10q10k10q10k.net

What changed in 1ST SOURCE CORP's 10-K — 2024 vs 2025

vs

Paragraph-level year-over-year comparison of 1ST SOURCE 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.

+265 added−254 removedSource: 10-K (2026-02-17) vs 10-K (2025-02-18)

Top changes in 1ST SOURCE CORP's 2025 10-K

265 paragraphs added · 254 removed · 211 edited across 8 sections

Item 1. Business

Business — how the company describes what it does

28 edited+10 added−5 removed59 unchanged
Biggest changeCommunity Engagement — Our organization is only as strong as the communities we serve. 1st Source and our colleagues are proud to support our local schools, nonprofits, and faith groups. • In 2024, our colleagues donated approximately 13,900 hours to a total of 530 different organizations. • In 2024, our colleagues contributed over $190,000 to local United Way organizations. • In 2024, 1st Source contributed over $600,000 to over 400 deserving and successful community service organizations.
Biggest changeCommunity Engagement — Our organization is only as strong as the communities we serve. 1st Source and our colleagues are proud to support our local schools, nonprofits, and faith groups. • In 2025, our colleagues donated approximately 14,000 hours to a total of 560 different organizations. • In 2025, our colleagues contributed over $197,000 to local United Way organizations. • In 2025, 1st Source contributed over $670,000 to over 440 deserving and successful community service organizations. • In 2025, 1st Source contributed $1,000,000 to 1st Source Bank Foundation. 1st Source Bank Foundation works in collaboration with 1st Source Bank to enhance and strengthen the social, economic, and cultural fabric of our communities through a commitment of providing financial resources. 1st Source Bank Foundation provides support to organizations working in the following areas: Social welfare and human services, education, arts and culture and economic development.
At December 31, 2024, the Bank was categorized as “well capitalized,” meaning that our total risk-based capital ratio exceeded 10.00%, our Tier 1 risk-based capital ratio exceeded 8.00%, our common equity Tier 1 risk-based capital ratio exceeded 6.50%, our leverage ratio exceeded 5.00%, and we are not subject to a regulatory order, agreement, or directive to meet and maintain a specific capital level for any capital measure. 1st Source and the Bank have elected not to utilize the optional community bank leverage ratio framework implemented by the Federal Reserve and the other federal banking agencies.
At December 31, 2025, the Bank was categorized as “well capitalized,” meaning that our total risk-based capital ratio exceeded 10.00%, our Tier 1 risk-based capital ratio exceeded 8.00%, our common equity Tier 1 risk-based capital ratio exceeded 6.50%, our leverage ratio exceeded 5.00%, and we are not subject to a regulatory order, agreement, or directive to meet and maintain a specific capital level for any capital measure. 1st Source and the Bank have elected not to utilize the optional community bank leverage ratio framework implemented by the Federal Reserve and the other federal banking agencies.
Aircraft finance relationships generally range from $500,000 to $30 million with fixed or variable interest rates and terms of one to ten years. 3 Table of Contents We offer auto and light truck fleet financing for new and pre-owned vehicles to automobile and light truck rental companies, commercial leasing companies, and a limited number of single unit financing for users of specialty vehicles (step vans, vocational work trucks, motor coaches, shuttle buses and funeral cars).
Aircraft finance relationships generally range from $500,000 to $30 million with fixed or variable interest rates and terms of one to eleven years. 3 Table of Contents We offer auto and light truck fleet financing for new and pre-owned vehicles to automobile and light truck rental companies, commercial leasing companies, and a limited number of single unit financing for users of specialty vehicles (step vans, vocational work trucks, motor coaches, shuttle buses and funeral cars).
We provide construction and permanent loans, and tax equity investments for community solar, commercial and industrial, small utility scale, university, and municipal projects. Project sizes generally range from five megawatts to 20 megawatts. Consumer Services — 1st Source Bank provides a full range of consumer banking products and services through our banking centers, client service center, and on-line.
We provide construction and permanent loans, and tax equity investments for community solar, commercial and industrial, small utility scale, university, and municipal projects. Project sizes generally range from five megawatts to 20 megawatts. Consumer Services — 1st Source Bank provides a full range of consumer banking products and services through our banking centers, virtual Branch, client service center, and on-line.
The auto and light truck finance relationships generally range from $100,000 to $40 million with fixed or variable interest rates and terms of one to eight years. The medium and heavy duty truck division provides new and pre-owned fleet financing for highway tractors, medium duty trucks and trailers to the trucking industry.
The auto and light truck finance relationships generally range from $100,000 to $60 million with fixed or variable interest rates and terms of one to eight years. The medium and heavy duty truck division provides new and pre-owned fleet financing for highway tractors, medium duty trucks and trailers to the trucking industry.
The Specialty Finance Group operates through 1st Source Bank and its subsidiaries including: Michigan Transportation Finance Corporation, 1st Source Specialty Finance, Inc., SFG Aircraft, Inc., 1st Source Intermediate Holding, LLC, SFG Commercial Aircraft Leasing, Inc., and SFG Equipment Leasing Corporation I. 1ST SOURCE INSURANCE, INC. 1st Source Insurance, Inc. is our insurance agency subsidiary placing property and casualty, individual and group health, and life insurance for individuals and businesses. 1st Source Insurance, Inc. has ten offices.
The Specialty Finance Group operates through 1st Source Bank and its subsidiaries including: Michigan Transportation Finance Corporation, 1st Source Specialty Finance, Inc., SFG Aircraft, Inc., 1st Source Intermediate Holding, LLC, SFG Commercial Aircraft Leasing, Inc., and SFG Equipment Leasing Corporation I. 1ST SOURCE INSURANCE, INC. 1st Source Insurance, Inc. is our insurance agency subsidiary placing property and casualty, individual and group health, and life insurance for individuals and businesses. 1st Source Insurance, Inc. has thirteen offices.
The changes are designed to encourage banks to expand access to credit, investment and banking services in low- and moderate-income communities, adapt to industry changes including mobile and internet banking, provide greater clarity and consistency in the application of CRA regulations and tailor CRA evaluations and data collection to bank size and type.
The changes were designed to encourage banks to expand access to credit, investment and banking services in low- and moderate-income communities, adapt to industry changes including mobile and internet banking, provide greater clarity and consistency in the application of CRA regulations and tailor CRA evaluations and data collection to bank size and type.
In March 2020, in response to the COVID-19 pandemic, the Federal Reserve set the reserve requirement ratio for all net transaction accounts to zero percent, and this requirement remained in place throughout 2024; therefore, all of the Bank’s net transaction accounts as of December 31, 2024 were exempt from reserve requirements.
In March 2020, in response to the COVID-19 pandemic, the Federal Reserve set the reserve requirement ratio for all net transaction accounts to zero percent, and this requirement remained in place throughout 2025; therefore, all of the Bank’s net transaction accounts as of December 31, 2025 were exempt from reserve requirements.
Regulatory capital requirements to which we are subject are disclosed in Part II, Item 8, Financial Statements and Supplementary Data — Note 20 of the Notes to Consolidated Financial Statements. As of December 31, 2024, we were in compliance with all applicable regulatory capital requirements and guidelines.
Regulatory capital requirements to which we are subject are disclosed in Part II, Item 8, Financial Statements and Supplementary Data — Note 20 of the Notes to Consolidated Financial Statements. As of December 31, 2025, we were in compliance with all applicable regulatory capital requirements and guidelines.
OTHER CONSOLIDATED SUBSIDIARIES 1st Portfolio Management, Inc. owns and manages certain available-for-sale investment securities. 1st Source Bank is the managing general partner in eight subsidiaries that have interests in tax-advantaged investments with third parties.
OTHER CONSOLIDATED SUBSIDIARIES 1st Portfolio Management, Inc. owns and manages certain available-for-sale investment securities. 1st Source Bank is the managing general partner in four subsidiaries that have interests in tax-advantaged investments with third parties.
The SOA generally applies to all companies, including 1st Source, that file or are required to file periodic reports with the SEC under the Exchange Act. SOA also addresses functions and responsibilities of audit committees of public companies.
SOX generally applies to all companies, including 1st Source, that file or are required to file periodic reports with the SEC under the Exchange Act. SOX also addresses functions and responsibilities of audit committees of public companies.
Construction equipment finance relationships which may include multiple pieces of equipment generally range from $100,000 to $35 million with fixed or variable interest rates and terms of one to ten years.
Construction equipment finance relationships which may include multiple pieces of equipment generally range from $100,000 to $40 million with fixed or variable interest rates and terms of one to ten years.
We do not currently intend to file notice with the Federal Reserve to become a financial holding company or to engage in expanded financial activities through a financial subsidiary of the Bank. Financial Privacy — The GLBA also includes privacy protections for nonpublic personal information held by financial institutions regarding their customers.
We do not currently intend to file notice with the Federal Reserve to become a financial holding company or to engage in expanded financial activities through a financial subsidiary of the Bank. 6 Table of Contents Financial Privacy — The GLBA also includes privacy protections for nonpublic personal information held by financial institutions regarding their customers.
The SOA requires that audit committees be empowered to engage independent counsel and other advisors, and requires a public company to provide funding to pay the company’s auditors and any advisors the audit committee retains.
SOX requires that audit committees be empowered to engage independent counsel and other advisors, and requires a public company to provide funding to pay the company’s auditors and any advisors the audit committee retains.
Business . 1ST SOURCE CORPORATION 1st Source Corporation, an Indiana corporation incorporated in 1971, is a bank holding company headquartered in South Bend, Indiana that provides, through its subsidiaries (collectively referred to as “1st Source”, the “Company”, “we”, and “our”), a broad array of financial products and services. 1st Source Bank (“Bank”), its banking subsidiary, offers commercial and consumer banking services, trust and wealth advisory services, and insurance to individual and business clients through most of our 77 banking center locations in 18 counties in Indiana and Michigan and Sarasota County in Florida. 1st Source Bank’s Specialty Finance Group, with 18 locations nationwide, offers specialized financing services for construction equipment, new and pre-owned private and cargo aircraft, and various vehicle types (cars, trucks, vans) for fleet purposes.
Business . 1ST SOURCE CORPORATION 1st Source Corporation, an Indiana corporation incorporated in 1971, is a bank holding company headquartered in South Bend, Indiana that provides, through its subsidiaries (collectively referred to as “1st Source”, the “Company”, “we”, and “our”), a broad array of financial products and services. 1st Source Bank (“Bank”), its wholly-owned banking subsidiary, offers commercial and consumer banking services, trust and wealth advisory services, and insurance to individual and business clients (through 1st Source Insurance, Inc.) from most of our 78 banking center locations in 19 counties in Indiana and Michigan and Sarasota County in Florida. 1st Source Bank’s Specialty Finance Group, with 15 locations nationwide, offers specialized financing services for construction equipment, new and pre-owned private and cargo aircraft, and various vehicle types (cars, trucks, vans) for fleet purposes.
OUR PEOPLE At December 31, 2024, we had approximately 1,205 colleagues on a full-time equivalent basis. As a service-driven business, our long-term success depends on our people. And as we have grown, the importance of our talent strategy has intensified. We are committed to a multi-dimensional approach to talent and culture.
OUR PEOPLE At December 31, 2025, we had approximately 1,190 colleagues on a full-time equivalent basis. As a service-driven business, our long-term success depends on our people. And as we have grown, the importance of our talent strategy has intensified. We are committed to a multi-dimensional approach to talent and culture.
Our colleagues, completed 468 career paths, made progress on 310 paths, and more than 5,100 skills were developed. • Our personal finance course is just one of the ways that we helped our colleagues learn the 1st Source philosophy on topics including: Savings and Emergency Fund, Budgeting, Credit and Debt, Renting and Home Ownership, Investing and Retirement, and Protecting your Assets and Charitable Giving.
Our colleagues completed 364 career paths, made progress on 322 paths, and more than 11,000 skills were developed. • Our personal finance course is just one of the ways that we helped our colleagues learn the 1st Source philosophy on topics including: Savings and Emergency Fund, Budgeting, Credit and Debt, Renting and Home Ownership, Investing and Retirement, and Protecting your Assets and Charitable Giving.
We provide developmental opportunities for our colleagues at all levels through a robust set of formal and informal programs. • 1st Source University enables colleagues to build skills and knowledge in multiple facets of our business. • In 2024, 1st Source colleagues completed over 43,500 training modules consisting of over 985 different courses covering topics such as regulations, leadership development, relationship building, cybersecurity, communication, and unconscious bias. • The 1st Source L.E.A.D. program is a set of immersive experiences and collaborative interactions, developing leadership capability over a twelve-month period.
We provide developmental opportunities for our colleagues at all levels through a robust set of formal and informal programs. • 1st Source University enables colleagues to build skills and knowledge in multiple facets of our business. • In 2025, 1st Source colleagues completed over 37,900 training modules consisting of over 950 different courses and materials covering topics such as regulations, leadership development, relationship building, cybersecurity, communication, and unconscious bias. 4 Table of Contents • The 1st Source L.E.A.D. program is a set of immersive experiences and collaborative interactions, developing leadership capability over a twelve-month period.
While our Specialty Finance lending portfolio is concentrated in certain equipment types, we serve a diverse client base. We are not dependent upon any single industry or client. At December 31, 2024, we had consolidated total assets of $8.93 billion, total loans and leases of $6.85 billion, total deposits of $7.23 billion, and total shareholders’ equity of $1.11 billion.
While our Specialty Finance lending portfolio is concentrated in certain equipment types, we serve a diverse client base. We are not dependent upon any single industry or client. At December 31, 2025, we had consolidated total assets of $9.06 billion, total loans and leases of $7.05 billion, total deposits of $7.23 billion, and total shareholders’ equity of $1.27 billion.
We are a registered bank holding company under the Bank Holding Company Act of 1956, as amended (BHCA), subject to regulation, supervision, and examination by the Board of Governors of the Federal Reserve System (Federal Reserve).
We are a registered bank holding company under the Bank Holding Company Act of 1956, as amended (BHCA), subject to regulation, supervision, and examination by the Board of Governors of the Federal Reserve System (Federal Reserve). We are required to file annual reports with the Federal Reserve and provide additional information as required.
In 2024, we reimbursed over $132,500 to colleagues for tuition at 16 different Colleges and Universities with an average of approximately $3,900 per colleague who used the benefit. • To encourage our colleagues to build careers delivering the highest levels of outstanding client service at 1st Source Bank, we developed mastery career paths for critical roles including personal and commercial banking, management and pre-management, and customer service.
In 2025, we reimbursed over $114,000 to colleagues for tuition at 13 different Colleges and Universities with an average of approximately $4,230 per colleague who used the benefit. • To encourage our colleagues to build careers delivering the highest levels of outstanding client service at 1st Source Bank, we have mastery career paths for critical roles including personal and commercial banking, management and pre-management, and the customer service center.
At December 31, 2024, the Bank had $100 million of BTFP borrowings. 7 Table of Contents Sarbanes-Oxley Act of 2002 (SOA) — The SOA includes provisions intended to enhance corporate responsibility and protect investors by improving the accuracy and reliability of corporate disclosures pursuant to the securities laws, and which increase penalties for accounting and auditing improprieties at public traded companies.
Sarbanes-Oxley Act of 2002 (SOX) — SOX includes provisions intended to enhance corporate responsibility and protect investors by improving the accuracy and reliability of corporate disclosures pursuant to the securities laws, and which increase penalties for accounting and auditing improprieties at public traded companies.
We are required to file annual reports with the Federal Reserve and provide additional information as required. 5 Table of Contents The Bank, as an Indiana state bank and member of the Federal Reserve System, is subject to prudential supervision by the Indiana Department of Financial Institutions (DFI) and the Federal Reserve Bank of Chicago (FRB Chicago). 1st Source Bank is regularly examined by and subject to regulations promulgated by the DFI and the Federal Reserve.
The Bank, as an Indiana state bank and member of the Federal Reserve System, is subject to prudential supervision by the Indiana Department of Financial Institutions (DFI) and the Federal Reserve Bank of Chicago (FRB Chicago). We are regularly examined by and subject to regulations promulgated by the DFI and the Federal Reserve.
In 2024, 66 career paths were tracked in our Learning Management System.
In 2025, 67 career paths were tracked in our Learning Management System.
We are also subject to various state laws, including the California Consumer Privacy Act, that generally require us (directly or indirectly through our vendors) to protect the personal information of individual customers and notify them if confidentiality of their personal information is or may have been compromised as the result of a data security breach or failure. 6 Table of Contents USA Patriot Act of 2001 — Regulations under the USA Patriot Act require financial institutions to maintain appropriate controls to combat money laundering activities, perform due diligence of private banking and correspondent accounts, establish standards for verifying customer identity, and provide records related to suspected anti-money laundering activities upon request from federal authorities.
We are also subject to various state laws, including the California Consumer Privacy Act, that generally require us (directly or indirectly through our vendors) to protect the personal information of individual customers and notify them if confidentiality of their personal information is or may have been compromised as the result of a data security breach or failure.
The Bank is also subject to regulations promulgated by the Consumer Financial Protection Bureau (CFPB), but the DFI and the FRB Chicago, rather than the CFPB, currently examine the Bank for compliance with such regulations, and will continue to do so until the Bank's regulatory assets exceed $10 billion for four consecutive quarter-ends.
The Bank is also subject to regulations promulgated by the Consumer Financial Protection Bureau (CFPB), but the DFI and the FRB Chicago, rather than the CFPB, currently examine the Bank for compliance with such regulations, and will continue to do so until the Bank’s regulatory assets exceed $10 billion for four consecutive quarter-ends. 5 Table of Contents U.S. banking regulation materially changed in 2025 with the beginning of the second Trump administration, characterized by a decisive shift in policy from the Biden administration in numerous areas, including bank supervision, bank merger review standards, regulatory thresholds applicable to independent audit and reporting requirements, digital assets regulation, and de novo bank chartering.
The amount of dividends the Bank may pay may also be limited by certain covenant agreements and by the principles of prudent bank management. See Part II, Item 5, Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities for further discussion of dividend limitations.
The amount of dividends the Bank may pay may also be limited by certain covenant agreements and by the principles of prudent bank management.
Monetary Policy and Economic Control — The commercial banking business also is affected by the monetary policies of the Federal Reserve.
See Part II, Item 5, Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities for further discussion of dividend limitations. 7 Table of Contents Monetary Policy and Economic Control — The commercial banking business also is affected by the monetary policies of the Federal Reserve.
Removed
Diversity, Equity, and Inclusion — We cultivate diversity in all forms as part of building a strong culture in which inclusion and belonging are paramount.
Added
In this regard, in 2025 the FDIC and Office of the Comptroller of the Currency (OCC) emphasized that bank examinations will be refocused on material financial risk rather than risk management, reputational risk, and governance issues.
Removed
Our culture is what unifies our colleagues across our diverse business model, ensures we are best positioned to serve our diverse clients and propels our continuous evolution. • For the third consecutive year, all new employees completed a series of facilitated training sessions on unconscious bias within six months of hire. 4 Table of Contents • Diversity in leadership starts with our Board of Directors and we are proud to report that five of our twelve Board Members (42%) are women or minority. • For the eighth consecutive year, more than 21% of our new hires were diverse colleagues. • In 2024, the Company was recognized as Forbes America’s Best Banks and for the third consecutive year as Forbes Best-In-State Bank.
Added
In addition, the Federal Reserve revised the large financial institution rating framework so that institutions with limited supervisory deficiencies could still be considered “well managed.” With respect to bank merger regulation, in 2025 the FDIC and OCC rescinded their respective 2024 bank merger policies and reinstated their pre-2024 merger review policies.
Removed
We expect the Trump administration will seek to implement a regulatory reform agenda that is significantly different from that of the Biden administration, impacting the rulemaking, supervision, examination and enforcement priorities of the federal banking agencies.
Added
As a result, the FDIC has returned to focusing on traditional objective statutory factors under the Bank Merger Act rather than subjective principles-based factors, and the OCC has reinstated expedited review procedures and a streamlined merger application process for non-controversial transactions.
Removed
In March 2023, the Federal Reserve created a Bank Term Funding Program (BTFP) to provide funding to eligible depository institutions in addition to the funding provided through its “discount window.” The Federal Reserve ceased extending advances under the BTFP on March 11, 2024.
Added
Moreover, in November 2025 the FDIC adjusted several asset-based regulatory thresholds governing annual independent audit and reporting requirements for insured depository institutions, which will result in hundreds of smaller institutions no longer being subject to these requirements.
Removed
Under the BTFP, the Federal Reserve offered loans up to one year in length and may be prepaid without penalty. The amount that could be borrowed under the BTFP was based upon the par value of the securities pledged as collateral to the Federal Reserve.
Added
Under the FDIC’s final rule, the asset threshold for requiring an annual independent audit of the institution has been raised from $500 million in total assets to $1 billion, the threshold for requiring management reports on internal controls has increased from $1 billion to $5 billion, and the threshold for audit committee independence requirements was increased from $3 billion to $5 billion in total assets.
Added
With regard to digital asset regulation, in 2025 the federal prudential banking regulators reversed most of the Biden administration’s guidance that discouraged banks from engaging in cryptocurrency related activities. The OCC also issued guidance confirming that national banks may hold digital assets as principal to facilitate network operations and engage in riskless principal crypto-asset transactions.
Added
Finally, in 2025 the federal banking agencies indicated they would be willing to approve several types of de novo charter applications for new institutions, particularly for fintech or technology-focused banks. These de novo applications include those for limited purpose national trust banks and industrial loan companies, many involving non-traditional fintech and digital-asset firms.
Added
In sum, 2025 saw a decisive change in the focus of federal bank regulatory activity, which is expected to continue in 2026.
Added
USA Patriot Act of 2001 — Regulations under the USA Patriot Act require financial institutions to maintain appropriate controls to combat money laundering activities, perform due diligence of private banking and correspondent accounts, establish standards for verifying customer identity, and provide records related to suspected anti-money laundering activities upon request from federal authorities.
Added
In July 2025, the Federal Reserve, OCC, and FDIC issued a joint proposal to repeal the 2023 rule and reinstate the CRA regulatory framework that existed prior to the 2023 final rule, which means banks will continue operating under the prior rules while awaiting the outcome of the formal rescission process, which involves public review and comment.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

