WEST BANCORPORATION INC
For the period ended Sep 30, 2025. Filed Oct 23, 2025.
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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.
Sep 30, 2025 · Filed Oct 23, 2025
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Item 2. Results of Operations
RESULTS OF OPERATIONS
The following table shows selected financial results and measures for the three and nine months ended September 30, 2025 compared with the same periods in 2024.
| Three Months Ended September 30, · Nine Months Ended September 30, | ||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2025 · 2024 · Change · Change % · 2025 · 2024 · Change · Change % | ||||||||||||||
| Net income | $9,314 | $5,952 | $3,362 | 56.49% | $25,135 | $16,953 | $8,182 | 48.26% | ||||||
| Average assets | 4,004,769 | 3,973,824 | 30,945 | 0.78% | 3,988,902 | 3,916,919 | 71,983 | 1.84% | ||||||
| Average stockholders' equity | 242,245 | 227,513 | 14,732 | 6.48% | 235,551 | 222,392 | 13,159 | 5.92% | ||||||
| Return on average assets | 0.92% | 0.60% | 0.32% | 0.84% | 0.59% | 0.25% | ||||||||
| Return on average equity | 15.25% | 10.41% | 4.84% | 14.27% | 10.18% | 4.09% | ||||||||
| Net interest margin (1) | 2.36% | 1.91% | 0.45% | 2.30% | 1.88% | 0.42% | ||||||||
| Efficiency ratio (1) (2) | 54.06% | 63.28% | (9.22)% | 55.60% | 64.16% | (8.56)% | ||||||||
| Dividend payout ratio | 45.47% | 70.71% | (25.24)% | 50.44% | 74.31% | (23.87)% | ||||||||
| Average equity to average assets ratio | 6.05% | 5.73% | 0.32% | 5.91% | 5.68% | 0.23% | ||||||||
| As of September 30, | ||||||||||||||
| 2025 · 2024 · Change | ||||||||||||||
| Nonperforming assets to total assets (2) | 0.00% | 0.01% | (0.01)% | |||||||||||
| Equity to assets ratio | 6.40% | 5.90% | 0.50% | |||||||||||
| Tangible common equity ratio | 6.40% | 5.90% | 0.50% | |||||||||||
(1) Amounts are presented on a FTE basis. These are non-GAAP financial measures. For further information, refer to the Non-GAAP Financial Measures section of this report.
(2) A lower ratio is more desirable.
Definitions of ratios:
Return on average assets - annualized net income divided by average assets.
Return on average equity - annualized net income divided by average stockholders' equity.
Net interest margin - annualized tax-equivalent net interest income divided by average interest-earning assets.
Efficiency ratio - noninterest expense (excluding other real estate owned expense and write-down of premises) divided by noninterest income (excluding net securities gains/losses and gains/losses on disposition of premises and equipment) plus tax-equivalent net interest income.
Dividend payout ratio - dividends paid to common stockholders divided by net income.
Average equity to average assets ratio - average equity divided by average assets.
Nonperforming assets to total assets - total nonperforming assets divided by total assets.
Equity to assets ratio - equity divided by assets.
Tangible common equity ratio - common equity less intangible assets (none held) divided by tangible assets.
Net Interest Income
The following tables present average balances and related interest income or interest expense, with the resulting annualized average yield or rate by category of interest-earning assets or interest-bearing liabilities. Interest income and the resulting net interest income
are shown on a FTE basis.
