insiderdeltaSEC filings, surfaced and scored

CoverageForm 410-K10-Q8-K13D13G13F

Lakeland Financial Corp

LKFNCIK 0000721994 · Every Form 4 filed by insiders at this issuer. See financials →

Annual report (10-K)

Latest 10-K filed Feb 25, 2026. Sentiment + YoY language diff vs prior year. Read sections →

Signal:Neutral

Risk Factors:tone -0.0332Δ+0.001294% similar+38/-39 ¶

MD&A:tone -0.0133Δ+0.001687% similar+73/-75 ¶

Sentiment via Loughran-McDonald lexicon · YoY diff via Jaccard similarity + paragraph set difference.

Recent 8-K announcements

Per-item disclosure feed. Item 2.02 is the earnings release.

Apr 27, 2026no items parsed Apr 27, 2026no items parsed Apr 15, 2026no items parsed Apr 14, 20267.01 · Regulation FD Disclosure9.01 · Financial Statements and Exhibits Mar 6, 2026no items parsed

Top insiders

Most active reporters at Lakeland Financial Corp

Name	Roles	Filings
Lahrman Brok A	Officer	11
Steiner Jonathan P	Officer	11
Findlay David M	Officer	10
Robinson-Gay Donald	Officer	9
Hurford Jennifer M	Officer	8

Showing 16-20 of 27

Per pagePrevPage 4 of 6Next

Top performers

Insiders ranked by realized 90-day signed return on their open-market trades at Lakeland Financial Corp. Minimum 3 scored trades. Returns are signed - a sale followed by a rally counts against the insider.

#	Insider	Trades	Win rate	Avg	Median	Best	Worst
1	Robinson-Gay Donald	4	100%	+20.0%	+20.7%	+32.6%	+6.1%
2	Ross Steven D	3	100%	+16.8%	+11.7%	+32.6%	+6.1%
3	Steiner Jonathan P	5	100%	+12.1%	+8.1%	+32.6%	+1.9%
4	Kubacki Michael L	4	100%	+11.5%	+10.1%	+17.6%	+8.1%
5	Lahrman Brok A	5	100%	+11.2%	+4.6%	+38.8%	+0.1%
6	O'Neill Lisa M	9	89%	+10.6%	+11.4%	+17.1%	-3.9%
7	Clark Kyra E	4	75%	+10.2%	+7.3%	+32.6%	-6.6%
8	Ottinger Eric H	5	100%	+9.8%	+9.1%	+13.4%	+7.2%
9	Leniski Stephanie R	8	88%	+9.4%	+7.0%	+37.6%	-3.9%
10	Donovan James Rickard	4	50%	+8.8%	+4.0%	+38.8%	-11.5%

All filings

405 Form 4 / 4-A filings, newest first

Filed	Insider	Top transaction	Shares	Price	Value
Jun 1, 2026	Toothaker Bradley J Director	SSale	5,900	$60.6193	$357,654
May 6, 2026	Pichon Emily E Director	Holdings only	-	-	-
May 6, 2026	Ross Steven D Director	SSale	1,281	$62.50	$80,063
May 6, 2026	Welch M Scott Director	Holdings only	-	-	-
May 6, 2026	Augsburger Blake Director	Holdings only	-	-	-

Showing 1-5 of 405

Per pagePage 1 of 81Next

Real-time Form 4 intelligence. Smarter insider tracking.

Filed		Top transaction	Shares	Price	Value

YoY shift: Neutral

Year-over-year tone shift - average net-tone change across Risk Factors and MD&A vs the prior 10-K. This filing is 0.14pp more bullish than last year's.

Why YoY instead of absolute: the LM lexicon has ~6.6× more negative words than positive (legal/risk-disclosure language is heavy on hedging), so every 10-K reads bearish on raw tone. Year-over-year change strips that bias and surfaces the actual shift in management's framing.

Tone shift by section

The two components the gauge averages: how Risk Factors and MD&A each shifted in net tone versus last year's 10-K. The headline above is their average, so a green needle over a soft section just means the other section carried it.

Risk Factors

+0.12pp

Flat

Net-tone change vs last year's 10-K.

MD&A

+0.16pp

Flat

Net-tone change vs last year's 10-K.

Per-snippet highlights

Sentence-level sentiment highlighting with category and subcategory filters is coming once the snippet-scoring pipeline lands. For now, dig into the actual section text on the Sections tab.

Language change vs prior 10-K

Risk Factors (Item 1A) - words with the biggest YoY frequency increase

Negative rising

negatively+1
harm+1
shortages+1
easing+1
prolonged+1

Positive rising

No words rose this year.

Risk Factors (Item 1A)

8,625 words

ITEM 1A. RISK FACTORS

In addition to the other information in this Annual Report on Form 10-K, stockholders or prospective investors should carefully consider the following risk factors:

Risks Relating to General Economic Conditions

A downturn in general economic or business conditions, nationally or in markets where our business is concentrated, could have an adverse effect on our business, results of operations and financial condition.

Our success depends upon the business activity, population, employment rates, income levels, deposits and real estate activity in our markets in Northern and Central Indiana. Although our customers’ business and financial interests may extend well beyond these market areas, adverse economic conditions that affect these market areas could reduce our growth rate, diminish the ability of our customers to repay their loans to us, decrease the value of any collateral securing our loans and generally adversely affect our financial condition and results of operations. Moreover, because of our geographic concentration, we are less able than other regional or national financial institutions to diversify our credit risks across multiple markets.

Economic conditions in the United States and our Indiana markets are affected by complex factors that are difficult to predict and beyond our control, including uncertainties regarding the persistence of inflation, U.S. trade policy, including the potential changes to tariffs, geopolitical developments, disruptions in the global energy market, labor market conditions, the potential impact of deportation initiatives, the effects of bird flu or other potential infectious diseases, supply chain issues both domestically and internationally, and the potential effects of the current presidential administration and its actions with respect to the foregoing. In addition, uncertainty in the business community regarding these potential developments can itself harm economic conditions in our markets. Collectively, these issues could adversely affect our business, financial condition, results of operations and growth prospects.

Monetary policies of the Federal Reserve could adversely affect our financial condition and results of operations.

In the current environment, economic and business conditions are significantly affected by U.S. monetary policy, particularly the actions of the Federal Open Market Committee of the Federal Reserve ("FOMC") to raise or lower short-term interest rates. Beginning in March of 2022, the FOMC substantially tightened monetary policy by increasing the target Federal Funds rate in pursuit of its policy mandate to maintain maximum employment and achieve price stability. Further rate increases were paused starting in September 2023 as the rate of inflation had significantly subsided from levels experienced in 2022. In September of 2024, the FOMC began easing monetary policy by cutting the Federal Funds rate by 50 basis points and proceeded with two additional 25 basis point cuts in November and December of 2024. In 2025, the FOMC cut the Federal Funds rate by 75 basis points, with 25 basis point cuts in September, October and December, and signaled additional cuts may be warranted in 2026. In 2023, funding costs rose substantially as the cost to retain deposits and borrow increased due to market competition and a series of bank failures in the first quarter of 2023. The Company's increase in cost of funds negatively affected net interest income in 2023 and throughout the first half of 2024. The pivot in policy actions by the FOMC to lower the target Federal Funds rate allowed the Company to reprice deposits faster than loans in the second half of 2024 and into 2025, which had a impact on net interest income. Future changes by the FOMC to adjust the target Federal Funds rate could have varying impacts on the Company's net interest margin. Additionally, a reduction in longer-term rates would impact the fair value of our investment securities portfolio, which had $143.3 million in unrealized in available-for-sale investment securities at December 31, 2025. Alternatively, a rise in long-term interest rates could result in an increase in the unrealized in available-for-sale securities. Lower interest rates can also affect our customers’ businesses and financial condition and increase the value of collateral securing loans in our portfolio.

Given the complex factors affecting the strength of the U.S. economy, including uncertainties regarding the persistence of inflation, international geopolitical developments, developments in the global energy market, labor market conditions and the impact of higher rates on consumers and businesses, there is a meaningful risk that the Federal Reserve and other central banks may underestimate the impact of their monetary policies and potentially cause an economic recession. Restrictive monetary policies could limit economic growth and potentially cause an economic recession, and accommodative monetary policy could lead to rapid and prolonged inflation. As noted above, this could decrease loan demand, harm the credit characteristics of our existing loan portfolio and decrease the value of collateral securing loans in the portfolio.

Continued elevated levels of inflation could adversely impact our business and results of operations.

The United States has recently experienced elevated levels of inflation, with the rate peaking in mid-2022 and moderating in 2024 and 2025, although still above 2% at the end of 2025. Inflation pressures are currently expected to remain

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elevated as the inflation rate remains above the Federal Reserve’s target rate of 2%, which is intended to help accomplish its policy. Continued high levels of inflation could have complex effects on our business and results of operations, some of which could be materially adverse. For example, elevated inflation harms consumer purchasing power, which could negatively affect our retail customers and the economic environment and, ultimately, many of our business customers, and could also negatively affect our levels of noninterest expense. In addition, if prevailing interest rates persist or increase in response to elevated levels of inflation, the value of our securities portfolio would be negatively impacted. Continued elevated levels of inflation could also cause increased volatility and uncertainty in the business environment, which could adversely affect loan demand and our clients' ability to repay indebtedness. It is also possible that governmental responses to the current inflation environment could adversely affect our business, such as changes to monetary and fiscal policy that are too strict, or the imposition or imposition of price controls. The duration and of the current inflationary period cannot be estimated with precision.

Interest rate shifts may reduce net interest income and otherwise negatively impact our financial condition and results of operations.

Shifts in short-term interest rates may reduce net interest income, which is the principal component of our earnings. Net interest income is the difference between the amounts received by us on our interest bearing assets and the interest paid by us on our interest bearing liabilities. When interest rates rise, the rate of interest we pay on our liabilities may rise more quickly than the rate of interest that we receive on our interest bearing assets, which may cause our profits to decrease. Conversely, when interest rates fall, our interest bearing assets generally reprice slower than our interest bearing liabilities, given our balance sheet composition, which may cause our net interest income to increase. The impact on earnings is more adverse when the slope of the yield curve flattens, i.e. when short-term interest rates increase more than corresponding changes in long-term interest rates or when long-term interest rates decrease more than corresponding changes in short-term interest rates. In addition, when competition for deposits increases and deposit costs rise more quickly than loan yields, net interest income may be negatively impacted.

Interest rate increases often result in larger payment requirements for our borrowers, which increase the potential for default. At the same time, the value and marketability of any underlying assets securing a loan may be adversely affected by any reduced demand resulting from higher interest rates. In a declining interest rate environment, there may be an increase in prepayments on fixed rate loans, such as mortgages, as borrowers may seek to refinance these loans at lower rates.

Changes in interest rates also can affect the value of loans, securities and other assets. An increase in interest rates that adversely affects the ability of borrowers to pay the principal and interest on loans may lead to an increase in nonperforming assets and a reduction of income recognized, which could have a material adverse effect on our results of operations and cash flows. Thus, an increase in the amount of nonperforming assets would have an adverse impact on net interest income.

Labor shortages and failure to attract and retain qualified employees could negatively impact our business, results of operations and financial condition .

A number of factors may adversely affect the labor force available to us or increase labor costs, including high employment levels, and decreased labor force size and participation rates. Although we have not experienced any material labor shortages to date, we have continued to experience a competitive local labor market, especially for commercial lenders. As of December 31, 2025, Indiana's unemployment rate was 3.5%. A sustained labor shortage or increased turnover rates within our employee base could lead to increased costs, such as increased compensation expense to attract and retain employees.

In addition, if we are unable to hire and retain employees capable of performing at a high-level, or if mitigation measures we may take to respond to a decrease in labor availability have unintended negative effects, our business could be adversely affected. An overall labor shortage, lack of skilled labor, increased turnover or labor inflation could have a material adverse impact on our operations, results of operations, liquidity or cash flows.

Adverse developments or concerns affecting the financial services industry or specific financial institutions could adversely affect our financial condition and results of operations.

Actual events involving limited liquidity, defaults, non-performance or other adverse developments that affect financial institutions, transactional counterparties or other companies in the financial services industry or the financial services industry generally, or concerns or rumors about any events of these kinds or other similar events, have in the past and may in the future lead to erosion of customer confidence in the banking system, deposit volatility, liquidity issues, stock price volatility and other adverse developments. Additionally, we may be negatively affected by brand or reputational harm as a result of failures of other financial institutions.

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The current interest rate environment has led to a decline in the trading value of previously issued debt securities with interest rates below current market interest rates. Any sale of investment securities that are held in an unrealized loss position by the Company for liquidity or other purposes will cause actual losses to be realized. There can be no assurance that there will not be additional bank failures or issues such as liquidity concerns in the broader financial services industry or in the U.S. financial system as a whole. Adverse financial market and economic conditions can exert downward pressure on stock prices, security prices and credit availability for financial institutions without regard to their underlying financial strength.

While we did not experience any abnormal changes in our total outstanding deposit balances following bank closure events of 2023, we experienced changes in deposit balances resulting from typical seasonal fluctuations due to the nature of our business. While our deposit base primarily consists of a stable mix of commercial, public funds, and retail deposits, we cannot be assured that unusual deposit withdrawal activity will not affect banks generally or the Company specifically in the future. Continued uncertainty or volatility in the banking industry could also adversely impact our estimate of our allowance for credit losses and related provision for credit losses.

Additionally, the cost of resolving recent and future bank failures may prompt the FDIC to charge higher deposit insurance premiums and/or impose special assessments on insured depository institutions, regardless of asset size. These events and any future similar events may also result in changes to laws or regulations governing bank holding companies and banks, including higher capital requirements, or the imposition of restrictions through supervisory or enforcement activities, any of which could have a material adverse effect.

Any of these impacts, or any other impacts resulting from the events described above, could have a material adverse effect on our liquidity and capital levels, and our current and/or projected business operations and financial condition and results of operations.

Risks Relating to Our Business

If we do not effectively manage our credit risk, we may experience increased levels of nonperforming loans, charge offs and delinquencies, which could require further increases in our provision for credit losses.

There are risks inherent in making any loan, including risks inherent in working with individual borrowers, risks of nonpayment, risks resulting from uncertainties as to the future value of collateral, and risks resulting from changes in economic and industry conditions. In general, these risks have remained elevated as a result of the current monetary policy and impact of tariffs, which have potentially increased the risk of a near-term decline in growth or an economic downturn. We cannot assure you that our loan application approval procedures, use of loan concentration limits, credit monitoring, use of independent reviews of outstanding loans, use of third-party appraisals, or other procedures will reduce these credit risks. If the overall economic climate in the United States, generally, and our market areas, specifically, does not perform in the manner we expect, or even if it does, our borrowers may experience difficulties in repaying their loans, and the level of nonperforming loans, charge offs, and delinquencies could rise and require increases in the provision for credit losses, which would cause our net income and return on equity to decrease.

