OHIO VALLEY BANC CORP

Previous wording

Certain statements contained in this quarterly report on Form 10-Q (the “report”) and other publicly available documents incorporated herein by reference constitute "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Act of 1934, as amended (the “Exchange Act”), and as defined in the Private Securities Litigation Reform Act of 1995. Such statements are often, but not always, identified by the use of such words as “believes,” “anticipates,” “expects,” “intends,” “plan,” “goal,” “seek,” “project,” “estimate,” “strategy,” “future,” “likely,” “may,” “should,” “will,” and other similar expressions. Such statements involve various important assumptions, risks, uncertainties, and other factors, many of which are beyond our control, particularly with regard to developments related to the current economic and geopolitical landscape, and which could cause actual results to differ materially from those expressed in such forward looking-statements. However, it is difficult to predict the effect of known factors, and by Ohio Valley Banc Corp. (“Ohio Valley”) cannot anticipate all factors that could affect future results. Important factors that could cause actual results to differ materially from expectations expressed in or implied in forward looking statements include, but are not limited to: the effects of fluctuating interest rates on our customers’ operations and financial condition; changes in political, economic or other factors, such as inflation rates, recessionary or expansive trends, taxes, tariffs, the effects of implementation of legislation and the continuing economic uncertainty in various parts of the world; competitive pressures; the level of defaults and prepayment on loans made by Ohio Valley and its direct and indirect subsidiaries (collectively, the “Company”); unanticipated litigation, claims, or assessments; fluctuations in the cost of obtaining funds to make loans; and regulatory changes. Additional detailed information concerning such factors is available in the Company’s filings with the Securities and Exchange Commission, under the Exchange Act, including the disclosure under the heading “Item 1A. Risk Factors” of Part I of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2024 and elsewhere in this document (including, without limitation, in conjunction with the forward looking statements themselves and under the heading “Critical Accounting Estimates”). All forward looking statements are qualified in their entirety by these and other cautionary statements that the Company makes from time to time in its other SEC filings and public communications. Readers are cautioned not to place undue reliance on such forward looking statements, which speak only as of the date hereof. The Company undertakes no obligation and disclaims any duty to update or revise any forward looking statements, whether as a result of new informati…

Excerpt shortened here; the source contains the full paragraph.

Current wording

Certain statements contained in this quarterly report on Form 10-Q (the “report”) and other publicly available documents incorporated herein by reference constitute "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Act of 1934, as amended (the “Exchange Act”), and as defined in the Private Securities Litigation Reform Act of 1995. Such statements are often, but not always, identified by the use of such words as “believes,” “anticipates,” “expects,” “intends,” “plan,” “goal,” “seek,” “project,” “estimate,” “strategy,” “future,” “likely,” “may,” “should,” “will,” and other similar expressions. Such statements involve various important assumptions, risks, uncertainties, and other factors, many of which are beyond our control, particularly with regard to developments related to the current economic and geopolitical landscape, and which could cause actual results to differ materially from those expressed in such forward looking-statements. However, it is difficult to predict the effect of known factors, and by Ohio Valley Banc Corp. (“Ohio Valley”) cannot anticipate all factors that could affect future results. Important factors that could cause actual results to differ materially from expectations expressed in or implied in forward looking statements include, but are not limited to: the effects of fluctuating interest rates on our customers’ operations and financial condition; changes in political, economic or other factors, such as inflation rates, recessionary or expansive trends, taxes, tariffs, the effects of implementation of legislation and the continuing economic uncertainty in various parts of the world; competitive pressures; the level of defaults and prepayment on loans made by Ohio Valley and its direct and indirect subsidiaries (collectively, the “Company”); unanticipated litigation, claims, or assessments; fluctuations in the cost of obtaining funds to make loans; and regulatory changes. Additional detailed information concerning such factors is available in the Company’s filings with the Securities and Exchange Commission, under the Exchange Act, including the disclosure under the heading “Item 1A. Risk Factors” of Part I of the 2024 Annual Report for the fiscal year ended December 31, 2024 and elsewhere in this document (including, without limitation, in conjunction with the forward looking statements themselves and under the heading “Critical Accounting Estimates”). All forward looking statements are qualified in their entirety by these and other cautionary statements that the Company makes from time to time in its other SEC filings and public communications. Readers are cautioned not to place undue reliance on such forward looking statements, which speak only as of the date hereof. The Company undertakes no obligation and disclaims any duty to update or revise any forward looking statements, whether as a result of new information, unanticipated …

Excerpt shortened here; the source contains the full paragraph.

Previous wording

IMPACT OF PARTICIPATING IN THE OHIO HOMEBUYER PLUS PROGRAM: During the third quarter of 2024, the Company began participating in a program offered by the Ohio Treasurer (the “Treasurer”) called the Ohio Homebuyer Plus. The program is designed to encourage Ohio residents to save for the purchase of a home. As a participant in the program, the Company developed the “Sweet Home Ohio” deposit account to offer participants an above-market interest rate of 5.83%, along with a deposit bonus to assist customers in achieving their home savings goals. For each Sweet Home Ohio account that was opened, the Company received a deposit from the Treasurer at a subsidized interest rate of 0.86%. Accounts connected with Ohio Homebuyer Plus must be used within five years and the corresponding balance of Treasurer deposits will fluctuate based upon active customer accounts. At March 31, 2025, the balance of Sweet Home Ohio accounts totaled $7,729 compared to $6,775 at December 31, 2024. At March 31, 2025, the amount of Treasurer deposits totaled $82,373 compared to $97,366 at December 31, 2024. Since the Treasurer deposits are classified as public funds, which are required to be collateralized, the Company invested the funds in securities to be pledged as collateral to the Treasurer. At March 31, 2025, the balance of securities used to collateralize the Treasurer deposits totaled $96,707 compared to $102,871 at December 31, 2024.

Current wording

IMPACT OF PARTICIPATING IN THE OHIO HOMEBUYER PLUS PROGRAM: During the third quarter of 2024, the Company began participating in a program offered by the Ohio Treasurer (the “Treasurer”) called Ohio Homebuyer Plus. The program is designed to encourage Ohio residents to save for the purchase of a home. As a participant in the program, the Company developed the “Sweet Home Ohio” deposit account to offer participants an above-market interest rate of 5.83%, along with a deposit bonus to assist customers in achieving their home savings goals. For each Sweet Home Ohio account that was opened, the Company received a deposit from the Treasurer at a subsidized interest rate of 0.86%. Accounts connected with Ohio Homebuyer Plus must be used within five years and the corresponding balance of Treasurer deposits will fluctuate based upon active customer accounts. At June 30, 2025, the balance of Sweet Home Ohio accounts totaled $8,419 compared to $6,775 at December 31, 2024. At June 30, 2025, the amount of Treasurer deposits totaled $77,265 compared to $97,366 at December 31, 2024. Since the Treasurer deposits are classified as public funds, which are required to be collateralized, the Company invested the funds in securities to be pledged as collateral to the Treasurer. At June 30, 2025, the balance of securities used to collateralize the Treasurer deposits totaled $81,123 compared to $102,871 at December 31, 2024.