26 edited+11 added−4 removed70 unchanged
Biggest changeOur primary source of income is net interest income, which is the difference between interest earned on loans and leases and investments, and interest paid on deposits and borrowings. We expect that we will periodically experience imbalances in the interest rate sensitivities of our assets and liabilities and the relationships of various interest rates to each other.
Biggest changeMarket Risks Fluctuations in interest rates could reduce our profitability and affect the value of our assets — Like other financial institutions, we are subject to interest rate risk. Our primary source of income is net interest income, which is the difference between interest earned on loans and leases and investments, and interest paid on deposits and borrowings.
We rely on security systems to provide the protection and authentication necessary to secure transmission of data against damage by theft, fire, power loss, telecommunications failure or a similar catastrophic event, as well as from security breaches, ransomware, denial of service attacks, viruses, worms, use of artificial intelligence and other disruptive problems caused by hackers.
We rely on security systems to provide the protection and authentication necessary to secure transmission of data against damage by theft, fire, power loss, telecommunications failure or a similar catastrophic event, as well as from security breaches, ransomware, denial of service attacks, viruses, worms, use of artificial intelligence (AI) and other disruptive problems caused by hackers.
Additionally, some residential mortgages are sold into the secondary market and serviced by our principal banking subsidiary, 1st Source Bank. 8 Table of Contents Consumer loans are primarily all other non-real estate loans to individuals in our regional market area. Consumer loans can entail risk, particularly in the case of loans that are unsecured or secured by rapidly depreciating assets.
Additionally, some residential mortgages are sold into the secondary market and serviced by our principal banking subsidiary, 1st Source Bank. Consumer loans are primarily all other non-real estate loans to individuals in our regional market area. Consumer loans can entail risk, particularly in the case of loans that are unsecured or secured by rapidly depreciating assets.
Issuing debit cards to our clients exposes us to potential losses which, in the event of a data breach at one or more major retailers may adversely affect our business, financial condition, and results of operations. Furthermore, there continues to be heightened legislative and regulatory focus on privacy, data protection and information security.
Issuing debit cards to our clients exposes us to potential losses which, in the event of a data breach at one or more major retailers may adversely affect our business, financial condition, and results of operations. 12 Table of Contents Furthermore, there continues to be heightened legislative and regulatory focus on privacy, data protection and information security.
This framework is comprised of various processes, systems and strategies, and is designed to manage the types of risk to which we are subject, including, credit, market, liquidity, operational, legal/compliance, and reputational risks.
This framework is comprised of various processes, systems and strategies, and is designed to manage the types of risk to which we are subject, including, credit, market, liquidity/capital, strategic/operational, legal/compliance, and reputational risks.
Any such losses could have a material adverse effect on our financial condition and results of operations. We may be adversely affected by climate change and related legislative and regulatory initiatives — Federal and state legislatures and regulatory agencies continue to propose and advance numerous legislative and regulatory initiatives seeking to mitigate the effects of climate change.
Any such losses could have a material adverse effect on our financial condition and results of operations. 9 Table of Contents We may be adversely affected by climate change and related legislative and regulatory initiatives — Federal and state legislatures and regulatory agencies continue to propose and advance numerous legislative and regulatory initiatives seeking to mitigate the effects of climate change.
In addition, our implementation of certain new technologies, such as those related to artificial intelligence, automation and algorithms, in our business processes may have unintended consequences due to their limitations or our failure to use them effectively.
In addition, our implementation of certain new technologies, such as those related to AI, automation and algorithms, in our business processes may have unintended consequences due to their limitations or our failure to use them effectively.
These conditions include short-term and long-term interest rates, inflation, money supply, political issues, legislative and regulatory changes, fluctuations in both debt and equity capital markets, broad trends in industry and finance, unemployment, infectious disease epidemics or outbreaks and the strength of the U.S. economy and the local economies in which we operate, all of which are beyond our control.
These conditions include short-term and long-term interest rates, inflation, money supply, political issues, legislative and regulatory changes, fluctuations in both debt and equity capital markets, broad trends in industry and finance, unemployment, government shutdowns, debt ceilings or funding for the government, tariffs and other trade policies, infectious disease epidemics or outbreaks and the strength of the U.S. economy and the local economies in which we operate, all of which are beyond our control.
Failure to successfully keep pace with technological change affecting the financial services industry could have a material adverse impact on our business and, in turn, our financial condition and results of operations.
Failure to successfully keep pace with technological change affecting the financial services industry could have a material adverse impact on our business and, in turn, our financial condition and results of operations. We are in the early stages of incorporating AI into our business activities to increase employee productivity.
Failure to comply with laws, regulations or policies could result in sanctions by regulatory agencies, civil money penalties and/or reputation damage, which could have a material adverse effect on our business, financial condition and results of operations. 12 Table of Contents As we continue to grow in size and complexity, regulatory expectations and scrutiny will likely increase and could have a potential impact on our operations and business — We have organically grown steadily over the past four years.
Failure to comply with laws, regulations or policies could result in sanctions by regulatory agencies, civil money penalties and/or reputation damage, which could have a material adverse effect on our business, financial condition and results of operations. 13 Table of Contents As we continue to grow in size and complexity, regulatory expectations and scrutiny will likely increase and could have a potential impact on our operations and business — As financial institutions grow, so do the expectations of regulatory agencies regarding the financial institution’s ability to control for increasingly complex and sophisticated business operations.
Item 1A. Risk Factors. An investment in our common stock is subject to risks inherent to our business. The material risks and uncertainties that we believe affect us are described below. See “Forward Looking Statements” under Item 7 of this report for a discussion of other important factors that can affect our business.
Item 1A. Risk Factors. An investment in our common stock is subject to risks inherent to our business. The material risks and uncertainties that we believe affect us are described below.
If these events occur, we may experience a decrease in the value of our loan and lease portfolio and our revenue, and may incur additional operational expenses, each of which could have a material adverse effect on our financial condition and results of operations. 9 Table of Contents Market Risks Fluctuations in interest rates could reduce our profitability and affect the value of our assets — Like other financial institutions, we are subject to interest rate risk.
If these events occur, we may experience a decrease in the value of our loan and lease portfolio and our revenue, and may incur additional operational expenses, each of which could have a material adverse effect on our financial condition and results of operations.
Liquidity Risks We could experience an unexpected inability to obtain needed liquidity which could adversely affect our business, profitability, and viability as a going concern — The liquidity of a financial institution reflects its ability to meet loan requests, to accommodate possible outflows in deposits, and to take advantage of interest rate market opportunities and is essential to a financial institution’s business.
Market declines, reductions in the value of our clients’ accounts, and the loss of wealth management clients may negatively impact the fees generated by our trust and wealth management business and could have an adverse effect on our business, financial condition and results of operations. 10 Table of Contents Liquidity/Capital Risks We could experience an unexpected inability to obtain needed liquidity which could adversely affect our business, profitability, and viability as a going concern — The liquidity of a financial institution reflects its ability to meet loan requests, to accommodate possible outflows in deposits, and to take advantage of interest rate market opportunities and is essential to a financial institution’s business.
Our available-for-sale investment securities portfolio consists of obligations of the U.S. Treasury and federal agencies, obligations of state and local municipalities and federal agency mortgage obligations. We held no held-to-maturity or equity securities at December 31, 2024. Many of the instruments in our securities portfolio are particularly sensitive to interest rate fluctuations, especially long-term fixed-income securities.
We held no held-to-maturity or equity securities at December 31, 2025. Many of the instruments in our securities portfolio are particularly sensitive to interest rate fluctuations, especially long-term fixed-income securities.
We maintain a cyber insurance policy that is designed to cover a majority of loss resulting from cyber security breaches, but there is no assurance such coverage or other protective measures we employ will be adequate to address all potential material adverse impacts. 11 Table of Contents We also confront the risk of being compromised by emails sent by perpetrators posing as company executives or vendors in order to dupe company personnel into sending large sums of money to accounts controlled by the perpetrators.
We maintain a cyber insurance policy that is designed to cover a majority of loss resulting from cyber security breaches, but there is no assurance such coverage or other protective measures we employ will be adequate to address all potential material adverse impacts.
We have policies and procedures in place that seek to protect our reputation and promote ethical conduct. Nonetheless, negative publicity may arise regarding our business, employees, or customers, with or without merit, and could result in the loss of customers, investors, or employees, costly litigation, a decline in revenues, and increased government regulation.
Nonetheless, negative publicity may arise regarding our business, employees, or customers, with or without merit, and could result in the loss of customers, investors, or employees, costly litigation, a decline in revenues, increased government regulation, and could adversely affect the trading price of our shares. Item 1B. Unresolved Staff Comments. None
Operational Risks Our risk management framework could prove ineffective which could have a material adverse effect on our ability to mitigate risks and/or losses — We have established a risk management framework to identify and manage our risk exposure.
If we fail to maintain capital to meet regulatory requirements, our financial condition, liquidity and results of operations would be materially and adversely affected. 11 Table of Contents Strategic/Operational Risks Our risk management framework could prove ineffective which could have a material adverse effect on our ability to mitigate risks and/or losses — We have established a risk management framework to identify and manage our risk exposure.
For example, the Durbin Amendment to the Dodd-Frank Act limits the amount of interchange fees that banks with assets of $10.0 billion or more may charge to process electronic debit transactions. Banks must comply with the Durbin Amendment no later than July 1 of the next calendar year after the bank crosses the $10.0 billion asset threshold.
Banks must comply with the Durbin Amendment no later than July 1 of the next calendar year after the bank crosses the $10.0 billion asset threshold.
Over any defined period of time, our interest-earning assets may be more sensitive to changes in market interest rates than our interest-bearing liabilities, or vice-versa. In addition, the individual market interest rates underlying our loan and lease and deposit products may not change to the same degree over a given time period.
In addition, the individual market interest rates underlying our loan and lease and deposit products may not change to the same degree over a given time period. If market interest rates should move contrary to our position, earnings may be negatively affected.
However, the Board of Depositories could alter this requirement in the future, which could adversely affect our liquidity depending on the amount of collateral we may be required to pledge. 10 Table of Contents Unrealized losses in our available-for-sale investment securities portfolio could adversely affect liquidity — As market interest rates increased during 2022 and 2023, we experienced increased unrealized losses within our available-for-sale investment securities portfolio.
However, the Board of Depositories could alter this requirement in the future, which could adversely affect our liquidity depending on the amount of collateral we may be required to pledge.
Market interest rates are beyond our control, and they fluctuate in response to general economic conditions and the policies of various governmental and regulatory agencies, in particular, the Federal Reserve Board.
Additionally, changes in levels of market interest rates could cause our debt securities available-for-sale to move into unrealized loss positions which is a negative component of total shareholders’ equity. Market interest rates are beyond our control, and they fluctuate in response to general economic conditions and the policies of various governmental and regulatory agencies, in particular, the Federal Reserve Board.
Our inability to receive dividends from our subsidiaries could have a material adverse effect on our business, financial condition and results of operations.
Our inability to receive dividends from our subsidiaries could have a material adverse effect on our business, financial condition and results of operations. We are required to maintain capital to meet regulatory requirements — 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 continually encounter technological change — The financial services industry is constantly undergoing rapid technological change with frequent introductions of new technology-driven products and services.
We continually encounter technological change — The financial services industry is constantly undergoing rapid technological change with frequent introductions of new technology-driven products and services, including innovative ways that customers can make payments or manage their accounts, such as through the use of mobile payments, digital wallets or digital currencies.
Credit Risks We are subject to credit risks relating to our loan and lease portfolios — Commercial and commercial real estate loans generally involve higher credit risks than residential real estate and consumer loans.
See “Forward Looking Statements” under Item 7 of this report for a discussion of other important factors that can affect our business. 8 Table of Contents Credit Risks We are subject to credit risks relating to our loan and lease portfolios — Commercial and commercial real estate loans generally involve higher credit risks than residential real estate and consumer loans.
If market interest rates should move contrary to our position, earnings may be negatively affected. In addition, loan and lease volume and quality and deposit volume and mix can be affected by market interest rates as can the businesses of our clients.
In addition, loan and lease volume and quality and deposit volume and mix can be affected by market interest rates as can the businesses of our clients. Changes in levels of market interest rates could have a material adverse effect on our net interest spread, asset quality, origination volume, and overall profitability.
As financial institutions grow, so do the expectations of regulatory agencies regarding the financial institution’s ability to control for increasingly complex and sophisticated business operations. Certain regulations and laws have embedded asset thresholds that change regulatory expectations, have different financial statement impacts, require different committee and management compositions, or enhanced reporting requirements.
Certain regulations and laws have embedded asset thresholds that change regulatory expectations, have different financial statement impacts, require different committee and management compositions, or enhanced reporting requirements. For example, the Durbin Amendment to the Dodd-Frank Act limits the amount of interchange fees that banks with assets of $10.0 billion or more may charge to process electronic debit transactions.
Removed
Changes in levels of market interest rates could have a material adverse effect on our net interest spread, asset quality, origination volume, and overall profitability. Additionally, changes in levels of market interest rates could cause our debt securities available-for-sale to move into unrealized loss positions which is a negative component of total shareholders’ equity.
Added
We expect that we will periodically experience imbalances in the interest rate sensitivities of our assets and liabilities and the relationships of various interest rates to each other. Over any defined period of time, our interest-earning assets may be more sensitive to changes in market interest rates than our interest-bearing liabilities, or vice-versa.
Removed
Market declines, reductions in the value of our clients’ accounts, and the loss of wealth management clients may negatively impact the fees generated by our trust and wealth management business and could have an adverse effect on our business, financial condition and results of operations.
Added
Unrealized losses in our available-for-sale investment securities portfolio could adversely affect liquidity — As market interest rates increased during 2022 and 2023, we experienced increased unrealized losses within our available-for-sale investment securities portfolio. Our available-for-sale investment securities portfolio consists of obligations of the U.S. Treasury and federal agencies, obligations of state and local municipalities and federal agency mortgage obligations.
Removed
In addition, focus among investors, customers, and regulators on environmental, social and governance (“ESG”) issues has continued to increase in recent years. Customers, prospective customers, investors or third parties evaluate us based on their assessment of our achievement of ESG objectives and may assign their ESG ratings to us.
Added
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.
Removed
Such persons may believe that our practices, including our lending practices, are not sufficiently robust from an ESG perspective and may publish their views. Adverse publicity regarding such assessments of our ESG performance could damage our reputation or prospects. Adverse market perception can adversely affect the trading price of our shares. Item 1B. Unresolved Staff Comments.
Added
Our ability to raise additional capital depends on conditions in the capital markets, economic conditions and a number of other factors, including investor perceptions regarding the banking industry, market conditions and governmental activities and on our financial condition and performance.
Added
Accordingly, we cannot assure you that we will be able to raise additional capital if needed or on terms acceptable to us.
Added
We also confront the risk of being compromised by emails sent by perpetrators posing as company executives or vendors in order to dupe company personnel into sending large sums of money to accounts controlled by the perpetrators.
Added
In recent years, competition has increased from institutions not subject to the same regulatory restrictions as domestic banks and holding companies, including financial technology companies, or ‘fintechs,’ which may offer bank-like products or services that compete directly with the Company’s products and services.
Added
We have not yet deployed AI-driven systems in critical decision-making or client-facing processes. Our vendors or third parties may develop or incorporate AI technology in certain business processes, services, or products. Any reliance on AI presents a number of risks and challenges to our business.
Added
Furthermore, the legal and regulatory landscape impacting new technologies such as AI is evolving rapidly, and the inability to predict how this regulation will take shape and the absence of a uniform regulatory framework for AI may present unforeseen challenges in applying and relying on existing compliance systems.
Added
Complying with existing and new AI and data usage laws, and inconsistencies in regulation from jurisdiction to jurisdiction, could increase expenses and exposure to legal or regulatory proceedings.
Added
We have policies and procedures in place that seek to protect our reputation and promote ethical conduct.

Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

5 edited+1 added−1 removed11 unchanged
Biggest changeOur processes for assessing, identifying, and managing material risks from cybersecurity threats are based on examination guidance published by the Federal Financial Institution Examination Council (FFIEC), an interagency body established under the Financial Institutions Regulatory and Interest Rate Control Act of 1978.
Biggest changeSuch reports include management’s updates on the inherent risk level of cybersecurity and other information security risks and the strength of controls designed to mitigate those risks. 14 Table of Contents Our processes for assessing, identifying, and managing material risks from cybersecurity threats are based on examination guidance published by the Federal Financial Institution Examination Council (FFIEC), an interagency body established under the Financial Institutions Regulatory and Interest Rate Control Act of 1978.
Such oversight includes regular reporting by management to the Board on the adequacy of such processes and potential material issues identified. Before escalation to the Board, issues are generally identified and assessed through our risk governance structure established under our Enterprise Risk Management Program.
As noted above, such oversight includes regular reporting by management to the Board on the adequacy of such processes and potential material issues identified. Before escalation to the Board, issues are generally identified and assessed through our risk governance structure established under our Enterprise Risk Management Program.
These management oversight committees include the Information Security Committee, co-chaired by the CISO and CRO, the Operational and Compliance Risk Committee, chaired by the CFO, vice chaired by the CISO and Chief Compliance Officer, the IT Steering Committee, chaired by the Chief Information Officer (CIO), the Enterprise Risk Management Committee, chaired by the CRO, the Data Governance Committee, chaired by the CIO, and the executive management committee known as the Strategic Deployment Committee, chaired by the CEO.
These management oversight committees include the Information Security Committee, co-chaired by the CISO and CRO, the Operational and Compliance Risk Committee, chaired by the Chief Operating Officer (COO) and vice chaired by the Chief Compliance Officer, the IT Steering Committee, chaired by the Chief Information Officer (CIO), the Enterprise Risk Management Committee, chaired by the CRO, the Data Governance Committee, chaired by the CIO, and the executive management committee known as the Strategic Deployment Committee, chaired by the Chief Executive Officer (CEO).
Item 1C. Cybersecurity. Risk Management and Strategy Our Board of Directors has delegated primary responsibility for oversight of cybersecurity risk management to the Audit, Finance & Risk Committee of the Board. The Committee receives quarterly reports from the Chief Information Security Officer (CISO) and Chief Risk Officer (CRO), respectively, and reviews them with such officers.
Item 1C. Cybersecurity. Risk Management and Strategy Our Board of Directors has delegated primary responsibility for oversight of cybersecurity risk management to the Digital and Technology Committee of the Board. The Committee receives quarterly reports from the Chief Information Security Officer (CISO) and the Chief Information Officer (CIO), respectively, and reviews them with such officers.
Risk Factors - Operational Risks - Technology Security Breaches.” 14 Table of Contents
Risk Factors - Operational Risks - Technology Security Breaches.”
Removed
These reports are made available to all board members concurrently. The CRO’s report includes evaluation of the level of cybersecurity risks and strength of mitigating controls. All board members are invited to attend the portion of the Committee’s meetings for review of reports received on risk management from management (e.g., the CRO, CISO, Chief Compliance Officer).
Added
These reports are made available to all board members. In addition, our Chief Risk Officer (CRO) provides a quarterly report to the full Board that covers material risks to the organization and cybersecurity and other information security risks are among the organization’s material risks.

