Carter Bankshares(CARE) - 2025 Q2 - Quarterly Results

Q2 2025 Financial Results Overview Carter Bankshares reported Q2 2025 net income and net interest income growth year-over-year, with slight sequential declines in net income and EPS Quarterly and Year-to-Date Performance The company reported mixed quarterly results with year-over-year growth but sequential declines in net income and diluted EPS Quarterly and Year-to-Date Financial Performance (Millions USD) | Metric | Q2 2025 | Q1 2025 | Q2 2024 | YTD 2025 | YTD 2024 | | :-------------------------- | :------ | :------ | :------ | :------- | :------- | | Net Income (millions) | $8.5 | $9.0 | $4.8 | $17.5 | $10.6 | | Diluted EPS | $0.37 | $0.39 | $0.21 | $0.76 | $0.46 | | Net Interest Income (millions) | $32.4 | $30.1 | $28.1 | $62.5 | $56.5 | | Pre-tax Pre-provision Income (millions) | $8.0 | $9.0 | $6.2 | $17.0 | $13.4 | - The company completed the acquisition of two leased branch facilities, acquiring $55.9 million of deposits and welcoming 10 new associates[1] - A stock repurchase program was announced to purchase up to $20.0 million of common stock; 547,332 shares were repurchased for $9.1 million at a weighted average cost of $16.70 per share as of June 30, 2025[2] - Loans related to Justice Entities negatively impacted interest income by $6.7 million in Q2 2025; aggregate curtailment payments of $66.4 million reduced the NPL balance from $301.9 million (June 30, 2023) to $235.5 million (June 30, 2025)[3][4] CEO Commentary and Strategic Highlights CEO highlighted strong fundamentals, margin expansion, and loan growth, strategically positioning the company for future interest rate shifts - The company experienced margin expansion and solid loan growth, with an annualized loan growth of 6.5% reflecting momentum in commercial lending[6] - Deposit balances showed modest growth, and the cost of deposits continued to decline, positioning the company to benefit if the Federal Reserve reduces short-term interest rates[6] - The purchase of two leased branch facilities in North Carolina added $55.9 million of deposits and new associates[7] - Approximately 46% of the $20.0 million stock repurchase program has been utilized as of June 30, 2025, deemed the most prudent way to deliver shareholder value given the strong capital position[7] Key Financial and Operational Metrics Q2 2025 metrics show positive trends in loan and deposit growth, net interest income, net interest margin, and asset quality Key Financial and Operational Metrics | Metric | June 30, 2025 | March 31, 2025 | June 30, 2024 | YoY Change (Q2 2025 vs Q2 2024) | | :-------------------------------- | :------------ | :------------- | :------------ | :------------------------------ | | Total portfolio loans | $3.7 billion | $3.6 billion | $3.5 billion | +5.6% ($197.6 million) | | Allowance for credit losses to total portfolio loans | 1.90% | 1.99% | 2.72% | -82 bps | | Total deposits | $4.2 billion | $4.2 billion | $3.9 billion | +8.8% ($340.9 million) | | Net interest income | $32.4 million | $30.1 million | $28.1 million | +15.2% ($4.3 million) | | Net interest margin (FTE) | 2.82% | 2.70% | 2.56% | +26 bps | | NPLs to total portfolio loans | 6.69% | 7.09% | 8.46% | -177 bps | | Efficiency ratio | 78.63% | 75.71% | 81.62% | -299 bps | | Adjusted efficiency ratio (non-GAAP) | 75.55% | 78.67% | 81.33% | -578 bps | Operating Highlights This section details the company's Q2 operating performance across credit quality, net interest income, noninterest income, and expenses Credit Quality Q2 2025 credit quality improved, marked by decreased nonperforming loans and a lower NPLs to total portfolio loans ratio due to curtailment payments Credit Quality Metrics (Millions USD) | Metric | June 30, 2025 | March 31, 2025 | June 30, 2024 | | :-------------------------------- | :------------ | :------------- | :------------ | | NPLs to total portfolio loans | 6.69% | 7.09% | 8.46% | | Total NPLs (millions) | $250.6 | $261.4 | $300.2 | | Justice Entities NPL balance (millions) | $235.5 | $245.1 | $294.1 | | Specific reserves for Justice Entities (millions) | $24.0 | $27.1 | N/A | | (Recovery) Provision for Credit Losses (millions) | $(2.3) | $(2.0) | $0.5 | | Recovery for Unfunded Commitments (thousands) | $(335) | $(114) | $(236) | - The decrease in NPLs during Q2 2025 was primarily due to $9.5 million of curtailment payments from the Bank's largest NPL credit relationship and a $1.2 million decline in nonaccrual residential mortgages[9] - The Justice Entities NPL relationship represents 94.0% of total NPLs and 6.3% of total portfolio loans at June 30, 2025[10] Net