1ST SOURCE CORP (SRCE)

CIK: 0000034782. SIC: 6022 State Commercial Banks. Latest 10-K as of: 2026-02-17.

SIC breadcrumb: Finance, Insurance, And Real Estate > Depository Institutions > SIC 6022 State Commercial Banks

SEC company page: https://www.sec.gov/edgar/browse/?CIK=34782. Latest filing source: 0000034782-26-000011.

Selected Fundamentals

Financials

Annual standardized facts from SEC companyfacts as of latest extracted filing date 2026-02-17. Source: https://data.sec.gov/api/xbrl/companyfacts/CIK0000034782.json. Derived margins, ratios, and free cash flow are computed from the extracted annual SEC facts.

Flow metrics use full-year FY periods from 10-K/10-K/A filings; balance-sheet metrics use FY-end instants. Free cash flow = operating cash flow - capital expenditures. Missing metrics are omitted rather than fabricated.

Ratios

ROE and ROA use period-end equity/assets. Liabilities / equity uses total liabilities divided by stockholders' equity. Current ratio uses current assets divided by current liabilities when both are reported.

Financial Charts

Quarterly

Quarterly standardized facts from SEC companyfacts as of latest extracted filing date 2026-04-23. Source: https://data.sec.gov/api/xbrl/companyfacts/CIK0000034782.json.

Flow metrics use discrete quarter-length periods from 10-Q/10-Q/A filings. Q4 revenue and net income are derived only when annual FY and nine-month YTD facts exist for the same fiscal year; derived Q4 values are labeled. EPS Q4 is not derived.

Quarterly Charts

Macro Cross-References

• CPIAUCSL - Consumer Price Index for All Urban Consumers: All Items in U.S. City Average
• UNRATE - Unemployment Rate
• FEDFUNDS - Federal Funds Effective Rate
• CES0500000003 - Average Hourly Earnings of All Employees, Total Private
• DFEDTARU - Federal Funds Target Range - Upper Limit
• DFEDTARL - Federal Funds Target Range - Lower Limit
• DGS3MO - Market Yield on U.S. Treasury Securities at 3-Month Constant Maturity
• DGS2 - Market Yield on U.S. Treasury Securities at 2-Year Constant Maturity
• DGS10 - Market Yield on U.S. Treasury Securities at 10-Year Constant Maturity
• DGS30 - Market Yield on U.S. Treasury Securities at 30-Year Constant Maturity
• T10Y2Y - 10-Year Treasury Constant Maturity Minus 2-Year Treasury Constant Maturity
• CPILFESL - Consumer Price Index for All Urban Consumers: All Items Less Food and Energy
• CPIUFDSL - Consumer Price Index for All Urban Consumers: Food
• CPIENGSL - Consumer Price Index for All Urban Consumers: Energy
• CUSR0000SAH1 - Consumer Price Index for All Urban Consumers: Shelter
• PCEPI - Personal Consumption Expenditures: Chain-type Price Index
• PCEPILFE - Personal Consumption Expenditures Excluding Food and Energy: Chain-type Price Index
• PPIACO - Producer Price Index by Commodity: All Commodities
• T10YIE - 10-Year Breakeven Inflation Rate
• U6RATE - Total Unemployed, Plus All Marginally Attached Workers Plus Total Employed Part Time for Economic Reasons
• PAYEMS - All Employees, Total Nonfarm
• CIVPART - Labor Force Participation Rate
• EMRATIO - Employment-Population Ratio
• UNEMPLOY - Unemployed
• CE16OV - Employment Level
• ICSA - Initial Claims
• JTSJOL - Job Openings: Total Nonfarm
• JTSQUR - Quits: Total Nonfarm
• GDPC1 - Real Gross Domestic Product
• A191RL1Q225SBEA - Real Gross Domestic Product: Percent Change from Preceding Period
• INDPRO - Industrial Production: Total Index
• TCU - Capacity Utilization: Total Index
• HOUST - New Privately-Owned Housing Units Started: Total Units
• PERMIT - New Privately-Owned Housing Units Authorized in Permit-Issuing Places: Total Units
• RSAFS - Advance Retail Sales: Retail Trade
• PCE - Personal Consumption Expenditures
• DSPIC96 - Real Disposable Personal Income
• PSAVERT - Personal Saving Rate
• M2SL - M2
• BOPGSTB - U.S. International Trade in Goods and Services: Balance
• MSPUS - Median Sales Price of Houses Sold for the United States
• HSN1F - New One Family Houses Sold: United States
• RHORUSQ156N - Homeownership Rate in the United States
• TTLCONS - Total Construction Spending: Total Construction in the United States
• RRVRUSQ156N - Rental Vacancy Rate in the United States
• TOTALSL - Total Consumer Credit Owned and Securitized
• REVOLSL - Revolving Consumer Credit Owned and Securitized
• DRCCLACBS - Delinquency Rate on Credit Card Loans, All Commercial Banks
• GDP - Gross Domestic Product
• GPDI - Gross Private Domestic Investment
• GCE - Government Consumption Expenditures and Gross Investment
• PCEC - Personal Consumption Expenditures
• NETEXP - Net Exports of Goods and Services
• GFDEBTN - Federal Debt: Total Public Debt
• GFDEGDQ188S - Federal Debt: Total Public Debt as Percent of Gross Domestic Product
• FYFSD - Federal Surplus or Deficit
• FGRECPT - Federal Government Current Receipts
• FGEXPND - Federal Government: Current Expenditures
• MANEMP - All Employees, Manufacturing
• USCONS - All Employees, Construction
• USTRADE - All Employees, Retail Trade
• USFIRE - All Employees, Financial Activities
• USGOVT - All Employees, Government
• AWHAETP - Average Weekly Hours of All Employees, Total Private
• DGORDER - Manufacturers' New Orders: Durable Goods
• NEWORDER - Manufacturers' New Orders: Nondefense Capital Goods Excluding Aircraft
• BUSINV - Total Business Inventories
• EXPGS - Exports of Goods and Services
• IMPGS - Imports of Goods and Services
• IR - Import Price Index (End Use): All Commodities
• PPIFIS - Producer Price Index by Commodity: Final Demand

Latest quarter (10-Q)

Latest 10-Q source: 0000034782-26-000032.

Extracted structurally from real Item 2 body heading to real Item 3/4 boundary. Confidence: high. Filing date: 2026-04-23. Report date: 2026-03-31.

ITEM 2.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following management’s discussion and analysis is presented to provide information concerning 1st Source Corporation and its subsidiaries’ (collectively referred to as “the Company”, “we”, and “our”) financial condition as of March 31, 2026, as compared to December 31, 2025, and the results of operations for the three months ended March 31, 2026, and 2025. This discussion and analysis should be read in conjunction with our consolidated financial statements and the financial and statistical data appearing elsewhere in this report and our 2025 Annual Report.

Except for historical information contained herein, the matters discussed in this document express “forward-looking statements.” Generally, the words “believe,” “contemplate,” “seek,” “plan,” “possible,” “assume,” “hope,” “expect,” “intend,” “targeted,” “continue,” “remain,” “estimate,” “anticipate,” “project,” “will,” “should,” “indicate,” “would,” “may” and other similar expressions are intended to identify forward-looking statements but are not the exclusive means of identifying such statements. Those statements, including statements, projections, estimates or assumptions concerning future events or performance, and other statements that are other than statements of historical fact, are subject to material risks and uncertainties. We caution readers not to place undue reliance on any forward-looking statements, which speak only as of the date made. We may make other written or oral forward-looking statements from time to time. Readers are advised that various important factors could cause our actual results or circumstances for future periods to differ materially from those anticipated or projected in such forward-looking statements. Such factors include, but are not limited to, changes in law, regulations or GAAP; our competitive position within the markets we serve; increasing consolidation within the banking industry; unforeseen changes in interest rates; unforeseen changes in loan prepayment assumptions; unforeseen downturns in or major events affecting the local, regional or national economies or the industries in which we have credit concentrations; potential impacts of epidemics, pandemics or other infectious disease outbreaks; and other matters discussed in our filings with the SEC, including our Annual Report on Form 10-K  for 2025, which filings are available from the SEC. We undertake no obligation to publicly update or revise any forward-looking statements.

FINANCIAL CONDITION

Our total assets at March 31, 2026, were $9.11 billion, an increase of $58.16 million or 0.64% from December 31, 2025. Total investment securities available-for-sale were $1.53 billion, an increase of $7.11 million or 0.47% from December 31, 2025. The largest contributor to the increase in investment securities available-for-sale was driven by additional investments made during the period. Federal funds sold and interest bearing deposits with other banks were $51.14 million, an increase of $0.53 million or 1.04% from December 31, 2025. The increase in federal funds sold and interest bearing deposits with other banks was due to higher interest bearing deposits at other banks.

31

Table of Contents

Total loans and leases were $7.08 billion, an increase of $36.86 million or 0.52% from December 31, 2025. The largest contributors to the increase in loans and leases was growth in the renewable energy, commercial real estate, and commercial and agricultural loan portfolios, offset by decreases in the auto and light truck, aircraft, and construction equipment portfolios. Our foreign loan and lease balances, all denominated in U.S. dollars, were $321.91 million and $319.93 million as of March 31, 2026, and December 31, 2025, respectively. Foreign loans and leases are in aircraft financing. Loan and lease balances to borrowers in Brazil and Mexico were $137.27 million and $167.83 million as of March 31, 2026, respectively, compared to $136.98 million and $163.70 million as of December 31, 2025, respectively. As of March 31, 2026, and December 31, 2025, there was not a significant concentration in any other country.

Equipment owned under operating leases was $6.60 million, a decrease of $0.36 million, or 5.18% compared to December 31, 2025. The largest contributors to the decrease in equipment owned under operating leases was reduced leasing volume primarily due to a change in customer preferences and continued competitive pricing pressure for new business.

Total deposits were $7.23 billion at March 31, 2026, relatively flat compared to the end of 2025. Changes to the mix in total deposits included higher noninterest-bearing demand deposits, brokered deposits, and savings deposits, offset by a decrease in interest-bearing demand deposits. Rate competition for deposits persisted during the first quarter across our footprint from various sources, including traditional bank and credit union competitors, money market funds, bond markets, and other non-bank alternatives.

Short-term borrowings were $289.18 million, an increase of $50.56 million or 21.19% from December 31, 2025, due primarily to an increase in federal funds purchased and short-term FHLB borrowings. Long-term debt and mandatorily redeemable securities were $35.51 million, a decrease of $7.82 million or 18.05% from December 31, 2025, due primarily to the maturity of a $10.00 million long-term borrowing. Accrued expenses and other liabilities were $181.54 million, an increase of $10.65 million or 6.23% from December 31, 2025, mainly due to increased unfunded partnership commitments offset by decreases due to annual incentive-related payments to employees.

The following table shows accrued income and other assets.

(Dollars in thousands)

March 31,

2026

December 31,

2025

Accrued income and other assets:

Bank owned life insurance cash surrender value

$

88,488 

$

88,357 

Operating lease right of use assets

22,662 

20,130 

Accrued interest receivable

34,437 

35,539 

Mortgage servicing rights

3,318 

3,300 

Repossessions

1,319 

267 

Partnership investments carrying amount

150,501 

120,260 

Deferred tax assets

42,239 

44,959 

All other assets

29,683 

39,109 

Total accrued income and other assets

$

372,647 

$

351,921 

The largest contributor to the increase in accrued income and other assets from December 31, 2025, was an increase in partnership investments.

CAPITAL

As of March 31, 2026, total shareholders’ equity was $1.28 billion, up $2.99 million, or 0.23% from the $1.27 billion at December 31, 2025. In addition to net income of $39.96 million, other significant changes in shareholders’ equity during the first three months of 2026 included $23.35 million in common stock repurchased and $9.79 million of dividends paid. The accumulated other comprehensive loss component of shareholders’ equity increased to $40.90 million at March 31, 2026, compared to $34.78 million at December 31, 2025, due to changes in market conditions on our available-for-sale investment portfolio. Our shareholders’ equity-to-assets ratio was 14.02% as of March 31, 2026, compared to 14.08% at December 31, 2025. Book value per common share increased to $53.10 at March 31, 2026, from $52.32 at December 31, 2025, primarily due to increased retained earnings.

