FRME 10-K & 10-Q changes, risk factors and insider trading

The Corporation adopted Accounting Standards Update (“ASU”) No. 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments as amended, on January 1, 2021, which replaced the previous “incurred loss” model for measuring credit losses with an “expected life of loan loss” model described above,model, referred to as the CECL model. Consistent with rules adopted by federal banking regulators, the Corporation has elected to phase in the cumulative effect of the adoption on its regulatory capital, at a rate of 25 percent per year, over a three-year transition period that began on January 1, 2021. Under that phase-in schedule, the cumulative effect of the adoption was fully reflected in regulatory capital on January 1, 2024.

As part of the Corporation’s liquidity management, a number of funding sources are used, including core deposits and repayments and maturities of loans and investments. Sources also include brokered certificates of deposit, repurchase agreements, federal funds purchased and Federal Home Loan Bank (“FHLB”) advances. Negative operating results or changes in industry conditions could lead to an inability to replace these additional funding sources at maturity. The Corporation’s financial flexibility could be constrained if we are unable to maintain access to funding or if adequate financing is not available to accommodate future growth at acceptable interest rates. Finally, if the Corporation is required to rely more heavily on more expensive funding sources to support future growth, revenues may not increase proportionately to cover the costs. In this casecase, the Corporation’s results of operations and financial condition would be negatively affected.

Use of third-party software and services also exposes the Corporation to cybersecurity risk as numerous service providers host critical data or have direct contact with our bank customers. Although the Corporation adheres to industry standard practices in conducting thorough due diligence of vendors and contract management, should a vendor experience a breach, similar to the MOVEit breach in 2023 which impacted a vendor utilized by the Bank, the Bank could still suffer reputational harm, and potentially financial losses. Expanded use of cloud-based technologies and providing our customers more internet-based product offerings to continue to remain competitive will serve to increase these potential risks. The Corporation’s third-partyThird-Party managementRisk programManagement Program helps to mitigate risks posed by reliance on third and fourth parties.

Management has established an Information Security Committee in order to assist executive management and the Board of Directors of the Bank in fulfilling their oversight responsibilities related to information security. The Committee reports its activities, key conclusions and recommendations to the Enterprise Risk Management Committee and the Board’s Risk and Credit Policy Committee of the Board on a quarterly basis.

The Board considers cybersecurity risks in business strategy by getting updates on the Bank’s cybersecurity risk assessment. It assesses the experience of management personnel responsible for preventing, mitigating, detecting and remediating any cyber incidents, including the Chief Information Security Officer.Officer (“CISO”).

•Increasing scrutiny and evolvingEvolving expectations from customers, regulators, investors, and other stakeholders with respect to the Corporation’s environmental, social and governance practices may impose additional costs on the Corporation or expose it to new or additional risks.

CompaniesThe areexpectations facing increasing scrutiny fromof customers, regulators, investors, and other stakeholders related to theirthe Corporation’s environmental, social and governance (“ESG”) practices and disclosure.disclosure Investor advocacy groups, investment funds and influential investors are also increasingly focused on these practices, especially as they relatecontinue to the environment, health and safety, diversity, labor conditions and human rights. Increased ESG-related compliance costs for the Corporation as well as among our suppliers, vendors and various other parties within our supply chain could result in increases to our overall operational costs.evolve. Failure to adapt to or comply with regulatory requirements or investor or stakeholder expectations and standards could negatively impact our reputation, ability to do business with certain partners, access to capital, and our stock price. New government regulations could also result in new or more stringent forms of ESG oversight and expanding mandatory and voluntary reporting, diligence, and disclosure.

The global business community has increasedcontinued its political and social awareness surrounding the state of the global environment and the issue of climate change. Further, the U.S. Congress, state legislatures and federal and state regulatory agencies continue to propose numerous initiatives related to climate change. SimilarAt andthe evensame moretime, expansivesome initiativespolicymakers have adopted or are expectedconsidering underadopting, therequirements currentthat administration, including potentially increasing supervisory expectations with respect to banks’ risk management practices, accounting for the effects ofconstrain climate change in stress testing scenarios and systemic risk assessments, revising expectations for credit portfolio concentrations based on climate-related factors and encouraging investment by banks in climate-related initiatives and lending to communities disproportionately impacted by the effects of climate change.initiatives. The lack of empiricallegislative dataor regulatory certainty surrounding theclimate creditrisk management and other financial risks posed by climate changepractices make it impossible to predict how specifically climate change may impact our financial condition and results of operations. To the extent our customers experience unpredictable and more frequent weather disasters attributed to climate change, the value of real property securing the loans in our portfolios may be negatively impacted. Additionally, if insurance obtained by our borrowers is insufficient to cover any disaster-related losses sustained to the collateral, or if insurance coverage is otherwise unavailable to our borrowers, the collateral securing our loans may be negatively impacted by climate change, which could impact our financial condition and results of operations. Further, the effects of weather disasters attributed to climate change may negatively impact regional and local economic activity, which could lead to an adverse effect on our customers and impact the communities in which we operate. Overall, climate change, its effects and the resulting, unknown impact could have a material adverse effect on our financial condition and results of operations.

The operations of financial institutions, such as the Corporation, are dependent to a large degree on net interest income, which is the difference between interest income from loans and investments and interest expense on deposits and borrowings. An institution’s net interest income is significantly affected by market rates of interest, which in turn are affected by prevailing economic conditions, by the fiscal and monetary policies of the federal government and by the policies of various regulatory agencies. In addition to affecting profitability, changes in interest rates can impact the valuation of assets and liabilities. For example, changes in reference rates linked to financial instruments, such as the Secured Overnight Financing Rate (“SOFR”), may adversely affect the value of financial instruments the Corporation holds or issues and related net interest income. Rate changes can also affect the ability of borrowers to meet obligations under variable or adjustable rate loans which in turn affect loss rates on those assets. Also, the demand for interest rate based products and services, including loans and deposit accounts, may decline resulting in the flow of funds away from financial institutions into direct investments. Direct investments, such as U.S. Government and corporate securities and other investment vehicles, including mutual funds, generally pay higher rates of return than financial institutions, because of the absence of federal insurance premiums and reserve requirements.

