FINANCIAL INSTITUTIONS INC
For the period ended Jun 30, 2025. Filed Aug 4, 2025.
View on SEC.govAbout this filing
A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Jun 30, 2025 · Filed Aug 4, 2025
FISI$39.73+0.6%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2025-03-31; filed 2025-05-05.
0000950170-25-063527
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2025-06-30; filed 2025-08-04.
0000950170-25-101991
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 216 previous paragraphs and 222 current paragraphs.
158 unchanged; 46 reworded; 15 added; 12 removed; 0 previous and 3 current paragraphs rearranged.
Tables are not compared: 18 previous and 20 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (15)
Current report
Summary of 2025 Second Quarter Results
Current report
Noninterest expense totaled $35.7 million in the second quarter of 2025, compared to $33.0 million in the second quarter of 2024. The increase in noninterest expense for the second quarter of 2025 was primarily attributable to a $2.3 million increase in salaries and employee benefits, reflecting an increase in health insurance benefits due to higher medical claims, and the impact of annual merit increases.
Current report
Analysis of Net Interest Income for the Six Months Ended June 30, 2025 and 2024
Current report
Net interest income on a taxable equivalent basis for the six months ended June 30, 2025, was $96.1 million, an increase of $14.7 million versus the comparable period in 2024 of $81.4 million. Our net interest margin for the six months ended June 30, 2025 was 3.42%, 59-basis points higher than 2.83% for the same period in 2024. The increase in net interest income and net interest margin was primarily due to an increase in the average yield on investment securities, following the previously disclosed restructuring of the available-for-sale securities portfolio in December 2024, partially offset by a decrease in market interest rates due to the federal funds interest rate cuts that occurred in the latter part of 2024 as previously mentioned.
Current report
For the six months ended June 30, 2025, the average yield on average interest earning assets of 5.84% was 37-basis points higher than the six months ended June 30, 2024 of 5.47%. The average yield on investment securities increased 217-basis points to 4.30% for the six months ended June 30, 2025 compared to 2.13% for the six months ended June 30, 2024, while the average yield on loans decreased 14-basis points during the six months ended June 30, 2025, to 6.23% from 6.37% for the comparable period last year.
Current report
Average interest-earning assets were $5.65 billion for the six months ended June 30, 2025 compared to $5.79 billion for the six months ended June 30, 2024, a decrease of $134.1 million, or 2.3%, with a decrease in investment securities of $110.3 million from $1.19 billion for the six months ended June 30, 2024 to $1.08 billion for the six months ended June 30, 2025, and a $90.8 million decrease in average Federal Reserve interest-earning cash, while average loans were up $67.0 million from $4.45 billion for the six months ended June 30, 2024 to $4.45 billion for the six months ended June 30, 2025. Average investment securities represented 19.1% of average interest-earning assets during the six months ended June 30, 2025 compared to 20.6% during the six months ended June 30, 2024, and average loans comprised 79.9% of average interest-earning assets during the six months ended June 30, 2025 compared to 76.9% during the six months ended June 30, 2024. The increase in average loans was primarily due to organic growth in commercial mortgages during the first six months of 2025. Overall, the increase in interest income of $6.7 million was reflective of the higher average interest rates on average investment securities, partially offset by the decrease in average loan yields.
Current report
For the six months ended June 30, 2025, the average cost of average interest-bearing liabilities of 3.03% was 30-basis points lower than the average cost of 3.33% for the six months ended June 30, 2024, with the average cost of average interest-bearing deposits of 3.00% decreasing 29-basis points from 3.29% for the six months ended June 30, 2024, due to the repricing of deposits and borrowings at lower rates given the federal funds interest rate cuts that occurred in the latter part of 2024 as previously mentioned.
Current report
Average interest-bearing liabilities of $4.51 billion in the six months ended June 30, 2025 were $68.9 million, or 1.5%, lower than the six months ended June 30, 2024. The decrease was driven by a decrease in average total borrowings of $73.2 million, partially offset by a $4.4 million increase in average interest-bearing deposits. Average short-term borrowings decreased to $90.6 million, down $69.3 million from the six months ended June 30, 2024, and average long-term borrowings decreased to $120.6 million, down $4.0 million, reflective of the previously disclosed $10 million call in April 2025 of the fixed-to-floating subordinated debt that was originally issued in April 2015. On average, interest-bearing deposits increased $4.4 million for the current period, while noninterest-bearing demand deposits (a principal component of net free funds) decreased $31.6 million to $925.0 million for the six months ended June 30, 2025. The slight increase in average deposits reflected growth in non-public and public deposits, partially offset by decreases in reciprocal and brokered deposits. For further discussion of the reciprocal deposit programs, refer to the “Funding Activities–Deposits” section of this Management’s Discussion and Analysis. Overall, interest-bearing liability rate changes resulted in an $8.0 million decrease in interest expense during the six months ended June 30, 2025.
Current report
(3)Annualized.
Current report
The provision for credit losses in the second quarter of 2025 was driven by a combination of factors, including higher net charge-offs, partially offset by improvement in the forecasted loss rate for pooled loans, and a reduction in specific reserves. The provision for credit losses for the six months ended June 30, 2025 was primarily driven by an improvement in forecasted losses, partly offset by an increase in specific reserves and higher net charge-offs.
Current report
Income from investments in limited partnerships of $307 thousand for the second quarter of 2025, decreased $496 thousand, compared to $803 thousand for the second quarter of 2024. For the first six months of 2025, income from investments in limited partnerships decreased $423 thousand, to $722 thousand. Income from our investments in limited partnerships fluctuates based on the maturity and performance of the underlying investments.
Current report
Net gain on sale of other assets for the second quarter of 2024 and first six months of 2024, was comprised of the net gain generated from the sale of SDN.
Current report
Salaries and employee benefits expense increased $2.3 million, or 15%, to $18.1 million for the second quarter of 2025, compared to $15.7 million for the second quarter of 2024, reflecting an increase in health insurance benefits due to higher medical claims, and annual merit increases. For the first six months of 2025, salaries and employee benefits expense increased $1.9 million, or 6%, to $35.0 million, compared to the first six months of 2024, due to higher health insurance benefits expense and the impact of annual merit increases, partially offset by lower salaries and wages as a result of the sale of SDN on April 1, 2024.
Current report
Occupancy and equipment expense increased $534 thousand, or 15%, to $4.0 million for the second quarter of 2025, compared to $3.4 million for the second quarter of 2024. For the first six months of 2025, occupancy and equipment expense increased $372 thousand, or 5%, to $7.6 million, compared to the first six months of 2024. The increases were due, in part, to timing associated with a change in facilities maintenance vendors, as well as costs associated with our ongoing ATM conversion and upgrade project.
Current report
Computer and data processing expense increased $537 thousand, or 10%, to $5.9 million for the second quarter of 2025, compared to $5.3 million for the second quarter of 2024. For the first six months of 2025, computer and data processing expense increased $638 thousand, or 6%, to $11.4 million compared to $10.7 million for the first six months of 2024. The increases in both periods were impacted by the timing of expenses for in-process technology enhancement and upgrade initiatives.
Removed paragraphs (12)
Previous report
Recent Events
Previous report
In April 2025, the Company called $10.0 million of its $40.0 million of fixed-to-floating subordinated debt that was originally issued in April 2015. These notes initially bore interest at a fixed rate of 6.00% and were scheduled to reprice at a rate equal to the then-current three-month term SOFR plus 4.20561% after the April 2025 call date. The Company currently expects to retain the remaining $30.0 million of April 2015 notes, as well as the separate $35.0 million of fixed-to-floating rate subordinated notes that were issued in October 2020, which currently bear interest at a fixed rate of 4.375%, and are set to reprice at a rate of the then-current three-month term SOFR plus 4.265% beginning in October 2025. The April 2015 notes are callable on a quarterly basis going forward and the October 2020 notes become callable beginning in October 2025. The Company will continue to evaluate options relative to the subordinated debt, which may include redemption in part or in full, as well as replacing or refinancing the facilities.
