Isabella Bank Corp(ISBA) - 2025 Q2 - Quarterly Results

Executive Summary & Highlights Second Quarter 2025 Financial Performance Overview Isabella Bank Corporation reported a significant increase in net income and diluted EPS for Q2 2025 compared to Q2 2024, with core net income also showing growth Q2 2025 vs. Q2 2024 Financial Performance: | Metric | Q2 2025 | Q2 2024 | Change | | :-------------------- | :---------- | :---------- | :------- | | Net Income | $5.0 million | $3.5 million | +$1.5 million | | Diluted EPS | $0.68 | $0.46 | +$0.22 | | Core Net Income (non-GAAP) | $4.1 million | $3.5 million | +$0.6 million | | Core Diluted EPS (non-GAAP) | $0.55 | $0.46 | +$0.09 | CEO Commentary CEO Jerome Schwind highlighted strong Q2 2025 performance driven by growth in Net Interest Margin (NIM), loans, and deposits, alongside a focus on profitability and non-interest income. The Nasdaq uplisting has also increased stock volume and potential for growth - NIM expanded by 8 basis points over the prior quarter due to repricing earning assets and stable cost of funds[4] - Loan growth was primarily driven by the commercial loan portfolio, supported by a strong pipeline and concentrated efforts[4] - Total deposits increased, notably an $89 million rise in non-maturity deposits from a not-for-profit entity, demonstrating strong community relationships[4] - The Company recovered the entire overdraft charge-off from Q3 2024, positively impacting the provision for credit losses[4] - Management continues to focus on operational profitability and initiatives to enhance non-interest income[5] - Since uplisting to Nasdaq in May, stock volume has significantly increased, viewed as an expanded source of currency and opportunity for growth, with a continued focus on building shareholder value through earnings, repurchases, and dividends[6] Financial Condition Balance Sheet Overview Total assets increased to $2.2 billion, primarily driven by higher interest-bearing cash balances and core loan growth, partially offset by a decline in gross securities Key Balance Sheet Changes (QoQ): | Metric | Q2 2025 | Change from Q1 2025 | | :-------------------------- | :---------- | :------------------ | | Total Assets | $2.2 billion | +$53.6 million | | Interest Bearing Cash Balances | N/A | +$33.9 million | | Core Loans (non-GAAP) | N/A | +$29.8 million | | Gross Securities | N/A | -$16.4 million | Performance Ratios (QoQ): | Metric | Q2 2025 | Q1 2025 | Change | | :-------------------------- | :------ | :------ | :----- | | Return on Average Assets (ROA) | 0.96% | 0.68% | +0.28% | | Core ROA (non-GAAP) | 0.79% | 0.68% | +0.11% | | Total Loan Growth (annualized) | 9% | N/A | N/A | | Total Deposit Growth (annualized) | 11% | N/A | N/A | | Net Interest Margin (NIM) (non-GAAP) | 3.14% | 2.82% | +0.32% | | Noninterest Income Growth (QoQ) | 4% | N/A | N/A | | Nonperforming Loans to Total Loans | 0.09% | N/A | N/A | Available-for-Sale Securities Available-for-sale (AFS) securities decreased to $501 million, primarily due to amortization and maturities, partially offset by new purchases. Net unrealized losses improved, decreasing to 3% of total AFS securities Available-for-Sale Securities (QoQ): | Metric | June 30, 2025 | March 31, 2025 | Change | | :------------------------------------ | :------------ | :------------- | :----- | | AFS Securities at Fair Value | $501 million | $513.5 million | -$12.5 million | | Decline Drivers: | | | | | - Amortization and Maturities | N/A | N/A | -$26.8 million | | - Purchases | N/A | N/A | +$10.6 million | | Net Unrealized Losses | $17.6 million | $21.5 million | -$3.9 million | | Net Unrealized Losses as % of AFS Securities | 3% | 4% | -1% | - The decrease in net unrealized losses was primarily due to the treasury portfolio rapidly approaching maturity[8] Loans Portfolio Total loans reached $1.4 billion, driven by strong growth in commercial and residential loans. This growth was partially offset by declines in agricultural and consumer loan portfolios Loan Portfolio Growth (QoQ): | Loan Category | June 30, 2025 | Change from Q1 2025 | | :-------------------------------- | :------------ | :------------------ | | Total Loans | $1.4 billion | +$29.8 million | | Commercial Loans (excl. mortgage brokers) | N/A | +$23.1 million (10.3% annualized) | | Residential Mortgages | N/A | +$11.3 million | - Outsized commercial loan growth resulted from closing several loans expected in Q1 and executing a robust Q2 pipeline[9] - Residential mortgage increases were due to construction loan drawdowns and seasonal origination patterns[9] - Agricultural and consumer loan portfolios continued to decline due to decreasing demand[9] - Future loan growth could be lower due to changes in timing, funding, customer demand, and overall economic conditions, despite a strong commercial pipeline[9] Allowance for Credit Losses The allowance for credit losses increased to $13.0 million, reflecting core loan growth and changes in historical loss rates. Nonaccrual loans also rose due to a specific commercial real estate loan downgrade Credit Loss Metrics (QoQ): | Metric | June 30, 2025 | March 31, 2025 | Change | | :------------------------------------ | :------------ | :------------- | :----- | | Allowance for Credit Losses | $13.0 million | $12.735 million | +$242 thousand | | Nonaccrual Loan Balances | $1.2 million | $0.173 million | +$991 thousand | | Past Due & Accruing (30-89 days) to Total Loans | 0.08% | 0.41% | -0.33% | - The increase in nonaccrual loans was primarily due to the downgrade of one unique commercial real estate loan[10] Deposits Total deposits grew to $1.85 billion, primarily driven by a significant increase in demand deposits from a single large customer. This growth was partially offset by declines in money market and interest-bearing demand deposits due to seasonal trends Deposit Growth (QoQ): | Deposit Type | June 30, 2025 | Change from Q1 2025 | | :-------------------------- | :------------ | :------------------ | | Total Deposits | $1.85 billion | +$51.5 million | | Demand Deposits | N/A | +$89.3 million | | Retail Certificates of Deposit | N/A | +$5.7 million | | Money Market Deposits | N/A | -$26.3 million | | Interest-Bearing Demand Deposits | N/A | -$20.6 million | - The increase in demand deposits was largely due to one customer with large deposits expected to be withdrawn by year-end[11] - Consumer demand for retail certificates of deposit accounts continued due to the elevated market interest rate environment[11] Shareholder Equity & Repurchases Tangible book value per share increased to $23.39, despite the negative impact of net unrealized losses on AFS securities. The company also repurchased shares totaling approximately $1.5 million during the quarter Shareholder Metrics (QoQ): | Metric | June 30, 2025 | March 31, 2025 | Change | | :------------------------------------ | :------------ | :------------- | :----- | | Tangible Book Value Per Share (non-GAAP) | $23.39 | $22.58 | +$0.81 | | Reduction to TBV per Share from Unrealized Losses | $1.90 | $2.30 | -$0.40 | | Shares Repurchased (Q2 2025) | 57,824 | N/A | N/A | | Aggregate Purchase Price (Q2 2025) | ~$1.5 million | N/A | N/A | | Average Per Share Purchase Price (Q2 2025) | ~$26.03 | N/A | N/A | Results of Operations Net Interest Margin (NIM) Net Interest Margin (NIM) expanded to 3.14% in Q2 2025, showing improvement both quarter-over-quarter and year-over-year. This was driven by higher yields on loans and securities, coupled with a decrease in the cost of interest-bearing liabilities Net Interest Margin & Yields: | Metric | Q2 2025 | Q1 2025 | Q2 2024 | | :------------------------------------ | :------ | :------ | :------ | | NIM (fully taxable equivalent) | 3.14% | 3.06% | 2.82% | | Book Yield from Securities | 2.38% | N/A | 2.17% | | Yield on Loans | 5.71% | N/A | 5.50% | | Cost of Interest-Bearing Liabilities | 2.24% | 2.26% | 2.38% | - The expansion in loan yields resulted from higher interest rates on new loans and repricing variable-rate commercial loans[13] - Approximately 38% of commercial loans were fixed at rates lower than current market rates, with the majority contractually repricing to variable rates over the next four years[13] - Cost of interest-bearing liabilities decreased due to reductions in money market and certificate of deposit product rates[13] - NIM is expected to continue expanding as loans reprice and the cost of interest-bearing liabilities stabilizes[13] Provision for Credit Losses The Company recorded a credit of $1.1 million for the provision for credit losses in Q2 2025, primarily due to significant net recoveries, particularly from previously charged-off overdraft accounts. Credit quality continues to be closely monitored amidst economic uncertainties Provision for Credit Losses: | Metric | Q2 2025 | Q2 2024 | | :------------------------------------ | :------------ | :---------- | | Provision for Credit Losses | -$1.1 million (credit) | $170 thousand | | Net Recoveries (Q2 2025) | $1.4 million | N/A | | Specific Recoveries (Q2 2025) | $1.6 million | N/A | - The net recoveries in Q2 2025 included $1.6 million related to overdrawn deposit accounts from a single customer that were charged off in Q3 2024[14][15] - The Company continues to closely monitor credit quality due to ongoing economic uncertainties, including elevated interest rates, employment data, trade policy, and inflationary pressures[16] - Additional provisions for credit losses may be necessary in future periods[16] Noninterest Income Noninterest income increased to $3.7 million in Q2 2025, driven by higher service charges and fees, increased earnings on bank-owned life insurance (BOLI) policies, and growth in wealth management fees Noninterest Income (QoQ): | Metric | Q2 2025 | Q2 2024 | Change | | :------------------------------------ | :------------ | :---------- | :----- | | Total Noninterest Income | $3.7 million | $3.6 million | +$0.1 million | | Service Charges and Fees | N/A | N/A | +$48 thousand | | Earnings on BOLI Policies | N/A | N/A | +$47 thousand | | Wealth Management Fees | N/A | N/A | +$36 thousand | | Assets Under Management (AUM) | $679 million | $648 million | +$31 million | - Service charges and fees increased due to profitability initiatives[17] - BOLI earnings increased from new investments in a separate account BOLI, partially offset by a one-time $120 thousand restructuring expense[17] - Wealth management fees grew due to an increase in assets under management (AUM)[17] Noninterest Expenses Noninterest expenses increased to $13.7 million in Q2 2025, primarily due to higher compensation and benefits, reflecting