| Data for the three months ended September 30: | |||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Average Balance · Interest Income/Expense · Yield/Rate | |||||||||||||||||
| 2025 · 2024 · Change · Change-% · 2025 · 2024 · Change · Change-% · 2025 · 2024 · Change | |||||||||||||||||
| Interest-earning assets: | |||||||||||||||||
| Loans: (1) (2) | |||||||||||||||||
| Commercial | $499,754 | $507,127 | $(7,373) | (1.45)% | $8,182 | $8,514 | $(332) | (3.90)% | 6.50% | 6.68% | (0.18)% | ||||||
| Real estate (3) | 2,436,758 | 2,469,145 | (32,387) | (1.31)% | 33,647 | 33,721 | (74) | (0.22)% | 5.48% | 5.43% | 0.05% | ||||||
| Consumer and other | 23,450 | 15,000 | 8,450 | 56.33% | 399 | 282 | 117 | 41.49% | 6.75% | 7.48% | (0.73)% | ||||||
| Total loans | 2,959,962 | 2,991,272 | (31,310) | (1.05)% | 42,228 | 42,517 | (289) | (0.68)% | 5.66% | 5.65% | 0.01% | ||||||
| Securities: | |||||||||||||||||
| Taxable | 425,238 | 468,100 | (42,862) | (9.16)% | 2,643 | 3,261 | (618) | (18.95)% | 2.49% | 2.79% | (0.30)% | ||||||
| Tax-exempt (3) | 121,446 | 141,214 | (19,768) | (14.00)% | 770 | 822 | (52) | (6.33)% | 2.54% | 2.33% | 0.21% | ||||||
| Total securities | 546,684 | 609,314 | (62,630) | (10.28)% | 3,413 | 4,083 | (670) | (16.41)% | 2.50% | 2.68% | (0.18)% | ||||||
| Deposits with banks | 186,474 | 149,102 | 37,372 | 25.06% | 2,087 | 2,041 | 46 | 2.25% | 4.44% | 5.45% | (1.01)% | ||||||
| Securities purchased under | |||||||||||||||||
| agreements to resell | 97,034 | — | 97,034 | N/A | 1,258 | — | 1,258 | N/A | 5.07% | —% | 5.07% | ||||||
| Total interest-earning assets(3) | $3,790,154 | $3,749,688 | $40,466 | 1.08% | 48,986 | 48,641 | 345 | 0.71% | 5.13% | 5.16% | (0.03)% | ||||||
| Interest-bearing liabilities: | |||||||||||||||||
| Deposits: | |||||||||||||||||
| Interest-bearing demand | $457,323 | $453,589 | $3,734 | 0.82% | 1,830 | 2,167 | (337) | (15.55)% | 1.59% | 1.90% | (0.31)% | ||||||
| Savings and money market | 1,817,719 | 1,609,695 | 208,024 | 12.92% | 15,021 | 15,566 | (545) | (3.50)% | 3.28% | 3.85% | (0.57)% | ||||||
| Time deposits | 547,133 | 665,938 | (118,805) | (17.84)% | 5,688 | 8,343 | (2,655) | (31.82)% | 4.12% | 4.98% | (0.86)% | ||||||
| Total interest-bearing deposits | 2,822,175 | 2,729,222 | 92,953 | 3.41% | 22,539 | 26,076 | (3,537) | (13.56)% | 3.17% | 3.80% | (0.63)% | ||||||
| Borrowed Funds: | |||||||||||||||||
| Federal funds purchased and | |||||||||||||||||
| other short-term borrowings | 1 | 8,132 | (8,131) | (99.99)% | — | 115 | (115) | (100.00)% | 4.52% | 5.62% | (1.10)% | ||||||
| Subordinated notes, net | 80,058 | 79,792 | 266 | 0.33% | 1,107 | 1,112 | (5) | (0.45)% | 5.49% | 5.55% | (0.06)% | ||||||
| Federal Home Loan Bank | |||||||||||||||||
| advances | 270,000 | 315,000 | (45,000) | (14.29)% | 2,292 | 2,748 | (456) | (16.59)% | 3.37% | 3.47% | (0.10)% | ||||||
| Long-term debt | 39,407 | 44,407 | (5,000) | (11.26)% | 486 | 601 | (115) | (19.13)% | 4.90% | 5.38% | (0.48)% | ||||||
| Total borrowed funds | 389,466 | 447,331 | (57,865) | (12.94)% | 3,885 | 4,576 | (691) | (15.10)% | 3.96% | 4.07% | (0.11)% | ||||||
| Total interest-bearing | |||||||||||||||||