Previous wording

FINANCIAL RESULTS OVERVIEW: Net income totaled $4,406 during the first quarter of 2025, an increase of $1,613 from the same period of 2024. Earnings per share for the first quarter of 2025 finished at $.94 per share, compared to $.58 per share during the first quarter of 2024. The positive results during the quarterly period were impacted by a 10.8% increase in average earning assets, coming primarily from loans and securities, which contributed to a 17.4% increase in net interest income during the three months ended March 31, 2025, compared to the same period in 2024. Also contributing to higher net earnings was a 44.6% decrease in provision for credit loss expense, impacted by a decrease in loan balances generally allocated for during 2025. The positive effects from higher net interest income and lower provision expense were partially offset by a 1.4% decrease in noninterest income and a 0.7% increase in noninterest expense. Higher net earnings also had a corresponding impact to the Company’s annualized net income to average asset ratio, or return on assets, which increased 37 basis points to 1.20% during the first quarter of 2025, compared to the same period in 2024. In addition, the Company’s net income to average equity ratio, or return on equity, increased 405 basis points to 11.82% during the first quarter of 2025, compared to the same period in 2024.

Current wording

FINANCIAL RESULTS OVERVIEW: Net income totaled $4,210 during the second quarter of 2025, an increase of $1,238 from the same period of 2024. Earnings per share for the second quarter of 2025 finished at $.89 per share, compared to $.63 per share during the second quarter of 2024. Net income totaled $8,616 during the first six months of 2025, an increase of $2,851 from the same period of 2024. Earnings per share during the first six months of 2025 finished at $1.83 per share, compared to $1.21 per share during the first six months of 2024. Earnings were positively impacted by the growth in average earning assets, which increased 8.3% and 9.5% during both the quarterly and year-to-date periods, respectively. The increases came primarily from loans and securities, which contributed to a 21.5% and 19.5% increase in net interest income during both the three and six months ended June 30, 2025, compared to the same periods in 2024, respectively. Also contributing to higher net earnings were increases in noninterest income, up 5.4% and 1.5%, during both the three and six months ended June 30, 2025, compared to the same periods in 2024, respectively. The positive effects from higher net interest and noninterest income were partially offset by higher provision and noninterest expense. During the second quarter of 2025, provision expense increased $967 in large part due to strong asset growth and higher net charge-offs, which contributed to a 67.8% increase in provision expense on a year-to-date basis. In addition, noninterest expense increased 1.7% and 1.2% during both the three and six months ended June 30, 2025, compared to the same periods in 2024, respectively. Higher net earnings also had a corresponding impact on the Company’s annualized net income to average asset ratio, or return on assets, which increased 32 basis points to 1.16% during the first six months of 2025, compared to the same period in 2024. In addition, the Company’s net income to average equity ratio, or return on equity, increased 329 basis points to 11.30% during the first six months of 2025, compared to the same period in 2024.

Previous wording

During the three months ended March 31, 2025, net interest income increased $1,950, or 17.4%, over the same period in 2024. This growth came mostly from a $136,241 increase in average earning assets, led mostly by a 55.2% increase in average securities and a 7.0% increase in average loans. The growth in average securities came in large part to the increased pledging requirements on public fund deposits as part of the Ohio Homebuyer Plus program. The growth in average loans was related to the commercial and residential real estate lending segments. Earnings were further enhanced by a higher net interest margin, increasing 24 basis points during the three months ended March 31, 2025, compared to the same period in 2024. Margin growth was related to an increase in the yield on earning assets, while the cost of funding sources decreased. The improvement to earning asset yields was directly related to the growth in higher-yielding securities and loans, while the cost of funding sources decreased as the composition of funding sources shifted to lower cost deposit sources, such as NOW, money market, checking and savings accounts.

Current wording

During the three months ended June 30, 2025, net interest income increased $2,572, or 21.5%, over the same period in 2024. During the six months ended June 30, 2025, net interest income increased $4,522, or 19.5%, over the same period in 2024. Net interest income growth during both the quarterly and year-to-date periods came mostly from an increase in average earning assets, led by securities and loans. During the three months ended June 30, 2025, average securities increased $103,063 while average loans increased $51,150. During the six months ended June 30, 2025, average securities increased $99,312 while average loans increased $59,742. The growth in average securities came in large part due to the increased pledging requirements on public fund deposits as part of the Ohio Homebuyer Plus program. The growth in average loans was related to the commercial and residential real estate lending segments. Earnings were further enhanced by a higher net interest margin, increasing 43 basis points during the three months ended June 30, 2025, and 33 basis points during the six months ended June 30, 2025, compared to the same periods in 2024, respectively. Margin growth was related to an increase in the yield on earning assets, while the cost of funding sources decreased. The improvement to earning asset yields was directly related to the growth in higher-yielding securities and loans, and the accretion of an $817 market discount on purchased loans that was recognized in the second quarter of 2025. The cost of funding sources decreased as the composition of funding sources shifted to lower cost deposit sources, such as Negotiable Order of Withdrawal (“NOW”), savings, money market, and checking accounts.

Previous wording

During the three months ended March 31, 2025, noninterest expense increased $77, or 0.7%, over the same period in 2024. Noninterest expenses were led by increases in data processing, occupancy and equipment, and marketing costs, which collectively increased $240, or 13.1%. Data processing expenses were impacted by costs associated with the Company’s debit and credit card platforms. Occupancy and equipment costs were impacted by various repair and maintenance items. Marketing cost increases were impacted by higher donation and advertising budgets for 2025. Partially offsetting the increases in overhead costs were decreases in salaries and employee benefits and software expenses, which collectively decreased $235, or 3.5%. Cost savings in salaries and employee benefits was the direct result of a voluntary early retirement program implemented in 2024, while software expenses declined as a result of costs associated with select service agreements from the first quarter of 2024 that was not as impactful in 2025. The remaining noninterest expenses increased $72 primarily from higher FDIC insurance assessment costs.

Current wording

During the three and six months ended June 30, 2025, noninterest expense increased $186, or 1.7%, and $263, or 1.2%, over the same periods in 2024. Noninterest expenses were led by increases in data processing and marketing costs, which collectively increased $239, or 23.7%, and $411, or 20.1%, during the three and six months ended June 30, 2025, over the same periods in 2024. Data processing expenses were impacted by costs associated with the Company’s debit and credit card platforms. Marketing cost increases were impacted by higher donation and advertising budgets for 2025. The Company’s largest noninterest expense, salaries and employee benefits, increased $8 during the three months ended June 30, 2025, but decreased $147 during the six months ended June 30, 2025, when compared to the same periods in 2024. Cost savings in salaries and employee benefits during the first half of 2025 were the direct result of a voluntary early retirement program implemented in 2024. The changes in the remaining noninterest expense areas were minimal.

Previous wording

The $545 increase in the Company’s provision for income taxes during the three months ended March 31, 2025, compared to the same period in 2024, was largely due to the increase in operating income affected by the factors mentioned above, as well as an increase in the effective tax rate.