annual merit increases, incentives, and increased medical insurance claims. Professional services also rose due to profitability initiatives and Nasdaq uplisting legal fees Noninterest Expenses (QoQ): | Metric | Q2 2025 | Q2 2024 | Change | | :------------------------------------ | :------------ | :---------- | :----- | | Total Noninterest Expenses | $13.7 million | $12.9 million | +$0.8 million | | Compensation and Benefit Expenses | N/A | N/A | +$526 thousand | | Professional Services | N/A | N/A | N/A | - Higher compensation and benefit expenses were driven by annual merit increases, incentives, and increased medical insurance claims[18] - Professional services included $173 thousand for profitability initiative costs and $47 thousand in legal fees related to the Nasdaq uplisting[18] Company Information About Isabella Bank Corporation Isabella Bank Corporation is the parent holding company of Isabella Bank, a community bank established in 1903. It provides a range of personal and commercial banking services across eight Mid-Michigan counties - Isabella Bank Corporation (Nasdaq: ISBA) is the parent holding company of Isabella Bank, a state-chartered community bank[19] - Isabella Bank was established in 1903 and has served its communities for over 120 years[19] - The Bank offers personal and commercial lending and deposit products, as well as investment, trust, and estate planning services[19] - It operates across eight Mid-Michigan counties: Bay, Clare, Gratiot, Isabella, Mecosta, Midland, Montcalm, and Saginaw[19] Investor Relations & Available Information The Company provides investor information, including annual and quarterly reports, and press releases, on its dedicated Investor Relations website. This website is also used for disclosing material non-public information in compliance with Regulation FD - The Company's Investor Relations website (ir.isabellabank.com/overview) provides annual reports, quarterly earnings reports, and other press releases[21] - The Company uses its website (www.isabellabank.com and ir.isabellabank.com/news) as a means of disclosing material non-public information and complying with Regulation FD[22] - Investors should monitor the Company's website in addition to other public disclosures[22] Legal & Financial Disclosures Forward-Looking Statements This section outlines the Company's forward-looking statements, emphasizing that they are subject to risks and uncertainties and are not guarantees of future results. Investors are cautioned not to unduly rely on them and are directed to SEC filings for more information on risks - The press release contains forward-looking statements intended to be covered by the safe harbor provisions of the Private Securities Litigation Reform Act of 1995[24] - These statements relate to future events, financial condition, plans, objectives, and other matters affecting the Company's future business and operations[24] - Forward-looking statements are based on current information and management's good faith beliefs, but assumptions could be inaccurate, and results may not be realized[25] - Investors are cautioned not to unduly rely on these statements, and additional risks are detailed in the Company's Form 10-K and 10-Q filings with the SEC[25] - The Company undertakes no obligation to update any forward-looking statement to reflect developments after the statement is made, except as required by law[25] Non-GAAP Financial Measures The Company uses non-GAAP financial measures to provide a more complete understanding of its financial position and performance, noting that these are supplemental and not a substitute for GAAP measures. A reconciliation to GAAP is provided - Non-GAAP financial measures are used to provide management and investors with a more complete understanding of the Company's financial position and performance[26] - These measures are supplemental and not a substitute for GAAP financial measures[26] - The Company defines non-GAAP measures as those excluding or including amounts that are included or excluded in the most directly comparable GAAP measure[27] - A reconciliation of non-GAAP financial measures to GAAP financial measures is provided at the end of the press release[28] Consolidated Financial Schedules (Unaudited) Selected Financial Data This table presents key selected financial data, including per share amounts, performance ratios, assets under management, asset quality, and capital ratios, for the three-month periods ended June 30, 2025, and prior quarters | | | | | | | Three Months Ended | | | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | | June 30 | | March 31 | | December 31 | | September 30 | | June 30 | | | | 2025 | | 2025 | | 2024 | | 2024 | | 2024 | | PER SHARE | | | | | | | | | | | | Basic earnings | $ | 0.68 | $ | 0.53 | $ | 0.54 | $ | 0.44 | $ | 0.47 | | Diluted earnings | | 0.68 | | 0.53 | | 0.54 | | 0.44 | | 0.46 | | (1) Core diluted earnings | | 0.55 | | 0.57 | | 0.52 | | 0.61 | | 0.46 | | Dividends | | 0.28 | | 0.28 | | 0.28 | | 0.28 | | 0.28 | | (2) Book value | | 29.95 | | 29.10 | | 28.32 | | 28.63 | | 27.06 | | (1) (2) Tangible book value | | 23.39 | | 22.58 | | 21.82 | | 22.14 | | 20.60 | | (2) Market price | | 30.15 | | 23.59 | | 25.99 | | 21.21 | | 18.20 | | (2) (3) Common shares outstanding | | 7,361,684 | | 7,408,010 | | 