, 2024, of which $41.6 million was utilized.
The Bank had total available sources of liquidity totaling $3.526 billion at December 31, 2025 compared to $3.681 billion at December 31, 2024. The Company has approval of $3.747 billion in secondary funding sources available as of December 31, 2025, of which $221.8 million was utilized.
The decrease to noninterest expense in 2024 was driven by lower miscellaneous expenses for losses incurred in 2023 and was partially offset by a $4.5 million legal accrual recorded in the second quarter of 2024 related to resolution of a previously disclosed legal matter.
The decrease to noninterest expense in 2024 was driven by lower miscellaneous expenses for losses incurred in 2023 and was partially offset by a $4.5 million legal accrual.
Core operational diluted earnings per common share, a non-GAAP financial measure, were $3.47 for the year ended December 31, 2024, a decrease of 12.2% from $3.95 for the prior year. 38 Table of Contents Net Interest Income The following table presents a three-year average balance sheet and, for each major asset and liability category, its related interest income and yield or its expense and rate for the years ended December 31, 2024, 2023 and 2022.
Core operational diluted earnings per share decreased 12.2% in 2024, down from $3.95 in 2023. 36 Table of Contents Net Interest Income The following table presents a three-year average balance sheet and, for each major asset and liability category, its related interest income and yield or its expense and rate for the years ended December 31, 2025, 2024 and 2023.
Based upon these analytics as of December 31, 2024, the securities in the combined available-for-sale and held-to-maturity portfolios had an effective duration of approximately 5.96 years.
Based upon these analytics as of December 31, 2025, the securities in the combined available-for-sale and held-to-maturity portfolios had an effective duration of approximatel y 5.94 y ears.
The growth in adjusted core noninterest expense, a non-GAAP financial measure that excludes the impact of certain non-routine operating events, reflects the Company's continued investment in its people, technology, and physical infrastructure.
Adjusted core noninterest income increased by 2.4% and 7.6% for 2025 and 2024, respectively. The growth in adjusted core noninterest expense, a non-GAAP financial measure that excludes the impact of certain non-routine operating events, reflects the Company's continued investment in its people, technology, and physical infrastructure.
See reconciliation on the following pages. 35 Table of Contents The Company believes that providing non-GAAP financial measures provides investors with information useful to understanding the company's financial performance. Reconciliations of these non-GAAP financial measures is provided below.
See reconciliation on the following pages. 33 Table of Contents The Company believes that providing non-GAAP financial measures provides investors with information useful to understanding the company's financial performance. Reconciliations of these non-GAAP financial measures is provided in the following tables (dollars in thousands, except per share data).
As of December 31, 2024, the Company had $123.6 million of assets classified as Special Mention , $44.0 million classified as Substandard, $43.5 million classified as Doubtful and $0 classified as Loss as compared to $143.6 million, $39.4 million, $0 and $0, respectively, at December 31, 2023.
As of December 31, 2025, the Company had $134.0 million of assets classified as Special Mention , $50.0 million classified as Substandard, $74,000 classified as Doubtful and none classified as Loss as compared to $123.6 million, $44.0 million, $43.5 million and none, respectively, at December 31, 2024.
The tax equivalent rate for tax exempt loans and tax exempt securities acquired after January 1, 1983 included the TEFRA adjustment applicable to nondeductible interest expense. Net interest income decreased by $356,000 to $196.7 million in 2024 compared to $197.0 million in 2023, primarily as a result of increased funding costs. Total interest expense increased $30.2 million, or 20.7%.
The tax equivalent rate for tax exempt loans and tax exempt securities acquired after January 1, 1983 included the TEFRA adjustment applicable to nondeductible interest expense. Net interest income increased by $24.3 million to $221.0 million in 2025 compared to $196.7 million in 2024, primarily as a result of decreased costs of funds.