Beginning in the first half of 2022, in response to growing signs of inflation, the FOMC began increasing the federal funds benchmark rapidly and the Federal Reserve announced its intention to take actions to mitigate inflationary pressures by continuing to further reduce its purchase program. Rapid changes in interest rates makesmake it challenging for the Bank to balance its loan and deposit portfolios, which may adversely affect the Corporation’s results of operations by reducing asset yields or spreads or having other adverse impacts on our business. As discussed above, the increased market interest rates could also adversely affect the ability of our floating-rate borrowers to meet their higher payment obligations. If this occurred, it could cause an increase in nonperforming assets and charge-offs, which could adversely affect our business. Conversely, decreases in interest rates could result in an acceleration of loan prepayments.

In response to easing inflation pressures, the Federal Reserve is expected to decreasedecreased the target federal funds rate in 2025.2024 and 2025, but uncertainty remains concerning inflation and interest rates. If the Federal Reserve were to aggressively lower the target federal funds, those lower rates could pressure our interest rate spread and may adversely affect our results of operations. On the other hand, increases in interest rates, to combat inflation or otherwise, may result in a change in the mix of the Bank’s noninterest and interest-bearing accounts. We are unable to predict changes in interest rates, which are affected by factors beyond our control, including inflation, deflation, recession, unemployment, money supply and other changes in financial markets. However, generally, if the interest rates on the Bank’s interest-bearing liabilities increase at a faster pace than the interest rates on its interest-earning assets, the result would be a reduction in net interest income and with it, a reduction in net earnings.

The Board of Governors of the Federal Reserve System regulates the supply of money and credit in the United States. Its fiscal and monetary policies determine in a large part the Corporation’s cost of funds for lending and investing and the return that can be earned on those loans and investments, both of which affect the Corporation’s net interest margin. Federal Reserve Board policies can also materially affect the value of financial instruments that the Corporation holds, such as debt securities. The Corporation and the Bank are heavily regulated at the federal and state levels. This regulation is to protect depositors, federal deposit insurance funds and the banking system as a whole. Congress and state legislatures and federal and state agencies continually review banking laws, regulations and policies for possible changes. After the Great Recession, efforts to promote the safety and soundness of financial institutions, financial market stability, the transparency and liquidity of financial markets, and consumer and investor protection resulted in increased regulation in the financial services industry. Regulatory agencies have intensified their examination practices and enforcement of laws and regulations. Compliance with regulations and other supervisory initiatives could increase the Corporation’s expenses and reduce revenues by limiting the types of financial services and products that the Corporation offers and/or increasing the ability of non-banks to offer competing financial services and products. See a description of recent legislation in the “REGULATION AND SUPERVISION OF FIRST MERCHANTS CORPORATION AND SUBSIDIARIES” section of Item 1:1. Business of this Annual Report on Form 10-K.

Since the Deposit Insurance Fund is funded by premiums and assessments paid by insured banks, our FDIC insurance premium could increase in future years depending upon the FDIC’s actual loss experience, changes in the Bank’s financial condition or capital strength, and future conditions in the banking industry. See the “Deposit Insurance” section of “REGULATION AND SUPERVISION OF FIRST MERCHANTS CORPORATION AND SUBSIDIARIES” in Item 1:1. Business of this Annual Report on Form 10-K for additional information.

Recent events relating to the failures of Silicon Valley Bank and Signature Bank in March 2023 have caused general uncertainty and concerns regarding the adequacy of liquidity in the banking sector as a whole. A financial institution’s liquidity reflects its ability to meet customer demand for loans, accommodating possible outflows in deposits and accessing alternative sources of funds when needed, while at the same time taking advantage of interest rate market opportunities. The ability to manage liquidity is fundamental to a financial institution’s business and success. The bank failures in March 2023 highlight the potential results of an insured depository institution unexpectedly having to obtain needed liquidity to satisfy deposit withdrawal requests, including how quickly such requests can accelerate once uninsured depositors lose confidence in an institution’s ability to satisfy its obligations to depositors. Current market uncertainties and other external factors may impact the competitive landscape for deposits in the banking industry in an unpredictable manner. In addition, the risingelevated interest rate environment has continued to increase competition for liquidity and the premium at which liquidity is available to meet funding needs. These possible impacts may adversely affect our future operating results, including net income, and negatively impact capital.

The historical consolidated financial data discussed below reflects our historical results of operations and financial condition and should be read in conjunction with our financial statements and related notes thereto presented in Item 8 of this Annual Report on Form 10-K. In addition to historical financial data, this discussion includes certain forward-looking statements regarding events and trends that may affect our future results. Such statements are subject to risks and uncertainties that could cause our actual results to differ materially. See our cautionary “Statement Regarding Forward-Looking Statements.” For a more complete discussion of the factors that could affect our future results, see “Risk Factors” under Item 1A of this Annual Report on Form 10-K.

First MerchantsThe Corporation (the “Corporation”) is a financial holding company headquartered in Muncie, Indiana and was organized in September 1982. The Corporation’s common stock is traded on the Nasdaq’s Global Select Market System under the symbol FRME. The Corporation conducts its banking operations through First Merchants Bank (the “Bank”), a wholly-owned subsidiary that opened for business in Muncie, Indiana, in March 1893. The Bank also operates First Merchants Private Wealth Advisors (a division of First Merchants Bank). The Bank includes 110111 banking locations in Indiana, Ohio, and Michigan. In addition to its branch network, the Corporation offers comprehensive electronic and mobile delivery channels to its customers. The Corporation’s business activities are currently limited to one significant business segment, which is community banking.

Generally accepted accounting principles require management to apply significant judgment to certain accounting, reporting and disclosure matters. Management must use assumptions and estimates to apply those principles where actual measurement is not possible or practical. The judgments and assumptions made are based upon historical experience or other factors that management believes to be reasonable under the circumstances. Because of the nature of the judgments and assumptions, actual results could differ from estimates, which could have a material effect on ourthe Corporation’s financial condition and results of operations. For a complete discussion of the Corporation’s significant accounting policies see NOTE 1. NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES of the Notes to Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K.

