FARMERS & MERCHANTS BANCORP INC
For the period ended Sep 30, 2025. Filed Oct 31, 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 31, 2025
FMAO$36.35-0.1%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2025-06-30; filed 2025-08-04.
0000950170-25-101771
Item 2. Management's Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2025-09-30; filed 2025-10-31.
0001193125-25-260124
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 174 previous paragraphs and 190 current paragraphs.
88 unchanged; 70 reworded; 28 added; 15 removed; 1 previous and 4 current paragraphs rearranged.
Tables are not compared: 21 previous and 21 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 (28)
Current report
This year will see the completion of our current three year strategic plan as management will develop the next three year plan during fourth quarter 2025, building on our record of success. On August 1, 2025, the Bank added to its existing footprint by opening a full-service branch in Troy, Michigan.
Current report
We have seen great earnings improvement, with earnings per share levels approaching third quarter of 2022's $0.68 per share. This has allowed for increased dividends of 8.3% since September 2022 and has continued our thirty-one year history of annual increases to those dividends.
Current report
As we review the results of our farm and agribusiness clients in recent quarters, the growing conditions throughout our market area were favorable through the first of August and then late season dryness has been seen. The effects on production will be known in the fourth quarter of 2025. Tariffs and trade discussions continue to be a point of interest, but commodity prices are similar to the same period in 2024. Our agricultural businesses have performed well, but with a decline in farm income, they too will feel this effect. Those involved in equipment sales have experienced the greatest impact. The performance of the agricultural portfolio continues to be monitored but payment activity continues to remain strong through the first three quarters of 2025.
Current report
The housing market has remained stable since last quarter in regard to values and inventory. Rate decreases during the third quarter have created an increase in loan applications across our footprint. Our Home Equity product has seen a surge in popularity due to borrowers not wanting to refinance their first mortgages which are at lower rates.
Current report
Consumer real estate loans and other loans saw decreases in their portfolios from the second quarter to the third quarter of 2025. All other portfolio segments saw increases. The total loan portfolio saw an increase of $33.2 million, or 1.3% at end of third quarter 2025 over second quarter. The largest increase was in the agricultural portfolio segment which increased $21.5 million, or 13.6%.
Current report
Noninterest income was $4.4 million for the quarter, which was up $397 thousand from third quarter 2024 and up $422 thousand from last quarter. Net gain on sale of loans and other service charges and fees saw the largest increases over second quarter 2025.
Current report
The Company and the Bank continue to monitor federal regulatory developments that may impact operations, compliance, and strategic initiatives. Changes in laws, rules, and guidance present operational and compliance challenges and require ongoing evaluation of policies, procedures, and systems.
Current report
Truth in Lending Act – Ability to Repay / Qualified Mortgage. The Bank monitors mortgage loans to ensure they meet Qualified Mortgage (QM) requirements, which provide a presumption of compliance under TILA’s Ability to Repay rules. The final General QM Rule, effective October 2022, eliminated the 43% debt-to-income limit, removed Appendix Q underwriting standards, and established price-based thresholds for QM status. Loans must still meet underwriting standards, product features, and points-and-fees limits. The Bank occasionally originates Non-QM and Higher Priced Mortgage Loans, which are reviewed periodically by the Loan Committee.
Current report
ECOA / Section 1071 – Small Business Lending Data Collection. The CFPB’s Section 1071 rule requires covered institutions to collect and report demographic data on small business credit applications. Court injunctions have stayed mandatory compliance for community banks, including the Bank. The Bank continues to monitor developments and prepare for future rulemaking.
Current report
Community Reinvestment Act (CRA) Updates. The 2023 CRA rule, jointly issued by the Federal Reserve, FDIC, and OCC, is subject to ongoing litigation and its implementation is currently paused. The agencies have proposed rescinding the 2023 framework and reverting to pre-October 2023 standards. The Bank continues to operate under the prior framework and monitors regulatory updates.
Current report
Basel III Endgame. The Basel Committee initiated the final phase of Basel III reforms in July 2025, increasing capital requirements, revising standardized approaches, and limiting internal model usage. While these rules primarily affect global banks, the Bank continues to assess potential indirect implications for capital adequacy and regulatory compliance.
Current report
GENIUS Act – Payment Stablecoins. Enacted in July 2025, the GENIUS Act establishes standards for payment stablecoins issued by banks, including reserve requirements, reporting, audits, and supervisory oversight. The Bank is evaluating potential strategic and compliance implications under this framework as part of its digital asset initiatives.
Current report
Executive Order on Fair Banking. An Executive Order issued in August 2025 prohibits denial of financial services based on constitutionally or statutorily protected beliefs, affiliations, or political views, and prohibits politicized or unlawful “debanking.” Banking decisions must be based on individualized, objective, and risk-based analysis. The Bank continues to review and adjust policies and practices to ensure compliance.
Current report
Ongoing Commitment. The Company and the Bank continue to make good faith efforts to comply with applicable laws, rules, regulations, and guidance from federal agencies and remain attentive to developments that could affect operations, capital, or strategic initiatives.
Current report
This report, including the sections entitled Management’s Discussion and Analysis of Financial Condition and Results of Operations, may contain “forward‑looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, including Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Forward‑looking statements are not historical facts and can be identified by words such as “anticipate,” “believe,” “could,” “expect,” “forecast,” “goal,” “guidance,” “intend,” “likely,” “may,” “objective,” “outlook,” “plan,” “project,” “seeks,” “should,” “target,” “will,” “would,” and similar expressions, as well as their negatives. These statements include, among other things, statements regarding our strategy, future operations, financial condition, results of operations, capital and liquidity levels, margins, asset quality, loan and deposit growth, noninterest income, expense trends, capital management, dividends, share repurchases, and the timing and effects of regulatory or accounting developments and are based on current expectations and assumptions of management.
Current report
Forward‑looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those expressed or implied. Factors that could cause actual results to differ materially include, but are not limited to, the following:
Current report
Changes in interest rates, yield curves, deposit betas, and funding availability and costs; the mix and level of deposits (including the risk of outflows), wholesale funding, and other sources of liquidity; and the impact on net interest income and margin.
Current report
Economic conditions nationally and in our markets, including in our Midwest footprint; inflation, employment trends, business and consumer confidence, and housing conditions.
Current report
Credit risks of lending activities, including concentrations (such as commercial real estate), borrower performance, collateral values, and the level and volatility of the allowance for credit losses under CECL.
Current report
Market risks related to our investment securities and hedging activities, including fair value changes, other‑than‑temporary or credit‑related impairments, and accumulated other comprehensive income (AOCI) volatility.
Current report
Competition from banks and nonbanks (including fintechs) for loans, deposits, and fee‑based products and services.
Current report
Operational, technology, and information security risks, including cybersecurity threats, fraud, ransomware, data breaches, business interruption, and risks related to third‑party and vendor relationships (including core and cloud service providers).
Current report
Legal, compliance, supervisory, and regulatory risks, including the nature, timing, and effect of changes in banking laws and regulations and of examination findings and enforcement actions; potential changes to regulatory capital requirements (including U.S. implementation of the “Basel III Endgame” framework); developments related to small business lending data collection under Section 1071; Community Reinvestment Act developments; and other rulemakings or guidance applicable to community and regional banking organizations.
Current report
Changes in accounting principles and interpretations, tax laws, and related guidance.
Current report
Our ability to attract and retain key personnel and to execute on business strategies and initiatives, including technology and digital payments initiatives and any activities relating to stablecoin or other digital asset/payment innovations under applicable law and regulation.
Current report
Natural disasters, severe weather, public health events, geopolitical conflicts, or other external events.
Current report
Other risks described in the Company’s filings with the Securities and Exchange Commission, including the Risk Factors in our most recent Annual Report on Form 10‑K and any updates in this Form 10‑Q.
Current report
Any forward‑looking statement speaks only as of the date it is made. The Company undertakes no obligation to update any forward‑looking statements, whether written or oral, to reflect events or circumstances after the date of this report, except as required by law. Readers should not place undue reliance on forward‑looking statements, which are not guarantees of future performance and involve risks, uncertainties, and assumptions.
Removed paragraphs (15)
Previous report
There were two primary reasons behind the decrease in the cost of funds for the quarter, the first being the lower repricing of higher cost certificate of deposits (CDs), combined with a balance sheet shift or reduction in CD balances. Some of the CDs that are repricing were specials offered last year that are now converting to standard rates. The second primary reason was a reduction in interest expense due to rate changes in the NOW and savings bucket which includes interest bearing checking, money market accounts and savings accounts. The Company experienced a full six months of the advantage of interest rate cuts implemented due to the Federal Reserve dropping rates over the last four months of 2024. In addition, all of our offices have now converted to deposit origination software that will simplify the origination process and provide additional efficiencies to the Company.