We declared and paid cash dividends per common share of $0.40 during the first quarter of 2026. The trailing four quarters dividend payout ratio, representing cash dividends per common share divided by diluted earnings per common share, was 23.93%. The dividend payout is continually reviewed by management and the Board of Directors subject to the Company’s capital and dividend policy.

The banking regulators have established guidelines for leverage capital requirements, expressed in terms of Tier 1 or core capital as a percentage of average assets, to measure the soundness of a financial institution. In addition, banking regulators have established risk-based capital guidelines for U.S. banking organizations.

32

Table of Contents

The actual capital amounts and ratios of 1st Source Corporation and 1st Source Bank as of March 31, 2026, remained at their historically strong and conservative levels and are presented in the table below.

Actual

Minimum Capital Adequacy

Minimum Capital Adequacy with

Capital Buffer

To Be Well Capitalized Under Prompt Corrective Action Provisions

(Dollars in thousands)

Amount

Ratio

Amount

Ratio

Amount

Ratio

Amount

Ratio

Total Capital (to Risk-Weighted Assets):

1st Source Corporation

$

1,441,417 

17.80 

%

$

647,935 

8.00 

%

$

850,414 

10.50 

%

$

809,918 

10.00 

%

1st Source Bank

1,339,689 

16.54 

647,964 

8.00 

850,453 

10.50 

809,955 

10.00 

Tier 1 Capital (to Risk-Weighted Assets):

1st Source Corporation

1,339,277 

16.54 

485,951 

6.00 

688,430 

8.50 

647,935 

8.00 

1st Source Bank

1,237,544 

15.28 

485,973 

6.00 

688,462 

8.50 

647,964 

8.00 

Common Equity Tier 1 Capital (to Risk-Weighted Assets):

1st Source Corporation

1,239,395 

15.30 

364,463 

4.50 

566,943 

7.00 

526,447 

6.50 

1st Source Bank

1,194,662 

14.75 

364,480 

4.50 

566,969 

7.00 

526,471 

6.50 

Tier 1 Capital (to Average Assets):

1st Source Corporation

1,339,277 

14.90 

359,614 

4.00 

N/A

N/A

449,517 

5.00 

1st Source Bank

1,237,544 

13.76 

359,652 

4.00 

N/A

N/A

449,564 

5.00 

LIQUIDITY AND INTEREST RATE SENSITIVITY

Effective liquidity management ensures that the cash flow requirements of depositors and borrowers, as well as our operating cash needs are met. Funds are available from a number of sources, including the securities portfolio, the core deposit base, access to the national brokered certificates of deposit market, national listing service certificates of deposit, Federal Home Loan Bank (FHLB) borrowings, Federal Reserve Bank (FRB) borrowings, and the capability to package loans for sale.

We maintain prudent strategies to support a strong liquidity position. The following table represents our sources of liquidity as of March 31, 2026.

(Dollars in thousands)

Available

Internal Sources

Unencumbered securities

$

1,235,447 

External Sources

FHLB advances(1)

471,293 

FRB borrowings

385,666 

Fed funds purchased(2)

320,000 

Brokered deposits(3)

650,713 

Listing services deposits(3)

454,253 

Total liquidity

$

3,517,372 

% of Total deposits net brokered and listing services certificates of deposit

50.49 

%

(1) Availability is shown net of required stock purchases under the FHLB activity-based stock ownership requirement, which is currently 4.50%, and may vary

(2) Availability contingent on correspondent bank approvals at time of borrowing

(3) Availability contingent on internal borrowing guidelines

External sources as listed in the table above are managed to approved guidelines by our Board of Directors. Total net available liquidity was $3.52 billion at March 31, 2026, which accounted for approximately 50% of total deposits net of brokered and listing services certificates of deposit.

Our loan to asset ratio was 77.73% at March 31, 2026, compared to 77.82% at December 31, 2025 and 76.57% at March 31, 2025. Cash and cash equivalents totaled $118.81 million at March 31, 2026, compared to $119.86 million at December 31, 2025 and $222.82 million at March 31, 2025. The decrease in cash and cash equivalents was primarily due to funding loan growth and purchases of investment securities available-for-sale. At March 31, 2026, the Consolidated Statements of Financial Condition was rate sensitive by $245.08 million more liabilities than assets scheduled to reprice within one year, or approximately 0.94%. Management believes that the present funding sources provide adequate liquidity to meet our cash flow needs.

33

Table of Contents

Under Indiana law governing the collateralization of public fund deposits, t

[Excerpt truncated for page length; source filing is linked above.]

Latest 10-K MD&A

Extracted from Item 7 to the first post-MD&A boundary after HTML sanitization. Confidence: high. Filing date: 2026-02-17. Report date: 2025-12-31.

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

This analysis is intended to assist you in understanding our results of operations for each of the past three years and financial condition for each of the past two years.

FORWARD-LOOKING STATEMENTS

This report, including Management’s Discussion and Analysis of Financial Condition and Results of Operations, contains forward-looking statements. Forward-looking statements include statements with respect to our beliefs, plans, objectives, goals, expectations, anticipations, assumptions, estimates, intentions, and future performance, and involve known and unknown risks, uncertainties and other factors, which may be beyond our control, and which may cause actual results, performance or achievements to be materially different from future results, performance or achievements expressed or implied by such forward-looking statements.

All statements other than statements of historical fact are statements that could be forward-looking statements. Words such as “believe,” “contemplate,” “seek,” “estimate,” “plan,” “project,” “anticipate,” “possible,” “assume,” “expect,” “intend,” “targeted,” “continue,” “remain,” “will,” “should,” “indicate,” “would,” “may” and other similar expressions are intended to identify forward-looking statements but are not the exclusive means of identifying such statements. Forward-looking statements provide current expectations or forecasts of future events and are not guarantees of future performance, nor should they be relied upon as representing management’s views as of any subsequent date.

All written or oral forward-looking statements that are made by or attributable to us are expressly qualified in their entirety by this cautionary notice. We have no obligation, and do not undertake, to update, revise, or correct any of the forward-looking statements after the date of this report, or after the respective dates on which such statements otherwise are made. We have expressed our expectations, beliefs, and projections in good faith and we believe they have a reasonable basis. However, we make no assurances that our expectations, beliefs, or projections will be achieved or accomplished. The results or outcomes indicated by our forward-looking statements may not be realized due to a variety of factors, including, without limitation, the following:

•Local, regional, national, and international economic conditions and the impact they may have on us and our clients and our assessment of that impact.

•Changes in the level of nonperforming assets and charge-offs.

•Changes in estimates of future cash reserve requirements based upon the periodic review thereof under relevant regulatory and accounting requirements.

•The effects of and changes in trade and monetary and fiscal policies and laws, including the interest rate policies of the Federal Reserve Board.

•Inflation, interest rate, securities market, and monetary fluctuations, including substantial changes in the cost of fuel.

•Political instability, acts of war or terrorism, or cybersecurity threats.

•The spread of infectious diseases or pandemics.

•The timely development and acceptance of new products and services and perceived overall value of these products and services by others.

•Changes in consumer spending, borrowings, and savings habits.

•Changes in the financial performance and/or condition of our borrowers.

•Technological changes.

•The impact of climate change.

•Acquisitions and integration of acquired businesses.

•The ability to increase market share and control expenses.

•The ability to expand effectively into new markets that we target.

•Changes in the competitive environment.

•The effect of changes in laws and regulations (including laws and regulations concerning taxes, banking, securities, insurance, and climate change) with which we and our subsidiaries must comply.

•The effect of changes in accounting policies and practices and auditing requirements, as may be adopted by the regulatory agencies, as well as the Public Company Accounting Oversight Board, the Financial Accounting Standards Board, and other accounting standard setters.

•Changes in our organization, compensation, and benefit plans.

•The costs and effects of legal and regulatory developments including the resolution of legal proceedings or regulatory or other governmental inquires and the results of regulatory examinations or reviews.

18

Table of Contents

•Greater than expected costs or difficulties related to the integration of new products and lines of business.

•Our success at managing the risks described in Item 1A. Risk Factors.

APPLICATION OF CRITICAL ACCOUNTING POLICIES AND ESTIMATES

Our consolidated financial statements are prepared in accordance with U.S. generally accepted accounting principles (GAAP) and follow general practices within the industries in which we operate. Application of these principles requires management to make estimates or judgments that affect the amounts reported in the financial statements and accompanying notes. These estimates or judgments reflect management’s view of the most appropriate manner in which to record and report our overall financial performance. Because these estimates or judgments are based on current circumstances, they may change over time or prove to be inaccurate based on actual experience. As such, changes in these estimates, judgments, and/or assumptions may have a significant impact on our financial statements. All accounting policies are important, and all policies described in Part II, Item 8, Financial Statements and Supplementary Data – Note 1 of the Notes to Consolidated Financial Statements (Note 1), should be reviewed for a greater understanding of how our financial performance is recorded and reported.

We have identified the following two policies as being critical because they require management to make particularly difficult, subjective, and/or complex estimates or 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. These policies relate to the determination of the allowance for credit losses and fair value measurements. Management believes it has used the best information available to make the estimations or judgments necessary to value the related assets and liabilities. Actual performance that differs from estimates or judgments and future changes in the key variables could change future valuations and impact net income. Management has reviewed the application of these policies with the Audit, Finance and Risk Committee of the Board of Directors. Following is a discussion of the areas we view as our most critical accounting policies.

Allowance for Credit Losses — The allowance for credit losses represents management’s estimate of expected credit losses over the expected contractual life of our existing loan and lease portfolio and the establishment of an allowance that is sufficient to absorb those losses. Determining the appropriateness of the allowance is complex and requires judgment by management about the effect of matters that are inherently uncertain. In determining an appropriate allowance, management makes numerous judgments, assumptions, and estimates which are inherently subjective, as they require material estimates that may be susceptible to significant change. These estimates are derived based on continuous review of the loan and lease portfolio, assessments of client performance, movement through delinquency stages, probability of default, losses given default, collateral values, and disposition, as well as expected cash flows, economic forecasts, and qualitative factors, such as changes in current economic conditions.

As stated in Note 1, we segment our loan and lease portfolios based on similar risk characteristics for collective evaluation using a non-discounted cash flow approach to estimate expected losses. We use a cohort cumulative loss methodology for select loan and lease segments. The cohort methodology has a steady state assumption. For other segments, we use a PD/LGD (probability of default/loss given default) model which aligns well with our internal risk rating system. When we observe limitations in the data or models, we use model overlays to make adjustments to model outputs to capture a particular risk or compensate for a known limitation, or in the case of the cohort model, changes in the steady state assumptions. Actual losses may differ from estimated amounts due to model inefficiencies or management’s inability to adequately determine appropriate model adjustment factors.

Additionally, we are required to use forecasts about future economic conditions to determine the expected credit losses over the remaining life of the asset. Forecast adjustments are inherently challenging for many reasons including, the current macroeconomic environment, a softening labor market, heightened geopolitical uncertainty, inflation which remains above long-term policy targets, and interest rates that are still restrictive despite recent easing. We endeavor to apply a forecast adjustment that is directionally consistent, reasonable, supportable, and reflective of current expectations and conditions. We use a two-year reasonable and supportable period across all loan and lease segments to forecast economic conditions. We believe the two-year time horizon aligns with available industry guidance and various forecasting sources. Following this two-year forecasting period, we use a two-year reversion period to revert forecast rates to historical loss rates.

In assessing the factors used to derive an appropriate allowance, management benefits from a lengthy organizational history and experience with credit decisions and related outcomes. We have been diligent in our efforts to review our portfolios, loan segmentations, methodologies and models and believe we have made appropriate and prudent decisions. Nonetheless, if management’s underlying assumptions prove to be inaccurate, the allowance for credit losses would have to be adjusted. Our accounting policies related to the allowance for credit losses is disclosed in Note 1 under the heading “Allowance for Credit Losses.”