As discussed in NOTE 5. LOANS AND ALLOWANCE FOR CREDIT LOSSES of the Notes to Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K, the allowance for credit losses on loans is a contra-asset valuation account that is deducted from the amortized cost basis of loans to present the net amount expected to be collected. The amount of the allowance represents management’s best estimate of current expected credit losses on loans considering available information,information obtained from internal and external sources,sources that is relevant to assessing exposure to credit loss over the contractual term of the instrument. Relevant available information includes historical credit loss experience, current conditions and reasonable and supportable economic forecasts. While historical credit loss experience provides the basis for the estimation of expected credit losses, the Corporation qualitatively adjusts model results for risk factors that are not inherently considered in the quantitative modeling process,process but are nonetheless relevant in assessing the expected credit losses within the loan portfolio. These adjustments may either increase or decrease the estimate of expected credit losses based upon the assessed level of risk for each qualitative factor. The various risks that may be considered in making qualitative adjustments include, among other things, the impact of (i) changes in the nature and volume of the loan portfolio, (ii) changes in the existence, growth and effect of any concentrations in credit, (iii) changes in lending policies and procedures, including changes in underwriting standards and practices for collections, write-offs, and recoveries, (iv) changes in the quality of the credit review function, (v) changes in the experience, ability and depth of lending management and staff, and (vi) other environmental factors such as regulatory, legal and technological considerations, as well as competition.

While management utilizes its best judgment and information available, the ultimate adequacy of the allowance is dependent upon a variety of factors beyond management’s control, which includes, but is not limited to,including the performance of the loan portfolio, the economy, changes in interest rates and the view of the regulatory authorities toward classification of assets.

When adjusting for certain non-recurring items, 2024 adjusted net income available to common stockholders for the year ended 2024 was $203.3 million and adjusted diluted earnings per common share totaled $3.47, compared to 2023 $236.7 million and $3.98, respectively.respectively, for the year ended 2023. These adjusted net income and earnings per share amounts are non-GAAP measures. For reconciliations of non-GAAP measures to their most comparable GAAP measures, see “NON-GAAP FINANCIAL MEASURES” within the “Results of Operations” section of this Management’s Discussion and Analysis of Financial Condition and Results of Operations.

As of December 31, 2024, total assets equaled $18.3 billion, a decrease of $93.9 millionmillion, or 0.5 percentpercent, from December 31, 2023.

The Corporation’s total loan portfolio grew $368.1 millionmillion, or 2.9 percentpercent, since December 31, 2023. The composition of the loan portfolio is 75.0 percent commercial oriented with the largest loan classes of commercial and industrial and commercial real estate, non-owner occupied, representing 31.9 percent and 17.7 percent of the total loan portfolio, respectively. The increase was primarily driven by an increase in commercial and industrial, public finance and other commercial loans, and residential real estate loans. Partially offsetting those increases was a decrease in construction and non-owner occupied commercial real estateestate, non-owner occupied loans. Additional details of the changes in the Corporation’s loan portfolio are discussed within NOTE 5. LOANS AND ALLOWANCE FOR CREDIT LOSSES of the Notes to Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K, and the “LOAN QUALITY AND PROVISION FOR CREDIT LOSSES ON LOANS” section of this Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The Corporation’s allowance for credit losses - loans (“ACL - loans”)Loans totaled $192.8 million as of December 31, 2024 and equaled 1.50 percent of total loans, compared to $204.9 million and 1.64 percent of total loans at December 31, 2023. During the year ended December 31, 2024, the Corporation recognized $49.4 million of net charge-offs, or 39 basis points of average loans, compared to net charge-offs of $25.6 million, or 21 basis points of average loans, for the year ended December 31, 2023. The increase in net charge-offs is primarily related to two commercial and industrial relationships that accounted for $42.7 million of charge-offs during 2024. One borrower experienced a sudden change in revenue from the cancellation and inability to renegotiate their contracts with the U.S. Government. This negatively impacted the value of the borrower'sborrower’s business and resulted in their inability to repay the principal and interest. The second borrower provided notification of its plans to cease operations, which resulted in their inability to repay principal and interest and a charge-off for the Corporation. The Corporation recorded $35.7 million of provision for credit losses during 2024 compared to $3.5 million during 2023. The increase in the provision for credit losses was primarily driven by the increase in net charge-offs described above. Nonaccrual loans as of December 31, 2024 totaled $73.8 million, an increase of $20.2 million from December 31, 2023, primarily due to a $24.1 million increase in non-accrualnonaccrual balances within the construction loan class. The increase was partially offset by a $3.6 million decrease in non-accrualnonaccrual balances within the residential loan class. The coverage ratio of ACL - Loans to nonaccrual loans is 261.3 percent at December 31, 2024. Additional details of the Corporation’s allowance methodology and asset quality are discussed within NOTE 5. LOANS AND ALLOWANCE FOR CREDIT LOSSES of the Notes to Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K and within the “LOAN QUALITY AND PROVISION FOR CREDIT LOSSES ON LOANS” section of this Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Deposits decreased $299.8 million from December 31, 2023. The decrease in deposits was primarily driven by the sale of $267.4 million of deposits related to the Illinois branch sale that closed in the fourth quarter of 2024. Total deposits excluding time deposits greater than $100,000 represented 92.8 percent of the deposit portfolio at December 31, 2024. Noninterest bearing deposits representsrepresented 16.0 percent of the deposit portfolio, down slightly from 16.9 percent as of December 31, 2023. The decline is the result of a mix shift occurring across the industry as clients movemoved into higher yielding deposit products.

The average account balance within the deposit portfolio was $35,000 at December 31, 2024. Insured deposits totaled 70.6 percent of total deposits, with the State of Indiana’s Public Deposit Insurance Fund, which insures certain public deposits, providing insurance to 14.0 percent of deposits and the FDIC providing insurance to the remaining 56.6 percent. Only 29.4 percent of deposits arewere uninsured and our available liquidity iswas ample to cover those when considering both on balance sheet sources of liquidity and unused capacity from the Federal Reserve Discount Window, FHLB and unsecured borrowing sources.

The Corporation’s other liabilities as of December 31, 2024 increased $22.0 million from theDecember same period in31, 2023, primarily due to an increase in unfunded commitments related to the Corporation’s LIHTC partnerships which totaled $35.8 million.