Previous report
As we review the results of our farm and agribusiness clients from 2024, the performance of our customer base was steady. Yields were average with declined commodity prices making their net income less than prior years. Marketing and crop insurance coverage was and will continue to be important. Most of our customer base's financial position was sound as we enter a period where they anticipate they may have declining net income. Our anticipation is 2025 will be similar to 2024. Planting conditions in our market area varied, as some areas were able to plant early while others were delayed due to wet conditions. We have communicated regularly with our clients potentially affected by the bird flu outbreak and have developed options for individual clients. To date, this portion of our portfolio continues to perform as agreed. Our agribusiness clientele continue to perform well, but declined farm income will potentially affect certain sectors. Loan demand has ranged from steady to soft as our clientele has taken a more conservative approach with anticipated lower net income. Although agricultural usage has increased, borrowers have plenty of availability on lines of credit overall. Global political pressures continue to be monitored. The performance of our agricultural portfolio continues to be monitored but continues to perform well.
Previous report
Although the housing market has softened, home loan activity has remained strong and steady in all areas. Inventory in our market areas has improved in the midrange values. The Bank participated in the “Welcome Home” program offered through the Federal Home Loan Bank of Cincinnati ("FHLB"). This program assists with grants for down payments. The funds are open to all members of FHLB and capped by overall funds available. The funds were depleted in a matter of hours so the Bank is pleased to have received approval for some of our customers.
Previous report
Consumer loans decreased during the second quarter 2025 as compared to the first quarter. While other areas showed increases, we did experience a decrease in our auto loan portfolio segment. In response to that, the Bank offered an auto loan special in June that continued into July which has been received favorably.
Previous report
Noninterest income was $3.9 million for the quarter which was up $219 thousand from second quarter 2024; however, down $227 thousand from last quarter and $64 thousand from fourth quarter 2024. Loan service income and interchange income both decreased as compared to first quarter 2025 and fourth quarter 2024.
Previous report
The Company and the Bank remain attentive to the current regulatory environment in light of the regulatory agencies’ risk-based approach to examinations and the change in presidential administration. Regulatory changes and the complexity of new and amended rules have resulted in challenges and uncertainties which could pose an increased risk of noncompliance. Various significant mortgage rules require monitoring by means of testing, validation of results, additional training, and further research or consultation to ensure ongoing compliance.
Previous report
Under the Truth in Lending Act (TILA) Ability to Repay requirements, the Bank focuses on Qualified Mortgage (QM) status for mortgage loans originated as they provide certain presumptions of compliance under the Ability to Repay rules adopted under the Dodd-Frank Act. In satisfying QM requirements, any mortgage lender regardless of their size can make loans which are entitled to the QM presumption of compliance. New final rules, effective October 2022, amended the Ability to Repay/Qualified Mortgage Rules. The General QM Final Rule amended the definition of the QM category to offset the impact of the sunsetting of the temporary Government Sponsored Enterprise (GSE) QMs. The General QM loan definition amended and removed the 43% debt-to-income limit, eliminated Appendix Q underwriting standards and any requirement to use them as a qualification for General QM status, and instead implemented price-based thresholds. For General QM status, applicable to first-lien mortgage loans offered by the Bank, a loan must still observe existing product features, underwriting requirements, and limits on points and fees. Since the Bank, on occasion, does make Non-Qualified Mortgages, approvals and originations of both Non-QM loans and Higher Priced Mortgage Loans are periodically reported to the Bank’s Loan Committee.
Previous report
On March 30, 2023, the Consumer Financial Protection Bureau (CFPB) issued final rules which amended Regulation B to implement changes to the Equal Credit Opportunity Act (ECOA) as made by Section 1071 of the Dodd-Frank Act. Covered financial institutions were required to collect and report data on covered credit applications involving small businesses, including those businesses owned by women or minorities. Small businesses were defined as those businesses (including agricultural businesses) which had gross annual revenue of $5 million of less during its most recent fiscal year. Data collection included demographic information collected from a loan applicant regarding that applicant’s status as a minority-owned business, a women-owned business, and an LGBTQI+-owned business, as well as the applicant’s principal owners’ ethnicity, race, and sex. Implementation of these final rules would involve significant changes to processes and procedures along with new software configurations to accommodate and capture required data points regarding applications and final action taken. Data would be reported to the CFPB which would then make aggregated information publicly available. These new final rules had a phased implementation period with the largest lenders being required to collect and report data first. A Lender, such as the Bank, that originated at least 500 covered small business loans annually, data collection would have originally commenced on April 1, 2025.
Previous report
A lawsuit filed in April 2023 by the Texas Bankers Association and Rio Bank based in McAllen, Texas in the U.S. District Court for the Southern District of Texas challenged the CFPB's final rule implementing Section 1071 of the Dodd-Frank Act. Shortly thereafter, the American Bankers Association joined the lawsuit as a plaintiff. The argument was the final rule far exceeded the statutory scope of Section 1071, failed to take into consideration relevant industry comments, and did not conduct appropriate cost-benefit analysis. Additionally, the constitutionality of the CFPB was challenged based on its funding structure, and was also based upon another pending lawsuit which awaited a hearing by the U.S. Supreme Court regarding CFPB's funding. On July 31, 2023, an injunction was granted by a federal judge in the Southern District of Texas banning the CFPB from requiring Rio Bank, and members of both the Texas Bankers Association and the American Bankers Association from complying with the final rules implementing Section 1071 of the Dodd-Frank Act until the Supreme Court of the United States rules on the CFPB's funding. On August 4, 2023, a motion was filed by the Independent Community Bankers of America, the Independent Bankers Association of Texas, and Texas First Bank in the U.S. District Court for the Southern District of Texas requesting expansion of the injunction previously granted. In late October 2023, the federal judge granted the expansion of the injunctive relief to provide a nationwide injunction to all community banks and covered financial institutions thus ensuring relief was not limited by trade association membership. The U.S. Supreme Court issued its long-awaited decision on the challenge to the CFPB’s funding mechanism in May 2024 ruling that the CFPB’s funding does not violate the U.S. Constitution’s Appropriations Clause. Subsequently, the CFPB issued an interim final rule on June 25, 2024, to make date related adjustments on a day for day basis based on recent court orders involving ongoing litigation. This extended compliance dates for beginning data collection by 290 days. As of February 7, 2025, an order issued by the New Orleans First Circuit Court of Appeals granted a stay pending appeal and deadlines for compliance were extended further.
Previous report
Most recently, on June 18, 2025, in light of recent court orders and ongoing litigation, the CFPB published an interim final rule along with a request for public comment. The mandatory compliance dates for the Section 1071 rule were again extended, however, these new mandatory compliance dates do not override the Circuit Court's order that stayed the mandatory compliance dates indefinitely. The Bank, as a member of the American Bankers Association, remains impacted by the stay of the mandatory compliance dates. The CFPB has stated plans to begin new 1071 rulemaking with the issuance of a notice of proposed rulemaking. The Bank remains attentive to these recent developments.
Previous report
A final rule to amend the Community Reinvestment Act (CRA) was jointly released by the Federal Reserve, the FDIC, and Office of the Comptroller of the Currency on October 24, 2023. These amendments were intended to update how CRA activities qualify for consideration, where CRA activities are considered, and how CRA activities are evaluated. The final rule was effective on April 1, 2024, with certain amendments effective April 1, 2024, through January 1, 2031, and other amendments in the final rule were delayed indefinitely. The final CRA rules were published in the Federal Register on February 1, 2024. On February 5, 2024, the American Bankers Association, the U.S. Chamber of Commerce, the Independent Community Bankers of America, along with four state associations jointly sued the Federal Reserve, FDIC, and Office of Comptroller of the Currency for exceeding their statutory authority. The lawsuit filed in the U.S. District Court for the Northern District of Texas requested the regulatory agencies vacate the rule and sought a preliminary injunction pausing the new rules while the court decided the merits of the case. On March 21, 2024, the joint regulatory agencies issued an interim final rule and a technical corrections final rule related to the CRA final rule both effective on April 1, 2024. The Agencies also requested comments on the interim final rule for a period of 45 days after publication in the Federal Register. The interim final rule extended two provisions of the CRA final rule from April 1, 2024, to January 1, 2026. Then on March 29, 2024, the district court judge granted a temporary injunction to pause the implementation of CRA final rule while the case moves forward. The injunction extended implementation dates on a day for day basis for each day the injunction remains in place. A joint press release on March 28, 2025, announced the joint agencies intent to rescind the 2023 Community Reinvestment Act Final Rule and reinstate the CRA framework that existed prior to the October 2023 final rule. As a large bank examined for its CRA performance, the Bank remains attentive to the CRA framework in place prior to the October 2023 final rule.