Current wording

The $328 and $873 increase in the Company’s provision for income taxes during the three and six months ended June 30, 2025, compared to the same periods in 2024, was largely due to the increase in operating income affected by the factors mentioned above, as well as an increase in the effective tax rate.

Previous wording

At March 31, 2025, total assets were $1,513,105, an increase of $9,693 from year-end 2024. The increase in assets was primarily the result of a $34,634 increase in balances maintained at the FRB, as total loans decreased $18,529 and total securities decreased $9,378. As previously mentioned, the decrease in loans was related to a $31,473 decrease in a warehouse line of credit extended to another mortgage lender. Absent this decrease, the Company would have experienced loan growth of $12,944 during the first quarter of 2025 in the targeted commercial real estate and residential real estate loan portfolios. The decrease in securities was related to the lower need for securities to pledge to the Treasurer due to a $14,993 balance decrease.

Current wording

At June 30, 2025, total assets were $1,510,358, an increase of $6,946 from year-end 2024. The increase in assets was primarily the result of a $39,442 increase in loans, which was driven by strong second quarter loan growth of $57,971 that more than offset the $18,529 decrease in loans that occurred during the first quarter. The first quarter loan decrease was related to a $31,473 decrease in a warehouse line of credit extended to another mortgage lender. The second quarter growth in loans occurred primarily in the targeted areas of commercial real estate, commercial and industrial, and residential real estate loans. This included a $12,777 repurchase of two commercial and industrial loans in June 2025 that had been previously participated out The increase in loans was primarily funded by a $29,581 decrease in interest-bearing balances maintained at the FRB. Total securities also decreased by $3,334 in relation to a lower need for securities to be pledged to the Treasurer due to a $20,101 deposit balance decrease from year-end 2024.

Previous wording

At March 31, 2025, total liabilities were $1,357,390, up $4,306 from year-end 2024. Contributing most to this increase were higher deposit balances, which increased $8,991 from year-end 2024. Leading deposit growth were interest-bearing deposit balances, up $10,510 from year-end 2024, consisting of higher balances from savings and money market accounts (+2.4%), and time deposits (+1.6%), partially offset by a decrease in Negotiable Order of Withdrawal (“NOW”) accounts (-0.9%). At March 31, 2025, the Company experienced lower noninterest-bearing demand deposits, decreasing $1,519 from year-end 2024.

Current wording

At June 30, 2025, total liabilities were $1,349,598, down $3,486 from year-end 2024. Contributing most to this decrease were lower interest-bearing deposit balances, down $7,406 from year-end 2024, consisting of lower balances from NOW accounts (-5.6%), and time deposits (-2.2%), partially offset by an increase in savings and money market accounts (+5.8%). At June 30, 2025, the Company experienced higher noninterest-bearing demand deposits, increasing $8,990 from year-end 2024.

Previous wording

At March 31, 2025, total shareholders' equity was $155,715, up $5,387 from December 31, 2024. This increase came primarily from quarterly net income and an after-tax increase in net unrealized gains on AFS securities, partially offset by quarterly cash dividends paid. Regulatory capital ratios of the Company remained higher than the "well capitalized" minimums.

Current wording

At June 30, 2025, total shareholders' equity was $160,760, up $10,432 from December 31, 2024. This increase came primarily from year-to-date net income and an after-tax increase in net unrealized gains on AFS securities, partially offset by year-to-date cash dividends paid. Regulatory capital ratios of the Company remained higher than the "well capitalized" minimums.

Previous wording

At March 31, 2025, cash and cash equivalents were $120,608, an increase of $37,501, or 45.1%, from December 31, 2024. The increase came primarily from interest-bearing deposits with banks, which were up $34,634, or 51.4%, from year-end 2024. The Company’s interest-bearing FRB clearing account contributed most to the increase in interest-bearing deposits with banks, representing 84% of cash and cash equivalents at March 31, 2025. The Company utilizes its interest-bearing FRB clearing account to manage excess funds, as well as to assist in funding earning asset growth. The increases in excess funds during the first quarter of 2025 came primarily from decreases in both loans and securities, which were down $18,529 and $9,378, respectively, from year-end 2024. As previously mentioned, the decrease in loans was related to a $31,473 decrease in a warehouse line of credit extended to another mortgage lender. The decrease in securities was related to the lower need for securities to pledge to the Treasurer deposits as part of the Homebuyer Plus program. The interest rate paid on both the required and excess reserve balances of the FRB is based on the targeted federal funds rate established by the Federal Open Market Committee, which remained at a range of 4.25% to 4.50% at March 31, 2025 and December 31, 2024. The interest-bearing deposit balances in the FRB are 100% secured by the U.S. Government.

Current wording

At June 30, 2025, cash and cash equivalents were $54,627, a decrease of $28,480, or 34.3%, from December 31, 2024. The decrease came primarily from interest-bearing deposits with banks, which were down $29,581, or 43.9%, from year-end 2024. The Company’s interest-bearing FRB clearing account contributed most to the decrease in interest-bearing deposits with banks, representing 68% of cash and cash equivalents at June 30, 2025. The Company utilizes its interest-bearing FRB clearing account to manage excess funds, as well as to assist in funding earning asset growth. The decrease in excess funds during the first six months of 2025 came primarily from an increase in loans, which were up $39,442 from year-end 2024. The interest rate paid on both the required and excess reserve balances of the FRB is based on the targeted federal funds rate established by the Federal Open Market Committee, which remained at a range of 4.25% to 4.50% at June 30, 2025 and December 31, 2024. The interest-bearing deposit balances in the FRB are 100% secured by the U.S. Government.

Previous wording

The balance of total securities decreased $9,378, or 3.4% from year-end 2024. As previously mentioned, the decrease in securities was impacted by the lower need for securities to pledge to the Treasurer deposits in relation to the Homebuyers Plus program. The Company’s U.S. Government securities portfolio decreased $33,860 from $168,030 at year-end 2024 to $134,170 at March 31, 2025, impacted by $35,000 in scheduled maturities. The Company utilized a portion of its proceeds from maturities of U.S. Government securities to fund additional purchases in U.S. Government agency (“Agency”) mortgage-backed securities, which were up $24,918, or 26.5%, from year-end 2024. During the first quarter of 2025, purchases of Agency mortgage-backed securities totaled $27,482, while being partially offset by $4,460 in principal repayments. The monthly repayment of principal has been the primary advantage of Agency mortgage-backed securities as compared to other types of investment securities, which deliver proceeds upon maturity or call date. At March 31, 2025, the Company’s investment securities portfolio was comprised mostly of U.S. Government securities at 50.5% of total investments, while Agency mortgage-backed securities represented 44.8%.

Current wording

The balance of total securities decreased $3,334, or 1.2% from year-end 2024. As previously mentioned, the decrease in securities was impacted by the lower need for securities to pledge to the Treasurer for deposits related to the Homebuyers Plus program. The Company’s U.S. Government securities portfolio decreased $63,226 from $168,030 at year-end 2024 to $104,804 at June 30, 2025, impacted by $65,180 in scheduled maturities. The Company utilized a portion of its proceeds from maturities of U.S. Government securities to fund additional purchases in U.S. Government agency (“Agency”) mortgage-backed securities, which were up $60,295, or 64.0%, from year-end 2024. During the first half of 2025, purchases of Agency mortgage-backed securities totaled $67,306, while being partially offset by $10,841 in principal repayments. The monthly repayment of principal has been the primary advantage of Agency mortgage-backed securities as compared to other types of investment securities, which deliver proceeds upon maturity or call date. At June 30, 2025, the Company’s investment securities portfolio was comprised mostly of Agency mortgage-backed securities at 56.8% of total investments, while U.S. Government securities represented 38.6%.