The Company also had a Tier 1 leverage ratio of 12.15% and a tangible equity ratio of 10.19%. When excluding the impact of accumulated other comprehensive income (loss) on tangible common equity, the Company's adjusted tangible common equity to adjusted tangible assets was 12.37%. See "Note 15 – Capital Requirements and Restrictions on Retained Earnings" for more information.
When excluding the impact of accumulated other comprehensive income (loss) on tangible common equity, the Company's adjusted tangible common equity to adjusted tangible assets was 12.45%. See "Note 15 – Capital Requirements and Restrictions on Retained Earnings" for more information.
The increase in deposits was attributable to increases in commercial and public fund deposits. Commercial deposits increased $41.9 million, or 1.9% and represented 38.4% and 38.9% of total deposits at December 31, 2024 and 2023, respectively. Public fund deposits increased $246.6 million, or 15.8% and represented 30.7% and 27.3% of total deposits at December 31, 2024 and 2023, respectively.
The increase in deposits was attributable to increases in commercial and public fund deposits. 46 Table of Contents Commercial deposits increased $41.9 million, or 1.9% and represented 38.4% and 38.9% of total deposits at December 31, 2024 and 2023, respectively.
(dollars in thousands) 2024 2023 Amount of loans outstanding, net of deferred fees, December 31, $ 5,117,948 $ 4,916,534 Commercial and industrial loans Past due accruing loans (90 days or more) 3 0 Nonaccrual loans 52,857 11,395 Subtotal nonperforming loans 52,860 11,395 Commercial real estate and multi-family residential loans Past due accruing loans (90 days or more) 0 0 Nonaccrual loans 1,775 3,247 Subtotal nonperforming loans 1,775 3,247 Agri-business and agricultural loans Past due accruing loans (90 days or more) 0 0 Nonaccrual loans 71 100 Subtotal nonperforming loans 71 100 Other commercial loans Past due accruing loans (90 days or more) 0 0 Nonaccrual loans 0 0 Subtotal nonperforming loans 0 0 Consumer 1-4 family mortgage loans Past due accruing loans (90 days or more) 26 27 Nonaccrual loans 1,439 831 Subtotal nonperforming loans 1,465 858 Other consumer loans Past due accruing loans (90 days or more) 0 0 Nonaccrual loans 275 112 Subtotal nonperforming loans 275 112 Total nonperforming loans $ 56,446 $ 15,712 Ratio: Nonperforming loans to total loans 1.10 % 0.32 % Nonperforming assets of the Company include nonperforming loans (as indicated above), nonaccrual investments, other real estate owned and repossessions, the total of which amounted to $56.9 million and $16.1 million at December 31, 2024 and 2023, respectively.
(dollars in thousands) 2025 2024 Amount of loans outstanding, net of deferred fees, December 31, $ 5,375,349 $ 5,117,948 Commercial and industrial loans Past due accruing loans (90 days or more) 0 3 Nonaccrual loans 12,610 52,857 Subtotal nonperforming loans 12,610 52,860 Commercial real estate and multi-family residential loans Past due accruing loans (90 days or more) 0 0 Nonaccrual loans 3,854 1,775 Subtotal nonperforming loans 3,854 1,775 Agri-business and agricultural loans Past due accruing loans (90 days or more) 0 0 Nonaccrual loans 48 71 Subtotal nonperforming loans 48 71 Other commercial loans Past due accruing loans (90 days or more) 0 0 Nonaccrual loans 0 0 Subtotal nonperforming loans 0 0 Consumer 1-4 family mortgage loans Past due accruing loans (90 days or more) 7 26 Nonaccrual loans 3,969 1,439 Subtotal nonperforming loans 3,976 1,465 Other consumer loans Past due accruing loans (90 days or more) 0 0 Nonaccrual loans 416 275 Subtotal nonperforming loans 416 275 Total nonperforming loans $ 20,904 $ 56,446 Ratio: Nonperforming loans to total loans 0.39 % 1.10 % Nonperforming assets of the Company include nonperforming loans (as indicated above), nonaccrual investments, other real estate owned and repossessions, the total of which amounted to $20.9 million and $56.9 million at December 31, 2025 and 2024, respectively.