Previous report
In July 2025, the Basel Committee on Banking Supervision initiated the implementation of the final phase of the Basel III regulatory capital reforms, commonly referred to as the “Basel III Endgame.” These reforms introduce more stringent capital requirements, revise standardized approaches for credit and operational risks, and eliminate the use of internal models for certain risk calculations. While these changes primarily impact large global banks with assets exceeding $100 billion, the evolving regulatory environment underscores the importance of capital planning and risk management at all banking organizations. We continue to monitor developments to assess any indirect implications for our capital adequacy and regulatory compliance framework.
Previous report
In July 2025, new federal legislation known as the GENIUS Act was enacted to establish a comprehensive regulatory framework for payment stablecoins issued by banking organizations and their subsidiaries. The GENIUS Act imposes requirements including asset reserve standards, enhanced reporting, independent audits, and supervisory oversight specific to payment stablecoin issuance. As a bank holding company, we are assessing the potential opportunities and compliance obligations under this new law, which could affect our strategic initiatives in digital asset and payment innovation. We continue to evaluate the operational, legal, and regulatory implications of the GENIUS Act as part of our ongoing digital asset strategy.
Previous report
With regard to all regulatory matters, the Company and the Bank remain committed in making good faith efforts to comply with technical requirements of the laws, rules, regulations, and guidance from both federal and state agencies which govern its activities.
Previous report
Statements contained in this portion of the Company's report may be forward-looking statements, as that term is defined in the Private Securities Litigation Reform Act of 1995. Forward-looking statements may be identified by the use of words such as "intend," "believe," "expect," "anticipate," "should," "planned," "estimated," and "potential." Such forward-looking statements are based on current expectations, but actual results may differ materially from those currently anticipated due to a number of factors, which include, but are not limited to, factors discussed in documents filed by the Company with the Securities and Exchange Commission from time to time. Other factors which could have a material adverse effect on the operations of the Company and its subsidiaries include, but are not limited to, changes in interest rates, general economic conditions, legislative and regulatory changes, monetary and fiscal policies of the U.S. Government, including policies of the U.S. Treasury and the Federal Reserve Board, the quality and composition of the loan or investment portfolios, demand for loan products, deposit flows, competition, demand for financial services in the Bank's market area, changes in relevant accounting principles and guidelines and other factors over which management has no control. The forward-looking statements are made as of the date of this report, and the Company assumes no obligation to update the forward-looking statements or to update the reasons why actual results differ from those projected in the forward-looking statements.
Reworded paragraphs (70)
Previous wording
The largest improvement in profitability of the second quarter of 2025 as compared to the same quarter last year is in the Company’s net interest income generated from the highest net interest margin since third quarter 2022, when looking at individual quarters. Net interest income for the first six months of 2025 is up $8.1 million over the same period last year. This represents a solid base from which to continue improvement for the remainder of 2025 as we expect loan repricing and continued growth in low-cost core deposits to increase the margin going forward. Net interest margin has improved for four consecutive quarters. Year to date net interest margin has increased 47 basis points over year to date last year. Second quarter 2025 net interest margin has improved by 19 basis points over first quarter 2025 and 38 basis points over fourth quarter 2024. The improvement compared to last quarter was driven by a 26 basis point increase in the yield on interest earning assets and a reduction of 7 basis points in the cost of funding. The pricing of existing loans and favorable yields on new production are contributing to the increase in yield on interest earning assets.
Current wording
Net interest income continues to be a significant contributor to profitability in the third quarter of 2025 as compared to the same quarter last year. Net interest income for the first nine months of 2025 is up $13.4 million over the same period last year. We have seen improved margin, driven by asset yield improvement, and anticipate even more opportunities for improvement as loans continue to reprice. Year to date net interest margin has improved for six consecutive quarters. Year to date net interest margin has increased 54 basis points over year to date last year. Third quarter 2025 net interest margin has improved by 18 basis points over second quarter 2025 and 56 basis points over fourth quarter 2024. The improvement compared to last quarter was driven by a 17 basis point increase in the yield on interest earning assets while the cost of funding remained unchanged. The repricing of existing loans and favorable yields on new production are contributing to the increase in yield on interest earning assets.
Previous wording
Overall, asset quality metrics are still favorable. We continue to keep a watchful eye on the overall impact of pending tariffs, which may cause past dues and non-accruals to increase throughout the year. Our credit department continues to monitor all areas and complete stress testing to better prepare our responsiveness to market events.
Current wording
Overall, asset quality metrics are still favorable. We continue to keep a watchful eye on the overall impact of the economy and pending tariffs, which may cause past dues and non-accruals to increase throughout the year. Our credit department continues to monitor all areas and complete stress testing to better prepare our responsiveness to market events.
Previous wording
Decreased net charge-offs and lower provision related expense resulted in lower credit cost in the second quarter of 2025 as compared to the first quarter of 2025. The effect of loan growth was partially offset by improved asset quality metrics resulting in a decreased provision for credit losses for the quarter compared to last quarter. Provision for credit losses was $661 thousand for the quarter and net charge-offs were $36 thousand. First quarter 2025 saw a provision for credit losses of $811 thousand and net charge-offs of $285 thousand.
Current wording
Increased net charge-offs offset by lower provision related expense resulted in lower credit cost in the third quarter of 2025 as compared to the second quarter of 2025. The effect of loan growth was partially offset by improved asset quality metrics resulting in a decreased provision for credit losses for the quarter compared to last quarter. Provision for credit losses was $557 thousand for the quarter ended September 30, 2025 and net charge-offs were $59 thousand. Second quarter 2025 saw a provision for credit losses of $661 thousand and net charge-offs of $36 thousand.
Previous wording
F&M Commercial Banking Division saw loan demand grow in late 2024, continue into first quarter 2025 and remain steady in second quarter 2025. Lending rates and terms remained consistent from fourth quarter 2024 into second quarter 2025. Commercial clients’ primary concerns so far in 2025 remain inflation and any impact of potential tariffs to their business. Credit quality of the commercial portfolio remains strong and second quarter collateral values and auction values are still holding consistent with previous quarters. Past dues and delinquencies remained low for the F&M portfolio, but the team continues to monitor the portfolio closely for the impact from inflationary pressures, input costs and margin compression on the portfolio.
Current wording
F&M Commercial Banking Division saw loan demand grow in late 2024, continue into first quarter 2025 and remain steady in the second and third quarters of 2025. Lending rates and terms remained consistent from fourth quarter 2024 throughout the second and third quarters of 2025. The economy, inflation and the impact from potential tariffs remain the largest concerns to commercial businesses within the Company's footprint. Credit quality of the commercial portfolio has remained good and third quarter collateral values and auction values are still holding consistent with previous quarters. Past dues and delinquencies remained low for the F&M portfolio, but the team continues to monitor the portfolio closely for the impact from inflationary pressures and agricultural yields as we enter the harvest season.
Previous wording
Noninterest expense was higher in second quarter 2025 by $1.9 million as compared to same quarter 2024 and $3.2 million higher than fourth quarter 2024. Looking at the difference between the second quarter comparisons, increased employee benefits, specifically group medical insurance was up $132 thousand in 2025 along with payroll taxes increasing by $19 thousand. Consulting services increased by $296 thousand. Most of the increase was related to the use of a consultant to negotiate our core processor services agreement and to explore additional ancillary products to the core banking system. While the base contract negotiation is complete, the consultant will continue to be used. The benefits of using the consultant have far outweighed the cost and will continue to be realized after our consultant services have ended. That being said, data processing and ATM expense increased a combined $973 thousand. In comparing second quarter 2025 to fourth quarter 2024, $664 thousand of the increase is attributable to salary and benefits expenses. Net occupancy and furniture and equipment expenses amounted to a $385 thousand increase. Another $1.6 million in the difference is due to data processing, ATM expense and consulting expenses. Fourth quarter 2024 included a much higher usage of flex credits that were provided in the renegotiation of which some may be used on a wider range of services than others that are product specific. Smaller levels of flex credit will be realized going forward along with lower consulting fee levels throughout 2025.