Previous wording

Included in the increasing factors mentioned above were changes in net unrealized losses associated with AFS securities. During the first quarter of 2025, a decrease in long-term market rates led to a $2,589 increase in the fair value associated with the Company’s AFS securities at March 31, 2025. The fair value of an investment security moves inversely to interest rates, so as rates decreased, the fair value increased, causing the unrealized loss in the portfolio to decrease. These changes in rates are typical and do not impact earnings of the Company as long as the securities are held to full maturity.

Current wording

Included in the factors mentioned above were changes in net unrealized losses associated with AFS securities. During the first half of 2025, a decrease in long-term market rates led to a $5,051 increase in the fair value associated with the Company’s AFS securities at June 30, 2025. The fair value of an investment security moves inversely to interest rates, so as rates decreased, the fair value increased, causing the unrealized loss in the portfolio to decrease. These changes in rates are typical and do not impact earnings of the Company as long as the securities are held to full maturity.

Previous wording

The Company’s loan balances decreased to $1,043,296 at March 31, 2025, representing a decrease of $18,529, or 1.7%, as compared to $1,061,825 at December 31, 2024. The decrease in loans came primarily from the residential real estate loan and consumer loan portfolios, partially offset by increases in in the commercial real estate and commercial and industrial portfolios from year-end 2024.

Current wording

The Company’s loan balances increased to $1,101,267 at June 30, 2025, representing an increase of $39,442, or 3.7%, as compared to $1,061,825 at December 31, 2024. The increase in loans came primarily from the commercial real estate and commercial and industrial portfolios, partially offset by decreases in the residential real estate and consumer loan portfolios from year-end 2024.

Previous wording

The decreases in the Company’s residential real estate and consumer loan portfolios at March 31, 2025 were partially offset by an increase in commercial loans. The Company’s commercial loan portfolio increased $14,182, or 2.7%, from year-end 2024. Contributing most to this increase were higher loan balances within the commercial real estate portfolio, which increased $7,992, or 2.1%, from year-end 2024. At March 31, 2025, commercial real estate loans represented the largest segment of the Company’s total loan portfolio at 36.5%. The increase from year-end 2025 came primarily from new originations within the owner- and nonowner-occupied loan segments.

Current wording

The Company’s commercial loan portfolio increased $64,117, or 12.1%, from year-end 2024. The most significant driver of this increase was higher loan balances within the commercial real estate portfolio, which increased $46,349, or 12.4%, from year-end 2024. At June 30, 2025, commercial real estate loans represented the largest segment of the Company’s total loan portfolio at 38.1%. The increase from year-end 2025 came primarily from new originations within the owner- and nonowner-occupied loan segments.

Previous wording

Commercial loans were also positively impacted by an increase in the commercial and industrial portfolio, which was up $6,190, or 3.9%, from year-end 2024. The growth was impacted by an increase in larger loan originations during the year. While management believes lending opportunities exist in the Company’s markets, future commercial lending activities will depend upon economic and other related conditions, such as general demand for loans in the Company’s primary markets, interest rates offered by the Company, and the effects of competitive pressure and normal underwriting considerations. Management will continue to place emphasis on its commercial lending, which generally yields a higher return on investment as compared to other types of loans.

Current wording

Commercial loans were also positively impacted by an increase in the commercial and industrial portfolio, which was up $17,768, or 11.2%, from year-end 2024. The growth was impacted by an increase in larger loan originations during the year. This included a $12,777 repurchase of two commercial and industrial loans in June 2025 that had been previously participated out. While management believes lending opportunities exist in the Company’s markets, future commercial lending activities will depend upon economic and other related conditions, such as general demand for loans in the Company’s primary markets, interest rates offered by the Company, and the effects of competitive pressure and normal underwriting considerations. Management will continue to place emphasis on its commercial lending, which generally yields a higher return on investment as compared to other types of loans.

Previous wording

The Company’s residential real estate loan portfolio decreased $24,708, or 6.6%, from year-end 2024. At March 31, 2025, residential real estate loans represented the second largest segment of the Company’s total loan portfolio at 33.4%. As previously mentioned, the decrease was largely due to a $31,473 paydown in a warehouse line of credit extended to another mortgage lender. The warehouse lending line is used by the mortgage lender to make loans for the purchase of one- to four-family residential real estate properties. The mortgage lender eventually sells the loan and repays the Bank. The paydown was a result of lower mortgage volume due to higher mortgage rates and the increase in the lead bank’s internal capacity in relation to a capital infusion. The balance of this line of credit is expected to increase in future periods if mortgage volume increases and the funding needs of the lead bank changes. The remaining residential real estate loan balances increased $6,765, or 1.8%, from year-end 2024. During 2025, as mortgage rates continued to increase, the Company experienced less opportunities to sell long-term fixed rate loans to the secondary market. With elevated mortgage rates, mortgage customers were selecting more variable rate mortgage products instead of long-term fixed rate mortgage products. This had a direct impact on lowering loan volume within the long-term fixed rate loan portfolio (down $1,435) and contributed to a shift into more short-term variable rate mortgages (up $7,947) as of March 31, 2025.

Current wording

The increase in the Company’s commercial loan portfolio at June 30, 2025 was partially offset by decreases in the residential real estate and consumer loan portfolios. The Company’s residential real estate loan portfolio decreased $12,808, or 3.4%, from year-end 2024. At June 30, 2025, residential real estate loans represented the second largest segment of the Company’s total loan portfolio at 32.7%. As previously mentioned, the decrease was largely due to a $31,473 paydown in a warehouse line of credit extended to another mortgage lender. The warehouse lending line is used by the mortgage lender to make loans for the purchase of one- to four-family residential real estate properties. The mortgage lender eventually sells the loan and repays the Bank. The paydown was a result of lower mortgage volume due to higher mortgage rates and the increase in the lead bank’s internal capacity in relation to a capital infusion. At June 30, 2025, the balance of this line of credit was $0, but may increase in future periods if mortgage volume increases and the funding needs of the lead bank changes. The remaining residential real estate loan balances increased $18,665, or 5.0%, from year-end 2024. Through the first half of 2025, as mortgage rates continued to increase, the Company experienced fewer opportunities to sell long-term fixed rate loans to the secondary market. As a result of the elevated mortgage rates, mortgage customers selected more variable rate mortgage products instead of long-term fixed rate mortgage products. This had a direct impact on lowering loan volume within the long-term fixed rate loan portfolio (down $2,563) and contributed to a shift into more short-term variable rate mortgages (up $13,970) as of June 30, 2025.