| liabilities | $3,211,641 | $3,176,553 | $35,088 | 1.10% | 26,424 | 30,652 | (4,228) | (13.79)% | 3.26% | 3.84% | (0.58)% | ||||||
| Net interest income (FTE) (4) | $22,562 | $17,989 | $4,573 | 25.42% | |||||||||||||
| Net interest spread (FTE) | 1.87% | 1.32% | 0.55% | ||||||||||||||
| Net interest margin (FTE) (4) | 2.36% | 1.91% | 0.45% | ||||||||||||||
| Data for the nine months ended September 30: | |||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Average Balance · Interest Income/Expense · Yield/Rate | |||||||||||||||||
| 2025 · 2024 · Change · Change-% · 2025 · 2024 · Change · Change-% · 2025 · 2024 · Change | |||||||||||||||||
| Interest-earning assets: | |||||||||||||||||
| Loans: (1) (2) | |||||||||||||||||
| Commercial | $519,911 | $525,870 | $(5,959) | (1.13)% | $25,167 | $26,266 | $(1,099) | (4.18)% | 6.47% | 6.67% | (0.20)% | ||||||
| Real estate (3) | 2,447,208 | 2,438,739 | 8,469 | 0.35% | 98,704 | 97,438 | 1,266 | 1.30% | 5.39% | 5.34% | 0.05% | ||||||
| Consumer and other | 21,248 | 13,916 | 7,332 | 52.69% | 1,070 | 785 | 285 | 36.31% | 6.73% | 7.53% | (0.80)% | ||||||
| Total loans | 2,988,367 | 2,978,525 | 9,842 | 0.33% | 124,941 | 124,489 | 452 | 0.36% | 5.59% | 5.58% | 0.01% | ||||||
| Securities: | |||||||||||||||||
| Taxable | 428,445 | 478,742 | (50,297) | (10.51)% | 8,116 | 10,071 | (1,955) | (19.41)% | 2.53% | 2.80% | (0.27)% | ||||||
| Tax-exempt (3) | 123,371 | 141,354 | (17,983) | (12.72)% | 2,321 | 2,501 | (180) | (7.20)% | 2.51% | 2.36% | 0.15% | ||||||
| Total securities | 551,816 | 620,096 | (68,280) | (11.01)% | 10,437 | 12,572 | (2,135) | (16.98)% | 2.52% | 2.70% | (0.18)% | ||||||
| Deposits with banks | 195,696 | 94,026 | 101,670 | 108.13% | 6,551 | 3,855 | 2,696 | 69.94% | 4.48% | 5.48% | (1.00)% | ||||||
| Securities purchased under | |||||||||||||||||
| agreements to resell | 33,279 | — | 33,279 | N/A | 1,280 | — | 1,280 | N/A | 5.14% | —% | 5.14% | ||||||
| Total interest-earning assets (3) | $3,769,158 | $3,692,647 | $76,511 | 2.07% | 143,209 | 140,916 | 2,293 | 1.63% | 5.08% | 5.10% | (0.02)% | ||||||
| Interest-bearing liabilities: | |||||||||||||||||
| Deposits: | |||||||||||||||||
| Interest-bearing demand | $498,965 | $460,005 | $38,960 | 8.47% | 6,192 | 6,550 | (358) | (5.47)% | 1.66% | 1.90% | (0.24)% | ||||||
| Savings and money market | 1,714,363 | 1,504,553 | 209,810 | 13.95% | 41,509 | 42,054 | (545) | (1.30)% | 3.24% | 3.73% | (0.49)% | ||||||
| Time | 598,560 | 622,105 | (23,545) | (3.78)% | 18,937 | 22,974 | (4,037) | (17.57)% | 4.23% | 4.93% | (0.70)% | ||||||
| Total interest-bearing deposits | 2,811,888 | 2,586,663 | 225,225 | 8.71% | 66,638 | 71,578 | (4,940) | (6.90)% | 3.17% | 3.70% | (0.53)% | ||||||
| Borrowed funds: | |||||||||||||||||
| Federal funds purchased and | |||||||||||||||||
| other short-term borrowings | 1 | 101,166 | (101,165) | (100.00)% | — | 4,248 | (4,248) | (100.00)% | 4.63% | 5.61% | (0.98)% | ||||||
| Subordinated notes, net | 79,991 | 79,726 | 265 | 0.33% | 3,316 | 3,325 | (9) | (0.27)% | 5.54% | 5.57% | (0.03)% | ||||||
| Federal Home Loan Bank | |||||||||||||||||