If our allowance for credit losses is not sufficient to absorb losses that may occur in our loan portfolio, our financial condition and liquidity could suffer.

We establish our allowance for credit losses and maintain it at a level considered adequate by management to absorb expected credit losses within the portfolio. Allocations of the allowance are made for specific loans and for pools of similar types of loans, although the entire allowance is available for any loan that, in management's judgment, should be charged against the allowance. Additions to the allowance for credit losses, which are charged to earnings through the provision for credit losses, are determined based on a variety of factors, including an analysis of the loan portfolio, historical loss experience and an evaluation of current economic conditions in our market areas. The actual amount of credit losses is affected by changes in economic, operating and other conditions within our markets, which may be beyond our control, and such losses may exceed current estimates.

At December 31, 2025, our allowance for credit losses as a percentage of total loans was 1.3% and as a percentage of total nonperforming loans was 330.5%. Because of the nature of our loan portfolio and our concentration in commercial and industrial loans and commercial real estate loans, which tend to be larger loans, the movement of a small number of loans to nonperforming status can have a significant impact on these ratios. Although a formal evaluation of the adequacy of the credit loss allowance is conducted monthly, we cannot predict credit losses with certainty and we cannot provide assurance that our allowance for credit losses will prove sufficient to cover actual credit losses in the future. Credit losses in excess of our reserves may adversely affect our business, results of operations and financial condition.

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Commercial and industrial loans make up a significant portion of our loan portfolio.

Commercial and industrial loans were $1.554 billion , or approximately 28.9% of our total loan portfolio, as of December 31, 2025. Commercial and industrial loans are often larger and involve greater risks than other types of lending. Because payments on such loans are often dependent on the successful operation of the borrower involved, repayment of such loans is o ften more sensitive than other types of loans to adverse conditions in the general economy. For example, the cumulative effects of changes in the economy and overall business environment, impact of tariffs, and labor availability shortages have adversely affected commercial and industrial loans, and we expect this trend to continue for certain portions of our loan portfolio, particularly if general economic conditions worsen.

Negative economic trends can also harm the value of security for our commercial and industrial loans. These loans are primarily made based on the identified cash flow of the borrower and secondarily on the underlying collateral provided by the borrower, and in many cases, personal guarantees provided by the business owners. Most often, this collateral is accounts receivable, inventory, machinery, or real estate. As a result of elevated interest rates and other factors, we have observed a corresponding decline in the value of commercial real estate securing these loans, substantially all of which are located within our Indiana markets. In the case of loans secured by accounts receivable, the availability of funds for the repayment of these loans may be substantially dependent on the ability of the borrower to collect amounts due from its customers, which could decline in the case of an economic recession.

The collateral securing other loans may depreciate over time, may be difficult to appraise, and may fluctuate in value based on the success of the business. Due to the larger average size of each commercial loan as compared with consumer loans as well as collateral that is generally less readily-marketable, losses incurred on a small number of commercial loans could adversely affect our business, results of operations, and growth prospects. Historically, the Bank's largest charge offs have been in this segment of the loan portfolio.

Our loan portfolio includes commercial real estate loans, which involve risks specific to real estate value.

Commercial real estate loans were $2.667 billion , or approximately 49.5% of our total loan portfolio, as of December 31, 2025. The market value of real estate can fluctuate significantly in a short period of time as a result of interest rates and market conditions in our Indiana markets, where substantially all of our commercial real estate collateral is located, and, as a general matter, some of these values have been significantly and negatively affected by prevailing interest rates.

Although a significant portion of such loans are secured by real estate as a secondary form of collateral, these developments and any future adverse developments affecting real estate values in one or more of our markets could increase the credit risk associated with our loan portfolio. A portion of our owner-occupied commercial real estate loans represent the factories and businesses owned by our commercial and industrial borrowers discussed above, which are secured by real estate. Additionally, real estate lending typically involves higher loan principal amounts and the repayment of the loans generally is dependent, in large part, on sufficient income from the properties securing the loans to cover operating expenses and debt service. Economic events or governmental regulations outside of the control of the borrower or lender could negatively impact the future cash flow and market values of the affected properties.

If the loans that are collateralized by real estate become troubled and the value of the real estate has been significantly impaired, then we may not be able to recover the full contractual amount of principal and interest that we anticipated at the time of originating the loan, which could cause us to increase our provision for credit losses and adversely affect our operating results and financial condition.

Our loan portfolio has a notable concentration in agri-business, which has a higher level of uncontrolled risk.

Our agri-business loans, which totaled $406.9 million , or approximately 7.6% of our total loan portfolio, as of December 31, 2025, are subject to risks outside of our or the borrower’s control. Although our agriculture portfolio is well-diversified, the risks, specific to the agricultural industry, include decreases in livestock and crop prices, increases in labor and input prices, increase in stockpiles of agricultural commodities, the strength of the U.S. dollar, the potential changes in tariffs and other trade restrictions on commodities and the nature of climate and weather conditions. To the extent these or other factors affect the performance or financial condition of our agri-business borrowers, such as the Avian bird flu, our results of operations and financial performance could suffer.

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Our consumer loans generally have a higher degree of risk of default than our other loans.

At December 31, 2025, consumer loans totaled $116.2 million , or 2.2% of our total loan portfolio. Consumer loans typically have shorter terms and lower balances with higher yields as compared to commercial loans, but generally carry higher risks of default. Consumer loan collections are dependent on the borrower’s continuing financial stability, and thus are more likely to be affected by adverse personal circumstances. Furthermore, the application of various federal and state laws, including bankruptcy and insolvency laws, may limit the amount which can be recovered on these loans.

Nonperforming assets take significant time to resolve and adversely affect our results of operations and financial condition and could result in further losses in the future.

Our nonperforming assets, totaling $20.9 million at December 31, 2025, adversely affect our net income in various ways. We do not record interest income on nonaccrual loans or other real estate owned, which adversely affects our net income and returns on assets and equity, increases our loan administration costs, and adversely affects our efficiency ratio. When we take collateral in foreclosure and similar proceedings, we are required to mark the collateral to its current fair market value at the time of transfer, which may result in a loss. These nonperforming loans and other real estate owned also increase our risk profile and our regulatory capital requirements may increase in light of such risks. The resolution of nonperforming assets requires significant time commitments from management and can be detrimental to the performance of their other responsibilities. If we experience increases in nonperforming loans and other assets, our net interest income and provision expense may be impacted and our loan administration costs could increase, each of which could have an effect on our net income and related ratios, such as return on assets and equity.

Liquidity risks could affect operations and jeopardize our business, results of operations and financial condition.

Liquidity is essential to our business. An inability to raise funds through deposits, borrowings, the sale of loans, investment securities, or other sources could have a substantial, negative effect on our liquidity. Our primary sources of funds consist of deposits, cash from operations, and investment security maturities and sales. Additional liquidity is provided by brokered time deposits, brokered money market deposits, IntraFi Network CDARS One-Way Buy and Insured Cash Sweep One-Way Buy program deposits, and American Financial Exchange overnight borrowings. We are also able to borrow from several federal funds lines at correspondent banks and are eligible to borrow from the Federal Reserve and the Federal Home Loan Bank (the "FHLB"), subject to collateral availability. At December 31, 2025, available liquidity totaled $3.526 billion, with $436.2 million of unpledged loan collateral. A portion of this available liquidity is comprised of $622.8 million of unpledged investment securities that were eligible to serve as collateral for liquidity availability at the FHLB and the Federal Reserve Bank. Our access to funding sources in amounts adequate to finance or capitalize our activities or on terms that are acceptable to us could be impaired by factors that affect us directly or the financial services industry or economy in general, such as disruptions in the financial markets or views and expectations about the prospects for the financial services industry. In addition, increased competition with banks and credit unions in our footprint, brokerage firms, and online deposit gatherers for retail deposits may impact our ability to raise funds through deposits and could have a effect on our liquidity.

Any decline in available funding could adversely impact our ability to originate loans, purchase investment securities, meet our expense obligations, pay dividends to our stockholders, or fulfill obligations such as repaying our borrowings or meeting deposit withdrawal demands, any of which could have a material adverse impact on our liquidity, business, results of operations and financial condition.

Any action or steps to change coverages or eliminate Indiana’s Public Deposit Insurance Fund could require us to find alternative, higher-cost funding sources to replace public fund deposits or to provide for collateralization of these deposits.

At December 31, 2025 , appro ximately 33.2% of our deposit balances are concentrated in public funds from municipalities and government agencies located in the Bank’s geographic footprint. The five largest of which have operating and other deposit accounts that, collectively, represented approximately 18.9% of total deposits at December 31, 2025. A shift in funding away from public fund deposits would impact liquidity availability and could increase our cost of funds, as the alternate funding sources, such as brokered certificates of deposit, can be higher-cost, are less favorable deposits, and could require collateral to be pledged. The inability to maintain these public funds on deposit could result in a material, adverse effect on the Bank’s liquidity and could materially impact our ability to grow and remain profitable.

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Declines in asset values may result in impairment charges and adversely affect the value of our investment securities, financial performance and capital.

We maintain an investment securities portfolio that includes, but is not limited to, U.S. treasuries, mortgage-backed securities and municipal securities. The market value of these investment securities has been, and may continue to be, affected by factors other than the performance of the servicer of the securities or the mortgages underlying the securities, such as changes in the interest rate environment, negative trends in the residential and commercial real estate markets, ratings downgrades, adverse changes in the business climate, and a lack of liquidity in the secondary market for certain investment securities. On a quarterly basis, we evaluate investment securities and other assets for credit and other impairment indicators. We may be required to record additional credit reserve charges if our investment securities suffer a decline in fair value that has resulted from credit losses or other factors. If we determine that a significant reserve is needed, we would be required to charge against earnings the credit-related portion, which could have a material effect on our results of operations in the periods in which the write-offs occur. In addition, we may determine to sell securities in our available-for-sale investment securities portfolio, and any such sale could cause us to realize currently unrealized that resulted from the increases in the prevailing interest rates since the time these securities were purchased.

Risks Relating to Our Corporate Strategy

We may need to raise additional capital in the future to achieve our growth plans, but that capital may not be available when it is needed.

We are required by federal and state regulatory authorities to maintain adequate levels of capital to support our operations. Accordingly, we may need to raise additional capital to support our future growth plans. 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. Accordingly, we cannot make assurances of our ability to raise additional capital, if needed, on terms acceptable to us. In particular, if we were required to raise additional capital in the current interest rate environment, we believe the pricing and other terms investors may require in such an offering may not be attractive to us. If we cannot raise additional capital when needed, our financial condition and our ability to further expand our operations through organic growth or acquisitions could be materially impacted.

We may experience difficulties in managing our growth, and our growth strategy involves risks that may negatively impact our net income.

In addition to our continuing expansion in Indianapolis and larger cities in Northern Indiana, we may expand into additional communities or attempt to strengthen our position in our current markets through opportunistic acquisitions of all or part of other financial institutions, or by opening new branches in or within three hours of our contiguous geographic footprint. To the extent that we undertake acquisitions or new branch openings, we are likely to experience the effects of higher operating expenses relative to operating income from the new operations, which may have an adverse effect on our levels of reported net income, return on average equity and return on average assets. Other effects of engaging in such growth strategies may include potential diversion of our management’s time and attention and general disruption to our business.

To the extent that we grow through acquisitions and branch openings, we cannot assure you that we will be able to adequately and profitably manage this growth. Acquiring other banks and businesses will involve similar risks to those commonly associated with branching but may also involve additional risks, including:

• potential exposure to unknown or contingent liabilities of banks and businesses we acquire;

• exposure to potential asset quality issues of the acquired bank or related business;

• difficulty and expense of integrating the operations and personnel of banks and businesses we acquire; and

• the possible loss of key employees and customers of the banks and businesses we acquire.

We face intense competition in all phases of our business from other banks, financial institutions, private credit funds and nonbank financial service providers.

The banking and financial services business in our market is highly competitive. Our competitors include large national, regional and local community banks, credit unions, fintech and nonbank financial service providers, securities and brokerage companies, mortgage companies, insurance companies, finance companies, money market mutual funds and farm

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credit services. Many of these competitors are not subject to the same operating costs or regulatory restrictions as we are and are able to provide customers with a feasible alternative to traditional banking services.

Increased competition may also result in a decrease in the amounts of our loans and deposits, reduced spreads between loan rates and deposit rates, or loan terms that are more favorable to the borrower, particularly in the case of incremental loan growth. Any of these results could have a material, adverse effect on our ability to grow and remain profitable. If increased competition causes us to significantly discount the interest rates we offer on loans or increase the amount we pay on deposits, our net interest income could be adversely impacted. If increased competition causes us to relax our underwriting standards, we could be exposed to higher losses from lending activities. Moreover, we rely on deposits to be a low-cost source of funding, and a loss in our deposit base could cause us to incur higher funding costs from wholesale funding sources.

The financial services industry is constantly undergoing rapid technological changes with frequent introductions of new technology-driven products and services, including artificial intelligence. We invest from time to time in investment funds that seek to promote the development of such new and emerging financial technologies. However, there can be no assurance that we will be able to effectively incorporate, or otherwise benefit from, such developments.

Additionally, many of our competitors are much larger in total assets and capitalization, have greater access to capital markets, possess larger lending limits, and offer a broader range of financial services than we can offer.

Attractive acquisition opportunities may not be available to us in the future.

We expect that other banking and financial service companies, many of which have significantly greater resources than we do, will compete with us in acquiring other financial institutions if we pursue such acquisitions. This competition could increase prices for potential acquisitions that we believe are attractive. Also, acquisitions are subject to various regulatory approvals. If we fail to receive the appropriate regulatory approvals, we will not be able to consummate an acquisition that we believe is in our best interests. Among other factors, our regulators consider our capital, liquidity, profitability, regulatory compliance, and levels of goodwill and intangibles when considering acquisition and expansion proposals. Any acquisition could be dilutive to our earnings and stockholders’ equity per share of our common stock.

Risks Relating to Regulation, Tax and Accounting

We may be materially and adversely affected by the highly regulated environment in which we operate.