Previous wording

Further decreases in loans came from the Company’s consumer loan portfolio, which was down $8,003, or 5.1%, from year-end 2024. This change was impacted by a $4,651, or 9.3%, decrease in automobile loans. This was directly impacted by management’s strategy to place more emphasis on higher yielding loan portfolios (i.e. commercial, and to a smaller extent, residential real estate). Indirect automobile loans bear additional costs from dealers that partially offset interest revenue and lower the rate of return. As a result, the Company exited the indirect lending business for automobiles and recreational vehicles during the fourth quarter of 2024. Decreases in consumer loans also came from a $4,248, or 6.6%, decrease in other consumer loans from year-end 2024, impacted by principal repayments and payoffs. Decreases in consumer loans were partially offset by a $896, or 2.1%, increase in home equity lines of credit.

Current wording

Further decreases in loans came from the Company’s consumer loan portfolio, which was down $11,867, or 7.6%, from year-end 2024. This change was impacted by a $7,901, or 15.7%, decrease in automobile loans. This was directly impacted by management’s strategy to place more emphasis on higher yielding loan portfolios (i.e. commercial, and to a smaller extent, residential real estate). Indirect automobile loans bear additional costs from dealers that partially offset interest revenue and lower the rate of return. As a result, the Company exited the indirect lending business for automobiles and recreational vehicles during the fourth quarter of 2024. Decreases in consumer loans also came from a $7,020, or 10.9%, decrease in other consumer loans from year-end 2024, impacted by principal repayments and payoffs. Decreases in consumer loans were partially offset by a $3,054, or 7.2%, increase in home equity lines of credit.

Previous wording

For AFS debt securities, the Company evaluates the securities at each measurement date to determine whether the decline in the fair value below the amortized costs basis is due to credit-related factors or noncredit-related factors. As of March 31, 2025, the Company determined that all AFS securities that experienced a decline in fair value below the amortized cost basis from year-end 2024 were due to non-credit related factors. Furthermore, the Company does not have the intent to sell any of these securities and believes that it is more likely than not that the Company will not have to sell any such securities before a recovery of cost. Therefore, no ACL was recorded, and no provision expense was recognized during the three months ended March 31, 2025.

Current wording

For AFS debt securities, the Company evaluates the securities at each measurement date to determine whether the decline in the fair value below the amortized costs basis is due to credit-related factors or noncredit-related factors. As of June 30, 2025, the Company determined that all AFS securities that experienced a decline in fair value below the amortized cost basis from year-end 2024 were due to non-credit related factors. Furthermore, the Company does not have the intent to sell any of these securities and believes that it is more likely than not that the Company will not have to sell any such securities before a recovery of cost. Therefore, no ACL was recorded, and no provision expense was recognized during the three and six months ended June 30, 2025.

Previous wording

For HTM debt securities, the Company evaluates the securities collectively by major security type at each measurement date to determine expected credit losses based on issuer’s bond rating, historical loss, financial condition, and timely principal and interest payments. At March 31, 2025, a $1 ACL was recognized based on a .02% cumulative default rate taken from the S&P and Moody’s bond rating index. The $1 ACL for HTM debt securities was unchanged from December 31, 2024, resulting in no provision expense during the three months ended March 31, 2025.

Current wording

For HTM debt securities, the Company evaluates the securities collectively by major security type at each measurement date to determine expected credit losses based on issuer’s bond rating, historical loss, financial condition, and timely principal and interest payments. At June 30, 2025, a $1 ACL was recognized based on a .02% cumulative default rate taken from the S&P and Moody’s bond rating index. The $1 ACL for HTM debt securities was unchanged from December 31, 2024, resulting in no provision expense during the three and six months ended June 30, 2025.

Previous wording

As of March 31, 2025, the ACL for loans totaled $10,139, or 0.97%, of total loans. As of December 31, 2024, the ACL for loans totaled $10,088, or 0.95%, of total loans. All of the $51, or 0.5%, increase in the ACL came from loans collectively evaluated. The increase in ACL reserves was impacted primarily by a higher historical loss rate within the commercial real estate and commercial and industrial portfolios, partially offset by a lower historical loss rate within the consumer loan portfolio. At March 31, 2025, there were no specific reserves on loans being individually evaluated for impairment, the same as year-end 2024.

Current wording

As of June 30, 2025, the ACL for loans totaled $10,856, or 0.99%, of total loans. As of December 31, 2024, the ACL for loans totaled $10,088, or 0.95%, of total loans. The $768, or 7.6%, increase in the ACL came primarily from loans collectively evaluated. The increase in ACL reserves was mostly due to a higher historical loss rate within the commercial real estate and commercial and industrial portfolios, partially offset by a lower historical loss rate within the consumer loan portfolio.

Previous wording

The Company experienced minimal change in their delinquency levels from year-end 2024. Nonperforming loans to total loans increased slightly to 0.48% at March 31, 2025, compared to 0.46% at December 31, 2024, while nonperforming assets to total assets remained unchanged at 0.33%. The increase in nonperforming loans to total loans resulted from a $124 increase in nonaccrual loans, coming mostly from the commercial and industrial and residential real estate loan portfolios.

Current wording

The Company experienced minimal change in its delinquency levels from year-end 2024. Nonperforming loans to total loans decreased slightly to 0.45% at June 30, 2025, compared to 0.46% at December 31, 2024, while nonperforming assets to total assets remained unchanged at 0.33%. The decrease in nonperforming loans to total loans resulted from a $130 decrease in nonaccrual loans, coming mostly from the commercial real estate and consumer loan portfolios.

Previous wording

Deposits are used as part of the Company’s liquidity management strategy to meet obligations for depositor withdrawals, fund the borrowing needs of loan customers, and fund ongoing operations. Deposits continue to be the most significant source of funds used by the Company to support earning assets. Total deposits at March 31, 2025 increased $8,991, or 0.7%, from year-end 2024. This change in deposits came primarily from interest-bearing deposit balances, which were up by $10,510, or 1.1%, from year-end 2024, while noninterest-bearing deposits decreased $1,519, or 0.5%, from year-end 2024.

Current wording

Deposits are used as part of the Company’s liquidity management strategy to meet obligations for depositor withdrawals, fund the borrowing needs of loan customers, and fund ongoing operations. Deposits continue to be the most significant source of funds used by the Company to support earning assets. Total deposits at June 30, 2025 increased $1,584, or 0.1%, from year-end 2024. This minimal change in deposits came primarily from noninterest-bearing deposit balances, which were up by $8,990, or 2.8%, from year-end 2024, while interest-bearing deposits decreased $7,406, or 0.8%, from year-end 2024.

Previous wording

The decrease in noninterest-bearing demand deposits was primarily from the Company’s business and incentive-based checking account balances.

Current wording

The increase in noninterest-bearing demand deposits was primarily from the Company’s business and incentive-based checking account balances.

Previous wording

Partially offsetting the increases in savings, money market and time deposit balances were lower interest-bearing NOW account balances, which decreased $2,574, or 0.9%, from year-end 2024. The decrease was largely from a $14,993 decrease in the Company’s municipal NOW account with the Treasurer in relation to the Homebuyer Plus program. Excluding this decrease in the Treasurer account balances, the Company would have experienced a $16,216 increase in its other municipal NOW product balances, particularly within the Gallia County, Ohio, and Mason County, West Virginia, market areas.