7,424,893 | | 7,438,720 | | 7,474,016 | | Average number of diluted common shares | | | | | | | | | | | | (3) outstanding | | 7,398,109 | | 7,432,162 | | 7,451,718 | | 7,473,184 | | 7,494,828 | | PERFORMANCE RATIOS | | | | | | | | | | | | Return on average total assets | | 0.96 % | | 0.77 % | | 0.76 % | | 0.62 % | | 0.68 % | | (1) Core return on average total assets | | 0.79 % | | 0.83 % | | 0.74 % | | 0.87 % | | 0.68 % | | Return on average shareholders' equity | | 9.19 % | | 7.48 % | | 7.47 % | | 6.26 % | | 6.97 % | | Core return on average shareholders' equity | (1) | 7.48 % | | 8.05 % | | 7.29 % | | 8.70 % | | 6.96 % | | Return on average tangible shareholders' equity (1) | | | | | | | | | | | | | | 11.78 % | | 9.65 % | | 9.66 % | | 8.15 % | | 9.19 % | | Core return on average tangible shareholders' | | | | | | | | | | | | (1) equity | | 9.59 % | | 10.40 % | | 9.43 % | | 11.32 % | | 9.17 % | | Net interest margin yield (fully taxable | | | | | | | | | | | | (1) equivalent) | | 3.14 % | | 3.06 % | | 2.98 % | | 2.96 % | | 2.82 % | | (1) Efficiency ratio | | 70.53 % | | 71.73 % | | 71.08 % | | 72.30 % | | 73.93 % | | (2) Gross loan to deposit ratio | | 75.57 % | | 76.07 % | | 81.48 % | | 79.93 % | | 80.22 % | | (2) Shareholders' equity to total assets | | 10.23 % | | 10.25 % | | 10.08 % | | 10.11 % | | 9.82 % | | Tangible shareholders' equity to tangible assets | | | | | | | | | | | | (1) (2) | | 8.17 % | | 8.14 % | | 7.95 % | | 8.00 % | | 7.65 % | | ASSETS UNDER MANAGEMENT | | | | | | | | | | | | (2) Wealth assets under management (thousands) | | 678,959 | | 656,617 | | 658,042 | | 679,858 | | 647,850 | | ASSET QUALITY | | | | | | | | | | | | (2) Nonaccrual loans (thousands) | | 1,164 | | 173 | | 282 | | 547 | | 994 | | (2) Foreclosed assets (thousands) | | 667 | | 649 | | 544 | | 546 | | 629 | | Net loan charge-offs (recoveries) (thousands) | | (1,432) | | (52) | | 102 | | 1,359 | | 393 | | Net loan charge-offs (recoveries) to average | | | | | | | | | | | | loans outstanding | | (0.10)% | | 0.00 % | | 0.01 % | | 0.10 % | | 0.03 % | | (2) Nonperforming loans to gross loans | | 0.09 % | | 0.01 % | | 0.02 % | | 0.04 % | | 0.07 % | | (2) Nonperforming assets to total assets | | 0.09 % | | 0.04 % | | 0.04 % | | 0.06 % | | 0.08 % | | (2) Allowance for credit losses to gross loans | | 0.93 % | | 0.93 % | | 0.91 % | | 0.89 % | | 0.95 % | | (2) CAPITAL RATIOS | | | | | | | | | | | | Tier 1 leverage | | 9.04 % | | 8.96 % | | 8.86 % | | 8.77 % | | 8.83 % | | Common equity tier 1 capital | | 12.46 % | | 12.58 % | | 12.21 % | | 12.08 % | | 12.37 % | | Tier 1 risk-based capital | | 12.46 % | | 12.58 % | | 12.21 % | | 12.08 % | | 12.37 % | | Total risk-based capital | | 15.34 % | | 15.50 % | | 15.06 % | | 14.90 % | | 15.29 % | Consolidated Balance Sheets - Quarterly Trend This table provides a quarterly trend of the Company's consolidated balance sheets, detailing assets, liabilities, and shareholders' equity from June 30, 2025, back to June 30, 2024 | | | June 30 | | March 31 | | December 31 | | September 30 | | June 30 | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | | 2025 | | 2025 | | 2024 | | 2024 | | 2024 | | ASSETS (thousands) | | | | | | | | | | | | Cash and demand deposits due from banks | $ | 34,246 | $ | 28,786 | $ | 22,830 | $ | 27,019 | $ | 22,690 | | Fed Funds sold and interest bearing balances due | | | | | | | | | | | | from banks | | 74,308 | | 40,393 | | 1,712 | | 359 | | 869 | | Total cash and cash equivalents | | 108,554 | | 69,179 | | 24,542 | | 27,378 | | 23,559 | | Available-for-sale securities, at fair value | | 500,560 | | 513,040 | | 489,029 | | 506,806 | | 505,646 | | Federal Home Loan Bank stock | | 5,600 | | 5,600 | | 12,762 | | 12,762 | | 12,762 | | Mortgage loans held-for-sale | | 55 | | 127 | | 242 | | 504 | | 637 | | Loans | | 1,397,513 | | 1,367,724 | | 1,423,571 | | 1,424,283 | | 1,381,636 | | Less allowance for credit losses | | 12,977 | | 12,735 | | 12,895 | | 12,635 | | 13,095 | | Net loans | | 1,384,536 | | 1,354,989 | | 1,410,676 | | 1,411,648 | | 1,368,541 | | Premises and equipment | | 28,171 | | 28,108 | | 27,659 | | 27,674 | | 27,843 | | Cash surrender value of bank-owned life | | | | | | | | | | | | insurance policies | | 45,774 | | 45,833 | | 34,882 | | 34,625 | | 34,382 | | Goodwill and other intangible assets | | 48,282 | | 48,282 | | 48,283 | | 48,283 | | 48,283 | | Other assets | | 34,636 | | 37,429 | | 38,166 | | 37,221 | | 38,486 | | Total assets | $ | 2,156,168 | $ | 2,102,587 | $ | 2,086,241 | $ | 2,106,901 | $ | 2,060,139 | | LIABILITIES AND SHAREHOLDERS' EQUITY (thousands) | | | | | | | | | | | | Liabilities | | | | | | | | | | | | Demand deposits | $ | 493,477 | $ | 404,194 | $ | 416,373 | $ | 421,493 | $ | 412,193 | | Interest bearing demand deposits | | 223,376 | | 243,939 | | 237,548 | | 228,902 | | 232,660 | | Money market deposits | | 446,845 | | 473,138 | | 423,883 | | 471,745 | | 429,150 | | Savings | | 289,746 | | 286,399 | | 281,665 | | 276,095 | | 279,847 | | Certificates of deposit | | 395,932 | | 390,239 | | 387,591 | | 383,597 | | 368,449 | | Total deposits | | 1,849,376 | | 1,797,909 | | 1,747,060 | | 1,781,832 | | 1,722,299 | | Short-term borrowings | | 43,208 | | 47,310 | | 53,567 | | 52,434 | | 44,194 | | Federal Home Loan Bank advances | | — | | — | | 30,000 | | 15,000 | | 