Current wording
Noninterest expense was higher in third quarter 2025 by $2.3 million as compared to same quarter 2024 and $479 thousand higher than second quarter 2025. Looking at the difference between the third quarter comparisons, increased salaries and benefits were up a combined $556 thousand in 2025. Data processing and ATM expense increased a combined $963 thousand. 2024 included a much higher usage of flex credits that were provided in the renegotiation of the core processor contract. Smaller levels of flex credit will be realized going forward along with lower consulting fee levels for the remainder of 2025. The net amortization of servicing rights also increased $367 thousand over 2024. In comparing third quarter 2025 to second quarter 2025, $549 thousand of the increase is attributable to salary and benefits expenses. Net occupancy and furniture and equipment expenses amounted to a $147 thousand increase. Data processing and ATM expense decreased a combined $44 thousand from second quarter 2025. The net amortization of servicing rights increased $352 thousand in third quarter 2025 as compared to second quarter 2025.
Previous wording
The Company is encouraged by the higher-than-expected improvement in the net interest margin in the three and six months ended June 30, 2025. Overall net income, which was $2.0 million higher than second quarter 2024 and $758 thousand higher than first quarter 2025, continues on the path for a more profitable 2025. As with every year, challenges will present opportunities and the Bank has additional projects in the works to improve revenue while keeping an eye on costs. The Company remains well-capitalized with sound liquidity levels and strong asset quality; the future appears bright.
Current wording
The Company is encouraged by the higher-than-expected improvement in the net interest margin in the three and nine months ended September 30, 2025. Overall net income, which was $2.3 million higher than third quarter 2024 and $1.1 million higher than second quarter 2025, continues the path towards a more profitable 2025. As with every year, challenges will present opportunities, and the Bank has additional projects in the works to improve revenue while keeping an eye on costs. The Company remains well-capitalized with sound liquidity levels and strong asset quality; the future appears bright.
Previous wording
Our executive offices are located at 307 North Defiance Street, Archbold, Ohio 43502, and our telephone number is (419) 446-2501. The Bank operates thirty-seven full-service banking offices throughout Northwest Ohio, Northeast Indiana and Southeast Michigan along with a drive-up facility in Archbold. The Bank also operates four Loan Production Offices (LPOs), two in Ohio, one in Indiana and one in Michigan.
Current wording
Our executive offices are located at 307 North Defiance Street, Archbold, Ohio 43502, and our telephone number is (419) 446-2501. The Bank operates thirty-eight full-service banking offices throughout Northwest Ohio, Northeast Indiana and Southeast Michigan along with a drive-up facility in Archbold. The Bank also operates three Loan Production Offices (LPOs), two in Ohio and one in Indiana.
Previous wording
The Bank has established underwriting policies and procedures which facilitate operating in a safe and sound manner in accordance with supervisory and regulatory guidance. Within this sphere of safety and soundness, the Bank's practice has been to not promote innovative, unproven credit products which may not be in the best interest of the Bank or its customers. The Bank does offer a hybrid mortgage loan. Hybrid loans are loans that start out as a fixed rate mortgage but after a set number of years automatically adjust to an adjustable rate mortgage. The Bank offers a seven and ten year fixed rate mortgage and a seven year jumbo fixed rate mortgage after which the interest rate will adjust annually for all. In order to offer longer term fixed rate mortgages, the Bank does participate in the Freddie Mac, Farmer Mac and Small Business Lending programs. The Bank also normally retains the servicing rights on these partially or 100% sold loans. In order for the customer to participate in these programs they must meet the requirements established by those agencies. In addition, the Bank does sell some of its longer term fixed rate agricultural mortgages into the secondary market with the aid of brokers. The Bank currently participates in three State of Ohio programs: Ag-Link, Grow Now and Home Saver Plus. What all three of these programs have in common, is the ability to provide the Bank an avenue to offer a product that saves both the Bank and the consumer savings over other traditional products. With the acquisition of Perpetual Federal Savings Bank in the fourth quarter of 2021 and the addition of Peoples Federal Savings in the fourth quarter of 2022, the Bank saw an increase in fixed rate, long-term mortgage loans to our portfolio from that banking service area. The Bank began offering a low income home buyer mortgage program, currently Hometown Advantage Mortgage Program, in November of 2023.
Current wording
The Bank has established underwriting policies and procedures which facilitate operating in a safe and sound manner in accordance with supervisory and regulatory guidance. Within this sphere of safety and soundness, the Bank's practice has been to not promote innovative, unproven credit products which may not be in the best interest of the Bank or its customers. The Bank does offer a hybrid mortgage loan. Hybrid loans are loans that start out as a fixed rate mortgage but after a set number of years automatically adjust to an adjustable rate mortgage. The Bank offers a seven and ten year fixed rate mortgage and a seven year jumbo fixed rate mortgage after which the interest rate will adjust annually for all. In order to offer longer term fixed rate mortgages, the Bank does participate in the Freddie Mac, Farmer Mac and Small Business Lending programs. The Bank also normally retains the servicing rights on these partially or 100% sold loans. In order for the customer to participate in these programs they must meet the requirements established by those agencies. In addition, the Bank does sell some of its longer term fixed rate agricultural mortgages into the secondary market with the aid of brokers. The Bank currently participates in three State of Ohio programs: Ag-Link, Grow Now and Ohio Homebuyers Plus. What all three of these programs have in common, is the ability to provide the Bank an avenue to offer a product that saves both the Bank and the consumer savings over other traditional products. With the acquisition of Perpetual Federal Savings Bank in the fourth quarter of 2021 and the addition of Peoples Federal Savings in the fourth quarter of 2022, the Bank saw an increase in fixed rate, long-term mortgage loans to our portfolio from that banking service area. The Bank began offering a low income home buyer mortgage program, currently Hometown Advantage Mortgage Program, in November of 2023.
Previous wording
At June 30, 2025, we had 488 full time equivalent employees. The employees are not represented by a collective bargaining unit. We provide our employees with a comprehensive benefit program, some of which is contributory. We consider our employee relations to be good.
Current wording
At September 30, 2025, we had 476 full time equivalent employees. The employees are not represented by a collective bargaining unit. We provide our employees with a comprehensive benefit program, some of which is contributory. We consider our employee relations to be good.
Previous wording
Loans that management has the intent and ability to hold for the foreseeable future or until maturity or payoff are reported at amortized cost. Amortized cost is the principal balance outstanding, net of purchase premiums and discounts, deferred loan fees and costs. Accrued interest receivable totaled $11.9 million and $10.7 million at June 30, 2025 and December 31, 2024, respectively, and was reported in Other Assets on the condensed consolidated balance sheets and is excluded from the estimate of credit losses. Interest income is accrued on the unpaid principal balance. Loan origination fees, net of certain direct origination costs, are deferred and recognized in interest income using the level-yield method without anticipation of repayments.
Current wording
Loans that management has the intent and ability to hold for the foreseeable future or until maturity or payoff are reported at amortized cost. Amortized cost is the principal balance outstanding, net of purchase premiums and discounts, deferred loan fees and costs. Accrued interest receivable totaled $13.6 million and $10.7 million at September 30, 2025 and December 31, 2024, respectively, and was reported in Other Assets on the condensed consolidated balance sheets and is excluded from the estimate of credit losses. Interest income is accrued on the unpaid principal balance. Loan origination fees, net of certain direct origination costs, are deferred and recognized in interest income using the level-yield method without anticipation of repayments.
Previous wording
Interest income on mortgage and commercial loans is discontinued and placed on nonaccrual status at the time the loan is 90 days delinquent unless the loan is well secured and in process of collection. Mortgage loans are charged off at 180 days past due and commercial loans are charged off to the extent principal or interest is deemed uncollectible. Consumer loans continue to accrue interest until they are charged off no later than 120 days past due unless the loan is in the process of collection. Past-due status is based on the contractual terms of the loan. In all cases, loans are placed on nonaccrual or charged off at an earlier date if collection of principal or interest is considered doubtful.
Current wording
Interest income on mortgage and commercial loans is discontinued and placed on nonaccrual status at the time the loan is 90 days delinquent unless the loan is well secured and in process of collection. Consumer loans continue to accrue interest until they are charged off no later than 120 days past due unless the loan is in the process of collection. Past-due status is based on the contractual terms of the loan. In all cases, loans are placed on nonaccrual or charged off at an earlier date if collection of principal or interest is considered doubtful.