The Company declared cash dividends of $1.92 per share in 2024, which decreased equity by $49.3 million. The Company declared cash dividends of $1.84 per share in 2023, which decreased equity by $47.1 million. Total stockholder's equity has been impacted by declines in the market value of the Company's available-for-sale investment securities portfolio.
The Company declared cash dividends of $1.92 per share in 2024, which decreased equity by $49.3 million. Total stockholder's equity has been impacted by declines in the market value of the Company's available-for-sale investment securities portfolio. The market value decline, resulting from FOMC's tightening of monetary policy in 2022 and 2023, has generated unrealized losses in the available-for-sale portfolio.
(dollars in thousands) 2024 2023 2022 Amount of loans outstanding, net of deferred fees, December 31, $ 5,117,948 $ 4,916,534 $ 4,710,396 Average daily loans outstanding during the year ended December 31, $ 5,039,406 $ 4,813,678 $ 4,427,166 Allowance for credit losses, January 1, $ 71,972 $ 72,606 $ 67,773 Loans charged-off: Commercial and industrial loans 1,615 6,341 4,022 Commercial real estate and multi-family residential loans 840 0 597 Agri-business and agricultural loans 0 0 0 Other commercial loans 0 0 0 Consumer 1-4 family mortgage loans 94 163 42 Other consumer loans 919 828 473 Total loans charged-off 3,468 7,332 5,134 Recoveries of loans previously charged-off: Commercial and industrial loans 177 180 71 Commercial real estate and multi-family residential loans 106 322 277 Agri-business and agricultural loans 0 0 0 Other commercial loans 0 0 0 Consumer 1-4 family mortgage loans 53 38 52 Other consumer loans 370 308 192 Total recoveries 706 848 592 Net loans charged-off 2,762 6,484 4,542 Provision for credit loss charged to expense 16,750 5,850 9,375 Balance, December 31, $ 85,960 $ 71,972 $ 72,606 Ratios: Net charge offs (recoveries) to average daily loans outstanding: Commercial and industrial loans 0.03 % 0.13 % 0.09 % Commercial real estate and multi-family residential loans 0.01 (0.01) 0.01 Agri-business and agricultural loans 0.00 0.00 0.00 Other commercial loans 0.00 0.00 0.00 Consumer 1-4 family mortgage loans 0.00 0.00 0.00 Other consumer loans 0.01 0.01 0.00 Total ratio of net charge offs (recoveries) 0.05 % 0.13 % 0.10 % Allowance for credit losses on loans to: Total loans 1.68 % 1.46 % 1.54 % Ratio of allowance for credit losses to nonperforming loans 152.25 % 458.01 % 424.91 % 53 Table of Contents The following is a summary of the allocation for credit losses as of December 31, 2024 and 2023.