45,000 | | Subordinated debt, net of unamortized issuance | | | | | | | | | | | | costs | | 29,469 | | 29,447 | | 29,424 | | 29,402 | | 29,380 | | Total borrowed funds | | 72,677 | | 76,757 | | 112,991 | | 96,836 | | 118,574 | | Other liabilities | | 13,615 | | 12,365 | | 15,914 | | 15,248 | | 17,017 | | Total liabilities | | 1,935,668 | | 1,887,031 | | 1,875,965 | | 1,893,916 | | 1,857,890 | | Shareholders' equity | | | | | | | | | | | | Common stock | | 124,607 | | 125,547 | | 126,224 | | 125,218 | | 126,126 | | Shares to be issued for deferred compensation | | | | | | | | | | | | obligations | | 2,331 | | 2,508 | | 2,383 | | 3,981 | | 3,951 | | Retained earnings | | 107,949 | | 104,940 | | 103,024 | | 101,065 | | 99,808 | | Accumulated other comprehensive income (loss) | | (14,387) | | (17,439) | | (21,355) | | (17,279) | | (27,636) | | Total shareholders' equity | | 220,500 | | 215,556 | | 210,276 | | 212,985 | | 202,249 | | Total liabilities and shareholders' equity | $ | 2,156,168 | $ | 2,102,587 | $ | 2,086,241 | $ | 2,106,901 | $ | 2,060,139 | Consolidated Statements of Income This table presents the consolidated statements of income for the six months ended June 30, 2025, and June 30, 2024, showing interest income, interest expense, net interest income, provision for credit losses, noninterest income, noninterest expenses, and net income | | | Six Months Ended June 30 | | | | --- | --- | --- | --- | --- | | | | 2025 | | 2024 | | Interest income (thousands) | | | | | | Loans | $ | 39,180 | $ | 36,920 | | Available-for-sale securities | | 5,675 | | 5,688 | | Federal Home Loan Bank stock | | 285 | | 304 | | Federal funds sold and other | | 735 | | 556 | | Total interest income | | 45,875 | | 43,468 | | Interest expense (thousands) | | | | | | Deposits | | 14,854 | | 14,476 | | Short-term borrowings | | 665 | | 642 | | Federal Home Loan Bank advances | | 170 | | 1,026 | | Subordinated debt | | 532 | | 532 | | Total interest expense | | 16,221 | | 16,676 | | Net interest income (thousands) | | 29,654 | | 26,792 | | (Reversal of) provision for credit losses (thousands) | | (1,206) | | 562 | | Net interest income after provision for credit losses (thousands) | | 30,860 | | 26,230 | | Noninterest income (thousands) | | | | | | Service charges and fees | | 4,045 | | 3,956 | | Wealth management fees | | 2,063 | | 1,987 | | Earnings on bank-owned life insurance policies | | 672 | | 496 | | Net gain on sale of mortgage loans | | 77 | | 101 | | Other | | 357 | | 536 | | Total noninterest income | | 7,214 | | 7,076 | | Noninterest expenses (thousands) | | | | | | Compensation and benefits | | 14,879 | | 13,985 | | Occupancy and equipment | | 5,250 | | 5,325 | | Other professional services | | 1,574 | | 1,040 | | ATM and debit card fees | | 1,041 | | 956 | | Marketing | | 928 | | 851 | | FDIC insurance premiums | | 570 | | 532 | | Other losses | | 454 | | 561 | | Other | | 2,348 | | 2,321 | | Total noninterest expenses | | 27,044 | | 25,571 | | Income before income tax expense (thousands) | | 11,030 | | 7,735 | | Income tax expense (thousands) | | 2,050 | | 1,123 | | Net income (thousands) | $ | 8,980 | $ | 6,612 | | Earnings per common share | | | | | | Basic | $ | 1.21 | $ | 0.88 | | Diluted | | 1.21 | | 0.88 | | Cash dividends per common share | | 0.56 | | 0.56 | Consolidated Statements of Income - Quarterly Trend This table provides a quarterly trend of the Company's consolidated statements of income, detailing interest income, interest expense, net interest income, provision for credit losses, noninterest income, noninterest expenses, and net income for the three-month periods ended June 30, 2025, and prior quarters | | | | | | | Three Months Ended | | | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | | June 30 | | March 31 | | December 31 | | September 30 | | June 30 | | | | 2025 | | 2025 | | 2024 | | 2024 | | 2024 | | Interest income (thousands) | | | | | | | | | | | | Loans | $ | 19,832 | $ | 19,348 | $ | 20,145 | $ | 20,230 | | 18,863 | | Available-for-sale securities | | 3,032 | | 2,643 | | 2,656 | | 2,749 | | 2,804 | | Federal Home Loan Bank stock | | 125 | | 160 | | 168 | | 168 | | 158 | | Federal funds sold and other | | 253 | | 482 | | 200 | | 194 | | 263 | | Total interest income | | 23,242 | | 22,633 | | 23,169 | | 23,341 | | 22,088 | | Interest expense (thousands) | | | | | | | | | | | | Deposits | | 7,391 | | 7,463 | | 7,583 | | 7,631 | | 7,313 | | Short-term borrowings | | 324 | | 341 | | 413 | | 384 | | 321 | | Federal Home Loan Bank advances | | 132 | | 38 | | 352 | | 571 | | 638 | | Subordinated debt | | 266 | | 266 | | 266 | | 267 | | 266 | | Total interest expense | | 8,113 | | 8,108 | | 8,614 | | 8,853 | | 8,538 | | Net interest income (thousands) | | 15,129 | | 14,525 | | 14,555 | | 14,488 | | 13,550 | | (Reversal of) provision for credit losses (thousands) | | (1,099) | | (107) | | 376 | | 946 | | 170 | | Net interest income after provision for credit | | | | | | | | | | | | losses (thousands) | | 16,228 | | 14,632 | | 14,179 | | 13,542 | | 13,380 | | Noninterest income (thousands) | | | | | | | | | | | | Service charges and fees | | 2,071 | | 1,974 | | 2,186 | | 2,133 | | 2,023 | | Wealth management fees | | 1,084 | | 979 | | 1,051 | | 1,003 | | 1,048 | | Earnings on bank-owned life insurance policies | | 300 | | 