Previous wording
The ACL represents management’s estimate of expected credit losses inherent in the Bank’s loan portfolio and unfunded loan commitments at the report date. The ACL methodology is regularly reviewed for its appropriateness and is approved annually by the Board of Directors. This written methodology is consistent with Generally Accepted Accounting Principles which provides for a consistently applied analysis.
Current wording
The ACL represents management’s estimate of expected credit losses inherent in the Bank’s loan portfolio and unfunded loan commitments at the report date. The ACL methodology is regularly reviewed for its appropriateness and is approved annually by the Board of Directors or a sub-committee of the Board of Directors, such as the Enterprise Risk Management Committee. This written methodology is consistent with Generally Accepted Accounting Principles which provides for a consistently applied analysis.
Previous wording
Loans that do not share risk characteristics are evaluated on an individual basis. Loans evaluated individually are not included in the collective evaluation; reserves for expected credit losses for collateral-dependent loans are based on the expected shortfall of the loan based on the discounted collateral value. This specific reserve portion of the ACL was $91 thousand at June 30, 2025 and $52 thousand at December 31, 2024. When management determines that foreclosure is probable, expected credit losses are based on the fair value of the collateral at the reporting date, adjusted for selling costs as appropriate. At 90 days delinquent, secured consumer loans are charged down to the value of the collateral, if repossession of the collateral is assured and/or in the process of repossession. Consumer mortgage loan deficiencies are charged down upon the sale of the collateral or sooner upon the recognition of collateral deficiency.
Current wording
Loans that do not share risk characteristics are evaluated on an individual basis. Loans evaluated individually are not included in the collective evaluation; reserves for expected credit losses for collateral-dependent loans are based on the expected shortfall of the loan based on the discounted collateral value. This specific reserve portion of the ACL was $389 thousand at September 30, 2025 and $52 thousand at December 31, 2024. When management determines that foreclosure is probable, expected credit losses are based on the fair value of the collateral at the reporting date, adjusted for selling costs as appropriate. At 90 days delinquent, secured consumer loans are charged down to the value of the collateral, if repossession of the collateral is assured and/or in the process of repossession. Consumer mortgage loan deficiencies are charged down upon the sale of the collateral or sooner upon the recognition of collateral deficiency.
Previous wording
For 2025, the Company plans to have modest loan growth and to continue to focus on earnings improvement. Paydowns and payoffs will be used to fund originations to existing customers and to build relationships in our newer markets. Loan balances as of June 30, 2025, were $63.9 million or 2.5% higher than December 31, 2024 balances and there remains $96.4 million of funds committed to complete construction projects of commercial customers as of June 30, 2025.
Current wording
For the remainder of 2025, the Company plans to continue with its current year strategy of modest loan growth and to focus on earnings improvement. Paydowns and payoffs will be used to fund originations to existing customers and to build relationships in our newer markets. Loan balances as of September 30, 2025, were $97.2 million or 3.8% higher than December 31, 2024 balances and there remains $85.0 million of funds committed to complete construction projects of commercial customers as of September 30, 2025.
Previous wording
The Company continues to focus on growth in the areas of core deposits and the expansion of contingency funding. Growing deposits has been a focus especially in our newer markets since 2024. Core deposits provide additional opportunities for noninterest income. The Bank offers the Insured Cash Sweep (ICS) product and CDARS, a certificate of deposit registry, accessed through the IntraFi network of financial institutions which helps to reduce the amount of pledged securities needed. The Bank’s uninsured deposit ratio remains low at 11.9%. As of June 30, 2025, total uninsured deposits of the Bank were $322.7 million of $2.7 billion total deposits. If the amount of coverage is adjusted for what is insured solely by FDIC, the percentage is 21.9% or $592.3 million of uninsured deposits as of June 30, 2025. The underlying difference between these two percentages is the protection required for public funds for which the Bank pledges securities. A State insurance fund exists for public funds in Indiana. The state of Michigan also does not require the pledging of collateral for public funds, though some entities do request it.
Current wording
The Company continues to focus on growth in the areas of core deposits and the expansion of contingency funding. Growing deposits has been a focus especially in our newer markets since 2024. Core deposits provide additional opportunities for noninterest income. The Bank offers the Insured Cash Sweep (ICS) product and CDARS, a certificate of deposit registry, accessed through the IntraFi network of financial institutions which helps to reduce the amount of pledged securities needed. The Bank’s uninsured deposit ratio remains low at 12.7%. As of September 30, 2025, total uninsured deposits of the Bank were $350.5 million of approximately $2.8 billion total deposits. If the amount of coverage is adjusted for what is insured solely by FDIC, the percentage is 20.4% or $561.0 million of uninsured deposits as of September 30, 2025. The underlying difference between these two percentages is the protection required for public funds for which the Bank pledges securities. A State insurance fund exists for public funds in Indiana. The state of Michigan also does not require the pledging of collateral for public funds, though some entities do request it.
Previous wording
Deposits have increased $23.6 million as of June 30, 2025 since December 31, 2024, while cash and cash equivalents have decreased $88.1 million over the same time period. Cash balances have been used to fund loan growth and to repay maturing FHLB advances. The $88.2 million of cash holdings represents 2.6% of total assets and 3.3% of total deposits as of June 30, 2025. Even though we are currently below the Bank’s internal guideline of 3.5% of cash holdings to total assets, management is comfortable with our position based on our cash forecast modeling. If differences would arise between actual cash and the forecast, the Bank has access to ample short term funding sources. Since June 30, 2024, deposits have increased $69.2 million, or 2.6%, while cash and cash equivalents have decreased $104.8 million or 54.3%. Management has continued to hold biweekly sub-ALCO meetings, of which liquidity is a topic of discussion, in order to be more responsive to opportunities and threats as they arise.
Current wording
Deposits have increased $65.1 million as of September 30, 2025 since December 31, 2024, while cash and cash equivalents have decreased $59.3 million over the same time period. Cash balances have been used to fund loan growth and to repay maturing FHLB advances. The $117.0 million of cash holdings represents 3.5% of total assets and 4.3% of total deposits as of September 30, 2025. Currently, we are at the Bank’s internal guideline of 3.5% of cash holdings to total assets and management is comfortable with our position based on our cash forecast modeling. If differences would arise between actual cash and the forecast, the Bank has access to ample short term funding sources. Since September 30, 2024, deposits have increased $67.1 million, or 2.5%, while cash and cash equivalents have decreased $128.5 million or 52.3%. Management has continued to hold biweekly sub-ALCO meetings, of which liquidity is a topic of discussion, in order to be more responsive to opportunities and threats as they arise.
Previous wording
During the first six months of 2025, borrowings from the FHLB decreased $57.6 million with $56.5 million maturing in the second quarter and the remainder through normal paydowns. The Bank utilized four sources for brokered CDs in 2024 for a total of $26.9 million. This was done to establish relationships to test the access of such funds and to decrease the cost of funds going forward. To assure a proper net interest margin over the 3 and 4-year time period of these CDs, the Bank internally looked at loan originations in the quarter with similar or slightly longer fixed interest rate periods. The Bank also tested all correspondent borrowing lines during the first quarter of 2025 to assure availability should the need arise. The availability for overnight borrowing on unsecured Federal Funds lines is $163.0 million. Combining the available line of credit at the holding company level, the Company has $178.0 million overnight borrowing availability.
Current wording
During the first nine months of 2025, borrowings from the FHLB decreased $58.1 million with $56.5 million maturing in the second quarter and the remainder through normal paydowns. The Bank utilized four sources for brokered CDs in 2024 for a total of $26.9 million. This was done to establish relationships to test the access of such funds and to decrease the cost of funds going forward. To assure a proper net interest margin over the 3 and 4-year time period of these CDs, the Bank internally looked at loan originations in the quarter with similar or slightly longer fixed interest rate periods. The Bank also tested all correspondent borrowing lines during the third quarter of 2025 to assure availability should the need arise. The availability for overnight borrowing on unsecured Federal Funds lines is $163.0 million. Combining the available line of credit at the holding company level, the Company has $178.0 million overnight borrowing availability.
Previous wording
In comparing to the same prior year period, the June 30, 2025 (at amortized cost) loan balances of $2.6 billion accounted for $65.8 million or 2.6% increase when compared to same period 2024. Individual growth was comprised of 9.4% in non-real estate commercial loans, 3.3% in commercial real estate loans and 10.5% in agricultural loans. Consumer real estate loans decreased by 0.4% while consumer loans decreased by 16.2%. Agricultural related loans increased 3.7% year over year. Individual growth was comprised of 10.5% in non-real estate agricultural loans partially offset by a decline of 0.7% in agricultural real estate loans. Other loans decreased by 6.8%. The Company's strong team of lenders remain focused on providing customers valuable localized services and thereby increasing our market share.