(dollars in thousands) 2025 2024 2023 Amount of loans outstanding, net of deferred fees, December 31, $ 5,375,349 $ 5,117,948 $ 4,916,534 Average daily loans outstanding during the year ended December 31, $ 5,223,458 $ 5,039,406 $ 4,813,678 Allowance for credit losses, January 1, $ 85,960 $ 71,972 $ 72,606 Loans charged-off: Commercial and industrial loans $ 28,868 $ 1,615 $ 6,341 Commercial real estate and multi-family residential loans 0 840 0 Agri-business and agricultural loans 0 0 0 Other commercial loans 0 0 0 Consumer 1-4 family mortgage loans 226 94 163 Other consumer loans 1,320 919 828 Total loans charged-off 30,414 3,468 7,332 Recoveries of loans previously charged-off: Commercial and industrial loans 960 177 180 Commercial real estate and multi-family residential loans 105 106 322 Agri-business and agricultural loans 0 0 0 Other commercial loans 0 0 0 Consumer 1-4 family mortgage loans 69 53 38 Other consumer loans 515 370 308 Total recoveries 1,649 706 848 Net loans charged-off 28,765 2,762 6,484 Provision for credit loss charged to expense 11,800 16,750 5,850 Balance, December 31, $ 68,995 $ 85,960 $ 71,972 Ratios: Net charge offs (recoveries) to average daily loans outstanding: Commercial and industrial loans 0.53 % 0.03 % 0.13 % Commercial real estate and multi-family residential loans 0.00 0.01 (0.01) Agri-business and agricultural loans 0.00 0.00 0.00 Other commercial loans 0.00 0.00 0.00 Consumer 1-4 family mortgage loans 0.00 0.00 0.00 Other consumer loans 0.02 0.01 0.01 Total ratio of net charge offs (recoveries) 0.55 % 0.05 % 0.13 % Allowance for credit losses on loans to: Total loans 1.28 % 1.68 % 1.46 % Ratio of allowance for credit losses to nonperforming loans, net of deferred fees 330.06 % 152.29 % 458.07 % 51 Table of Contents The following is a summary of the allocation for credit losses as of December 31, 2025 and 2024 .
Pooled loan allocations decreased $5.4 million from $63.8 million at December 31, 2023 to $58.4 million at December 31, 2024. The unallocated component of the allowance for credit losses was $383,000 at December 31, 2024, which increased nominally from $372,000 reported at December 31, 2023 .
Pooled loan allocations increased $2.2 million from $58.4 million at December 31, 2024 to $60.6 million at December 31, 2025. The unallocated component of the allowance for credit losses was $325,000 at December 31, 2025, which decreased $58,000 from $383,000 reported at December 31, 2024 .
Management considers these measures of core financial performance to be meaningful to understanding the Company’s business performance for these periods.
Management considers these measures of core financial performance to be meaningful to understanding the Company’s business performance for these periods (dollars in thousands, except per share data).
The market value decline, resulting from higher interest rate environment, has generated unrealized losses in the available-for-sale portfolio. Unrealized losses from the available-for-sale investment securities portfolio are recorded, net of tax, in accumulated other comprehensive income (loss) in the statement of stockholders' equity.
Unrealized losses from the available-for-sale investment securities portfolio are recorded, net of tax, in accumulated other comprehensive income (loss) in the statement of stockholders' equity.
Bank Owned Life Insurance Bank owned life insurance increased by $4.2 million to $113.3 million at December 31, 2024 and by $707,000 to $109.1 million at December 31, 2023 from $108.4 million at December 31, 2022.
Bank Owned Life Insurance Bank owned life insurance increased by $16.7 million to $130.0 million at December 31, 2025 and by $4.2 million to $113.3 million at December 31, 2024 from $109.1 million at December 31, 2023.
The average equity to average assets ratio was 9.94% in 2024, compared to 9.11% in 2023 and 9.28% in 2022. Net income in 2024 as compared to 2023 was positively impacted by a $7.0 million increase in noninterest income and a $5.6 million decrease in noninterest expense.
Net income in 2024 as compared to 2023 was positively impacted by a $7.0 million increase in noninterest income and a $5.6 million decrease in noninterest expense.
Management believes this to be the case due to the fact that generally neither the timing nor the magnitude of the inflationary changes in the consumer price index ("CPI") coincides with changes in interest rates.
While management believes that inflation affects the growth of total assets, it believes that it is difficult to assess the overall impact. Management believes this to be the case due to the fact that generally neither the timing nor the magnitude of the inflationary changes in the consumer price index ("CPI") coincides with changes in interest rates.
(dollars in thousands) 2024 2023 Allocated allowance for credit losses: Commercial and industrial loans $ 45,539 $ 30,338 Commercial real estate and multi-family residential loans 30,865 31,335 Agri-business and agricultural loans 3,541 4,150 Other commercial loans 743 1,129 Consumer 1-4 family mortgage loans 3,358 3,474 Other consumer loans 1,531 1,174 Total allocated allowance for credit losses 85,577 71,600 Unallocated allowance for credit losses 383 372 Total allowance for credit losses $ 85,960 $ 71,972 At December 31, 2024, the allowance for credit losses was 1.68% of total loans outstanding, versus 1.46% of total loans outstanding at December 31, 2023.