Interest Income Net interest income and margin significantly increased in Q2 2025, driven by lower funding costs and higher asset yields, benefiting from rate cuts Net Interest Income and Margin Performance (Millions USD) | Metric | Q2 2025 | Q1 2025 | Q2 2024 | QoQ Change (Q2 2025 vs Q1 2025) | YoY Change (Q2 2025 vs Q2 2024) | | :-------------------------------- | :------ | :------ | :------ | :------------------------------ | :------------------------------ | | Net Interest Income (millions) | $32.4 | $30.1 | $28.1 | +7.4% ($2.2 million) | +15.2% ($4.3 million) | | Net Interest Margin (FTE) | 2.82% | 2.70% | 2.56% | +12 bps | +26 bps | | Total interest-bearing deposit costs | 2.70% | 2.86% | N/A | -16 bps | N/A | | Average interest-bearing deposits (millions) | N/A | N/A | N/A | +$31.8 million | N/A | | Total average borrowings (millions) | $119.5 | $80.3 | N/A | +$39.2 million | N/A | - The increase in net interest income was primarily due to 14 basis point and 30 basis point declines in funding costs and one basis point and four basis point increases in the yield on average interest-earning assets compared to Q1 2025 and Q2 2024, respectively[14] - Lower interest-bearing funding costs were positively impacted by the Federal Reserve's cut of short-term interest rates by 100 basis points from September 2024 to December 2024[16] Noninterest Income Noninterest income decreased sequentially due to a Q1 BOLI gain and year-over-year from lower other noninterest income and insurance commissions Total Noninterest Income (Millions USD) | Metric | Q2 2025 | Q1 2025 | Q2 2024 | QoQ Change (Q2 2025 vs Q1 2025) | YoY Change (Q2 2025 vs Q2 2024) | | :-------------------- | :------ | :------ | :------ | :------------------------------ | :------------------------------ | | Total Noninterest Income (millions) | $4.9 | $6.9 | $5.5 | -28.9% ($2.0 million) | -11.3% ($0.6 million) | - The primary driver for the sequential decrease was a $1.9 million gain on a BOLI death benefit recorded in other noninterest income in Q1 2025[17] - Significant year-over-year decreases included $0.3 million in other noninterest income and $0.2 million in insurance commissions due to lower activity[17] Noninterest Expense Noninterest expense rose due to higher other noninterest expenses, professional fees, and salaries, influenced by a BOLI exchange fee and branch acquisition Total Noninterest Expense (Millions USD) | Metric | Q2 2025 | Q1 2025 | Q2 2024 | QoQ Change (Q2 2025 vs Q1 2025) | YoY Change (Q2 2025 vs Q2 2024) | | :-------------------- | :------ | :------ | :------ | :------------------------------ | :------------------------------ | | Total Noninterest Expense (millions) | $29.3 | $28.0 | $27.4 | +4.5% ($1.3 million) | +$1.9 million | - Primary drivers for the sequential increase were increases in other noninterest expenses ($0.3 million 1035 exchange fee on BOLI), professional and legal fees ($0.4 million), and salaries and employee benefits ($0.4 million), due to higher medical expenses, an extra day, and ten new associates from the Branch Purchase[18] - Occupancy expense, net, increased $0.4 million year-over-year primarily due to additional software and maintenance expenses and higher depreciation expense as a result of the Branch Purchase[19] Financial Condition This section reviews the company's asset composition, liabilities (deposits and borrowings), and overall capitalization and liquidity position Assets Total assets grew to $4.8 billion, driven by increases in cash, available-for-sale securities, and portfolio loans, especially commercial real estate Asset Overview (Millions USD) | Metric | June 30, 2025 | March 31, 2025 | QoQ Change | | :-------------------------------- | :------------ | :------------- | :--------- | | Total Assets (millions) | $4,784.1 | $4,700.3 | +$83.8 | | Cash and Due From Banks (millions) | $99.9 | $89.0 | +$10.9 | | Available-for-Sale Securities (millions) | $755.2 | $745.4 | +$9.8 | | Total Portfolio Loans (millions) | $3,747.1 | $3,687.5 | +$59.6 | - The increase in portfolio loans was driven by growth of $84.9 million in commercial real estate loans and $12.9 million in residential mortgages[21] - These increases were partially offset by decreases of $15.7 million in construction, $12.1 million in commercial and industrial, $9.5 million in other, and $0.8 million in other consumer loans[21] Liabilities (Deposits & Borrowings) Total deposits increased due to a branch acquisition, though core deposits declined, while FHLB borrowings rose to support loan growth Liabilities Overview (Millions USD) | Metric | June 30, 2025 | March 31, 2025 | QoQ Change | | :-------------------------------- | :------------ | :------------- | :--------- | | Total Deposits (millions) | $4,222.2 | $4,200.9 | +$21.3 | | FHLB Borrowings (millions) | $113.5 | $55.0 | +$58.5 | - Total deposits included $55.9 million related to the Branch Purchase; excluding these, total deposits decreased $34.6 million, primarily due to large commercial depositors repositioning funds[22] - Approximately 81.5% of total deposits were insured under standard FDIC limits, with 18.5% being uninsured deposits over the limit at June 30, 2025[23] Capitalization and Liquidity The company maintained a well-capitalized status with substantial liquidity, including significant borrowing availability and unpledged investment securities Capital Ratios | Capital Ratio | June 30, 2025 | March 31, 2025 | | :---------------------- | :------------ | :------------- | | Tier 1 Capital ratio | 10.87% | 11.01% | | Leverage ratio | 9.46% | 9.67% | | Total Risk-Based Capital ratio | 12.12% | 12.27% | - The Company has borrowing availability at the FHLB of approximately $1.2 billion, with eligibility to borrow up to an additional $732.0 million[25] - Additional funding sources include unsecured facilities totaling $30.0 million, a fully secured facility of $45.0 million with other correspondent financial institutions, access to the institutional CD market, and $438.8 million in unpledged available-for-sale investment securities[25] About Carter Bankshares, Inc. This section provides a brief overview of Carter Bankshares, Inc., its services, asset size, and branch network Company Overview Carter Bankshares, Inc. is a Martinsville, VA-based holding company offering diverse banking services with $4.8 billion in assets and 64 branches - Headquartered in Martinsville, VA, Carter Bankshares, Inc. (NASDAQ: CARE) provides commercial banking, consumer banking, mortgage, and services through its subsidiary Carter Bank[26] - The Company has $4.8 billion in assets and operates 64 branches in Virginia and North Carolina[26] Important Notes and Disclaimers This section outlines important considerations regarding non-GAAP financial measures and forward-looking statements, including associated risks Important Note Regarding Non-GAAP Financial Measures This section clarifies the use of non-GAAP financial measures for evaluating operating results, noting they are not GAAP alternatives and require careful consideration - Non-GAAP financial measures are used to enhance the ability of investors and management to evaluate and compare the Company's operating results and understand its underlying business, operational performance, and trends[27] - These measures should not be considered as an alternative to GAAP or more relevant than GAAP results, nor are they necessarily comparable with similar non-GAAP measures presented by other companies[27] - Investors should consider the Company's performance and financial condition as reported under GAAP and all other relevant information[27] Important Note Regarding Forward-Looking Statements This section disclaims forward-looking statements, highlighting inherent risks and uncertainties that could cause actual results to differ materially - Forward-looking statements are not guarantees of future results or performance and involve certain risks, uncertainties, and assumptions that are difficult to predict and often beyond the Company's control[29] - Key risks include market interest rates, inflation, changes in government policies, cyber-security threats, the ability to resolve nonperforming assets, changes in liquidity and capital positions, concentrations of loans (especially CRE), and regulatory supervision[29][30] - Other factors include general economic conditions, changes in customer behaviors, failure to attract or retain key associates, and potential turbulence in financial and real estate markets[32] Consolidated Financial Data Tables This section provides detailed consolidated financial data tables, including balance sheets, income statements, and net interest margin analyses Balance Sheets This table presents consolidated balance sheet data for June 30, 2025, March 31, 2025, and June 30, 2024, detailing assets, liabilities, and equity Balance Sheets (Dollars in Thousands, except per share data) | | June 30, | | March 31, | | June 30, | | --- | --- | --- | --- | --- | --- | | (Dollars in Thousands, except per share data) | 2025 | | 2025 | | 2024 | | ASSETS | (unaudited) | | (unaudited) | | (unaudited) | | Cash and Due From Banks, including Interest-Bearing Deposits of $51,890 at June 30, 2025, $46,490 at March 31, 2025 and $21,364 at June 30, 2024 | $99,905 | | $88,999 | | $61,746 | | Securities Available-for-Sale, at Fair Value | 755,212 | | 745,390 | | 746,325 | | Equity Securities | 10,200 | | 10,178 | | 5,063 | | Loans Held-for-Sale | 246 | | — | | — | | Portfolio Loans | 3,747,121 | | 3,687,495 | | 3,549,521 | | Allowance for Credit Losses | (71,023) | | (73,518) | | (96,686) | | Portfolio Loans, net | 3,676,098 | | 3,613,977 | | 3,452,835 | | Bank Premises and Equipment, net | 72,105 | | 73,944 | | 73,347 | | Goodwill | 1,193 | | — | | — | | Core Deposit Intangible | 1,073 | | — | | — | | Other Real Estate Owned, net | 1,657 | | 577 | | 2,501 | | Federal Home Loan Bank Stock, at Cost | 8,653 | | 5,875 | | 14,467 | | Bank Owned Life Insurance | 48,365 | | 48,224 | | 58,828 | | Other Assets | 109,384 | | 113,123 | | 117,397 | | Total Assets | $4,784,091 | | $4,700,287 | | $4,532,509 | | LIABILITIES | | | | | | | Deposits: | | | | | | | Noninterest-Bearing Demand | 635,192 | | 631,714 | | 653,296 | | Interest-Bearing Demand | 805,013 | | 794,059 | | 565,465 | | Money Market | 544,764 | | 528,381 | | 500,475 | | Savings | 343,659 | | 353,394 | | 399,833 | | Certificates of Deposit | 1,893,611 | | 1,893,379 | | 1,762,232 | | Total Deposits | 4,222,239 | | 4,200,927 | | 3,881,301 | | Federal Home Loan Bank Borrowings | 113,500 | | 55,000 | | 238,000 | | Reserve for Unfunded Loan Commitments | 2,737 | | 3,072 | | 2,914 | | Other Liabilities | 39,980 | | 39,522 | | 45,883 | | Total Liabilities | 4,378,456 | | 4,298,521 | | 4,168,098 | | SHAREHOLDERS' EQUITY | | | | | | | Common Stock, Par Value $1.00 Per Share, Authorized 100,000,000 Shares; Outstanding- 22,669,834 shares at June 30, 2025, 23,161,993 shares at March 31, 2025 and 23,072,750 shares at June 30, 2024 | 22,670 | | 23,162 | | 23,073 | | Additional Paid-in Capital | 84,146 | | 92,418 | | 91,274 | | Retained Earnings | 351,069 | | 342,559 | | 319,697 | | Accumulated Other Comprehensive Loss | (52,250) | | (56,373) | | (69,633) | | Total Shareholders' Equity | 405,635 | | 401,766 | | 364,411 | | Total Liabilities and Shareholders' Equity | $4,784,091 | | $4,700,287 | | $4,532,509 | | PERFORMANCE RATIOS | | | | | | | Return on Average Assets (QTD Annualized) | 0.72 % | | 0.78 % | | 0.43 % | | Return on Average Shareholders' Equity (QTD Annualized) | 8.45 % | | 9.27 % | | 5.40 % | | Return on Average Shareholders' Equity (YTD Annualized) | 8.85 % | | 9.27 % | | 5.99 % | | Allowance for Credit Losses to Total Portfolio Loans | 1.90 % | | 1.99 % | | 2.72 % | | Portfolio Loans to Deposit Ratio | 88.75 % | | 87.78 % | | 91.45 % | | Shareholders' Equity to Assets | 8.48 % | | 8.55 % | | 8.04 % | | CAPITALIZATION RATIOS | | | | | | | Tier 1 Leverage Ratio | 9.46 % | | 9.67 % | | 9.43 % | | Risk-Based Capital - Tier 1 | 10.87 % | | 11.01 % | | 10.95 % | | Risk-Based Capital - Total | 12.12 % | | 12.27 % | | 12.22 % | Income Statements This table provides consolidated income statement data for quarterly and year-to-date periods, detailing interest income, expenses, and net income Income Statements (Dollars in Thousands, except per share data) | | | June 30, | | March 31, | | June 30, | | June 30, | | June 30, | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | (Dollars in Thousands, except per share data) | | 2025 | | 2025 | | 2024 | | 2025 | | 2024 | | | | (unaudited) | | (unaudited) | | (unaudited) | | (unaudited) | | (unaudited) | | Interest Income | $ | 57,747 | $ | 56,007 | $ | 54,583 | $ | 113,754 | $ | 108,632 | | Interest Expense | | 25,388 | | 25,869 | | 26,491 | | 51,257 | | 52,121 | | NET INTEREST INCOME | | 32,359 | | 30,138 | | 28,092 | | 62,497 | | 56,511 | | (Recovery) Provision for Credit Losses | | (2,330) | | (2,025) | | 491 | | (4,355) | | 507 | | Recovery for Unfunded Commitments | | (335) | | (114) | | (236) | | (449) | | (279) | | NET INTEREST INCOME AFTER (RECOVERY) PROVISION FOR CREDIT LOSSES | | 35,024 | | 32,277 | | 27,837 | | 67,301 | | 56,283 | | NONINTEREST INCOME | | | | | | | | | | | | Gains on Sales of Securities, net | | — | | — | | 36 | | — | | 36 | | Service Charges, Commissions and Fees | | 1,765 | | 1,874 | | 1,852 | | 3,639 | | 3,727 | | Debit Card Interchange Fees | | 1,942 | | 2,104 | | 1,933 | | 4,046 | | 4,019 | | Insurance Commissions | | 714 | | 344 | | 934 | | 1,058 | | 1,548 | | Bank Owned Life Insurance Income | | 357 | | 341 | | 365 | | 698 | | 713 | | Other | | 130 | | 2,238 | | 413 | | 2,368 | | 535 | | Total Noninterest Income | | 4,908 | | 6,901 | | 5,533 | | 11,809 | | 10,578 | | NONINTEREST EXPENSE | | | | | | | | | | | | Salaries and Employee Benefits | | 14,082 | | 13,657 | | 14,216 | | 27,739 | | 28,416 | | Occupancy Expense, net | | 4,230 | | 4,472 | | 3,793 | | 8,702 | | 7,541 | | FDIC Insurance Expense | | 1,436 | | 1,430 | | 1,566 | | 2,866 | | 3,253 | | Other Taxes | | 922 | | 947 | | 894 | | 1,869 | | 1,802 | | Advertising Expense | | 708 | | 911 | | 528 | | 1,619 | | 885 | | Telephone Expense | | 307 | | 304 | | 342 | | 611 | | 759 | | Professional and Legal Fees | | 1,921 | | 1,230 | | 1,542 | | 3,151 | | 3,055 | | Data Processing | | 1,395 | | 1,444 | | 1,234 | | 2,839 | | 2,125 | | Debit Card Expense | | 991 | | 992 | | 808 | | 1,983 | | 1,564 | | Other | | 3,312 | | 2,655 | | 2,523 | | 5,967 | | 4,303 | | Total Noninterest Expense | | 29,304 | | 28,042 | | 27,446 | | 57,346 | | 53,703 | | Income Before Income Taxes | | 10,628 | | 11,136 | | 5,924 | | 21,764 | | 13,158 | | Income Tax Provision | | 2,118 | | 2,183 | | 1,121 | | 4,301 | | 2,544 | | Net Income | $ | 8,510 | $ | 8,953 | $ | 4,803 | $ | 17,463 | $ | 10,614 | | Shares Outstanding, at End of Period | | 22,669,834 | | 23,161,993 | | 23,072,750 | | 22,669,834 | | 23,072,750 | | Average Shares Outstanding-Basic & Diluted | | 22,805,881 | | 22,873,800 | | 22,826,510 | | 22,839,412 | | 22,798,476 | | PER SHARE DATA | | | | | | | | | | | | Basic Earnings Per Common Share* | $ | 0.37 | $ | 0.39 | $ | 0.21 | $ | 0.76 | $ | 0.46 | | Diluted Earnings Per Common Share* | $ | 0.37 | $ | 0.39 | $ | 0.21 | $ | 0.76 | $ | 0.46 | | Book Value | $ | 17.89 | $ | 17.35 | $ | 15.79 | $ | 17.89 | $ | 15.79 | | Market Value | $ | 17.34 | $ | 16.18 | $ | 15.12 | $ | 17.34 | $ | 15.12 | | PROFITABILITY RATIOS (GAAP) | | | | | | | | | | | | Net Interest Margin | | 2.80 % | | 2.68 % | | 2.55 % | | 2.74 % | | 2.56 % | | Efficiency Ratio | | 78.63 % | | 75.71 % | | 81.62 % | | 77.18 % | | 80.05 % | | PROFITABILITY RATIOS (Non-GAAP) | | | | | | | | | | | | 3 Net Interest Margin (FTE) | | 2.82 % | | 2.70 % | | 2.56 % | | 2.76 % | | 2.58 % | | 4 Adjusted Efficiency Ratio (Non-GAAP) | | 75.55 % | | 78.67 % | | 81.33 % | | 77.06 % | | 80.17 % | Net Interest Margin (FTE) - QTD Averages This table details average balances, income/expense, and rates for interest-earning assets and liabilities on an FTE basis for quarterly periods Net Interest Margin (FTE) - QTD Averages (Dollars in Thousands) | | Average | | June 30, 2025 Income/ | | | Average | March 31, 2025 Income/ | | Average | June 30, 2024 Income/ | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | (Dollars in Thousands) | Balance | | Expense | Rate | | Balance | Expense | Rate | Balance | Expense | Rate | | ASSETS | | | | | | | | | | | | | Interest-Bearing Deposits with Banks | $58,006 | $643 | | 4.45 % | $67,387 | $748 | 4.50 % | $31,083 | $420 | 5.43 % | | 3 Tax-Free Investment Securities | 11,622 | 85 | | 2.93 % | 11,662 | 84 | 2.92 % | 11,779 | 86 | 2.94 % | | Taxable Investment Securities | 818,588 | 6,796 | | 3.33 % | 807,891 | 6,655 | 3.34 % | 841,787 | 7,721 | 3.69 % | | Total Securities | 830,210 | 6,881 | | 3.32 % | 819,553 | 6,739 | 3.33 % | 853,566 | 7,807 | 3.68 % | | 3 Tax-Free Loans | 89,362 | 732 | | 3.29 % | 93,480 | 761 | 3.30 % | 105,487 | 854 | 3.26 % | | Taxable Loans | 3,648,629 | 49,522 | | 5.44 % | 3,567,184 | 47,825 | 5.44 % | 3,430,330 | 45,395 | 5.32 % | | Total Loans | 3,737,991 | 50,254 | | 5.39 % | 3,660,664 | 48,586 | 5.38 % | 3,535,817 | 46,249 | 5.26 % | | Federal Home Loan Bank Stock | 8,428 | 140 | | 6.66 % | 6,499 | 112 | 6.99 % | 16,611 | 304 | 7.36 % | | Total Interest-Earning Assets | 4,634,635 | 57,918 | | 5.01 % | 4,554,103 | 56,185 | 5.00 % | 4,437,077 | 54,780 | 4.97 % | | Noninterest Earning Assets | 126,303 | | | | 121,766 | | | 91,648 | | | | Total Assets | $4,760,938 | | | | $4,675,869 | | | $4,528,725 | | | | LIABILITIES AND SHAREHOLDERS' EQUITY | | | | | | | | | | | | | Interest-Bearing Demand | $805,749 | $3,661 | | 1.82 % | $744,895 | $3,386 | 1.84 % | $532,700 | $1,689 | 1.28 % | | Money Market | 536,366 | 3,510 | | 2.62 % | 525,463 | 3,319 | 2.56 % | 510,828 | 3,926 | 3.09 % | | Savings | 347,863 | 129 | | 0.15 % | 355,123 | 113 | 0.13 % | 411,457 | 145 | 0.14 % | | Certificates of Deposit | 1,885,486 | 16,759 | | 3.57 % | 1,918,195 | 18,205 | 3.85 % | 1,731,358 | 16,963 | 3.94 % | | Total Interest-Bearing Deposits | 3,575,464 | 24,059 | | 2.70 % | 3,543,676 | 25,023 | 2.86 % | 3,186,343 | 22,723 | 2.87 % | | Federal Home Loan Bank Borrowings | 108,753 | 1,186 | | 4.37 % | 69,833 | 702 | 4.08 % | 283,154 | 3,675 | 5.22 % | | Other Borrowings | 10,713 | 143 | | 5.35 % | 10,417 | 144 | 5.61 % | 8,460 | 93 | 4.42 % | | Total Borrowings | 119,466 | 1,329 | | 4.46 % | 80,250 | 846 | 4.28 % | 291,614 | 3,768 | 5.20 % | | Total Interest-Bearing Liabilities | 3,694,930 | 25,388 | | 2.76 % | 3,623,926 | 25,869 | 2.90 % | 3,477,957 | 26,491 | 3.06 % | | Noninterest-Bearing Liabilities | 662,168 | | | | 660,437 | | | 693,336 | | | | Shareholders' Equity | 403,840 | | | | 391,506 | | | 357,432 | | | | Total Liabilities and Shareholders' Equity | $4,760,938 | | | | $4,675,869 | | | $4,528,725 | | | | 3 Net Interest Income | | $32,530 | | | | $30,316 | | | | $28,289 | | | Net Interest Margin 3 | | | | 2.82 % | | | 2.70 % | | | 2.56 % | Net Interest Margin (FTE) - YTD Averages This table presents average balances, income/expense, and rates for interest-earning assets and liabilities on an FTE basis for year-to-date periods Net Interest Margin (FTE) - YTD Averages (Dollars in Thousands) | | | Average | | Six Months Ended June 30, 2025 Income/ | | Average | Income/ | Six Months Ended June 30, 2024 | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | (Dollars in Thousands) | | Balance | | Expense | Rate | Balance | Expense | | Rate | | ASSETS | | | | | | | | | | | Interest-Bearing Deposits with Banks | $ | 62,670 | $ | 1,391 | 4.48 % | $27,606 | $ | 755 | 5.50 % | | 3 Tax-Free Investment Securities | | 11,642 | | 169 | 2.93 % | 11,799 | | 171 | 2.91 % | | Taxable Investment Securities | | 813,269 | | 13,451 | 3.34 % | 847,664 | | 15,464 | 3.67 % | | Total Securities | | 824,911 | | 13,620 | 3.33 % | 859,463 | | 15,635 | 3.66 % | | 3 Tax-Free Loans | | 91,410 | | 1,493 | 3.29 % | 108,479 | | 1,751 | 3.25 % | | Taxable Loans | | 3,608,131 | | 97,347 | 5.44 % | 3,418,994 | | 90,212 | 5.31 % | | Total Loans | | 3,699,541 | | 98,840 | 5.39 % | 3,527,473 | | 91,963 | 5.24 % | | Federal Home Loan Bank Stock | | 7,469 | | 252 | 6.80 % | 18,507 | | 682 | 7.41 % | | Total Interest-Earning Assets | | 4,594,591 | | 114,103 | 5.01 % | 4,433,049 | | 109,035 | 4.95 % | | Noninterest Earning Assets | | 124,048 | | | | 91,409 | | | | | Total Assets | $ | 4,718,639 | | | | $4,524,458 | | | | | LIABILITIES AND SHAREHOLDERS' EQUITY | | | | | | | | | | | Interest-Bearing Demand | $ | 775,490 | $ | 7,047 | 1.83 % | $514,376 | $ | 2,801 | 1.10 % | | Money Market | | 530,944 | | 6,829 | 2.59 % | 517,862 | | 7,922 | 3.08 % | | Savings | | 351,473 | | 242 | 0.14 % | 425,616 | | 282 | 0.13 % | | Certificates of Deposit | | 1,901,751 | | 34,964 | 3.71 % | 1,683,589 | | 32,435 | 3.87 % | | Total Interest-Bearing Deposits | | 3,559,658 | | 49,082 | 2.78 % | 3,141,443 | | 43,440 | 2.78 % | | Federal Home Loan Bank Borrowings | | 89,400 | | 1,888 | 4.26 % | 324,968 | | 8,494 | 5.26 % | | Other Borrowings | | 10,566 | | 287 | 5.48 % | 8,081 | | 187 | 4.65 % | | Total Borrowings | | 99,966 | | 2,175 | 4.39 % | 333,049 | | 8,681 | 5.24 % | | Total Interest-Bearing Liabilities | | 3,659,624 | | 51,257 | 2.82 % | 3,474,492 | | 52,121 | 3.02 % | | Noninterest-Bearing Liabilities | | 661,308 | | | | 693,814 | | | | | Shareholders' Equity | | 397,707 | | | | 356,152 | | | | | Total Liabilities and Shareholders' Equity | $ | 4,718,639 | | | | $4,524,458 | | | | | 3 Net Interest Income | | | $ | 62,846 | | | $ | 56,914 | | | 3 Net Interest Margin | | | | | 2.76 % | | | | 2.58 % | Loans and Loans Held-for-Sale This table provides a detailed breakdown of the loan portfolio by category, including Commercial Real Estate, Residential Mortgages, and Construction Loans and Loans Held-for-Sale (Dollars in Thousands) | | | June 30, | | March 31, | | June 30, | | --- | --- | --- | --- | --- | --- | | (Dollars in Thousands) | | 2025 | | 2025 | | 2024 | | Commercial | | | | | | | | Commercial Real Estate | $ | 2,000,766 | $ | 1,915,863 | $ | 1,801,397 | | Commercial and Industrial | | 221,880 | | 234,024 | | 240,611 | | Total Commercial Loans | | 2,222,646 | | 2,149,887 | | 2,042,008 | | Consumer | | | | | | | | Residential Mortgages | | 814,188 | | 801,253 | | 783,903 | | Other Consumer | | 27,991 | | 28,804 | | 31,284 | | Total Consumer Loans | | 842,179 | | 830,057 | | 815,187 | | Construction | | 443,573 | | 459,285 | | 394,926 | | Other | | 238,723 | | 248,266 | | 297,400 | | Total Portfolio Loans | | 3,747,121 | | 3,687,495 | | 3,549,521 | | Loans Held-for-Sale | | 246 | | — | | — | | Total Loans | $ | 3,747,367 | $ | 3,687,495 | $ | 3,549,521 | Asset Quality Data This table presents key asset quality metrics, including nonaccrual loans, total nonperforming assets, and various related ratios Asset Quality Data (Dollars in Thousands) | | | | | For the Periods Ended | | | | --- | --- | --- | --- | --- | --- | --- | | | | June 30, | | March 31, | | June 30, | | (Dollars in Thousands) | | 2025 | | 2025 | | 2024 | | Nonaccrual