19

Table of Contents

Fair Value Measurements — We use fair value measurements to record certain financial instruments and to determine fair value disclosures. Available-for-sale securities, trading account securities, mortgage loans held for sale, and interest rate swap agreements are financial instruments recorded at fair value on a recurring basis. Additionally, from time to time, we may be required to record at fair value other financial assets on a nonrecurring basis. These nonrecurring fair value adjustments typically involve write-downs of, or specific reserves against, individual assets. GAAP establishes a three-level hierarchy for disclosure of assets and liabilities recorded at fair value. The classification of assets and liabilities within the hierarchy is based on whether the inputs to the valuation methodology used in the measurement are observable or unobservable. Observable inputs reflect market-driven or market-based information obtained from independent sources, while unobservable inputs reflect our estimates about market data.

The degree of management judgment involved in determining the fair value of a financial instrument is dependent upon the availability of quoted market prices or observable market data. For financial instruments that trade actively and have quoted market prices or observable market data, there is minimal subjectivity involved in measuring fair value. When observable market prices and data are not fully available, management judgment is necessary to estimate fair value. In addition, changes in the market conditions may reduce the availability of quoted prices or observable data. For example, reduced liquidity in the capital markets or changes in secondary market activities could result in observable market inputs becoming unavailable. Therefore, when market data is not available, we use valuation techniques that require more management judgment to estimate the appropriate fair value measurement. Fair value is discussed further in Note 1 under the heading “Fair Value Measurements” and in Note 21, “Fair Value Measurements.”

EARNINGS SUMMARY

Net income available to common shareholders in 2025 was $158.28 million, up from $132.62 million in 2024 and up from $124.93 million in 2023. Diluted net income per common share was $6.41 in 2025, $5.36 in 2024, and $5.03 in 2023. Return on average total assets was 1.76% in 2025 compared to 1.52% in 2024, and 1.48% in 2023. Return on average common shareholders’ equity was 13.16% in 2025 versus 12.54% in 2024, and 13.48% in 2023.

Net income in 2025, as compared to 2024, was positively impacted by a $47.36 million or 15.74% increase in net interest income, which was partially offset by a $13.24 million or 6.50% increase in noninterest expense. Net income in 2024, as compared to 2023, was positively impacted by a $22.17 million or 7.96% increase in net interest income, which was offset by a $6.60 million increase in provision for credit losses, a $4.32 million or 4.76% decrease in noninterest income and a $1.88 million or 0.93% increase in noninterest expense.

Dividends paid on common stock in 2025 amounted to $1.52 per share, compared to $1.40 per share in 2024, and $1.30 per share in 2023. The level of earnings reinvested and dividend payouts are determined by the Board of Directors based on various considerations, including liquidity needs, capital requirements, and management’s assessment of future growth opportunities and the level of capital necessary to support them.

Net Interest Income — Our primary source of earnings is net interest income, the difference between income on earning assets and the cost of funds supporting those assets. Significant categories of earning assets are loans and leases and investment securities while deposits and borrowings represent the major portion of interest-bearing liabilities. For purposes of the following discussion, comparison of net interest income is done on a tax-equivalent basis, which provides a common basis for comparing yields on earning assets exempt from federal income taxes to those which are fully taxable.

Net interest margin (the ratio of net interest income to average earning assets) is significantly affected by movements in interest rates and changes in the mix of earning assets and the liabilities that fund those assets. Net interest margin on a fully taxable- equivalent basis was 4.07% in 2025, compared to 3.64% in 2024 and 3.51% in 2023. Net interest income was $348.18 million for 2025, compared to $300.82 million for 2024 and $278.65 million for 2023. Tax-equivalent net interest income totaled $348.79 million for 2025, up $47.38 million from the $301.40 million reported in 2024. Tax-equivalent net interest income for 2024 was up $22.02 million from the $279.39 million reported for 2023.

During 2025, average earning assets increased $279.10 million or 3.37% while average interest-bearing liabilities increased $128.46 million or 2.20% over the comparable period in 2024. The yield on average earning assets increased 16 basis points to 6.01% for 2025 from 5.85% for 2024 primarily due to higher loan and lease average balances and higher rates on investment securities offset by lower rates on other investments, which include federal funds sold, time deposits with other banks, Federal Reserve Bank excess balances, Federal Reserve Bank and Federal Home Loan Bank (FHLB) stock and commercial paper. Total cost of average interest-bearing liabilities decreased 35 basis points to 2.79% during 2025 from 3.14% in 2024 mainly as a result of repricing of interest-bearing deposits and lower rates and average balances of other short-term borrowings which is primarily short-term FHLB borrowings offset by higher rates on mandatorily redeemable securities. The result to the fully taxable-equivalent net interest margin was an increase of 43 basis points.

20

Table of Contents

The largest contributors to the increase in the yield on average earning assets in 2025 was an increase in average loan and lease balances and higher rates on taxable investment securities. During 2025, average loans and leases increased $336.29 million or 5.10% from 2024 while the yield decreased to 6.79% from 6.84% in 2024. Strong growth primarily within our Renewable Energy portfolio and selective growth in our Commercial Real Estate portfolio drove total average loans and leases higher during the year. Net interest recoveries positively contributed seven basis points to the yield on average loans and leases during 2025 and three basis points to the average loans and leases yield during 2024. The tax-equivalent yield on investment securities increased 81 basis points to 2.53% while the average balance decreased $73.56 million or 4.68% with the largest decreases in U.S. treasury and federal agency securities and state and municipal securities. Average mortgages held for sale increased $0.66 million or 20.45% during 2025 while the yield decreased 33 basis points. Average other investments increased $15.71 million or 13.96% during 2025 while the yield decreased 72 basis points. The average balance increase in other investments was primarily a result of higher balances held at the Federal Reserve Bank.

Average interest-bearing deposits increased $270.38 million or 4.91% during 2025 while the effective rate paid on those deposits decreased 33 basis points. The increased average balance was primarily due to increases in non-brokered time deposits and money market accounts. The decrease in the average cost of interest-bearing deposits was primarily the result of Fed rate cuts during the second half of 2024 and second half of 2025. Average noninterest-bearing demand deposits decreased $7.05 million or 0.44% during 2025 due primarily to persistent rate competition for deposits and greater utilization of excess funds by our business customers.

Average short-term borrowings decreased $142.22 million or 62.15% during 2025 while the effective rate paid decreased 209 basis points primarily due to the maturity and pay off of $100 million in borrowings from the Federal Reserve’s Bank Term Funding Program. Average long-term debt and mandatorily redeemable securities balances increased $0.31 million or 0.75% during 2025 while the effective rate increased 364 basis points primarily due to a higher imputed interest on mandatorily redeemable securities from an increased improvement in book value per share during 2025 compared to 2024. Mandatorily redeemable shares are issued under the terms of one of our executive incentive compensation plans and are settled based on book value per share with changes from the previous reporting date recorded as interest expense.

21

Table of Contents

The following table provides an analysis of net interest income and illustrates interest income earned and interest expense charged for each major component of interest earning assets and the interest bearing liabilities. Yields/rates are computed on a tax-equivalent basis, using a 21% rate. Nonaccrual loans and leases are included in the average loan and lease balance outstanding.

2025

2024

2023

(Dollars in thousands)

Average Balance

Interest Income/Expense

Yield/Rate

Average Balance

Interest Income/Expense

Yield/Rate

Average Balance

Interest Income/Expense

Yield/Rate

ASSETS

Investment securities available-for-sale:

Taxable

$

1,463,913 

$

36,360 

2.48 

%

$

1,539,900 

$

25,720 

1.67 

%

$

1,632,567 

$

24,501 

1.50 

%

Tax-exempt(1)

32,894 

1,501 

4.56 

%

30,464 

1,312 

4.31 

%

44,083 

1,805 

4.09 

%

Mortgages held for sale

3,894 

245 

6.29 

%

3,233 

214 

6.62 

%

2,368 

155 

6.55 

%

Loans and leases, net of unearned discount(1)

6,934,619 

471,070 

6.79 

%

6,598,329 

451,432 

6.84 

%

6,203,857 

387,524 

6.25 

%

Other investments

128,273 

5,830 

4.54 

%

112,563 

5,925 

5.26 

%

73,729 

3,663 

4.97 

%

Total earning assets(1)

8,563,593 

515,006 

6.01 

%

8,284,489 

484,603 

5.85 

%

7,956,604 

417,648 

5.25 

%

Cash and due from banks

66,638 

65,285 

70,304 

Allowance for loan and lease losses

(161,191)

(151,050)

(144,183)

Other assets

512,297 

540,815 

532,072 

Total assets

$

8,981,337 

$

8,739,539 

$

8,414,797 

LIABILITIES AND SHAREHOLDERS’ EQUITY

Interest-bearing deposits

$

5,780,337 

$

155,914 

2.70 

%

$

5,509,956 

$

166,842 

3.03 

%

$

5,204,095 

$

123,162 

2.37 

%

Short-term borrowings:

Securities sold under agreements to repurchase

59,433 

494 

0.83 

%

60,388 

542 

0.90 

%

78,928 

136 

0.17 

%

Other short-term borrowings

27,191 

1,088 

4.00 

%

168,460 

8,434 

5.01 

%

134,683 

6,896 

5.12 

%

Subordinated notes

58,764 

4,033 

6.86 

%

58,764 

4,217 

7.18 

%

58,764 

4,174 

7.10 

%

Long-term debt and mandatorily redeemable securities

41,278 

4,690 

11.36 

%

40,971 

3,165 

7.72 

%

46,323 

3,892 

8.40 

%

Total interest-bearing liabilities

5,967,003 

166,219 

2.79 

%

5,838,539 

183,200 

3.14 

%

5,522,793 

138,260 

2.50 

%

Noninterest-bearing deposits

1,601,954 

1,609,001 

1,753,149 

Other liabilities

152,504 

161,657 

151,659 

Shareholders’ equity

1,202,863 

1,057,331 

926,935 

Noncontrolling interests

57,013 

73,011 

60,261 

Total liabilities and equity

$

8,981,337 

$

8,739,539 

$

8,414,797 

Less: Fully tax-equivalent adjustments

(612)

(586)

(741)

Net interest income/margin (GAAP-derived)(1)

$

348,175 

4.07 

%

$

300,817 

3.63 

%

$

278,647 

3.50 

%

Fully tax-equivalent adjustments

612 

586 

741 

Net interest income/margin - FTE(1)

$

348,787 

4.07 

%

$

301,403 

3.64 

%

$

279,388 

3.51 

%

(1) See “Reconciliation of Non-GAAP Financial Measures” for more information on this performance measure/ratio.

22

Table of Contents

Reconciliation of Non-GAAP Financial Measures — Our accounting and reporting policies conform to GAAP in the United States and prevailing practices in the banking industry. However, certain non-GAAP performance measures are used by management to evaluate and measure the Company’s performance. These include taxable-equivalent net interest income (including its individual components) and net interest margin (including its individual components). Management believes that these measures provide users of the Company’s financial information a more meaningful view of the performance of the interest-earning assets and interest-bearing liabilities.

Management reviews yields on certain asset categories and the net interest margin of the Company and its banking subsidiaries on a fully taxable-equivalent (“FTE”) basis. In this non-GAAP presentation, net interest income is adjusted to reflect tax-exempt interest income on an equivalent before-tax basis. This measure ensures comparability of net interest income arising from both taxable and tax-exempt sources. The following table shows the reconciliation of non-GAAP financial measures for the most recent three years ended December 31.