Current wording
In comparing to the same prior year period, the September 30, 2025 (at amortized cost) loan balances of $2.7 billion accounted for $123.0 million or a 4.9% increase when compared to same period 2024. The year over year improvement was made up of an increase in commercial and industrial related loans of 5.7%. Individual growth was comprised of 13.6% in non-real estate commercial loans and 4.1% in commercial real estate loans. Agricultural related loans increased 12.3% year over year. Individual growth was comprised of 30.6% in non-real estate agricultural loans as we saw an increased use in lines of credit and 0.9% in agricultural real estate loans. Consumer real estate loans decreased by 0.3% while consumer loans decreased by 10.2%. Other loans decreased by 7.1%. The Company's strong team of lenders remain focused on providing customers valuable localized services and thereby increasing our market share.
Previous wording
The Bank maintains a well-balanced, diverse and high performing commercial real estate loan portfolio. Gross commercial real estate loans, excluding deferred loan fees and costs, represented 51.25% of the Company's total gross loan portfolio as of June 30, 2025. The tables below present the commercial real estate (CRE) portfolio segment by category, location and loan grade.
Current wording
The Bank maintains a well-balanced, diverse and high performing commercial real estate loan portfolio. Gross commercial real estate loans, excluding deferred loan fees and costs, represented 50.95% of the Company's total gross loan portfolio as of September 30, 2025. The tables below present the commercial real estate (CRE) portfolio segment by category, location and loan grade.
Previous wording
Management feels confident that liquidity needs can be met through additional maturities from the security portfolio, increased deposit generating efforts and additional borrowings. For short term needs, the Bank has the unsecured borrowing capacity through its correspondent banks mentioned above along with access to $167.9 million through a Cash Management Advance with the FHLB as of June 30, 2025. The Bank's secured borrowing capacity limits at the FHLB would have allowed draws based on current collateral pledging of $230.2 million on June 30, 2025.
Current wording
Management feels confident that liquidity needs can be met through additional maturities from the security portfolio, increased deposit generating efforts and additional borrowings. For short term needs, the Bank has the unsecured borrowing capacity through its correspondent banks mentioned above along with access to $167.9 million through a Cash Management Advance with the FHLB as of September 30, 2025. The Bank's secured borrowing capacity limits at the FHLB would have allowed draws based on current collateral pledging of $162.6 million on September 30, 2025.
Previous wording
While the security portfolio has been utilized to fund loan growth in previous periods, additional sources have been cultivated during 2024 and 2025. The security portfolio increased in the first six months of 2025 from year end 2024 due to purchases of $29.8 million offset by maturities and paydowns of $32.8 million, net amortization of $0.1 million and a $7.6 million decrease in unrealized losses. The amount of pledged investment securities increased by $16.4 million as compared to year end and increased $34.4 million as compared to June 30, 2024. As of June 30, 2025 pledged investment securities totaled $268.1 million. The Company plans to make additional purchases of securities the remainder of the year for the purposes of increasing our investment holdings in Community Reinvestment Act (CRA) qualifying securities, liquidity and contingency planning and as a means of balance sheet gap management.
Current wording
While the security portfolio has been utilized to fund loan growth in previous periods, additional sources have been cultivated during 2024 and 2025. The security portfolio decreased in the first nine months of 2025 from year end 2024 due to purchases of $32.8 million offset by sales of $1.4 million, maturities and paydowns of $49.4 million, net amortization of $0.1 million and a $14.2 million decrease in unrealized losses. The amount of pledged investment securities increased by $15.3 million as compared to year end and increased $20.0 million as compared to September 30, 2024. As of September 30, 2025, pledged investment securities totaled $267.1 million. The Company plans to make additional purchases of securities the remainder of the year for the purposes of increasing our investment holdings in Community Reinvestment Act (CRA) qualifying securities, liquidity and contingency planning and as a means of balance sheet gap management.
Previous wording
As mentioned previously, an additional $230.2 million is also available to the Bank from the FHLB based on current amounts of pledged collateral. The Bank has pledged eligible 1-4 family, home equity, commercial real estate, multifamily real estate portfolios and specific securities. The CRE holdings may be adjusted quarterly to replace paydowns or increase availability of funds. Based on total asset capacity, the Bank would have nearly $1.2 billion available to borrow.
Current wording
As mentioned previously, an additional $162.6 million is also available to the Bank from the FHLB based on current amounts of pledged collateral. The Bank has pledged eligible 1-4 family, home equity, commercial real estate, multifamily real estate portfolios and specific securities. The CRE holdings may be adjusted quarterly to replace paydowns or increase availability of funds. Based on total asset capacity, the Bank would have more than $1.1 billion available to borrow.
Previous wording
Overall total assets decreased 0.6% or $19.0 million since year end 2024. The largest areas of growth occurred in the loan portfolio of $63.9 million and in the security portfolio of $4.5 million offset by a decrease in cash and cash equivalents of $88.1 million, all of which were discussed above.
Current wording
Overall total assets increased 0.8% or $26.0 million since year end 2024. The largest areas of growth occurred in the loan portfolio of $96.6 million offset by decreases in cash and cash equivalents of $59.3 million and the security portfolio of $3.8 million, all of which were discussed above.
Previous wording
Total liabilities decreased $34.5 million or 1.1% since year end 2024. The largest change was a decrease in the FHLB borrowings of $57.6 million of which $56.5 million was due to advances maturing in second quarter 2025. Offsetting the decreased borrowings was total deposits growth of $23.6 million or 0.9%. The mix of deposits saw increases in interest bearing checking, savings and money market deposits offset by decreases in time deposit accounts and noninterest bearing accounts since December 31, 2024. The Bank has adjusted its checking product offerings to decrease the number of overall types and provide better service to our customers.
Current wording
Total liabilities only decreased $540 thousand since year end 2024. The largest decrease was in the FHLB borrowings of $58.1 million of which $56.5 million was due to advances maturing in second quarter 2025. Offsetting the decreased borrowings was total deposits growth of $65.1 million or 2.4%. The mix of deposits saw increases in interest-bearing checking, savings and money market deposits offset by decreases in time deposit accounts and noninterest-bearing accounts since December 31, 2024. The Bank has adjusted its checking product offerings to decrease the number of overall types and provide better service to our customers.
Previous wording
Shareholders’ equity increased by $15.6 million as of June 30, 2025 compared to year end 2024. Earnings exceeded dividend declarations during the six months ended June 30, 2025. Accumulated other comprehensive loss decreased in unrealized loss position by $6.0 million from December 2024 to an unrealized loss of $19.2 million on June 30, 2025. Dividends declared remained unchanged from the prior quarter at $0.22125 per share and were 0.6% over second quarter 2024’s $0.22 per share. Compared to June 30, 2024, shareholders’ equity increased 8.7% or $28.1 million with $9.4 million attributed to an improvement in accumulated other comprehensive loss. Net income was higher for the quarter ended June 2025 compared to
Current wording
Shareholders’ equity increased by $26.6 million as of September 30, 2025 compared to year end 2024. Earnings exceeded dividend declarations during the nine months ended September 30, 2025. Accumulated other comprehensive loss decreased in unrealized loss position by $11.2 million from December 2024 to an unrealized loss of $14.0 million on September 30, 2025. Dividends declared increased to $0.2275 per share from the prior quarter’s $0.22125 per share and were 2.8% over third quarter 2024’s $0.22125 per share. Compared to September 30, 2024, shareholders’ equity increased 7.9% or $26.4 million with $5.4 million attributed to an improvement in accumulated other comprehensive loss. Net income was higher for the quarter ended September 2025 compared to September 2024 by $2.3 million and $1.1 million higher than second quarter 2025. We are encouraged that net interest income has continued to improve quarter over quarter since third quarter 2023.
Previous wording
While the Holding Company generally has sufficient liquidity to maintain its dividend policy without relying on the upstreaming of dividends from the Bank, the Bank declared a $3.35 million dividend during the second quarter of 2025.
Current wording
While the Holding Company generally has sufficient liquidity to maintain its dividend policy without relying on the upstreaming of dividends from the Bank, the Bank declared a $3.35 million dividend during the third quarter of 2025.