We are subject to extensive federal and state regulation, supervision, and examination. A more detailed description of the primary federal and state banking laws and regulations that affect us is contained in the section of this Annual Report on Form 10-K captioned "Supervision and Regulation". Banking regulations are primarily intended to protect depositors’ funds, FDIC funds, customers, and the banking system as a whole, rather than our shareholders. These regulations affect our lending practices, capital structure, investment practices, dividend policy, and growth, among other considerations.

As a bank holding company, we are subject to extensive regulation and supervision and undergo periodic examinations by our regulators, who have extensive discretion and authority to prevent or remedy unsafe or unsound practices or violations of law by banks and bank holding companies. Failure to comply with applicable laws, regulations, or policies could result in sanctions by regulatory agencies, civil monetary penalties, and/or damage to our reputation, which could have a material adverse effect on us. Although we have policies and procedures designed to mitigate the risk of any such violations, there can be no assurance that such violations will not occur.

The laws, regulations, rules, standards, policies, and interpretations governing us are constantly evolving and may change significantly over time. For example, on July 21, 2010, the Dodd-Frank Act was signed into law, which significantly changed the regulation of financial institutions and the financial services industry. The Dodd-Frank Act, together with the regulations developed thereunder, includes provisions affecting large and small financial institutions alike, including several provisions that affect how community banks, thrifts, and small bank and thrift holding companies operate. In addition, the Federal Reserve, in recent years, has adopted numerous new regulations addressing banks’ overdraft and mortgage lending practices. Further, the CFPB has historically had broad powers to supervise and enforce consumer protection laws, and additional consumer protection legislation may be enacted or pursued in the future. Any enforcement actions or other rule-making in these areas could negatively affect our business and our ability to maintain or grow levels of noninterest income.

Other legislative initiatives could detrimentally impact our operations in the future. Governments and agencies may enact new laws or promulgate new regulations, or interpret existing laws and regulations differently than they have in the past, including as a result of the new presidential administration, or commence investigations or inquiries into our business practices.

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For example, the previous presidential administration announced a government-wide effort to eliminate "junk fees" which could subject our business practices to further scrutiny. The CFBP’s action on junk fees thus far has largely focused on fees associated with deposit products, such as "surprise" overdraft fees and non-sufficient funds fees. However, what constitutes a "junk fee" remains undefined. As a result of this regulatory focus, we have changed how we assess overdraft and non-sufficient funds fees and may be required to implement additional changes based on regulatory directives or guidance. Such changes have led to and may continue to cause a reduction in our noninterest income and thus impact our overall net income.

These provisions, as well as any other aspects of current or proposed regulatory or legislative changes to laws applicable to the financial industry, may impact the profitability of our business activities, and may change certain of our business practices, including our ability to offer new products, obtain financing, attract deposits, make loans, and achieve satisfactory interest spreads and could expose us to additional costs, including increased compliance costs.

Regulations of the Federal Reserve could adversely affect our business, financial condition and results.

An important function of the Federal Reserve is to regulate the money supply and credit conditions. Among the instruments used by the Federal Reserve to implement these objectives are open market operations in U.S. government securities, adjustments of the discount rate, and changes in reserve requirements against bank deposits. These instruments are used in varying combinations to influence overall economic growth and the distribution of credit, bank loans, investments, and deposits. Their use also affects interest rates charged on loans or paid on deposits.

The monetary policies and regulations of the Federal Reserve have had a significant effect on the operating results of commercial banks in the past and are expected to continue to do so in the future. The effects of such policies upon our business, financial condition, and results of operations cannot be predicted.

We are required to maintain capital to meet regulatory requirements, and, if we fail to maintain sufficient capital, whether due to losses, an inability to raise additional capital or otherwise, our financial condition, liquidity and results of operations, as well as our ability to maintain regulatory compliance, would be adversely affected.

The Company, on a consolidated basis, and the Bank, on a stand-alone basis, must meet certain regulatory capital requirements and maintain sufficient liquidity. We face significant capital and other regulatory requirements as a financial institution, which were heightened with the implementation of the Basel III Rule and the phase-in of the capital conservation buffer requirement. 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. Accordingly, we cannot assure you that we will be able to raise additional capital if needed or on terms acceptable to us. If we fail to maintain capital to meet regulatory requirements, our financial condition, liquidity, and results of operations would be materially and adversely affected.

We may be subject to a higher consolidated effective tax rate if there is a change in tax laws relating to LCB Investments II, Inc. or if LCB Funding, Inc. fails to qualify as a real estate investment trust.

The Bank holds certain investment securities in its wholly owned subsidiary LCB Investments II, Inc., which is incorporated in Nevada. Pursuant to the State of Indiana’s current tax laws and regulations, we are not subject to Indiana income tax for income earned through that subsidiary. If there are changes in Indiana’s tax laws or interpretations thereof requiring us to pay state taxes for income generated by LCB Investments II, Inc., the resulting tax consequences could increase our effective tax rate or cause us to have a tax liability for prior years.

The Bank also holds certain commercial real estate loans, residential real estate loans and other loans in a real estate investment trust through LCB Investments II, Inc., which is incorporated in Maryland. Qualification as a real estate investment trust involves application of specific provisions of the Internal Revenue Code relating to various asset tests. If LCB Funding, Inc. fails to meet any of the required provisions for real estate investment trusts, it could no longer qualify as a real estate investment trust and the resulting tax consequences would increase our effective tax rate or cause us to have a tax liability for prior years. Additionally, changes to the State of Indiana's current tax laws and regulations for real estate investment trust income disallowance could increase our effective tax rate or cause us to have a tax liability for prior years.

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Our accounting policies and methods are the basis for how we prepare our consolidated financial statements and how we report our financial condition and results of operations, and they require management to make estimates about matters that are inherently uncertain.

Our accounting policies and methods are fundamental to how we record and report our financial condition and results of operations. Our management must exercise judgment in selecting and applying many of these accounting policies and methods in order to ensure they comply with GAAP and reflect management’s judgment as to the most appropriate manner in which to record and report our financial condition and results of operations. In some cases, management must select the accounting policy or method to apply from two or more alternatives, any of which might be reasonable under the circumstances. The application of that chosen accounting policy or method might result in the Company reporting different amounts than would have been reported under a different alternative. If management’s estimates or assumptions are incorrect, the Company may experience material losses.

Management has identified one accounting policy as being "critical" to the presentation of the Company’s financial condition and results of operations because it requires management to make particularly subjective and complex judgments about matters that are inherently uncertain and because of the likelihood that materially different amounts would be reported under different conditions or using different assumptions. This critical accounting policy relates to the allowance for credit losses. Because of the inherent uncertainty of this estimate, no assurance can be given that the application of alternative policies or methods might not result in the reporting of a different amount of the allowance for credit losses and, accordingly, net income.

From time to time, the Financial Accounting Standards Board ("FASB") and the SEC change the financial accounting and reporting standards or the interpretation of those standards that govern the preparation of our external financial statements. These changes are beyond our control, can be difficult to predict and could materially impact how we report our financial condition and results of operations. Changes in these standards are continuously occurring, and given the current economic environment, more drastic changes may occur. The implementation of such changes could have a material adverse effect on our financial condition and results of operations.

We may be adversely affected by changes in U.S. tax laws and regulations.

Any change in federal or state tax laws or regulations, including any increase in the federal corporate income tax rate from the current level of 21%, could negatively affect our business and results of operations, including as a result of our income tax expense and any impact to the profitability of our loan customers.

Risks Relating to our Operations

Our ability to attract and retain management and key personnel and any damage to our reputation may affect future growth and earnings.

Much of our success and growth has been influenced strongly by our ability to attract and retain management experienced in banking and financial services and familiar with the communities in our market areas. Our ability to retain the executive officers, management teams, branch managers, loan officers, and wealth advisors at the Bank will continue to be important to the successful implementation of our strategy. It is also critical, as we grow, to be able to attract and retain qualified additional management and loan officers with the appropriate level of experience and knowledge about our market areas to implement our community-based operating strategy. The unexpected loss of services of any key management personnel, or the inability to recruit and retain qualified personnel in the future, could have an adverse effect on our business, results of operations, and financial condition.

In addition, our business depends on earning and maintaining the trust of our customers and communities. Harm to our reputation could arise from numerous sources, including employee misconduct, compliance failures, internal control deficiencies, litigation, or our failure to deliver appropriate levels of service. If any events or circumstances occur which could undermine our reputation, there can be no assurance that the additional costs and expenses we may incur as a result would not have an adverse impact on our business.

We have a continuing need to adapt to technological change and we may not have the resources to effectively implement new technology.

The financial services industry is constantly undergoing rapid technological changes with frequent introductions of new technology-driven products and services. In addition to better serving customers, the effective use of technology increases

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efficiency and enables financial institutions to reduce costs. Our future success will depend in part upon our ability to address the needs of our customers by using technology and artificial intelligence to provide products and services that will satisfy customer demands for convenience as well as to create additional efficiencies in our operations as we continue to grow and expand our market areas. Many of our larger competitors have substantially greater resources to invest in technological improvements, such as artificial intelligence. As a result, they may be able to offer additional or superior products to those that we will be able to offer, which would put us at a competitive disadvantage. Accordingly, we cannot provide assurances that we will be able to effectively implement new technology-driven products and services or be in marketing such products and services to our customers.

The Company’s information systems may experience an interruption or breach in security and cyber-attacks, all of which could have a material adverse effect on the Company’s business.

The Company relies heavily on internal and outsourced technologies, communications, and information systems to conduct its business, particularly with respect to our core processing provider and our digital banking provider. Additionally, in the normal course of business, the Company collects, processes, and retains sensitive and confidential information regarding our customers. As the Company’s reliance on technology has increased, so have the potential risks of a technology-related operation interruption (such as disruptions in the Company’s core provider, general ledger, deposit, loan, digital banking or other systems) or the occurrence of a cyber-attack (such as unauthorized access to the Company’s systems). These risks have increased for all financial institutions as new technologies, the use of the Internet and telecommunications technologies (including mobile devices) to conduct financial, and other business transactions and the increased sophistication and activities of organized crime, perpetrators of fraud, hackers, terrorists, and others have increased. In addition to cyber-attacks, business e-mail compromise campaigns, or other security breaches involving the theft of sensitive and confidential information, hackers recently have engaged in attacks against financial institutions, particularly of service attacks, which are designed to key business services, such as customer-facing web sites and social engineering attacks that could influence an employee of the Company to click on a link that downloads malware or ransomware to the Company’s system or prompts the employee to enter system credentials. The Company is not to anticipate or implement preventive measures all security of these types, including deep fakes, especially because the techniques used change frequently and because attacks can originate from a wide variety of sources. In addition, it is possible that we may not be to detect security on a timely basis, or at all, which could increase the costs and risks associated with any such .

The Company also faces risks related to cyber-attacks and other security breaches in connection with credit card and debit card transactions that typically involve the transmission of sensitive information regarding the Company’s customers through various third parties, including merchant acquiring banks, payment processors, payment card networks and its processors. Some of these parties have in the past been the target of security breaches and cyber-attacks, and because the transactions involve third parties and environments such as the point of sale that the Company does not control or secure, future security breaches or cyber-attacks affecting any of these third parties could impact the Company through no fault of its own, and in some cases it may have exposure and suffer losses for breaches or attacks relating to them. In addition, the Company offers its customers protection against fraud and certain losses for unauthorized use of debit cards in order to stay competitive with other financial institutions. Offering such protection the Company to that could affect its business, financial condition, and results of operations. Further cyber-attacks or other in the future, whether affecting the Company or others, could intensify consumer and regulatory focus and result in reduced use of payment cards and increased costs, all of which could have a material effect on the Company’s business. To the extent we are involved in any future cyber-attacks or other , the Company’s reputation could be affected, which could also have a material effect on the Company’s business, financial condition or results of operations.

We are subject to certain operational risks, including, but not limited to, customer or employee fraud and data processing system failures and errors.

Employee errors and misconduct could subject us to financial losses or regulatory sanctions and seriously harm our reputation. Misconduct by our employees could include hiding their own unauthorized activities from us, improper or unauthorized activities on behalf of our customers, or improper use of confidential information. It is not always possible to prevent employee errors and misconduct, and the precautions we take to prevent and detect this activity may not be effective in all cases. Employee errors could also subject us to financial claims for negligence, among others.

In addi tion, as a bank, we are susceptible to fraudulent activity that may be committed against us, third parties or our clients, which may result in financial losses or increased costs to us or our clients, disclosure or misuse of our information or our client information, misappropriation of assets, privacy breaches against our clients, litigation or damage to our reputation. Such fraudulent activity may take many forms, including check fraud, electronic fraud, wire fraud, phishing, social engineering

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and other dishonest acts. For example, during 2023, the Bank was the victim of international wire fraud resulting in a loss of $18.1 million, prior to additional insurance and loss recoveries of $7.3 million.

Should we fail to prevent or detect an occurrence, or if any resulting loss is not insured or exceeds applicable insurance limits, it could have a material adverse effect on our business, results of operations and financial condition.

The Company is and may become involved from time to time in suits, legal proceedings, information-gathering requests, investigations and proceedings by governmental and self-regulatory agencies that may lead to adverse consequences.

Many aspects of our business and operations involve the risk of legal liability, and in some cases we or our subsidiaries have been named or threatened to be named as defendants in various lawsuits arising from our business activities. For example, as previously disclosed in the third quarter of 2019, the Bank discovered potentially fraudulent activity by a former treasury management client involving multiple banks. In the context of resulting bankruptcy proceedings involving the former client, the liquidating trustee had filed a complaint against the Bank, focused on a series of business transactions among the former client, related entities and the Bank. This matter was dismissed with prejudice on June 21, 2024. In addition, companies in our industry are frequently the subject of governmental and self-regulatory agency information-gathering requests, reviews, investigations and proceedings. The results of such proceedings could lead to significant civil or , including monetary , , judgments, settlements, , , restrictions on the way in which we conduct our business, or reputational .

Although we establish accruals for legal proceedings when information related to the loss contingencies represented by those matters indicates both that a loss is probable and that the amount of loss can be reasonably estimated, we do not have accruals for all legal proceedings where we face a risk of loss. In addition, due to the inherent subjectivity of the assessments and unpredictability of the outcome of legal proceedings, amounts accrued may not represent the ultimate loss to us from the legal proceedings in question. Accordingly, our ultimate losses may be higher, and possibly significantly so, than the amounts accrued for legal loss contingencies, which could adversely affect our financial condition and results of operations.