(dollars in thousands) 2025 2024 Allocated allowance for credit losses: Commercial and industrial loans $ 28,436 $ 45,539 Commercial real estate and multi-family residential loans 30,163 30,865 Agri-business and agricultural loans 3,315 3,541 Other commercial loans 1,041 743 Consumer 1-4 family mortgage loans 3,996 3,358 Other consumer loans 1,719 1,531 Total allocated allowance for credit losses 68,670 85,577 Unallocated allowance for credit losses 325 383 Total allowance for credit losses $ 68,995 $ 85,960 At December 31, 2025, the allowance for credit losses was 1.28% of total loans outstanding, versus 1.68% of total loans outstanding at December 31, 2024.
FINANCIAL CONDITION Overview Total assets of the Company were $6.678 billion as of December 31, 2024, an increase of $154.3 million, or 2.4%, when compared to $6.524 billion as of December 31, 2023. Total loans outstanding increased by $201.4 million, or 4.1%, to $5.118 billion at December 31, 2024, from $4.917 billion at December 31, 2023.
FINANCIAL CONDITION Overview Total assets of the Company were $6.990 billion as of December 31, 2025, an increase of $311.6 million, or 4.7%, when compared to $6.678 billion as of December 31, 2024. Total loans outstanding increased by $257.4 million, or 5.0%, to $5.375 billion at December 31, 2025, from $5.118 billion at December 31, 2024.
Additionally, brokered deposits decreased $93.8 million, and represented 0.7% and 2.4% of total deposits at December 31, 2024 and 2023, respectively. Retail deposits decreased $14.2 million, or 0.8%, and represented 30.2% and 31.4% of deposits at December 31, 2024 and 2023, respectively.
Public fund deposits increased by $246.6 million, or 15.8% and represented 30.7% and 27.3% of total deposits at December 31, 2024 and 2023, respectively. Additionally, brokered deposits decreased $93.8 million and represented 0.7% and 2.4% of total deposits at December 31, 2024 and 2023, respectively.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest change(dollars in thousands) Base Falling (300 Basis Points) Falling (200 Basis Points) Falling (100 Basis Points) Falling (50 Basis Points) Falling (25 Basis Points) Rising (25 Basis Points) Rising (50 Basis Points) Rising (100 Basis Points) Rising (200 Basis Points) Rising (300 Basis Points) Net interest income $ 230,487 $ 223,080 $ 227,066 $ 229,245 $ 229,973 $ 230,294 $ 230,579 $ 230,651 $ 230,749 $ 230,900 $ 231,046 Variance from Base ($7,407) ($3,421) ($1,242) ($514) ($193) $92 $164 $262 $413 $559 Percent of change from Base (3.21) % (1.48) % (0.54) % (0.22) % (0.08) % 0.04 % 0.07 % 0.11 % 0.18 % 0.24 % For more information on the Company’s interest rate sensitivity see the Interest Rate Risk discussion in Item 7A. above. 60 Table of Contents
Biggest change(dollars in thousands) Base Falling (300 Basis Points) Falling (200 Basis Points) Falling (100 Basis Points) Falling (50 Basis Points) Falling (25 Basis Points) Rising (25 Basis Points) Rising (50 Basis Points) Rising (100 Basis Points) Rising (200 Basis Points) Rising (300 Basis Points) Net interest income $ 234,446 $ 229,750 $ 232,700 $ 234,377 $ 234,662 $ 234,672 $ 234,192 $ 233,847 $ 233,162 $ 231,539 $ 229,671 Variance from Base ($4,696) ($1,746) ($69) $216 $226 ($254) ($599) ($1,284) ($2,907) ($4,775) Percent of change from Base (2.00) % (0.74) % (0.03) % 0.09 % 0.10 % (0.11) % (0.26) % (0.55) % (1.24) % (2.04) % For more information on the Company’s interest rate sensitivity see the Interest Rate Risk discussion in Item 7A. above. 57 Table of Contents
Results for the base, falling 300 basis points, falling 200 basis points, falling 100 basis points, falling 50 basis points, falling 25 basis points, rising 25 basis points, rising 50 basis points, rising 100 basis points, rising 200 basis points, and rising 300 basis points interest rate scenarios are listed below based upon the Company’s rate sensitive assets and liabilities at December 31, 2024.
