Financial Data and Key Metrics Changes - The third quarter reflected continued momentum in core earnings with net interest margin expanding by 11 basis points to 3.28% compared to the prior quarter [5] - Customer fees, excluding net credit valuation adjustment, grew by $10 million, while adjusted expenses declined by $1 million, leading to an improved efficiency ratio of 59.6% [5] - Diluted earnings per share was $1.48, down from $1.63 in the prior period, impacted by a $0.06 per share negative effect from net credit valuation adjustment [7] - The provision for credit loss was recorded at $49 million, with net charge-offs of $56 million or 37 basis points of loans on an annualized basis [6][21] Business Line Data and Key Metrics Changes - Net interest income increased by $52 million or 8% compared to Q3 2024, benefiting from fixed asset repricing and favorable shifts in the composition of average interest-earning assets [9] - Customer-related non-interest income was $163 million for the quarter, slightly down from $164 million in the prior period, but adjusted customer-related non-interest income increased by 6% compared to the second quarter [12][13] - Average loans decreased by 2.1% annualized over the previous quarter, while average non-interest-bearing deposits grew by approximately $192 million or 0.8% compared to the prior quarter [15][16] Market Data and Key Metrics Changes - Total borrowings declined by $1.8 billion during the quarter, with short-term FHLB advances decreasing by $2.3 billion [19] - The cost of total deposits declined sequentially by one basis point to 1.67% [18] - Non-performing assets remained low at 0.54% of loans and other real estate owned, compared to 0.51% in the prior quarter [21] Company Strategy and Development Direction - The company expects to continue producing positive operating leverage as revenue growth outpaces non-interest expense growth [24] - The outlook for net interest income for 2026 is moderately increasing relative to 2025, supported by continued earnings asset remix and growth in loans and deposits [11] - The company is focused on maintaining a strong credit quality and has established a full reserve against certain loans, viewing recent charge-offs as isolated incidents [6][30] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the credit quality and indicated that the recent charge-offs were isolated incidents, with no further exposure related to the borrowers involved [30][31] - The company anticipates moderate loan growth driven by commercial loans, despite some recent reductions in C&I classified levels [15][76] - Management noted that the current economic environment presents both challenges and opportunities, with a focus on strategic investments in revenue-generating businesses [14][93] Other Important Information - The common equity Tier one ratio was reported at 11.3%, indicating a strong capital position [23] - The company has been actively pursuing new products and marketing strategies to enhance loan growth and customer acquisition [73][93] Q&A Session Summary Question: Can you talk about the isolated incident related to the charge-offs? - Management confirmed that the charge-offs were an isolated incident and that a thorough review of the portfolio did not reveal similar issues [29][30] Question: What is the outlook for net interest income? - The company expects a slight to moderate increase in net interest income, factoring in fixed asset repricing and loan growth [11][39] Question: How is loan demand changing? - Loan spreads have improved slightly, and while there has been some runoff in C&I, production remains strong [88][90] Question: What is the company's risk appetite following recent events? - Management stated that the risk appetite remains unchanged and that they will continue to underwrite loans as they have historically [107] Question: How does the company view the NDFI portfolio? - Management believes that concerns regarding the NDFI portfolio are somewhat overblown, emphasizing the safety of certain categories within it [120]

Financial Data and Key Metrics Changes - The company reported net income of $10.2 million or $0.66 per diluted share, a 60% increase from Q1 2024 and a $275,000 increase from the previous quarter [4] - Net interest income for the quarter was $32.8 million, representing a 4.5% increase compared to the previous quarter [5] - The efficiency ratio improved to 64.9% from 68.3% in the linked quarter and 73.8% in the prior year's first quarter [11] Business Line Data and Key Metrics Changes - The loan and lease portfolio grew at an annualized rate of 2.8% during the first quarter, with total loans and leases increasing by $22.8 million [11] - Non-interest income declined by $1.2 million or 12.8% compared to the linked quarter, primarily due to a decrease in gains on the sale of loans and other fees [10] - The company anticipates loan growth to be in the mid-single digit range for the remainder of 2025 [14] Market Data and Key Metrics Changes - Total deposits increased by $27 million or an annualized growth rate of 3.2%, with organic deposit growth of $67.1 million excluding brokered deposits [14][15] - The loan-to-deposit ratio was 95.8% at quarter-end, indicating a disciplined approach to managing loan growth [15] - The average deposit account, excluding CDs, was approximately $28,000, reflecting a granular deposit base [15] Company Strategy