| advances | 270,000 | 315,000 | (45,000) | (14.29)% | 6,786 | 7,791 | (1,005) | (12.90)% | 3.36% | 3.30% | 0.06% | ||||||
| Long-term debt | 40,657 | 45,674 | (5,017) | (10.98)% | 1,508 | 1,868 | (360) | (19.27)% | 4.96% | 5.46% | (0.50)% | ||||||
| Total borrowed funds | 390,649 | 541,566 | (150,917) | (27.87)% | 11,610 | 17,232 | (5,622) | (32.63)% | 3.97% | 4.25% | (0.28)% | ||||||
| Total interest-bearing | |||||||||||||||||
| liabilities | $3,202,537 | $3,128,229 | $74,308 | 2.38% | 78,248 | 88,810 | (10,562) | (11.89)% | 3.27% | 3.79% | (0.52)% | ||||||
| Net interest income (FTE) (4) | $64,961 | $52,106 | $12,855 | 24.67% | |||||||||||||
| Net interest spread (FTE) | 1.81% | 1.31% | 0.50% | ||||||||||||||
| Net interest margin (FTE) (4) | 2.30% | 1.88% | 0.42% | ||||||||||||||
(1)Average loan balances include nonaccrual loans. Interest income recognized on nonaccrual loans has been included.
(2)Interest income on loans includes amortization of loan fees and costs and prepayment penalties collected, which are not material.
(3)Tax-exempt income has been adjusted to a tax-equivalent basis using a federal income tax rate of 21 percent and is adjusted to reflect the effect of the nondeductible interest expense associated with owning tax-exempt securities and loans.
(4)Net interest income (FTE) and net interest margin (FTE) are non-GAAP financial measures. For further information, refer to the Non-GAAP Financial Measures section of this report.
The Company's largest component of net income is net interest income, which is the difference between interest earned on interest-earning assets, consisting primarily of loans and securities, and interest paid on interest-bearing liabilities, consisting of deposits and borrowings. Fluctuations in net interest income can result from the combination of changes in the average balances of asset and liability categories and changes in interest rates. Interest rates earned and paid are also affected by general economic conditions, particularly changes in market interest rates, and by competitive factors, government policies and actions of regulatory authorities. The Federal Reserve decreased the target federal funds interest rate by a total of 100 basis points from September through December of 2024, which impacted the comparability of the net interest margin between the three and nine months ended September 30, 2025 and the three and nine months ended September 30, 2024. Additionally, in September 2025, the Federal Reserve decreased the target federal funds interest rate by 25 basis points.
Net interest margin on a FTE basis, a non-GAAP financial measure, is a measure of the net return on interest-earning assets and is computed by dividing annualized tax-equivalent net interest income by total average interest-earning assets for the period. The net interest margin for the three and nine months ended September 30, 2025 increased by 45 and 42 basis points, respectively, compared to the three and nine months ended September 30, 2024. Tax-equivalent net interest income for the three and nine months ended September 30, 2025 increased $4,573 and $12,855, respectively, when compared to the same periods in 2024.