372 | | 259 | | 252 | | 253 | | Net gain on sale of mortgage loans | | 47 | | 30 | | 75 | | 37 | | 67 | | Other | | 184 | | 173 | | 401 | | 103 | | 217 | | Total noninterest income | | 3,686 | | 3,528 | | 3,972 | | 3,528 | | 3,608 | | Noninterest expenses (thousands) | | | | | | | | | | | | Compensation and benefits | | 7,496 | | 7,383 | | 7,340 | | 7,251 | | 6,970 | | Occupancy and equipment | | 2,650 | | 2,600 | | 2,554 | | 2,645 | | 2,619 | | Other professional services | | 863 | | 711 | | 584 | | 588 | | 527 | | ATM and debit card fees | | 555 | | 486 | | 516 | | 503 | | 487 | | Marketing | | 469 | | 459 | | 458 | | 403 | | 425 | | FDIC insurance premiums | | 267 | | 303 | | 309 | | 291 | | 280 | | Other losses | | 339 | | 115 | | 209 | | 347 | | 416 | | Other | | 1,106 | | 1,242 | | 1,360 | | 1,200 | | 1,171 | | Total noninterest expenses | | 13,745 | | 13,299 | | 13,330 | | 13,228 | | 12,895 | | Income before income tax expense (thousands) | | 6,169 | | 4,861 | | 4,821 | | 3,842 | | 4,093 | | Income tax expense (thousands) | | 1,138 | | 912 | | 825 | | 561 | | 612 | | Net income (thousands) | $ | 5,031 | $ | 3,949 | $ | 3,996 | $ | 3,281 | $ | 3,481 | | Earnings per common share | | | | | | | | | | | | Basic | $ | 0.68 | $ | 0.53 | $ | 0.54 | $ | 0.44 | $ | 0.47 | | Diluted | | 0.68 | | 0.53 | | 0.54 | | 0.44 | | 0.46 | | 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 costs of interest-bearing liabilities, reported on a fully taxable equivalent (FTE) basis, for the three-month periods ended June 30, 2025, and prior quarters | | | | Three Months Ended | | | | --- | --- | --- | --- | --- | --- | | | June 30 | March 31 | December 31 | September 30 | June 30 | | | 2025 | 2025 | 2024 | 2024 | 2024 | | INTEREST EARNING ASSETS (%) | | | | | | | (1) Loans | 5.71 % | 5.71 % | 5.66 % | 5.72 % | 5.50 % | | Available-for-sale securities | 2.38 % | 2.20 % | 2.15 % | 2.17 % | 2.17 % | | Federal Home Loan Bank stock | 8.94 % | 5.82 % | 5.25 % | 5.26 % | 4.97 % | | Fed funds sold | 3.83 % | 4.32 % | 4.54 % | 5.36 % | 5.30 % | | Other | 4.92 % | 4.06 % | 4.94 % | 5.18 % | 7.38 % | | Total interest earning assets | 4.81 % | 4.75 % | 4.72 % | 4.75 % | 4.59 % | | INTEREST BEARING LIABILITIES (%) | | | | | | | Interest bearing demand deposits | 0.37 % | 0.41 % | 0.36 % | 0.28 % | 0.30 % | | Money market deposits | 2.55 % | 2.58 % | 2.71 % | 2.77 % | 2.85 % | | Savings | 0.76 % | 0.76 % | 0.64 % | 0.61 % | 0.56 % | | Certificates of deposit | 3.82 % | 3.93 % | 4.07 % | 4.13 % | 4.01 % | | Short-term borrowings | 3.11 % | 3.18 % | 3.22 % | 3.17 % | 3.18 % | | Federal Home Loan Bank advances | 4.53 % | 4.53 % | 4.88 % | 5.52 % | 5.55 % | | Subordinated debt, net of unamortized | | | | | | | issuance costs | 3.61 % | 3.62 % | 3.62 % | 3.62 % | 3.63 % | | Total interest bearing liabilities | 2.24 % | 2.26 % | 2.38 % | 2.42 % | 2.38 % | | Net yield on interest earning assets (FTE) (2) | 3.14 % | 3.06 % | 2.98 % | 2.96 % | 2.82 % | | Net interest spread | 2.57 % | 2.49 % | 2.34 % | 2.33 % | 2.21 % | Average Balances This table provides the average daily amounts outstanding for interest-earning assets, non-earning assets, interest-bearing liabilities, and noninterest-bearing liabilities for the three-month periods ended June 30, 2025, and prior quarters | | | | | | | Three Months Ended | | | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | | June 30 | | March 31 | | December 31 | | September 30 | | June 30 | | | | 2025 | | 2025 | | 2024 | | 2024 | | 2024 | | INTEREST EARNING ASSETS (thousands) | | | | | | | | | | | | (1) Loans | $ | 1,388,684 | $ | 1,370,765 | $ | 1,412,578 | $ | 1,403,810 | $ | 1,375,523 | | (2) Available-for-sale securities | | 534,352 | | 514,479 | | 522,733 | | 536,379 | | 545,827 | | Federal Home Loan Bank stock | | 5,600 | | 11,011 | | 12,762 | | 12,762 | | 12,762 | | Fed funds sold | | | 6 | 4 | | 8 | | 4 | | 7 | | (3) Other | | 20,487 | | 47,374 | | 15,905 | | 14,597 | | 14,054 | | Total interest earning assets | | 1,949,129 | | 1,943,633 | | 1,963,986 | | 1,967,552 | | 1,948,173 | | NONEARNING ASSETS (thousands) | | | | | | | | | | | | Allowance for credit losses | | (13,369) | | (12,884) | | (12,598) | | (13,125) | | (13,431) | | Cash and demand deposits due from banks | | 22,026 | | 23,899 | | 22,800 | | 25,903 | | 23,931 | | Premises and equipment | | 28,306 | | 27,962 | | 27,773 | | 27,868 | | 27,999 | | Other assets | | 106,595 | | 102,927 | | 92,608 | | 87,002 | | 80,539 | | Total assets | $ | 2,092,687 | $ | 2,085,537 | $ | 2,094,569 | $ | 2,095,200 | $ | 2,067,211 | | INTEREST BEARING LIABILITIES (thousands) | | | | | | | | | | | | Interest bearing demand deposits | $ | 236,076 | $ | 240,860 | $ | 232,271 | $ | 232,018 | $ | 238,866 | | Money market deposits | | 449,110 | | 460,663 | | 436,235 | | 451,216 | | 434,061 | | Savings | | 286,434 | | 286,364 | | 276,856 | | 274,828 | | 283,605 | | Certificates of deposit | | 395,450 | | 387,820 | | 386,871 | | 375,936 | | 366,440 | | Short-term borrowings | | 41,661 | | 43,563 | | 50,862 | | 48,304 | | 40,609 | | Federal Home Loan Bank advances | | 11,539 | | 3,333 | | 28,261 | | 40,435 | | 45,494 | | Subordinated debt, net of unamortized issuance | | | | | | | | | | | | costs | | 29,455 | | 29,433 | | 29,410 | | 29,388 | | 29,365 | | Total interest bearing liabilities | | 