Isabella Bank Corp(ISBA) - 2025 Q1 - Quarterly Results

Executive Summary & Highlights First Quarter 2025 Performance Overview Isabella Bank Corporation achieved strong performance in Q1 2025, with significant year-over-year increases in net income and core earnings | Metric | Q1 2025 | Q1 2024 | Change (YoY) | | :--------------------- | :---------- | :---------- | :----------- | | Net Income | $3.9 million | $3.1 million | +$0.8 million | | Diluted EPS | $0.53 | $0.42 | +$0.11 | | Core Earnings (non-GAAP) | $4.3 million | $3.1 million | +$1.2 million | | Core Diluted EPS (non-GAAP) | $0.57 | $0.41 | +$0.16 | CEO Commentary CEO Jerome Schwind highlighted strong Q1 2025 performance driven by expanded Net Interest Margin (NIM), increased fee income, and improved credit quality - Net Interest Margin (NIM) has consistently risen since Q1 2024, attributed to the repricing of interest-earning assets and reduced funding costs[2] - Credit quality remains strong, with the recovery of contractual interest on nonaccrual loans contributing four basis points to the net interest margin[3] - The company executed a strategy to restructure a majority of Bank-Owned Life Insurance (BOLI) policies into higher-yielding separate accounts, with full impact expected by Q3 2025[3] - Research on all other fee income components is complete, with revenue enhancement initiatives anticipated to launch by the end of Q3 2025[3] Financial Condition Balance Sheet Overview Total assets increased by $16.3 million to $2.1 billion as of March 31, 2025, driven by higher interest-bearing cash, securities, and BOLI assets, partially offset by a reduction in mortgage broker advances | Metric | March 31, 2025 | December 31, 2024 | Change | | :--------------------- | :------------- | :---------------- | :------- | | Total Assets | $2.1 billion | $2.086 billion | +$16.3 million | | Interest Bearing Cash | N/A | N/A | +$38.7 million | | Gross Securities | N/A | N/A | +$19.0 million | | BOLI Assets | N/A | N/A | +$11.0 million | | Advances to Mortgage Brokers | N/A | N/A | -$60.1 million | Securities Portfolio Available-for-sale (AFS) securities grew by $24 million to $513 million by the end of Q1 2025, primarily due to mortgage-backed securities purchases, while net unrealized losses decreased from 5% to 4% of total AFS securities | Metric | March 31, 2025 | December 31, 2024 | Change | | :--------------------- | :------------- | :---------------- | :------- | | AFS Securities (fair value) | $513.0 million | $489.0 million | +$24.0 million | | CMO Purchases | N/A | N/A | +$40.4 million | | Net Unrealized Losses | $21.5 million | $26.5 million | -$5.0 million | | Unrealized Losses % of AFS | 4% | 5% | -1 percentage point | - The reduction in net unrealized losses is attributed to the treasury portfolio rapidly approaching maturity and declining market yields[7] Loan Portfolio Total loans decreased by $55.8 million to $1.4 billion by the end of Q1, primarily due to a $60.1 million reduction in mortgage broker advances, though core loans (excluding mortgage broker advances) grew by $4.2 million | Metric | March 31, 2025 | December 31, 2024 | Change | | :--------------------- | :------------- | :---------------- | :------- | | Total Loans | $1.4 billion | $1.423 billion | -$55.8 million | | Advances to Mortgage Brokers | $3.015 million | $63.080 million | -$60.065 million | | Core Loans Growth | N/A | N/A | +$4.2 million | | CRE Loan Growth | N/A | N/A | +$4.8 million | | C&I Loan Growth | N/A | N/A | +$4.3 million | | Residential Mortgages | N/A | N/A | +$6.5 million | | Agricultural Loans | $94.359 million | $99.694 million | -$5.335 million | | Consumer Loans | $81.548 million | $87.584 million | -$6.036 million | - Loan growth in the first quarter was concentrated in construction, real estate, and hospitality sectors[9] - Customers are increasingly favoring adjustable-rate loans, which are retained on the balance sheet rather than sold in the secondary market[9] Allowance for Credit Losses The allowance for credit losses decreased by $160 thousand to $12.7 million by the end of Q1 2025, reflecting improved historical loss experience and $136 thousand in recoveries from three previously charged-off loans | Metric | March 31, 2025 | December 31, 2024 | Change | | :--------------------- | :------------- | :---------------- | :------- | | Allowance for Credit Losses | $12.7 million | $12.895 million | -$160 thousand | | Nonaccrual Loan Balances | $173 thousand | $282 thousand | -$109 thousand | | Past Due & Accruing (30-89 days) % of Total Loans | 0.41% | 0.40% | +0.01 percentage point | - Recoveries of $136 thousand from three previously charged-off loans