and Development Direction - The company continues to focus on deepening customer relationships to reduce reliance on brokered funding, which is seen as a valuable characteristic of the deposit franchise [16] - Management is committed to increasing tangible common equity while balancing dividend payments and potential stock repurchases [17][18] - The company plans to invest in technology and digital initiatives to enhance customer engagement and operational efficiency [33] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the strength of the core deposit franchise and the ability to control non-interest expenses, positioning the company well for future success [19][90] - The economic environment in Ohio and Southeastern Indiana remains stable, with no signs of deterioration in credit quality [19] - Management anticipates continued loan demand but acknowledges potential impacts from economic uncertainties on loan growth [14][19] Other Important Information - The company announced a quarterly dividend of $0.17 per share, representing an annualized yield of 3.48% [8] - A stock repurchase program was renewed, authorizing the repurchase of up to $13.5 million in outstanding shares [8] Q&A Session Summary Question: Margin inputs and funding costs - Management indicated there is still opportunity for margin expansion, expecting 4-5 basis points in the second quarter and 2-3 basis points in the third quarter [26][30] Question: Expense normalization and future investments - Management expects expenses to remain flat in the second quarter, with potential increases in the second half due to investments in technology and marketing [33][37] Question: Fee income outlook - Management anticipates a bounce back in fee income in the second quarter, particularly in mortgage and leasing [40][42] Question: Loan yield increase - The increase in loan yield was attributed to new loans repricing higher, with no unusual recoveries contributing to the increase [51] Question: Commercial borrowers' sentiment - Management noted a cautious sentiment among commercial borrowers regarding CapEx spending due to economic uncertainties [56][58] Question: Credit metrics and expectations - Management remains optimistic about credit quality, with delinquencies down and a healthy allowance for credit losses [83][84]

Financial Data and Key Metrics Changes - The company reported a net income of $15.6 million or $0.74 per diluted share for Q1 2025, compared to $16 million or $0.76 per diluted share in the prior year period, indicating a slight decrease in earnings [4] - Overall loans increased by 3.4% annualized, while core deposits rose by 0.8% annualized [4] - Tangible book value per share grew by 13.2% compared to the prior year quarter [5] Business Line Data and Key Metrics Changes - Total loans grew by $34 million, with commercial loan generation strong at $54.8 million, representing an 11% annualized rate [8][9] - The residential mortgage portfolio saw a slight decline of $3.9 million, while the installment loan portfolio decreased by $17 million [9] - Nonperforming loans were $7.1 million or 17 basis points of total loans, up slightly from 15 basis points at year-end 2024 [11] Market Data and Key Metrics Changes - Total deposits as of March 31, 2025, were $4.63 billion, with retail deposits increasing by $34.2 million and business deposits declining by $44 million [6] - The total cost of funds decreased by 12 basis points to 1.8% [7] Company Strategy and Development Direction - The company aims to be Michigan's most people-focused bank, continuing to invest in its team and technology while supporting communities [3][22] - The management is optimistic about the long-term future of the franchise despite current market uncertainties [5] Management Comments on Operating Environment and Future Outlook - Management noted that while there is cautiousness among business owners regarding expansion, they are maintaining close contact with clients to monitor their situations [5][36] - The company is prepared for various economic scenarios, including potential Fed rate cuts, and believes it can maintain consistent earnings [29][30] Other Important Information - Non-interest income totaled $10.4 million in Q1 2025, down from $12.6 million in the year-ago quarter [17] - Non-interest expense was $34.3 million, slightly lower than the forecasted range [21] Q&A Session Summary Question: Potential for Outperformance in Guidance - Management indicated that there may be opportunities to outperform guidance, particularly in provisions, depending on deposit trends and potential rate cuts [28][29] Question: Client Conversations Amid Uncertainty - Management reported that while there is uncertainty, they are not seeing immediate impacts on credit quality, although they are monitoring the automotive sector closely [35][39] Question: Stock Buybacks - Management confirmed that share repurchases are part of their capital management strategy, and they will continue to evaluate market conditions for potential buybacks [45][46] Question: Loan Growth Outlook - Management expressed that uncertainties have made borrowers cautious, but there could be pent-up demand if economic conditions stabilize [50][51] Question: Capital Management and M&A Considerations - Management stated they are open to M&A opportunities, emphasizing their strong community bank franchise and recent technology investments [52][54]