1,449,725 | | 1,452,036 | | 1,440,766 | | 1,452,125 | | 1,438,440 | | NONINTEREST BEARING LIABILITIES AND SHAREHOLDERS' EQUITY (thousands) | | | | | | | | | | | | Demand deposits | | 409,262 | | 403,024 | | 425,116 | | 418,973 | | 411,282 | | Other liabilities | | 14,158 | | 16,265 | | 15,775 | | 15,658 | | 16,755 | | Shareholders' equity | | 219,542 | | 214,212 | | 212,912 | | 208,444 | | 200,734 | | Total liabilities and shareholders' equity | $ | 2,092,687 | $ | 2,085,537 | $ | 2,094,569 | $ | 2,095,200 | $ | 2,067,211 | Asset Quality Analysis This table provides a detailed analysis of the Company's asset quality, including nonperforming assets, allowance for credit losses, and net loan charge-offs (recoveries) for the three-month periods ended June 30, 2025, and prior quarters | | | June 30 2025 | | March 31 2025 | | December 31 2024 | | September 30 2024 | | June 30 2024 | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | NONPERFORMING ASSETS (thousands) | | | | | | | | | | | | Commercial and industrial | $ | 17 | $ | — | $ | — | $ | 120 | $ | 271 | | Commercial real estate | | 533 | | — | | — | | — | | — | | Agricultural | | — | | — | | — | | — | | 167 | | Residential real estate | | 614 | | 173 | | 282 | | 427 | | 556 | | Consumer | | — | | — | | — | | — | | — | | Total nonaccrual loans | | 1,164 | | 173 | | 282 | | 547 | | 994 | | Accruing loans past due 90 days or more | | 31 | | 26 | | 19 | | 64 | | 15 | | Total nonperforming loans | | 1,195 | | 199 | | 301 | | 611 | | 1,009 | | Foreclosed assets | | 667 | | 649 | | 544 | | 546 | | 629 | | Debt securities | | — | | — | | — | | 12 | | 12 | | Total nonperforming assets | $ | 1,862 | $ | 848 | $ | 845 | $ | 1,169 | $ | 1,650 | | Nonperforming loans to gross loans | | 0.09 % | | 0.01 % | | 0.02 % | | 0.04 % | | 0.07 % | | Nonperforming assets to total assets | | 0.09 % | | 0.04 % | | 0.04 % | | 0.06 % | | 0.08 % | | Allowance for credit losses as a % of nonaccrual | | | | | | | | | | | | (1) loans | | N/M | | N/M | | N/M | | N/M | | N/M | | ALLOWANCE FOR CREDIT LOSSES (thousands) | | | | | | | | | | | | Allowance at beginning of period | $ | 12,735 | $ | 12,895 | $ | 12,635 | $ | 13,095 | $ | 13,390 | | Charge-offs | | 390 | | 172 | | 299 | | 1,767 | | 527 | | Recoveries | | 1,822 | | 224 | | 197 | | 408 | | 134 | | Net loan charge-offs (recoveries) | | (1,432) | | (52) | | 102 | | 1,359 | | 393 | | (Reversal of) provision for credit losses - loans | | (1,190) | | (212) | | 362 | | 899 | | 98 | | Allowance at end of period | $ | 12,977 | $ | 12,735 | $ | 12,895 | $ | 12,635 | $ | 13,095 | | Allowance for credit losses to gross loans | | 0.93 % | | 0.93 % | | 0.91 % | | 0.89 % | | 0.95 % | | Reserve for unfunded commitments (thousands) | | 708 | | 617 | | 512 | | 498 | | 450 | | Provision for credit losses - unfunded | | | | | | | | | | | | commitments (thousands) | | 91 | | 105 | | 14 | | 47 | | 72 | | Reserve to unfunded commitments | | 0.16 % | | 0.14 % | | 0.15 % | | 0.15 % | | 0.14 % | | NET LOAN CHARGE-OFFS (RECOVERIES) (thousands) | | | | | | | | | | | | Commercial and industrial | $ | 68 | $ | (80) | $ | 13 | $ | (6) | $ | 334 | | Commercial real estate | | (50) | | (2) | | (2) | | (318) | | (29) | | Agricultural | | — | | — | | (4) | | — | | — | | Residential real estate | | (16) | | (13) | | (16) | | (20) | | (19) | | Consumer | | (1,434) | | 43 | | 111 | | 1,703 | | 107 | | Total | $ | (1,432) | $ | (52) | $ | 102 | $ | 1,359 | $ | 393 | | Net (recoveries) charge-offs (Quarter to Date | | | | | | | | | | | | annualized to average loans) | | (0.41)% | | (0.02)% | | 0.03 % | | 0.39 % | | 0.11 % | | Net (recoveries) charge-offs (Year to Date | | | | | | | | | | | | annualized to average loans) | | (0.22)% | | (0.02)% | | 0.14 % | | 0.17 % | | 0.06 % | | DELINQUENT AND NONACCRUAL LOANS (thousands) | | | | | | | | | | | | Accruing loans 30-89 days past due | $ | 1,076 | $ | 5,555 | $ | 5,682 | $ | 2,226 | $ | 1,484 | | Accruing loans past due 90 days or more | | 31 | | 26 | | 19 | | 64 | | 15 | | Total accruing past due loans | | 1,107 | | 5,581 | | 5,701 | | 2,290 | | 1,499 | | Nonaccrual loans | | 1,164 | | 173 | | 282 | | 547 | | 994 | | Total past due and nonaccrual loans | $ | 2,271 | $ | 5,754 | $ | 5,983 | $ | 2,837 | $ | 2,493 | Consolidated Loan and Deposit Analysis This table provides a detailed breakdown of the Company's loan and deposit portfolios, including annualized growth rates, for the three-month periods ended June 30, 2025, and prior quarters Loan Analysis: | | | | | | | | | | | | | Annualized Growth | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | | | June 30 | | March 31 | | December 31 | | September 30 | | June 30 | % | | | | | 2025 | | 2025 | | 2024 | | 2024 | | 2024 | Quarter to Date | | Commercial and industrial (thousands) | (1) | $ | 207,719 | $ | 205,172 | $ | 200,623 | $ | 197,372 | $ | 198,769 | 4.97 % | | (1) Commercial real estate (thousands) | | | 614,383 | | 596,282 | | 591,718 | | 590,255 | | 586,481 | 12.14 % | | Advances to mortgage | | | | | | | | | | | | | | brokers (thousands) | | | 3,005 | | 3,015 | | 63,080 | | 76,187 | | 39,300 | (1.33)% | | Agricultural (thousands) | | | 96,842 | | 94,359 | | 99,694 | | 96,794 | | 94,996 | 10.53 % | | Total commercial loans (thousands) | | | 921,949 | | 898,828 | | 955,115 | | 960,608 | | 919,546 | 