Results for the base, falling 300 basis points, falling 200 basis points, falling 100 basis points, falling 50 basis points, falling 25 basis points, rising 25 basis points, rising 50 basis points, rising 100 basis points, rising 200 basis points, and rising 300 basis points interest rate scenarios are listed below based upon the Company’s rate sensitive assets and liabilities at December 31, 2025.
Although management does not consider GAP ratios in planning, the information can be used in a general fashion to look at asset and liability mismatches. The Company’s cumulative repricing GAP ratio as of December 31, 2024 for the next 12 months using a scenario in which interest rates remained unchanged was a negative 12.28% of earning assets.
Although management does not consider GAP ratios in planning, the information can be used in a general fashion to look at asset and liability mismatches. The Company’s cumulative repricing GAP ratio as of December 31, 2025 for the next 12 months using a scenario in which interest rates remained unchanged was a negative 12.76% of earning assets.
Management believes that the Company’s liquidity and interest sensitivity position at December 31, 2024, remained adequate to meet the Company’s primary goal of achieving optimum interest margins while 59 Table of Contents avoiding undue interest rate risk. The Company places a greater level of credence in net interest income simulation modeling.
Management believes that the Company’s liquidity and interest sensitivity position at December 31, 2025, remained adequate to meet the Company’s primary goal of achieving optimum interest margins while avoiding undue interest rate risk. The Company places a greater level of credence in net interest income simulation modeling.
For loans, securities and liabilities with contractual maturities, the table presents principal cash flows and related weighted-average interest rates by contractual maturities, as well as the Company’s assumptions relative to the impact of interest-rate fluctuations on the prepayment of certain commercial, residential and home equity loans and mortgage-backed securities.
For loans, securities and liabilities with contractual maturities, the table presents principal cash flows and related weighted-average interest rates by contractual maturities, as well as the Company’s assumptions relative to the impact of interest-rate fluctuations on the prepayment of loans and mortgage-backed securities.
Removed