The Corporation’s accounting and reporting policies conform to GAAP and general practices within the banking industry. As a supplement to GAAP, the Corporation provides non-GAAP performance measures, which management believes are useful because they assist investors in assessing the Corporation’s performance. Non-GAAP financial measures have inherent limitations, are not required to be uniformly applied, and are not audited. Although these non-GAAP financial measures are frequently used by investors to evaluate a company, they have limitations as analytical tools, and should not be considered in isolation, or as a substitute for analyses of results as reported under GAAP. Where non-GAAP financial measures are used, the comparable GAAP financial measure, as well as the reconciliation to the comparable GAAP financial measuremeasure, can be found in the following tables.

Adjusted net income available to common stockholders and adjusted diluted earnings per share,common excluding PPP loan income, net realized gains/losses on the sales of available for sale securities, acquisition-related expenses and non-core expenses,share are meaningful non-GAAP financial measures for management, as they provide a meaningful foundation for period-to-period and company-to-company comparisons, which management believes will aid both investors and analysts in analyzing our financial measures and predicting future performance. These non-GAAP financial measures are also used by management to assess the performance of the Corporation’s business, because management does not consider these items to be relevant to ongoing financial performance on a per share basis.

Non-GAAP financial measures such as tangible common stockholders’ equity, tangible assets, tangible common stockholders’ equity to tangible assets, tangible earningsbook value per common share, tangible net income available to common stockholders, diluted tangible net income per common share, return on average tangible assetscommon stockholders’ equity and return on average tangible equityassets are important measures of the strength of the Corporation’s capital and ability to generate earnings on tangible common equity invested by our shareholders. These non-GAAP measures provide useful supplemental information and may assist investors in analyzing the Corporation’s financial position without regard to the effects of intangible assets and preferred stock, but do retain the effect of accumulated other comprehensive gainsincome (lossesloss) in shareholder’sstockholders’ equity. Disclosure of these measures also allows analysts and banking regulators to assess our capital adequacy on these same bases.

Return on average tangible capitalcommon stockholders’ equity is tangible net income available to common stockholders expressed as a percentage of average tangible capital.common stockholders’ equity. Return on average tangible assets is tangible net income available to common stockholders expressed as a percentage of average tangible assets.

Net interest income is the most significant component of the Corporation’s earnings, comprising 80.680.9 percent of revenues for the year ended December 31, 2024.2025. Net interest income and net interest margin are influenced by many factors, primarily the volume and mix of earning assets,assets and funding sources, andas well as prevailing interest rate fluctuations.conditions. Other factors include the level of accretion income on purchased loans, loan prepayment risk on loan and investment-related assets,activity and the composition and maturity of earning assets and interest-bearing liabilities. Loans typically generate more interest income than investment securities with similar maturities. Funding from customer deposits generally costs less than wholesale funding sources. Factors such as general economic activity, the Federal Reserve BoardReserve’s monetary policy, and price volatility of competing alternative investments, can also exert significant influence on our ability to optimize the mix of assets and funding and theour net interest income and net interest margin.

First Merchants Corporation (the “Corporation”) is a financial holding company headquartered in Muncie, Indiana and was organized in September 1982. The Corporation’s common stock is traded on the Nasdaq’s Global Select Market System under the symbol FRME. The Corporation conducts its banking operations through First Merchants Bank (the “Bank”), a wholly-owned subsidiary that opened for business in Muncie, Indiana in March 1893. The Bank also operates First Merchants Private Wealth Advisors (a division of First Merchants Bank). The Bank operates 127126 banking locations in Indiana, Ohio, and Michigan. In addition to its branch network, the Corporation offers comprehensive electronic and mobile delivery channels to its customers. The Corporation’s business activities are currently limited to one significantreportable business segment, which is community banking.

The Corporation acquired total assets of $2.4 billion, total loans of $1.8 billion, and total deposits of $1.7 billion. The total purchase price of approximately $243.2 million consistsconsisted primarily of equity consideration issued by the Corporation and iswas measured at fair value based on the Corporation’s common stock price as of the acquisition date. The purchase price also includesincluded cash paid in lieu of fractional shares. The purchase price representsrepresented the fair value of consideration transferred in accordance with ASC 805. Immediately following the acquisition of First

There have been no significant changes during the threesix months ended MarchJune 31,30, 2026 to the items disclosed as our critical accounting policies and estimates in Management's Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the year ended December 31, 2025. For a complete discussion of our significant accounting policies, see “Notes to the Consolidated Financial Statements” in our Annual Report on Form 10-K for the year ended December 31, 2025. However, due to the First Savings acquisition on February 1, 2026, the Corporation has expanded below its discussion below of accounting practices and valuation methodologies related to business combinations, which involve significant judgment and estimation uncertainty.

In connection with the acquisition, and consistent with the guidance in ASU 2025‑08, loans acquired through business combinations that meet the definition of PSL are recorded using the gross-up method. PCD loans continue to be accounted for under existing PCD guidance, which also applies the gross‑up method; however, PCD loans represent loans that experienced more‑than‑insignificant credit deterioration since origination, while PSLs did not. Under this method, the Corporation recognizes an allowance for credit losses on loans at the acquisition date, with a corresponding increase to the loan's amortized cost basis. The establishment of the ACL - Loans at acquisition doesdid not result in a provision for credit losses or earnings impact on the acquisition date. Expected credit losses as of the acquisition date are recognized through the acquisition‑date allowance for credit losses, while the non‑credit discount reflects all other valuation factors, including differences between contractual interest rates and prevailing market rates, liquidity considerations, and other non‑credit‑related assumptions. The non‑credit discount is accreted into interest income over the remaining life of the loans using the effective interest method. Subsequent changes in expected credit losses for PSLs are recognized through the provision for credit losses in the period in which the estimate changes, consistent with the Corporation's methodology for originated loans measured at amortized cost.

Results for the three and six months ended MarchJune 31,30, 2026 reflect the partial-period impact of the acquisition of First Savings Financial Group, Inc. ("First Savings"),Savings, which was completed on February 1, 2026. Accordingly, period-over-period changes in assets, loans, deposits, net interest income, noninterest income and noninterest expense reflect the contribution of the acquired operations in addition to changes driven by market conditions, volume, and mix. Further details of the Corporation's acquisition are provided within NOTE 2. ACQUISITIONS of the Notes to Consolidated Condensed Financial Statements of this Quarterly Report on Form 10-Q.