10.29 % | | Residential real estate (thousands) | | | 398,668 | | 387,348 | | 380,872 | | 369,846 | | 365,188 | 11.69 % | | Consumer (thousands) | | | 76,896 | | 81,548 | | 87,584 | | 93,829 | | 96,902 | (22.82)% | | Gross loans (thousands) | | $ | 1,397,513 | $ | 1,367,724 | $ | 1,423,571 | $ | 1,424,283 | $ | 1,381,636 | 8.71 % | Deposit Analysis: | | | | | | | | | | | | Annualized Growth | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | | June 30 | | March 31 | December 31 | | | September 30 | | June 30 | % | | | | 2025 | | 2025 | 2024 | | | 2024 | | 2024 | Quarter to Date | | Noninterest bearing demand | | | | | | | | | | | | | deposits (thousands) | $ | 493,477 | $ | 404,194 | $ | 416,373 | $ | 421,493 | $ | 412,193 | 88.36 % | | Interest bearing demand | | | | | | | | | | | | | deposits (thousands) | | 223,376 | | 243,939 | | 237,548 | | 228,902 | | 232,660 | (33.72)% | | Money market deposits (thousands) | | 446,845 | | 473,138 | | 423,883 | | 471,745 | | 429,150 | (22.23)% | | Savings (thousands) | | 289,746 | | 286,399 | | 281,665 | | 276,095 | | 279,847 | 4.67 % | | Certificates of deposit (thousands) | | 395,932 | | 390,239 | | 387,591 | | 383,597 | | 368,449 | 5.84 % | | Total deposits (thousands) | $ | 1,849,376 | $ | 1,797,909 | $ | 1,747,060 | $ | 1,781,832 | $ | 1,722,299 | 11.45 % | Reconciliation of Non-GAAP Financial Measures This table provides a reconciliation of non-GAAP financial measures to their most directly comparable GAAP measures, including core net income, core noninterest expense, net interest income (FTE), and various core performance ratios, for the three-month periods ended June 30, 2025, and prior quarters | | | | | | | | Three Months Ended | | | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | | | June 30 | | March 31 | | December 31 | | September 30 | | June 30 | | | | | 2025 | | 2025 | | 2024 | | 2024 | | 2024 | | Net income (thousands) | | $ | 5,031 | $ | 3,949 | $ | 3,996 | $ | 3,281 | $ | 3,481 | | Net gains (losses) on foreclosed assets (thousands) | | | — | | (55) | | 74 | | 4 | | 6 | | (1) Overdraft (charge-off) recoveries (thousands) | | | 1,556 | | — | | 66 | | (1,622) | | — | | (2) Profitability initiative cost (thousands) | | | (173) | | — | | (23) | | — | | — | | (2) Legal fees related to Nasdaq (thousands) | | | (47) | | (121) | | — | | — | | — | | Income tax impact on items above (thousands) | | | (281) | | 37 | | (25) | | 340 | | (1) | | Exchange fees on bank-owned life | | | | | | | | | | | | | (3) insurance transfers (thousands) | | | (120) | | — | | — | | — | | — | | Income tax expense on bank-owned | | | | | | | | | | | | | (4) life insurance surrender (thousands) | | | — | | (166) | | — | | — | | — | | Core net income (thousands) | (A) | $ | 4,096 | $ | 4,254 | $ | 3,904 | $ | 4,559 | $ | 3,476 | | Noninterest expenses (thousands) | | $ | 13,745 | $ | 13,299 | $ | 13,330 | $ | 13,228 | $ | 12,895 | | Amortization of acquisition | | | | | | | | | | | | | intangibles (thousands) | | | — | | 1 | | 1 | | — | | 1 | | Non-core expenses (thousands) | | | 220 | | 121 | | 23 | | — | | — | | Core noninterest expense (thousands) | (B) | $ | 13,525 | $ | 13,177 | $ | 13,306 | $ | 13,228 | $ | 12,894 | | Net interest income (thousands) | | $ | 15,129 | $ | 14,525 | $ | 14,555 | $ | 14,488 | $ | 13,550 | | Tax equivalent adjustment for net | | | | | | | | | | | | | interest margin (thousands) | | | 178 | | 184 | | 213 | | 232 | | 237 | | Net interest income (FTE) (thousands) | (C) | | 15,307 | | 14,709 | | 14,768 | | 14,720 | | 13,787 | | Noninterest income (thousands) | | | 3,686 | | 3,528 | | 3,972 | | 3,528 | | 3,608 | | Tax equivalent adjustment for | | | | | | | | | | | | | efficiency ratio (thousands) | | | 63 | | 78 | | 54 | | 53 | | 53 | | Core revenue (FTE) (thousands) | | | 19,056 | | 18,315 | | 18,794 | | 18,301 | | 17,448 | | Non-core revenue (loss) (thousands) | | | (120) | | (55) | | 74 | | 4 | | 6 | | Core revenue (thousands) | (D) | $ | 19,176 | $ | 18,370 | $ | 18,720 | $ | 18,297 | $ | 17,442 | | Efficiency ratio | (B/D) | | 70.53 % | | 71.73 % | | 71.08 % | | 72.30 % | | 73.93 % | | Average earning assets (thousands) | (E) | | 1,949,129 | | 1,943,633 | | 1,963,986 | | 1,967,552 | | 1,948,173 | | Net yield on interest earning assets | | | | | | | | | | | | | (FTE) | (C/E) | | 3.14 % | | 3.06 % | | 2.98 % | | 2.96 % | | 2.82 % | | Average assets (thousands) | (F) | | 2,092,687 | | 2,085,537 | | 2,094,569 | | 2,095,200 | | 2,067,211 | | Average shareholders' equity (thousands) | (G) | | 219,542 | | 214,212 | | 212,912 | | 208,444 | | 200,734 | | Average tangible shareholders' | | | | | | | | | | | | | equity (thousands) | (H) | | 171,260 | | 165,929 | | 164,629 | | 160,161 | | 152.451 | | Average diluted shares outstanding (5) | (I) | | 7,398,109 | | 7,432,162 | | 7,451,718 | | 7,473,184 | | 7,494,828 | | Core diluted earnings per share | (A/I) $ | | 0.55 | $ | 0.57 | $ | 0.52 | $ | 0.61 | $ | 0.46 | | Core return on average assets | (A/F) | | 0.79 % | | 0.83 % | | 0.74 % | | 0.87 % | | 0.68 % | | Core return on average | | | | | | | | | | | | | shareholders' equity | (A/G) | | 7.48 % | | 8.05 % | | 7.29 % | | 8.70 % | | 6.96 % | | Core return on average tangible | | | | | | | | | | | | | shareholders' equity | (A/H) | | 9.59 % | | 10.40 % | | 9.43 % | | 11.32 % | | 9.17 % |