Previous report
Settlement of Auto Lending Litigation
Previous report
On March 7, 2025, following a mediation held on February 28, 2025, the Company entered into a Settlement Agreement (“the Settlement Agreement ”) with plaintiffs in the previously disclosed class action lawsuit to which the Company and the Bank are parties, brought by borrowers in New York and Pennsylvania in Pennsylvania state court regarding notices the Bank sent to defaulting borrowers after their vehicles were repossessed, which were alleged to have not fully complied with the relevant portions of the Uniform Commercial Code in both states. As part of the Settlement Agreement, which is subject to court approval, we agreed to making a cash payment in the amount of $29.5 million in full resolution of the matter. We do not anticipate that additional amounts will be accrued for this matter in 2025 or other future periods. The Company determined that the March 7, 2025 event met the definition of a recognized subsequent event in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 855, Subsequent Events, at the December 31, 2024 balance sheet date, and has therefore recorded a $23.0 million pre-tax litigation accrual, which reflects the agreed upon settlement less approximately $6.5 million of available related insurance proceeds, in the Company’s December 31, 2024 consolidated financial statements. The settlement resulted in an after-tax loss of approximately $17.1 million in 2024.
Previous report
Summary of 2025 First Quarter Results
Previous report
Noninterest expense totaled $33.7 million in the first quarter of 2025, compared to $54.0 million in the first quarter of 2024. The decrease in noninterest expense for the first quarter of 2025 was primarily attributable to the previously disclosed deposit-related fraud event in March 2024, in which we recorded an $18.4 million pre-tax loss in deposit-related charged-off items, and $660 thousand of related legal fees in professional services expenses, coupled with a $442 thousand decrease in salaries and employee benefits expense primarily due to a decrease in headcount as a result of our insurance subsidiary asset sale.
Previous report
The provision for credit losses in the first quarter of 2025 was primarily driven by a combination of factors, including the impact of loan growth and an increase in specific reserves, partially offset by modest improvement in forecasted losses and qualitative factors, primarily reflecting a reduction in consumer indirect delinquencies.
Previous report
Investment advisory income increased $155 thousand, or 6%, to $2.7 million for the first quarter of 2025 compared to $2.6 million for the first quarter of 2024, due to a combination of new business and market growth positively impacting assets under management at Courier Capital.
Previous report
Salaries and employee benefits expense decreased $442 thousand, or 3%, to $16.9 million for the first quarter of 2025 compared to $17.3 million for the first quarter of 2024. The decrease was driven in part by lower salaries and wages as a result of the sale of SDN.
Previous report
Non-Agency Mortgage-backed Securities
Previous report
Our non-Agency MBS portfolio consists of positions in one privately issued whole loan collateralized mortgage obligations with a fair value of $359 thousand as of March 31, 2025. As of that date, the one non-Agency MBS was rated below investment grade. This security was not in an unrealized loss position.
Previous report
The Parent has a revolving line of credit with a commercial bank allowing borrowings up to $20.0 million in total as an additional source of working capital. At March 31, 2025, no amounts have been drawn on the line of credit.
Reworded paragraphs (46)
Previous wording
We prioritize customer acquisition through cost-effective, high-demand digital, virtual and physical channels, while maintaining a community bank distinctiveness relative to larger banks and digital-only neobanks. We leverage the retail branch network and customer contact center to build trust and credibility, provide personal financial education and advice, offer convenience, and bridge digital and physical channels. Our enhanced digital capabilities complement a continued focus on a consistent customer experience and engagement across physical and virtual channels, including using branches to create deeper engagement and relationships with customers, balancing customer engagement with efficiency opportunities (e.g., framing outreach to the customer contact center to teach customers how to use digital channels, in addition to addressing the reason for the call), and maintaining and expanding our customer reach digitally, physically or virtually. By employing digital channels across our current products and services, we deepen existing relationships and enter new geographies or market segments that would otherwise be prohibitively expensive targets using traditional approaches. Deepening our existing digital capabilities allows us to capitalize on a shift in customer preferences away from physical branches. On September 16, 2024, we announced our intent to begin an orderly wind down of our BaaS offerings, following a careful review by the Company’s executive management and Board of Directors undertaken in conjunction with its annual strategic planning process. We continue to expect the majority of remaining BaaS-related deposits to flow out by mid-2025.
Current wording
We prioritize customer acquisition through cost-effective, high-demand digital, virtual and physical channels, while maintaining a community bank distinctiveness relative to larger banks and digital-only neobanks. We leverage the retail branch network and customer contact center to build trust and credibility, provide personal financial education and advice, offer convenience, and bridge digital and physical channels. Our enhanced digital capabilities complement a continued focus on a consistent customer experience and engagement across physical and virtual channels, including using branches to create deeper engagement and relationships with customers, balancing customer engagement with efficiency opportunities (e.g., framing outreach to the customer contact center to teach customers how to use digital channels, in addition to addressing the reason for the call), and maintaining and expanding our customer reach digitally, physically or virtually. By employing digital channels across our current products and services, we deepen existing relationships and enter new geographies or market segments that would otherwise be prohibitively expensive targets using traditional approaches. Deepening our existing digital capabilities allows us to capitalize on a shift in customer preferences away from physical branches. On September 16, 2024, we announced our intent to begin an orderly wind down of our BaaS offerings, following a careful review by the Company’s executive management and Board of Directors undertaken in conjunction with its annual strategic planning process. As expected, the majority of BaaS-related deposits were off the balance sheet by mid-2025. We expect the remaining balance to flow out during the third quarter of 2025.
Previous wording
Net income increased $14.8 million to $16.9 million for the first quarter of 2025 compared to $2.1 million for the first quarter of 2024. Net income available to common shareholders for the first quarter of 2025 was $16.5 million, or $0.81 per diluted share, compared with $1.7 million, or $0.11 per diluted share, for the first quarter of 2024. Return on average common equity was 11.82% and return on average assets was 1.10% for the first quarter of 2025 compared to 1.83% and 0.13%, respectively, for the first quarter of 2024. First quarter 2024 results were negatively impacted by the previously disclosed deposit-related fraud event, for which we recorded an $18.4 million pre-tax loss in deposit-related charged-off items, and $660 thousand of related legal fees in professional services expenses.
Current wording
Net income decreased $8.1 million to $17.5 million for the second quarter of 2025 compared to $25.6 million for the second quarter of 2024. Net income available to common shareholders for the second quarter of 2025 was $17.2 million, or $0.85 per diluted share, compared with $25.3 million, or $1.62 per diluted share, for the second quarter of 2024. Return on average common equity was 11.88% and return on average assets was 1.13% for the second quarter of 2025 compared to 23.51% and 1.68%, respectively, for the second quarter of 2024. Second quarter 2024 results benefited from a pre-tax gain of $13.5 million, after selling costs, associated with the sale of the assets of SDN on April 1, 2024.