Language change vs prior 10-K

MD&A (Item 7) - words with the biggest YoY frequency increase

Negative rising

disclosed+8
easing+4
losses+2
difficulty+2
loss+1

Positive rising

gain+4
positive+3
favorable+2
improvement+2
positively+1

MD&A (Item 7)

15,143 words

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

OVERVIEW

Net income in 2025 was $103.4 million, an increase of 10.6%, from $93.5 million in 2024. Net income for 2024 was less than 1% lower compared to $93.8 million in 2023.

Diluted net income per common share was $4.01 in 2025, $3.63 in 2024 and $3.65 in 2023. Return on average total assets was 1.50% in 2025, versus 1.40% in 2024 and 1.45% in 2023. Return on average total equity was 14.40% in 2025, versus 14.12% in 2024 and 15.93% in 2023. The dividend payout ratio, with respect to diluted earnings per share, was 49.88% in 2025, versus 52.89% in 2024 and 50.41% in 2023. The average equity to average assets ratio was 10.44% in 2025, compared to 9.94% in 2024 and 9.11% in 2023.

Net income in 2025 as compared to 2024 was positively impacted by a $24.3 million increase to net interest income and a decrease in the provision for credit losses of $5.0 million. Offsetting these positive contributions was a decrease in noninterest income of $8.9 million and an increase in noninterest expense of $6.5 million. Pretax pre-provision earnings, a non-GAAP measure calculated by adding net interest income to noninterest income and subtracting noninterest expense, were $137.4 million for the year ended December 31, 2025, an increase of $8.9 million, or 7.0%, compared to $128.4 million for the year ended December 31, 2024.

Net income in 2024 as compared to 2023 was positively impacted by a $7.0 million increase in noninterest income and a $5.6 million decrease in noninterest expense. Offsetting these positive contributions to net income were an increase to the provision for credit losses of $10.9 million, an increase to income tax expense of $1.6 million, and a decrease to net interest income of $356,000. Pretax pre-provision earnings were $128.4 million for the year ended December 31, 2024, an increase of $12.3 million, or 10.5%, compared to $116.2 million for the year ended December 31, 2023.

Total assets were $6.990 billion as of December 31, 2025, versus $6.678 billion as of December 31, 2024, an increase of $311.6 million or 4.7%. Balance sheet expansion in 2025 was driven by loan growth net of the allowance for credit losses of $274.4 million, or 5.5%, and an increase in available-for-sale securities of $60.6 million, or 6.1%. Deposits increased by $72.4 million, or 1.2%, during 2025, to fund the balance sheet expansion. Borrowings outstanding at December 31, 2025, were $184.2 million, compared to no borrowings outstanding at December 31, 2024.

CRITICAL ACCOUNTING POLICIES

Certain of the Company’s accounting policies are important to the portrayal of the Company’s financial condition, since they require management to make difficult, complex or subjective judgments, some of which may relate to matters that are inherently uncertain. Estimates associated with these policies are susceptible to material changes as a result of changes in facts and circumstances. Some of the facts and circumstances which could affect these judgments include changes in interest rates, in the performance of the economy or in the financial condition of borrowers. Management believes that its critical accounting policies include determining the allowance for credit losses.

Allowance for Credit Losses

The Company maintains an allowance for credit losses to provide for expected credit losses. Losses are charged against the allowance when management believes that the principal is uncollectible. Subsequent recoveries, if any, are credited to the allowance. Allocations of the allowance are made for specific loans and for pools of similar types of loans, although the entire allowance is available for any loan that, in management’s judgment, should be charged against the allowance. A provision for credit losses is taken based on management’s ongoing evaluation of the appropriate allowance balance. A formal evaluation of the adequacy of the credit loss allowance is conducted monthly. The ultimate recovery of all loans is susceptible to future market factors beyond the Company’s control.

The level of credit loss provision is influenced by growth in the overall loan portfolio, emerging market risk, emerging concentration risk, commercial loan focus and large credit concentration, new industry lending activity, general economic conditions and historical loss analysis. In addition, management gives consideration to changes in the facts and circumstances of watch list credits, which includes the security position of the borrower, in determining the appropriate level of the credit loss provision. Furthermore, management’s overall view on credit quality is a factor in the determination of the provision.

The determination of the appropriate allowance is inherently subjective, as it requires significant estimates by management. The Company has an established process to determine the adequacy of the allowance for credit losses that

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generally includes consideration of changes in the nature and volume of the loan portfolio and overall portfolio quality, along with current and forecasted economic conditions that may affect borrowers’ ability to repay. Consideration is not limited to these factors although they represent the most commonly cited factors. To determine the specific allocation levels for individual credits, management considers the current valuation of collateral and the amounts and timing of expected future cash flows as the primary measures. Management also considers trends in adversely classified loans based upon an ongoing review of those credits. With respect to pools of similar loans, an appropriate level of general allowance is determined by portfolio segment using a probability of default-loss given default ("PD/LGD") model, subject to a floor. A default can be triggered by one of several different asset quality factors, including past due status, nonaccrual status, material modification to a borrower experiencing financial difficulty or if the loan has had a charge off. This PD is then combined with a LGD derived from historical charge off data to construct a default rate. This loss rate is then supplemented with adjustments for reasonable and supportable forecasts of relevant economic indicators, particularly the rate forecast from the Federal Open Market Committee’s Summary of Economic Projections, and other environmental factors based on the risks present for each portfolio segment. These environmental factors include consideration of the following: levels of, and trends in, and loans; trends in volume and terms of loans; changes in collateral ; effects of any changes in risk selection and underwriting standards; other changes in lending policies, procedure, and practices; experience, ability, and depth of lending management and other relevant staff; national and local economic trends and conditions; industry conditions; and effects of changes in credit concentrations. It is also possible that these factors could include social, political, economic, and terrorist events or activities. All of these factors are subject to change, which may be significant. As a result of this detailed process, the allowance results in two forms of allocations, specific and pooled. These two components represent the total allowance for credit deemed adequate to cover expected inherent in the loan portfolio. The Company's allowance for credit balance was comprised of 12% specific allocations and 88% pooled allocations at December 31, 2025, compared to 32% specific allocations and 68% pooled allocations at December 31, 2024. The decrease in specific allocations was driven by a previously commercial credit that was specifically allocated for within in the allowance for credit in 2024 and partially charged off in 2025.

Commercial loans are subject to a dual standardized grading process administered by the credit administration function. These grade assignments are performed independently of each other and a consensus is reached by credit administration and the loan officer. Specific allocations are established in cases where management has identified significant conditions or circumstances related to an individual credit that indicate it should be analyzed on an individual basis. Considerations with respect to specific allocations for these individual credits include, but are not limited to, the following: (a) the sufficiency of the customer’s cash flow or net worth to repay the loan; (b) the adequacy of the discounted value of collateral relative to the loan balance; (c) whether the loan has been criticized in a regulatory examination; (d) whether the loan is nonperforming; (e) any other reasons the ultimate collectability of the loan may be in question; or (f) any unique loan characteristics that require special monitoring.

Allocations are also applied to categories of loans considered not to be individually analyzed, but for which the rate of loss is expected to be consistent with or greater than historical averages. Such allocations are based on past loss experience and information about specific borrower situations and estimated collateral values. These general pooled loan allocations are performed for portfolio segments of commercial and industrial; commercial real estate, multi-family, and construction; agri-business and agricultural; other commercial loans; and consumer 1-4 family mortgage and other consumer loans. Pooled allocations of the allowance are determined by a historical loss rate based on the calculation of each pool’s probability of default-loss given default, subject to a floor. The length of the historical period for each pool is based on the average life of the pool. The historical loss rates are supplemented with consideration of economic conditions and portfolio trends.

Due to the imprecise nature of estimating the allowance for credit losses, the Company’s allowance for credit losses includes an unallocated component. The unallocated component of the allowance for credit losses incorporates the Company’s judgmental determination of potential expected losses that may not be fully reflected in other allocations. As a practical expedient, the Company has elected to state accrued interest separately from loan principal balances on the consolidated balance sheet. Additionally, when a loan is placed on non-accrual, interest payments are reversed through interest income.

For off balance sheet credit exposures outlined in the ASU at 326-20-30-11, it is the Company’s position that nearly all of the unfunded amounts on lines of credit are unconditionally cancellable, and therefore not subject to having a liability recorded.

The allowance is inherently uncertain as it represents the Company’s expectation of the future collectability of loans in its portfolio; actual collections may be greater than or less than expectations. Actual collections may be impacted by wider economic conditions such as changes in the competitive environment or in the levels of business investment or consumer spending, or by the quality of borrowers’ management teams and the success of their strategy execution. Borrowers’ ability to

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repay may also change due to the effects of government monetary or fiscal policy, which could affect the level of demand for borrowers’ products or services or the borrowers' ability to service their debt payments in the future.

The Company’s allowance for credit losses is subject to changes in the inputs to the model, including the following: the number of delinquent loans, nonaccrual loans, material modification due to a borrower experiencing financial difficulty, or charge offs; the levels of charge offs and recoveries; projected unemployment rates and other economic indicators; the Company’s collateral position on adversely classified loans; or management’s qualitative judgment of the implication of trends in its loan portfolio or in the broader economy.

RESULTS OF OPERATIONS

Overview

In 2025, the Company continued to expand its balance sheet organically, achieving average loan growth of 3.7% and average deposit growth of 3.5% in its geographic footprint of northern Indiana and in the Indianapolis market. The Company had 55 branches as of December 31, 2025. The Company’s increase in net interest income of $24.3 million, or 12.4%, was primarily responsible for the $9.9 million, or 10.6%, increase to net income. Net interest margin expansion was the key driver for the increase in net interest income, which increased by 27 basis points from 3.18% in 2024 to 3.45% in 2025. Deposit costs, which peaked in the second quarter of 2024 and began to contract during the second half of that year, continued to decline further as a result of continued monetary policy easing by the FOMC and favorable deposit repricing. Additionally, the provision for credit losses decreased by $5.0 million, which further contributed to the increase in net income. Offsetting these positive contributions was a decrease to noninterest income of $8.9 million and an increase to noninterest expense of $6.5 million.

Provision expense was elevated in 2024 as compared to 2025 a result of specific allocations that were recorded related to the previously disclosed downgrade of a $43.3 million commercial relationship to nonperforming status. While provision expense in 2025 was partially driven by additional specific allocations that were recorded for this credit, the Company reached a settlement of the matter and recognized a net charge off of $27.8 million during 2025. As a result, the allowance coverage ratio decreased from 1.68% at December 31, 2024 to 1.28% at December 31, 2025. Individually analyzed and watch list loans as a percentage of total loans returned to near historic lows of 3.42% at December 31, 2025, as compared to 4.13% at December 31, 2024.

Fee based lines of business, including wealth advisory fees investment brokerage fees, service charges on deposit accounts, loan and service fees, and interest rate swap fee income anchored 2025 growth in adjusted core noninterest income, a non-GAAP financial measure that excludes the impact of certain non-routine operating events. Adjusted core noninterest income increased by 2.4% and 7.6% for 2025 and 2024, respectively. The growth in adjusted core noninterest expense, a non-GAAP financial measure that excludes the impact of certain non-routine operating events, reflects the Company's continued investment in its people, technology, and physical infrastructure. The outlook for 2026 includes plans for continued organic balance sheet growth, disciplined credit philosophy with proactive management of loan portfolio challenges, continued investments in human and technological capital, completion of the Lake City Bank Innovation and Technology Center which represents a significant investment in the downtown Warsaw campus headquarters, and expansion of our branch network into Boone County, Indiana, with a new office scheduled to open in Whitestown in 2026. Beyond 2026, the Company plans to accelerate plans for branch development with locations in Indianapolis, South Bend, Fort Wayne and Elkhart identified for expansion over the next several years as the Company seeks to become a recognized Midwest leader in community banking.

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Selecte d income statement information for the years ended December 31, 2025, 2024, and 2023 is presented in the following table.

(dollars in thousands, except per share data)

Income Statement Summary:

Net interest income (a)

Provision for credit losses

Noninterest income (b)

Adjusted Core Noninterest Income (1)

Noninterest expense (c)

Adjusted Core Noninterest Expense (1)

Other Data:

Efficiency ratio (2)

Adjusted Core Efficiency Ratio (1)

Dilutive EPS

Total equity

Tangible capital ratio (3)

Adjusted tangible capital ratio (4)

Net charge offs to average loans

Net interest margin

Noninterest income to total revenue

Pretax Pre-Provision Earnings (5)

(1) Non-GAAP financial measure. Calculated by excluding the effects of the 2024 net gain on Visa shares, legal accrual, and additional wire fraud loss recovery and the 2023 wire fraud loss and related recoveries and adjustments to salary and benefits. Management believes this is an important measure that helps management and investors understand the Company’s core business performance for these periods. See reconciliation on the following pages.

(2) Noninterest expense (c)/(Net interest income (a) plus Noninterest income (b)).

(3) Non-GAAP financial measure. Calculated by subtracting intangible assets, net of deferred tax, from total assets and total equity. Management believes this is an important measure because it is useful for planning and forecasting purposes. See reconciliation on the following pages.

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

(5) Non-GAAP financial measure. Pretax pre-provision earnings is calculated by adding net interest income to noninterest income and subtracting noninterest expense. Management believes this is an important measure because it may enable investors to identify the trends in the Company's earnings exclusive of the effects of tax and provision expense, which may vary significantly from period to period. See reconciliation on the following pages.

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The Company believes that providing non-GAAP financial measures provides investors with information useful to understanding the company's financial performance. Reconciliations of these non-GAAP financial measures is provided in the following tables (dollars in thousands, except per share data).

Year Ended

December 31, 2025

December 31, 2024

December 31, 2023

Total Equity

Less: Goodwill

Plus: DTA Related to Goodwill

Tangible Common Equity

Market Value Adjustment in AOCI

Adjusted Tangible Common Equity

Assets

Less: Goodwill

Plus: DTA Related to Goodwill

Tangible Assets

Market Value Adjustment in AOCI

Adjusted Tangible Assets

Ending Common Shares Issued

Tangible Book Value Per Common Share

Tangible Common Equity/Tangible Assets

Adjusted Tangible Common Equity/Adjusted Tangible Assets

Net Interest Income

Plus: Noninterest Income

Minus: Noninterest Expense

Pretax Pre-Provision Earnings

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The impact of the net gain on Visa shares, legal accrual, wire fraud loss and associated insurance and loss recoveries and adjustments to salaries and benefits is presented below. Management considers these measures of core financial performance to be meaningful to understanding the Company’s business performance for these periods (dollars in thousands, except per share data).