The Corporation reported firstsecond quarter 2026 net income available to common stockholders and diluted earnings per common share of $27.7$43.5 million and $0.45$0.70 per diluted share, respectively, compared to $54.9$56.4 million and $0.94$0.98 per diluted share, respectively, during the firstsecond quarter of 2025. The Corporation reported net income available to common stockholders and diluted earnings per common share of $71.2 million and $1.15 per diluted share, respectively, for the six months ended June 30, 2026 compared to $111.2 million and $1.92 per diluted share, respectively, for the six months ended June 30, 2025.

When adjusting for certain non-recurring items, adjusted net income available to common stockholders was $63.1$46.4 million and adjusted diluted earnings per common share totaled $1.03$0.74 for the firstsecond quarter of 2026, compared to $54.9$56.4 million and $0.94,$0.98, respectively, in the firstsecond quarter of 2025. Adjusted net income available to common stockholders and adjusted diluted earnings per common share for the six months ended June 30, 2026, totaled $109.5 million and $1.77, respectively, compared to $111.2 million and $1.92, respectively, for the same period in 2025. These adjusted net income and earnings per share amounts are non-GAAP measures. For reconciliations of GAAP earnings per share measures to the corresponding non-GAAP measures provided above, refer to the "NON-GAAP FINANCIAL MEASURES" section of this Management's Discussion and Analysis of Financial Condition and Results of Operations.

As of MarchJune 31,30, 2026, total assets were $21.1$21.3 billion, an increase of $2.0$2.3 billion or 10.812.2 percent from December 31, 2025. The Corporation acquired First Savings on February 1, 2026, which included $2.4 billion in assets at acquisition. Details of the acquisition are discussed within NOTE 2. ACQUISITIONS of the Notes to Consolidated Condensed Financial Statements of this Quarterly Report on Form 10-Q.

Cash and due from banks and interest-bearing deposits decreasedincreased $7.0 million from December 31, 2025. Total investment securities decreased by $68.7$335.6 million from December 31, 2025, primarily due to $44.0proceeds received from the mortgage loan portfolio sale completed on June 30, 2026. Total investment securities decreased by $86.6 million from December 31, 2025, primarily due to $88.9 million of principal paydowns and maturities, as well as a $23.7 million decline in the valuation of available for sale securities.maturities. Investments represented 15.715.4 percent of total assets at MarchJune 31,30, 2026, compared to 17.8 percent at December 31, 2025. Additional details of the Corporation's investment securities portfolio are discussed within NOTE 3. INVESTMENT SECURITIES of the Notes to Consolidated Condensed Financial Statements of this Quarterly Report on Form 10-Q.

Excluding loans held-for-sale, total loans increased $1.5$1.7 billion from December 31, 2025. Loans acquired in the First Savings acquisition contributed $1.8 billion, partially offset by the transfersale of $357.0$271.1 million ofin mortgage loans to held for sale.loans. Excluding acquired loans and the impact of loans transferredsold, tothe held-for-sale,Corporation experienced organic loan growth of remained$202.9 flatmillion, or 2.9 percent, since December 31, 2025. The loan portfolio remains predominantly commercial-oriented, with commercial loans comprising 76.976.6 percent of total loans. Commercial and industrial and commercial real estate, non-owner occupied, represent the largest loan categories at 30.230.4 percent and 20.921.1 percent of total loans, respectively. Growth during the period was driven primarily by increases in commercial and industrial, construction, commercial real estate, non-owner occupied, home equity, commercial and industrial, and commercial real estate, owner occupied, and home equity loans, partially offset by a decline in residentialoccupied loans. Additional details regarding changes in the Corporation's loan portfolio are discussed within NOTE 4. LOANS AND ALLOWANCE FOR CREDIT LOSSES of the Notes to Consolidated Condensed Financial Statements of this Quarterly Report on Form 10-Q, and the "LOAN QUALITY AND PROVISION FOR CREDIT LOSSES ON LOANS" section of this Management's Discussion and Analysis of Financial Condition and Results of Operations.

The Corporation's allowance for credit losses - loans ("ACL - Loans") totaled $212.5$241.6 million, or 1.391.56 percent of total loans, as of MarchJune 31,30, 2026, compared to $195.6 million, or 1.42 percent, at December 31, 2025, representing an increase of $16.9$46.0 million from December 31, 2025.million. The increase was primarily attributable toreflected a $22.3 million acquisition-date allowance for expected credit losses recognized in connection with the First Savings loan portfolio.portfolio, and a provision expense recorded during the period, including $29.7 million of specific reserves established during the second quarter related to two commercial lending relationships, partially offset by net charge-offs of $3.9 million. During the three and six months ended MarchJune 31,30, 2026, the Corporation recorded net charge-offs of $10.3$3.9 million and $14.2 million, respectively, and provision for credit losses - loans of $4.9$33.0 million and $37.9 million, comparedrespectively. toDuring the three and six months ended June 30, 2025, the Corporation recorded net charge-offs of $4.9$2.3 million and $7.2 million, respectively, and provision for credit losses - loans of $4.2$5.6 million forand the$9.8 samemillion, period in 2025.respectively. Nonaccrual loans as of MarchJune 31,30, 2026 totaled $89.6$118.2 million, an increase of $17.8$46.4 million from December 31, 2025,2025. The increase was primarily drivenattributable byto the additiontwo commercial lending relationships discussed above, totaling $41.8 million, being placed on nonaccrual status during the second quarter of $20.5 million of nonaccrual loans acquired from First Savings.2026. The Corporation's reserve for unfunded commitments increased to $18.5 million at MarchJune 31,30, 2026, from $18.0 million at December 31, 2025, reflecting a $0.5 million of Day 1 allowance for credit losses recognized in connection with the First Savings acquisition related to off-balance sheet commitments. The reserve is recorded in Otherother liabilities. There was no provision for credit losses on unfunded commitments recognized during the three and six months ended MarchJune 31,30, 2026. Additional details of the Corporation's allowance methodology and asset quality are discussed within NOTE 4. LOANS AND ALLOWANCE FOR CREDIT LOSSES of the Notes to Consolidated Condensed Financial Statements of this Quarterly Report on Form 10-Q and within the “LOAN QUALITY AND PROVISION FOR CREDIT LOSSES ON LOANS” section of this Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Several additional asset categories increased from December 31, 2025 primarily due to the acquisition of First Savings, including goodwill of $70.8$76.2 million, cash surrender value of life insurance of $62.8 million, other intangibles of $27.9$64.8 million, premises and equipment of $25.0$27.1 million, other intangibles of $25.2 million, FHLB stock of $23.6 million, and interest receivable of $3.7$8.6 million.