Previous wording
Net interest income totaled $46.9 million in the first quarter of 2025, an increase of $6.8 million compared to $40.1 million in the first quarter of 2024. Average interest-earning assets for the first quarter of 2025 were $153.6 million lower than the first quarter of 2024 due to a $97.3 million decrease in average investment securities, and a $86.3 million decrease in the average balance of Federal Reserve interest-earning cash, partially offset by a $30.0 million increase in average loans. Average interest-bearing liabilities for the first quarter of 2025 were $108.0 million lower than the first quarter of 2024 due to a $105.3 million decrease in average savings and money market account deposits, an $84.2 million decrease in average borrowings, and a $4.3 million decrease in average interest-bearing demand deposits, partially offset by an $85.9 million increase in average time deposits.
Current wording
Net interest income totaled $49.1 million in the second quarter of 2025, an increase of $7.9 million compared to $41.2 million in the second quarter of 2024. Average interest-earning assets for the second quarter of 2025 were $114.5 million lower than the second quarter of 2024 due to a $123.2 million decrease in average investment securities, and a $95.1 million decrease in the average balance of Federal Reserve interest-earning cash, partially offset by a $103.8 million increase in average loans. Average interest-bearing liabilities for the second quarter of 2025 were $29.8 million lower than the second quarter of 2024 due to an $83.4 million decrease in average savings and money market account deposits, a $62.2 million decrease in average borrowings, and a $10.0 million decrease in average interest-bearing demand deposits, partially offset by a $125.7 million increase in average time deposits.
Previous wording
Net interest margin was 3.35% for the first quarter of 2025 compared to 2.78% in the first quarter of 2024, primarily due to an increase in the average yield on investment securities, following the previously disclosed restructuring of the available-for-sale securities portfolio in December 2024, which supported an increase in the average yield on interest-earnings assets, while funding costs were reduced, in part reflecting deposit repricing.
Current wording
Net interest margin was 3.49% for the second quarter of 2025 compared to 2.87% in the second quarter of 2024, primarily due to an increase in the average yield on investment securities, following the previously disclosed restructuring of the available-for-sale securities portfolio in December 2024, which supported an increase in the average yield on interest-earnings assets, while funding costs were reduced, in part reflecting deposit repricing.
Previous wording
The provision for credit losses was $2.9 million in the first quarter of 2025 compared to a benefit for credit losses of $5.5 million in the first quarter of 2024. The provision for credit losses for the first quarter of 2025 was primarily driven by a combination of factors, including the impact of loan growth and an increase in specific reserves, partially offset by modest improvement in forecasted losses and qualitative factors, primarily reflecting a reduction in consumer indirect delinquencies. Net charge-offs during the recent quarter were $2.4 million, representing 0.21% of average loans on an annualized basis, compared to $3.1 million, or an annualized 0.28% of average loans, in the first quarter of 2024. See the “Allowance for Credit Losses–Loans” and “Non-Performing Assets and Potential Problem Loans” sections of this Management’s Discussion and Analysis for further discussion regarding the provision for credit losses and net charge-offs.
Current wording
The provision for credit losses was $2.6 million in the second quarter of 2025 compared to $2.0 million in the second quarter of 2024. The provision for credit losses for the second quarter of 2025 was driven by a combination of factors, including higher net charge-offs, partially offset by improvement in the forecasted loss rate for pooled loans, and a reduction in specific reserves. Net charge-offs during the recent quarter were $4.1 million, representing 0.36% of average loans on an annualized basis, compared to $1.1 million, or an annualized 0.10% of average loans, in the second quarter of 2024. See the “Allowance for Credit Losses–Loans” and “Non-Performing Assets and Potential Problem Loans” sections of this Management’s Discussion and Analysis for further discussion regarding the provision for credit losses and net charge-offs.
Previous wording
Noninterest income totaled $10.4 million in the first quarter of 2025, compared to $10.9 million in the first quarter of 2024. The sale of the assets of our insurance subsidiary in April 2024 resulted in a decrease in insurance income of $2.1 million compared to the first quarter of 2024. Partially offsetting this decrease were increases of $1.5 million in company owned life insurance income as a result of a surrender and redeploy strategy executed in January 2025.
Current wording
Noninterest income totaled $10.6 million in the second quarter of 2025, compared to $24.0 million in the second quarter of 2024. Second quarter 2024 results benefited from a pre-tax gain of $13.5 million, after selling costs, associated with the sale of the assets of SDN on April 1, 2024. Other decreases in the second quarter of 2025 included $918 thousand in net loss on tax credit investments, and $496 thousand lower income from investments in limited partnerships. These decreases were offset by a $1.6 million increase in income from company owned life insurance as a result of a surrender and redeploy strategy executed in January 2025.
Previous wording
The regulatory Tier 1 Capital Ratio was 10.71% and 10.87%, respectively, and Total Risk-Based Capital Ratio was 13.09% and 13.25%, respectively, at March 31, 2025 and December 31, 2024. See the “Liquidity and Capital Management” section of this Management’s Discussion and Analysis for further discussion regarding regulatory capital and the Basel III capital rules.
Current wording
The regulatory Tier 1 Capital Ratio was 11.17% and 10.87%, respectively, and Total Risk-Based Capital Ratio was 13.27% and 13.25%, respectively, at June 30, 2025 and December 31, 2024. See the “Liquidity and Capital Management” section of this Management’s Discussion and Analysis for further discussion regarding regulatory capital and the Basel III capital rules.
Previous wording
Net interest income is our primary source of revenue, comprising approximately 82% and 79% of revenue during the three months ended March 31, 2025 and 2024, respectively. Net interest income is the difference between interest income on interest-earning assets, such as loans and investment securities, and interest expense on interest-bearing deposits and other borrowings used to fund interest-earning and other assets or activities. Net interest income is affected by changes in interest rates and by the amount and composition of interest-earning assets and interest-bearing liabilities, as well as the sensitivity of the balance sheet to changes in interest rates, including characteristics such as the fixed or variable nature of the financial instruments, contractual maturities and repricing frequencies.
Current wording
Net interest income is our primary source of revenue, comprising approximately 82% and 63% of revenue during the three months ended June 30, 2025 and 2024, respectively, and 82% and 70% for the six months ended June 30, 2025 and 2024, respectively. Net interest income is the difference between interest income on interest-earning assets, such as loans and investment securities, and interest expense on interest-bearing deposits and other borrowings used to fund interest-earning and other assets or activities. Net interest income is affected by changes in interest rates and by the amount and composition of interest-earning assets and interest-bearing liabilities, as well as the sensitivity of the balance sheet to changes in interest rates, including characteristics such as the fixed or variable nature of the financial instruments, contractual maturities and repricing frequencies.
Previous wording
Net interest income on a taxable equivalent basis for the three months ended March 31, 2025, was $46.9 million, an increase of $6.8 million versus the comparable quarter last year of $40.2 million. Our net interest margin for the first quarter of 2025 was 3.35%, 57-basis points higher than 2.78% for the same period in 2024. The increase in net interest income and net interest margin was primarily due to an increase in the average yield on investment securities, following the previously disclosed restructuring of the available-for-sale portfolio in December 2024, which supported an increase in the average yield on interest-earnings assets, while funding costs were reduced, reflecting deposit repricing due in part to the federal funds interest rate cuts totaling 100-basis points that occurred in September 2024 through December 2024.
Current wording
Net interest income on a taxable equivalent basis for the three months ended June 30, 2025, was $49.2 million, an increase of $7.9 million versus the comparable quarter last year of $41.3 million. Our net interest margin for the second quarter of 2025 was 3.49%, 62-basis points higher than 2.87% for the same period in 2024. The increase in net interest income and net interest margin was primarily due to an increase in the average yield on investment securities, following the previously disclosed restructuring of the available-for-sale securities portfolio in December 2024, which supported an increase in the average yield on interest-earnings assets, while funding costs were reduced, reflecting deposit repricing due in part to the federal funds interest rate cuts totaling 100-basis points that occurred in September 2024 through December 2024.