(Dollars in thousands)

2025

2024

2023

Calculation of Net Interest Margin

(A)

Interest income (GAAP)

$

514,394 

$

484,017 

$

416,907 

Fully tax-equivalent adjustments:

(B)

- Loans and leases

302 

317 

381 

(C)

- Tax-exempt investment securities

310 

269 

360 

(D)

Interest income - FTE (A+B+C)

515,006 

484,603 

417,648 

(E)

Interest expense (GAAP)

166,219 

183,200 

138,260 

(F)

Net interest income (GAAP) (A-E)

348,175 

300,817 

278,647 

(G)

Net interest income - FTE (D-E)

348,787 

301,403 

279,388 

(H)

Total earning assets

$

8,563,593 

$

8,284,489 

$

7,956,604 

Net interest margin (GAAP-derived) (F/H)

4.07 

%

3.63 

%

3.50 

%

Net interest margin - FTE (G/H)

4.07 

%

3.64 

%

3.51 

%

23

Table of Contents

The change in interest due to both rate and volume illustrated in the following table has been allocated to volume and rate changes in proportion to the relationship of the absolute dollar amounts of the change in each. The following table shows changes in tax-equivalent interest earned and interest paid, resulting from changes in volume and changes in rates.

Increase (Decrease) due to

(Dollars in thousands)

Volume

Rate

Net

2025 compared to 2024

Interest earned on:

Investment securities available-for-sale:

Taxable

$

(1,326)

$

11,966 

$

10,640 

Tax-exempt

108 

81 

189 

Mortgages held for sale

42 

(11)

31 

Loans and leases, net of unearned discount

22,864 

(3,226)

19,638 

Other investments

770 

(865)

(95)

Total earning assets

$

22,458 

$

7,945 

$

30,403 

Interest paid on:

Interest-bearing deposits

$

7,910 

$

(18,838)

$

(10,928)

Short-term borrowings:

Securities sold under agreements to repurchase

(8)

(40)

(48)

Other short-term borrowings

(5,927)

(1,419)

(7,346)

Subordinated notes

— 

(184)

(184)

Long-term debt and mandatorily redeemable securities

24 

1,501 

1,525 

Total interest-bearing liabilities

$

1,999 

$

(18,980)

$

(16,981)

Net interest income - FTE

$

20,459 

$

26,925 

$

47,384 

2024 compared to 2023

Interest earned on:

Investment securities available-for-sale:

Taxable

$

(1,443)

$

2,662 

$

1,219 

Tax-exempt

(582)

89 

(493)

Mortgages held for sale

57 

2 

59 

Loans and leases, net of unearned discount

25,580 

38,328 

63,908 

Other investments

2,032 

230 

2,262 

Total earning assets

$

25,644 

$

41,311 

$

66,955 

Interest paid on:

Interest-bearing deposits

$

7,590 

$

36,090 

$

43,680 

Short-term borrowings:

Securities sold under agreements to repurchase

(39)

445 

406 

Other short-term borrowings

1,694 

(156)

1,538 

Subordinated notes

— 

43 

43 

Long-term debt and mandatorily redeemable securities

(428)

(299)

(727)

Total interest-bearing liabilities

$

8,817 

$

36,123 

$

44,940 

Net interest income - FTE

$

16,827 

$

5,188 

$

22,015 

24

Table of Contents

Noninterest Income — Noninterest income decreased in 2025 from 2024 following a decrease in 2024 from 2023. The following table shows the components of our noninterest income for the most recent three years ended December 31.

(Dollars in thousands)

2025

2024

2023

2025

$ Change

from 2024

2025

% Change

from 2024

2024

$ Change

from 2023

2024

% Change

from 2023

Noninterest income:

Trust and wealth advisory

$

27,867 

$

26,709 

$

23,706 

$

1,158 

4.34 

%

$

3,003 

12.67 

%

Service charges on deposit accounts

13,184 

12,877 

12,749 

307 

2.38 

%

128 

1.00 

%

Debit card

17,774 

17,785 

17,980 

(11)

(0.06)

%

(195)

(1.08)

%

Mortgage banking

4,103 

4,210 

3,471 

(107)

(2.54)

%

739 

21.29 

%

Insurance commissions

7,700 

6,730 

6,911 

970 

14.41 

%

(181)

(2.62)

%

Equipment rental

3,021 

5,171 

8,837 

(2,150)

(41.58)

%

(3,666)

(41.48)

%

Losses on investment securities available-for-sale

(8,679)

(3,889)

(2,926)

(4,790)

(123.17)

%

(963)

(32.91)

%

Other

20,633 

16,714 

19,895 

3,919 

23.45 

%

(3,181)

(15.99)

%

Total noninterest income

$

85,603 

$

86,307 

$

90,623 

$

(704)

(0.82)

%

$

(4,316)

(4.76)

%

NM = Not Meaningful

Trust and wealth advisory fees (which include investment management fees, estate administration fees, mutual fund fees, annuity fees, and fiduciary fees) increased in 2025 from 2024, compared to an increase in 2024 over 2023. Trust and wealth advisory fees are largely based on the number and size of client relationships and the market value of assets under management. The market value of trust assets under management at December 31, 2025 and 2024 was $6.28 billion and $5.97 billion, respectively. The positive performance of the stock and bond markets during 2025 resulted in an increase in the market value of trust assets under management compared to 2024. At December 31, 2025, these trust assets were comprised of $4.37 billion of personal and agency trusts and estate administration assets, $1.05 billion of employee benefit plan assets, $0.66 billion of individual retirement accounts, and $0.20 billion of custody assets.

Service charges on deposit accounts increased in 2025 from 2024, compared to an increase in 2024 from 2023. The growth in service charges on deposit accounts in 2025 was primarily due to higher consumer nonsufficient fund and overdraft transactions. The growth in service charges on deposit accounts in 2024 was primarily due to a higher volume of business deposit account fees.

Debit card income remained relatively flat during 2025 following a slight decrease during 2024. The decline in 2024 to 2023 was related to shifts in both client transaction behavior and the networks over which those merchants are routing transactions.

Mortgage banking income decreased in 2025 over 2024, compared to an increase in 2024 from 2023. During 2025, 2024, and 2023, we determined that no permanent write-down was necessary for previously recorded impairment on MSRs. During 2025, mortgage banking income decreased due to lower margins on loans originated for the secondary market and a reduction in servicing fees resulting from fewer loans being serviced for others. During 2024, mortgage banking income increased due to higher production of loans originated for the secondary market resulting in increased income on loans sold into the secondary market.

Insurance commissions increased in 2025 compared to 2024, and decreased in 2024 compared to 2023. The increase in 2025 was primarily due to higher contingent commissions received and an increased book of business. The decrease in 2024 was primarily due to fewer contingent commissions received.

Equipment rental income generated from operating leases decreased during 2025 from 2024, compared to a similar reduction during 2024 from 2023. The average equipment rental portfolio decreased in 2025 and 2024 as a result of reduced leasing volume primarily in the medium and heavy duty truck and construction equipment portfolios due to changing customer preferences and competitive pricing pressures for new business. In 2025 and 2024, the decline in rental income was offset by a similar decline in depreciation on equipment owned under operating leases.

Losses on investment securities available-for-sale during 2025 were exclusively the result of repositioning the portfolio during the second, third, and fourth quarters. In the combined repositioning trades, approximately $256 million of securities with a weighted average yield of 0.92% were sold and used to purchase approximately $254 million of securities with a weighted average yield of 3.66%. In the 2024 repositioning, approximately $63 million of securities with a weighted average yield of 0.71% were sold and used to purchase approximately $63 million of securities with a weighted average yield of 4.64%. In the 2023 repositioning, approximately $40 million of securities with a weighted average yield of 1.10% were sold and used to purchase approximately $40 million of securities with a weighted average yield of 4.80%. The remaining 2023 losses were the result of sales to support liquidity and fund loan growth during the first quarter.

25

Table of Contents

Other income increased in 2025 from 2024, compared to a decrease in 2024 from 2023. The increase in 2025 was mainly a result of higher partnership investment gains on sale of renewable energy tax equity investments of $2.07 million, an increase in brokerage commissions and fees of $0.41 million, and increased customer interest rate swap fees of $0.54 million offset by a write-down of $0.77 million on a small business capital investment. The decrease in 2024 was mainly a result of lower partnership investment gains on sale of renewable energy tax equity investments, a writedown of $0.86 million on a small business capital investment and a reduction in customer interest rate swap fees of $0.48 million, offset by increased brokerage commissions and fees of $0.84 million and rental income of $0.23 million related to a repossessed asset.

Noninterest Expense — Noninterest expense increased in 2025 from 2024 following an increase in 2024 from 2023. The following table shows the components of our noninterest expense for the most recent three years ended December 31.

(Dollars in thousands) 

2025

2024

2023

2025

$ Change

from 2024

2025

% Change

from 2024

2024

$ Change

from 2023

2024

% Change

from 2023

Noninterest expense:

Salaries and employee benefits

$

129,564 

$

121,909 

$

115,612 

$

7,655 

6.28 

%

$

6,297 

5.45 

%

Net occupancy

12,724 

11,939 

11,090 

785 

6.58 

%

849 

7.66 

%

Furniture and equipment

6,454 

5,612 

5,653 

842 

15.00 

%

(41)

(0.73)

%

Data Processing

29,844 

27,567 

25,055 

2,277 

8.26 

%

2,512 

10.03 

%

Depreciation — leased equipment

2,415 

4,073 

7,093 

(1,658)

(40.71)

%

(3,020)

(42.58)

%

Professional fees

7,115 

7,098 

6,705 

17 

0.24 

%

393 

5.86 

%

FDIC and other insurance

5,793 

6,142 

5,926 

(349)

(5.68)

%

216 

3.64 

%

Business development and marketing

8,855 

6,876 

7,157 

1,979 

28.78 

%

(281)

(3.93)

%

Provision (recovery of provision) for unfunded

    loan commitments

— 

— 

2,566 

NM

NM

NM

NM

Other

14,075 

12,385 

14,867 

1,690 

13.65 

%

(2,482)

(16.69)

%

Total noninterest expense

$

216,839 

$

203,601 

$

201,724 

$

13,238 

6.50 

%

$

1,877 

0.93 

%

NM = Not Meaningful

Total salaries and employee benefits increased in 2025 from 2024, following an increase in 2024 from 2023.

Employee salaries grew $5.21 million or 5.16% in 2025 from 2024, compared to an increase of $7.45 million or 7.97% in 2024 from 2023. The increase in 2025 was mainly a result of higher base salaries due to normal merit increases and a rise in incentive compensation. The increase in 2024 was mainly a result of higher base salaries due to normal merit increases, the impact of wage inflation, and an increase in the number of employees from the filling of prior open positions and lower employee turnover as well as an increase in incentive compensation.

Employee benefits increased $2.45 million or 11.67% in 2025 from 2024, compared to a $1.15 million or 5.20% decrease in 2024 from 2023. During 2025, group insurance costs were higher due to overall higher health insurance claims experienced and an increase in employer profit sharing contribution expense due to the utilization of accumulated plan forfeitures to offset employer contributions in the prior year. During 2024, group insurance costs were lower due to fewer claims experienced and the utilization of accumulated plan forfeitures of $0.65 million to offset current year employer contribution expense.

Occupancy expense rose in 2025 from 2024, compared to an increase in 2024 from 2023. The expense increase in 2025 was primarily the result of higher building depreciation and increased premises expenses. The expense increase in 2024 was primarily the result of increased premises expenses and higher rents.

Furniture and equipment expense, including depreciation, increased in 2025 from 2024, and was relatively flat in 2024 from 2023. The increase in 2025 was primarily due to an increase in equipment repairs and maintenance and higher equipment depreciation.

Data processing expense rose in 2025 from 2024, following an increase in 2024 from 2023. The increases in both 2025 and 2024 were due to a rise in software maintenance costs and higher computer processing charges related to a variety of technology projects.

Depreciation on equipment owned under operating leases declined in 2025 from 2024, following a similar decrease in 2024 from 2023. In 2025 and 2024, depreciation on equipment owned under operating leases correlated with the change in equipment rental income.

Professional fees remained flat in 2025 from 2024, compared to an increase in 2024 from 2023. The higher expense in 2024 can primarily be attributed to a $1.08 million reversal of accrued legal fees in the first quarter of 2023, as well as an increase in audit and examination fees and the utilization of consulting services for technology projects and compliance services during the year.