contributed to an $88 thousand reduction in the allowance[10] Bank-Owned Life Insurance (BOLI) Bank-Owned Life Insurance (BOLI) assets increased by $11 million from December, primarily due to a $10.6 million investment in new separate account policies in early January, including a $5.4 million redemption and redeployment from existing general account policies | Metric | March 31, 2025 | December 31, 2024 | Change | | :--------------------- | :------------- | :---------------- | :------- | | BOLI Assets | $45.833 million | $34.882 million | +$10.951 million | | New Separate Account Investment | N/A | N/A | +$10.6 million | | Separate Account BOLI Yield | 5.4% | N/A | N/A | | General Account BOLI Yield | 2.9% | N/A | N/A | - An additional $9 million of general account policies are slated for conversion to separate account BOLI, expected to be completed by the end of Q3[11] Deposits Total deposits increased by $50.8 million to $1.8 billion by the end of Q1, driven by growth in interest-bearing demand, money market, and savings deposits | Deposit Category | March 31, 2025 | December 31, 2024 | Change | Annualized Growth (QoQ) | | :--------------------- | :------------- | :---------------- | :------- | :---------------------- | | Total Deposits | $1.798 billion | $1.747 billion | +$50.8 million | 11.64% | | Interest Bearing Demand | $243.939 million | $237.548 million | +$6.391 million | 10.76% | | Money Market Deposits | $473.138 million | $423.883 million | +$49.255 million | 46.48% | | Savings | $286.399 million | $281.665 million | +$4.734 million | 6.72% | | Certificates of Deposit | $390.239 million | $387.591 million | +$2.648 million | 2.73% | | Noninterest Bearing Demand | $404.194 million | $416.373 million | -$12.179 million | (11.70)% | Shareholders' Equity & Capital Ratios Tangible book value per share increased to $22.58 as of March 31, 2025, despite a $2.30 negative impact from unrealized losses on available-for-sale securities, with capital ratios remaining strong and slightly improved | Metric | March 31, 2025 | December 31, 2024 | Change | | :--------------------- | :------------- | :---------------- | :------- | | Tangible Book Value per Share | $22.58 | $21.82 | +$0.76 | | AFS Unrealized Losses Impact on TBV per Share | -$2.30 | -$2.82 | +$0.52 | | Share Repurchases (Q1 2025) | 45,582 shares | N/A | N/A | | Value of Repurchases | $1.1 million | N/A | N/A | | Tier 1 Leverage Ratio | 8.96% | 8.86% | +0.10 percentage point | | Common Equity Tier 1 Capital | 12.48% | 12.21% | +0.27 percentage point | | Total Risk-Based Capital | 15.37% | 15.06% | +0.31 percentage point | Results of Operations Net Interest Income & Margin Net Interest Margin (NIM) expanded to 3.06% in Q1 2025, up from 2.79% in Q1 2024 and 2.98% in Q4 2024, driven by rising loan yields to 5.71% and a decrease in the cost of interest-bearing liabilities to 2.26% | Metric | Q1 2025 | Q4 2024 | Q1 2024 | Change (QoQ) | Change (YoY) | | :--------------------- | :------ | :------ | :------ | :----------- | :----------- | | Net Interest Margin (NIM) | 3.06% | 2.98% | 2.79% | +0.08 pp | +0.27 pp | | Yield on Loans | 5.71% | 5.66% | 5.38% | +0.05 pp | +0.33 pp | | Cost of Interest-Bearing Liabilities | 2.26% | 2.38% | 2.28% | -0.12 pp | -0.02 pp | - The expansion in loan yields is due to higher rates on new loans and the repricing of variable-rate commercial loans[14] - Approximately 39% of commercial loans are fixed-rate below current market rates but are contractually set to reprice to variable rates over the next four years[14] Provision for Credit Losses In Q1 2025, the company recorded a $107 thousand credit for provision for credit losses, a significant improvement compared to the $392 thousand expense in Q1 2024, reflecting a $160 thousand reduction in the allowance for loan credit losses and $52 thousand in net recoveries | Metric | Q1 2025 | Q1 2024 | Change (YoY) | | :--------------------- | :------ | :------ | :----------- | | Provision for Credit Losses | -$107 thousand | $392 thousand | -$499 thousand | | Change in Allowance for Credit Losses on Loans | -$160 thousand | N/A | N/A | | Net Recoveries | $52 thousand | N/A | N/A | Noninterest Income Total noninterest income in Q1 2025 was $3.5 million, consistent with Q1 2024, with increases in wealth management income and BOLI earnings offset by a $55 thousand loss on foreclosed assets | Metric | Q1 2025 | Q1 2024 | Change (YoY) | | :--------------------- | :------ | :------ | :----------- | | Total Noninterest Income | $3.5 million | $3.5 million | $0 | | Wealth Management Income | $979 thousand | $939 thousand | +$40 thousand | | Earnings on BOLI Policies | $372 thousand | $243 