Previous wording
For the first quarter of 2025, the average yield on average interest earning assets of 5.80% was 37-basis points higher than the first quarter of 2024 of 5.43% primarily due to an increase in the average yield on investment securities, following the previously disclosed restructuring of the available-for-sale securities portfolio in December 2024, partially offset by a decrease in market interest rates due to the federal funds interest rate cuts that occurred in the latter part of 2024 as previously mentioned. Average loan yields decreased 13-basis points during the first quarter of 2025 to 6.20% from 6.33% for the first quarter of 2024, and the average yield on investment securities increased 216-basis points during the first quarter of 2025 to 4.25% from 2.09% for the first quarter of 2024.
Current wording
For the second quarter of 2025, the average yield on average interest earning assets of 5.88% was 38-basis points higher than the second quarter of 2024 of 5.50% primarily due to an increase in the average yield on investment securities, following the previously disclosed restructuring of the available-for-sale securities portfolio in December 2024, partially offset by a decrease in market interest rates due to the federal funds interest rate cuts that occurred in the latter part of 2024 as previously mentioned. Average yield on investment securities increased 217-basis points during the second quarter of 2025 to 4.34% from 2.17% for the second quarter of 2024, while average loan yields decreased 14-basis points during the second quarter of 2025 to 6.26% from 6.40% for the second quarter of 2024.
Previous wording
Average interest-earning assets were $5.65 billion for the first quarter of 2025 compared to $5.80 billion for the first quarter of 2024, a decrease of $153.6 million, or 3%, from the comparable quarter last year, with a decrease in average investment securities of $97.3 million from $1.18 billion for the first quarter of 2024 to $1.09 billion for the first quarter of 2025, and an $86.3 million decrease in average Federal Reserve interest-earning cash, partially offset by an increase in average loans of $30.0 million from $4.46 billion for the first quarter of 2024 to $4.49 billion for the first quarter of 2025. Average loans comprised 80% of average interest-earning assets during the first quarter of 2025 compared to 77% during the first quarter of 2024. The increase in average loans was primarily due to organic growth in commercial mortgages. Average investment securities represented 19% of average interest-earning assets during the first quarter of 2025 compared to 20% during the first quarter of 2024. Overall, the average interest rate changes increased interest income by $3.7 million and volume variance decreased interest income by $1.1 million during the first quarter of 2025, which collectively drove a $2.6 million increase in total interest income during the first quarter of 2025, as compared to the prior year quarter.
Current wording
Average interest-earning assets were $5.65 billion for the second quarter of 2025 compared to $5.77 billion for the second quarter of 2024, a decrease of $114.5 million, or 2%, from the comparable quarter last year, with a decrease in average investment securities of $123.2 million from $1.19 billion for the second quarter of 2024 to $1.07 billion for the second quarter of 2025, and a $95.1 million decrease in average Federal Reserve interest-earning cash, partially offset by an increase in average loans of $103.8 million from $4.44 billion for the second quarter of 2024 to $4.54 billion for the second quarter of 2025. Average loans comprised 80% of average interest-earning assets during the second quarter of 2025 compared to 77% during the second quarter of 2024. The increase in average loans was primarily due to organic growth in commercial mortgages in the first quarter of 2025. Average investment securities represented 19% of average interest-earning assets during the second quarter of 2025 compared to 21% during the second quarter of 2024. Overall, the increase in interest income of $4.1 million was reflective of the higher average interest rates on average investment securities, partially offset by the decrease in average loan yields.
Previous wording
For the first quarter of 2025, the average cost of average interest-bearing liabilities of 3.07% was 27-basis points lower than the first quarter of 2024. The average cost of interest-bearing deposits of 3.04% was 25-basis points lower than the first quarter of 2024. The average cost of total borrowings decreased 37-basis points to 3.71% in the first quarter of 2025, compared to 4.08% in the first quarter of 2024. The reduction in the cost of interest-bearing liabilities was primarily driven by the repricing of deposits and borrowings at lower rates given the federal funds interest rate cuts that occurred in the latter part of 2024 as previously mentioned.
Current wording
For the second quarter of 2025, the average cost of average interest-bearing liabilities of 3.00% was 32-basis points lower than the second quarter of 2024. The average cost of interest-bearing deposits of 2.96% was 33-basis points lower than the second quarter of 2024. The average cost of total borrowings decreased 3-basis points to 3.80% in the second quarter of 2025, compared to 3.83% in the second quarter of 2024. The reduction in the cost of interest-bearing liabilities was primarily driven by the repricing of deposits and borrowings at lower rates given the federal funds interest rate cuts that occurred in the latter part of 2024 as previously mentioned.
Previous wording
Average interest-bearing liabilities were $4.51 billion for the first quarter of 2025, compared to $4.61 billion for the first quarter of 2024, a decrease of $108.0 million, or 2%, driven by an $84.2 million decrease in the average balance of borrowings, couple with a $23.8 million decrease in average interest-bearing deposits. On average, interest-bearing deposits decreased from $4.31 billion for the first quarter of 2024 to $4.29 billion for the current quarter while noninterest-bearing demand deposits (a principal component of net free funds) decreased $35.8 million to $926.7 million for the first quarter of 2025. The decrease in average interest-bearing deposits was due to lower average brokered and reciprocal deposits, partially offset by higher average non-public and public deposits. For further discussion of deposits, refer to the “Funding Activities–Deposits” section of this Management’s Discussion and Analysis. Overall, interest-bearing liability rate changes resulted in a $3.8 million decrease in interest expense, and volume changes resulted in a $387 thousand decrease in interest expense during the first quarter of 2025 as compared to the prior year quarter.
Current wording
Average interest-bearing liabilities were $4.52 billion for the second quarter of 2025, compared to $4.55 billion for the second quarter of 2024, a decrease of $29.8 million, or 1%, driven by a $62.2 million decrease in the average balance of borrowings, partially offset by a $32.4 million increase in average interest-bearing deposits. On average, interest-bearing deposits increased from $4.28 billion for the second quarter of 2024 to $4.32 billion for the current quarter while noninterest-bearing demand deposits (a principal component of net free funds) decreased $27.4 million to $923.4 million for the second quarter of 2025. The increase in average interest-bearing deposits was due to higher average brokered and public deposits, partially offset by lower average reciprocal and nonpublic deposits. For further discussion of deposits, refer to the “Funding Activities–Deposits” section of this Management’s Discussion and Analysis. Overall, interest-bearing liability rate changes resulted in a $4.2 million decrease in interest expense, while volume changes resulted in a $360 thousand increase in interest expense during the second quarter of 2025 as compared to the prior year quarter.
Previous wording
The decrease in insurance income for the first quarter of 2025 was reflective of the sale of our insurance subsidiary, SDN, on April 1, 2024.
Current wording
The decrease in insurance income for the six months ended June 30, 2025, was reflective of the sale of our insurance subsidiary, SDN, on April 1, 2024.
Previous wording
Income from company owned life insurance increased $1.5 million, to $2.8 million for the first quarter of 2025 compared to $1.3 million for the first quarter of 2024. The increase was primarily due to the surrender and redeployment of a portion of our life insurance into a higher-yielding credit fund in January 2025.
Current wording
Income from company owned life insurance increased $1.6 million, to $3.0 million for the second quarter of 2025, compared to $1.4 million for the second quarter of 2024. For the first six months of 2025, income from company owned life insurance increased $3.1 million, to $5.7 million. The increase in both periods was reflective of the surrender and redeployment of a portion of our life insurance into a higher-yielding credit fund in January 2025.