Item 2. Properties

Properties — owned and leased real estate

4 edited+0 added−0 removed2 unchanged
Biggest changeJoseph, Starke, Tippecanoe, Wells, and Whitley Counties in the State of Indiana, Berrien, Cass, and Kalamazoo Counties in the State of Michigan, and Sarasota County in the state of Florida. At December 31, 2023, we owned approximately 35 acres in St.
Biggest changeJoseph, Starke, Tippecanoe, Wells, and Whitley Counties in the State of Indiana, Berrien, Cass, and Kalamazoo Counties in the State of Michigan, and Sarasota County in the state of Florida. 1st Source Bank also owns approximately 28 acres in St. Joseph County which were approved by the Board for development and construction of an operations and training facility.
Joseph County of which approximately 28 acres were approved by the Board for development and construction of an operations and training facility. During 2024 we sold the approximate seven acres of land that was not part of the 28 acres approved by the Board for development and construction.
During 2024 we sold approximately seven acres of land that was not part of the 28 acres approved by the Board for development and construction.
Item 2. Properties. Our headquarters building is located in downtown South Bend, Indiana. The building is part of a larger complex, including a 300-room hotel and a 500-car parking garage. Our lease on this property runs through September 2027. As of December 31, 2024, 1st Source leases approximately 71% of the office space in this complex.
Item 2. Properties. Our headquarters building is located in downtown South Bend, Indiana. The building is part of a larger complex, including a 300-room hotel and a 500-car parking garage. Our lease on this property runs through December 2029 for the 7th floor and September 2027 for all remaining floors.
At December 31, 2024, we owned or leased properties where our 77 banking centers were located. Our facilities are located in Allen, DeKalb, Elkhart, Fulton, Huntington, Kosciusko, LaPorte, Marshall, Porter, Pulaski, St.
As of December 31, 2025, 1st Source leases approximately 83% of the office space in this complex. 15 Table of Contents At December 31, 2025, we owned or leased properties where our 78 banking centers were located. Our facilities are located in Allen, DeKalb, Elkhart, Fulton, Hamilton, Huntington, Kosciusko, LaPorte, Marshall, Porter, Pulaski, St.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

6 edited+0 added−0 removed2 unchanged
Biggest changePeriod Total Number of Shares Purchased Average Price Paid Per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs* Maximum Number (or Approximate Dollar Value) of Shares that may yet be Purchased Under the Plans or Programs October 01 - 31, 2024 — $ — — 1,000,000 November 01 - 30, 2024 2,997 59.48 2,997 997,003 December 01 - 31, 2024 — — — 997,003 *1st Source maintains a stock repurchase plan that was authorized by the Board of Directors on October 19, 2023.
Biggest changePeriod Total Number of Shares Purchased Average Price Paid Per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs* Maximum Number (or Approximate Dollar Value) of Shares that may yet be Purchased Under the Plans or Programs October 01 - 31, 2025 42,630 $ 59.52 42,630 794,010 November 01 - 30, 2025 27,043 59.82 27,043 766,967 December 01 - 31, 2025 — — — 766,967 *1st Source maintains a stock repurchase plan that was authorized by the Board of Directors on October 19, 2023.
Comparison of Five Year Cumulative Total Return * Among 1st Source, Morningstar Market Weighted NASDAQ Index** and Peer Group Index*** * Assumes $100 invested on December 31, 2019, in 1st Source Corporation common stock, NASDAQ market index, and peer group index. ** The Morningstar Weighted NASDAQ Index Return is calculated using all companies which trade as NASD Capital Markets, NASD Global Markets or NASD Global Select.
Comparison of Five Year Cumulative Total Return * Among 1st Source, Morningstar Market Weighted NASDAQ Index** and Peer Group Index*** * Assumes $100 invested on December 31, 2020, in 1st Source Corporation common stock, NASDAQ market index, and peer group index. ** The Morningstar Weighted NASDAQ Index Return is calculated using all companies which trade as NASD Capital Markets, NASD Global Markets or NASD Global Select.
For information regarding restrictions on dividends, see Part I, Item 1, Business - Regulation and Supervision - Dividends and Part II, Item 8, Financial Statements and Supplementary Data - Note 20 of the Notes to Consolidated Financial Statements. Item 6. [Reserved] 16 Table of Contents
For information regarding restrictions on dividends, see Part I, Item 1, Business - Regulation and Supervision - Dividends and Part II, Item 8, Financial Statements and Supplementary Data - Note 20 of the Notes to Consolidated Financial Statements. Item 6. [Reserved] 17 Table of Contents
Under the terms of the plan, 1st Source may repurchase up to 1,000,000 shares of its common stock from time to time to mitigate the potential dilutive effects of stock-based incentive plans and other potential uses of common stock for corporate purposes. Since the inception of the plan, 1st Source has repurchased a total of 2,997 shares.
Under the terms of the plan, 1st Source may repurchase up to 1,000,000 shares of its common stock from time to time to mitigate the potential dilutive effects of stock-based incentive plans and other potential uses of common stock for corporate purposes. Since the inception of the plan, 1st Source has repurchased a total of 233,033 shares.
The following table shows our share repurchase activity during the three months ended December 31, 2024.
The following table shows our share repurchase activity during the three months ended December 31, 2025.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities. Our common stock is traded on the NASDAQ Global Select Market under the symbol “SRCE.” As of February 14, 2025, there were 1,857 holders of record of 1st Source common stock.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities. Our common stock is traded on the NASDAQ Global Select Market under the symbol “SRCE.” As of February 13, 2026, there were 1,716 holders of record of 1st Source common stock.

Item 6. [Reserved]

Selected Financial Data — reserved (removed by SEC in 2021)

2 edited+0 added−0 removed0 unchanged
Biggest changeFinancial Statements and Supplementary Data 39 Reports of Independent Registered Public Accounting Firm 40 Consolidated Statements of Financial Condition 43 Consolidated Statements of Income 44 Consolidated Statements of Comprehensive Income 45 Consolidated Statements of Shareholders’ Equity 45 Consolidated Statements of Cash Flow s 46 Notes to Consolidated Financial Statements 47
Biggest changeFinancial Statements and Supplementary Data 40 Reports of Independent Registered Public Accounting Firm 41 Consolidated Statements of Financial Condition 44 Consolidated Statements of Income 45 Consolidated Statements of Comprehensive Income 46 Consolidated Statements of Shareholders’ Equity 46 Consolidated Statements of Cash Flow s 47 Notes to Consolidated Financial Statements 48
Item 6. [Reserved] 16 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 17 Item 7A. Quantitative and Qualitative Disclosures About Market Risk 38 Item 8.
Item 6. [Reserved] 17 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 18 Item 7A. Quantitative and Qualitative Disclosures About Market Risk 39 Item 8.