26

Table of Contents

FDIC and other insurance expense decreased in 2025 from 2024, and increased in 2024 from 2023. The decrease in 2025 was mainly the result of lower insurance premiums due to a more cost effective policy renewal. The increase in 2024 was mainly the result of higher insurance premiums during 2024. FDIC insurance premiums remained relatively stable during 2025 and 2024.

Business development and marketing expenses increased in 2025 from 2024, following a decrease in 2024 from 2023. The increased expense in 2025 was mainly the result of a $1.00 million dollar charitable contribution, increased business development expenses, and marketing promotions. The decreased expense in 2024 was mainly the result of a charitable contribution of $1.00 million made during 2023 offset with higher marketing promotions during the year.

During 2024, we reclassified the provision for unfunded loan commitments out of Other Noninterest Expense and into the Provision for Credit Losses in the Consolidated Statements of Income. We believe this reclassification more appropriately reflected the nature of this expense item and enhances comparability for peer comparison purposes.

Other expenses increased in 2025 as compared to 2024, and decreased in 2024 as compared to 2023. The higher expense in 2025 was primarily the result of fewer gains related to the sale of fixed assets and off-lease equipment, higher collection and repossession expenses, and increased intangible asset amortization offset by a reduction in fraud losses. The lower expense in 2024 was primarily the result of higher gains on the sale of fixed assets and leased equipment, lower printing and postage costs, reduced data communication line charges and a reduction in employment and relocation costs offset by a $0.85 million stolen check fraud loss.

Income Taxes — 1st Source recognized income tax expense in 2025 of $46.12 million, compared to $38.44 million in 2024, and $36.75 million in 2023. The effective tax rate in 2025 was 22.57% compared to 22.47% in 2024, and 22.73% in 2023.

For a detailed analysis of 1st Source’s income taxes see Part II, Item 8, Financial Statements and Supplementary Data — Note 17 of the Notes to Consolidated Financial Statements.

FINANCIAL CONDITION

Loan and Lease Portfolio — The following table shows 1st Source’s loan and lease distribution at the end of each of the last two years as of December 31.

(Dollars in thousands) 

2025

2024

Commercial and agricultural

$

797,592 

$

772,974 

Renewable energy

652,799 

487,266 

Auto and light truck

887,876 

948,435 

Medium and heavy duty truck

269,749 

289,623 

Aircraft

1,086,821 

1,123,797 

Construction equipment

1,221,135 

1,203,912 

Commercial real estate

1,269,765 

1,215,265 

Residential real estate and home equity

740,777 

680,071 

Consumer

120,155 

133,465 

Total loans and leases

$

7,046,669 

$

6,854,808 

At December 31, 2025, there were no concentrations within the loan portfolio of 10% or more of total loans and leases.

Loans and leases, net of unearned discount, at December 31, 2025, were $7.05 billion and were 77.82% of total assets, compared to $6.85 billion and 76.74% of total assets at December 31, 2024. Average loans and leases, net of unearned discount, increased $336.29 million or 5.10% and increased $394.47 million or 6.36% in 2025 and 2024, respectively.

Commercial and agricultural lending, excluding those loans secured by real estate, increased $24.62 million or 3.18% in 2025 over 2024. Commercial and agricultural lending outstandings were $797.59 million and $772.97 million at December 31, 2025 and December 31, 2024, respectively. Commercial loan growth continued to be somewhat constrained as our clients dealt with higher costs and tighter gross margins. Tariff impact is partially to blame as well as slowing consumer demand. Loan growth was particularly constrained in the small business sector. We saw this in the form of reduced line of credit (LOC) balances throughout the year. Further, the agricultural and recreational vehicle sectors are entering their fourth consecutive year of depressed commodity prices and demand, which caused lower LOC usage and reduced investments by these borrowers. Finally, our commercial and industrial loan outstandings continue to be impacted by the acquisition and subsequent pay-offs by private equity firms and larger competitors.

Renewable energy loans and leases increased $165.53 million or 33.97% in 2025 over 2024. Renewable energy loan and lease outstandings were $652.80 million and $487.27 million at December 31, 2025 and 2024, respectively. The increase during 2025 was due to continued positive momentum from the addition of new clients and repeat business from existing clients. Demand for renewable energy loans and leases remained accelerated during 2025 from the incentives associated with the Inflation Reduction Act and the shortened phase out period of these incentives with the passage of the One Big Beautiful Bill.

27

Table of Contents

Auto and light truck loans decreased $60.56 million or 6.39% in 2025 over 2024. At December 31, 2025, auto and light truck loans had outstandings of $887.88 million and $948.44 million at December 31, 2024. This decrease was primarily attributable to vehicle rental clients’ reaction to cyclical market adjustments resulting in the downsizing of total fleet and transition into lower capital cost units along with our selective credit approach.

Medium and heavy duty truck loans and leases decreased $19.87 million or 6.86% in 2025. Medium and heavy duty truck financing at December 31, 2025 and 2024 had outstandings of $269.75 million and $289.62 million, respectively. The decrease at December 31, 2025 from December 31, 2024 can be mainly attributed to reduced equipment demand related to an ongoing trucking industry recession, selective credit approach, and maintenance of our adjusted yields.

Aircraft financing at year-end 2025 decreased $36.98 million or 3.29% from year-end 2024. Aircraft financing at December 31, 2025 and 2024 had outstandings of $1.09 billion and $1.12 billion, respectively. Domestic aircraft average outstandings increased modestly, while end-of-period balances declined year-over-year. The decline was driven by elevated client payoffs as aircraft owners capitalized on strong market pricing by divesting assets or aviation-related businesses during 2025. We continue to exercise a consistent disciplined approach to aircraft types and client credit profiles. Our foreign outstandings, all denominated in U.S. dollars, increased 6.23% during 2025 and were $319.93 million and $301.18 million as of December 31, 2025 and 2024, respectively. Loan and lease outstandings to borrowers in Brazil and Mexico were $136.98 million and $163.70 million as of December 31, 2025, respectively, compared to $129.12 million and $145.85 million as of December 31, 2024, respectively. Outstanding balances to other borrowers in other countries were insignificant.

Construction equipment financing increased $17.22 million or 1.43% in 2025 compared to 2024. Construction equipment financing at December 31, 2025 had outstandings of $1.22 billion, compared to outstandings of $1.20 billion at December 31, 2024. The growth in this category was primarily due to significant new client relationships and continued growth with existing clients primarily amongst road builders and site development clients.

Commercial loans secured by real estate increased $54.50 million or 4.48% in 2025 over 2024. Commercial loans secured by real estate outstanding at December 31, 2025 were $1.27 billion and $1.22 billion at December 31, 2024. Approximately 61% of loans were owner occupied at December 31, 2025. We continue to have solid loan demand within our markets as liquidity concerns, which have impacted many of our competitors’ willingness to lend as aggressively as they had been into commercial real estate, gave us more opportunities while underwriting standards and yields also improved. The majority of our non-owner occupied commercial real estate (CRE) projects are located within our primary market area. We had good CRE loan growth in 2025, fueled by continued funding of in-process projects nearing completion throughout the year. This new project funding was partially offset by an increasing number of CRE payoffs, via the sale of projects or refinancing in secondary markets. We continue to have very minimal exposure to non-owner occupied office property.

Residential real estate and home equity loans were $740.78 million at December 31, 2025 and $680.07 million at December 31, 2024. Residential real estate and home equity loans increased $60.71 million or 8.93% in 2025 from 2024. Residential mortgage and home equity outstandings grew in 2025 as clients began to turn back to home equity loans as variable rates began to decrease. Also, our fixed rate term second mortgages grew as clients looked to pull equity from increased home values instead of doing cash out refinances, which would impact their low mortgage rates that were locked in during COVID. In addition, the overall increase in home values, as well as home repairs and improvements, has resulted in more loans in our portfolio.

Consumer loans decreased $13.31 million or 9.97% in 2025 over 2024. Consumer loans outstanding at December 31, 2025, were $120.16 million and $133.47 million at December 31, 2024. During 2025, higher vehicle prices, reduced inventory levels, and consumer’s lack of liquidity contributed to the decrease in consumer loans.

28

Table of Contents

The following table shows the contractual maturities of loans and leases outstanding as of December 31, 2025 as well as classification according to the sensitivity to changes in interest rates.

(Dollars in thousands)

0-1 Year

1-5 Years

5-15 Years

Over 15 Years

Total

Commercial and agricultural

Fixed rate

$

70,819 

$

176,490 

$

11,526 

$

— 

$

258,835 

Variable rate

331,005 

182,735 

24,700 

317 

538,757 

Total commercial and agricultural

401,824 

359,225 

36,226 

317 

797,592 

Renewable energy

Fixed rate

12,726 

34,582 

52,911 

1,849 

102,068 

Variable rate

196,133 

163,793 

190,805 

— 

550,731 

Total renewable energy

208,859 

198,375 

243,716 

1,849 

652,799 

Auto and light truck

Fixed rate

197,305 

268,914 

4,393 

— 

470,612 

Variable rate

166,761 

250,503 

— 

— 

417,264 

Total auto and light truck

364,066 

519,417 

4,393 

— 

887,876 

Medium and heavy duty truck

Fixed rate

93,162 

172,984 

3,122 

— 

269,268 

Variable rate

293 

188 

— 

— 

481 

Total medium and heavy duty truck

93,455 

173,172 

3,122 

— 

269,749 

Aircraft

Fixed rate

167,142 

533,982 

13,087 

— 

714,211 

Variable rate

76,094 

210,888 

85,628 

— 

372,610 

Total aircraft

243,236 

744,870 

98,715 

— 

1,086,821 

Construction equipment

Fixed rate

376,894 

790,095 

12,344 

— 

1,179,333 

Variable rate

16,949 

23,912 

941 

— 

41,802 

Total construction equipment

393,843 

814,007 

13,285 

— 

1,221,135 

Commercial real estate

Fixed rate

115,449 

451,689 

44,930 

— 

612,068 

Variable rate

62,065 

422,748 

166,454 

6,430 

657,697 

Total commercial real estate

177,514 

874,437 

211,384 

6,430 

1,269,765 

Residential real estate and home equity

Fixed rate

73,344 

188,565 

184,933 

5,298 

452,140 

Variable rate

62,748 

147,217 

77,189 

1,483 

288,637 

Total residential real estate and home equity

136,092 

335,782 

262,122 

6,781 

740,777 

Consumer

Fixed rate

51,855 

52,593 

86 

— 

104,534 

Variable rate

10,170 

5,445 

6 

— 

15,621 

Total consumer

62,025 

58,038 

92 

— 

120,155 

Total loans and leases

Fixed rate

1,158,696 

2,669,894 

327,332 

7,147 

4,163,069 

Variable rate

922,218 

1,407,429 

545,723 

8,230 

2,883,600 

Total loans and leases

$

2,080,914 

$

4,077,323 

$

873,055 

$

15,377 

$

7,046,669 

During 2025, approximately 38% of the Bank’s residential mortgage originations were sold into the secondary market. Mortgage loans held for sale were $4.87 million at December 31, 2025 and were $2.57 million at December 31, 2024.

1st Source Bank sells residential mortgage loans to Fannie Mae as well as FHA-insured and VA-guaranteed loans in Ginnie Mae mortgage-backed securities. Additionally, we have sold loans on a service released basis to various other financial institutions in the past. The agreements under which we sell these mortgage loans contain various representations and warranties regarding the acceptability of loans for purchase. On occasion, we may be asked to indemnify the loan purchaser for credit losses on loans that were later deemed ineligible for purchase or we may be asked to repurchase a loan. Both circumstances are collectively referred to as “repurchases.” Within the industry, repurchase demands have decreased during recent years. We believe the loans we have underwritten and sold to these entities have met or exceeded applicable transaction parameters.