Previous wording
Professional services expense decreased $681 thousand, or 29%, to $1.7 million for the first quarter of 2025 compared to $2.4 million for the first quarter of 2024. The decrease was primarily due to higher legal expenses in 2024, attributed to the deposit-related fraud event we experienced in early March 2024.
Current wording
Professional services expense decreased $343 thousand, or 19%, to $1.5 million for the second quarter of 2025 compared to $1.8 million for the second quarter of 2024. For the first six months of 2025, professional services expense decreased $1.0 million, or 25%, to $3.1 million, compared to $4.2 million for the first six months of 2024. The decrease in both periods was primarily due to higher legal expenses in 2024, attributed to the deposit-related fraud event we experienced in early March 2024.
Previous wording
Deposit-related charged-off items recoveries were $294 thousand for the first quarter of 2025 and included insurance proceeds related to a past commercial deposit charged-off item, while deposit-related charged-off expense of $19.2 million for the first quarter of 2024 included an $18.4 million loss associated with the deposit-related fraud event.
Current wording
Deposit-related charged-off items expense of $19.6 million for the first six months of 2024 included an $18.4 million loss associated with the deposit-related fraud event.
Previous wording
Our efficiency ratio for the first quarter of 2025 was 58.79%, compared with 105.77% for the first quarter of 2024. The higher efficiency ratio for the first quarter of 2024 was reflective of the $18.4 million pre-tax loss in deposit-related charged-off items and approximately $660 thousand of legal and consulting expenses, recorded in professional services expense, attributed to the deposit-related fraud event. The efficiency ratio is calculated by dividing total noninterest expense by net revenue, defined as the sum of tax-equivalent net interest income and noninterest income before net gains on investment securities. An increase in the efficiency ratio indicates that more resources are being utilized to generate the same volume of income, while a decrease indicates a more efficient allocation of resources. The efficiency ratio, a banking industry financial measure, is not required by GAAP. However, the efficiency ratio is used by management in its assessment of financial performance specifically as it relates to noninterest expense control. Management also believes such information is useful to investors in evaluating Company performance.
Current wording
Our efficiency ratio for the second quarter of 2025 was 59.68%, compared with 50.58% for the second quarter of 2024. The lower efficiency ratio for the second quarter of 2024 was primarily due to the $13.5 million pre-tax gain on the sale of SDN. Our efficiency ratio for the first six months of 2025 was 59.24%, compared with 74.80% for the first six months of 2024. The higher efficiency ratio for the first six months of 2024 was reflective of the $18.4 million pre-tax loss in deposit-related charged-off items and approximately $660 thousand of legal and consulting expenses, recorded in professional services expense, attributed to the deposit-related fraud event. The efficiency ratio is calculated by dividing total noninterest expense by net revenue, defined as the sum of tax-equivalent net interest income and noninterest income before net gains on investment securities. An increase in the efficiency ratio indicates that more resources are being utilized to generate the same volume of income, while a decrease indicates a more efficient allocation of resources. The efficiency ratio, a banking industry financial measure, is not required by GAAP. However, the efficiency ratio is used by management in its assessment of financial performance specifically as it relates to noninterest expense control. Management also believes such information is useful to investors in evaluating Company performance.
Previous wording
For the first quarter of 2025, we recorded income tax expense of $3.7 million, compared to $356 thousand for the first quarter of 2024. The lower level of income tax expense incurred during the first quarter of 2024 was primarily due to a lower level of pre-tax income, reflecting the impact of the deposit-related fraud event. In the first quarter of 2025, we recognized federal and state tax benefits related to tax credit investments placed in service and/or amortized during the period resulting in a reduction in income tax expense of $1.1 million, compared to $785 thousand for the same period in the prior year.
Current wording
For the second quarter of 2025, we recorded income tax expense of $4.0 million, compared to $4.5 million for the second quarter of 2024, and $7.7 million for the first six months of 2025, compared to $4.9 million for the first six months of 2024. The lower level of income tax expense incurred during the first six months of 2024 was primarily due to a lower level of pre-tax income, reflecting the impact of the deposit-related fraud event. In the second quarter of 2025, we recognized federal and state tax benefits related to tax credit investments placed in service and/or amortized during the period resulting in a reduction in income tax expense of $1.1 million, compared to $1.3 million for the same period in the prior year. The first six months of 2025 and 2024 also included related benefits of $2.2 million and $2.1 million, respectively.
Previous wording
Our effective tax rate for the first quarter of 2025 was 18.2%, versus 14.7%, for the first quarter of 2024. Effective tax rates are typically impacted by items of income and expense that are not subject to federal or state taxation. Our effective tax rates reflect the impact of these items, which include, but are not limited to, interest income from tax-exempt securities, earnings on company owned life insurance and the impact of tax credit investments. In addition, our effective tax rates for 2025 and 2024 reflect the New York State tax benefit generated by our real estate investment trust.
Current wording
Our effective tax rate for the second quarter of 2025 was 18.4%, versus 15.0%, for the second quarter of 2024, and 18.3% for the first six months of 2025, compared to 15.0% for the first six months of 2024. Effective tax rates are typically impacted by items of income and expense that are not subject to federal or state taxation. Our effective tax rates reflect the impact of these items, which include, but are not limited to, interest income from tax-exempt securities, earnings on company owned life insurance and the impact of tax credit investments. In addition, our effective tax rates for 2025 and 2024 reflect the New York State tax benefit generated by our real estate investment trust.
Previous wording
Our available for sale (“AFS”) investment securities portfolio increased $15.9 million from December 31, 2024 to March 31, 2025. The AFS portfolio had a net unrealized loss of $46.6 million at March 31, 2025 and $61.6 million at December 31, 2024, respectively. The fair value of most of the investment securities in the AFS portfolio fluctuates as market interest rates change.
Current wording
Our available for sale (“AFS”) investment securities portfolio increased $5.0 million from December 31, 2024 to June 30, 2025. The AFS portfolio had a net unrealized loss of $46.5 million at June 30, 2025 and $61.6 million at December 31, 2024, respectively. The fair value of most of the investment securities in the AFS portfolio fluctuates as market interest rates change.
Previous wording
For AFS securities in an unrealized loss position, we first assess whether (i) we intend to sell, or (ii) it is more likely than not that we will be required to sell the security before recovery of its amortized cost basis. If either case is affirmative, any previously recognized allowances are charged-off and the security’s amortized cost is written down to fair value through income. If neither case is affirmative, the security is evaluated to determine whether the decline in fair value has resulted from credit losses or other factors. In making this assessment, management considers the extent to which fair value is less than amortized cost, any changes to the rating of the security by a rating agency and any adverse conditions specifically related to the security, among other factors. If this assessment indicates that a credit loss exists, the present value of cash flows expected to be collected from the security are compared to the amortized cost basis of the security. If the present value of cash flows expected to be collected is less than the amortized cost basis, a credit loss exists and an allowance for credit losses is recorded for the credit loss, limited by the amount that the fair value is less than the amortized cost basis. Any impairment that has not been recorded through an allowance for credit losses is recognized in other comprehensive income. Adjustments to the allowance are reported in our income statement as a component of credit loss expense. AFS securities are charged-off against the allowance or, in the absence of any allowance, written down through income when deemed uncollectible by management or when either of the aforementioned criteria regarding intent or requirement to sell is met. For the three months ended March 31, 2025 and 2024, no allowance for credit losses was recognized on AFS securities in an unrealized loss position as management does not believe any of the securities are impaired due to reasons of credit quality.