Item 7. Management's Discussion & Analysis

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

139 edited+32 added−33 removed69 unchanged
Biggest changeNonaccrual loans and leases are included in the average loan and lease balance outstanding. 2024 2023 2022 (Dollars in thousands) Average Balance Interest Income/Expense Yield/Rate Average Balance Interest Income/Expense Yield/Rate Average Balance Interest Income/Expense Yield/Rate ASSETS Investment securities available-for-sale: Taxable $ 1,539,900 $ 25,720 1.67 % $ 1,632,567 $ 24,501 1.50 % $ 1,805,041 $ 26,294 1.46 % Tax-exempt (1) 30,464 1,312 4.31 % 44,083 1,805 4.09 % 40,310 1,311 3.25 % Mortgages held for sale 3,233 214 6.62 % 2,368 155 6.55 % 5,178 217 4.19 % Loans and leases, net of unearned discount (1) 6,598,329 451,432 6.84 % 6,203,857 387,524 6.25 % 5,566,701 264,043 4.74 % Other investments 112,563 5,925 5.26 % 73,729 3,663 4.97 % 243,938 2,579 1.06 % Total earning assets (1) 8,284,489 484,603 5.85 % 7,956,604 417,648 5.25 % 7,661,168 294,444 3.84 % Cash and due from banks 65,285 70,304 75,836 Allowance for loan and lease losses (151,050) (144,183) (133,028) Other assets 540,815 532,072 469,135 Total assets $ 8,739,539 $ 8,414,797 $ 8,073,111 LIABILITIES AND SHAREHOLDERS’ EQUITY Interest-bearing deposits $ 5,509,956 $ 166,842 3.03 % $ 5,204,095 $ 123,162 2.37 % $ 4,673,494 $ 25,231 0.54 % Short-term borrowings: Securities sold under agreements to repurchase 60,388 542 0.90 % 78,928 136 0.17 % 166,254 85 0.05 % Other short-term borrowings 168,460 8,434 5.01 % 134,683 6,896 5.12 % 48,716 1,412 2.90 % Subordinated notes 58,764 4,217 7.18 % 58,764 4,174 7.10 % 58,764 3,550 6.04 % Long-term debt and mandatorily redeemable securities 40,971 3,165 7.72 % 46,323 3,892 8.40 % 54,940 69 0.13 % Total interest-bearing liabilities 5,838,539 183,200 3.14 % 5,522,793 138,260 2.50 % 5,002,168 30,347 0.61 % Noninterest-bearing deposits 1,609,001 1,753,149 2,037,882 Other liabilities 161,657 151,659 103,740 Shareholders’ equity 1,057,331 926,935 872,721 Noncontrolling interests 73,011 60,261 56,600 Total liabilities and equity $ 8,739,539 $ 8,414,797 $ 8,073,111 Less: Fully tax-equivalent adjustments (586) (741) (628) Net interest income/margin (GAAP-derived) (1) $ 300,817 3.63 % $ 278,647 3.50 % $ 263,469 3.44 % Fully tax-equivalent adjustments 586 741 628 Net interest income/margin - FTE (1) $ 301,403 3.64 % $ 279,388 3.51 % $ 264,097 3.45 % (1) See “Reconciliation of Non-GAAP Financial Measures” for more information on this performance measure/ratio. 21 Table of Contents Reconciliation of Non-GAAP Financial Measures — Our accounting and reporting policies conform to GAAP in the United States and prevailing practices in the banking industry.
Biggest changeNonaccrual loans and leases are included in the average loan and lease balance outstanding. 2025 2024 2023 (Dollars in thousands) Average Balance Interest Income/Expense Yield/Rate Average Balance Interest Income/Expense Yield/Rate Average Balance Interest Income/Expense Yield/Rate ASSETS Investment securities available-for-sale: Taxable $ 1,463,913 $ 36,360 2.48 % $ 1,539,900 $ 25,720 1.67 % $ 1,632,567 $ 24,501 1.50 % Tax-exempt (1) 32,894 1,501 4.56 % 30,464 1,312 4.31 % 44,083 1,805 4.09 % Mortgages held for sale 3,894 245 6.29 % 3,233 214 6.62 % 2,368 155 6.55 % Loans and leases, net of unearned discount (1) 6,934,619 471,070 6.79 % 6,598,329 451,432 6.84 % 6,203,857 387,524 6.25 % Other investments 128,273 5,830 4.54 % 112,563 5,925 5.26 % 73,729 3,663 4.97 % Total earning assets (1) 8,563,593 515,006 6.01 % 8,284,489 484,603 5.85 % 7,956,604 417,648 5.25 % Cash and due from banks 66,638 65,285 70,304 Allowance for loan and lease losses (161,191) (151,050) (144,183) Other assets 512,297 540,815 532,072 Total assets $ 8,981,337 $ 8,739,539 $ 8,414,797 LIABILITIES AND SHAREHOLDERS’ EQUITY Interest-bearing deposits $ 5,780,337 $ 155,914 2.70 % $ 5,509,956 $ 166,842 3.03 % $ 5,204,095 $ 123,162 2.37 % Short-term borrowings: Securities sold under agreements to repurchase 59,433 494 0.83 % 60,388 542 0.90 % 78,928 136 0.17 % Other short-term borrowings 27,191 1,088 4.00 % 168,460 8,434 5.01 % 134,683 6,896 5.12 % Subordinated notes 58,764 4,033 6.86 % 58,764 4,217 7.18 % 58,764 4,174 7.10 % Long-term debt and mandatorily redeemable securities 41,278 4,690 11.36 % 40,971 3,165 7.72 % 46,323 3,892 8.40 % Total interest-bearing liabilities 5,967,003 166,219 2.79 % 5,838,539 183,200 3.14 % 5,522,793 138,260 2.50 % Noninterest-bearing deposits 1,601,954 1,609,001 1,753,149 Other liabilities 152,504 161,657 151,659 Shareholders’ equity 1,202,863 1,057,331 926,935 Noncontrolling interests 57,013 73,011 60,261 Total liabilities and equity $ 8,981,337 $ 8,739,539 $ 8,414,797 Less: Fully tax-equivalent adjustments (612) (586) (741) Net interest income/margin (GAAP-derived) (1) $ 348,175 4.07 % $ 300,817 3.63 % $ 278,647 3.50 % Fully tax-equivalent adjustments 612 586 741 Net interest income/margin - FTE (1) $ 348,787 4.07 % $ 301,403 3.64 % $ 279,388 3.51 % (1) See “Reconciliation of Non-GAAP Financial Measures” for more information on this performance measure/ratio. 22 Table of Contents Reconciliation of Non-GAAP Financial Measures — Our accounting and reporting policies conform to GAAP in the United States and prevailing practices in the banking industry.
The results or outcomes indicated by our forward-looking statements may not be realized due to a variety of factors, including, without limitation, the following: • Local, regional, national, and international economic conditions and the impact they may have on us and our clients and our assessment of that impact. • Changes in the level of nonperforming assets and charge-offs. • Changes in estimates of future cash reserve requirements based upon the periodic review thereof under relevant regulatory and accounting requirements. • The effects of and changes in trade and monetary and fiscal policies and laws, including the interest rate policies of the Federal Reserve Board. • Inflation, interest rate, securities market, and monetary fluctuations, including substantial changes in the cost of fuel. • Political instability, acts of war or terrorism, or cybersecurity threats. • The spread of infectious diseases or pandemics. • The timely development and acceptance of new products and services and perceived overall value of these products and services by others. • Changes in consumer spending, borrowings, and savings habits. • Changes in the financial performance and/or condition of our borrowers. • Technological changes. • The impact of climate change. • Acquisitions and integration of acquired businesses. • The ability to increase market share and control expenses. • The ability to expand effectively into new markets that we target. • Changes in the competitive environment. • The effect of changes in laws and regulations (including laws and regulations concerning taxes, banking, securities, insurance, and climate change) with which we and our subsidiaries must comply. • The effect of changes in accounting policies and practices and auditing requirements, as may be adopted by the regulatory agencies, as well as the Public Company Accounting Oversight Board, the Financial Accounting Standards Board, and other accounting standard setters. • Changes in our organization, compensation, and benefit plans. • The costs and effects of legal and regulatory developments including the resolution of legal proceedings or regulatory or other governmental inquires and the results of regulatory examinations or reviews. 17 Table of Contents • Greater than expected costs or difficulties related to the integration of new products and lines of business. • Our success at managing the risks described in Item 1A.
The results or outcomes indicated by our forward-looking statements may not be realized due to a variety of factors, including, without limitation, the following: • Local, regional, national, and international economic conditions and the impact they may have on us and our clients and our assessment of that impact. • Changes in the level of nonperforming assets and charge-offs. • Changes in estimates of future cash reserve requirements based upon the periodic review thereof under relevant regulatory and accounting requirements. • The effects of and changes in trade and monetary and fiscal policies and laws, including the interest rate policies of the Federal Reserve Board. • Inflation, interest rate, securities market, and monetary fluctuations, including substantial changes in the cost of fuel. • Political instability, acts of war or terrorism, or cybersecurity threats. • The spread of infectious diseases or pandemics. • The timely development and acceptance of new products and services and perceived overall value of these products and services by others. • Changes in consumer spending, borrowings, and savings habits. • Changes in the financial performance and/or condition of our borrowers. • Technological changes. • The impact of climate change. • Acquisitions and integration of acquired businesses. • The ability to increase market share and control expenses. • The ability to expand effectively into new markets that we target. • Changes in the competitive environment. • The effect of changes in laws and regulations (including laws and regulations concerning taxes, banking, securities, insurance, and climate change) with which we and our subsidiaries must comply. • The effect of changes in accounting policies and practices and auditing requirements, as may be adopted by the regulatory agencies, as well as the Public Company Accounting Oversight Board, the Financial Accounting Standards Board, and other accounting standard setters. • Changes in our organization, compensation, and benefit plans. • The costs and effects of legal and regulatory developments including the resolution of legal proceedings or regulatory or other governmental inquires and the results of regulatory examinations or reviews. 18 Table of Contents • Greater than expected costs or difficulties related to the integration of new products and lines of business. • Our success at managing the risks described in Item 1A.
Risks include construction and developer related risks and delays, site issues, climate and weather risks, regulatory problems and permitting issues, as well as utility interconnection delays. Maturity risk and refinancing costs are elevated given the higher interest rate environment. To date, we have not incurred any losses in this portfolio and credit performance continues to be favorable.
Risks include construction and developer related risks and delays, site issues, climate and weather risks, regulatory problems and permitting issues, as well as utility interconnection delays. Maturity risk and refinancing costs are elevated given the elevated interest rate environment. To date, we have not incurred any losses in this portfolio and credit performance continues to be favorable.
Internal guidelines consist of: (i) Available Liquidity (sum of short term borrowing capacity) greater than $500 million; (ii) Liquidity Ratio (total of net cash, short term investments and unpledged marketable assets divided by the sum of net deposits and short term liabilities) greater than 15%; (iii) Dependency Ratio (net potentially volatile liabilities minus short term investments divided by total earning assets minus short term investments) less than 15%; and (iv) Loans to Deposits Ratio less than 100% At December 31, 2024, we were in compliance with the foregoing internal policies and regulatory guidelines.
Internal guidelines consist of: (i) Available Liquidity (sum of short term borrowing capacity) greater than $500 million; (ii) Liquidity Ratio (total of net cash, short term investments and unpledged marketable assets divided by the sum of net deposits and short term liabilities) greater than 15%; (iii) Dependency Ratio (net potentially volatile liabilities minus short-term investments divided by total earning assets minus short-term investments) less than 15%; and (iv) Loans to Deposits Ratio less than 100% At December 31, 2025, we were in compliance with the foregoing internal policies and regulatory guidelines.
Mandatorily redeemable shares are issued under the terms of one of our executive incentive compensation plans and are settled based on book value per share with changes from the previous reporting date recorded as interest expense. 20 Table of Contents The following table provides an analysis of net interest income and illustrates interest income earned and interest expense charged for each major component of interest earning assets and the interest bearing liabilities.
Mandatorily redeemable shares are issued under the terms of one of our executive incentive compensation plans and are settled based on book value per share with changes from the previous reporting date recorded as interest expense. 21 Table of Contents The following table provides an analysis of net interest income and illustrates interest income earned and interest expense charged for each major component of interest earning assets and the interest bearing liabilities.
At December 31, 2024 and 2023, the impact of these hypothetical fluctuations in interest rates on our derivative holdings was not significant, and, as such, separate disclosure is not presented. We manage the interest rate risk related to mortgage loan commitments by entering into contracts for future delivery of loans with outside parties.
At December 31, 2025 and 2024, the impact of these hypothetical fluctuations in interest rates on our derivative holdings was not significant, and, as such, separate disclosure is not presented. We manage the interest rate risk related to mortgage loan commitments by entering into contracts for future delivery of loans with outside parties.
To estimate expected loan and lease losses under the Current Expected Credit Losses (CECL) methodology, we use a broad range of data over a lengthy time horizon, generally back to the fourth quarter of 2007, thus capturing most of the economic business cycle which includes the Great Recession and the subsequent long and slow recovery which supports full lifetime losses.
To estimate expected loan and lease losses under the Current Expected Credit Losses (CECL) methodology, we use a broad range of data over a lengthy time horizon, generally back to the fourth quarter of 2007, thus capturing most of the economic business cycle which includes the Great Recession and the subsequent recovery which supports full lifetime losses.
The contingency plan provides for ongoing monitoring of unused borrowing capacity and available sources of contingent liquidity to prepare for unexpected liquidity needs and to cover unanticipated events that could affect liquidity. We maintain prudent strategies to support a strong liquidity position. The following table represents our sources of liquidity as of December 31, 2024.
The contingency plan provides for ongoing monitoring of unused borrowing capacity and available sources of contingent liquidity to prepare for unexpected liquidity needs and to cover unanticipated events that could affect liquidity. We maintain prudent strategies to support a strong liquidity position. The following table represents our sources of liquidity as of December 31, 2025.
Determining the appropriateness of the allowance is complex and requires judgement by management about the effect of matters that are inherently uncertain. In determining an appropriate allowance, management makes numerous judgments, assumptions, and estimates which are inherently subjective, as they require material estimates that may be susceptible to significant change.
Determining the appropriateness of the allowance is complex and requires judgment by management about the effect of matters that are inherently uncertain. In determining an appropriate allowance, management makes numerous judgments, assumptions, and estimates which are inherently subjective, as they require material estimates that may be susceptible to significant change.
Our accounting policies related to the allowance for credit losses is disclosed in Note 1 under the heading “Allowance for Credit Losses.” 18 Table of Contents Fair Value Measurements — We use fair value measurements to record certain financial instruments and to determine fair value disclosures.
Our accounting policies related to the allowance for credit losses is disclosed in Note 1 under the heading “Allowance for Credit Losses.” 19 Table of Contents Fair Value Measurements — We use fair value measurements to record certain financial instruments and to determine fair value disclosures.
Net Interest Income — Our primary source of earnings is net interest income, the difference between income on earning assets and the cost of funds supporting those assets. Significant categories of earning assets are loans and securities while deposits and borrowings represent the major portion of interest-bearing liabilities.
Net Interest Income — Our primary source of earnings is net interest income, the difference between income on earning assets and the cost of funds supporting those assets. Significant categories of earning assets are loans and leases and investment securities while deposits and borrowings represent the major portion of interest-bearing liabilities.
The following table shows the maturities of securities available-for-sale at December 31, 2024, at the amortized costs and weighted average yields of such securities. (Dollars in thousands) Amount Yield U.S.
The following table shows the maturities of securities available-for-sale at December 31, 2025, at the amortized costs and weighted average yields of such securities. (Dollars in thousands) Amount Yield U.S.
Our expense for repurchase losses, included in Loan and Lease Collection and Repossession expense on the Statements of Income, was $0.02 million of expense in 2024 compared to recoveries of $0.07 million in 2023 and $0.05 million in 2022. The mortgage repurchase liability represents our best estimate of the loss that we may incur.
Our expense for repurchase losses, included in Loan and Lease Collection and Repossession expense on the Statements of Income, was $0.07 million of recoveries in 2025 compared to $0.02 million of expense in 2024 and recoveries of $0.07 million in 2023. The mortgage repurchase liability represents our best estimate of the loss that we may incur.
Our policy is to discontinue the accrual of interest on loans and leases where principal or interest is past due and remains unpaid for 90 days or more, or when an individual analysis of a borrower’s credit worthiness indicates a credit should be placed on nonperforming status, except for residential real estate and home equity loans, which are placed on nonaccrual at the time the loan is placed in foreclosure and consumer loans that are both well secured and in the process of collection.