thousand | +$129 thousand | | Net Gain (Loss) on Foreclosed Assets | -$55 thousand | $69 thousand | -$124 thousand | Noninterest Expenses Noninterest expenses increased to $13.3 million in Q1 2025 from $12.7 million in Q1 2024, primarily due to a $368 thousand rise in compensation and benefits and $121 thousand in legal fees related to a Nasdaq listing application | Metric | Q1 2025 | Q1 2024 | Change (YoY) | | :--------------------- | :------ | :------ | :----------- | | Total Noninterest Expenses | $13.3 million | $12.7 million | +$0.6 million | | Compensation and Benefits | $7.383 million | $7.015 million | +$368 thousand | | Other Professional Services | $711 thousand | $513 thousand | +$198 thousand | - Professional services expenses include $121 thousand in legal fees associated with the Nasdaq listing application[17] Income Tax Expense Income tax expense increased to $912 thousand in Q1 2025 from $511 thousand in Q1 2024, with the effective tax rate (ETR) rising from 14% to 19%, including a one-time $166 thousand tax expense from BOLI policy redemptions | Metric | Q1 2025 | Q1 2024 | Change (YoY) | | :--------------------- | :------ | :------ | :----------- | | Income Tax Expense | $912 thousand | $511 thousand | +$401 thousand | | Effective Tax Rate (ETR) | 19% | 14% | +5 percentage points | | One-time BOLI Tax Expense | $166 thousand | N/A | N/A | | ETR (excluding one-time charge) | 15% | N/A | N/A | Company Information About Isabella Bank Corporation Isabella Bank Corporation (OTCQX: ISBA) is the parent company of Isabella Bank, a state-chartered community bank established in 1903 and headquartered in Mount Pleasant, Michigan - Isabella Bank Corporation (OTCQX: ISBA) is the parent company of Isabella Bank, a state-chartered community bank headquartered in Mount Pleasant, Michigan[19] - Founded in 1903, the bank offers personal and commercial loans, deposit products, and investment, trust, and estate planning services across eight counties in central Michigan[19] Forward-Looking Statements This section contains forward-looking statements subject to various risks, uncertainties, and other factors that could cause actual results to differ materially from projections, and investors are cautioned not to place undue reliance on these statements - Forward-looking statements typically involve losses, event impacts, financial condition, plans, objectives, earnings prospects, revenues, expenses, capital and liquidity levels and ratios, asset levels, asset quality, financial position, and other matters related to the company's future business and operations[21] - These forward-looking statements are subject to various risks, uncertainties, and other factors that could cause actual results and trends to differ materially from those made, projected, or implied in the statements[21] Non-GAAP Financial Measures This document includes non-GAAP financial measures to provide readers with additional supplementary perspectives on operating results, performance trends, and financial condition - Non-GAAP metrics are intended to provide readers with additional supplementary perspectives on operating results, performance trends, and financial condition[22] - Non-GAAP financial measures are not a substitute for GAAP measures and should be read and used in conjunction with the company's GAAP financial information[22] - Reconciliations of non-GAAP financial measures to GAAP measures are provided in this press release[22] Financial Statements & Supplementary Data Selected Financial Data This table provides a comprehensive overview of key financial metrics, including per-share data, performance ratios, assets under management, asset quality indicators, and capital ratios, presented quarterly for the past five quarters | Metric | March 31 2025 | December 31 2024 | September 30 2024 | June 30 2024 | March 31 2024 | | :------------------------------------- | :------------ | :--------------- | :---------------- | :----------- | :------------ | | PER SHARE | | | | | | | Basic earnings | $0.53 | $0.54 | $0.44 | $0.47 | $0.42 | | Diluted earnings | 0.53 | 0.54 | 0.44 | 0.46 | 0.42 | | (1) Core diluted earnings | 0.57 | 0.52 | 0.61 | 0.46 | 0.41 | | Dividends | 0.28 | 0.28 | 0.28 | 0.28 | 0.28 | | (2) Book value | 29.10 | 28.32 | 28.63 | 27.06 | 26.80 | | (2) Tangible book value | 22.58 | 21.82 | 22.14 | 20.60 | 20.35 | | (2) Market price | 23.59 | 25.99 | 21.21 | 18.20 | 19.40 | | (2) (3) Common shares outstanding | 7,408,010 | 7,424,893 | 7,438,720 | 7,474,016 | 7,488,101 | | Average number of diluted common shares (3) outstanding | 7,432,162 | 7,451,718 | 7,473,184 | 7,494,828 | 7,507,739 | | PERFORMANCE RATIOS | | | | | | | Return