Year Ended

December 31, 2025

December 31, 2024

December 31, 2023

Noninterest Income

Less: Net Gain on Visa Shares

Less: Insurance Recovery

Adjusted Core Noninterest Income

Noninterest Expense

Less: Legal Accrual

Less: Wire Fraud Loss

Plus: Salaries and Employee Benefits (1)

Adjusted Core Noninterest Expense

Earnings Before Income Taxes

Adjusted Core Impact:

Noninterest Income

Noninterest Expense

Total Adjusted Core Impact

Adjusted Earnings Before Income Taxes

Tax Effect

Core Operational Profitability (2)

Diluted Earnings Per Common Share

Impact of Adjusted Core Items

Core Operational Diluted Earnings Per Common Share

Adjusted Core Efficiency Ratio

(1) In 2023, long-term, incentive-based compensation accruals were reduced as a result of the wire fraud loss and associated insurance and loss recoveries.

(2) Core operational profitability was $4.1 million lower than reported net income of $93.5 million and $7.8 million higher than reported net income of $93.8 million for the years ended December 31, 2024 and 2023, respectively.

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Net Income

Net income was $103.4 million in 2025, an increase of $9.9 million, versus net income of $93.5 million in 2024. The increase was driven by an increase in net interest income of $24.3 million, or 12.4%, and a reduction in provision for loan losses of $5.0 million, or 29.6%. Offsetting these items was a decrease in noninterest income of $8.9 million, or 15.6%, an increase in noninterest expense of $6.5 million, or 5.2%, and increased income tax expense of $4.0 million, or 22.0%. Pretax pre-provision earnings were $137.4 million in 2025, an increase of $8.9 million, or 7.0%, compared to $128.4 million in 2024.

Noninterest income was elevated in 2024 as compared to 2025 primarily as a result of the net gain of $9.0 million on the exchange and sale of the Company's Visa shares. Additionally, a $1.0 million insurance recovery related to the 2023 wire fraud loss was recorded in 2024. Adjusted core noninterest income, which excludes the impact of these events, was $48.0 million in 2025 as compared to $46.8 million in 2024, representing an increase of $1.1 million, or 2.4%. Noninterest expense in 2024 was impacted by the recognition of a previously disclosed legal accrual of $4.5 million. Adjusted core noninterest expense, which excludes the impact of the settlement, was $131.6 million in 2025 as compared to $120.5 million in 2024, an increase of $11.1 million, or 9.2%.

Net income was $93.5 million in 2024, a decrease of $289,000, versus net income of $93.8 million in 2023. The decrease in net income from 2023 to 2024 was driven by an increase in provision expense of $10.9 million, or 186.3%, an increase in income tax expense of $1.6 million, or 9.9%, and a decrease in net interest income of $356,000. Offsetting these items were an increase in noninterest income of $7.0 million, or 14.0%, and a decrease to noninterest expense of $5.6 million, or 4.3%. Pretax pre-provision earnings were $128.4 million for the year ended December 31, 2024, an increase of $12.3 million, or 10.5%, compared to $116.2 million for the year ended December 31, 2023.

The increase to noninterest income in 2024 was primarily driven by the aforementioned net gain of $9.0 million on the exchange and sale of Visa shares and the $1.0 million insurance recovery. Contributing further to the increase to noninterest income ware increases of $1.4 million, or 15.3%, in wealth advisory fees, $1.1 million, or 34.4%, in bank owned life insurance income, and $370,000 in mortgage banking income. The decrease to noninterest expense in 2024 was driven by lower miscellaneous expenses for losses incurred in 2023 and was partially offset by a $4.5 million legal accrual.

Core operational profitability, a non-GAAP financial measure that excludes the impact of certain aforementioned non-routine operating events, was $103.4 million for the year ended December 31, 2025, an increase $14.0 million, or 15.6%, compared to $89.4 million for the year ended December 31, 2024. Core operational profitability decreased $12.2 million, or 12.0%, in 2024 from $101.6 million in 2023. Core operational diluted earnings per common share, a non-GAAP financial measure, were $4.01 for 2025, an increase of 15.6% from $3.47 for 2024. Core operational diluted earnings per share decreased 12.2% in 2024, down from $3.95 in 2023.

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Net Interest Income

The following table presents a three-year average balance sheet and, for each major asset and liability category, its related interest income and yield or its expense and rate for the years ended December 31, 2025, 2024 and 2023.

THREE YEAR AVERAGE BALANCE SHEET AND NET INTEREST ANALYSIS

(fully tax equivalent basis, dollars in thousands)

Average Balance

Interest Income

Yield (1)/

Rate

Average Balance

Interest Income

Yield (1)/

Rate

Average Balance

Interest Income

Yield (1)/

Rate

Earning Assets

Loans:

Taxable (2)(3)

Tax exempt (1)

Investments:

Securities (1)

Short-term investments

Interest bearing deposits

Total earning assets

Less: Allowance for credit losses

Nonearning Assets

Cash and due from banks

Premises and equipment

Other nonearning assets

Total assets

Interest Bearing Liabilities

Savings deposits

Interest bearing checking accounts

Time deposits:

In denominations under $100,000

In denominations over $100,000

Short-term borrowings

Long-term borrowings

Total interest bearing liabilities

Noninterest Bearing Liabilities

Demand deposits

Other liabilities

Stockholders' Equity

Total liabilities and stockholders' equity

Interest Margin Recap

Interest income/average earning assets

Interest expense/average earning assets

Net interest income and margin

(1) Tax exempt income was converted to a fully taxable equivalent basis at a 21 percent tax rate. The tax equivalent rate for tax exempt loans and tax exempt securities acquired after January 1, 1983 included the Tax Equity and Fiscal Responsibility Act of 1982 ("TEFRA") adjustment applicable to nondeductible interest expenses. Taxable equivalent basis adjustments were $4.4 million, $4.7 million and $5.3 million for the years ended December 31, 2025, 2024 and 2023, respectively.

(2) Loan fees, which are immaterial in relation to total taxable loan interest income for the years ended December 31, 2025, 2024 and 2023, are included as taxable loan interest income.

(3) Nonaccrual loans are included in the average balance of taxable loans.

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NET INTEREST INCOME – RATE/VOLUME ANALYSIS (fully tax equivalent basis, dollars in thousands)

The following table shows fluctuations in net interest income attributable to changes in the average balances of assets and liabilities and the yields earned or rates paid for the years ended December 31.

2025 Over (Under) 2024 (1)

2024 Over (Under) 2023 (1)

Attributable to

Total Change

Attributable to

Total

Change

Volume

Rate

Volume

Rate

Interest Income (2)

Loans:

Taxable

Tax exempt

Investments:

Securities

Short-term investments

Interest bearing deposits

Total interest income

Interest Expense

Savings deposits

Interest bearing checking accounts

Time deposits:

In denominations under $100,000

In denominations over $100,000

Miscellaneous short-term borrowings

Long-term borrowings

Total interest expense

Net Interest Income (tax equivalent)

(1) The earning assets and interest bearing liabilities used to calculate interest differentials are based on average daily balances for 2025, 2024 and 2023. The changes in net interest income are created by changes in interest rates and changes in the volumes of loans, investments, deposits and borrowings. In the table above, changes attributable to volume are computed using the change in volume from the prior year multiplied by the previous year’s rate, and changes attributable to rate are computed using the change in rate from the prior year multiplied by the previous year’s volume. The change in interest or expense due to both rate and volume has been allocated between factors in proportion to the relationship of the absolute dollar amounts of the change in each.

(2) Tax exempt income was converted to a fully taxable equivalent basis at a 21 percent tax rate. The tax equivalent rate for tax exempt loans and tax exempt securities acquired after January 1, 1983 included the TEFRA adjustment applicable to nondeductible interest expense.

Net interest income increased by $24.3 million to $221.0 million in 2025 compared to $196.7 million in 2024, primarily as a result of decreased costs of funds. Total interest expense decreased $23.8 million, or 13.5%. Of this decrease, deposit interest expense decreased $22.0 million, or 12.8%, from decreased rates paid for customer deposits. Funding costs for deposits decreased 46 basis points to 2.50% during 2025, compared to 2.96% during 2024. Ending noninterest bearing deposits to total deposits were 20.4% at 2025 compared to 22.0% at 2024. Average noninterest bearing deposits decreased $3.1 million, to $1.255 billion for 2025 as compared to $1.258 billion for 2024. Average interest bearing deposits increased $206.9 million, or 4.5%, to $4.785 billion for 2025 as compared to $4.578 billion for 2024. Wholesale funding reliance remained low at 0.80% as of December 31, 2025 compared to 0.70% at December 31, 2024.

Investment securities interest income increased $1.9 million, or 7.0%, and contributed to the increase in net interest income during 2025. The increase in investment securities income was driven by an increase in average securities balances of $6.2 million, or 0.5%, during 2025 as a result of available-for-sale investment securities maturities, calls and paydowns of $66.8 million, and offset by purchases of securities of $83.3 million. The yield on average investment securities increased 16 basis points to 2.97% for 2025, as compared to 2.81% for 2024. Investment securities cash flows were used to fund loan growth and reinvested in securities during 2025.

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Net interest margin increased 27 basis points to 3.45% in 2025 versus 3.18% in 2024. Net interest margin decreased to 3.18% in 2024 from 3.31% in 2023 . The improvement in net interest margin between the periods was primarily driven by the effects of the continued easing of monetary policy by the FOMC, which commenced in September 2024, and resulted in favorable deposit repricing, which has outpaced the downward repricing of earning assets.

Loan interest income decreased by $723,000, or 0.2%, to $337.0 million during 2025 compared to $337.8 million during 2024. The increase in average loans was driven by loan growth during the period as average loan balances increased $184.1 million, or 3.7%, from $5.039 billion during 2024 to $5.223 billion during 2025. Loan yields decreased 25 basis points, or 3.8%, from 6.71% for 2024 to 6.46% for 2025 as a result of the lower rate environment and loan repricing.

The utilization of commercial and retail lines of credit increased to 44% at December 31, 2025, up from 41% at December 31, 2024, and 39% at December 31, 2023. Total lines of credit available have increased by $241.0 million to $4.789 billion at December 31, 2025, compared to $4.548 billion at December 31, 2024, or a 5.3% increase. The increased line utilization marks the highest utilization rate since 2019 amid an encouraging increase in borrower demand for working lines of capital.

Provision for Credit Losses

The Company recorded a provision for credit losses of $11.8 million in 2025 compared to $16.8 million in 2024 and $5.9 million in 2023. Provision expense during 2025 was partially driven by the recognition of additional specific allocations related to the downgrade of a previously disclosed commercial relationship. The remainder of provision expense was attributable to growth of the loan portfolio and a net increase in specific allocations related to other watch list credits. The Company’s allowance for credit losses as of December 31, 2025 was $69.0 million compared to $86.0 million as of December 31, 2024 and $72.0 million as of December 31, 2023. The allowance for credit losses represented 1.28% of total loans as of December 31, 2025, versus 1.68% at December 31, 2024 and 1.46% at December 31, 2023. Net charge offs of $28.8 million, or 0.55% of average loans, and $2.8 million, or 0.05% of average loans, were recorded in 2025 and 2024, respectively. Net charge offs for 2025 resulted primarily from the partial charge off of $28.6 million that was recognized during the second quarter of 2025 in conjunction with the disposition of the credit. A subsequent recovery of $800,000 was recognized during the fourth quarter of 2025 related to this credit. The Company’s management continues to monitor the adequacy of the provision based on loan levels, asset quality, economic conditions including the impact of the current rate environment, inflation levels, and other factors that may influence the assessment of the collectability of loans.

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Noninterest Income

The following table presents changes in the components of noninterest income for the years ended December 31, 2025, 2024 and 2023.

% Change From

Prior Year

(dollars in thousands)

Wealth advisory fees

Investment brokerage fees

Service charges on deposit accounts

Loan and service fees

Merchant and interchange fee income

Bank owned life insurance income

Interest rate swap fee income

Mortgage banking income (loss)

Net securities gains (losses)

Net gain on Visa Shares

Other income

Total noninterest income

Noninterest income to total revenue

Noninterest income decreased by $8.9 million, or 15.6%, to $48.0 million for the year ended December 31, 2025, compared to $56.8 million for the prior year. Noninterest income was elevated during the prior year primarily due to the net gain of $9.0 million on the sale of Visa shares and a $1.0 million insurance recovery. Adjusted core noninterest income, a non-GAAP financial measure that excludes the impact of these events, increased by $1.1 million, or 2.4%, from $46.8 million for the year ended December 31, 2024.

Noninterest income for the year ended December 31, 2025 benefited from fee-based service increases to wealth advisory fees of $896,000, or 8.6% , loan and service fees of $462,000, or 3.9% , service charges on deposit accounts of $317,000, or 2.8% , and investment brokerage fees of $304,000, or 16.1% , as compared to the prior year. Wealth advisory fees growth was driven by continued client relationship expansion and increased assets under management. Commercial service fee growth was the primary contributor for the increase in loan and service fees. The expansion of investment brokerage fees was driven by increased volume and commissions on product mix. Offsetting these increases was a decrease in other income of $1.9 million, or 41.1% . The decline in other income was primarily attributable to reduced limited partnership income and the lack of insurance recovery of $1.0 million as compared to 2024.

Noninterest income increased by $7.0 million, or 14.0%, to $56.8 million for the year ended December 31, 2024, compared to $49.9 million for the prior year. The increase in noninterest income for the year ended December 31, 2024 was primarily driven by the net gain on sale of Visa shares of $9.0 million. Contributing further to the increase in noninterest income was an increase to wealth and advisory fees of $1.4 million, or 15.3%, driven by growth in customers and favorable market performance. Bank owned life insurance income increased $1.1 million, or 34.4%, due to favorable market performance of the Company's variable bank owned life insurance policies. Offsetting these increases was a $4.5 million, or 48.9%, decrease to other income. Other income was elevated during the year ended December 31, 2023 from insurance and loss recoveries of $6.3 million that were related to the 2023 wire fraud loss. Offsetting the impact of these recoveries was increased investment income from the Company's limited partnership investments and the receipt of an additional $1.0 million in insurance recoveries. Adjusted core noninterest income was $46.8 million for the year ended December 31, 2024, an increase of $3.3 million, or 7.6%, compared to $43.6 million for year ended December 31, 2023.

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Noninterest Expense

The following table presents changes in the components of noninterest expense for the years ended December 31, 2025, 2024 and 2023.