Our policy is to discontinue the accrual of interest on loans and leases where principal or interest is past due and remains unpaid for 90 days or more, or when an individual analysis of a borrower’s credit worthiness indicates a credit should be placed on nonperforming status, except for residential real estate and home equity loans, and consumer loans that are both well secured and in the process of collection.
Mortgage loans held for sale were $2.57 million at December 31, 2024 and were $1.44 million at December 31, 2023. 1st Source Bank sells residential mortgage loans to Fannie Mae as well as FHA-insured and VA-guaranteed loans in Ginnie Mae mortgage-backed securities. Additionally, we have sold loans on a service released basis to various other financial institutions in the past.
Mortgage loans held for sale were $4.87 million at December 31, 2025 and were $2.57 million at December 31, 2024. 1st Source Bank sells residential mortgage loans to Fannie Mae as well as FHA-insured and VA-guaranteed loans in Ginnie Mae mortgage-backed securities. Additionally, we have sold loans on a service released basis to various other financial institutions in the past.
Net interest margin (the ratio of net interest income to average earning assets) is significantly affected by movements in interest rates and changes in the mix of earning assets and the liabilities that fund those assets. Net interest margin on a fully taxable- equivalent basis was 3.64% in 2024, compared to 3.51% in 2023 and 3.45% in 2022.
Net interest margin (the ratio of net interest income to average earning assets) is significantly affected by movements in interest rates and changes in the mix of earning assets and the liabilities that fund those assets. Net interest margin on a fully taxable- equivalent basis was 4.07% in 2025, compared to 3.64% in 2024 and 3.51% in 2023.
Concentration risk is impacted primarily by geographic concentration in northern Indiana and southwestern Michigan in our business banking and commercial real estate portfolios and by collateral concentration in our specialty finance portfolios. We include a factor for global risk in our analysis.
Concentration risk is impacted primarily by geographic concentration in northern Indiana and southwestern Michigan in our business banking and commercial real estate portfolios and by collateral concentration in our specialty finance portfolios. 30 Table of Contents We include a factor for global risk in our analysis.
During 2024, higher vehicle prices, increased interest rates, reduced inventory levels and consumer’s lack of liquidity contributed to the decrease in consumer loans. 27 Table of Contents The following table shows the contractual maturities of loans and leases outstanding as of December 31, 2024 as well as classification according to the sensitivity to changes in interest rates.
During 2025, higher vehicle prices, reduced inventory levels, and consumer’s lack of liquidity contributed to the decrease in consumer loans. 28 Table of Contents The following table shows the contractual maturities of loans and leases outstanding as of December 31, 2025 as well as classification according to the sensitivity to changes in interest rates.
We believe the loans we have underwritten and sold to these entities have met or exceeded applicable transaction parameters. 28 Table of Contents Our liability for repurchases, included in Accrued Expenses and Other Liabilities on the Statements of Financial Condition, was $0.18 million and $0.15 million as of December 31, 2024 and 2023, respectively.
We believe the loans we have underwritten and sold to these entities have met or exceeded applicable transaction parameters. 29 Table of Contents Our liability for repurchases, included in Accrued Expenses and Other Liabilities on the Statements of Financial Condition, was $0.12 million and $0.18 million as of December 31, 2025 and 2024, respectively.
Management monitors these loans closely and reviews their performance on a regular basis. As of December 31, 2024 and 2023, we had $20.60 million and $34.04 million, respectively, in loans of this type which are not included in either of the non-accrual or 90 days past due loan categories.
Management monitors these loans closely and reviews their performance on a regular basis. As of December 31, 2025 and 2024, we had $11.10 million and $20.60 million, respectively, in loans of this type which are not included in either of the non-accrual or 90 days past due loan categories.
While regulatory capital adequacy ratios exclude unrealized gains (losses), it does impact our equity as reported in the audited financial statements. The unrealized losses on available-for-sale securities, net of income taxes, were $87.23 million and $106.32 million at December 31, 2024 and 2023, respectively.
While regulatory capital adequacy ratios exclude unrealized gains (losses), it does impact our equity as reported in the audited financial statements. The unrealized losses on available-for-sale securities, net of income taxes, were $34.78 million and $87.23 million at December 31, 2025 and 2024, respectively.
It is our opinion that the allowance for loan and lease losses was appropriate to absorb current expected credit losses inherent in the loan and lease portfolio as of December 31, 2024. Charge-offs for loan and lease losses were $13.73 million for 2024, compared to $6.65 million for 2023 and $3.41 million for 2022.
It is our opinion that the allowance for loan and lease losses was appropriate to absorb current expected credit losses inherent in the loan and lease portfolio as of December 31, 2025. Charge-offs for loan and lease losses were $8.30 million for 2025, compared to $13.73 million for 2024 and $6.65 million for 2023.
The increased expense in 2023 was mainly the result of a charitable contribution of $1.00 million and higher marketing promotions. During 2024, we reclassified the provision for unfunded loan commitments out of Other Noninterest Expense and into the Provision for Credit Losses in the Consolidated Statements of Income.
The decreased expense in 2024 was mainly the result of a charitable contribution of $1.00 million made during 2023 offset with higher marketing promotions during the year. During 2024, we reclassified the provision for unfunded loan commitments out of Other Noninterest Expense and into the Provision for Credit Losses in the Consolidated Statements of Income.
Shareholders’ equity was 12.44% of total assets at year-end 2024, compared to 11.34% at year-end 2023. We include unrealized gains (losses) on available-for-sale securities, net of income taxes, in accumulated other comprehensive income (loss) which is a component of shareholders’ equity.
Shareholders’ equity was 14.08% of total assets at year-end 2025, compared to 12.44% at year-end 2024. We include unrealized gains (losses) on available-for-sale securities, net of income taxes, in accumulated other comprehensive income (loss) which is a component of shareholders’ equity.
Fair value is discussed further in Note 1 under the heading “Fair Value Measurements” and in Note 21, “Fair Value Measurements.” EARNINGS SUMMARY Net income available to common shareholders in 2024 was $132.62 million, up from $124.93 million in 2023 and up from $120.51 million in 2022.
Fair value is discussed further in Note 1 under the heading “Fair Value Measurements” and in Note 21, “Fair Value Measurements.” EARNINGS SUMMARY Net income available to common shareholders in 2025 was $158.28 million, up from $132.62 million in 2024 and up from $124.93 million in 2023.
Trust and wealth advisory fees are largely based on the number and size of client relationships and the market value of assets under management. The market value of trust assets under management at December 31, 2024 and 2023 was $5.97 billion and $5.46 billion, respectively.
Trust and wealth advisory fees are largely based on the number and size of client relationships and the market value of assets under management. The market value of trust assets under management at December 31, 2025 and 2024 was $6.28 billion and $5.97 billion, respectively.
The average equipment rental portfolio decreased in 2024 over 2023 and decreased in 2023 over 2022 as a result of reduced leasing volume primarily in the medium and heavy duty truck, construction equipment and the auto and light truck portfolios due to changing customer preferences and competitive pricing pressures for new business.
The average equipment rental portfolio decreased in 2025 and 2024 as a result of reduced leasing volume primarily in the medium and heavy duty truck and construction equipment portfolios due to changing customer preferences and competitive pricing pressures for new business.
In 2024 and 2023, the decline in rental income was offset by a similar decline in depreciation on equipment owned under operating leases. Losses on investment securities available-for-sale during 2024 were exclusively the result of repositioning the portfolio during the fourth quarter.
In 2025 and 2024, the decline in rental income was offset by a similar decline in depreciation on equipment owned under operating leases. Losses on investment securities available-for-sale during 2025 were exclusively the result of repositioning the portfolio during the second, third, and fourth quarters.
The following table shows the amortized cost of investment securities available-for-sale as of December 31. (Dollars in thousands) 2024 2023 U.S. Treasury and Federal agencies securities $ 786,417 $ 979,530 U.S.
The following table shows the amortized cost of investment securities available-for-sale as of December 31. (Dollars in thousands) 2025 2024 U.S. Treasury and Federal agencies securities $ 697,652 $ 786,417 U.S.
The most stable source of liability-funded liquidity is deposit growth and retention of the core deposit base. The principal source of asset-funded liquidity is available-for-sale investment securities, cash and due from banks, overnight investments, securities purchased under agreements to resell, and loans and interest bearing deposits with other banks maturing within one year.
The principal source of asset-funded liquidity is available-for-sale investment securities, cash and due from banks, overnight investments, securities purchased under agreements to resell, and loans and interest bearing deposits with other banks maturing within one year.
Dividends paid on common stock in 2024 amounted to $1.40 per share, compared to $1.30 per share in 2023, and $1.26 per share in 2022.
Dividends paid on common stock in 2025 amounted to $1.52 per share, compared to $1.40 per share in 2024, and $1.30 per share in 2023.
Primarily reflective of our strong loan and lease growth and qualitative adjustments, we added $13.66 million to the provision for credit losses on loans and leases for 2024, compared to a provision of $5.87 million for 2023 and a provision of $13.25 million for 2022. 31 Table of Contents The following table summarizes our loan and lease loss experience for each of the last three years ended December 31.
Primarily reflective of loan and lease growth and accretive forecast adjustments, we added $10.51 million to the provision for credit losses on loans and leases for 2025, compared to a provision of $13.66 million for 2024 and a provision of $5.87 million for 2023. 32 Table of Contents The following table summarizes our loan and lease loss experience for each of the last three years ended December 31.
Allowance for loan and lease losses – The allowance for loan and lease losses at December 31, 2024, totaled $155.54 million and was 2.27% of loans and leases, compared to $147.55 million or 2.26% of loans and leases at December 31, 2023 and $139.27 million or 2.32% of loans and leases at December 31, 2022.
Allowance for loan and lease losses – The allowance for loan and lease losses at December 31, 2025, totaled $161.85 million and was 2.30% of loans and leases, compared to $155.54 million or 2.27% of loans and leases at December 31, 2024 and $147.55 million or 2.26% of loans and leases at December 31, 2023.
LIQUIDITY AND CAPITAL RESOURCES Core Deposits — Our major source of investable funds is provided by stable core deposits consisting of all interest bearing and noninterest bearing deposits, excluding brokered certificates of deposit, listing services certificates of deposit and certain certificates of deposit over $250,000 based on established FDIC insured deposits.
During January 2025, we repaid the borrowing in full. LIQUIDITY AND CAPITAL RESOURCES Core Deposits — Our major source of investable funds is provided by stable core deposits consisting of all interest bearing and noninterest bearing deposits, excluding brokered certificates of deposit, listing services certificates of deposit and certain certificates of deposit over $250,000 based on established FDIC insured deposits.
The higher expense in 2024 can primarily be attributed to a $1.08 million reversal of accrued legal fees in the first quarter of 2023, as well as an increase in audit and examination fees and the utilization of consulting services for technology projects and compliance services during the year.
The higher expense in 2024 can primarily be attributed to a $1.08 million reversal of accrued legal fees in the first quarter of 2023, as well as an increase in audit and examination fees and the utilization of consulting services for technology projects and compliance services during the year. 26 Table of Contents FDIC and other insurance expense decreased in 2025 from 2024, and increased in 2024 from 2023.
Nonperforming assets amounted to $31.33 million at December 31, 2024, compared to $24.24 million at December 31, 2023, and $26.93 million at December 31, 2022. During 2024, interest income on nonaccrual loans and leases would have increased by approximately $2.06 million compared to $1.47 million in 2023 if these loans and leases had earned interest at their full contractual rate.
Nonperforming assets amounted to $77.38 million at December 31, 2025, compared to $31.33 million at December 31, 2024, and $24.24 million at December 31, 2023. During 2025, interest income on nonaccrual loans and leases would have increased by approximately $5.83 million compared to $2.06 million in 2024 if these loans and leases had earned interest at their full contractual rate.
The positive performance of the stock and bond markets primarily during the first nine months of 2024 resulted in an increase in the market value of trust assets under management compared to 2023.
The positive performance of the stock and bond markets during 2025 resulted in an increase in the market value of trust assets under management compared to 2024.
Purchased funds are raised from customers seeking short-term investments and are used to manage the Bank’s interest rate sensitivity. During 2024, our reliance on purchased funds increased to 12.69% of average total assets from 11.45% in 2023. Shareholders’ Equity — Average shareholders’ equity equated 12.10% of average total assets in 2024, compared to 11.02% in 2023.
Purchased funds are raised from customers seeking short-term investments and are used to manage the Bank’s interest rate sensitivity. During 2025, our reliance on purchased funds decreased to 10.54% of average total assets from 12.69% in 2024. Shareholders’ Equity — Average shareholders’ equity equated 13.39% of average total assets in 2025, compared to 12.10% in 2024.
At December 31, 2024, these trust assets were comprised of $4.03 billion of personal and agency trusts and estate administration assets, $1.18 billion of employee benefit plan assets, $0.59 million of individual retirement accounts, and $0.17 million of custody assets. Service charges on deposit accounts increased in 2024 from 2023 compared to an increase in 2023 from 2022.
At December 31, 2025, these trust assets were comprised of $4.37 billion of personal and agency trusts and estate administration assets, $1.05 billion of employee benefit plan assets, $0.66 billion of individual retirement accounts, and $0.20 billion of custody assets. Service charges on deposit accounts increased in 2025 from 2024, compared to an increase in 2024 from 2023.
The growth in service charges on deposit accounts in 2024 was primarily due to a higher volume of business deposit account fees. The growth in service charges on deposit accounts in 2023 was primarily due to increased consumer and business overdraft transactions. Debit card income declined during 2024 following a slight decrease during 2023.
The growth in service charges on deposit accounts in 2025 was primarily due to higher consumer nonsufficient fund and overdraft transactions. The growth in service charges on deposit accounts in 2024 was primarily due to a higher volume of business deposit account fees. Debit card income remained relatively flat during 2025 following a slight decrease during 2024.
Percentage Change in Net Interest Income December 31, 2024 December 31, 2023 Basis Point Interest Rate Change 12 Months 24 Months 12 Months 24 Months Up 200 (2.19)% 2.79% (1.40)% 3.01% Up 100 (1.11)% 1.35% (0.66)% 1.52% Down 100 0.89% (2.10)% (0.18)% (2.42)% The earnings simulation model excludes the earnings dynamics related to how fee income and noninterest expense may be affected by changes in interest rates.
Percentage Change in Net Interest Income December 31, 2025 December 31, 2024 Basis Point Interest Rate Change 12 Months 24 Months 12 Months 24 Months Up 200 1.63% 6.59% (2.19)% 2.79% Up 100 0.79% 3.31% (1.11)% 1.35% Down 100 (1.83)% (4.88)% 0.89% (2.10)% The earnings simulation model excludes the earnings dynamics related to how fee income and noninterest expense may be affected by changes in interest rates.
In 2024, average core deposits equaled 71.39% of average total assets, compared to 73.77% in 2023 and 79.60% in 2022. The effective rate of core deposits in 2024 was 1.97%, compared to 1.45% in 2023 and 0.32% in 2022. Average noninterest bearing core deposits decreased 8.22% in 2024 compared to a decrease of 13.97% in 2023.
In 2025, average core deposits equaled 72.62% of average total assets, compared to 71.39% in 2024 and 73.77% in 2023. The effective rate of core deposits in 2025 was 1.80%, compared to 1.97% in 2024 and 1.45% in 2023. Average noninterest bearing core deposits decreased 0.44% in 2025 compared to a decrease of 8.22% in 2024.
These represented 25.79% of total core deposits in 2024, compared to 28.24% in 2023, and 31.71% in 2022.
These represented 24.56% of total core deposits in 2025, compared to 25.79% in 2024, and 28.24% in 2023.