Previous wording
When comparing second quarter 2025 to second quarter 2024, average loan balances grew $60.9 million which represented a 2.4% increase in a one-year time period. Interest income on loans increased $2.9 million or 8.0% as compared to the quarter ended June 30, 2024. Loan interest income for second quarter 2025 included $546 thousand of fee income related to interest rate swap transactions compared to $20 thousand for second quarter 2024. The associated impact to loan yield and total asset yield for second quarter 2025 was 8 basis points and 7 basis points, respectively, whereas the impact to loan yield was only 1 basis point for second quarter 2024. During the second quarter 2024, the Company recognized loan interest income of slightly more than $1.0 million related to the payoff of one nonaccrual relationship of which approximately $185 thousand was earned in second quarter 2024. The Company's loan portfolio is 42.5% variable rate with 25.8% of total loans subject to repricing within the next three months.
Current wording
When comparing third quarter 2025 to third quarter 2024, average loan balances grew $97.5 million which represented a 3.8% increase. Interest income on loans increased $4.1 million or 11.2% as compared to the quarter ended September 30, 2024. Loan interest income for third quarter 2025 included $227 thousand of fee income related to interest rate swap transactions compared to $7 thousand for third quarter 2024. The associated impact to both loan yield and total asset yield for third quarter 2025 was 3 basis points, whereas there was no impact to loan yield or total asset yield for third quarter 2024. Loan interest for third quarter 2025 also includes a one-time fee collected of $195 thousand in addition to $191 thousand from the recovery of one acquired relationship that had been fully charged off prior to acquisition. The Company's loan portfolio is 44.1% variable rate with 28.3% of total loans subject to repricing within the next three months.
Previous wording
The available-for-sale securities portfolio increased in average balances by $63.6 million when comparing to the same quarter in 2024 with the income associated with the security portfolio increasing $1.0 million over second quarter 2024. The increased balances were the result of increasing our holdings for liquidity and contingency planning purposes and to improve our investments in CRA qualifying securities. Federal funds sold and interest bearing deposits decreased in average balances by $87.7 million as compared to the same quarter in 2024 with decreased income of approximately $1.7 million for the current quarter. The decreased balances are the result of funding loan growth, purchases of available-for-sale securities and repayment of other borrowed money.
Current wording
The available-for-sale securities portfolio increased in average balances by $25.6 million or 5.9% when comparing to the same quarter in 2024 with the income associated with the security portfolio increasing $711 thousand over third quarter 2024. The increased balances were the result of increasing our holdings for liquidity and contingency planning purposes and to improve our investments in CRA qualifying securities. Federal funds sold and interest-bearing deposits decreased in average balances by $141.1 million as compared to the same quarter in 2024 with decreased income of approximately $2.3 million for the current quarter. The decreased balances are the result of funding loan growth, purchases of available-for-sale securities and repayment of other borrowed money.
Previous wording
The overall total average balance of the Bank’s earning assets increased by $36.8 million and interest income for the quarter comparisons was higher for second quarter 2025 by 5.7% or $2.3 million as compared to second quarter 2024. Rate changes between periods have contributed to approximately 104.6% of the growth.
Current wording
The overall total average balance of the Bank’s earning assets decreased by $18.1 million and interest income for the quarter comparisons was higher for third quarter 2025 by 6.2% or $2.6 million as compared to third quarter 2024. Rate changes between periods have contributed to approximately 119.1% of the growth.
Previous wording
Annualized yield, for the quarter ended June 30, 2025, was 5.45% as compared to 5.22% for the quarter ended June 30, 2024. The following charts demonstrate loan rate increases accounted for 70.3% of the increased loan interest income while increased loan balances accounted for the remaining 29.7%. The yields on tax-exempt securities and the portion of the tax-exempt IDB loans included in loans have been tax adjusted based on a 21% tax rate in the charts to follow. The tax-exempt interest income was $115 thousand for second quarter 2025 and 2024 which resulted in a federal tax savings of $24 thousand.
Current wording
Annualized yield, for the quarter ended September 30, 2025, was 5.62% as compared to 5.27% for the quarter ended September 30, 2024. The following charts demonstrate loan rate increases accounted for 66.0% of the increased loan interest income while increased loan balances accounted for the remaining 34.0%. The yields on tax-exempt securities and the portion of the tax-exempt IDB loans included in loans have been tax adjusted based on a 21% tax rate in the charts to follow. The tax-exempt interest income was $112 and $114 thousand for third quarter 2025 and 2024, respectively, which resulted in a federal tax savings of $24 thousand for both third quarter 2025 and 2024.
Previous wording
Contributing to the increased net interest income for the quarter was a decrease in interest expense of $2.0 million or 10.2% compared to second quarter 2024. Since 2024, average interest bearing deposit balances have increased $63.7 million or 2.9% while the Company recognized $1.7 million less in interest expense for the most recent quarter. During 2024, the Federal Reserve decreased the federal funds rate by 50 basis points in September and 25 basis points in November and December. Deposit rates have been adjusted numerous times with all the rate changes. The following charts demonstrate increased average interest bearing deposit balances accounted for 19.4% of additional interest bearing deposit expense while rate decreases accounted for decreased interest bearing deposit expense of 119.4%.
Current wording
Contributing to the increased net interest income for the quarter was a decrease in interest expense of $2.7 million or 13.4% compared to third quarter 2024. Since September 30, 2024, average interest-bearing deposit balances have increased $24.2 million or 1.1% while the Company recognized $1.9 million less in interest expense for the most recent quarter. In September 2025, the Federal Reserve made its first rate change to the federal funds rate for 2025 with a reduction of 25 basis points. During 2024, the Federal Reserve decreased the federal funds rate by 50 basis points in September and 25 basis points in November and December. Deposit rates have been adjusted numerous times with all the rate changes. The following charts demonstrate increased average interest-bearing deposit balances accounted for 1.5% of additional interest-bearing deposit expense while rate decreases accounted for decreased interest-bearing deposit expense of 101.5%. Noninterest-bearing deposits balances increased $18.6 million compared to third quarter 2024. The Bank continues to focus on capturing the full customer relationship; however, it has sometimes resulted in more expensive deposits being brought in.
Previous wording
Interest expense on borrowed funds decreased $331 thousand in the second quarter 2025 over the same time frame in 2024 due to the repayment of FHLB advances. During the current quarter, FHLB borrowings of $57.0 million were repaid compared to new FHLB borrowings of $15.0 million and repayment of $5.5 million in second quarter 2024. Interest expense on fed funds purchased and securities sold under agreement to repurchase decreased $4 thousand compared to second quarter 2024 due to the decrease of $420 thousand in average balances. Cost of funds decreased even with growth in interest bearing deposit balances offset by decreased borrowings and decreased noninterest bearing deposits balances of $4.9 million compared to second quarter 2024. The Bank continues to focus on capturing the full customer relationship; however, it has sometimes resulted in more expensive deposits being brought in. The average cost of funds decreased to 2.83% in second quarter 2025 compared to 3.18% in second quarter 2024. Refer to Note 11 for additional information on subordinated notes.
Current wording
Interest expense on borrowed funds decreased $838 thousand in the third quarter 2025 over the same time frame in 2024 due to the repayment of FHLB advances. During the current quarter, FHLB borrowings of $536 thousand were repaid compared to repayment of $3.0 million in third quarter 2024. Interest expense on federal funds purchased and securities sold under agreement to repurchase decreased $4 thousand compared to third quarter 2024 due to the decrease of $207 thousand in average balances. Cost of funds decreased even with growth in interest-bearing deposit balances offset by decreased borrowings compared to third quarter 2024. The average cost of funds decreased to 2.83% in third quarter 2025 compared to 3.21% in third quarter 2024. Refer to Note 11 for additional information on subordinated notes.
Previous wording
As the following chart indicates, the improvement in yields on interest earning assets of 23 basis points combined with the decreased cost of funds of 35 basis points equated to a 58 basis point improvement in net interest spread when comparing to the same period a year ago. Competition for deposits remains intense with most competitors offering special rates for specific terms.
Current wording
As the following chart indicates, the improvement in yields on interest earning assets of 35 basis points combined with the decreased cost of funds of 38 basis points equated to a 73 basis point improvement in net interest spread when comparing to the same period a year ago. Competition for deposits remains intense with most competitors offering special rates for specific terms.