Weighted-average variable rates are based upon rates existing at the reporting date. 58 Table of Contents 2024 Principal/Notional Amount Maturing in: (dollars in thousands) Year 1 Year 2 Year 3 Year 4 Year 5 Thereafter Total Fair Value 12/31/2024 Rate sensitive assets: Fixed interest rate loans $ 840,141 $ 369,687 $ 288,183 $ 139,233 $ 75,574 $ 88,541 $ 1,801,359 $ 1,769,497 Average interest rate 5.12 % 5.49 % 5.96 % 6.24 % 6.22 % 5.11 % Variable interest rate loans $ 1,820,216 $ 489,519 $ 271,599 $ 187,711 $ 134,202 $ 413,342 $ 3,316,589 $ 3,257,927 Average interest rate 7.29 % 7.08 % 6.94 % 6.90 % 6.74 % 6.59 % Total loans $ 2,660,357 $ 859,206 $ 559,782 $ 326,944 $ 209,776 $ 501,883 $ 5,117,948 $ 5,027,424 Average interest rate 6.61 % 6.40 % 6.43 % 6.62 % 6.55 % 6.33 % Fixed interest rate securities $ 72,208 $ 63,570 $ 59,277 $ 66,569 $ 48,385 $ 1,023,025 $ 1,333,034 $ 1,104,530 Average interest rate 2.23 % 2.23 % 2.23 % 2.10 % 2.17 % 2.40 % Variable interest rate securities $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 Average interest rate 0.00 % 0.00 % 0.00 % 0.00 % 0.00 % 0.00 % Other interest-bearing assets $ 96,472 $ 0 $ 0 $ 0 $ 0 $ 0 $ 96,472 $ 96,472 Average interest rate 4.12 % 0.00 % 0.00 % 0.00 % 0.00 % 0.00 % Total earning assets $ 2,829,037 $ 922,776 $ 619,059 $ 393,513 $ 258,161 $ 1,524,908 $ 6,547,454 $ 6,228,426 Average interest rate 6.41 % 6.11 % 6.03 % 5.85 % 5.73 % 3.70 % Rate sensitive liabilities: Noninterest bearing checking $ 209,825 $ 114,309 $ 102,296 $ 91,544 $ 81,923 $ 697,559 $ 1,297,456 $ 1,297,456 Average interest rate 0.00 % 0.00 % 0.00 % 0.00 % 0.00 % 0.00 % Savings & interest bearing checking $ 667,263 $ 238,315 $ 214,414 $ 193,336 $ 174,694 $ 2,259,612 $ 3,747,634 $ 3,747,634 Average interest rate 3.09 % 2.39 % 2.44 % 2.50 % 2.56 % 3.23 % Time deposits $ 720,094 $ 90,709 $ 35,337 $ 5,813 $ 3,718 $ 205 $ 855,876 $ 851,933 Average interest rate 4.06 % 3.49 % 3.42 % 3.06 % 2.70 % 0.50 % Total deposits $ 1,597,182 $ 443,333 $ 352,047 $ 290,693 $ 260,335 $ 2,957,376 $ 5,900,966 $ 5,897,023 Average interest rate 3.12 % 2.00 % 1.83 % 1.73 % 1.75 % 2.47 % Fixed interest rate borrowings $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 Average interest rate 0.00 % 0.00 % 0.00 % 0.00 % 0.00 % 0.00 % Variable interest rate borrowings $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 Average interest rate 0.00 % 0.00 % 0.00 % 0.00 % 0.00 % 0.00 % Total funds $ 1,597,182 $ 443,333 $ 352,047 $ 290,693 $ 260,335 $ 2,957,376 $ 5,900,966 $ 5,897,023 Average interest rate 3.12 % 2.00 % 1.83 % 1.73 % 1.75 % 2.47 % Interest rate sensitivity gap by period $ 1,231,855 $ 479,443 $ 267,012 $ 102,820 $ (2,174) $ (1,432,468) Cumulative rate sensitivity gap $ 1,231,855 $ 1,711,298 $ 1,978,310 $ 2,081,130 $ 2,078,956 $ 646,488 Cumulative rate sensitivity ratio at December 31, 2024 177.1 % 208.1 % 175.8 % 135.4 % 99.2 % 51.6 % at December 31, 2023 122.3 % 238.4 % 187.4 % 143.7 % 130.7 % 63.3 % The Company utilizes computer modeling software to measure interest rate risk and to stress test the balance sheet under a wide variety of interest rate scenarios.