% Change From

Prior Year

(dollars in thousands)

Salaries and employee benefits

Net occupancy expense

Equipment costs

Data processing fees and supplies

Corporate and business development

FDIC insurance and other regulatory fees

Professional fees

Wire fraud loss

Other expense

Total noninterest expense

Noninterest expense increased by $6.5 million, or 5.2%, from $125.1 million to $131.6 million for the year ended December 31, 2024 and 2025, respectively. Salaries and benefits expense increased $8.6 million, or 12.8%. The primary drivers for the increase to salaries and benefits expense were increased performance-based incentive compensation accruals of $5.3 million and salaries and wages of $3.3 million. Data processing fees and supplies expense increased $1.4 million, or 9.1%, from continued investment in customer-facing and operational technology solutions, including artificial intelligence. Net occupancy expense increased $659,000, or 9.6%, from the continued expansion of the bank's branch and operational networks, with the 55th branch location opening in Westfield, Indiana, during 2025. Offsetting these increases was a decrease in professional fees of $1.3 million, or 14.0%, and other expense of $3.1 million, or 23.5%. Legal accruals of $4.5 million were incurred in 2024 that were related to a one-time matter, previously disclosed. Adjusted core noninterest expense, a non-GAAP financial measure, increased $11.1 million, or 9.2%, to $131.6 million from $120.5 million for the year ended December 31, 2025 and 2024, respectively.

Noninterest expense decreased by $5.6 million, or 4.3%, from $130.7 million to $125.1 million for the year ended December 31, 2023 and 2024, respectively. Noninterest expense during 2023 was elevated as compared to 2024 due to the wire fraud loss, which added a net $16.7 million to noninterest expense. Offsetting this impact on noninterest expense was a $7.6 million, or 12.8%, increase in salaries and employees benefits during 2024. The increase to salaries and benefits expense resulted primarily from increases to salaries and wages of $3.2 million, performance-based incentive compensation of $2.3 million , health insurance expense of $918,000, and variable deferred compensation of $950,000, which relates to the Company's variable bank owned life insurance. Other expense increased $2.6 m illion, or 24.0%, primarily due to an accrued legal accrual expense of $4.5 million. Data processing fees and supplies increased by $1.2 million, or 8.3%, from the continued investment in customer-facing and operational technology solutions. Adjusted core noninterest expense was $120.5 million for the year ended December 31, 2024, an increase of $6.5 million, or 5.7%, compared to $114.0 million for the year ended December 31, 2023.

Income Taxes

The Company recognized income tax expense in 2025 of $22.2 million, compared to $18.2 million in 2024 and $16.6 million in 2023. The effective tax rate was 17.7% in 2025, compared to 16.3% in 2024 and 15.0% in 2023. The effective tax rate increased due to the adoption of ASU 2023-02, which changed how the Company's investment in low-income housing tax credit structures are accounted for by moving the investment write-down impact from operating revenues to income tax expense within the consolidated statements of income, as well as a reduction in the tax benefit recognized from stock-based compensation vesting of shares for plan participants. For a detailed analysis of the Company’s income taxes see "Note 12 – Income Taxes".

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CERTAIN STATISTICAL DISCLOSURES BY BANK HOLDING COMPANIES

We are required to provide certain statistical disclosures as a bank holding company. The following table provides certain of those disclosures.

Years Ended December 31,

Return on average assets

Return on average equity

Average equity to average assets

Dividend payout ratio

Return on average assets is computed by dividing net income by average assets for each indicated fiscal year. Average assets is computed by adding total assets as of each date during the indicated fiscal year and dividing by the number of days in the fiscal year.

Return on average total equity is computed by dividing net income by average equity for each indicated fiscal year. Average equity is computed by adding the total equity attributable to the Company as of each date during the indicated fiscal year and dividing by the number of days in the fiscal year.

Average equity to average assets is computed by dividing average equity by average assets for each indicated fiscal year, as calculated in accordance with the previous explanation.

Dividend payout ratio is computed by dividing dividends declared per common share by earnings per diluted common share for each indicated fiscal year.

Refer to the "Financial Condition - Loan Portfolio", "Financial Condition - Sources of Funds" and "Risk Management - Loan Portfolio" sections of this MD&A and to the Notes to Consolidated Financial Statements of this Form 10-K for other required statistical disclosures.

FINANCIAL CONDITION

Overview

Total assets of the Company were $6.990 billion as of December 31, 2025, an increase of $311.6 million, or 4.7%, when compared to $6.678 billion as of December 31, 2024. Total loans outstanding increased by $257.4 million, or 5.0%, to $5.375 billion at December 31, 2025, from $5.118 billion at December 31, 2024. Total deposits increased $72.4 million, or 1.2%, from $5.901 billion at December 31, 2024, to $5.973 billion at December 31, 2025, driven by increased public funds deposits due to the addition of new customers and offset by net retail and commercial outflows.

Total cash and equivalents decreased $26.9 million, to $141.3 million at December 31, 2025, from $168.2 million at December 31, 2024. Total investment securities increased by $62.3 million, to $1.185 billion at December 31, 2025, from $1.123 billion at December 31, 2024. The increase was attributable to an increase in available-for-sale securities, which increased by $60.6 million, primarily as a result of purchases of $83.3 million and an improvement in fair market valuations of $47.8 million. These increases were offset by maturities, calls and paydowns of $66.8 million. There were no securities sales during the year ended December 31, 2025. The Company had borrowings of $184.2 million at December 31, 2025, as compared to no borrowings outstanding at December 31, 2024. Borrowings at December 31, 2025 consisted of $183.0 million in short-term and other borrowings and $1.2 million in long-term borrowings.

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Uses of Funds

Investment Portfolio

At year end 2025, 2024 and 2023, there were no holdings of securities of any one issuer, other than the U.S. government, government agencies and government sponsored agencies, in an amount greater than 10% of stockholders’ equity. See "Note 2 – Securities" for more information on these investments.

Purchases of securities available-for-sale totaled $83.3 million in 2025, $27.5 million in 2024 and $7.2 million in 2023. Purchases in 2024 and 2025 were driven by the liquidity provided primarily by principal and interest paydowns. Cash flows from the investment securities portfolio were used to fund loan growth and reinvestments into the investment securities portfolio, and the Company anticipates receiving approximately $134.5 million of principal and interest cash flows to use for such purposes in 2026. Investment securities represented 17.0% of total assets on December 31, 2025 compared to 16.8% on December 31, 2024 and 18.1% on December 31, 2023.

There were no securities sales in 2025, as compared to sales of $7.1 million in 2024 and $105.2 million in 2023. Paydowns from prepayments and scheduled payments of $66.5 million, $59.0 million and $56.2 million were received in 2025, 2024 and 2023, and the amortization of premiums, net of the accretion of discounts, was $4.0 million, $4.8 million and $4.9 million, respectively. Maturities and calls of securities totaled $349,000 , $695,000 and $13.6 million in 2025 , 2024 and 2023, respectively. No provision for allowance for credit loss was recorded in connection with the investment securities portfolio in 2025 , 2024 or 2023. The investment portfolio is managed to provide for an appropriate balance between liquidit y, credit risk and investment return and to limit the Company’s exposure to risk to an acceptable level. The longer duration of the investment security portfolio serves to balance the shorter duration of the loan portfolio.

Securities held-to-maturity were carried at amortized cost of $133.2 million and $131.6 million at December 31, 2025 and 2024, respectively. All of the Company's securities designated as held-to-maturity were transferred from the available-for-sale classification. The net unrealized gain or loss on the transferred securities was recorded as a component of accumulated other comprehensive income (loss) at the time of the transfer and is amortized over the remaining life of the underlying securities as an adjustment to the yield on those securities. The net amount of the unrealized loss on the securities included in accumulated other comprehensive income (loss) was $17.0 million ($13.4 million, net of tax) at December 31, 2025.

The weighted average yields and maturity distribution for the securities portfolio at December 31, 2025, were as follows:

Within

One Year

After One

Within Five Years

After Five Years

Within Ten years

After Ten

Years

(fully tax equivalent basis, dollars in thousands)

Fair

Value

Yield

Fair

Value

Yield

Fair

Value

Yield

Fair

Value

Yield

U.S. Treasury securities

U.S. government sponsor agency

Mortgage-backed securities: residential

State and municipal securities

Total Securities

The Company does not trade or invest in or sponsor certain unregistered investment companies defined as hedge funds and private equity funds in the Volcker Rule.

Real Estate Mortgage Loans Held-For-Sale

Real estate mortgages held-for-sale increased by $1.0 million to $2.7 million at December 31, 2025 from $1.7 million at December 31, 2024 as a result of fluctuations in secondary market sales activity. This asset category is subject to a high degree of variability depending on, among other factors, recent mortgage loan rates and the quantity and timing of loan sales into the secondary market. The Company generally sells almost all of the conforming mortgage loans it originates in the secondary market. Proceeds from sales totaled $17.6 million in 2025, $20.8 million in 2024 and $8.0 million in 2023.

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Loan Portfolio

The loan portfolio by class as of December 31, 2025, 2024 and 2023 was as follows:

(dollars in thousands)

Commercial and industrial loans:

Working capital lines of credit loans

Non-working capital loans

Total commercial and industrial loans

Commercial real estate and multi-family residential loans:

Construction and land development loans

Owner occupied loans

Nonowner occupied loans

Multi-family loans

Total commercial real estate and multi-family residential loans

Agri-business and agricultural loans:

Loans secured by farmland

Loans for agricultural production

Total agri-business and agricultural loans

Other commercial loans

Total commercial loans

Consumer 1-4 family mortgage loans:

Closed end first mortgage loans

Open end and junior lien loans

Residential construction and land development loans

Total consumer 1-4 family mortgage loans

Other consumer loans

Total consumer loans

Gross loans

Less: Allowance for credit losses

Net deferred loan fees

Loans, net

The ratio of loans to total loans by portfolio segment as of December 31, 2025 , 2024 and 2023 was as follows:

Commercial and industrial loans

Commercial real estate and multi-family residential loans

Agri-business and agricultural loans

Other commercial loans

Consumer 1-4 family mortgage loans

Other consumer loans

Total Loans

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The mix of the Company's loan portfolio consists primarily of commercial loans, and the Bank's lending focus is on the commercial sector of the Lake City Bank footprint. Owner occupied commercial real estate loans represent in many instances the buildings and factories of our commercial and industrial borrowers. Commercial and industrial loans together with owner occupied commercial real estate loans represented 43.9% and 44.1% of total loans as of December 31, 2025 and 2024, respectively. The non-owner occupied commercial real estate sector of the loan portfolio largely represents multi-family and industrial warehouse developments in the Indianapolis market with in-state developers that are well-known to the Bank. The Company has limited exposure to commercial office space borrowers, all of which are located in the Bank's Indiana markets. Loans totaling $104.2 million and $101.7 million for this sector represented 1.9% and 2.0% of total loans at December 31, 2025 and 2024, respectively. Loans to the agriculture and agri-business sector of our Indiana footprint represent a significant loan segment of the overall loan portfolio. This loan segment is well diversified with loans to corn, soybean, poultry, dairy, swine, beef and egg operations.

The residential construction and land development loans class included construction loans totaling $10.0 million and $7.6 million as of December 31, 2025 and December 31, 2024. Increases in consumer loans during 2025 resulted from an increased focus on indirect lending to consumers and adjustable rate mortgages. The Bank generally sells conforming mortgage loans, which it originates locally, into the secondary market. These loans generally represent mortgage loans that are made to clients with long-term or substantial relationships with the Bank on terms consistent with secondary market requirements. The loan classifications are based on the nature of the loans as of the loan origination date. There were no foreign loans included in the loan portfolio for the periods presented.

Repricing opportunities of the loan portfolio occur either according to predetermined float rate indices, adjustable rate schedules included in the related loan agreements or upon maturity of each principal payment. The following table indicates the scheduled maturities of the loan portfolio as of December 31, 2025:

(dollars in thousands)

Commercial and Industrial

Commercial Real Estate

and

Multi-family Residential

Agri-business and Agricultural

Other Commercial

Consumer 1-4 Family Mortgage

Other Consumer

Total

Percent

Within one year

After one year, within five years

Over five years

Nonaccrual loans

Total loans

At maturity, credits are reviewed and, if renewed, are renewed at rates and conditions that prevail at the time of maturity.

Based upon the table above, all loans due after one year which have a predetermined interest rate and loans due after one year which have floating or adjustable interest rates as of December 31, 2025 amounted to $2.204 billion and $1.368 billion, respectively.

Bank Owned Life Insurance

Bank owned life insurance increased by $16.7 million to $130.0 million at December 31, 2025 and by $4.2 million to $113.3 million at December 31, 2024 from $109.1 million at December 31, 2023. The increase during 2025 was primarily driven by the purchase of $12.5 million in general hybrid account policies, which contributed additional income during 2025. Additional income was provided by improved market performance of the Bank's variable bank owned life insurance policies, which trend directionally with the performance of the broader equity markets. The increase in 2024 was due to income from traditional policies and from variable policy market performance. Bank owned life insurance investment income is used to fund the cost of term life insurance purchased by the Bank as a benefit for bank officers.

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Sources of Funds

The average daily deposits and borrowings together with the average rates paid on those deposits and borrowings for the years ended December 31, 2025, 2024 and 2023 are summarized in the following table:

% Balance Change

From Prior Year

(dollars in thousands)

Balance

Rate

Balance

Rate

Balance

Rate

Noninterest bearing demand deposits

Savings and transaction accounts:

Savings deposits

Interest bearing demand deposits

Time deposits:

Deposits of $100,000 or more

Other time deposits

Total deposits

FHLB advances and other borrowings

Total funding sources

Time deposits as of December 31, 2025 will mature as follows:

(dollars in thousands)

or more

or less

Total

Within three months

Over three months, within six months

Over six months, within twelve months

Over twelve months

Total time certificates of deposit

Deposits

Deposits by portfolio segment for December 31, 2025, 2024 and 2023 are presented below:

(dollars in thousands)

Commercial

Retail

Public fund

Core deposits

Brokered deposits

Total

Total deposits increased by $72.4 million, or 1.2%, to $5.973 billion, at December 31, 2025 compared to $5.901 billion at December 31, 2024. The increase in deposits was attributable to an increase in public fund deposits. Public fund deposits increased $169.7 million, or 9.4%, and represented 33.2% and 30.7% of total deposits at December 31, 2025 and 2024, respectively. The growth in public funds was positively impacted by the addition of new public funds customers in the Lake City Bank footprint, including their operating accounts. Offsetting the increase in public funds were decreases to commercial and retail deposits. Commercial deposits decreased $89.1 million, or 3.9%, and represented 36.5% and 38.4% of total deposits at December 31, 2025 and 2024, respectively. Retail deposits decreased $17.3 million, or 1.0%, and represented 29.5% and 30.2% of total deposits at December 31, 2025 and 2024, respectively. Brokered deposits increased $9.0 million, or 21.7%, between the two periods. Core deposits represented 99.2% and 99.3% of total deposits at December 31, 2025 and 2024, respectively.