on average total assets | 0.77 % | 0.76 % | 0.62 % | 0.68 % | 0.61 % | | (1) Core return on average total assets | 0.83 % | 0.74 % | 0.87 % | 0.68 % | 0.60 % | | Return on average shareholders' equity | 7.48 % | 7.47 % | 6.26 % | 6.97 % | 6.19 % | | (1) Core return on average shareholders' equity | 8.05 % | 7.29 % | 8.70 % | 6.96 % | 6.08 % | | Return on average tangible shareholders' equity | 9.65 % | 9.66 % | 8.15 % | 9.19 % | 8.12 % | | Core return on average tangible shareholders' (1) equity | 10.40 % | 9.43 % | 11.32 % | 9.17 % | 7.97 % | | Net interest margin yield (fully taxable (1) equivalent) | 3.06 % | 2.98 % | 2.96 % | 2.82 % | 2.79 % | | (1) Efficiency ratio | 72.39 % | 71.20 % | 72.30 % | 73.93 % | 74.84 % | | (2) Gross loan to deposit ratio | 76.07 % | 81.48 % | 79.93 % | 80.22 % | 77.22 % | | (2) Shareholders' equity to total assets | 10.25 % | 10.08 % | 10.11 % | 9.82 % | 9.75 % | | Tangible shareholders' equity to tangible assets (2) | 8.14 % | 7.95 % | 8.00 % | 7.65 % | 7.58 % | | ASSETS UNDER MANAGEMENT | | | | | | | (2) Wealth assets under management | 656,617 | 658,042 | 679,858 | 647,850 | 660,645 | | ASSET QUALITY | | | | | | | (2) Nonaccrual loans | 173 | 282 | 547 | 994 | 1,283 | | (2) Foreclosed assets | 649 | 544 | 546 | 629 | 579 | | Net loan charge-offs (recoveries) | (52) | 102 | 1,359 | 393 | 46 | | Net loan charge-offs (recoveries) to average loans outstanding | 0.00 % | 0.01 % | 0.10 % | 0.03 % | 0.00 % | | (2) Nonperforming loans to gross loans | 0.01 % | 0.02 % | 0.04 % | 0.07 % | 0.09 % | | (2) Nonperforming assets to total assets | 0.04 % | 0.04 % | 0.06 % | 0.08 % | 0.09 % | | (2) Allowance for credit losses to gross loans | 0.93 % | 0.91 % | 0.89 % | 0.95 % | 0.98 % | | CAPITAL RATIOS | | | | | | | (2) Tier 1 leverage | 8.96 % | 8.86 % | 8.77 % | 8.83 % | 8.80 % | | Common equity tier 1 capital | 12.48 % | 12.21 % | 12.08 % | 12.37 % | 12.36 % | | Tier 1 risk-based capital | 12.48 % | 12.21 % | 12.08 % | 12.37 % | 12.36 % | | Total risk-based capital | 15.37 % | 15.06 % | 14.90 % | 15.29 % | 15.31 % | Consolidated Balance Sheets This table presents the consolidated balance sheets for Isabella Bank Corporation over the past five quarters, detailing the composition of assets (cash, securities, loans, BOLI), liabilities (deposits, borrowings), and shareholders' equity | | March 31 2025 | December 31 2024 | September 30 2024 | June 30 2024 | March 31 2024 | | :------------------------------------------ | :------------ | :--------------- | :---------------- | :----------- | :------------ | | ASSETS (in thousands) | | | | | | | Cash and demand deposits due from banks | $28,786 | $22,830 | $27,019 | $22,690 | $22,987 | | Fed Funds sold and interest bearing balances due from banks | 40,393 | 1,712 | 359 | 869 | 2,231 | | Total cash and cash equivalents | 69,179 | 24,542 | 27,378 | 23,559 | 25,218 | | Available-for-sale securities, at fair value | 513,040 | 489,029 | 506,806 | 505,646 | 517,585 | | Federal Home Loan Bank stock | 5,600 | 12,762 | 12,762 | 12,762 | 12,762 | | Mortgage loans held-for-sale | 127 | 242 | 504 | 637 | 366 | | Loans | 1,367,724 | 1,423,571 | 1,424,283 | 1,381,636 | 1,365,508 | | Less allowance for credit losses | 12,735 | 12,895 | 12,635 | 13,095 | 13,390 | | Net loans | 1,354,989 | 1,410,676 | 1,411,648 | 1,368,541 | 1,352,118 | | Premises and equipment | 28,108 | 27,659 | 27,674 | 27,843 | 27,951 | | Cash surrender value of bank-owned life insurance policies | 45,833 | 34,882 | 34,625 | 34,382 | 34,131 | | Goodwill and other intangible assets | 48,282 | 48,283 | 48,283 | 48,283 | 48,284 | | Other assets | 37,429 | 38,166 | 37,221 | 38,486 | 39,161 | | Total assets | $2,102,587 | $2,086,241 | $2,106,901 | $2,060,139 | $2,057,576 | | LIABILITIES AND SHAREHOLDERS' EQUITY (in thousands) | | | | | | | Liabilities | | | | | | | Demand deposits | $404,194 | $416,373 | $421,493 | $412,193 | $413,272 | | Interest bearing demand deposits | 243,939 | 237,548 | 228,902 | 232,660 | 250,314 | | Money market deposits | 473,138 | 423,883 | 471,745 | 429,150 | 453,014 | | Savings | 286,399 | 281,665 | 276,095 | 279,847 | 285,564 | | Certificates of deposit | 390,239 | 387,591 | 383,597 | 368,449 | 366,143 | | Total deposits | 1,797,909 | 1,747,060 | 1,781,832 | 1,722,299 | 1,768,307 | | Short-term borrowings | 47,310 | 53,567 | 52,434 | 44,194 | 42,998 | | Federal Home Loan Bank advances | — | 30,000 | 15,000 | 45,000 | — | | Subordinated debt, net of unamortized issuance costs | 29,447 | 29,424 | 29,402 | 29,380 | 29,357 | | Total borrowed funds | 76,757 | 112,991 | 96,836 | 118,574 | 72,355 | | Other liabilities | 12,365 | 15,914 | 15,248 | 17,017 | 16,240 | | Total liabilities | 1,887,031 | 1,875,965 | 1,893,916 | 1,857,890 | 1,856,902 | | Shareholders' equity (in thousands) | | | | | | | Common stock | 125,547 | 126,224 | 125,218 | 126,126 | 126,656 | | Shares to be issued for deferred compensation obligations | 2,508 | 2,383 | 3,981 | 3,951 | 3,890 | | Retained earnings | 104,940 | 103,024 | 101,065 | 99,808 | 98,318 | | Accumulated other comprehensive income (loss) | (17,439) | (21,355) | (17,279) | (27,636) | (28,190) | | Total shareholders' equity | 215,556 | 210,276 | 212,985 | 202,249 | 200,674 | | Total liabilities and shareholders' equity | $2,102,587 | $2,086,241 | $2,106,901 | $2,060,139 | $2,057,576 | Consolidated Statements of Income This section provides consolidated statements of income, including quarterly comparisons and trends over five quarters, detailing interest income and expenses, net interest income, provision for credit losses, noninterest income, noninterest expenses, and net income | | Three Months Ended | | | :------------------------------------------ | :---------------- | :---------------- | | | March 31 2025 | 2024 | | Interest income (in thousands) | | | | Loans | $19,348 | $18,057 | | Available-for-sale securities | 2,643 | 2,884 | | Federal Home Loan Bank stock | 160 | 146 | | Federal funds sold and other | 482 | 293 | | Total interest income | 22,633 | 21,380 | | Interest expense (in thousands) | | | | Deposits | 7,463 | 7,163 | | Short-term borrowings | 341 | 321 | | Federal Home Loan Bank advances | 38 | 388 | | Subordinated debt | 266 | 266 | | Total interest expense | 8,108 | 8,138 | | Net interest income | 14,525 | 13,242 | | Provision for credit losses | (107) | 392 | | Net interest income after provision for credit losses | 14,632 | 12,850 | | Noninterest income (in thousands) | | | | Service charges and fees | 1,974 | 1,933 | | Wealth management fees | 979 | 939 | | Earnings on bank-owned life insurance policies | 372 | 243 | | Net gain on sale of mortgage loans | 30 | 34 | | Other | 173 | 319 | | Total noninterest income | 3,528 | 3,468 | | Noninterest expenses (in thousands) | | | | Compensation and benefits | 7,383 | 7,015 | | Occupancy and equipment | 2,600 | 2,706 | | Other professional services | 711 | 513 | | ATM and debit card fees | 486 | 469 | | Marketing | 459 | 426 | | FDIC insurance premiums | 303 | 252 | | Other | 1,357 | 1,295 | | Total noninterest expenses | 13,299 | 12,676 | | Income before income tax expense | 4,861 | 3,642 | | Income tax expense | 912 | 511 | | Net income | $3,949 | $3,131 | | Earnings per common share | | | | Basic | $0.53 | $0.42 | | Diluted | 0.53 | 0.42 | | Cash dividends per common share | 0.28 | 0.28 | | | Three Months Ended | | | | | | :------------------------------------------ | :------------ | :--------------- | :---------------- | :----------- | :------------ | | | March 31 2025 | December 31 2024 | September 30 2024 | June 30 2024 | March 31 2024 | | Interest income (in thousands) | | | | | | | Loans | $19,348 | $20,145 | $20,230 | $18,863 | $18,057 | | Available-for-sale securities | 2,643 | 2,656 | 2,749 | 2,804 | 2,884 | | Federal Home Loan Bank stock | 160 | 168 | 168 | 158 | 146 | | Federal funds sold and other | 482 | 200 | 194 | 263 | 293 | | Total interest income | 22,633 | 23,169 | 23,341 | 22,088 | 21,380 | | Interest expense (in thousands) | | | | | | | Deposits | 7,463 | 7,583 | 7,631 | 7,313 | 7,163 | | Short-term borrowings | 341 | 413 | 384 | 321 | 321 | | Federal Home Loan Bank advances | 38 | 352 | 571 | 638 | 388 | | Subordinated debt | 266 | 266 | 267 | 266 | 266 | | Total interest expense | 8,108 | 8,614 | 8,853 | 8,538 | 8,138 | | Net interest income | 14,525 | 14,555 | 14,488 | 13,550 | 13,242 | | Provision for credit losses | (107) | 376 | 946 | 170 | 392 | | Net interest income after provision for credit losses | 14,632 | 14,179 | 13,542 | 13,380 | 12,850 | | Noninterest income (in thousands) | | | | | | | Service charges and fees | 1,974 | 2,186 | 2,133 | 2,023 | 1,933 | | Wealth management fees | 979 | 1,051 | 1,003 | 1,048 | 939 | | Earnings on bank-owned life insurance policies | 372 | 259 | 252 | 253 | 243 | | Net gain on sale of mortgage loans | 30 | 75 | 37 | 67 | 34 | | Other | 173 | 401 | 103 | 217 | 319 | | Total noninterest income | 3,528 | 3,972 | 3,528 | 3,608 | 3,468 | | Noninterest expenses (in thousands) | | | | | | | Compensation and benefits | 7,383 | 7,340 | 7,251 | 6,970 | 7,015 | | Occupancy and equipment | 2,600 | 2,554 | 2,645 | 2,619 | 2,706 | | Other professional services | 711 | 584 | 588 | 527 | 513 | | ATM and debit card fees | 486 | 516 | 503 | 487 | 469 | | Marketing | 459 | 458 | 403 | 425 | 426 | | FDIC insurance