Current wording
For AFS securities in an unrealized loss position, we first assess whether (i) we intend to sell, or (ii) it is more likely than not that we will be required to sell the security before recovery of its amortized cost basis. If either case is affirmative, any previously recognized allowances are charged-off and the security’s amortized cost is written down to fair value through income. If neither case is affirmative, the security is evaluated to determine whether the decline in fair value has resulted from credit losses or other factors. In making this assessment, management considers the extent to which fair value is less than amortized cost, any changes to the rating of the security by a rating agency and any adverse conditions specifically related to the security, among other factors. If this assessment indicates that a credit loss exists, the present value of cash flows expected to be collected from the security are compared to the amortized cost basis of the security. If the present value of cash flows expected to be collected is less than the amortized cost basis, a credit loss exists and an allowance for credit losses is recorded for the credit loss, limited by the amount that the fair value is less than the amortized cost basis. Any impairment that has not been recorded through an allowance for credit losses is recognized in other comprehensive income. Adjustments to the allowance are reported in our income statement as a component of credit loss expense. AFS securities are charged-off against the allowance or, in the absence of any allowance, written down through income when deemed uncollectible by management or when either of the aforementioned criteria regarding intent or requirement to sell is met. For the three and six months ended June 30, 2025 and 2024, no allowance for credit losses was recognized on AFS securities in an unrealized loss position as management does not believe any of the securities are impaired due to reasons of credit quality.
Previous wording
Our AFS portfolio as of March 31, 2025, reflected our strategic investment securities restructuring which occurred in December 2024 following the completion of the public common stock offering. As of March 31, 2025, there were 46 securities in the AFS Agency MBS portfolio with an aggregate fair value of $313.7 million that were in an unrealized loss position with unrealized losses totaling $50.9 million. Of these, 37 were in an unrealized loss position for 12 months or longer and had an aggregate fair value of $178.4 million and unrealized losses of $48.9 million, while eight were in an unrealized loss position for less than 12 months and had an aggregate fair value of $135.3 million and unrealized losses of $2.0 million. The unrealized loss of these securities was driven by the timing of the purchases of fixed-rate securities during the extended low-interest rate environments experienced in prior years, which has been compounded with subsequent increases in benchmark interest rates. However, these fixed-rate securities were purchased with the expectation that they will continue to prepay principal, and the proceeds will be invested at current market rates.
Current wording
Our AFS portfolio as of June 30, 2025, reflected our strategic investment securities restructuring which occurred in December 2024 following the completion of the public common stock offering. As of June 30, 2025, there were 50 securities in the AFS Agency MBS portfolio with an aggregate fair value of $405.3 million that were in an unrealized loss position with unrealized losses totaling $50.7 million. Of these, 35 were in an unrealized loss position for 12 months or longer and had an aggregate fair value of $169.0 million and unrealized losses of $47.3 million, while 15 were in an unrealized loss position for less than 12 months and had an aggregate fair value of $236.4 million and unrealized losses of $3.4 million. The unrealized loss of these securities was driven by the timing of the purchases of fixed-rate securities during the extended low-interest rate environments experienced in prior years, which has been compounded with subsequent increases in benchmark interest rates. However, these fixed-rate securities were purchased with the expectation that they will continue to prepay principal, and the proceeds will be invested at current market rates.
Previous wording
As a member of the FHLB, the Bank is required to hold FHLB stock. The amount of required FHLB stock is based on the Bank’s asset size and the amount of borrowings from the FHLB. We have assessed the ultimate recoverability of our FHLB stock and believe that no impairment currently exists. As a member of the FRB system, we are required to maintain a specified investment in FRB stock based on a ratio relative to our capital. At March 31, 2025, our ownership of FHLB and FRB stock totaled $9.4 million and $9.2 million, respectively, and is included in other assets and recorded at cost, which approximates fair value.
Current wording
As a member of the FHLB, the Bank is required to hold FHLB stock. The amount of required FHLB stock is based on the Bank’s asset size and the amount of borrowings from the FHLB. We have assessed the ultimate recoverability of our FHLB stock and believe that no impairment currently exists. As a member of the FRB system, we are required to maintain a specified investment in FRB stock based on a ratio relative to our capital. At June 30, 2025, our ownership of FHLB and FRB stock totaled $11.6 million and $9.2 million, respectively, and is included in other assets and recorded at cost, which approximates fair value.
Previous wording
Total loans were $4.55 billion at March 31, 2025, an increase of $74.1 million from $4.48 billion at December 31, 2024. The composition of our loan portfolio, excluding loans held for sale and including net unearned income and net deferred fees and costs, is summarized as follows (dollars in thousands):
Current wording
Total loans were $4.54 billion at June 30, 2025, an increase of $56.8 million from $4.48 billion at December 31, 2024. The composition of our loan portfolio, excluding loans held for sale and including net unearned income and net deferred fees and costs, is summarized as follows (dollars in thousands):
Previous wording
Total commercial loans of $2.94 billion represented 65% of total loans as of March 31, 2025, compared to $2.86 billion, or 64% of total loans as of December 31, 2024. Commercial business loans of $709.1 million, or 16% of total loans, were up $43.8 million, or 7%, from December 31, 2024, and total commercial mortgage loans of $2.23 billion, or 49% of total loans, were up $28.7 million, or 1.3% from $2.20 billion as of December 31, 2024. The increase in total commercial mortgage loans was attributable to increases in non-owner occupied and multifamily loans, partially offset by decreases in construction and owner-occupied loans. As of March 31, 2025, commercial real estate (“CRE”) loans made up approximately 66% of total commercial loans, and 43% of total loans, commercial and industrial loans approximated 30% of total commercial loans, and 19% of total loans, and business banking unit loans were approximately 4% of total commercial loans and 3% of total loans. Our CRE committed credit exposure at March 31, 2025 related to approximately 43% multi-family, 16% office, 9% retail, 8% hospitality, 7% industrial property, and 5% home builder properties. Approximately 68% of our office exposure at March 31, 2025, or 11% of our total CRE exposure, related to Class B or medical office space. More than 70% of our office and 90% of our multifamily CRE loans have full or limited personal or corporate recourse.
Current wording
Total commercial loans of $2.94 billion represented 65% of total loans as of June 30, 2025, compared to $2.86 billion, or 64% of total loans as of December 31, 2024. Commercial business loans of $726.2 million, or 16% of total loans, were up $60.9 million, or 9%, from December 31, 2024, and total commercial mortgage loans of $2.22 billion, or 49% of total loans, were up $15.6 million, or 1% from $2.20 billion as of December 31, 2024. The increase in total commercial mortgage loans was attributable to increases in multifamily, owner occupied and non-owner occupied loans, partially offset by decreases in construction loans. As of June 30, 2025, commercial real estate (“CRE”) loans made up approximately 67% of total commercial loans, and 43% of total loans, commercial and industrial loans approximated 29% of total commercial loans, and 19% of total loans, and business banking unit loans were approximately 4% of total commercial loans and 3% of total loans. Our CRE committed credit exposure at June 30, 2025 related to approximately 45% multi-family, 16% office, 8% retail, 8% hospitality, 6% industrial property, and 4% home builder properties. Approximately 72% of our office exposure at June 30, 2025, or 12% of our total CRE exposure, related to Class B or medical office space. More than 70% of our office and 90% of our multifamily CRE loans have full or limited personal or corporate recourse.