Added
Weighted-average variable rates are based upon rates existing at the reporting date. 2025 Principal/Notional Amount Maturing in: (dollars in thousands) Year 1 Year 2 Year 3 Year 4 Year 5 Thereafter Total Fair Value 12/31/2025 Rate sensitive assets: Fixed interest rate loans $ 889,225 $ 406,661 $ 234,338 $ 117,310 $ 58,494 $ 68,906 $ 1,774,934 $ 1,768,386 Average interest rate 5.34 % 6.17 % 6.46 % 6.43 % 6.04 % 4.99 % Variable interest rate loans $ 2,023,375 $ 502,561 $ 371,996 $ 203,950 $ 128,720 $ 369,813 $ 3,600,415 $ 3,587,133 Average interest rate 6.53 % 6.45 % 6.43 % 6.35 % 6.45 % 6.36 % Total loans $ 2,912,600 $ 909,222 $ 606,334 $ 321,260 $ 187,214 $ 438,719 $ 5,375,349 $ 5,355,519 Average interest rate 6.17 % 6.33 % 6.44 % 6.38 % 6.32 % 6.14 % Fixed interest rate securities $ 94,160 $ 74,508 $ 75,840 $ 54,809 $ 52,232 $ 993,985 $ 1,345,534 $ 1,169,572 Average interest rate 2.77 % 2.83 % 2.61 % 2.55 % 2.44 % 2.50 % Variable interest rate securities $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 Average interest rate 0.00 % 0.00 % 0.00 % 0.00 % 0.00 % 0.00 % Other interest-bearing assets $ 84,179 $ 0 $ 0 $ 0 $ 0 $ 0 $ 84,179 $ 84,179 Average interest rate 3.44 % 0.00 % 0.00 % 0.00 % 0.00 % 0.00 % Total earning assets $ 3,090,939 $ 983,730 $ 682,174 $ 376,069 $ 239,446 $ 1,432,704 $ 6,805,062 $ 6,609,270 Average interest rate 5.99 % 6.06 % 6.01 % 5.82 % 5.47 % 3.61 % Rate sensitive liabilities: Noninterest bearing checking $ 163,122 $ 131,724 $ 107,348 $ 90,150 $ 77,333 $ 651,650 $ 1,221,327 $ 1,221,327 Average interest rate 0.00 % 0.00 % 0.00 % 0.00 % 0.00 % 0.00 % Savings & interest bearing checking $ 591,290 $ 446,548 $ 373,906 $ 318,013 $ 272,996 $ 1,998,544 $ 4,001,297 $ 4,001,297 Average interest rate 2.68 % 2.69 % 2.76 % 2.78 % 2.79 % 2.60 % Time deposits $ 673,136 $ 65,985 $ 6,427 $ 3,771 $ 1,361 $ 46 $ 750,726 $ 748,798 Average interest rate 3.45 % 3.12 % 2.98 % 2.84 % 2.23 % 0.50 % Total deposits $ 1,427,548 $ 644,257 $ 487,681 $ 411,934 $ 351,690 $ 2,650,240 $ 5,973,350 $ 5,971,422 Average interest rate 2.74 % 2.19 % 2.15 % 2.17 % 2.17 % 1.96 % Fixed interest rate borrowings $ 170,000 $ 0 $ 0 $ 0 $ 0 $ 1,200 $ 171,200 $ 170,790 Average interest rate 3.82 % 0.00 % 0.00 % 0.00 % 0.00 % 0.00 % Variable interest rate borrowings $ 13,000 $ 0 $ 0 $ 0 $ 0 $ 0 $ 13,000 $ 12,997 Average interest rate 6.05 % 0.00 % 0.00 % 0.00 % 0.00 % 0.00 % Total funds $ 1,610,548 $ 644,257 $ 487,681 $ 411,934 $ 351,690 $ 2,651,440 $ 6,157,550 $ 6,155,209 Average interest rate 2.88 % 2.19 % 2.15 % 2.17 % 2.17 % 1.96 % Interest rate sensitivity gap by period $ 1,480,391 $ 339,473 $ 194,493 $ (35,865) $ (112,244) $ (1,218,736) Cumulative rate sensitivity gap $ 1,480,391 $ 1,819,864 $ 2,014,357 $ 1,978,492 $ 1,866,248 $ 647,512 Cumulative rate sensitivity ratio at December 31, 2025 191.9 % 152.7 % 139.9 % 91.3 % 68.1 % 54.0 % at December 31, 2024 177.1 % 208.1 % 175.8 % 135.4 % 99.2 % 51.6 % 56 Table of Contents The Company utilizes computer modeling software to measure interest rate risk and to stress test the balance sheet under a wide variety of interest rate scenarios.

Other LKFN 10-K year-over-year comparisons