Tax-equivalent interest income on loans decreased $289 for the three months ended September 30, 2025 compared to the three months ended September 30, 2024. The decrease in tax-equivalent interest income on loans for the three months ended September 30, 2025 compared to the same period in 2024 was primarily due to a decrease in average loan balances. Tax-equivalent interest income on loans increased $452 for the nine months ended September 30, 2025 compared to the nine months ended September 30, 2024. The increase in interest income on loans during the nine months ended September 30, 2025 compared to the same period in 2024 was driven primarily by an increase in the average loan balances. The average balance of loans for the nine months ended September 30, 2025 increased $9,842, compared to the nine months ended September 30, 2024. The yield on the loan portfolio increased by 1 basis point for both the three and nine months ended September 30, 2025 compared to the same periods in 2024. While the fixed-rate loan portfolio has benefited from higher prevailing market rates for originations and renewals compared to the roll off rates, the yield on the variable-rate loan portfolio has decreased due to reductions in the prime rate and SOFR rates driven by the reductions in the federal funds rate since September 2024.
The yield on the Company's loan portfolio is affected by the portfolio's loan mix, the interest rate environment, the effects of competition, the level of nonaccrual loans and reversals of previously accrued interest on charged-off loans. The political and economic environments can also influence the volume of new loan originations and the mix of variable-rate versus fixed-rate loans. The yield on the loan portfolio is expected to increase in flat and rising rate environments as variable-rate loans reprice at higher rates and renewals and new originations are priced at prevailing market rates, which exceed the roll-off rate of principal repayments on existing loans. In a declining rate environment, the yield on variable-rate loans will decline; however, as long as market rates remain higher than the yield on the fixed-rate portfolio, renewals and originations will continue to increase the yield on the fixed-rate portfolio.
Tax-equivalent interest income on securities decreased $670 and $2,135, respectively, for the three and nine months ended September 30, 2025 compared to the three and nine months ended September 30, 2024. The decrease was primarily due to the decrease in average balances of securities. This decrease in average balances of securities was driven by calls and principal paydowns on securities, which have been reinvested in the loan portfolio, deposits with banks and securities purchased under agreements to resell.
Interest income on deposits with banks increased $46 and $2,696, respectively, for the three and nine months ended September 30, 2025, compared to the three and nine months ended September 30, 2024. The increase was primarily due to the increase in the average balances of interest-bearing deposits with banks. This increase in balance sheet liquidity was driven by the growth in average deposit balances. Additionally, the Company began investing in securities purchased under agreements to resell in June 2025. These produced interest income of $1,258 and $1,280 for the three and nine months ended September 30, 2025.
The average balance of interest-bearing deposits increased $92,953 and $225,225, respectively, for the three and nine months ended September 30, 2025 compared to the same periods in 2024. The rate paid on interest-bearing deposits decreased 63 and 53 basis points for the three and nine months ended September 30, 2025 compared to the same periods in 2024. The decrease in the cost of deposits was primarily driven by the reductions in the federal funds rate since September of 2024.
Interest expense on borrowed funds decreased $691 and $5,622, respectively, for the three and nine months ended September 30, 2025 compared to the three and nine months ended September 30, 2024. The average balance of borrowed funds decreased $57,865 and $150,917, respectively, for the three and nine months ended September 30, 2025 compared to the three and nine months ended September 30, 2024. The largest drivers of the decrease in average borrowed funds balances were decreases in average balances of federal funds purchased and other short-term borrowings and FHLB advances. The average balance of federal funds purchased and other short-term borrowings decreased $8,131 and $101,165, respectively, for the three and nine months ended September 30, 2025, compared to the same periods in 2024 primarily due to increases in average customer deposits. The average balance of FHLB advances decreased by $45,000 for both the three and nine months ended September 30, 2025 compared to the three and nine months ended September 30, 2024. FHLB advances with a total balance of $45,000 matured in the fourth quarter of 2024.