Previous wording
Net interest income increased approximately $4.3 million for the second quarter 2025 over the same time frame in 2024 due to the increase in interest income of $2.3 million combined with the interest expense decrease of approximately $2.0 million as previously mentioned. As the new loans added in 2024 and 2025 generate more income, management expects the benefits of the Company’s strategy of repositioning the balance sheet to increase interest income in the long run. Loans as a percentage of earning assets increased to 82.0% in second quarter 2025 compared to 81.0% in second quarter 2024. Loans to total assets increased to 77.7% in second quarter 2025 compared to 77.2% for the same period 2024. The percentage of earning assets to total assets decreased to 94.8% for the three months ended June 30, 2025 compared to 95.3% for the three months ended June 30, 2024. In terms of net interest margin, the Bank recognizes competition for deposits will continue; however, there is a greater opportunity for gradual improvement with loans repricing upwards in the next year and a likely continuing decrease in cost of funds.
Current wording
Net interest income increased $5.3 million for the third quarter 2025 over the same time frame in 2024 due to the increase in interest income of $2.6 million combined with the interest expense decrease of $2.7 million as previously mentioned. As the new loans added in 2024 and 2025 generate more income, management expects the benefits of the Company’s strategy of repositioning the balance sheet to increase interest income in the long run. The Company has more opportunity for improved asset yield with loans repricing. Additionally, funding costs should continue to come down as well. Loans as a percentage of earning assets increased to 83.7% in third quarter 2025 compared to 80.1% in third quarter 2024. Loans to total assets increased to 79.1% in third quarter 2025 compared to 76.1% for the same period 2024. The percentage of earning assets to total assets decreased slightly to 94.6% for the three months ended September 30, 2025 compared to 95.0% for the three months ended September 30, 2024. In terms of net interest margin, the Bank recognizes competition for deposits will continue; however, there is a greater opportunity for gradual improvement with loans repricing upwards in the next year and a likely continuing decrease in cost of funds.
Previous wording
Total provision for credit losses increased $56 thousand for the three months ended June 30, 2025 as compared to the same period in 2024. Management continues to monitor asset quality, making adjustments to the provision as necessary. The impact of higher interest rates and inflation are taken into consideration when reviewing qualitative factors. Loan charge-offs were $47 thousand higher during the three months ended June 30, 2025 than the same period in 2024 with all loan charge-offs for the current quarter in the consumer portfolio segment. Recoveries were $26 thousand higher during the three months ended June 30, 2025 as compared to same period in 2024 with 75.0% of total current quarter recoveries in the consumer portfolio segment. Combined net charge-offs were $21 thousand higher in the three months ended June 30, 2025 than the same time period 2024. All of the time periods in 2024 and 2025 had net charge-offs to total loans ratios of 0.01% or lower attesting to the strong asset quality of the Bank's loan portfolio.
Current wording
Total provision for credit losses increased $275 thousand for the three months ended September 30, 2025 as compared to the same period in 2024. Management continues to monitor asset quality, making adjustments to the provision as necessary. The impact of higher interest rates and inflation are taken into consideration when reviewing qualitative factors. Loan charge-offs were $3 thousand lower during the three months ended September 30, 2025 than the same period in 2024 with all loan charge-offs for the current quarter in the consumer portfolio and commercial portfolio segments. Recoveries were $6 thousand higher during the three months ended September 30, 2025 as compared to same period in 2024 with 78.7% of total current quarter recoveries in the consumer portfolio segment. Combined net charge-offs were $9 thousand lower in the three months ended September 30, 2025 than the same time period 2024. All of the time periods in 2024 and 2025 had net charge-offs to total loans ratios lower than 0.1% attesting to the strong asset quality of the Bank's loan portfolio.
Previous wording
Loans past due 30 or more days decreased $681 thousand at June 30, 2025 as compared to June 30, 2024. The largest changes were attributed to the combined decrease of past due balances of $810 thousand in the agricultural and commercial real estate portfolio segments. The agricultural real estate portfolio segment past due balances increased $322 thousand for the same time period.
Current wording
Loans past due 30 or more days increased $1.0 million at September 30, 2025 as compared to September 30, 2024. The largest changes were attributed to the agricultural real estate portfolio segment past due balances which increased $712 thousand for the same time period. The commercial portfolio segment also increased $209 thousand over September 30, 2024.
Previous wording
The following table breaks down the activity within the ACL for each portfolio segment and shows the contribution provided by both recoveries and the provision, along with the reduction of the allowance caused by charge-offs. The time period covered is for the six months ended June 30, 2025, 2024, and 2023.
Current wording
The following table presents the activity within the ACL for each portfolio segment and shows the contribution provided by both recoveries and the provision, along with the reduction of the allowance caused by charge-offs. The time period covered is for the three months ended September 30, 2025, 2024, and 2023.
Previous wording
The balance of loans, amortized cost at June 30, 2025 and June 30, 2024 within this chart does not include a fair value basis adjustment for derivatives of $1.9 million and $612 thousand, respectively, or a daily average outstanding balance of $1.6 million and $1.2 million, respectively. Refer to Note 7 for additional information related to derivative financial instruments.
Current wording
The balance of loans, amortized cost at September 30, 2025 and September 30, 2024 within this chart does not include a fair value basis adjustment for derivatives of $1.9 million and $3.0 million, respectively, or a daily average outstanding balance of $1.8 million and $1.6 million, respectively. Refer to Note 7 for additional information related to derivative financial instruments.
Previous wording
Loans classified as nonaccrual were higher as of June 30, 2025 at $3.7 million as compared to $2.5 million as of June 30, 2024. The consumer real estate portfolio segment increased $1.4 million, or 83.5%, as compared June 30, 2024. The agricultural real estate portfolio segment increased $401 thousand, or 668.3%, as compared to June 30, 2024 while the agricultural portfolio segment only increased $13 thousand compared to June 30, 2024. The commercial real estate portfolio segment decreased 74.6% or $414 thousand compared to June 30, 2024. Nonaccrual loans in the commercial and industrial portfolio segment and the consumer portfolio segment also decreased $46 and $83 thousand, respectively, compared to June 30, 2024.
Current wording
Loans classified as nonaccrual were higher as of September 30, 2025 at $5.2 million as compared to $2.9 million as of September 30, 2024. The consumer real estate portfolio segment increased $1.9 million, or 86.8%, as compared to September 30, 2024. The agricultural real estate portfolio segment increased $334 thousand, or 267.2%, as compared to September 30, 2024 while the agricultural portfolio segment decreased $46 thousand compared to September 30, 2024. The commercial real estate portfolio segment decreased 61.1% or $220 thousand compared to September 30, 2024. Nonaccrual loans in the commercial and industrial portfolio segment increased $294 thousand compared to September 30, 2024.
Previous wording
The commercial real estate portfolio segment along with the consumer portfolio segment accounted for the largest component of recoveries for the three months ended June 30, 2025 compared to the commercial and industrial portfolio segment and consumer portfolio segment which accounted for the largest components of recoveries for the three months ended June 30, 2024. The consumer portfolio segment accounted for the entirety of charge-offs for the three months ended June 30, 2025 while the consumer real estate portfolio segment and the consumer portfolio segment accounted for the largest components of charge-offs for the three months ended June 30, 2024.
Current wording
The commercial and industrial portfolio segment along with the consumer portfolio segment accounted for the largest components of recoveries for both the three months ended September 30, 2025 and for the three months ended September 30, 2024. The consumer portfolio segment accounted for the majority of charge-offs for the three months ended September 30, 2025 and for the three months ended September 30, 2024.
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Current report — wording carried from elsewhere
Overall, asset quality metrics are still favorable. We continue to keep a watchful eye on the overall impact of the economy and pending tariffs, which may cause past dues and non-accruals to increase in the coming quarter. Our credit department continues to monitor all areas and complete stress testing to better prepare our responsiveness to market events.
Current report — wording carried from elsewhere
Overall, net income in the three months ended September 30, 2025 was up $2.3 million or 35.9% to $8.9 million as compared to last year's $6.5 million. The biggest contributor to the improvement was net interest income. Net interest income was up
Current report — wording carried from elsewhere
$1.6 million and $1.3 million, respectively. Refer to Note 7 for additional information related to derivative financial instruments.
Current report — wording carried from elsewhere
Consulting fees increased $846 thousand over the same period in 2024 of which the majority was for time spent to our core banking operating system for the base contract negotiation and additional ancillary products. Data processing expenses and
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Previous report — wording carried elsewhere
June 2024 by $2.0 million and $758 thousand higher than first quarter 2025. We are encouraged that net interest income has continued to improve quarter over quarter since third quarter 2023.