Other assets increased $35.7$62.2 million from December 31, 2025, ofprimarily whichdue to $26.5 million wasof attributableassets toacquired in the First Savings acquisitionacquisition, $28.4 million related to investments in community redevelopment funds, and $5.6 million related to the recognition of a right‑of‑use asset associated with the Corporation’s new Michigan headquarters.

As of MarchJune 31,30, 2026, total deposits equaled $16.5$16.8 billion, an increase of $1.2$1.5 billion from December 31, 2025, or 31.119.1 percent on an annualized basis. The acquisition of First Savings contributed $1.7 billion in deposits, partially offset by a decline in deposits of $499.4$231.6 million from December 31, 2025.2025 driven by $289.8 million reduction of brokered deposits. Net period activity resulted in increases from December 31, 2025 primarily in demand deposits of $800.0 million, money market and savings deposits of $772.7 million, demand deposits of $239.1$561.8 million, and time deposits of $159.6$201.5 million. Total deposits less time deposits greater than $100,000, or core deposits, represented 90.691.5 percent of the deposit portfolio at MarchJune 31,30, 2026. Noninterest bearing deposits represented 22.722.9 percent of the deposit portfolio at June 30, 2026, compared to 14.0 percent at December 31, 2025. Due to balance sheet growth, the loan to deposit ratio increased to 92.7 percent at period end from 90.3 percent as of December 31, 2025.

The average account balance within the deposit portfolio was $38,000$39,000 at MarchJune 31,30, 2026. Insured deposits totaled 71.470.5 percent of total deposits, with the State of Indiana's Public Deposit Insurance Fund, which insures certain public deposits, providing insurance tofor 13.815.8 percent of deposits and the Federal Deposit Insurance Corporation ("FDIC") providing insurance to the remaining 57.654.7 percent. OnlyUninsured 28.6deposits represented 29.5 percent of depositstotal aredeposits. uninsuredThe andCorporation ourmaintains available liquidity isthrough ample to cover those when considering both on balance sheeton-balance-sheet sources of liquidity and unused borrowing capacity from the Federal Reserve Discount Window, the FHLB and unsecured borrowing sources.

Total borrowings increased $645.1$603.8 million at MarchJune 31,30, 2026, compared to December 31, 2025. Federal funds purchased and FHLB advances and subordinated debentures and other borrowings increased $130.0$615.5 million and $500.6$28.7 million, respectively. The increase in borrowings was primarily attributable to the First Savings acquisition, which included the assumption of $482.7 million of FHLB advances and $28.7 million of subordinated debentures and other borrowings. SecuritiesThe soldremaining underincrease repurchasein agreementsFHLB advances was primarily attributable to borrowings used to support loan growth and liquidity needs. Federal funds purchased decreased $14.3$40.0 million from December 31, 2025, asprimarily customersdue shiftedto into otherelevated deposit products.balances during the second quarter, which reduced the Corporation's need for short-term wholesale funding. Additional details ofregarding the Corporation's subordinated debentures and term loans are discussed in NOTE 9. BORROWINGS of the Notes to Consolidated Condensed Financial Statements of this Quarterly Report on Form 10-Q.

The Corporation's other liabilities increased $5.0$31.6 million as of MarchJune 31,30, 2026, compared to December 31, 2025, primarily due to $13.8 million of assumed liabilities and $4.0 million of employee severance costs related to the First Savings acquisition, as well as aincreases in lease liabilities of $5.6 million leaserelated liability forto the new Michigan headquarters. These increases were partially offset by an $11.5 million decrease in salariesheadquarters and incentivesliabilities followingassociated annual incentive payouts and a $9.0 million decrease inwith unfunded commitments of $9.6 million related to the Corporation's affordable housing investments.

Additional paid-in capital increased $219.1$208.2 million duringfrom the three months ended MarchDecember 31, 2026,2025, primarily due to the issuance of $243.2 million of common stock issued as equity consideration in connection with the First Savings acquisition. The increase was partially offset by $38.3 million of share repurchases under the Corporation's Stock Repurchase Program and other capital activity.

Net interest income is the most significant component of ourthe Corporation's earnings, comprising 96.387.8 percent of total revenue for the threesix months ended MarchJune 31,30, 2026. Net interest income and net interest margin are influenced by the volume and mix of earning assets and funding sources, as well as prevailing interest rate conditions. Other factors include accretion income on purchased loans, prepayment activity and the composition and maturity of earning assets and interest-bearing liabilities. Loans typically generate more interest income than investment securities with similar maturities. Funding from customer deposits generally costs less than wholesale funding sources. Factors such as general economic activity, the Federal Reserve's monetary policy, and price volatility of competing alternative investments,investments can also exert significant influence on ourthe Corporation's ability to optimize the mix of assets and funding and the net interest income and net interest margin.

Net interest income is the excess of interest received from earning assets over interest paid on interest-bearing liabilities. For analytical purposes, net interest income is also presented on an FTE basis in the tables that follow to reflect what ourthe Corporation's tax-exempt assets would need to yield in order to achieve the same after-tax yield as a taxable asset. The federal statutory rate of 21 percent was used for 2026 and 2025. Management believes presenting net interest income and net interest margin on an FTE basis is a standard industry practice and provides meaningful comparability to peers by normalizing the impact of tax‑exempt income. For reconciliations of GAAP net interest margin to the corresponding non-GAAP measures provided below, refer to the "NON-GAAP FINANCIAL MEASURES" section of this Management's Discussion and Analysis of Financial Condition and Results of Operations.