Credit Loss Expense and the Related Allowance for Credit Losses
The credit loss expense recorded on the income statement represents a charge made to earnings to maintain an adequate allowance for credit losses. The adequacy of the allowance for credit losses is evaluated quarterly by management and reviewed by the Board of Directors. The allowance for credit losses is management's estimate of expected lifetime losses in the loan portfolio as of the balance sheet date. The Company recorded no credit loss expense for loans for the three and nine months ended September 30, 2025. The Company recorded a credit loss expense for loans of $1,000 for the three and nine months ended September 30, 2024. The credit loss expense for loans recorded in 2024 was primarily due to changes in the forecasted loss rates which were driven by increases in forecasted unemployment rates. The Company recorded no credit loss expense related to unfunded commitments for the three and nine months ended September 30, 2025, compared to a negative credit loss expense of $1,000 related to unfunded commitments for the three and nine months ended September 30, 2024. The negative credit loss expense related to unfunded commitments recorded in 2024 was primarily due to decreases in the balance of unfunded commitments resulting primarily from the funding of construction loans. Management believed the allowance for credit losses at September 30, 2025 was adequate to absorb expected losses in the loan portfolio as of that date.
Factors management considers in establishing an appropriate allowance include: the borrower's financial condition; the value and adequacy of loan collateral; the condition of the local economy and the borrower's specific industry; the levels and trends of loans by segment; and a review of delinquent and classified loans. The quarterly evaluation of the allowance focuses on factors such as specific loan reviews, changes in the components of the loan portfolio given the current and forecasted economic conditions, and historical loss experience. Any one of the following conditions may result in the review of a specific loan: concern about whether the customer's cash flow or net worth is sufficient to repay the loan; delinquency status; criticism of the loan in a regulatory examination; the suspension of interest accrual; or other factors, including whether the loan has other special or unusual characteristics that suggest special monitoring is warranted. The Company's concentration risks include geographic concentrations in central and eastern Iowa and southern Minnesota. The local economies in those markets are composed primarily of major financial service companies, healthcare providers, educational institutions, technology and agribusiness companies, and state and local governments.
West Bank has a significant portion of its loan portfolio in commercial real estate loans, commercial lines of credit, commercial term loans, and construction and land development loans. West Bank's typical commercial borrower is a small- or medium-sized, privately owned business entity. Compared to residential mortgages or consumer loans, commercial loans typically have larger balances and repayment usually depends on the borrowers' successful business operations. Commercial loans generally are not fully repaid over the loan period and may require refinancing or a large payoff at maturity. When the economy turns downward, commercial borrowers may not be able to repay their loans, and the value of their assets, which are usually pledged as collateral, may decrease rapidly and significantly.
While management uses available information to recognize losses on loans, further reduction in the carrying amounts of loans may be necessary based on changes in circumstances, changes in the overall economy in the markets we currently serve, or later acquired information. Identifiable sectors within the general economy are subject to additional volatility, which at any time may have a substantial impact on the loan portfolio. In addition, regulatory agencies, as integral parts of their examination processes, periodically review the credit quality of the loan portfolio and the level of the allowance for credit losses. Such agencies may require West Bank to recognize additional charge-offs or provisions for credit losses based on such agencies' review of information available to them at the time of their examinations.
West Bank's policy is to charge off loans when, in management's opinion, a loan or a portion of a loan is deemed uncollectible. Commercially reasonable efforts are made to maximize subsequent recoveries. The following table summarizes the activity in the Company's allowance for credit losses on loans for the three and nine months ended September 30, 2025 and 2024 and related ratios.