Construction equipment financing at December 31, 2024 had outstandings of $1.20 billion, compared to outstandings of $1.08 billion at December 31, 2023. The growth in this category was primarily due to significant new client relationships and continued growth with existing clients primarily amongst crane rental, aggregate producers and haulers, and site development clients.
Construction equipment financing at December 31, 2025 had outstandings of $1.22 billion, compared to outstandings of $1.20 billion at December 31, 2024. The growth in this category was primarily due to significant new client relationships and continued growth with existing clients primarily amongst road builders and site development clients.
DEPOSITS The following table shows the average daily amounts of deposits and rates paid on such deposits. 2024 2023 2022 (Dollars in thousands) Amount Rate Amount Rate Amount Rate Noninterest bearing demand $ 1,609,001 — % $ 1,753,149 — % $ 2,037,882 — % Interest bearing demand 2,463,386 2.73 2,481,362 2.33 2,554,945 0.69 Savings 1,255,111 1.45 1,181,314 0.68 1,283,143 0.08 Time 1,791,459 4.55 1,541,419 3.73 835,406 0.79 Total deposits $ 7,118,957 $ 6,957,244 $ 6,711,376 The following table shows the estimated scheduled maturities of the portion of time deposits in U.S. offices in excess of the FDIC insurance limit and time deposits that are otherwise uninsured.
DEPOSITS The following table shows the average daily amounts of deposits and rates paid on such deposits. 2025 2024 2023 (Dollars in thousands) Amount Rate Amount Rate Amount Rate Noninterest bearing demand $ 1,601,954 — % $ 1,609,001 — % $ 1,753,149 — % Interest bearing demand 2,554,311 2.36 2,463,386 2.73 2,481,362 2.33 Savings 1,376,299 1.57 1,255,111 1.45 1,181,314 0.68 Time 1,849,727 4.00 1,791,459 4.55 1,541,419 3.73 Total deposits $ 7,382,291 $ 7,118,957 $ 6,957,244 The following table shows the estimated scheduled maturities of the portion of time deposits in U.S. offices in excess of the FDIC insurance limit and time deposits that are otherwise uninsured.
INVESTMENT PORTFOLIO The amortized cost of securities available-for-sale at year-end 2024 decreased 6.34% from 2023, following a 10.50% decrease from year-end 2022 to year-end 2023. The amortized cost of securities available-for-sale at December 31, 2024 was 18.48% of total assets, compared to 20.19% of total assets at December 31, 2023.
INVESTMENT PORTFOLIO The amortized cost of securities available-for-sale at year-end 2025 decreased 4.98% from 2024, following a 6.34% decrease from year-end 2023 to year-end 2024. The amortized cost of securities available-for-sale at December 31, 2025 was 17.32% of total assets, compared to 18.48% of total assets at December 31, 2024.
The yield on average earning assets increased 60 basis points to 5.85% for 2024 from 5.25% for 2023 primarily due to higher rates and average balances on loans and leases, higher rates on taxable investment securities and higher average balances on other investments, which include federal funds sold, time deposits with other banks, Federal Reserve Bank excess balances, Federal Reserve Bank and Federal Home Loan Bank (FHLB) stock and commercial paper.
The yield on average earning assets increased 16 basis points to 6.01% for 2025 from 5.85% for 2024 primarily due to higher loan and lease average balances and higher rates on investment securities offset by lower rates on other investments, which include federal funds sold, time deposits with other banks, Federal Reserve Bank excess balances, Federal Reserve Bank and Federal Home Loan Bank (FHLB) stock and commercial paper.
Diluted net income per common share was $5.36 in 2024, $5.03 in 2023, and $4.84 in 2022. Return on average total assets was 1.52% in 2024 compared to 1.48% in 2023, and 1.49% in 2022. Return on average common shareholders’ equity was 12.54% in 2024 versus 13.48% in 2023, and 13.81% in 2022.
Diluted net income per common share was $6.41 in 2025, $5.36 in 2024, and $5.03 in 2023. Return on average total assets was 1.76% in 2025 compared to 1.52% in 2024, and 1.48% in 2023. Return on average common shareholders’ equity was 13.16% in 2025 versus 12.54% in 2024, and 13.48% in 2023.
The portfolio has also recognized several sizeable losses in recent years which have been successfully mitigated, achieving fairly high recovery rates with time. There remains elevated concern for construction contractors as the portfolio is inherently vulnerable to energy price volatility, high interest rates, and changes in the regulatory environment.
The portfolio has experienced some elevated loss activity in recent years which has been successfully mitigated, achieving fairly high recovery rates with time. There is ongoing concern for construction contractors as the portfolio is inherently vulnerable to energy price volatility, high interest rates, and changes in the regulatory environment.
At December 31, 2024, potential problem loans consisted of five relationships; one relationship in the commercial and agricultural portfolio, one relationship in the aircraft portfolio, one relationship in the medium and heavy duty truck portfolio, and two relationships in the construction portfolio. Weakness in the borrowers’ operating performance have caused us to give heighten attention to these credits.
At December 31, 2025, potential problem loans consisted of five relationships; two relationships in the commercial and agricultural portfolio, two relationships in the auto and light truck portfolio, and one relationship in the commercial real estate portfolio. Weakness in the borrowers’ operating performance have caused us to give heighten attention to these credits.
We reviewed our qualitative adjustments as of year-end and made slight adjustments to factors addressing interest rate maturity risk along with construction risk in select segments as the loan volume of projects under construction remains much higher than prior periods.
We reviewed our qualitative adjustments as of year-end and made slight adjustments to a factor addressing interest rate maturity risk and a slight increase to our construction risk factor as the loan volume of projects under construction remains higher than prior periods.
In the repositioning, approximately $63 million of securities with a weighted average yield of 0.71% were sold and used to purchase approximately $63 million of securities with a weighted average yield of 4.64%. Losses during 2023 were primarily the result of repositioning the investment securities portfolio.
In the 2024 repositioning, approximately $63 million of securities with a weighted average yield of 0.71% were sold and used to purchase approximately $63 million of securities with a weighted average yield of 4.64%.
Net interest recoveries positively contributed five basis points to the yield on average loans and leases during 2024 and four basis points to the average loans and leases yield during 2023.
Net interest recoveries positively contributed seven basis points to the yield on average loans and leases during 2025 and three basis points to the average loans and leases yield during 2024.
(Dollars in thousands) 2024 2023 2022 Amounts of loans and leases outstanding at end of period $ 6,854,808 $ 6,518,505 $ 6,011,162 Average amount of net loans and leases outstanding during period $ 6,598,329 $ 6,203,857 $ 5,566,701 Amount of unfunded loan commitments at end of period (1) $ 1,326,724 $ 1,478,840 $ 1,255,289 Balance of allowance for loan and lease losses at beginning of period $ 147,552 $ 139,268 $ 127,492 Charge-offs: Commercial and agricultural 9,825 4,305 625 Renewable energy — — — Auto and light truck 730 729 118 Medium and heavy duty truck — — — Aircraft 68 — — Construction equipment 1,692 54 1,114 Commercial real estate — 248 538 Residential real estate and home equity 66 101 284 Consumer 1,349 1,211 730 Total charge-offs 13,730 6,648 3,409 Recoveries: Commercial and agricultural 418 243 56 Renewable energy — — — Auto and light truck 3,273 5,591 417 Medium and heavy duty truck — 12 — Aircraft 1,279 967 785 Construction equipment 2,100 1,656 17 Commercial real estate 724 11 45 Residential real estate and home equity 26 334 160 Consumer 235 252 460 Total recoveries 8,055 9,066 1,940 Net charge-offs (recoveries) 5,675 (2,418) 1,469 Provision for credit losses - loans and leases 13,663 5,866 13,245 Balance of allowance for loan and lease losses at end of period $ 155,540 $ 147,552 $ 139,268 Balance of liability for unfunded loan commitments at beginning of period $ 8,182 $ 5,616 $ 4,196 (Recovery of) provision for credit losses - unfunded loan commitments (1,197) 2,566 1,420 Balance of liability for unfunded loan commitments at end of period $ 6,985 $ 8,182 $ 5,616 Asset Quality Ratios: Net charge-offs (recoveries) to average net loans and leases outstanding 0.09 % (0.04) % 0.03 % Allowance for loan and lease losses to net loans and leases outstanding end of period 2.27 % 2.26 % 2.32 % Liability for unfunded loan commitments to unfunded loan commitments end of period 0.53 % 0.55 % 0.45 % Allowance for loan and lease losses and liability for unfunded loan commitments to net loans and leases outstanding and unfunded loan commitments end of period 1.99 % 1.95 % 1.99 % (1) Represents noncancelable commitments The following table shows net charge-offs (recoveries) as a percentage of average loans and leases by portfolio type: 2024 2023 2022 Commercial and agricultural 1.29 % 0.52 % 0.07 % Renewable energy — — — Auto and light truck (0.26) (0.55) (0.04) Medium and heavy duty truck — — — Aircraft (0.11) (0.09) (0.08) Construction equipment (0.04) (0.16) 0.13 Commercial real estate (0.06) 0.02 0.05 Residential real estate and home equity 0.01 (0.04) 0.02 Consumer 0.81 0.66 0.19 Total net charge-offs (recoveries) to average portfolio loans and leases 0.09 % (0.04) % 0.03 % 32 Table of Contents The allowance for loan and lease losses has been allocated according to the amount deemed necessary to provide for the estimated current expected credit losses.
(Dollars in thousands) 2025 2024 2023 Amounts of loans and leases outstanding at end of period $ 7,046,669 $ 6,854,808 $ 6,518,505 Average amount of net loans and leases outstanding during period $ 6,934,619 $ 6,598,329 $ 6,203,857 Amount of unfunded loan commitments at end of period (1) $ 1,460,418 $ 1,326,724 $ 1,478,840 Balance of allowance for loan and lease losses at beginning of period $ 155,540 $ 147,552 $ 139,268 Charge-offs: Commercial and agricultural 2,420 9,825 4,305 Renewable energy — — — Auto and light truck 2,366 730 729 Medium and heavy duty truck — — — Aircraft 485 68 — Construction equipment 1,407 1,692 54 Commercial real estate 27 — 248 Residential real estate and home equity 74 66 101 Consumer 1,521 1,349 1,211 Total charge-offs 8,300 13,730 6,648 Recoveries: Commercial and agricultural 929 418 243 Renewable energy — — — Auto and light truck 1,806 3,273 5,591 Medium and heavy duty truck — — 12 Aircraft 565 1,279 967 Construction equipment 426 2,100 1,656 Commercial real estate 90 724 11 Residential real estate and home equity 21 26 334 Consumer 257 235 252 Total recoveries 4,094 8,055 9,066 Net charge-offs (recoveries) 4,206 5,675 (2,418) Provision for credit losses - loans and leases 10,512 13,663 5,866 Balance of allowance for loan and lease losses at end of period $ 161,846 $ 155,540 $ 147,552 Balance of liability for unfunded loan commitments at beginning of period $ 6,985 $ 8,182 $ 5,616 Provision (recovery of provision) for credit losses - unfunded loan commitments 2,050 (1,197) 2,566 Balance of liability for unfunded loan commitments at end of period $ 9,035 $ 6,985 $ 8,182 Asset Quality Ratios: Net charge-offs (recoveries) to average net loans and leases outstanding 0.06 % 0.09 % (0.04) % Allowance for loan and lease losses to net loans and leases outstanding end of period 2.30 % 2.27 % 2.26 % Liability for unfunded loan commitments to unfunded loan commitments end of period 0.62 % 0.53 % 0.55 % Allowance for loan and lease losses and liability for unfunded loan commitments to net loans and leases outstanding and unfunded loan commitments end of period 2.01 % 1.99 % 1.95 % (1) Represents noncancelable commitments The following table shows net charge-offs (recoveries) as a percentage of average loans and leases by portfolio type: 2025 2024 2023 Commercial and agricultural 0.19 % 1.29 % 0.52 % Renewable energy — — — Auto and light truck 0.06 (0.26) (0.55) Medium and heavy duty truck — — — Aircraft (0.01) (0.11) (0.09) Construction equipment 0.08 (0.04) (0.16) Commercial real estate (0.01) (0.06) 0.02 Residential real estate and home equity 0.01 0.01 (0.04) Consumer 1.00 0.81 0.66 Total net charge-offs (recoveries) to average portfolio loans and leases 0.06 % 0.09 % (0.04) % 33 Table of Contents The allowance for loan and lease losses has been allocated according to the amount deemed necessary to provide for the estimated current expected credit losses.
Commercial and agricultural – Multiple industries are represented in the commercial and agricultural portfolio and the outlook for the portfolio remains guarded. Small businesses are challenged to absorb higher interest rates, higher cost of capital, compete for labor, and control expenses. In our underlying industries, wholesalers have generally performed well and have been able to pass along rising costs.
Multiple industries are represented in the commercial and agricultural portfolio and the outlook for the portfolio remains guarded. Small businesses remain challenged to absorb still-elevated interest rates, higher cost of capital, compete for labor, and control expenses. In our underlying industries, wholesalers have generally performed well, while manufacturers remain under pressure.
Net interest income was $300.82 million for 2024, compared to $278.65 million for 2023 and $263.47 million for 2022. Tax-equivalent net interest income totaled $301.40 million for 2024, up $22.02 million from the $279.39 million reported in 2023. Tax-equivalent net interest income for 2023 was up $15.29 million from the $264.10 million reported for 2022.
Net interest income was $348.18 million for 2025, compared to $300.82 million for 2024 and $278.65 million for 2023. Tax-equivalent net interest income totaled $348.79 million for 2025, up $47.38 million from the $301.40 million reported in 2024. Tax-equivalent net interest income for 2024 was up $22.02 million from the $279.39 million reported for 2023.
Average noninterest-bearing demand deposits decreased $144.15 million or 8.22% during 2024 due primarily to persistent rate competition for deposits and greater utilization of excess funds by our business customers.
Average noninterest-bearing demand deposits decreased $7.05 million or 0.44% during 2025 due primarily to persistent rate competition for deposits and greater utilization of excess funds by our business customers.
(Dollars in thousands) 2024 2023 2022 Calculation of Net Interest Margin (A) Interest income (GAAP) $ 484,017 $ 416,907 $ 293,816 Fully tax-equivalent adjustments: (B) - Loans and leases 317 381 366 (C) - Tax-exempt investment securities 269 360 262 (D) Interest income - FTE (A+B+C) 484,603 417,648 294,444 (E) Interest expense (GAAP) 183,200 138,260 30,347 (F) Net interest income (GAAP) (A-E) 300,817 278,647 263,469 (G) Net interest income - FTE (D-E) 301,403 279,388 264,097 (H) Total earning assets $ 8,284,489 $ 7,956,604 $ 7,661,168 Net interest margin (GAAP-derived) (F/H) 3.63 % 3.50 % 3.44 % Net interest margin - FTE (G/H) 3.64 % 3.51 % 3.45 % 22 Table of Contents The change in interest due to both rate and volume illustrated in the following table has been allocated to volume and rate changes in proportion to the relationship of the absolute dollar amounts of the change in each.
(Dollars in thousands) 2025 2024 2023 Calculation of Net Interest Margin (A) Interest income (GAAP) $ 514,394 $ 484,017 $ 416,907 Fully tax-equivalent adjustments: (B) - Loans and leases 302 317 381 (C) - Tax-exempt investment securities 310 269 360 (D) Interest income - FTE (A+B+C) 515,006 484,603 417,648 (E) Interest expense (GAAP) 166,219 183,200 138,260 (F) Net interest income (GAAP) (A-E) 348,175 300,817 278,647 (G) Net interest income - FTE (D-E) 348,787 301,403 279,388 (H) Total earning assets $ 8,563,593 $ 8,284,489 $ 7,956,604 Net interest margin (GAAP-derived) (F/H) 4.07 % 3.63 % 3.50 % Net interest margin - FTE (G/H) 4.07 % 3.64 % 3.51 % 23 Table of Contents The change in interest due to both rate and volume illustrated in the following table has been allocated to volume and rate changes in proportion to the relationship of the absolute dollar amounts of the change in each.
We may utilize interest rate swaps to partially manage the primary market exposures associated with the interest rate risk related to underlying assets, liabilities, and anticipated transactions.
In the normal course of business, we face ongoing interest rate risks and uncertainties. We may utilize interest rate swaps to partially manage the primary market exposures associated with the interest rate risk related to underlying assets, liabilities, and anticipated transactions.
(Dollars in thousands) Under 3 Months $ 191,631 4 – 6 Months 197,654 7 – 12 Months 231,523 Over 12 Months 228,075 Total $ 848,883 See Part II, Item 8, Financial Statements and Supplementary Data — Note 10 of the Notes to Consolidated Financial Statements for additional information on deposits. 35 Table of Contents SHORT-TERM BORROWINGS The following table shows the distribution of our short-term borrowings and the weighted average interest rates thereon at the end of each of the last two years.
(Dollars in thousands) Under 3 Months $ 165,518 4 – 6 Months 157,830 7 – 12 Months 151,325 Over 12 Months 172,118 Total $ 646,791 See Part II, Item 8, Financial Statements and Supplementary Data — Note 10 of the Notes to Consolidated Financial Statements for additional information on deposits. 36 Table of Contents SHORT-TERM BORROWINGS The following table shows the distribution of our short-term borrowings and the weighted average interest rates thereon at the end of each of the last two years.
The following table shows the amount of such components of the allowance for loan and lease losses at December 31 and the ratio of such loan and lease categories to total outstanding loan and lease balances. 2024 2023 (Dollars in thousands) Allowance Amount Percentage of Loans and Leases in Each Category to Total Loans and Leases Allowance Amount Percentage of Loans and Leases in Each Category to Total Loans and Leases Commercial and agricultural $ 21,316 11.28 % $ 17,385 11.76 % Renewable energy 8,562 7.11 6,610 6.13 Auto and light truck 18,437 13.84 16,858 14.83 Medium and heavy duty truck 7,292 4.22 8,965 4.79 Aircraft 36,663 16.39 37,653 16.54 Construction equipment 28,258 17.56 26,510 16.64 Commercial real estate 24,821 17.73 23,690 17.33 Residential real estate and home equity 7,976 9.92 7,698 9.79 Consumer 2,215 1.95 2,183 2.19 Total $ 155,540 100.00 % $ 147,552 100.00 % Nonperforming Assets — Nonperforming assets include loans past due over 90 days, nonaccrual loans and leases, other real estate, repossessions and other nonperforming assets we own.