Current wording

The decrease in interest-bearing deposits came primarily from NOW account balances, which decreased $15,411, or 5.6%, from year-end 2024. The decrease was largely from a $20,101 decrease in the Company’s municipal NOW account with the Treasurer in relation to the Homebuyer Plus program. Excluding this decrease in the Treasurer account balances, the Company would have experienced a $4,036 increase in its other municipal NOW product balances, particularly within the Gallia County, Ohio, and Mason County, West Virginia, market areas.

Previous wording

Further increases in interest-bearing deposits came from time deposit balances, which increased $6,136, or 1.6%, from year-end 2024. The increase came from retail time deposits, which increased $5,767 from year-end 2024. The surge in product rate increases on retail CDs continued to slow during 2025, which has limited the growth in time deposits from year-end 2024 compared to savings and money market deposits. The Company’s wholesale time deposits increased $369, or 0.6%, from year-end 2024.

Current wording

Further decreases in interest-bearing deposits came from time deposit balances, which decreased $8,682, or 2.2%, from year-end 2024. The decrease came from wholesale time deposits, which decreased $13,901, or 22.8%, from year-end 2024. This was the result of $14,270 in brokered CD maturities during the second quarter of 2025. Retail time deposits increased $5,219 from year-end 2024, partially offsetting the impact of lower wholesale deposits. The surge in product rate increases on retail CDs continue to slow during 2025, which has limited the growth in time deposits from year-end 2024 compared to savings and money market deposits.

Previous wording

The increase in interest-bearing deposits came primarily from savings and money market account balances, which increased $6,948, or 2.4%, from year-end 2024. The increase came primarily from savings accounts, which increased $6,590 from year-end 2024, impacted mostly by the Company’s statement savings account product. Money market account balances increased $358 from year-end 2024, impacted mostly by increases in the Company’s tiered money market product (Money Fund) that was introduced in 2023 and offers a higher rate on tiered deposit balances.

Current wording

Partially offsetting the decreases in NOW and time deposit balances were higher savings and money market account balances, which increased $16,687, or 5.8%, from year-end 2024. The increase came primarily from money market accounts, which increased $9,101 from year-end 2024, impacted mostly by increases in the Company’s tiered money market product (Money Fund) that was introduced in 2023 and offers a higher rate on tiered deposit balances. Savings account balances increased $7,586 impacted mostly by the Company’s statement savings account product.

Previous wording

Other borrowed funds were $38,440 at March 31, 2025, a decrease of $1,300, or 3.3%, from year-end 2024. The decrease was related to the scheduled principal amortization for applicable FHLB advances. While deposits continue to be the primary source of funding for growth in earning assets, management will continue to utilize FHLB advances and promissory notes to help manage interest rate sensitivity and liquidity.

Current wording

Other borrowed funds were $37,177 at June 30, 2025, a decrease of $2,563, or 6.4%, from year-end 2024. The decrease was related to the scheduled principal amortization for applicable FHLB advances. While deposits continue to be the primary source of funding for growth in earning assets, management will continue to utilize various wholesale funding sources to help manage interest rate sensitivity and liquidity.

Previous wording

Total shareholders' equity at March 31, 2025 increased $5,387, or 3.6%, to finish at $155,715, as compared to $150,328 at December 31, 2024. This was primarily from quarterly net income and an increase in the fair value of AFS securities, partially offset by cash dividends paid. The after-tax increase in fair value on AFS securities totaled $2,018 from year-end 2024, as long-term market rates decreased during the first quarter of 2025, causing an increase in the fair value of AFS securities.

Current wording

Total shareholders' equity at June 30, 2025 increased $10,432, or 6.9%, to finish at $160,760, as compared to $150,328 at December 31, 2024. This was primarily from year-to-date net income and an increase in the fair value of AFS securities, partially offset by cash dividends paid. The after-tax increase in fair value on AFS securities totaled $3,937 from year-end 2024, as long-term market rates decreased during the first half of 2025, causing an increase in the fair value of AFS securities.

Previous wording

The following discussion focuses, in more detail, on the consolidated results of operations of the Company for the three months ended March 31, 2025, compared to the same period in 2024. This discussion should be read in conjunction with the interim consolidated financial statements and the notes included in this Form 10‑Q.

Current wording

The following discussion focuses, in more detail, on the consolidated results of operations of the Company for the three and six months ended June 30, 2025, compared to the same period in 2024. This discussion should be read in conjunction with the interim consolidated financial statements and the notes included in this Form 10‑Q.

Previous wording

The most significant portion of the Company's revenue, net interest income, results from properly managing the spread between interest income on earning assets and interest expense incurred on interest-bearing liabilities. During the three months ended March 31, 2025, net interest income increased $1,950, or 17.4%, compared to the same period in 2024. The improvement during 2025 came from average earning asset growth and the net interest margin. The average growth was impacted by a composition shift into higher-yielding loans and securities, combined with a consumer shift to more lower-cost deposit sources that helped reduce the higher average costs paid on deposits and borrowings.

Current wording

The most significant portion of the Company's revenue, net interest income, results from properly managing the spread between interest income on earning assets and interest expense incurred on interest-bearing liabilities. During the three and six months ended June 30, 2025, net interest income increased $2,572, or 21.5%, and $4,522, or 19.5%, compared to the same periods in 2024, respectively. The quarterly and year-to-date improvement during 2025 came from average earning asset growth and the net interest margin. The average growth was impacted by a composition shift into higher-yielding loans and securities, combined with a consumer shift to more lower-cost deposit sources that helped reduce the higher average costs paid on deposits and borrowings.

Previous wording

Total interest and fee income recognized on the Company’s earning assets increased $2,116, or 12.0%, during the first quarter of 2025, compared to the same period in 2024. The earnings growth was impacted by interest on loans, which increased $1,445, or 9.5%. This improvement was impacted by increases in both average loan balances and loan yields. Overall, average loans increased $68,219, or 7.0%, during the three months ended March 31, 2025, compared to the same period in 2024. Balance increases were mostly realized within the commercial and residential real estate loan portfolios due to higher commercial loan volume and a consumer preference for short-term, variable rate residential real estate loans. Loan revenue improvement also came from average loan yields increasing from 6.34% during the first quarter of 2024 to 6.53% during the first quarter of 2025. Loan yield increases were mostly impacted by the commercial and residential real estate loan portfolios.

Current wording

Total interest and fee income recognized on the Company’s earning assets increased $2,387, or 12.8%, during the second quarter of 2025, and $4,503, or 12.4%, during the six months ended June 30, 2025, compared to the same periods in 2024, respectively. The earnings growth was impacted by interest on loans, which increased $1,725, or 11.1%, and $3,072, or 10.2%, during the three and six months ended June 30, 2025, compared to the same periods in 2024, respectively. This improvement was impacted by increases in both average loan balances and loan yields. Overall, average loans increased $51,150 during the second quarter of 2025 and $59,742 during the first half of 2025. Balance increases were mostly realized within the commercial and residential real estate loan portfolios due to higher commercial loan volume and a consumer preference for short-term, variable rate residential real estate loans. Loan revenue improvement also came from average loan yields increasing 37 basis points to 6.82% during the second quarter of 2025 and increasing 28 basis points during the first half of 2025, compared to the same periods in 2024. A portion of the loan yield improvement came from the recognition of a market discount on two purchased commercial and industrial loans totaling $817 in the second quarter of 2025. Loan yield increases were mostly impacted by the commercial and residential real estate loan portfolios.