Loans | | | | | | | | Commercial Real Estate | $ | 9,613 | $ | 9,733 | $ | 611 | | Commercial and Industrial | | 1,048 | | 1,070 | | 1,084 | | Residential Mortgages | | 4,142 | | 5,326 | | 1,951 | | Other Consumer | | 29 | | 38 | | 30 | | Construction | | 207 | | 213 | | 2,426 | | Other | | 235,542 | | 245,064 | | 294,140 | | Total Nonperforming Loans | | 250,581 | | 261,444 | | 300,242 | | Other Real Estate Owned | | 1,657 | | 577 | | 2,501 | | Total Nonperforming Assets | $ | 252,238 | $ | 262,021 | $ | 302,743 | | Nonperforming Loans to Total Portfolio Loans | | 6.69 % | | 7.09 % | | 8.46 % | | Nonperforming Assets to Total Portfolio Loans plus Other Real Estate Owned | | 6.73 % | | 7.10 % | | 8.52 % | | Allowance for Credit Losses to Total Portfolio Loans | | 1.90 % | | 1.99 % | | 2.72 % | | Allowance for Credit Losses to Nonperforming Loans | | 28.34 % | | 28.12 % | | 32.20 % | | Net Loan Charge-offs QTD | $ | 165 | $ | 57 | $ | 341 | | Net Loan Charge-offs YTD | $ | 222 | $ | 57 | $ | 873 | | Net Loan Charge-offs (Annualized) to Average Portfolio Loans QTD | | 0.02 % | | 0.01 % | | 0.04 % | | Net Loan Charge-offs (Annualized) to Average Portfolio Loans YTD | | 0.01 % | | 0.01 % | | 0.05 % | Allowance for Credit Losses This table details changes in the allowance for credit losses, including provisions, charge-offs by loan category, and recoveries Allowance for Credit Losses (Dollars in Thousands) | | | | Quarter-to-Date | | | | Year-to-Date | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | June 30, | | March 31, | | June 30, | June 30, | | June 30, | | | (Dollars in Thousands) | 2025 | | 2025 | | 2024 | 2025 | | 2024 | | | Balance Beginning of Period | $ | 73,518 | $ | 75,600 | $ | 96,536 | $ | 75,600 | $ | 97,052 | | (Recovery) Provision for Credit Losses | | (2,330) | | (2,025) | | 491 | | (4,355) | | 507 | | Charge-offs: | | | | | | | | | | | Commercial Real Estate | | — | | — | | — | | — | | — | | Commercial and Industrial | | — | | 7 | | 1 | | 7 | | 19 | | Residential Mortgages | | — | | — | | 4 | | — | | 27 | | Other Consumer | | 288 | | 171 | | 488 | | 459 | | 968 | | Construction | | — | | 1 | | — | | 1 | | 156 | | Other | | — | | — | | — | | — | | — | | Total Charge-offs | | 288 | | 179 | | 493 | | 467 | | 1,170 | | Recoveries: | | | | | | | | | | | Commercial Real Estate | | — | | — | | — | | — | | — | | Commercial and Industrial | | 2 | | 3 | | 1 | | 5 | | 2 | | Residential Mortgages | | 2 | | 8 | | 22 | | 10 | | 24 | | Other Consumer | | 119 | | 110 | | 129 | | 229 | | 271 | | Construction | | — | | 1 | | — | | 1 | | — | | Other | | — | | — | | — | | — | | — | | Total Recoveries | | 123 | | 122 | | 152 | | 245 | | 297 | | Total Net Charge-offs | | 165 | | 57 | | 341 | | 222 | | 873 | | Balance End of Period | $ | 71,023 | $ | 73,518 | $ | 96,686 | $ | 71,023 | $ | 96,686 | Pre-tax Pre-provision Income (Non-GAAP) This table reconciles GAAP financial measures to the non-GAAP measure of Pre-tax Pre-provision Income for quarterly and year-to-date periods Pre-tax Pre-provision Income (Non-GAAP) (Dollars in Thousands) | 1 Pre-tax Pre-provision Income (Non-GAAP) | Quarter-to-Date | | | | | Year-to-Date | | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | June 30, | March 31, | | | June 30, | | June 30, | | June 30, | | (Dollars in Thousands) | 2025 | 2025 | | | 2024 | | 2025 | | 2024 | | Net Interest Income | $32,359 | $30,138 | | | $28,092 | | $62,497 | | $56,511 | | Noninterest Income | 4,908 | 6,901 | | | 5,533 | | 11,809 | | 10,578 | | Noninterest Expense | 29,304 | 28,042 | | | 27,446 | | 57,346 | | 53,703 | | Pre-tax Pre-provision Income (Non-GAAP) | $7,963 | $8,997 | | | $6,179 | | $16,960 | | $13,386 | Adjusted Net Income (Non-GAAP) This table reconciles GAAP Net Income to Adjusted Net Income (Non-GAAP) by adjusting for non-recurring items and their tax effects Adjusted Net Income (Non-GAAP) (Dollars in Thousands, except per share data) | 2 Adjusted Net Income (Non-GAAP) | | | | Quarter-to-Date | | | Year-to-Date | | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | June 30, | | | March 31, | June 30, | | June 30, | | June 30, | | (Dollars in Thousands, except per share data) | 2025 | | | 2025 | 2024 | | 2025 | | 2024 | | Net Income | $ | 8,510 | $ | 8,953 | $ | 4,803 | $ | 17,463 | $ | 10,614 | | Gains on Sales of Securities, net | | — | | — | | (36) | | — | | (36) | | Equity Security Unrealized Fair Value Gain | | (22) | | (137) | | (63) | | (159) | | (63) | | Losses (Gains) on Sales and Write-downs of Bank Premises, net | | 60 | | (3) | | 44 | | 57 | | 45 | | Losses (Gains) on Sales and Write-downs of OREO, net | | 262 | | 81 | | (8) | | 343 | | (350) | | 1035 Exchange fee on BOLI | | 252 | | 275 | | — | | 527 | | — | | Acquisition Costs | | 386 | | — | | — | | 386 | | — | | 5 Gain on BOLI death benefit | | — | | (1,882) | | — | | (1,882) | | — | | OREO Income | | — | | — | | (20) | | — | | (28) | | Severance Pay | | 40 | | — | | — | | 40 | | — | | Contingent Liability | | 38 | | — | | — | | 38 | | — | | Total Tax Effect | | (214) | | (45) | | 18 | | (259) | | 91 | | Adjusted Net Income (Non-GAAP) | $ | 9,312 | $ | 7,242 | $ | 4,738 | $ | 16,554 | $ | 10,273 | | Average Shares Outstanding - diluted | | 22,805,881 | | 22,873,800 | 22,826,510 | | 22,839,412 | | 22,798,476 | | Adjusted Earnings Per Common Share (diluted) (Non-GAAP) | $ | 0.41 | $ | 0.32 | $ | 0.21 | $ | 0.72 | | $0.45 | Net Interest Income (FTE) (Non-GAAP) This table reconciles GAAP Interest and Dividend Income and Net Interest Income to their FTE Non-GAAP counterparts, including yields and margins Net Interest Income (FTE) (Non-GAAP) (Dollars in Thousands) | Net Interest Income (FTE) (Non-GAAP) | | | | Quarter-to-Date | | | | | Year-to-Date | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | | June 30, | | March 31, | | June 30, | | June 30, | | June 30, | | (Dollars in Thousands) | | 2025 | | 2025 | | 2024 | | 2025 | | 2024 | | Interest and Dividend Income (GAAP) | $ | 57,747 | $ | 56,007 | $ | 54,583 | $ | 113,754 | $ | 108,632 | | 3 Tax Equivalent Adjustment | | 171 | | 178 | | 197 | | 349 | | 403 | | Interest and Dividend Income (FTE) (Non GAAP) | | 57,918 | | 56,185 | | 54,780 | | 114,103 | | 109,035 | | Average Earning Assets | | 4,634,635 | | 4,554,103 | | 4,437,077 | | 4,594,591 | | 4,433,049 | | Yield on Interest-earning Assets (GAAP) | | 5.00 % | | 4.99 % | | 4.95 % | | 4.99 % | | 4.93 % | | Yield on Interest-earning Assets (FTE) (Non-GAAP) | | 5.01 % | | 5.00 % | | 4.97 % | | 5.01 % | | 4.95 % | | Net Interest Income (GAAP) | $ | 32,359 | $ | 30,138 | $ | 28,092 | $ | 62,497 | $ | 56,511 | | 3 Tax Equivalent Adjustment | | 171 | | 178 | | 197 | | 349 | | 403 | | Net Interest Income (FTE) (Non-GAAP) | | 32,530 | | 30,316 | | 28,289 | | 62,846 | | 56,914 | | Average Earning Assets | | 4,634,635 | | 4,554,103 | | 4,437,077 | | 4,594,591 | | 4,433,049 | | Net Interest Margin (GAAP) | | 2.80 % | | 2.68 % | | 2.55 % | | 2.74 % | | 2.56 % | | Net Interest Margin (FTE) (Non-GAAP) | | 2.82 % | | 2.70 % | | 2.56 % | | 2.76 % | | 2.58 % | Adjusted Efficiency Ratio (Non-GAAP) This table reconciles GAAP Noninterest Expense and Net Interest Income to calculate the Adjusted Efficiency Ratio for quarterly and year-to-date periods Adjusted Efficiency Ratio (Non-GAAP) (Dollars in Thousands) | 4 Adjusted Efficiency Ratio (Non-GAAP) | | | | Quarter-to-Date | | | | | Year-to-Date | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | | June 30, | | March 31, | | June 30, | | June 30, | | June 30, | | (Dollars in Thousands) | | 2025 | | 2025 | | 2024 | | 2025 | | 2024 | | Noninterest Expense | $ | 29,304 | $ | 28,042 | $ | 27,446 | $ | 57,346 | $ | 53,703 | | Less:(Losses) Gains on sales and write-downs of Branch Premises, net | | (60) | | 3 | | (44) | | (57) | | (45) | | Less: (Losses) Gains on Sales and write-downs of OREO, net | | (262) | | (81) | | 8 | | (343) | | 350 | | 1035 Exchange fee on BOLI | | (252) | | (275) | | — | | (527) | | — | | Less: Acquisition Costs | | (386) | | — | | — | | (386) | | — | | Less: Severance Pay | | (40) | | — | | — | | (40) | | — | | Less: Contingent Liability | | (38) | | — | | — | | (38) | | — | | Adjusted Noninterest Expense (Non-GAAP) | $ | 28,266 | $ | 27,689 | $ | 27,410 | $ | 55,955 | $ | 54,008 | | Net Interest Income | $ | 32,359 | $ | 30,138 | $ | 28,092 | $ | 62,497 | $ | 56,511 | | 3 Plus: Taxable Equivalent Adjustment | | 171 | | 178 | | 197 | | 349 | | 403 | | Net Interest Income (FTE) (Non-GAAP) | $ | 32,530 | $ | 30,316 | $ | 28,289 | $ | 62,846 | $ | 56,914 | | Less: Gains on Sales of Securities, net | | — | | — | | (36) | | — | | (36) | | Less: Equity Security Unrealized Fair Value Gain | | (22) | | (137) | | (63) | | (159) | | (63) | | 5 Gain on BOLI death benefit | | — | | (1,882) | | — | | (1,882) | | — | | Less: OREO Income | | — | | — | | (20) | | — | | (28) | | Noninterest Income | | 4,908 | | 6,901 | | 5,533 | | 11,809 | | 10,578 | | Net Interest Income (FTE) (Non-GAAP) plus Adjusted Noninterest Income | $ | 37,416 | $ | 35,198 | $ | 33,703 | $ | 72,614 | $ | 67,365 | | Efficiency Ratio (GAAP) | | 78.63 % | | 75.71 % | | 81.62 % | | 77.18 % | | 80.05 % | | Adjusted Efficiency Ratio (Non-GAAP) | | 75.55 % | | 78.67 % | | 81.33 % | | 77.06 % | | 80.17 % |