| Three Months Ended September 30, · Nine Months Ended September 30, | ||||||||
|---|---|---|---|---|---|---|---|---|
| 2025 · 2024 · Change · 2025 · 2024 · Change | ||||||||
| Balance at beginning of period | $30,539 | $28,422 | $2,117 | $30,432 | $28,342 | $2,090 | ||
| Charge-offs | (35) | (16) | (19) | (35) | (20) | (15) | ||
| Recoveries | 11 | 13 | (2) | 118 | 97 | 21 | ||
| Net (charge-offs) recoveries | (24) | (3) | (21) | 83 | 77 | 6 | ||
| Provision for credit losses charged | ||||||||
| (credited) to operations | — | 1,000 | (1,000) | — | 1,000 | (1,000) | ||
| Balance at end of period | $30,515 | $29,419 | $1,096 | $30,515 | $29,419 | $1,096 | ||
| Average loans outstanding | $2,959,962 | $2,991,272 | $2,988,367 | $2,978,525 | ||||
| Ratio of annualized net (charge-offs) | ||||||||
| recoveries during the period to average | ||||||||
| loans outstanding | 0.00% | 0.00% | 0.00% | 0.00% | ||||
| Ratio of allowance for credit losses for | ||||||||
| loans to average loans outstanding | 1.03% | 0.98% | 1.02% | 0.99% | ||||
| Ratio of allowance for credit losses for | ||||||||
| loans to total loans at end of period | 1.01% | 0.97% | 1.01% | 0.97% | ||||
Noninterest Income
The following tables show the variance from the prior year in the noninterest income categories shown in the Consolidated Statements of Income.
| Three Months Ended September 30, | ||||
|---|---|---|---|---|
| Noninterest income: | 2025 | 2024 | Change | Change % |
| Service charges on deposit accounts | $491 | $459 | $32 | 6.97% |
| Debit card usage fees | 477 | 500 | (23) | (4.60)% |
| Trust services | 894 | 828 | 66 | 7.97% |
| Increase in cash value of bank-owned life insurance | 308 | 287 | 21 | 7.32% |
| Other income | 333 | 285 | 48 | 16.84% |
| Total noninterest income | $2,503 | $2,359 | $144 | 6.10% |
| Nine Months Ended September 30, | ||||
| Noninterest income: | 2025 | 2024 | Change | Change % |
| Service charges on deposit accounts | $1,448 | $1,381 | $67 | 4.85% |
| Debit card usage fees | 1,401 | 1,448 | (47) | (3.25)% |
| Trust services | 2,472 | 2,398 | 74 | 3.09% |
| Increase in cash value of bank-owned life insurance | 885 | 839 | 46 | 5.48% |
| Other income | 950 | 938 | 12 | 1.28% |
| Total noninterest income | $7,156 | $7,004 | $152 | 2.17% |
Noninterest Expense
The following tables show the variance from the prior year in the noninterest expense categories shown in the Consolidated Statements of Income. In addition, accounts within the “other expenses” category that represent a significant portion of the total or a significant variance are shown below.
| Three Months Ended September 30, | ||||
|---|---|---|---|---|
| Noninterest expense: | 2025 | 2024 | Change | Change % |
| Salaries and employee benefits | $7,457 | $6,823 | $634 | 9.29% |
| Occupancy and equipment | 2,090 | 1,926 | 164 | 8.52% |
| Data processing | 663 | 771 | (108) | (14.01)% |
| Technology and software | 794 | 722 | 72 | 9.97% |
| FDIC insurance | 637 | 711 | (74) | (10.41)% |
| Professional fees | 303 | 239 | 64 | 26.78% |
| Director fees | 195 | 223 | (28) | (12.56)% |
| Other expenses: | ||||
| Insurance expense | 186 | 197 | (11) | (5.58)% |
| Business development | 249 | 216 | 33 | 15.28% |
| Trust | 189 | 168 | 21 | 12.50% |
| Consulting fees | 70 | 61 | 9 | 14.75% |
| Marketing | 22 | 12 | 10 | 83.33% |
| Low income housing projects amortization | 114 | 123 | (9) | (7.32)% |
| New markets tax credit project amortization and management fees | 76 | 230 | (154) | (66.96)% |
| All other | 505 | 470 | 35 | 7.45% |
| Total other expenses | 1,411 | 1,477 | (66) | (4.47)% |
| Total noninterest expense | $13,550 | $12,892 | $658 | 5.10% |
| Nine Months Ended September 30, | ||||
| Noninterest expense: | 2025 | 2024 | Change | Change % |
| Salaries and employee benefits | $21,804 | $20,481 | $1,323 | 6.46% |