premiums | 303 | 309 | 291 | 280 | 252 | | Other | 1,357 | 1,569 | 1,547 | 1,587 | 1,295 | | Total noninterest expenses | 13,299 | 13,330 | 13,228 | 12,895 | 12,676 | | Income before income tax expense | 4,861 | 4,821 | 3,842 | 4,093 | 3,642 | | Income tax expense | 912 | 825 | 561 | 612 | 511 | | Net income | $3,949 | $3,996 | $3,281 | $3,481 | $3,131 | | Earnings per common share | | | | | | | Basic | $0.53 | $0.54 | $0.44 | $0.47 | $0.42 | | Diluted | 0.53 | 0.54 | 0.44 | 0.46 | 0.42 | | Cash dividends per common share | 0.28 | 0.28 | 0.28 | 0.28 | 0.28 | Average Yields and Costs This table presents the average yields on interest-earning assets and average costs of interest-bearing liabilities, calculated on a fully taxable equivalent (FTE) basis, along with the net yield on interest-earning assets (FTE) and net interest spread for the past five quarters | | March 31 2025 | December 31 2024 | September 30 2024 | June 30 2024 | March 31 2024 | | :------------------------------------------ | :------------ | :--------------- | :---------------- | :----------- | :------------ | | INTEREST EARNING ASSETS | | | | | | | (1) Loans | 5.71 % | 5.66 % | 5.72 % | 5.50 % | 5.38 % | | Available-for-sale securities | 2.20 % | 2.15 % | 2.17 % | 2.17 % | 2.25 % | | Federal Home Loan Bank stock | 5.82 % | 5.25 % | 5.26 % | 4.97 % | 4.57 % | | Fed funds sold | 4.32 % | 4.54 % | 5.36 % | 5.30 % | 5.43 % | | Other | 4.06 % | 4.94 % | 5.18 % | 7.38 % | 4.66 % | | Total interest earning assets | 4.75 % | 4.72 % | 4.75 % | 4.59 % | 4.47 % | | INTEREST BEARING LIABILITIES | | | | | | | Interest bearing demand deposits | 0.41 % | 0.36 % | 0.28 % | 0.30 % | 0.33 % | | Money market deposits | 2.58 % | 2.71 % | 2.77 % | 2.85 % | 2.86 % | | Savings | 0.76 % | 0.64 % | 0.61 % | 0.56 % | 0.47 % | | Certificates of deposit | 3.93 % | 4.07 % | 4.13 % | 4.01 % | 3.84 % | | Short-term borrowings | 3.18 % | 3.22 % | 3.17 % | 3.18 % | 3.17 % | | Federal Home Loan Bank advances | 4.53 % | 4.88 % | 5.52 % | 5.55 % | 5.54 % | | Subordinated debt, net of unamortized issuance costs | 3.62 % | 3.62 % | 3.62 % | 3.63 % | 3.63 % | | Total interest bearing liabilities | 2.26 % | 2.38 % | 2.42 % | 2.38 % | 2.28 % | | Net yield on interest earning assets (FTE) (2) | 3.06 % | 2.98 % | 2.96 % | 2.82 % | 2.79 % | | Net interest spread | 2.49 % | 2.34 % | 2.33 % | 2.21 % | 2.19 % | Average Balances This table provides the average daily balances for interest-earning assets, non-earning assets, interest-bearing liabilities, non-interest-bearing liabilities, and shareholders' equity over the past five quarters | | March 31 2025 | December 31 2024 | September 30 2024 | June 30 2024 | March 31 2024 | | :------------------------------------------ | :------------ | :--------------- | :---------------- | :----------- | :------------ | | INTEREST EARNING ASSETS (in thousands) | | | | | | | (1) Loans | $1,370,765 | $1,412,578 | $1,403,810 | $1,375,523 | $1,348,749 | | (2) Available-for-sale securities | 514,479 | 522,733 | 536,379 | 545,827 | 557,030 | | Federal Home Loan Bank stock | 11,011 | 12,762 | 12,762 | 12,762 | 12,762 | | Fed funds sold | 4 | 8 | 4 | 7 | 7 | | (3) Other | 47,374 | 15,905 | 14,597 | 14,054 | 25,210 | | Total interest earning assets | 1,943,633 | 1,963,986 | 1,967,552 | 1,948,173 | 1,943,758 | | NONEARNING ASSETS (in thousands) | | | | | | | Allowance for credit losses | (12,884) | (12,598) | (13,125) | (13,431) | (13,100) | | Cash and demand deposits due from banks | 23,899 | 22,800 | 25,903 | 23,931 | 24,018 | | Premises and equipment | 27,962 | 27,773 | 27,868 | 27,999 | 28,022 | | Other assets | 102,927 | 92,608 | 87,002 | 80,539 | 84,059 | | Total assets | $2,085,537 | $2,094,569 | $2,095,200 | $2,067,211 | $2,066,757 | | INTEREST BEARING LIABILITIES (in thousands) | | | | | | | Interest bearing demand deposits | $240,860 | $232,271 | $232,018 | $238,866 | $245,299 | | Money market deposits | 460,663 | 436,235 | 451,216 | 434,061 | 451,476 | | Savings | 286,364 | 276,856 | 274,828 | 283,605 | 282,971 | | Certificates of deposit | 387,820 | 386,871 | 375,936 | 366,440 | 357,541 | | Short-term borrowings | 43,563 | 50,862 | 48,304 | 40,609 | 40,623 | | Federal Home Loan Bank advances | 3,333 | 28,261 | 40,435 | 45,494 | 27,692 | | Subordinated debt, net of unamortized issuance costs | 29,433 | 29,410 | 29,388 | 29,365 | 29,342 | | Total interest bearing liabilities | 1,452,036 | 1,440,766 | 1,452,125 | 1,438,440 | 1,434,944 | | NONINTEREST BEARING LIABILITIES AND SHAREHOLDERS' EQUITY (in thousands) | | | | | | | Demand deposits | 403,024 | 425,116 | 418,973 | 411,282 | 412,228 | | Other liabilities | 16,265 | 15,775 | 15,658 | 16,755 | 16,151 | | Shareholders' equity | 214,212 | 212,912 | 208,444 | 200,734 | 203,434 | | Total liabilities and shareholders' equity | $2,085,537 | $2,094,569 | $2,095,200 | $2,067,211 | $2,066,757 | Asset Quality Analysis This table provides a detailed asset quality analysis, including nonperforming assets (commercial, real estate, agricultural, residential, consumer), total nonaccrual loans, accruing loans past due, foreclosed assets, and debt securities, along with credit loss allowance and net loan charge-offs (recoveries) for the past five quarters | | March 31 2025 | December 31 2024 | September 30 2024 | June 30 2024 | March 31 2024 | | :------------------------------------------ | :------------ | :--------------- | :---------------- | :----------- | :------------ | | NONPERFORMING ASSETS (in thousands) | | | | | | | Commercial and industrial | $— | $— | $120 | $271 | $567 | | Commercial real estate | — | — | — | — | 234 | | Agricultural | — | — | — | 167 | 189 | | Residential real estate | 173 | 282 | 427 | 556 | 293 | | Consumer | — | — | — | — | — | | Total nonaccrual loans | 173 | 282 | 547 | 994 | 1,283 | | Accruing loans past due 90 days or more | 26 | 19 | 64 | 15 | — | | Total nonperforming loans | 199 | 301 | 611 | 1,009 | 1,283 | | Foreclosed assets | 649 | 544 | 546 | 629 | 579 | | Debt securities | — | — | 12 | 12 | 12 | | Total nonperforming assets | $848 | $845 | $1,169 | $1,650 | $1,874 | | Nonperforming loans to gross loans | 0.01 % | 0.02 % | 0.04 % | 0.07 % | 0.09 % | | Nonperforming assets to total assets | 0.04 % | 0.04 % | 0.06 % | 0.08 % | 0.09 % | | Allowance for credit losses as a % of nonaccrual (1) loans | N/M | N/M | N/M | N/M | N/M | | ALLOWANCE FOR CREDIT LOSSES (in thousands) | | | | | | | Allowance at beginning of period | $12,895 | $12,635 | $13,095 | $13,390 | $13,108 | | Charge-offs | 172 | 299 | 1,767 | 527 | 191 | | Recoveries | 224 | 197 | 408 | 134 | 145 | | Net loan charge-offs (recoveries) | (52) | 102 | 1,359 | 393 | 46 | | Provision for credit losses - loans | (212) | 362 | 899 | 98 | 328 | | Allowance at end of period | $12,735 | $12,895 | $12,635 | $13,095 | $13,390 | | Allowance for credit losses to gross loans | 0.93 % | 0.91 % | 0.89 % | 0.95 % | 0.98 % | | Reserve for unfunded commitments | 617 | 512 | 498 | 450 | 379 | | Provision for credit losses - unfunded commitments | 105 | 14 | 47 | 72 | 64 | | Reserve to unfunded commitments | 0.14 % | 0.15 % | 0.15 % | 0.14 % | 0.11 % | | NET LOAN CHARGE-OFFS (RECOVERIES) (in thousands) | | | | | | | Commercial and industrial | $(80) | $13 | $(6) | $334 | $(2) | | Commercial real estate | (2) | (2) | (318) | (29) | (6) | | Agricultural | — | (4) | — | — | (2) | | Residential real estate | (13) | (16) | (20) | (19) | (63) | | Consumer | 43 | 111 | 1,703 | 107 | 119 | | Total | $(52) | $102 | $1,359 | $393 | $46 | | Net (recoveries) charge-offs (Quarter to Date annualized to average loans) | (0.02)% | 0.03 % | 0.39 % | 0.11 % | 0.01 % | | Net (recoveries) charge-offs (Year to Date annualized to average loans) | (0.02)% | 0.14 % | 0.17 % | 0.00 % | 0.01 % | | DELINQUENT AND NONACCRUAL LOANS (in thousands) | | | | | | | Accruing loans 30-89 days past due | $5,555 | $5,682 | $2,226 | $1,484 | $7,938 | | Accruing loans past due 90 days or more | 26 | 19 | 64 | 15 | — | | Total accruing past due loans | 5,581 | 5,701 | 2,290 | 1,499 | 7,938 | | Nonaccrual loans | 173 | 282 | 547 | 994 | 1,283 | | Total past due and nonaccrual loans | $5,754 | $5,983 | $2,837 | $2,493 | $9,221 | Consolidated Loan and Deposit Analysis This section provides a detailed analysis of the loan portfolio (categorized by commercial and industrial, commercial real estate, advances to mortgage brokers, agricultural, residential real estate, and consumer) and the deposit portfolio (categorized by noninterest-bearing demand, interest-bearing demand, money market, savings, and certificates of deposit), including quarterly balances and annualized growth rates for the past five quarters | | March 31 2025 | December 31 2024 | September 30 2024 | June 30 2024 | March 31 2024 | Annualized Growth Quarter to Date | | :------------------------------------------ | :------------ | :--------------- | :---------------- | :----------- | :------------ | :-------------------------------- | | Commercial and industrial (in thousands) | $249,220 | $244,894 | $240,589 | $238,245 | $226,281 | 7.07 % | | Commercial real estate (in thousands) | 552,234 | 547,447 | 547,038 | 547,005 | 561,123 | 3.50 % | | Advances to mortgage brokers (in thousands) | 3,015 | 63,080 | 76,187 | 39,300 | 29,688 | N/M | | Agricultural (in thousands) | 94,359 | 99,694 | 96,794 | 94,996 | 93,695 | (21.41)% | | Total commercial loans (in thousands) | 898,828 | 955,115 | 960,608 | 919,546 | 910,787 | (23.57)% | | Residential real estate (in thousands) | 387,348 | 380,872 | 369,846 | 365,188 | 356,658 | 6.80 % | | Consumer (in thousands) | 81,548 | 87,584 | 93,829 | 96,902 | 98,063 | (27.57)% | | Gross loans (in thousands) | $1,367,724 | $1,423,571 | $1,424,283 | $1,381,636 | $1,365,508 | (15.69)% | | | March 31 2025 | December 31 2024 | September 30 2024 | June 30 2024 | March 31 2024 | Annualized Growth Quarter to Date | | :------------------------------------------ | :------------ | :--------------- | :---------------- | :----------- | :------------ | :-------------------------------- | | Noninterest bearing demand deposits (in thousands) | $404,194 | $416,373 | $421,493 | $412,193 | $413,272 | (11.70)% | | Interest bearing demand deposits (in thousands) | 243,939 | 237,548 | 228,902 | 232,660 | 250,314 | 10.76 % | | Money market deposits (in thousands) | 473,138 | 423,883 | 471,745 | 429,150 | 453,014 | 46.48 % | | Savings (in thousands) | 286,399 | 281,665 | 276,095 | 279,847 | 285,564 | 6.72 % | | Certificates of deposit (in thousands) | 390,239 | 387,591 | 383,597 | 368,449 | 366,143 | 2.73 % | | Total deposits (in thousands) | $1,797,909 | $1,747,060 | $1,781,832 | $1,722,299 | $1,768,307 | 11.64 % | Reconciliation of Non-GAAP Financial Measures This table provides a detailed reconciliation of non-GAAP financial measures, including core net income, core diluted EPS, core return on average assets, core return on average shareholders' equity, and core return on average tangible shareholders' equity, to their most directly comparable GAAP metrics for the past five quarters, along with nonrecurring adjustment items | | March 31 2025 | December 31 2024 | September 30 2024 | June 30 2024 | March 31 2024 | | :------------------------------------------ | :------------ | :--------------- | :---------------- | :----------- | :------------ | | Net income (in thousands) | $3,949 | $3,996 | $3,281 | $3,481 | $3,131 | | Nonrecurring items (in thousands) | | | | | | | Net gains (losses) on foreclosed assets | (55) | 74 | 4 | 6 | 69 | | (1) Overdraft (charge-off) recoveries | — | 66 | (1,622) | — | — | | Profitability initiative cost | — | (23) | — | — | — | | (2) Legal fees related to Nasdaq | (121) | — | — | — | — | | Income tax impact | 37 | (25) | 340 | (1) | (14) | | Tax expense on bank-owned life (3) insurance surrender | (166) | — | — | — | — | | Total nonrecurring items | (305) | 92 | (1,278) | 5 | 55 | | Core net income (in thousands) | $4,254 | $3,904 | $4,559 | $3,476 | $3,076 | | Noninterest expenses (in thousands) | $13,299 | $13,330 | $13,228 | $12,895 | $12,676 | | Amortization of acquisition intangibles (in thousands) | 1 | 1 | — | 1 | — | | Core noninterest expense (in thousands) | $13,298 | $13,329 | $13,228 | $12,894 | $12,676 | | Net interest income (in thousands) | $14,525 | $14,555 | $14,488 | $13,550 | $13,242 | | Tax equivalent adjustment for net interest margin (in thousands) | 184 | 213 | 232 | 237 | 246 | | Net interest income (FTE) (in thousands) | 14,709 | 14,768 | 14,720 | 13,787 | 13,488 | | Noninterest income (in thousands) | 3,528 | 3,972 | 3,528 | 3,608 | 3,468 | | Tax equivalent adjustment for efficiency ratio (in thousands) | 78 | 54 | 53 | 53 | 51 | | Core revenue (FTE) (in thousands) | 18,315 | 18,794 | 18,301 | 17,448 | 17,007 | | Nonrecurring items (in thousands) | | | | | | | Net gains (losses) on foreclosed assets | (55) | 74 | 4 | 6 | 69 | | Total nonrecurring items | (55) | 74 | 4 | 6 | 69 | | Core revenue (in thousands) | $18,370 | $18,720 | $18,297 | $17,442 | $16,938 | | Efficiency ratio | 72.39 % | 71.20 % | 72.30 % | 73.93 % | 74.84 % | | Average earning assets (in thousands) | 1,943,633 | 1,963,986 | 1,967,552 | 1,948,173 | 1,943,758 | | Net yield on interest earning assets (FTE) | 3.06 % | 2.98 % | 2.96 % | 2.82 % | 2.79 % | | Average assets (in thousands) | 2,085,537 | 2,094,569 | 2,095,200 | 2,067,211 | 2,066,757 | | Average shareholders' equity (in thousands) | 214,212 | 212,912 | 208,444 | 200,734 | 203,434 | | Average tangible shareholders' equity (in thousands) | 165,929 | 164,629 | 160,161 | 152,451 | 155,150 | | Average diluted shares outstanding (4) | 7,432,162 | 7,451,718 | 7,473,184 | 7,494,828 | 7,507,739 | | Core diluted earnings per share | $0.57 | $0.52 | $0.61 | $0.46 | $0.41 | | Core return on average assets | 0.83 % | 0.74 % | 0.87 % | 0.68 % | 0.60 % | | Core return on average shareholders' equity | 8.05 % | 7.29 % | 8.70 % | 6.96 % | 6.08 % | | Core return on average tangible shareholders' equity | 10.40 % | 9.43 % | 11.32 % | 9.17 % | 7.97 % |