29

Table of Contents

Our liability for repurchases, included in Accrued Expenses and Other Liabilities on the Statements of Financial Condition, was $0.12 million and $0.18 million as of December 31, 2025 and 2024, respectively. Our expense for repurchase losses, included in Loan and Lease Collection and Repossession expense on the Statements of Income, was $0.07 million of recoveries in 2025 compared to $0.02 million of expense in 2024 and recoveries of $0.07 million in 2023. The mortgage repurchase liability represents our best estimate of the loss that we may incur. The estimate is based on specific loan repurchase requests and a historical loss ratio with respect to origination dollar volume. Because the level of mortgage loan repurchase losses is dependent on economic factors, investor demand strategies and other external conditions that may change over the life of the underlying loans, the level of liability for mortgage loan repurchase losses is difficult to estimate and requires considerable management judgment.

CREDIT EXPERIENCE

Allowance for Credit Losses — The allowance for credit losses considers the historical loss experience, current conditions, and reasonable and supportable forecasts. To estimate expected loan and lease losses under the Current Expected Credit Losses (CECL) methodology, we use a broad range of data over a lengthy time horizon, generally back to the fourth quarter of 2007, thus capturing most of the economic business cycle which includes the Great Recession and the subsequent recovery which supports full lifetime losses. CECL requires our loan portfolio to be segregated into pools based on similar risk characteristics.

Pooled loans and leases are collectively evaluated using either a cohort cumulative loss rate methodology or a transition matrix-based probability of default (PD)/loss given default (LGD) methodology. Our management evaluates the allowance quarterly, reviewing all loans and leases over a fixed-dollar amount ($250,000) where the internal credit quality grade is at or below a predetermined classification, considering actual and anticipated loss experience, current economic events in specific industries, and other pertinent factors including general economic conditions. Determination of the allowance is inherently subjective as it requires significant estimates and adjustments to historical loss rates to capture differences that may exist between current and historical conditions, including consideration of economic risk which is generally reflected in a forecast adjustment, specific industry risk and concentration risk, all of which may be susceptible to significant and unforeseen changes. We review the loan and lease portfolios to identify borrowers that might develop financial problems and to mitigate losses. Our allowance for loan and lease losses is provided for by direct charges to the provision for credit losses on the Consolidated Statements of Income. Losses on loans and leases are charged against the allowance and likewise, recoveries during the period for prior losses are credited to the allowance. We utilize similar processes to estimate our liability for credit losses on unfunded loan commitments which is included in Accrued Expenses and Other Liabilities on the Consolidated Statements of Financial Position and is provided for by direct charges to the provision for unfunded loan commitments located in Provision for Credit Losses on the Consolidated Statements of Income. See Part II, Item 8, Financial Statements and Supplementary Data — Note 1 of the Notes to Consolidated Financial Statements for additional information on management’s evaluation of the allowance for credit losses.

We perform a thorough analysis of charge-offs, non-performing asset levels, special attention outstandings and delinquency to review portfolio trends, including specific industry risks and economic conditions, which may have an impact on the allowance and allowance ratios applied to various portfolios. We adjust the calculated historical-based ratio based on analysis of environmental factors, principally specific industry risk, collateral risk, and concentration risk, along with global economic and political issues. Our forecast adjustment includes key economic factors affecting our portfolios such as growth in gross domestic product, unemployment rates, housing market trends, commodity prices, and inflation. Forecasts are difficult to establish and the current environment presents ongoing challenges. The domestic economic outlook remains uncertain amid shifting trade/tariff policies, still-elevated inflation and interest rates, softening labor conditions, signs of consumer stress and weakening sentiment, and heightened geopolitical risks. GDP growth has largely exceeded forecasts in recent quarters, in large part due to front loading of inventory purchases in preparation for the implementation of tariffs. However, substantial headwinds remain in the forward outlook. Uncertainty is elevated given broadening global conflicts and significant political shifts domestically and internationally. U.S. tariff policy remains fluid, which has created volatility in the operating backdrop for our borrowers and markets. Collateral values are significant to underwriting our specialty finance portfolios and there is heightened potential for future policy changes to impact asset valuations. Management cannot predict the timing or magnitude of future policy changes but actively monitors developments and adjusts underwriting, including amortization and down payment requirements, as conditions evolve. Concentration risk is impacted primarily by geographic concentration in northern Indiana and southwestern Michigan in our business banking and commercial real estate portfolios and by collateral concentration in our specialty finance portfolios.

30

Table of Contents

We include a factor for global risk in our analysis. While difficult to predict with precision, global risks may adversely impact our borrowers, weakening their ability to repay their financial obligations. The global outlook calls for slowing growth, pressured by high sovereign debt levels and fiscal vulnerabilities, rising protectionism and trade tensions, and still-elevated interest rates and inflation. Global geopolitical uncertainty impacts the outlook and various ongoing foreign conflicts introduce downside risk. Trade tensions are rising which increases the potential for supply chain disruptions. Terrorism remains a persistent concern and risks of a catastrophic event are elevated. In Brazil and Mexico, where we have a presence with our aircraft lending, there are concerns with deteriorating economic growth prospects, persistent inflation and high interest rates, and long-standing structural issues including income inequality, poverty, and crime. Inflation remains a headline concern in Brazil where central bank rates are currently at a nearly two-decade high, and a heavy public debt burden pressures fiscal policy. Mexico is facing prospects of weakened economic growth, elevated inflation, and ongoing U.S. trade tensions.

The following discussion focuses on relevant economic conditions and various circumstances impacting the December 31, 2025 allowance for loan and lease losses of each of our loan and lease segments.

Commercial and agricultural – The allowance increased year-over-year due to modest loan growth, partially offset by a slight decline in special attention balances which carry higher reserves, and lower historical loss rates within the portfolio prior to the impact of the forecast adjustment. Multiple industries are represented in the commercial and agricultural portfolio and the outlook for the portfolio remains guarded. Small businesses remain challenged to absorb still-elevated interest rates, higher cost of capital, compete for labor, and control expenses. In our underlying industries, wholesalers have generally performed well, while manufacturers remain under pressure. The recreational vehicle industry, which is centered in our footprint, continues to struggle with low demand as it navigates a sharp pullback from record high shipment levels reached in 2022. The outlook for 2026 reflects ongoing weak demand and only modest improvement as compared to 2025. Pressures in the agricultural sector remain evident, although grain did find some footing in 2025 after experiencing sharp declines the previous year. Charge-off rates in the commercial and agricultural portfolio were modest in 2025 and credit quality remains acceptable, but we continue to see elevated special attention activity within the portfolio, particularly in small dollar accounts.

Renewable energy – Our allowance increased primarily due to loan growth, along with a slight increase in qualitative adjustments to address changes in the regulatory environment applicable to the portfolio. Our renewable energy (predominately solar) portfolio continues to perform well. Growth opportunities abound and overall credit quality remains solid. Risks include construction and developer related risks and delays, site issues, climate and weather risks, regulatory problems and permitting issues, as well as utility interconnection delays. Maturity risk and refinancing costs are elevated given the elevated interest rate environment. To date, we have not incurred any losses in this portfolio and credit performance continues to be favorable.

Auto and light truck – The primary auto rental segment of the auto and light truck portfolio remains under stress as the industry struggles with overcapacity, higher vehicle prices, elevated interest costs, and weak rental rates. Our allowance increased due to higher special attention balances, which are reserved at higher rates, an increase in historical loss rates, and an increase in qualitative adjustments to address continued elevated risk within the auto rental segment. The decline in loan balances within the portfolio is largely due to borrowers’ de-fleeting activity in the auto rental segment to address overcapacity. Credit quality weakened for a second consecutive year in the auto rental segment, as average delinquency and non-performing rates increased year-over-year. Wholesale used vehicle prices have held up better than in past industry downturns and stable asset valuations, along with tighter underwriting standards, have limited charge-off exposures. Overall, wholesale vehicle prices ended the year relatively stable and remain above the longer-term valuation trend line. Somewhat muted original equipment manufacturers’ (“OEM”) production volumes have also likely provided pricing support to used vehicle markets. The auto leasing segment performed well in 2025 and the portfolio continues to exhibit stable credit quality and low delinquency. Leasing customers lease to auto rental companies as well as other commercial entities. Our auto leasing portfolio is concentrated in larger client exposures. We remain diligent in our underwriting, setting residual values appropriately and monitoring fleet mix given the potential for volatility in vehicle prices.

Medium and heavy duty truck – The portfolio’s allowance decreased due to lower loan balances. The industry remains challenged by overcapacity, but freight rates appear to be stabilizing. This portfolio has historically been a barometer for overall economic weakness and the industry has experienced several high-profile carrier bankruptcies and generally difficult conditions over the last several years. In previous downturns, small companies and independent owner-operators were hit the hardest and asset valuations were pressured. Asset valuations have weakened in the segment. We did not incur any credit losses in the portfolio during the period.

31

Table of Contents

Aircraft – The portfolio’s allowance decreased as we experienced a modest decline in loan balances year-over-year in our domestic aircraft segment, while growth in our foreign aircraft segment was essentially flat. Credit quality metrics remain stable. Aircraft collateral values, particularly those in our niche, strengthened considerably early in this economic cycle but have leveled off with more available inventory. The portfolio has maintained stable credit quality in recent years, but was among the sectors affected most by the sluggish economy following the Great Recession. We experienced minimal loss in the portfolio this year, but our portfolio loss history has experienced past volatility, characterized by lengthy periods of minimal losses or modest recoveries followed by short intervals of high losses. In this portfolio, we have $320 million of foreign exposure, primarily domiciled in Mexico and Brazil. Brazil’s economy remains burdened by high sovereign debt levels and high interest rates. Mexico’s economic growth is expected to be somewhat weak as it manages through ongoing U.S. trade tensions. Heavy indebtedness and financial problems with state-owned oil firm Pemex are an ongoing concern for Mexico’s broader growth prospects.

Construction equipment – Our construction equipment portfolio reported more muted loan growth in 2025, compared to relatively high growth rates in previous years since the end of the pandemic. The allowance decrease was primarily driven by a reduction in qualitative factors for elevated problem loan activity in the segment due to improving credit quality trends. Infrastructure spending continues to have a positive impact on many contractors within the segment. Credit quality generally improved as delinquency rates were muted, special attention balances, which are reserved at higher rates, ended the year lower and non-performing balances also declined. The portfolio has experienced some elevated loss activity in recent years which has been successfully mitigated, achieving fairly high recovery rates with time. There is ongoing concern for construction contractors as the portfolio is inherently vulnerable to energy price volatility, high interest rates, and changes in the regulatory environment. Construction projects can have unknown costs or delays and large project risk is ever-present. Volatile energy, labor, and material prices create difficulties for cost structures in an industry that often operates under longer-term contracts lacking adequate cost escalators. Shifting trade policies add uncertainty, potentially increasing raw material and equipment costs. Historically, we have experienced less volatility in this portfolio than the broader industry as losses have been mitigated by appropriate underwriting and a global market for used construction equipment.

Commercial real estate – Similar to the commercial portfolio, our commercial real estate loans are concentrated in our local market with local customers although we do fund select projects outside our market with multi-state developers that are headquartered in our footprint. The allowance increase was due to loan growth in both owner and non-owner-occupied segments. We continue to monitor construction risk and maturity repricing risk in the elevated interest rate environment. Approximately 61% of the Bank’s exposure in this portfolio is from owner-occupied facilities where we are the primary relationship bank for our clients. Special attention activity in both the owner-occupied and non-owner-occupied segments remains modest with generally stable credit quality. We have seen limited evidence of slow lease-up and rental rate pressures in select markets in the multi-family segment. We reviewed our qualitative adjustments as of year-end and made slight adjustments to a factor addressing interest rate maturity risk and a slight increase to our construction risk factor as the loan volume of projects under construction remains higher than prior periods.

Residential real estate and home equity – Our residential real estate and home equity portfolio consists of loans to individuals in the communities we serve. The allowance increased due to loan growth. Generally, residential mortgage loans are originated using standards that result in salable mortgages. Home equity loans are also advanced in compliance with regulatory guidelines and the Bank’s credit policy. Losses in these portfolios have been immaterial since 2013. Qualitative factors in the portfolio are primarily for reasonable and supportable forecasts, although we maintain an adjustment to account for an elevated amount of non-salable adjustable-rate mortgages in the loan mix with repricing risk at maturity.