| Occupancy and equipment | 6,087 | 5,225 | 862 | 16.50% |
| Data processing | 1,923 | 2,239 | (316) | (14.11)% |
| Technology and software | 2,371 | 2,153 | 218 | 10.13% |
| FDIC insurance | 1,894 | 1,861 | 33 | 1.77% |
| Professional fees | 914 | 740 | 174 | 23.51% |
| Director fees | 603 | 658 | (55) | (8.36)% |
| Other expenses: | ||||
| Insurance expense | 771 | 592 | 179 | 30.24% |
| Business development | 663 | 613 | 50 | 8.19% |
| Trust | 566 | 495 | 71 | 14.34% |
| Consulting fees | 201 | 198 | 3 | 1.52% |
| Marketing | 58 | 75 | (17) | (22.67)% |
| Low income housing projects amortization | 399 | 439 | (40) | (9.11)% |
| New markets tax credit project amortization and management fees | 228 | 689 | (461) | (66.91)% |
| All other | 1,616 | 1,496 | 120 | 8.02% |
| Total other | 4,502 | 4,597 | (95) | (2.07)% |
| Total noninterest expense | $40,098 | $37,954 | $2,144 | 5.65% |
Salaries and employee benefits increased for the three and nine months ended September 30, 2025 compared to the same periods in 2024 due primarily to an increase in incentive compensation related accruals. Occupancy and equipment expense increased for the three and nine months ended September 30, 2025 compared to the three and nine months September 30, 2024 primarily due to an increase in occupancy costs related to new bank buildings. The Company's new headquarters, which opened in April 2024, contributed to the increase for the nine months ended September 30, 2025, compared to the nine months ended September 30, 2024, and the new branch building in Owatonna, Minnesota, which opened in January 2025, contributed to the increase for the three and nine months ended September 30, 2025 compared to the same periods in 2024. Insurance expense increased for the nine months ended September 30, 2025 compared to the same period in 2024 due to increased coverage related to these new bank buildings and general increases in insurance costs.
Technology and software expense increased for the three and nine months ended September 30, 2025 compared to the three and nine months ended September 30, 2024 due to ongoing updates in information technology and security solutions. New market tax credit project amortization declined with the expiration of the related tax credit.
Income Tax Expense
The Company recorded income tax expense of $2,140 (18.7 percent of pre-tax income) and $6,698 (21.0 percent of pre-tax income) for the three and nine months ended September 30, 2025, compared with $1,475 (19.9 percent of pre-tax income) and $4,037 (19.2 percent of pre-tax income) for the three and nine months ended September 30, 2024. The decrease in effective tax rate for the three months ended September 30, 2025 compared to the same period in 2024 was due to a change in estimate of energy-related investment tax credits in the third quarter of 2025. The increase in effective tax rate for the nine months ended September 30, 2025 compared to the nine months ended September 30, 2024 was primarily due to the expiration of the new markets tax credit at the end of 2024. The tax rates for the first nine months of 2025 and 2024 were impacted by total year-to-date tax credits of approximately $495 and $1,131, respectively. The Company's consolidated income tax rate differs from the federal statutory income tax rate in each period, primarily due to tax-exempt interest income, the tax-exempt increase in cash value of bank-owned life insurance, disallowed interest expense, and state income taxes. Additionally, for the nine months ended September 30, 2025, a tax benefit of $85 was recorded as a result of the increase in fair value of restricted stock over the vesting period, compared to a tax benefit of $2 for the nine months ended September 30, 2024.
The text of this filing, as the company filed it with the SEC, without its images or exhibits. This is not investment advice.