Total deposits increased by $180.4 million, or 3.2%, to $5.901 billion, at December 31, 2024 compared to $5.721 billion December 31, 2023. The increase in deposits was attributable to increases in commercial and public fund deposits.

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Commercial deposits increased $41.9 million, or 1.9% and represented 38.4% and 38.9% of total deposits at December 31, 2024 and 2023, respectively. Public fund deposits increased by $246.6 million, or 15.8% and represented 30.7% and 27.3% of total deposits at December 31, 2024 and 2023, respectively. Additionally, brokered deposits decreased $93.8 million and represented 0.7% and 2.4% of total deposits at December 31, 2024 and 2023, respectively. Retail deposits decreased $14.2 million, or 0.8% and represented 30.2% and 31.4% of total deposits at December 31, 2024 and 2023, respectively.

As previously noted, 33.2% of the Company’s deposit base is attributable to public fund entities which consist primarily of customers in the Company’s geographic footprint. A majority of public fund balances represent customers with operating accounts at the Bank. The public fund segment is a stable source of deposit funding and a focus in the treasury management area due to their business needs. A shift in funding away from public fund deposits could require the Company to execute alternative funding plans under the Contingency Funding Plan discussed in further detail under "Liquidity Risk".

FHLB Advances and Other Borrowings

During 2025, average total short-term and other borrowings decreased by $23.3 million to $43.0 million. Ending balances of short-term and other borrowings increased to $183.0 million at December 31, 2025 compared to none at December 31, 2024. At December 31, 2025, short-term borrowings consisted of a $170.0 million advance outstanding with the Federal Home Loan Bank of Indianapolis and $13.0 million was drawn on the Company's unsecured revolving credit agreement with another financial institution. Long-term borrowings outstanding at December 31, 2025 were $1.2 million. The Company's long-term borrowings were outstanding with the Federal Home Loan Bank of Indianapolis as part of the rate-subsidized Community Development Financial Institution ("CDFI") Rate Buydown Advance program to fund a low cost loan to a qualifying CDFI. The Company had no long-term borrowings outstanding during 2024.

Average short-term borrowings decreased $100.5 million from $166.8 million in 2023 compared to 2024. Average long-term borrowings were $967,000 during 2025, compared to none during 2024 and 2023.

Capital

The Company believes that a strong, appropriately managed capital position is critical to support continued growth of loans and earnings. Capital is used primarily to fund continued organic loan growth and to support dividends to shareholders. The Company had a total risk-based capital ratio of 15.92%, a Tier I risk-based capital ratio of 14.77% and a common Tier 1 risk-based capital ratio of 14.77% as of December 31, 2025. These ratios met or exceeded the Federal Reserve Bank’s "well capitalized" minimums of 10.0%, 8.0% and 6.5%, respectively. The Company also had a Tier 1 leverage ratio of 12.39% and a tangible equity ratio of 10.86%. When excluding the impact of accumulated other comprehensive income (loss) on tangible common equity, the Company's adjusted tangible common equity to adjusted tangible assets was 12.45%. See "Note 15 – Capital Requirements and Restrictions on Retained Earnings" for more information.

The ability to maintain these ratios is a function of the balance between net income, a prudent dividend policy, and the strategic yet disciplined utilization of the share repurchase plan. During 2025, the Company repurchased 337,890 shares at a weighted average price of $58.03 per share. The majority of share repurchases occurred during the fourth quarter of 2025, with 307,590 shares repurchased at a weighted average price of $58.23 per share. The Company expects to continue to use the share repurchase program for opportunistic purposes during 2026 based on guardrails that measure tangible book value dilution and earnings accretion at a range of share prices.

Total stockholders’ equity increased by 11.5% to $762.5 million as of December 31, 2025 from $683.9 million as of December 31, 2024. The Company earned $103.4 million in 2025 and $93.5 million in 2024. The Company declared cash dividends of $2.00 per share in 2025, which decreased equity by $51.4 million. The Company declared cash dividends of $1.92 per share in 2024, which decreased equity by $49.3 million. Total stockholder's equity has been impacted by declines in the market value of the Company's available-for-sale investment securities portfolio. The market value decline, resulting from FOMC's tightening of monetary policy in 2022 and 2023, has generated unrealized losses in the available-for-sale portfolio. Unrealized losses from the available-for-sale investment securities portfolio are recorded, net of tax, in accumulated other comprehensive income (loss) in the statement of stockholders' equity. Improvements in the fair value of securities as a result of the easing of monetary policy by the FOMC starting in 2024 and net defined pension plan gains positively impacted equity by $39.4 million in 2025 compared to a decrease of $11.3 million in 2024. The impact to equity due to other comprehensive income () is not included in regulatory capital.

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RISK MANAGEMENT

Overview

The Company, with the oversight of the Corporate Risk Committee of the board of directors, has developed a company-wide risk management program intended to help identify, manage and mitigate the various business risks it faces. Following is a discussion addressing the risks identified as most significant to the Company – Credit, Liquidity, Interest Rate and Market Risk. Item 7A. includes additional discussion about market risk.

Credit Risk

Credit risk represents the risk of loss arising from an obligor’s inability or failure to meet contractual payment or performance terms. Our primary credit risks result from lending and to a lesser extent, investment activities.

Investment Portfolio

The Company’s investment portfolio consists of U.S. treasuries, government or government-sponsored entity securities, and municipal bonds subject to an investment security policy that is approved annually by the board of directors. As of December 31, 2025, the Company’s investment in U.S government sponsored mortgage-backed securities represented approximately 39% of total investment securities fair value consisting of mortgage bonds issued by Ginnie Mae, Fannie Mae and Freddie Mac. Ginnie Mae, Fannie Mae and Freddie Mac securities are each guaranteed by their respective agencies as to principal and interest. All mortgage securities purchased by the Company in 2025 were within risk tolerances for price, prepayment, extension and original life risk characteristics contained in the Company’s investment policy. As of December 31, 2025, all mortgage-backed securities were performing in a manner consistent with management’s expectations at time of purchase. Municipal securities represented 50% of total investment securities fair value as of December 31, 2025 and were rated investment grade at the time of purchase and continue to be rated investment grade. The Company uses analytics provided by its third party portfolio advisor to evaluate and monitor credit risk for all investments on a quarterly basis. Based upon these analytics as of December 31, 2025, the securities in the combined available-for-sale and held-to-maturity portfolios had an effective duration of approximatel y 5.94 y ears. The analysis indicated a negative 6.7% change in market value in the event of a 100 basis point upward, instantaneous rate shock and a 6.8% change in mark et value in the event of a 100 basis point , instantaneous rate shock.

Loan Portfolio

The Company has a high percentage of commercial and commercial real estate loans extended to businesses with a broad range of revenue and within a wide variety of industries. Traditionally, this type of lending may have more credit risk than other types of lending because of the size and diversity of the credits. The Company manages this risk by utilizing conservative credit structures, adjusting its pricing to the perceived risk of each individual credit, diversifying the portfolio by customer, product, industry and market area and by obtaining personal loan guarantees.

There were no loan concentrations within industries that exceeded ten percent of total loans, except commercial real estate. Commercial real estate was $2.667 billion, or 49.5% , of total loans at December 31, 2025 . The owner occupied commercial real estate portfolio generally represents the financing of factories and operational facilities for the Bank's commercial and industrial borrowers. The Bank’s in-house lending limit was $40.0 million and its calculated legal lending limit was $144.0 million at December 31, 2025. M anufacturing loans are included in the commercial and industrial loans total and are well diversified by industry. Agri-business and agricultural loans represented 7.6% of total loans as of December 31, 2025 and are not concentrated to any agricultural sector. Substantially all of the Bank’s commercial, industrial, agricultural real estate mortgage, real estate construction mortgage and consumer loans are made within its geographic market areas and to diverse industries. When segmenting the Bank's loan portfolio as of December 31, 2025, the largest segments are multifamily housing, agriculture, the recreational vehicle industry, and industrial commercial real estate which represented 13.6%, 8.8%, 4.5% and 4.0% of total loans, respectively.

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The following is a summary of nonperforming loans on an amortized cost basis as of December 31, 2025 and 2024.

(dollars in thousands)

Amount of loans outstanding, net of deferred fees, December 31,

Commercial and industrial loans

Past due accruing loans (90 days or more)

Nonaccrual loans

Subtotal nonperforming loans

Commercial real estate and multi-family residential loans

Past due accruing loans (90 days or more)

Nonaccrual loans

Subtotal nonperforming loans

Agri-business and agricultural loans

Past due accruing loans (90 days or more)

Nonaccrual loans

Subtotal nonperforming loans

Other commercial loans

Past due accruing loans (90 days or more)

Nonaccrual loans

Subtotal nonperforming loans

Consumer 1-4 family mortgage loans

Past due accruing loans (90 days or more)

Nonaccrual loans

Subtotal nonperforming loans

Other consumer loans

Past due accruing loans (90 days or more)

Nonaccrual loans

Subtotal nonperforming loans

Total nonperforming loans

Ratio:

Nonperforming loans to total loans

Nonperforming assets of the Company include nonperforming loans (as indicated above), nonaccrual investments, other real estate owned and repossessions, the total of which amounted to $20.9 million and $56.9 million at December 31, 2025 and 2024, respectively. Nonperforming loans decreased to 0.4% of total loans at December 31, 2025 compared to 1.1% at December 31, 2024. Nonperforming loans decreased by $35.6 million during 2025, due primarily to the previously disclosed partial charge off of a nonperforming credit during 2025.

Loans for which the borrower appears to be unable or unwilling to repay its debt in full or on time, and the collateral is insufficient to cover all principal and accrued interest, will be reclassified as nonperforming to the extent they are unsecured, on or before the date when the loan becomes 90 days delinquent, with the exception of small dollar other consumer loans which are not placed on nonaccrual status since these loans are typically charged-off when they have been delinquent from 90 to 180 days, and when the related collateral, if any, is not sufficient to offset the indebtedness. When a loan is classified as a nonaccrual loan, interest on the loan is no longer accrued, all unpaid accrued interest is reversed and interest income is subsequently recorded only to the extent cash payments are received. Accrual status is resumed when all contractually due payments are brought current and future payments are reasonably assured.

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A loan is individually analyzed for a specific allocation within the allowance for credit losses when full payment under the original loan terms is not expected or when the amount collected is expected to differ materially from the estimate that would be arrived at under the pooled method. Allocations are evaluated in total for smaller-balance loans of similar nature not in nonaccrual status such as residential mortgage, consumer, and credit card loans, and on an individual loan basis for other loans including material modifications made to borrowers experiencing financial difficulty. If a loan is individually analyzed, a portion of the allowance may be specifically allocated so that the loan is reported, net, at the present value of estimated future cash flow or at the fair value of collateral if repayment is expected solely from the collateral.

The total amortized cost basis of nonperforming loans were $20.9 million, or 0.4% of total loans, at December 31, 2025 versus $56.5 million, or 1.1% of total loans, at December 31, 2024. There were 54 relationships totaling $43.0 million classified as individually analyzed as of December 31, 2025 on an amortized cost basis, versus 43 relationships totaling $78.6 million at the end of 2024. The decrease in individually analyzed loans during December 31, 2025 resulted primarily from the aforementioned partial charge off.

Renegotiated loans to borrowers experiencing financial difficulty are those loans for which the Company modifies the terms of loans for borrowers experiencing financial distress by providing the following forms of relief: forgiveness of loan principal, extension of repayment terms, reduction of interest rate or an other than insignificant payment delay. For the year ended December 31, 2025, one material loan modification with a total balance of $1.7 million with total allocations of $204,000 was made to a borrower experiencing financial difficulty. The modification was related to the previously disclosed partial charge-off with a personal guarantor of the loan. The modified note is collateralized by several of the guarantor's commercial and residential real estate properties. For the year ended December 31, 2024, there were no material modifications made to borrowers experiencing financial difficulty.

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The following is a summary of the credit loss experience for the years ended December 31, 2025 , 2024 and 2023 .

(dollars in thousands)

Amount of loans outstanding, net of deferred fees, December 31,

Average daily loans outstanding during the year ended December 31,

Allowance for credit losses, January 1,

Loans charged-off:

Commercial and industrial loans

Commercial real estate and multi-family residential loans

Agri-business and agricultural loans

Other commercial loans

Consumer 1-4 family mortgage loans

Other consumer loans

Total loans charged-off

Recoveries of loans previously charged-off:

Commercial and industrial loans

Commercial real estate and multi-family residential loans

Agri-business and agricultural loans

Other commercial loans

Consumer 1-4 family mortgage loans

Other consumer loans

Total recoveries

Net loans charged-off

Provision for credit loss charged to expense

Balance, December 31,

Ratios:

Net charge offs (recoveries) to average daily loans outstanding:

Commercial and industrial loans

Commercial real estate and multi-family residential loans

Agri-business and agricultural loans

Other commercial loans

Consumer 1-4 family mortgage loans

Other consumer loans

Total ratio of net charge offs (recoveries)

Allowance for credit losses on loans to:

Total loans

Ratio of allowance for credit losses to nonperforming loans, net of deferred fees

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The following is a summary of the allocation for credit losses as of December 31, 2025 and 2024 .

(dollars in thousands)

Allocated allowance for credit losses:

Commercial and industrial loans

Commercial real estate and multi-family residential loans

Agri-business and agricultural loans

Other commercial loans

Consumer 1-4 family mortgage loans

Other consumer loans

Total allocated allowance for credit losses

Unallocated allowance for credit losses

Total allowance for credit losses

At December 31, 2025, the allowance for credit losses was 1.28% of total loans outstanding, versus 1.68% of total loans outstanding at December 31, 2024. Management believes the allowance for credit losses is at a level commensurate with the overall risk exposure of the loan portfolio. The process of identifying expected credit losses is a subjective process. Therefore, the Company maintains a general allowance to cover expected credit losses within the entire portfolio. The methodology management uses to determine the adequacy of the credit loss reserve includes the considerations below.