Three months ended MarchJune 31,30, 2026 and 2025

Total average earning assets increased $1.9$2.4 billion, or 11.114.1 percent, to $18.8$19.6 billion for the three months ended MarchJune 31,30, 2026, compared to the same period in 2025. This increase was primarily driven by a $2.1$2.6 billion, or 15.919.6 percent, increase in average total loans, reflecting the impact of loans acquired from First Savings on February 1, 2026, which totaled approximately $1.8 billion at acquisition. Average commercial loans,loans and HELOC and installment loans and real estate mortgage loans increased $1.5$1.8 billion, $295.0 millionbillion and $177.7$446.6 million, respectively. These increases were partially offset by a $108.7$166.5 million decline in average investment securities and an $81.9 million decline in interest-bearing deposits.securities.

Total average deposits increased $2.0 billion year-over-year, reflective of $1.7 billion year-over-year.in deposits acquired from First Savings. Total average interest-bearing deposits increased $1.4$466.8 billion,million, driven primarily by higher money market and time deposit balances, reflectingpartially theoffset impactby of $1.5 billion oflower interest-bearing depositstransaction acquireddeposit frombalances. FirstThe Savings as well as changesdecrease in customerinterest-bearing transaction deposit mixbalances following the acquisition. Average noninterest‑bearing deposits increased $257.1 million, reflecting approximately $190.8 million of noninterest‑bearing deposits acquired from First Savings on February 1, 2026, as well asreflected changes to the Corporation’s deposit product offerings, under which certain accounts that previously earned interest were intentionally transitioned to noninterest-bearing products. Average noninterest‑bearing products.deposits increased $1.5 billion, consistent with those product offering changes. Average borrowings increased $145.3$389.9 million, primarily driven by higher FHLB advances, including advances associatedassumed in connection with the First Savings acquisition, partiallyand offsetborrowings byused lowerto repurchasesupport agreementbalance balances.sheet growth and liquidity needs.

Three months ended MarchJune 31,30, 2026 and 2025

Net interest income on an FTE basis increased $21.3$26.1 million, or 15.618.8 percent, to $157.7$165.3 million for the three months ended MarchJune 31,30, 2026, compared to $136.4$139.2 million for the three months ended MarchJune 31,30, 2025. Net interest margin on an FTE basis increased 13 basis points to 3.353.38 percent from 3.223.25 percent in the prior year quarter. This improvement was driven primarily by a 15 basis point declinegrowth in the cost of interest-bearing liabilities to 2.59 percent from 2.74 percent, reflecting lower average depositloan costsbalances and favorable changes in funding mix, whileincluding yieldshigher average noninterest-bearing deposits. The yield on average earning assets remaineddecreased relativelyfour stablebasis atpoints 5.41to 5.46 percent comparedfrom 5.50 percent, while the cost of interest-bearing liabilities decreased two basis points to 5.392.80 percent infrom the2.82 prior year period.percent. The Corporation recognized $2.8$3.7 million of fair value accretion income from purchased loans during the quarter, which contributed approximately sixeight basis points to net interest margin during the three months ended MarchJune 31,30, 2026. This compares to $1.1$1.0 million, or three basis points, in the same period of 2025.

Interest income on an FTE basis increased $26.3$31.3 million compared to the same period in the prior year, driven primarily by a $1.9$2.4 billion increase in average earning assets, which reflected the contribution of loans acquired from First Savings and growth in average loan balances across commercial, real estate mortgage,commercial and HELOC and installment portfolios. Average total loans increased $2.1$2.6 billion, or 15.919.6 percent, year‑over‑year, more than offsetting lower average balances in cash and investment securities. Additionally, the Corporation recorded a $1.2 million interest recovery during the first quarter of 2026 related to the resolution of a previously nonaccrual multifamily commercial real estate loan, which favorably impacted interest income for the period.

The following tabletables presentspresent the Corporation’s average balance sheet, interest income/interest expense, and the average rate as a percent of average earning assets/liabilities for the three and six months ended MarchJune 31,30, 2026 and 2025.

Noninterest income totaled $5.8$37.2 million for the three months ended MarchJune 31,30, 2026, arepresenting decreasean increase of $24.2$5.9 million, or 80.618.7 percent, compared to the same period in 2025. The decreaseincrease was driven primarily by a $29.8 million net loss recognized on mortgage loans reclassified to held for sale during the quarter. This decline was partially offsetdriven by higher customer‑related fees, which increased $4.7$4.8 million to $31.7$34.3 million for the three months ended MarchJune 31,30, 2026 compared to the same period in 2025. The increase in customer‑related fees was driven primarily by higherincreases fiduciary and wealth management fees, increased service charges on deposit accounts, higher card payment fees, and higherin net gains and fees on sales of loans.loans $1.9 million, higher fiduciary and wealth management fees of $0.8 million, increased service charges on deposit accounts of $0.8 million, and higher card payment fees of $0.6 million.

NoninterestFor the six months ended June 30, 2026, noninterest expense totaled $125.1$240.5 million, representing an increase of $54.0 million, or 29.0 percent, compared to the same period in 2025. The increase was driven primarily by higher salaries and employee benefits, which increased $25.7 million to $135.2 million for the threesix months ended MarchJune 31,30, 2026, a $32.2 million, or 34.7 percent, increase from the first quarter of 2025.2026. Integration and transaction-related expenses totaling $17.0$20.8 million were incurred during the quarter,six months ended June 30, 2026, including $5.2$10.7 million attributedof contract termination and similar charges, $5.8 million related to salaries and benefits, $3.0 million of acquisition-related professional and advisory services,services and $8.4$1.3 million ofin contractmiscellaneous termination and similar charges.costs. Salaries and employee benefits expense, excluding integration and transaction-related expenses, increased by $9.3$19.9 million, primarily due to higher salaries and incentive costs during the threesix months ended MarchJune 31,30, 2026, compared to the same period in 2025. Professional and other outside services, excluding integration and transaction-related expenses, increased $9.6 million during the six months ended June 30, 2026, compared to the same period in 2025. Additionally, equipment, net occupancy and outside data processing fees increased $2.5 million, $2.5 million and $2.2 million, respectively, during the six months ended June 30, 2026, compared to the same period in 2025. Other expense increased $1.5$3.1 million primarily due to a one-time charge for the write-down of a held-for-sale building.building, Additionally,increased outsidetravel data processing feescosts and netother occupancymiscellaneous increased $1.3 million and $1.1 million, respectively, during the three months ended March 31, 2026, compared to the same period in 2025.expenses.