Previous wording

Total interest on securities increased $1,264, or 137.5%, during the first quarter of 2025, compared to the same period in 2024. The earnings growth was primarily from the purchase of $100,497 in U.S. Government securities during the third quarter of 2024 as part of the Company’s participation in the state’s Homebuyer Plus program. The securities were purchased at a weighted average yield of 4.7% with maturity terms ranging from 6 months to 18 months. The security purchases were used to collateralize $100,00 in public fund deposits received by the Treasurer as part of the program. This contributed to increases in average security balances, which were up $95,521 during the first quarter of 2025, compared to the same period in 2024. While securities have grown in large part due to the security purchases from the Homebuyer Plus program, the Company has placed more emphasis on growing its higher-yielding loan portfolio during 2024 and 2025, utilizing proceeds from various maturities and repayments of securities to help fund loan growth. Earnings from securities were positively impacted by increases in the average yield on securities, impacted by the $100,497 purchase of U.S Government securities at a weighted average yield of 4.7% that was higher than the 3.17% average yield on the total securities portfolio at March 31, 2025. Average security yields have also been positively impacted by the elevated market rate environment during 2024 that continued into 2025. As a result, average security yields increased 119 basis points to 3.17% during the first quarter of 2025, compared to the same period in 2024.

Current wording

Total interest on securities increased $1,342, or 136.8%, during the second quarter of 2025, and $2,606, or 137.2%, during the first half of 2025, compared to the same periods in 2024. The earnings growth was primarily from the purchase of $100,497 in U.S. Government securities during the third quarter of 2024 as part of the Company’s participation in the state’s Homebuyer Plus program. The securities were purchased at a weighted average yield of 4.7% with maturity terms ranging from 6 to 18 months. The security purchases were used to collateralize $100,000 in public fund deposits received by the Treasurer as part of the program. This contributed to increases in average security balances, which were up $103,063 and $99,312 during the three and six months ended June 30, 2025, compared to the same periods in 2024. While average securities have grown in large part due to the security purchases from the Homebuyer Plus program, the Company has placed more emphasis on growing its higher-yielding loan portfolio during 2024 and 2025, utilizing proceeds from various maturities and repayments of securities to help fund loan growth. Earnings from securities were positively impacted by increases in the average yield on securities, impacted by the $100,497 purchase of U.S Government securities at a weighted average yield of 4.7% that was higher than the 2.04% average yield on the total securities portfolio at June 30, 2024. Average security yields were also positively impacted by the elevated market rate environment during 2024 that continued into 2025. As a result, average security yields increased 115 basis points to 3.25% during the second quarter of 2025 and increased 117 basis points to 3.21% during the first half of 2025, compared to the same periods in 2024.

Previous wording

Total interest income from interest-bearing deposits with banks decreased $591 during the first quarter of 2025, compared to the same period in 2024. This was largely from average balance decreases with the Company’s interest-bearing FRB clearing account, which decreased $27,503 during the three months ended March 31, 2025, compared to the same period in 2024. FRB clearing balances were used to assist in funding loan growth, which contributed to the average balance decrease of FRB funds during the first quarter of 2025, compared to the first quarter of 2024. Further impacting lower interest income from the FRB clearing account were short-term rate decreases during 2024. Between September and December 2024, the FRB took action to reduce the rate associated with the FRB clearing account by 100 basis points due to improvements in inflationary pressures. This action lowered the target federal funds rate to a range of 4.25% to 4.50%, which had a negative impact on the FRB clearing account’s interest earnings.

Current wording

Total interest income from interest-bearing deposits with banks decreased $807, or 55.8%, during the second quarter of 2025, and decreased $1,398, or 48.8%, during the first half of 2025, compared to the same periods in 2024. This was largely from average balance decreases with the Company’s interest-bearing FRB clearing account, which decreased $45,937 and $36,766 during the three and six months ended June 30, 2025, compared to the same periods in 2024, respectively. FRB clearing balances were used to assist in funding loan growth, which contributed to the average balance decrease of FRB funds during 2025. Further impacting lower interest income from the FRB clearing account were short-term rate decreases during 2024. Between September and December 2024, the FRB took action to reduce the rate associated with the FRB clearing account by 100 basis points due to improvements in inflationary pressures. This action lowered the target federal funds rate to a range of 4.25% to 4.50%, which had a negative impact on the FRB clearing account’s interest earnings.

Previous wording

Total interest expense incurred on the Company’s interest-bearing liabilities increased $166 during the first quarter of 2025, compared to the same period in 2024. Increases in interest expense were impacted by growth in the Company’s average interest-bearing deposits, which increased $125,662 during the first quarter of 2025, compared to the same period in 2024. A large portion of this growth came from lower-costing NOW and savings account balances related to the Company’s participation in the Homebuyers Plus program. With the additions of the municipal NOW Treasurer account and new Home Sweet Home savings accounts during the second half of 2024, this contributed to an average balance increase of over $94,595 in interest-bearing deposits during the first quarter of 2025. Average interest-bearing deposit growth also came from a $31,770 increase in the Company’s lower-costing tiered money market product (Money Fund).

Current wording

Growth in the Company’s average interest-bearing liabilities came mostly from NOW, savings and money market deposit balances, which increased $103,195 and $110,624 during both the second quarter and first half of 2025, compared to the same periods in 2024. A large portion of this growth came from lower-costing NOW and savings account balances related to the Company’s participation in the Homebuyers Plus program. With the additions of the municipal NOW Treasurer account and new Home Sweet Home savings accounts during the second half of 2024, this contributed to an average balance increase of $87,013 and $90,804 in interest-bearing deposits during the three and six months ended June 30, 2025, compared to the same periods in 2024, respectively. Average interest-bearing deposit growth also came from the Company’s lower-costing tiered money market product (Money Fund), which increased $31,235 and $31,530 during the three and six months ended June 30, 2025, compared to the same periods in 2024, respectively.

Previous wording

The Company also experienced a $7,609 increase in its average time deposits during the first quarter of 2025, compared to the same period in 2024. While the movement of higher time deposit balances had a corresponding impact to higher interest expense, the average cost associated with time deposits decreased during the first quarter of 2025, compared to the same period in 2024. During 2023, rate offerings on retail CDs continued to adjust up as a result of market competition. The Company had offered various “short-term” CD rate specials with maturity terms of less than one year to attract and retain its core deposit funding during this time. Since then, product rates on retail CDs have decreased, which has allowed a large portion of those short-term retail CDs to renew at lower rates, or in some cases, be reinvested into lower-costing savings or money market accounts. Furthermore, the Company’s average wholesale funding balances decreased $20,172 during the first quarter of 2025, which included the use of brokered CDs (average cost of 4.70%) and FHLB advances (average cost of 4.05%). With the Company utilizing the growth in its lower-cost retail deposit sources to fund earning asset growth, the reliance on higher-cost wholesale deposits to fund asset growth decreased, which helped to limit the growth in interest expense during 2025. As a result of the rate repricings on retail CDs and the deposit shift into lower-cost funding sources, the Company’s total weighted average costs on interest-bearing liabilities decreased by 14 basis points from 2.15% at March 31, 2024 to 2.01% at March 31, 2025.