Previous wording
Total consumer loans of $1.62 billion, or 35% of total loans at March 31, 2025, increased $1.6 million from December 31, 2024. Consumer loans at March 31, 2025 were comprised of residential real estate loans and lines of credit of $718.8 million, or 16% of total loans, consumer indirect loans of $853.2 million, or 19% of total loans, and other consumer loans of $44.0 million, or 1% of total loans. During the first quarter of 2025, we originated $89.1 million in indirect automobile loans with a mix of approximately 27% new automobile and 73% used automobile loans. This compares with the $57.9 million originated of indirect automobile loans with a mix of approximately 18% new automobile and 82% used automobile loans for the first quarter of 2024. Origination volumes and the mix of new and used vehicles financed fluctuate depending on general market conditions.
Current wording
Total consumer loans of $1.59 billion, or 35% of total loans at June 30, 2025, decreased $19.7 million from December 31, 2024. Consumer loans at June 30, 2025 were comprised of residential real estate loans and lines of credit of $722.9 million, or 16% of total loans, consumer indirect loans of $833.5 million, or 18% of total loans, and other consumer loans of $38.3 million, or 1% of total loans. During the second quarter of 2025, we originated $165.1 million in indirect automobile loans with a mix of approximately 27% new automobile and 73% used automobile loans. This compares with the $114.7 million originated of indirect automobile loans with a mix of approximately 22% new automobile and 78% used automobile loans for the second quarter of 2024. Origination volumes and the mix of new and used vehicles financed fluctuate depending on general market conditions.
Previous wording
Loans held for sale (not included in the loan portfolio composition table) were entirely comprised of residential real estate loans and totaled $387 thousand and $2.3 million as of March 31, 2025 and December 31, 2024, respectively.
Current wording
Loans held for sale (not included in the loan portfolio composition table) were entirely comprised of residential real estate loans and totaled $2.4 million and $2.3 million as of June 30, 2025 and December 31, 2024, respectively.
Previous wording
We sell certain qualifying newly originated or refinanced residential real estate loans on the secondary market. Residential real estate loans serviced for others, which are not included in the consolidated statements of financial condition, amounted to $280.2 million and $280.8 million as of March 31, 2025 and December 31, 2024, respectively.
Current wording
We sell certain qualifying newly originated or refinanced residential real estate loans on the secondary market. Residential real estate loans serviced for others, which are not included in the consolidated statements of financial condition, amounted to $281.6 million and $280.8 million as of June 30, 2025 and December 31, 2024, respectively.
Previous wording
Net charge-offs of $2.4 million for the first quarter of 2025 represented 0.21% of average loans on an annualized basis compared to net charge-offs of $3.1 million, or 0.28% of average loans for the first quarter of 2024. The allowance for credit losses–loans was $49.0 million at March 31, 2025, compared with $43.1 million at March 31, 2024. The increase in allowance for credit losses–loans was primarily due to an increase in loan balances, qualitative factors and specific reserves. The ratio of the allowance for credit losses–loans to total loans was 1.08% at March 31, 2025 and 0.60% at March 31, 2024. Non-performing loans decreased $1.4 million to $40.0 million at March 31, 2025, compared to $41.4 million at March 31, 2024. The ratio of the allowance for credit losses–loans to total loans was 1.08% and 0.60% at March 31, 2025 and March 31, 2024, respectively. The ratio of allowance for credit losses–loans to non-performing loans was 122% at March 31, 2025, compared with 161% at March 31, 2024, reflective of the higher allowance for credit losses–loans.
Current wording
Net charge-offs of $4.1 million for the second quarter of 2025 represented 0.36% of average loans on an annualized basis compared to net charge-offs of $1.1 million, or 0.10%, of average loans for the second quarter of 2024. For the first six months of 2025, net charge-offs were $6.4 million, compared to $4.2 million for the first six months of 2024. The allowance for credit losses–loans was $47.3 million at June 30, 2025, compared with $44.0 million at June 30, 2024. The increase in allowance for credit losses–loans was primarily attributed to an increase in loan balances and specific reserves. The ratio of the allowance for credit losses–loans to total loans was 1.04% at June 30, 2025 and 0.99% at June 30, 2024. Non-performing loans decreased $9.0 million to $32.4 million at June 30, 2025, compared to $41.4 million at June 30, 2024. The decrease in non-performing loans reflects a reduction of approximately $3.7 million associated with the foreclosure of a participated loan secured by real estate, as well as a $1.9 million partial charge-off of a credit facility for which a specific reserve was in place. Both the aforementioned foreclosed participated loan and the partially charged-off credit facility related to a previously disclosed commercial business relationship that was placed on nonaccrual status in the fourth quarter of 2023. The ratio of allowance for credit losses–loans to non-performing loans was 146% at June 30, 2025, compared with 174% at June 30, 2024.
Previous wording
Non-performing assets include non-performing loans and foreclosed assets. Non-performing assets at March 31, 2025 were $40.2 million, a decrease of $1.3 million from the $41.5 million balance at December 31, 2024. The primary component of non-performing assets is non-performing loans, which were $40.0 million or 0.88% of total loans at March 31, 2025 and $41.4 million or 0.92% of total loans at December 31, 2024.
Current wording
Non-performing assets include non-performing loans and foreclosed assets. Non-performing assets at June 30, 2025 were $32.6 million, a decrease of $8.9 million from the $41.5 million balance at December 31, 2024. The primary component of non-performing assets is non-performing loans, which were $32.4 million or 0.72% of total loans at June 30, 2025 and $41.4 million or 0.92% of total loans at December 31, 2024. The decrease in non-performing loans reflects the aforementioned foreclosed participated loan and the partially charged-off credit facility related to a previously disclosed commercial business relationship that was placed on nonaccrual status in the fourth quarter of 2023.
Previous wording
Approximately $1.2 million, or 3%, of the $40.0 million in non-performing loans as of March 31, 2025 were current with respect to payment of principal and interest but were classified as non-accruing because repayment in full of principal and/or interest was uncertain.
Current wording
Approximately $1.4 million, or 4%, of the $32.4 million in non-performing loans as of June 30, 2025 were current with respect to payment of principal and interest but were classified as non-accruing because repayment in full of principal and/or interest was uncertain.
Previous wording
Foreclosed assets consist of real property formerly pledged as collateral for loans, which we have acquired through foreclosure proceedings or acceptance of a deed in lieu of foreclosure. We had $196 thousand and $60 thousand of properties representing foreclosed asset holdings at March 31, 2025 and December 31, 2024, respectively.
Current wording
Foreclosed assets consist of real property formerly pledged as collateral for loans, which we have acquired through foreclosure proceedings or acceptance of a deed in lieu of foreclosure. We had $142 thousand and $60 thousand of properties representing foreclosed asset holdings at June 30, 2025 and December 31, 2024, respectively.
Previous wording
Potential problem loans are loans that are currently performing, but information known about possible credit problems of the borrowers causes us to have concern as to the ability of such borrowers to comply with the present loan payment terms and may result in disclosure of such loans as non-performing at some time in the future. These loans remain in a performing status due to a variety of factors, including payment history, the value of collateral supporting the credits, and/or personal or government guarantees. We consider loans classified as substandard, which continue to accrue interest, to be potential problem loans. We identified $24.3 million and $33.7 million in loans that continued to accrue interest which were classified as substandard as of March 31, 2025 and December 31, 2024, respectively.
Current wording
Potential problem loans are loans that are currently performing, but information known about possible credit problems of the borrowers causes us to have concern as to the ability of such borrowers to comply with the present loan payment terms and may result in disclosure of such loans as non-performing at some time in the future. These loans remain in a performing status due to a variety of factors, including payment history, the value of collateral supporting the credits, and/or personal or government guarantees. We consider loans classified as substandard, which continue to accrue interest, to be potential problem loans. We identified $26.4 million and $33.7 million in loans that continued to accrue interest which were classified as substandard as of June 30, 2025 and December 31, 2024, respectively.