Income tax benefitexpense for the three months ended MarchJune 31,30, 2026 was $1.1$3.8 million on pre-tax income of $27.1$47.8 million. For the same period in 2025, income tax expense was $7.9$8.3 million on pre-tax income of $63.2$65.1 million. The effective income tax rates for the firstsecond quarter of 2026 and 2025 were (3.9)%7.9 percent and 12.512.7 percent, respectively.

The lower effective income tax raterates for the three and six months ended MarchJune 31,30, 20262026, when compared to the same periodperiods in 20252025, waswere primarily due to a higher proportion of non-taxable income relative to total income before income taxes.taxes Theand lower income before income taxes in 2026. Lower income before income taxes during the firstthree quartermonths ofended June 30, 2026 was driven by integration and transaction‑related expenses resulting from the First Savings acquisition,acquisition and the net loss on mortgage loans reclassified to held for sale. Lower income before income taxes during the six months ended June 30, 2026 was driven by the provision for credit losses of $33.0 million.

As part of the Level One acquisition, the Corporation issued 10,000 shares of newly created 7.5 percent non-cumulative perpetual preferred stock, with a liquidation preference of $2,500 per share, in exchange for the outstanding Level One Series B preferred stock, and as part of that exchange, each outstanding Level One depository share representing a 1/100th interest in a share of the Level One preferred stock was converted into a depository share of the Corporation representing a 1/100th interest in a share of its newly issued preferred stock. The Corporation had $25.0 million of outstanding preferred stock at MarchJune 31,30, 2026 and December 31, 2025. During the three and six months ended MarchJune 31,30, 2026 and 2025, the Corporation declared and paid dividends of $46.88 per share (equivalent to $0.4688 per depository share) and $93.76 per share, respectively, equal to $0.5 million.million and $0.9 million, respectively. The Series A preferred stock qualifies as tier 1 capital for purposes of the regulatory capital calculations.

On March 18, 2025, the Board of Directors of the Corporation approved a stock repurchase program of up to 2,927,000 shares of the Corporation's outstanding common stock; provided, however, that the total aggregate investment in shares repurchased under the program may not exceed $100.0 million. On a share basis, the amount of common stock subject to the repurchase program represented approximately 5 percent of the Corporation's outstanding shares at the time the program became effective. During the three and six months ended MarchJune 31,30, 2026, the Corporation repurchased 0.60.3 million and 1.0 million shares of its common stockstock, respectively, under the program, for total consideration of $24.9$13.4 million.million and $38.3 million, respectively. The average purchase price was $38.90$39.79 and $39.21 per share.share, Asrespectively. ofDuring Marchthe 31,three 2026,and approximatelysix 1.1months ended June 30, 2025, the Corporation repurchased 0.6 million and 0.8 million shares remainedof availableits forcommon repurchasestock, respectively, under the program, withfor antotal aggregate remaining authorizationconsideration of $28.2$22.1 million.million and $30.0 million, respectively. The average purchase prices were $37.93 and $38.62 per share, respectively. The stock repurchase program approved in 2025 was discontinued as of June 24, 2026.

In August 2022, the Inflation Reduction Act of 2022 (the "IRA") was enacted. Among other things, the IRA imposes a new 1 percent excise tax on the fair market value of stock repurchased after December 31, 20222022, by publicly traded U.S. corporationscorporations, (likeincluding the Corporation).Corporation. With certain exceptions, the value of stock repurchased is determined net of stock issued in the year, including shares issued pursuant to compensatory arrangements. During the three and six months ended MarchJune 31,30, 20262026, the Corporation recorded excise tax of $0.1 million and $0.3 million, respectively. During the three and six months ended June 30, 2025, the Corporation recorded excise tax of $0.2 million and $0.1$0.3 million, respectively, related to its share repurchases during the period, which is reflected in the Statement of Stockholders' Equity as a component of additional paid-in capital.

Under the fully phased-in Basel III capital rules, the Corporation and the Bank maintain the minimum capital and leverage ratios, including a 2.5 percent capital conservation buffer, as illustrated in the tabletables below. In order to avoid limitations on capital distributions, including dividends, the Corporation must maintain capital levels above these minimum requirements. The Corporation and Bank have elected to opt-out of including accumulated other comprehensive income in regulatory capital. As of MarchJune 31,30, 2026, the Bank met all capital adequacy requirements to be considered well capitalized under the fully phased-in Basel III capital rules. There is no threshold for well capitalized status for bank holding companies.

The Corporation's and Bank's actual and required capital ratios as of MarchJune 31,30, 2026 and December 31, 2025 were as follows:

Non-GAAP financial measures such as tangible common equity to tangible assets, tangible earnings per share, return on average tangible assets and return on average tangible equity are important measures of the strength of the Corporation's capital and ability to generate earnings on tangible common equity invested by our shareholders. These non-GAAP measures provide useful supplemental information and may assist investors in analyzing the Corporation’s financial position without regard to the effects of intangible assets and preferred stock, but retain the effect of accumulated other comprehensive losses in shareholder'sstockholders' equity. Disclosure of these measures also allows analysts and banking regulators to assess our capital adequacy on these same bases.

The tables within the “NON-GAAP FINANCIAL MEASURES” section of this Management’s Discussion and Analysis of Financial Condition and Results of Operations reconcile traditional GAAP measures to these non-GAAP financial measures at MarchJune 31,30, 2026 and December 31, 2025.

The following tables present the maturity distribution of our loan portfolio, excluding loans held for sale, by collateral classification at MarchJune 31,30, 2026 according to contractual maturities of (1) one year or less, (2) after one year but within five years and (3) after five years.

At MarchJune 31,30, 2026, nonaccrual loans totaled $89.6$118.2 million, an increase of $17.8$46.4 million from December 31, 2025, primarily attributable to the placement of two commercial lending relationships, totaling $41.8 million, on nonaccrual status during the second quarter of 2026. The increase was also driven by the addition of $20.5 million of nonaccrual loans acquired from First Savings. The largest increases werein inthe commercial real estate, non-owner occupied, commercial real estate, owner occupiedoccupied, and residential loan classes whichof increased $11.4$8.0 million, $7.9$4.7 million, and $7.9$3.4 million, respectively. The increase was partially offset by a decrease in the construction loan class of $12.6$12.7 million.