Consumer – Our consumer loan portfolio consists of loans to individuals in the communities we serve. This portfolio consists primarily of loans secured by autos with advances in compliance with the Bank’s underwriting standards. The allowance was minimally changed year-over-year as lower loan balances were offset by higher historical loss rates in the portfolio. Delinquency rates remain manageable but are trending upward. Loss rates were modest from 2013 through the end of the pandemic, but we have experienced higher write-downs in each of the last three years. We review our qualitative adjustments each quarter, which primarily consist of reasonable and supportable forecasts and also include an adjustment to account for increasing delinquency and nonperforming activity within the portfolio.

Allowance for loan and lease losses – The allowance for loan and lease losses at December 31, 2025, totaled $161.85 million and was 2.30% of loans and leases, compared to $155.54 million or 2.27% of loans and leases at December 31, 2024 and $147.55 million or 2.26% of loans and leases at December 31, 2023. It is our opinion that the allowance for loan and lease losses was appropriate to absorb current expected credit losses inherent in the loan and lease portfolio as of December 31, 2025.

Charge-offs for loan and lease losses were $8.30 million for 2025, compared to $13.73 million for 2024 and $6.65 million for 2023. Primarily reflective of loan and lease growth and accretive forecast adjustments, we added $10.51 million to the provision for credit losses on loans and leases for 2025, compared to a provision of $13.66 million for 2024 and a provision of $5.87 million for 2023.

32

Table of Contents

The following table summarizes our loan and lease loss experience for each of the last three years ended December 31.

(Dollars in thousands)

2025

2024

2023

Amounts of loans and leases outstanding at end of period

$

7,046,669 

$

6,854,808 

$

6,518,505 

Average amount of net loans and leases outstanding during period

$

6,934,619 

$

6,598,329 

$

6,203,857 

Amount of unfunded loan commitments at end of period(1)

$

1,460,418 

$

1,326,724 

$

1,478,840 

Balance of allowance for loan and lease losses at beginning of period

$

155,540 

$

147,552 

$

139,268 

Charge-offs:

Commercial and agricultural

2,420 

9,825 

4,305 

Renewable energy

— 

— 

— 

Auto and light truck

2,366 

730 

729 

Medium and heavy duty truck

— 

— 

— 

Aircraft

485 

68 

— 

Construction equipment

1,407 

1,692 

54 

Commercial real estate

27 

— 

248 

Residential real estate and home equity

74 

66 

101 

Consumer

1,521 

1,349 

1,211 

Total charge-offs

8,300 

13,730 

6,648 

Recoveries:

Commercial and agricultural

929 

418 

243 

Renewable energy

— 

— 

— 

Auto and light truck

1,806 

3,273 

5,591 

Medium and heavy duty truck

— 

— 

12 

Aircraft

565 

1,279 

967 

Construction equipment

426 

2,100 

1,656 

Commercial real estate

90 

724 

11 

Residential real estate and home equity

21 

26 

334 

Consumer

257 

235 

252 

Total recoveries

4,094 

8,055 

9,066 

Net charge-offs (recoveries)

4,206 

5,675 

(2,418)

Provision for credit losses - loans and leases

10,512 

13,663 

5,866 

Balance of allowance for loan and lease losses at end of period

$

161,846 

$

155,540 

$

147,552 

Balance of liability for unfunded loan commitments at beginning of period

$

6,985 

$

8,182 

$

5,616 

Provision (recovery of provision) for credit losses - unfunded loan commitments

2,050 

(1,197)

2,566 

Balance of liability for unfunded loan commitments at end of period

$

9,035 

$

6,985 

$

8,182 

Asset Quality Ratios:

Net charge-offs (recoveries) to average net loans and leases outstanding

0.06 

%

0.09 

%

(0.04)

%

Allowance for loan and lease losses to net loans and leases outstanding end of period

2.30 

%

2.27 

%

2.26 

%

Liability for unfunded loan commitments to unfunded loan commitments end of period

0.62 

%

0.53 

%

0.55 

%

Allowance for loan and lease losses and liability for unfunded loan commitments to net loans and leases
outstanding and unfunded loan commitments end of period

2.01 

%

1.99 

%

1.95 

%

(1) Represents noncancelable commitments

The following table shows net charge-offs (recoveries) as a percentage of average loans and leases by portfolio type:

2025

2024

2023

Commercial and agricultural

0.19 

%

1.29 

%

0.52 

%

Renewable energy

— 

— 

— 

Auto and light truck

0.06 

(0.26)

(0.55)

Medium and heavy duty truck

— 

— 

— 

Aircraft

(0.01)

(0.11)

(0.09)

Construction equipment

0.08 

(0.04)

(0.16)

Commercial real estate

(0.01)

(0.06)

0.02 

Residential real estate and home equity

0.01 

0.01 

(0.04)

Consumer

1.00 

0.81 

0.66 

Total net charge-offs (recoveries) to average portfolio loans and leases

0.06 

%

0.09 

%

(0.04)

%

33

Table of Contents

The allowance for loan and lease losses has been allocated according to the amount deemed necessary to provide for the estimated current expected credit losses. The following table shows the amount of such components of the allowance for loan and lease losses at December 31 and the ratio of such loan and lease categories to total outstanding loan and lease balances.

2025

2024

(Dollars in thousands)

Allowance Amount

Percentage of Loans and Leases in Each Category to Total Loans and Leases

Allowance Amount

Percentage of Loans and Leases in Each Category to Total Loans and Leases

Commercial and agricultural

$

21,983 

11.32 

%

$

21,316 

11.28 

%

Renewable energy

11,833 

9.26 

8,562 

7.11 

Auto and light truck

21,653 

12.60 

18,437 

13.84 

Medium and heavy duty truck

6,295 

3.83 

7,292 

4.22 

Aircraft

35,843 

15.42 

36,663 

16.39 

Construction equipment

27,529 

17.33 

28,258 

17.56 

Commercial real estate

25,396 

18.02 

24,821 

17.73 

Residential real estate and home equity

9,076 

10.51 

7,976 

9.92 

Consumer

2,238 

1.71 

2,215 

1.95 

Total

$

161,846 

100.00 

%

$

155,540 

100.00 

%

Nonperforming Assets — Nonperforming assets include loans past due over 90 days, nonaccrual loans and leases, other real estate, repossessions and other nonperforming assets we own. Our policy is to discontinue the accrual of interest on loans and leases where principal or interest is past due and remains unpaid for 90 days or more, or when an individual analysis of a borrower’s credit worthiness indicates a credit should be placed on nonperforming status, except for residential real estate and home equity loans, and consumer loans that are both well secured and in the process of collection.

Nonperforming assets amounted to $77.38 million at December 31, 2025, compared to $31.33 million at December 31, 2024, and $24.24 million at December 31, 2023. During 2025, interest income on nonaccrual loans and leases would have increased by approximately $5.83 million compared to $2.06 million in 2024 if these loans and leases had earned interest at their full contractual rate.

Nonperforming assets at December 31, 2025 increased from December 31, 2024, mainly due to increases in nonaccrual loans and leases in the auto rental segment of our auto and light truck portfolio, partially offset by lower nonaccrual loans and leases in our construction portfolio. Repossessions consisted mainly of units in the construction equipment and consumer portfolios. There is no other real estate owned as of year end.

34

Table of Contents

Nonperforming assets at December 31 (Dollars in thousands)

2025

2024

Loans past due over 90 days

$

460 

$

106 

Nonaccrual loans and leases:

Commercial and agricultural

2,493 

4,715 

Renewable energy

— 

— 

Auto and light truck

54,348 

2,806 

Medium and heavy duty truck

1,576 

— 

Aircraft

— 

— 

Construction equipment

11,341 

17,976 

Commercial real estate

2,459 

1,595 

Residential real estate and home equity

3,645 

2,711 

Consumer

740 

810 

Total nonaccrual loans and leases

76,602 

30,613 

Total nonperforming loans and leases

77,062 

30,719 

Other real estate

— 

460 

Repossessions:

Commercial and agricultural

21 

— 

Auto and light truck

— 

— 

Medium and heavy duty truck

— 

— 

Aircraft

— 

— 

Construction equipment

192 

134 

Consumer

54 

21 

Total repossessions

267 

155 

Operating leases

49 

— 

Total nonperforming assets

$

77,378 

$

31,334 

Nonperforming loans and leases to loans and leases, net of unearned discount

1.09 

%

0.45 

%

Nonperforming assets to loans and leases and operating leases, net of unearned discount

1.10 

%

0.46 

%

Coverage ratio of allowance for loan and lease losses to nonperforming loans and leases

210.02 

%

506.33 

%

Potential Problem Loans — Potential problem loans consist of loans that are performing but for which management has concerns about the ability of a borrower to continue to comply with repayment terms because of potential operating or financial difficulties. Management monitors these loans closely and reviews their performance on a regular basis. As of December 31, 2025 and 2024, we had $11.10 million and $20.60 million, respectively, in loans of this type which are not included in either of the non-accrual or 90 days past due loan categories. At December 31, 2025, potential problem loans consisted of five relationships; two relationships in the commercial and agricultural portfolio, two relationships in the auto and light truck portfolio, and one relationship in the commercial real estate portfolio. Weakness in the borrowers’ operating performance have caused us to give heighten attention to these credits.

INVESTMENT PORTFOLIO

The amortized cost of securities available-for-sale at year-end 2025 decreased 4.98% from 2024, following a 6.34% decrease from year-end 2023 to year-end 2024. The amortized cost of securities available-for-sale at December 31, 2025 was 17.32% of total assets, compared to 18.48% of total assets at December 31, 2024.

The following table shows the amortized cost of investment securities available-for-sale as of December 31.

(Dollars in thousands) 

2025

2024

U.S. Treasury and Federal agencies securities

$

697,652 

$

786,417 

U.S. States and political subdivisions securities

113,126 

86,305 

Mortgage-backed securities — Federal agencies

757,151 

777,962 

Corporate debt securities

500 

— 

Total debt securities available-for-sale

$

1,568,429 

$

1,650,684 

35

Table of Contents

Yields on tax-exempt obligations are calculated on a fully tax-equivalent basis assuming a 21% tax rate. The following table shows the maturities of securities available-for-sale at December 31, 2025, at the amortized costs and weighted average yields of such securities.

(Dollars in thousands) 

Amount

Yield

U.S. Treasury and Federal agencies securities

Under 1 year

$

79,684 

1.41 

%

1 – 5 years

556,589 

3.31 

5 – 10 years

61,379 

4.35 

Over 10 years

— 

— 

Total U.S. Treasury and Federal agencies securities

697,652 

3.19 

U.S. States and political subdivisions securities

Under 1 year

6,806 

2.87 

1 – 5 years

53,756 

3.10 

5 – 10 years

38,134 

4.89 

Over 10 years

14,430 

5.89 

Total U.S. States and political subdivisions securities

113,126 

4.04 

Corporate debt securities

Under 1 year

— 

— 

1 – 5 years

500 

4.15 

5 – 10 years

— 

— 

Over 10 years

— 

— 

Total Corporate debt securities

500 

4.15 

Mortgage-backed securities — Federal agencies

757,151 

2.89 

Total investment securities available-for-sale

$

1,568,429 

3.11 

%

At December 31, 2025, the residential mortgage-backed securities we held consisted of GNMA, FNMA and FHLMC pass-through certificates (Government Sponsored Enterprise, GSEs). The type of loans underlying the securities were all conforming loans at the time of issuance. The underlying GSEs backing these mortgage-backed securities are rated Aaa or AA+ from the rating agencies. At December 31, 2025, the vintage (years originated) of the underlying loans comprising our securities are: 12% in the year 2025; 8% in the year 2024; 18% in the years 2022 and 2023; 48% in the years 2020 and 2021; 5% in the years 2018 and 2019; 9% in the years 2017 and prior.

DEPOSITS

The following table shows the average daily amounts of deposits and rates paid on such deposits.