Loans are charged against the allowance for credit losses when management believes that the principal is uncollectible. Subsequent recoveries, if any, are credited to the allowance. The allowance is an amount that management believes will be adequate for expected credit losses relating to specifically identified loans based on an analysis of the loans by management, as well as other expected credit losses inherent in the loan portfolio. The analysis takes into consideration such factors as changes in the nature and volume of the loan portfolio, overall portfolio quality, review of individual problem loans, and current and forecasted economic conditions that may affect the borrower’s ability to repay. Management also considers trends in adversely classified loans based upon a monthly review of those credits. An appropriate level of qualitative and environmental allowance is determined after considering the following factors: changes in the nature and volume of the loan portfolio, overall portfolio quality, changes in collateral strength and current economic conditions that may affect the borrowers’ ability to repay. Consideration is not limited to these factors although they represent the most commonly cited factors. Federal regulations require insured institutions to classify their own assets on a regular basis. The regulations provide for three categories of classified loans: , and . The regulations also contain a Special Mention category. Special Mention is defined as loans that do not currently an insured institution to a sufficient degree of risk to warrant classification as , or but do possess credit or potential deserving management’s close attention. The Company’s practice is to establish a specific allocation within the allowance for credit for any assets where management has identified conditions or circumstances that indicate an asset is . If an asset or portion thereof is classified as , the Company’s policy is to either establish a specific allocation for credit in the amount of 100% of the portion of the asset classified or charge off such amount.

At December 31, 2025, on the basis of management’s review of the loan portfolio, the Company had 96 credits totaling $184.0 million on the classified loan list, which includes Special Mention credits, versus 81 credits totaling $211.1 million on December 31, 2024. The decrease in the classified loan list in 2025 was primarily driven by the previously disclosed partial charge off in settlement of the troubled credit. Excluding this credit, asset quality metrics remained stable and near historical lows despite the heightened uncertainty surrounding the evolving state of US trade policy. The Company remains cautiously optimistic in regards to the credit quality of the loan portfolio given otherwise stable economic conditions within the Company's operating footprint and will continue to actively manage loan portfolio challenges. As of December 31, 2025, the Company had $134.0 million of assets classified as Special Mention , $50.0 million classified as Substandard, $74,000 classified as Doubtful and none classified as Loss as compared to $123.6 million, $44.0 million, $43.5 million and none, respectively, at December 31, 2024. The balances reported in "Note 4 – Allowance for Credit and Credit Quality" include deferred fees and costs. Included in the classified loan amounts above were loans receiving modifications due to financial experienced by the borrower. One borrower in financial with loans totalling $1.7 million and total allocations of $204,000 received a modification for the year ended December 31, 2025. There were no modifications to borrowers experiencing financial during the year ended December 31, 2024.

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Allowance estimates are developed by management taking into account actual loss experience, subject to a floor, adjusted for current economic conditions and a reasonably supportable forecast period. The Company has regular discussions regarding this methodology with regulatory authorities. Allowance estimates are considered a prudent measurement of the risk in the Company's loan portfolio based upon loan segment. In accordance with accounting guidance, the allowance is based on information about past events, including historical experience, current conditions, and reasonable and supportable forecasts that affect the collectibility of the reported amounts. For a more thorough discussion of the allowance for credit losses methodology see the "Critical Accounting Policies" section of this Item 2.

The allowance for credit losses decreased $17.0 million, or 19.7%, from $86.0 million at December 31, 2024 to $69.0 million at December 31, 2025, due primarily to net charge offs of $28.8 million and offset by provision expense of $11.8 million. Pooled loan allocations increased $2.2 million from $58.4 million at December 31, 2024 to $60.6 million at December 31, 2025. The unallocated component of the allowance for credit losses was $325,000 at December 31, 2025, which decreased $58,000 from $383,000 reported at December 31, 2024 . The unallocated component of the allowance for credit losses incorporates the Company’s judgmental determination of expected losses that may not be fully reflected in other allocations.

The Company has experienced organic growth in total loans over the last several years with an increase in gross loans of $257.4 million , or 5.0% , from December 31, 2024 to December 31, 2025 . This growth is largely concentrated in the commercial loan portfolio, which can result in overall asset quality being influenced by a small number of credits. Management has historically considered growth and portfolio composition when determining credit loss allocations. Management believes that it is prudent to continue to provide for credit losses in a manner consistent with its historical approach due to the loan growth described above and current economic conditions.

Watch list loans decreased $27.1 million , or 12.8% , to $184.0 million as of December 31, 2025 , compared to $211.1 million at December 31, 2024 . Watch list loans represented 3.4% of total loans at December 31, 2025 compared to 4.1% at December 31, 2024 . The decrease in watch list loans resulted primarily from a partial charge off of the previously disclosed nonperforming credit, net with other watch list additions and removals. The Company's continued growth strategy promotes diversification among industries as well as continued focus on the en forcement of a disciplined credit culture and a conservative posture in loan work-out situations.

Liquidity Risk

Liquidity risk arises from the possibility that the Company may not be able to satisfy current or future financial commitments or may become unduly reliant on alternative funding sources. Liquidity is monitored and closely managed by the ALCO Committee.

Management maintains a liquidity position that it believes will adequately provide funding for loan demand and deposit run-off that may occur in the normal course of business. The liquidity structure is expressly detailed in the Company’s Contingency Funding Plan, which is discussed below. The Company relies on a number of different sources in order to meet these potential liquidity demands. The primary sources are increases in deposit accounts and cash flows from loan payments and the securities portfolio. The cash flow from the securities portfolio is expected to provide approximately $134.5 million of potential contingent funding in 2026.

The Bank had total available sources of liquidity totaling $3.526 billion at December 31, 2025 compared to $3.681 billion at December 31, 2024. The Company has approval of $3.747 billion in secondary funding sources available as of December 31, 2025, of which $221.8 million was utilized. The Company had $395.0 million of availability in federal funds lines with thirteen correspondent banks, of which none was drawn on as of December 31, 2025. The Company has board of directors approval to borrow up to $800.0 million at the FHLB, but given the Company’s current collateral structure and outstanding borrowings as of December 31, 2025, the Company could have only borrowed up to $473.6 million under this authority. The Company has additional collateral that could be pledged to the FHLB of $241.8 million as of December 31, 2025 to generate additional liquidity. Further, the Company had available capacity at the Federal Reserve Bank of Chicago of up to $1.190 billion given its current collateral structure at the Federal Reserve Bank discount window program and the terms of that facility at December 31, 2025, with no balances outstanding at December 31, 2025. The Company also has established relationships in the brokered time deposit and brokered money market sectors, as well as the IntraFi Network CDARS One-Way Buy and Insured Cash Sweep One-Way Buy programs, to access these funds when desired with settlement of funds in one to two weeks’ time. The Bank is also a member of the American Financial Exchange ("AFX") where overnight fed funds purchased can be obtained from other banks on the exchange that have approved the Bank for an unsecured, overnight line. These funds are only available if the approving banks have an "offer" out to sell that day. As of December 31, 2025, the total amount approved for the Bank via AFX banks was $312.0 million and none was outstanding at year end.

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The Company h ad 90% of its securities, based upon fair market value, in the available-for-sale portfolio at December 31, 2025, allowing the Company extensive flexibility to sell securities to meet funding demands. The remaining portion of investments securities were designated as held-to-maturity. Management believes the majority of the securities in investment portfolio are of high quality and marketable. Approximately 49% of this portfolio is comprised of U.S. government agency securities or mortgage-backed securities directly or indirectly backed by the U.S. government. At December 31, 2025, 93% of municipal securities owned by the Company were AAA or AA rated with a diversified geography of state issuer. In addition, the Company has historically sold the majority of its originated mortgage loans on the secondary market to reduce interest rate risk and to create an additional source of funding.

The Company has a formalized Contingency Funding Plan ("CFP"). The Board and management recognize the importance of liquidity during times of normal operations and in times of stress. The CFP was developed to ensure that the multiple liquidity sources available to the Company are readily available. All liquidity sources are tested annually. The CFP specifically considers liquidity at the Bank and the Company level. The CFP identifies the potential funding sources at the Bank level, which includes the FHLB, the Federal Reserve Bank, brokered deposits, one-way buy products via the IntraFi Network (CDARS and Insured Cash Sweeps) and Federal Funds. The CFP also addresses the Bank’s ability to liquidate its securities portfolio or other liquid assets. The CFP funding sources at the holding company level include a holding company committed line of credit that renews annually, as well as the ability to transfer securities from the investment subsidiary of the Bank to the Company. The Company’s committed line of credit has availability up to $30.0 million, of which $13.0 million was drawn upon as of December 31, 2025 .

Further, the CFP identifies CFP team members and expressly details their respective roles. Potential risk scenarios are identified and the plan includes multiple scenarios, including short-term and long-term funding crisis situations. Under the long-term funding crisis, two additional scenarios are identified: a moderate risk scenario and a highly stressed scenario. The CFP details the responsibilities and the actions to be taken by the CFP team under each scenario. Quarterly reports to management and the Board under the CFP include an early warning indicator matrix and pro forma cash flows for the various scenarios.

The following table discloses information on the maturity of the Company’s contractual long-term obligations as of December 31, 2025.

Payments Due by Period

(dollars in thousands)

Total

One year

or less

2-3 years

4-5 years

After 5 years

Operating leases

Pension and SERP plans

Total contractual long-term cash obligations

During the normal course of business, the Company becomes a party to financial instruments with off-balance sheet risk in order to meet the financing needs of its customers. These financial instruments include commitments to make loans and open-ended revolving lines of credit. The Company follows the same credit policy (including requiring collateral, if deemed appropriate) to make such commitments as it follows for those loans that are recorded in its financial statements.

The Company’s exposure to credit losses in the event of nonperformance is represented by the contractual amount of the commitments. Management does not expect any significant losses as a result of these commitments. Off-balance sheet transactions are more fully discussed in "Note 17 – Commitments, Off-Balance Sheet Risks and Contingencies".

The following table discloses information on the maturity of the Company’s commitments.

Amount of Commitment Expiration Per Period

(dollars in thousands)

Total

Amount Committed

One year

or less

Over one

year

Unused loan commitments

Standby letters of credit

Total commitments and letters of credit

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Interest Rate Risk

Interest rate risk is the risk that the estimated fair value of the Company’s assets, liabilities and derivative financial instruments will decline as a result of changes in interest rates or financial market volatility, or that net income will be significantly reduced by interest rate changes.

Interest rate risk represents the Company’s primary market risk exposure. The Company does not have material exposure to foreign currency exchange risk and does not maintain a trading portfolio. The Corporate Risk Committee of the Board annually reviews and approves the ALCO policy and the Derivatives and Hedging policy used to manage interest rate risk. These policies set guidelines for balance sheet structure, which are designed to protect the Company from the impact that interest rate changes could have on net income, but it does not necessarily indicate the effect on future net interest income. During both 2025 and 2024, the Bank demonstrated a fairly neutral balance sheet structure after a history of more asset sensitivity. Driving this was a shift to shorter-term interest bearing deposit accounts, such as money market accounts, and an increase in deposit accounts with rates directly indexed to the effective federal funds rate. As a result, the Company expects net interest margin to remain relatively stable in the first 100 basis points potential change (decrease or increase) in the federal funds rate due to the more neutral posture for balance sheet sensitivity.

Earnings can also be affected by the monetary and fiscal policies of the U.S. Government and its agencies, particularly the Federal Reserve Board. During 2025 the FOMC decreased the target federal funds rate a total of 75 basis points, following a decline in 2024 of 100 basis points after a combined increase of 525 basis points in 2022 and 2023. Rate decreases were implemented during late 2025 at the September, October and December FOMC meetings. The combined effect of these actions decreased the target federal funds rate to a range of 3.50% to 3.75%. The FOMC statement released for the meeting in December 2025 recognized that inflation had moved up since earlier in the year and remains somewhat elevated. The statement also indicated that the downside risks to employment had risen in recent months. The Committee reaffirmed its dual objective relative to maximum employment and inflation targets. The updated economic projections released at the December meeting project the median federal funds rate decreasing to 3.4% in 2026 (lowering of the target federal funds rate by 25 basis points), with continued easing to 3.1% in 2027. Additionally, the longer run median forecast for the federal funds rate was left unchanged at 3.0%. The combined result of the decrease in the yield on earning assets being more than offset by a decrease in the cost of funds, led to an increase in net interest margin from 3.18% for 2024 to 3.45% for 2025. The Company’s yield on earning assets decreased 18 basis points during 2025 as variable rate loans repriced at lower rates, offset by the tailwind of fixed/adjustable rate loans repricing at higher rates as to when they were originated. The commercial loan portfolio represents 88% of the total loan portfolio as of December 31, 2025. Approximately 67% of the commercial loan portfolio are variable rate loans which are primarily indexed to One Month Term SOFR, Prime and FHLB indices. Another factor mitigating the earning asset yield was the investment securities yield 16 basis points from 2.81% for 2024 to 2.97% for 2025. The decrease in earning asset yields was more than offset by a decrease in the Company's funding costs, primarily as result of continued of monetary policy by the Federal Reserve Bank. The rate paid on deposit accounts and purchased funds decreased 45 basis points for 2025, following an increase of 40 basis points in 2024. The Company anticipates that cost of funds would continue to respond to any further monetary policy by the Federal Reserve Bank.

Future changes in the net interest margin will be dependent upon multiple factors including further actions by the FOMC during 2026 in response to inflation, economic conditions and geopolitical concerns, the results of any of the administration’s changes to economic policy and laws, competitive pressures in the various markets served, and changes in the structure of the balance sheet as a result of changes in customer demands for products and services. The market rates table in Item 7A quantifies the current sensitivity to market rates and demonstrates our more neutral balance sheet compared to a historically more asset sensitive balance sheet.

The effects of price changes and inflation can vary substantially for most financial institutions. While management believes that inflation affects the growth of total assets, it believes that it is difficult to assess the overall impact. Management believes this to be the case due to the fact that generally neither the timing nor the magnitude of the inflationary changes in the consumer price index ("CPI") coincides with changes in interest rates. The price of one or more of the components of the CPI may fluctuate considerably and thereby influence the overall CPI without having a corresponding effect on interest rates or upon the cost of those goods and services normally purchased by the Company. In years of high inflation and high interest rates, intermediate and long-term interest rates tend to increase, thereby adversely impacting the market values of investment securities, mortgage loans and other long-term fixed rate loans. In addition, higher short-term interest rates caused by inflation tend to increase the cost of funds.

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Lakeland Financial Corp

Annual report (10-K)

Recent 8-K announcements

Top insiders

Top performers

All filings

Tone shift by section

Language change vs prior 10-K

Risk Factors (Item 1A)

Language change vs prior 10-K

MD&A (Item 7)

External resources

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