Current wording

The Company also experienced a $4,557 and $6,083 increase in its average time deposits during both the second quarter and first half of 2025, compared to the same periods in 2024. While the movement of higher time deposit balances had a corresponding impact to higher interest expense, the average cost associated with time deposits decreased 44 basis points to 4.23% during the first half of 2025. During 2023, rate offerings on retail CDs continued to adjust up as a result of market competition. The Company had offered various “short-term” CD rate specials with maturity terms of less than one year to attract and retain its core deposit funding during this time. Since then, product rates on retail CDs have decreased, which has allowed a large portion of those short-term retail CDs to renew at lower rates, or in some cases, be reinvested into lower-costing NOW, savings or money market accounts (average cost of 1.40%). Furthermore, the Company’s average wholesale funding balances decreased $19,627 during the first half of 2025, which included the use of brokered CDs (average cost of 4.68%) and FHLB advances (average cost of 4.05%). With the Company utilizing the growth in its lower-cost retail deposit sources to fund earning asset growth, the reliance on higher-cost wholesale deposits to fund asset growth decreased, which contributed to lower interest expense during 2025. As a result of the rate repricings on retail CDs and the deposit shift into lower-cost funding sources, the Company’s total weighted average costs on interest-bearing liabilities decreased by 17 basis points from 2.15% at June 30, 2025 to 1.98% at June 30, 2024.

Previous wording

The Company’s net interest margin is defined as fully tax-equivalent net interest income as a percentage of average earning assets. During 2025, the Company’s first quarter net interest margin increased to 3.85%, compared to 2024’s first quarter net interest margin of 3.61%. Positive contributions to margin growth came from a 10.9% increase in the Company’s average earning assets, mostly from higher-yielding loans and securities. The margin increase was also positively impacted by lower average costs associated with the Bank’s interest-bearing liabilities due to a deposit composition shift into more lower-cost NOW, savings, money market, and checking account deposits. Furthermore, the Company has benefited from its retail CDs repricing at lower product rates, while also relying less on wholesale funding sources. The Company’s primary focus is to invest its funds into higher yielding assets, particularly loans, as opportunities arise. However, if loan balances do not continue to expand and remain a larger component of overall earning assets, the Company will face pressure within its net interest income and margin improvement.

Current wording

The Company’s net interest margin is defined as fully tax-equivalent net interest income as a percentage of average earning assets. During 2025, the Company’s second quarter net interest margin increased to 4.17%, compared to 2024’s second quarter net interest margin of 3.74%. The Company’s year-to-date net interest margin increased to 4.01%, compared to 2024’s year-to-date net interest margin of 3.68%. Positive contributions to margin growth came from the Company’s average earning assets, which increased 8.3% and 9.5% during the second quarter and first half of 2025, respectively, mostly from higher-yielding loans and securities. Margin improvement was also positively impacted by lower average costs associated with the Bank’s interest-bearing liabilities due to a deposit composition shift into more lower-cost NOW, savings, and money market account deposits. Furthermore, the Company has benefited from its retail CDs repricing at lower product rates, while also relying less on wholesale funding sources. The Company’s primary focus is to invest its funds into higher yielding assets, particularly loans, as opportunities arise. However, if loan balances do not continue to expand and remain a larger component of overall earning assets, the Company will face pressure within its net interest income and margin improvement.

Previous wording

Provision for credit losses is recorded to achieve an ACL that is adequate to absorb estimated losses inherent in the Company’s loan portfolio, unfunded loans, and HTM debt securities. Management performs, on a quarterly basis, a detailed analysis of the ACL that encompasses asset portfolio composition, asset quality, loss experience and other relevant economic factors. For the three months ended March 31, 2025, the Company’s provision for credit losses expense totaled $416, a decrease of $335 when compared to $751 in provision expense during the three months ended March 31, 2024.

Current wording

Provision for credit losses is recorded to achieve an ACL that is adequate to absorb estimated losses inherent in the Company’s loan portfolio, unfunded loans, and HTM debt securities. Management performs, on a quarterly basis, a detailed analysis of the ACL that encompasses asset portfolio composition, asset quality, loss experience and other relevant economic factors. For the three months ended June 30, 2025, the Company’s provision for credit losses expense totaled $1,148, an increase of $967 when compared to $181 in provision expense during the three months ended June 30, 2024. For the six months ended June 30, 2025, the Company’s provision for credit losses expense totaled $1,564, an increase of $632 when compared to $932 in provision expense during the six months ended June 30, 2024.

Previous wording

These decreasing effects to provision expense on loans were partially offset by the effects of higher net charge-offs and a higher historical loan loss factor that increased reserves primarily from a regression in GDP and unemployment projections from year-end 2024.

Current wording

Provision expense on loans during 2025 was also impacted by a higher historical loan loss and qualitative risk factor that increased reserves. The historical loan loss factor was primarily impacted by a regression in GDP and unemployment projections from year-end 2024. The qualitative risk factor was impacted by the improvement in residential real estate loan collateral risks that lowered reserves during 2024, that were not as impactful in 2025.

Previous wording

Credit loss expense during 2025 was also impacted by unfunded commitments on off-balance sheet liabilities, which increased $46 during the three months ended March 31, 2025, compared to the same period in 2024. During the first quarter of 2025, credit loss expense on unfunded commitments was reduced by $60, compared to a reduction of $106 in credit loss expense during first quarter of 2024. The impact came mostly from the commercial real estate construction segment.

Current wording

Credit loss expense during 2025 was also impacted by unfunded commitments on off-balance sheet liabilities, which increased $72 during the three months ended June 30, 2025, and increased $118 during the first half of 2025, compared to the same periods in 2024. The impact came mostly from an increase in the originations of several new commercial and industrial lines during the second quarter of 2025.

Previous wording

Completely offsetting the decreases in noninterest expense listed above were various increases in noninterest expense, including data processing fees, which increased $118 during the first quarter of 2025, compared to the same period in 2024. Higher data processing fees were primarily related to debit and credit card processing due to higher transaction volume and conversion costs for the Company’s new reward platform.

Current wording

Noninterest expense increased $186, or 1.7%, during the three months ended June 30, 2025, and increased $263, or 1.2%, during the three months ended June 30, 2025, compared to the same periods in 2024. Contributing most to the increase in noninterest expense were data processing expenses, which increased $181 and $299 during the three and six months ended June 30, 2025, compared to the same periods in 2024, respectively. Higher costs in this category were primarily related to debit and credit card processing due to higher transaction volume and conversion costs for the Company’s new reward platform.