The following table shows the amount of such components of the allowance for loan and lease losses at December 31 and the ratio of such loan and lease categories to total outstanding loan and lease balances. 2025 2024 (Dollars in thousands) Allowance Amount Percentage of Loans and Leases in Each Category to Total Loans and Leases Allowance Amount Percentage of Loans and Leases in Each Category to Total Loans and Leases Commercial and agricultural $ 21,983 11.32 % $ 21,316 11.28 % Renewable energy 11,833 9.26 8,562 7.11 Auto and light truck 21,653 12.60 18,437 13.84 Medium and heavy duty truck 6,295 3.83 7,292 4.22 Aircraft 35,843 15.42 36,663 16.39 Construction equipment 27,529 17.33 28,258 17.56 Commercial real estate 25,396 18.02 24,821 17.73 Residential real estate and home equity 9,076 10.51 7,976 9.92 Consumer 2,238 1.71 2,215 1.95 Total $ 161,846 100.00 % $ 155,540 100.00 % Nonperforming Assets — Nonperforming assets include loans past due over 90 days, nonaccrual loans and leases, other real estate, repossessions and other nonperforming assets we own.
Commercial real estate – Similar to the commercial portfolio, our commercial real estate loans are concentrated in our local market with local customers although we do fund select projects outside our market with multi-state developers that are headquartered in our footprint.
Commercial real estate – Similar to the commercial portfolio, our commercial real estate loans are concentrated in our local market with local customers although we do fund select projects outside our market with multi-state developers that are headquartered in our footprint. The allowance increase was due to loan growth in both owner and non-owner-occupied segments.
This portfolio has historically been a barometer for overall economic weakness and the industry has experienced several high-profile carrier bankruptcies and generally difficult conditions. In previous downturns, small companies and independent owner-operators were hit the hardest and asset valuations were pressured. Asset valuations have weakened.
The industry remains challenged by overcapacity, but freight rates appear to be stabilizing. This portfolio has historically been a barometer for overall economic weakness and the industry has experienced several high-profile carrier bankruptcies and generally difficult conditions over the last several years. In previous downturns, small companies and independent owner-operators were hit the hardest and asset valuations were pressured.
Loan and lease outstandings to borrowers in Brazil and Mexico were $129.12 million and $145.85 million as of December 31, 2024, respectively, compared to $119.38 million and $147.61 million as of December 31, 2023, respectively. Outstanding balances to other borrowers in other countries were insignificant. Construction equipment financing increased $119.16 million or 10.98% in 2024 compared to 2023.
Loan and lease outstandings to borrowers in Brazil and Mexico were $136.98 million and $163.70 million as of December 31, 2025, respectively, compared to $129.12 million and $145.85 million as of December 31, 2024, respectively. Outstanding balances to other borrowers in other countries were insignificant. Construction equipment financing increased $17.22 million or 1.43% in 2025 compared to 2024.
The following table shows the components of our noninterest expense for the most recent three years ended December 31.
Noninterest Expense — Noninterest expense increased in 2025 from 2024 following an increase in 2024 from 2023. The following table shows the components of our noninterest expense for the most recent three years ended December 31.
(Dollars in thousands) 2024 2023 2022 2024 $ Change from 2023 2024 % Change from 2023 2023 $ Change from 2022 2023 % Change from 2022 Noninterest income: Trust and wealth advisory $ 26,709 $ 23,706 $ 23,107 $ 3,003 12.67 % $ 599 2.59 % Service charges on deposit accounts 12,877 12,749 12,146 128 1.00 % 603 4.96 % Debit card 17,785 17,980 18,052 (195) (1.08) % (72) (0.40) % Mortgage banking 4,210 3,471 4,122 739 21.29 % (651) (15.79) % Insurance commissions 6,730 6,911 6,703 (181) (2.62) % 208 3.10 % Equipment rental 5,171 8,837 12,274 (3,666) (41.48) % (3,437) (28.00) % Losses on investment securities available-for-sale (3,889) (2,926) (184) (963) (32.91) % (2,742) NM Other 16,714 19,895 15,042 (3,181) (15.99) % 4,853 32.26 % Total noninterest income $ 86,307 $ 90,623 $ 91,262 $ (4,316) (4.76) % $ (639) (0.70) % NM = Not Meaningful Trust and wealth advisory fees (which include investment management fees, estate administration fees, mutual fund fees, annuity fees, and fiduciary fees) increased in 2024 from 2023 compared to an increase in 2023 over 2022.
(Dollars in thousands) 2025 2024 2023 2025 $ Change from 2024 2025 % Change from 2024 2024 $ Change from 2023 2024 % Change from 2023 Noninterest income: Trust and wealth advisory $ 27,867 $ 26,709 $ 23,706 $ 1,158 4.34 % $ 3,003 12.67 % Service charges on deposit accounts 13,184 12,877 12,749 307 2.38 % 128 1.00 % Debit card 17,774 17,785 17,980 (11) (0.06) % (195) (1.08) % Mortgage banking 4,103 4,210 3,471 (107) (2.54) % 739 21.29 % Insurance commissions 7,700 6,730 6,911 970 14.41 % (181) (2.62) % Equipment rental 3,021 5,171 8,837 (2,150) (41.58) % (3,666) (41.48) % Losses on investment securities available-for-sale (8,679) (3,889) (2,926) (4,790) (123.17) % (963) (32.91) % Other 20,633 16,714 19,895 3,919 23.45 % (3,181) (15.99) % Total noninterest income $ 85,603 $ 86,307 $ 90,623 $ (704) (0.82) % $ (4,316) (4.76) % NM = Not Meaningful Trust and wealth advisory fees (which include investment management fees, estate administration fees, mutual fund fees, annuity fees, and fiduciary fees) increased in 2025 from 2024, compared to an increase in 2024 over 2023.
Average long-term debt and mandatorily redeemable securities balances decreased $5.35 million or 11.55% during 2024 while the effective rate decreased 68 basis points primarily due to a lower imputed interest on mandatorily redeemable securities from a reduced improvement in book value per share during 2024 compared to 2023.
Average long-term debt and mandatorily redeemable securities balances increased $0.31 million or 0.75% during 2025 while the effective rate increased 364 basis points primarily due to a higher imputed interest on mandatorily redeemable securities from an increased improvement in book value per share during 2025 compared to 2024.
In the 2023 repositioning, approximately $40 million of securities with a weighted average yield of 1.10% were sold and used to purchase approximately $40 million of securities with a weighted average yield of 4.80%. The remaining 2023 losses were the result of sales to support liquidity and fund loan growth during the first quarter.
In the 2023 repositioning, approximately $40 million of securities with a weighted average yield of 1.10% were sold and used to purchase approximately $40 million of securities with a weighted average yield of 4.80%.
Residential real estate and home equity – Our residential real estate and home equity portfolio consists of loans to individuals in the communities we serve. Generally, residential mortgage loans are originated using standards that result in salable mortgages. Home equity loans are also advanced in compliance with regulatory guidelines and the Bank’s credit policy.
Residential real estate and home equity – Our residential real estate and home equity portfolio consists of loans to individuals in the communities we serve. The allowance increased due to loan growth. Generally, residential mortgage loans are originated using standards that result in salable mortgages.
There is currently one property held in other real estate related to our construction equipment portfolio. 33 Table of Contents Nonperforming assets at December 31 (Dollars in thousands) 2024 2023 Loans past due over 90 days $ 106 $ 149 Nonaccrual loans and leases: Commercial and agricultural 4,715 13,267 Renewable energy — — Auto and light truck 2,806 4,666 Medium and heavy duty truck — — Aircraft — — Construction equipment 17,976 176 Commercial real estate 1,595 2,970 Residential real estate and home equity 2,711 1,812 Consumer 810 490 Total nonaccrual loans and leases 30,613 23,381 Total nonperforming loans and leases 30,719 23,530 Other real estate 460 — Repossessions: Commercial and agricultural — — Auto and light truck — 689 Medium and heavy duty truck — — Aircraft — — Construction equipment 134 — Consumer 21 16 Total repossessions 155 705 Operating leases — — Total nonperforming assets $ 31,334 $ 24,235 Nonperforming loans and leases to loans and leases, net of unearned discount 0.45 % 0.36 % Nonperforming assets to loans and leases and operating leases, net of unearned discount 0.46 % 0.37 % Coverage ratio of allowance for loan and lease losses to nonperforming loans and leases 506.33 % 627.08 % Potential Problem Loans — Potential problem loans consist of loans that are performing but for which management has concerns about the ability of a borrower to continue to comply with repayment terms because of potential operating or financial difficulties.
There is no other real estate owned as of year end. 34 Table of Contents Nonperforming assets at December 31 (Dollars in thousands) 2025 2024 Loans past due over 90 days $ 460 $ 106 Nonaccrual loans and leases: Commercial and agricultural 2,493 4,715 Renewable energy — — Auto and light truck 54,348 2,806 Medium and heavy duty truck 1,576 — Aircraft — — Construction equipment 11,341 17,976 Commercial real estate 2,459 1,595 Residential real estate and home equity 3,645 2,711 Consumer 740 810 Total nonaccrual loans and leases 76,602 30,613 Total nonperforming loans and leases 77,062 30,719 Other real estate — 460 Repossessions: Commercial and agricultural 21 — Auto and light truck — — Medium and heavy duty truck — — Aircraft — — Construction equipment 192 134 Consumer 54 21 Total repossessions 267 155 Operating leases 49 — Total nonperforming assets $ 77,378 $ 31,334 Nonperforming loans and leases to loans and leases, net of unearned discount 1.09 % 0.45 % Nonperforming assets to loans and leases and operating leases, net of unearned discount 1.10 % 0.46 % Coverage ratio of allowance for loan and lease losses to nonperforming loans and leases 210.02 % 506.33 % Potential Problem Loans — Potential problem loans consist of loans that are performing but for which management has concerns about the ability of a borrower to continue to comply with repayment terms because of potential operating or financial difficulties.
Average loans and leases increased $394.47 million or 6.36% in 2024 from 2023 while the yield increased to 6.84%. Strong growth primarily within our Construction Equipment, Auto and Light Truck and Renewable Energy portfolios, and selective growth in our Commercial Real Estate portfolio drove total average loans and leases higher during the year.
During 2025, average loans and leases increased $336.29 million or 5.10% from 2024 while the yield decreased to 6.79% from 6.84% in 2024. Strong growth primarily within our Renewable Energy portfolio and selective growth in our Commercial Real Estate portfolio drove total average loans and leases higher during the year.
(Dollars in thousands) Available Internal Sources Unencumbered securities $ 1,177,201 External Sources FHLB advances (1) 665,100 FRB borrowings (2) 404,573 Fed funds purchased (3) 410,000 Brokered deposits (4) 394,909 Listing services deposits (4) 446,039 Total liquidity $ 3,497,822 % of Total deposits net brokered and listing services certificates of deposit 51.96 % (1) Availability is shown net of required stock purchases under the FHLB activity-based stock ownership requirement, which is currently 4.50%, and may vary (2) Includes access to discount window and Bank Term Funding Program (3) Availability contingent on correspondent bank approvals at time of borrowing (4) Availability contingent on internal borrowing guidelines 37 Table of Contents External sources as listed in the table above are managed to approved guidelines by our Board of Directors.
(Dollars in thousands) Available Internal Sources Unencumbered securities $ 1,285,144 External Sources FHLB advances (1) 479,610 FRB borrowings 366,265 Fed funds purchased (2) 360,000 Brokered deposits (3) 685,119 Listing services deposits (3) 451,572 Total liquidity $ 3,627,710 % of Total deposits net brokered and listing services certificates of deposit 51.79 % (1) Availability is shown net of required stock purchases under the FHLB activity-based stock ownership requirement, which is currently 4.50%, and may vary (2) Availability contingent on correspondent bank approvals at time of borrowing (3) Availability contingent on internal borrowing guidelines External sources as listed in the table above are managed to approved guidelines by our Board of Directors.
Loans and leases, net of unearned discount, at December 31, 2024, were $6.85 billion and were 76.74% of total assets, compared to $6.52 billion and 74.69% of total assets at December 31, 2023. Average loans and leases, net of unearned discount, increased $394.47 million or 6.36% and increased $637.16 million or 11.45% in 2024 and 2023, respectively.
Loans and leases, net of unearned discount, at December 31, 2025, were $7.05 billion and were 77.82% of total assets, compared to $6.85 billion and 76.74% of total assets at December 31, 2024. Average loans and leases, net of unearned discount, increased $336.29 million or 5.10% and increased $394.47 million or 6.36% in 2025 and 2024, respectively.
States and political subdivisions securities 86,305 97,522 Mortgage-backed securities — Federal agencies 777,962 676,257 Corporate debt securities — 8,448 Foreign government securities — 600 Total investment securities available-for-sale $ 1,650,684 $ 1,762,357 34 Table of Contents Yields on tax-exempt obligations are calculated on a fully tax-equivalent basis assuming a 21% tax rate.
States and political subdivisions securities 113,126 86,305 Mortgage-backed securities — Federal agencies 757,151 777,962 Corporate debt securities 500 — Total debt securities available-for-sale $ 1,568,429 $ 1,650,684 35 Table of Contents Yields on tax-exempt obligations are calculated on a fully tax-equivalent basis assuming a 21% tax rate.
At December 31, 2024, the vintage (years originated) of the underlying loans comprising our securities are: 10% in the year 2024; 3% in the year 2023; 53% in the years 2021 and 2022; 21% in the years 2019 and 2020; 6% in the years 2017 and 2018; 7% in the years 2016 and prior.
At December 31, 2025, the vintage (years originated) of the underlying loans comprising our securities are: 12% in the year 2025; 8% in the year 2024; 18% in the years 2022 and 2023; 48% in the years 2020 and 2021; 5% in the years 2018 and 2019; 9% in the years 2017 and prior.
Employee benefits decreased $1.15 million or 5.20% in 2024 from 2023, compared to a $3.33 million or 17.73% increase in 2023 from 2022. During 2024, group insurance costs were lower due to fewer claims experienced and the utilization of accumulated plan forfeitures of $0.65 million to offset current year employer contribution expense.
During 2024, group insurance costs were lower due to fewer claims experienced and the utilization of accumulated plan forfeitures of $0.65 million to offset current year employer contribution expense. Occupancy expense rose in 2025 from 2024, compared to an increase in 2024 from 2023.
Depreciation on equipment owned under operating leases declined in 2024 from 2023, following a similar decrease in 2023 from 2022. In 2024 and 2023, depreciation on equipment owned under operating leases correlated with the change in equipment rental income. Professional fees increased in 2024 from 2023, compared to a decrease in 2023 from 2022.
In 2025 and 2024, depreciation on equipment owned under operating leases correlated with the change in equipment rental income. Professional fees remained flat in 2025 from 2024, compared to an increase in 2024 from 2023.
Commercial loans secured by real estate increased $85.40 million or 7.56% in 2024 over 2023. Commercial loans secured by real estate outstanding at December 31, 2024 were $1.22 billion and $1.13 billion at December 31, 2023. Approximately 62% of loans were owner occupied at December 31, 2024.
Commercial loans secured by real estate increased $54.50 million or 4.48% in 2025 over 2024. Commercial loans secured by real estate outstanding at December 31, 2025 were $1.27 billion and $1.22 billion at December 31, 2024. Approximately 61% of loans were owner occupied at December 31, 2025.
The underlying GSEs backing these mortgage-backed securities are rated Aaa or AA+ from the rating agencies.
The type of loans underlying the securities were all conforming loans at the time of issuance. The underlying GSEs backing these mortgage-backed securities are rated Aaa or AA+ from the rating agencies.
The result to the fully taxable-equivalent net interest margin was an increase of 13 basis points. 19 Table of Contents The largest contributor to the increase in the yield on average earning assets in 2024 was the 59 basis point improvement in the loan and lease portfolio yield primarily from rising interest rates and higher average balances.
The result to the fully taxable-equivalent net interest margin was an increase of 43 basis points. 20 Table of Contents The largest contributors to the increase in the yield on average earning assets in 2025 was an increase in average loan and lease balances and higher rates on taxable investment securities.

… 124 more changes not shown on this page.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

1 edited+0 added−0 removed0 unchanged
Biggest changeItem 7A. Quantitative and Qualitative Disclosures about Market Risk. For information regarding Quantitative and Qualitative Disclosures about Market Risk, see Part II, Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations, Interest Rate Risk Management. 38 Table of Contents
Biggest changeItem 7A. Quantitative and Qualitative Disclosures about Market Risk. For information regarding Quantitative and Qualitative Disclosures about Market Risk, see Part II, Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations, Interest Rate Risk Management. 39 Table of Contents

Other SRCE 10-K year-over-year comparisons