Previous wording
As of March 31, 2025 and December 31, 2024, the aggregate amount of estimated uninsured deposits (deposits in amounts greater than $250 thousand, which is the maximum amount for federal deposit insurance) was $2.11 billion, or 39% of total deposits, and $1.93 billion, or 38% of total deposits, respectively. The portion of our time deposits by account that were in excess of the FDIC insurance limit was $340.6 million and $328.4 million at March 31, 2025 and December 31, 2024, respectively. The maturities of our uninsured time deposits at March 31, 2025 were as follows: $156.9 million in three months or less; $81.6 million between three months and six months; $45.6 million between six months and one year; and $56.5 million over one year. Approximately $1.23 billion and $1.00 billion of reciprocal and public deposits, characterized as preferred deposits for FDIC call report purposes, were collateralized by government-backed securities as of March 31, 2025 and December 31, 2024, respectively. As of March 31, 2025 and December 31, 2024, estimated uninsured nonpublic deposits were approximately 19% and 18% of total deposits, respectively.
Current wording
As of June 30, 2025 and December 31, 2024, the aggregate amount of estimated uninsured deposits (deposits in amounts greater than $250 thousand, which is the maximum amount for federal deposit insurance) was $2.07 billion, or 40% of total deposits, and $1.93 billion, or 38% of total deposits, respectively. The portion of our time deposits by account that were in excess of the FDIC insurance limit was $310.3 million and $328.4 million at June 30, 2025 and December 31, 2024, respectively. The maturities of our uninsured time deposits at June 30, 2025 were as follows: $132.5 million in three months or less; $50.8 million between three months and six months; $73.9 million between six months and one year; and $53.1 million over one year. Approximately $1.23 billion and $1.00 billion of reciprocal and public deposits, characterized as preferred deposits for FDIC call report purposes, were collateralized by government-backed securities as of June 30, 2025 and December 31, 2024, respectively. As of June 30, 2025 and December 31, 2024, estimated uninsured nonpublic deposits were approximately 19% and 18% of total deposits, respectively.
Previous wording
We offer a variety of deposit products designed to attract and retain customers, with the primary focus on building and expanding long-term relationships. At March 31, 2025, total deposits were $5.37 billion, representing an increase of $268.2 million, or 5%, from December 31, 2024. The increase was primarily due to increases in public, brokered and reciprocal deposits, partially offset by a decrease in non-public deposits. While seasonality in our public deposit portfolio was a contributor, public deposits accounts maintained higher balances during typical outflow cycles while growing deposits with new and existing municipalities. Time deposits were approximately 30% of total deposits at both March 31, 2025 and December 31, 2024.
Current wording
We offer a variety of deposit products designed to attract and retain customers, with the primary focus on building and expanding long-term relationships. At June 30, 2025, total deposits were $5.16 billion, representing an increase of $51.3 million, or 1%, from December 31, 2024. The increase was primarily due to increases in public, brokered and reciprocal deposits, partially offset by a decrease in non-public deposits primarily associated with exiting BaaS. While seasonality in our public deposit portfolio was a contributor, public deposits accounts maintained higher balances during typical outflow cycles while growing deposits with new and existing municipalities. Time deposits were approximately 31% of total deposits at both June 30, 2025 and December 31, 2024.
Previous wording
Non-public deposits, the largest component of our funding sources, totaled $3.15 billion and $3.21 billion at March 31, 2025 and December 31, 2024, respectively, and represented 59% and 63% of total deposits as of each date, respectively. We have managed this segment of funding through a strategy of competitive pricing that minimizes the number of customer relationships that have only a single service high-cost deposit account.
Current wording
Non-public deposits, the largest component of our funding sources, totaled $3.11 billion and $3.21 billion at June 30, 2025 and December 31, 2024, respectively, and represented 60% and 63% of total deposits as of each date, respectively. We have managed this segment of funding through a strategy of competitive pricing that minimizes the number of customer relationships that have only a single service high-cost deposit account.
Previous wording
As an additional source of funding, we offer a variety of public (municipal) deposit products to the towns, villages, counties and school districts within our market area. Public deposits generally range from 20% to 30% of our total deposits. There is a high degree of seasonality in this component of funding because the level of deposits varies with the seasonal cash flows for these public customers. We maintain the necessary levels of short-term liquidity to accommodate the seasonality associated with public deposits. Total public deposits were $1.22 billion and $1.07 billion at March 31, 2025 and December 31, 2024, respectively, and represented 23% and 21% of total deposits as of each date, respectively.
Current wording
As an additional source of funding, we offer a variety of public (municipal) deposit products to the towns, villages, counties and school districts within our market area. Public deposits generally range from 20% to 30% of our total deposits. There is a high degree of seasonality in this component of funding because the level of deposits varies with the seasonal cash flows for these public customers. We maintain the necessary levels of short-term liquidity to accommodate the seasonality associated with public deposits. Total public deposits were $1.06 billion and $1.07 billion at June 30, 2025 and December 31, 2024, respectively, and represented 21% of total deposits as of each date, respectively.
Previous wording
We also participate in reciprocal deposit programs, which enable depositors to receive FDIC insurance coverage for deposits otherwise exceeding the maximum insurable amount. Through these programs, deposits in excess of the maximum insurable amount are placed with multiple participating financial institutions. Reciprocal deposits totaled $796.6 million at March 31, 2025, compared to $746.7 million at December 31, 2024, as this product has been an attractive option for customers with more than $250 thousand on deposit, desiring FDIC insurance. Reciprocal deposits represented 15% of total deposits as of each date.
Current wording
We also participate in reciprocal deposit programs, which enable depositors to receive FDIC insurance coverage for deposits otherwise exceeding the maximum insurable amount. Through these programs, deposits in excess of the maximum insurable amount are placed with multiple participating financial institutions. Reciprocal deposits totaled $806.3 million at June 30, 2025, compared to $746.7 million at December 31, 2024, as this product has been an attractive option for customers with more than $250 thousand on deposit, desiring FDIC insurance. Reciprocal deposits represented 16% of total deposits as of each date.
Previous wording
Brokered deposits totaled $204.3 million and $80.9 million at March 31, 2025 and December 31, 2024, respectively, and represented 4% and 2% of total deposits as of each date. As of March 31, 2025 and December 31, 2024, $104.4 million and $28.1 million of interest-bearing demand deposits and $100.0 million and $52.8 million of time deposits were brokered deposit accounts, respectively.
Current wording
Brokered deposits totaled $175.2 million and $80.9 million at June 30, 2025 and December 31, 2024, respectively, and represented 3% and 2% of total deposits as of each date, respectively. As of June 30, 2025 and December 31, 2024, $75.2 million and $28.1 million of interest-bearing demand deposits and $100.0 million and $52.8 million of time deposits were brokered deposit accounts, respectively.
Showing the first 40 of 46 pairs. Open the source sections for the rest.
Rearranged current paragraphs (3)
Current report — wording carried from elsewhere
(1)Investment securities are shown at amortized cost.
Current report — wording carried from elsewhere
(2)The interest on tax-exempt securities is calculated on a tax-equivalent basis assuming a federal income tax rate of 21%.
Current report — wording carried from elsewhere
(4) Loans include net unearned income, net deferred loan fees and costs and non-accruing loans. Net deferred loan fees (costs) included in interest income were as follows (in thousands):