2025

2024

2023

(Dollars in thousands) 

Amount

Rate

Amount

Rate

Amount

Rate

Noninterest bearing demand

$

1,601,954 

— 

%

$

1,609,001 

— 

%

$

1,753,149 

— 

%

Interest bearing demand

2,554,311 

2.36 

2,463,386 

2.73 

2,481,362 

2.33 

Savings

1,376,299 

1.57 

1,255,111 

1.45 

1,181,314 

0.68 

Time

1,849,727 

4.00 

1,791,459 

4.55 

1,541,419 

3.73 

Total deposits

$

7,382,291 

$

7,118,957 

$

6,957,244 

The following table shows the estimated scheduled maturities of the portion of time deposits in U.S. offices in excess of the FDIC insurance limit and time deposits that are otherwise uninsured.

(Dollars in thousands)

Under 3 Months

$

165,518 

4 – 6 Months

157,830 

7 – 12 Months

151,325 

Over 12 Months

172,118 

Total

$

646,791 

See Part II, Item 8, Financial Statements and Supplementary Data — Note 10 of the Notes to Consolidated Financial Statements for additional information on deposits.

36

Table of Contents

SHORT-TERM BORROWINGS

The following table shows the distribution of our short-term borrowings and the weighted average interest rates thereon at the end of each of the last two years. Also provided are the maximum amount of borrowings and the average amount of borrowings, as well as weighted average interest rates for the last two years.

(Dollars in thousands)

Federal Funds Purchased and Securities Repurchase Agreements

Federal Home Loan Bank Advances

Federal Reserve Advances

Other

Short-Term Borrowings

Total Borrowings

2025

Balance at December 31, 2025

$

112,470 

$

125,000 

$

— 

$

1,151 

$

238,621 

Maximum amount outstanding at any month-end

112,470 

125,000 

— 

1,835 

239,305 

Average amount outstanding

63,170 

20,041 

1,918 

1,495 

86,624 

Weighted average interest rate during the year

1.04 

%

4.46 

%

1.45 

%

— 

%

1.83 

%

Weighted average interest rate for outstanding amounts at
     December 31, 2025

2.04 

%

3.79 

%

— 

%

— 

%

2.94 

%

2024

Balance at December 31, 2024

$

72,346 

$

75,000 

$

100,000 

$

1,852 

$

249,198 

Maximum amount outstanding at any month-end

82,591 

170,000 

100,000 

2,450 

355,041 

Average amount outstanding

61,956 

64,987 

100,027 

1,878 

228,848 

Weighted average interest rate during the year

1.01 

%

5.40 

%

4.84 

%

— 

%

3.92 

%

Weighted average interest rate for outstanding amounts at
     December 31, 2024

1.15 

%

4.50 

%

4.76 

%

— 

%

3.60 

%

During January 2024, we borrowed $100 million from the Federal Reserve’s Bank Term Funding Program based on the economics of the borrowing relative to our other funding sources. During January 2025, we repaid the borrowing in full.

LIQUIDITY AND CAPITAL RESOURCES

Core Deposits — Our major source of investable funds is provided by stable core deposits consisting of all interest bearing and noninterest bearing deposits, excluding brokered certificates of deposit, listing services certificates of deposit and certain certificates of deposit over $250,000 based on established FDIC insured deposits. In 2025, average core deposits equaled 72.62% of average total assets, compared to 71.39% in 2024 and 73.77% in 2023. The effective rate of core deposits in 2025 was 1.80%, compared to 1.97% in 2024 and 1.45% in 2023.

Average noninterest bearing core deposits decreased 0.44% in 2025 compared to a decrease of 8.22% in 2024. These represented 24.56% of total core deposits in 2025, compared to 25.79% in 2024, and 28.24% in 2023.

Purchased Funds — We use purchased funds to supplement core deposits, which include certain certificates of deposit over $250,000, brokered certificates of deposit, listing services certificates of deposit, over-night borrowings, securities sold under agreements to repurchase, commercial paper, and other short-term borrowings which includes Federal Home Loan Bank and Federal Reserve Bank borrowings. Purchased funds are raised from customers seeking short-term investments and are used to manage the Bank’s interest rate sensitivity. During 2025, our reliance on purchased funds decreased to 10.54% of average total assets from 12.69% in 2024.

Shareholders’ Equity — Average shareholders’ equity equated 13.39% of average total assets in 2025, compared to 12.10% in 2024. Shareholders’ equity was 14.08% of total assets at year-end 2025, compared to 12.44% at year-end 2024. We include unrealized gains (losses) on available-for-sale securities, net of income taxes, in accumulated other comprehensive income (loss) which is a component of shareholders’ equity. While regulatory capital adequacy ratios exclude unrealized gains (losses), it does impact our equity as reported in the audited financial statements. The unrealized losses on available-for-sale securities, net of income taxes, were $34.78 million and $87.23 million at December 31, 2025 and 2024, respectively. The unrealized losses occurred as a result of changes in interest rates, market spreads and market conditions subsequent to purchase. Additionally, we do not intend to sell these available-for-sale investment securities and it is more likely than not that we will not be required to sell these investments before recovery of the amortized cost basis, which may be the maturity dates of the securities.

Other Liquidity — Under Indiana law governing the collateralization of public fund deposits, the Indiana Board of Depositories determines which financial institutions are required to pledge collateral based on the strength of their financial ratings. We have been informed that no collateral is required for our public fund deposits. However, the Board of Depositories could alter this requirement in the future and adversely impact our liquidity. Our potential liquidity exposure if we must pledge collateral is approximately $1.44 billion.

37

Table of Contents

Liquidity Risk Management — The Bank’s liquidity is monitored and closely managed by the Asset/Liability Management Committee (ALCO), whose members are comprised of the Bank’s senior management. Asset and liability management includes the management of interest rate sensitivity and the maintenance of an adequate liquidity position. The purpose of interest rate sensitivity management is to stabilize net interest income during periods of changing interest rates.

Liquidity management is the process by which the Bank ensures that adequate liquid funds are available to meet short-term and long-term financial commitments on a timely basis. Financial institutions must maintain liquidity to meet day-to-day requirements of depositors and borrowers, take advantage of market opportunities and provide a cushion against unforeseen needs.

Liquidity of the Bank is derived primarily from core deposits, principal payments received on loans, the sale and maturity of investment securities, net cash provided by operating activities, and access to other funding sources. The most stable source of liability-funded liquidity is deposit growth and retention of the core deposit base. The principal source of asset-funded liquidity is available-for-sale investment securities, cash and due from banks, overnight investments, securities purchased under agreements to resell, and loans and interest bearing deposits with other banks maturing within one year. Additionally, liquidity is provided by repurchase agreements, and the ability to borrow from the Federal Reserve Bank (FRB) and the Federal Home Loan Bank (FHLB).

The Bank’s liquidity strategy is guided by internal policies and the Interagency Policy Statement on Funding and Liquidity Risk Management. Internal guidelines consist of:

(i)Available Liquidity (sum of short term borrowing capacity) greater than $500 million; 

(ii)Liquidity Ratio (total of net cash, short term investments and unpledged marketable assets divided by the sum of net deposits and short term liabilities) greater than 15%;

(iii)Dependency Ratio (net potentially volatile liabilities minus short-term investments divided by total earning assets minus short-term investments) less than 15%; and 

(iv)Loans to Deposits Ratio less than 100%

At December 31, 2025, we were in compliance with the foregoing internal policies and regulatory guidelines.

The Bank also maintains a contingency funding plan that assesses the liquidity needs under various scenarios of market conditions, asset growth and credit rating downgrades. The plan includes liquidity stress testing which measures various sources and uses of funds under the different scenarios. The contingency plan provides for ongoing monitoring of unused borrowing capacity and available sources of contingent liquidity to prepare for unexpected liquidity needs and to cover unanticipated events that could affect liquidity.

We maintain prudent strategies to support a strong liquidity position. The following table represents our sources of liquidity as of December 31, 2025.

(Dollars in thousands)

Available

Internal Sources

Unencumbered securities

$

1,285,144 

External Sources

FHLB advances(1)

479,610 

FRB borrowings

366,265 

Fed funds purchased(2)

360,000 

Brokered deposits(3)

685,119 

Listing services deposits(3)

451,572 

Total liquidity

$

3,627,710 

% of Total deposits net brokered and listing services certificates of deposit

51.79 

%

(1) Availability is shown net of required stock purchases under the FHLB activity-based stock ownership requirement, which is currently 4.50%, and may vary

(2) Availability contingent on correspondent bank approvals at time of borrowing

(3) Availability contingent on internal borrowing guidelines

External sources as listed in the table above are managed to approved guidelines by our Board of Directors. Total net available liquidity was $3.63 billion at December 31, 2025, which accounted for approximately 52% of total deposits net of brokered and listing services certificates of deposits.

38

Table of Contents

Interest Rate Risk Management — ALCO monitors and manages the relationship of earning assets to interest bearing liabilities and the responsiveness of asset yields, interest expense, and interest margins to changes in market interest rates. In the normal course of business, we face ongoing interest rate risks and uncertainties. We may utilize interest rate swaps to partially manage the primary market exposures associated with the interest rate risk related to underlying assets, liabilities, and anticipated transactions.

A hypothetical change in net interest income was modeled by calculating an immediate 200 basis point (2.00%) and 100 basis point (1.00%) increase and a 100 basis point (1.00%) decrease in interest rates across all maturities. The following table shows the aggregate hypothetical impact to pre-tax net interest income.

Percentage Change in Net Interest Income

December 31, 2025

December 31, 2024

Basis Point Interest Rate Change

12 Months

24 Months

12 Months

24 Months

Up 200

1.63%

6.59%

(2.19)%

2.79%

Up 100

0.79%

3.31%

(1.11)%

1.35%

Down 100

(1.83)%

(4.88)%

0.89%

(2.10)%

The earnings simulation model excludes the earnings dynamics related to how fee income and noninterest expense may be affected by changes in interest rates. Actual results may differ materially from those projected. The use of this methodology to quantify the market risk of the balance sheet should not be construed as an endorsement of its accuracy or the accuracy of the related assumptions.

At December 31, 2025 and 2024, the impact of these hypothetical fluctuations in interest rates on our derivative holdings was not significant, and, as such, separate disclosure is not presented. We manage the interest rate risk related to mortgage loan commitments by entering into contracts for future delivery of loans with outside parties. See Part II, Item 8, Financial Statements and Supplementary Data — Note 18 of the Notes to Consolidated Financial Statements.

Commitments and Contractual Obligations — In the ordinary course of operations, we enter into certain contractual obligations. Such obligations include customer deposits, the funding of operations through debt issuances as well as operating leases for the rent of premises and equipment. Additionally, we routinely enter into contracts for services that may require payment to be provided in the future and may contain penalty clauses for early termination of the contract. Further discussion of commitments and contractual obligations is included in Part II, Item 8, Financial Statements and Supplementary Data — Notes 10, 11, 12 and 18 of the Notes to Consolidated Financial Statements.

We also enter into derivative contracts under which we are required to either receive cash from, or pay cash to, counterparties depending on changes in interest rates. Derivative contracts are carried at fair value on the consolidated balance sheet with the fair value representing the net present value of expected future cash receipts or payments based on market interest rates as of the balance sheet date. The fair value of the contracts changes daily as market interest rates change. Further discussion of derivative contracts is included in Part II, Item 8, Financial Statements and Supplementary Data — Note 19 of the Notes to Consolidated Financial Statements.

OFF-BALANCE SHEET ARRANGEMENTS

Assets under management and assets under custody are held in fiduciary or custodial capacity for our clients. In accordance with U.S. generally accepted accounting principles, these assets are not included on our balance sheet.

We are also party to financial instruments with off-balance sheet risk in the normal course of business to meet the financing needs of our clients. These financial instruments include commitments to extend credit and standby letters of credit. Further discussion of these commitments is included in Part II, Item 8, Financial Statements and Supplementary Data — Note 18 of the Notes to Consolidated Financial Statements.