MERCANTILE BANK CORP
For the period ended Mar 31, 2025. Filed May 2, 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.
Mar 31, 2025 · Filed May 2, 2025
MBWM$60.57+0.5%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2024-09-30; filed 2024-11-01.
0001437749-24-032883
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2025-03-31; filed 2025-05-02.
0001437749-25-014197
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 78 previous paragraphs and 71 current paragraphs.
25 unchanged; 38 reworded; 8 added; 15 removed; 0 previous and 0 current paragraphs rearranged.
Tables are not compared: 6 previous and 5 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 (8)
Current report
We reported net income of $19.5 million, or $1.21 per diluted share, for the first quarter of 2025, compared with net income of $21.6 million, or $1.34 per diluted share, during the first quarter of 2024. Although net interest income increased, net income was negatively impacted by lower noninterest income, increased noninterest costs and a higher provision expense.
Current report
Net interest income increased $1.2 million during the first three months of 2025 compared to the first quarter of 2024, reflecting the net impact of $3.6 million and $2.4 million increases in interest income and interest expense, respectively. Our net interest margin during the first quarter of 2025 was 27 basis points lower than during the first quarter of 2024. Our yield on earning assets declined 32 basis points while our cost of funds was down 5 basis points during that time period. The lower yield on earning assets largely reflected the aggregate 100 basis point reduction in the federal funds rate during the last four months of 2024. Despite the reduction in the net interest margin, net interest income increased primarily due to significant loan growth between the first quarters of 2024 and 2025. Total loans averaged $4.63 billion and $4.30 billion during the first quarters of 2025 and 2024, respectively, reflecting growth of $330 million, or about 8%.
Current report
Noninterest income totaled $8.7 million during the first three months of 2025, compared to $10.9 million during the first quarter of 2024. Growth in treasury management fees, mortgage banking income and payroll service fees was more than offset by lower levels of interest rate swap income, revenue generated from a private equity fund investment and bank owned life insurance income.
Current report
Residential mortgage loans totaled $817 million, or 17.6% of total loans, as of March 31, 2025. Residential mortgage loans decreased $10.4 million during the first three months of 2025, as aggregate payoffs and scheduled monthly payments exceeded new loans added to the portfolio during the first quarter. Residential mortgage loan originations totaled $100 million during the first three months of 2025, of which about 80% were originated with the intent to sell.
Current report
The decrease in net income during the first three months of 2025 compared to the respective 2024 period reflected lower noninterest income and higher levels of noninterest expense and provisions for credit losses, which more than offset increased net interest income. Net interest income increased as earning asset expansion and a decrease in the cost of funds outpaced a lower yield on earning assets and growth in interest-bearing liabilities. Noninterest income declined as increases in treasury management fees, mortgage banking income, and payroll service fees were outweighed by reductions in interest rate swap income, revenue generated from an investment in a private equity fund, and bank owned life insurance income. Noninterest expense was up primarily due to increased salary and benefit and data processing costs. The provision expense recorded during the current-year first quarter mainly reflected an increased allocation necessitated by changes to the economic forecast.
Current report
Interest expense during the first quarter of 2025 was $31.8 million, an increase of $2.4 million, or 8.3%, from the $29.4 million expensed during the first quarter of 2024. The higher level of interest expense resulted from growth in average interest-bearing liabilities, which more than offset a decline in the weighted average cost of these funds. Average interest-bearing liabilities totaled $4.18 billion during the first three months of 2025, compared to $3.61 billion during the respective 2024 period, representing an increase of $575 million, or 15.9%. The average weighted cost of interest-bearing liabilities declined from 3.27% during the first quarter of 2024 to 3.08% during the first quarter of 2025 mainly due to lower rates paid on money market accounts, reflecting the decreased interest rate environment that began in September of 2024 in conjunction with the FOMC’s lowering of the targeted federal funds rate. A change in funding mix, primarily consisting of a decrease in average noninterest-bearing checking accounts and growth in average higher-cost money market accounts and time deposits, negatively impacted the weighted average cost of interest-bearing liabilities during the first three months of 2025. The increases in money market accounts and time deposits reflected new deposit relationships, growth in existing deposit relationships, and deposit migration.
Current report
Provisions for credit losses of $2.1 million and $1.3 million were recorded during the first quarters of 2025 and 2024, respectively. The provision expense recorded during the first three months of 2025 mainly reflected an increased allocation dictated by changes to the economic forecast. The provision expense recorded during the first three months of 2024 primarily reflected an individual allocation for a nonperforming commercial loan relationship, allocations necessitated by net loan growth, and a change in a commercial loan environmental factor, which more than offset the impacts of an improved economic forecast and changes to the loan portfolio composition. Sustained strength in loan quality metrics and the recording of net loan recoveries during both periods largely mitigated additional reserves associated with loan growth.
Current report
Noninterest expense totaled $31.1 million during the first quarter of 2025, compared to $29.9 million during the prior-year first quarter. The increase primarily resulted from higher salary and benefit costs, largely reflecting annual merit pay increases and market adjustments. A higher level of data processing costs, mainly reflecting increased software support costs, also contributed to the rise in noninterest expense. Lower depreciation expense, largely reflecting facility expansion and leasehold improvement projects becoming fully depreciated during 2024, and a reduced reserve for commercial loan commitments positively impacted noninterest expense during the first three months of 2025. Noninterest expense during the first quarter of 2024 included contributions to The Mercantile Bank Foundation totaling $0.7 million.
Removed paragraphs (15)
Previous report
We reported net income of $19.6 million, or $1.22 per diluted share, for the third quarter of 2024, compared with net income of $20.9 million, or $1.30 per diluted share, during the third quarter of 2023. Net income during the first nine months of 2024 totaled $60.0 million, or $3.72 per diluted share, compared to $62.2 million, or $3.89 per diluted share, during the first nine months of 2023.
Previous report
While noninterest income increased during both periods, net income was negatively impacted by expected lower net interest income and increased noninterest expenses. Provision expense was lower during the third quarter of 2024 when compared to the third quarter of 2023, and was the same during the first nine months of 2024 as it was during the first nine months of 2023.
Previous report
We recorded a provision expense of $1.1 million and $5.9 million during the third quarter and first nine months of 2024, respectively. The third quarter 2024 provision expense primarily reflects an increase in environmental factor allocations associated with the commercial and industrial loan segment and allocations necessitated by net loan growth, which were partially mitigated by decreases in the calculated allowance due primarily from the payoffs of two larger accruing problem commercial lending relationships. The provision expense during the first nine months of 2024 also includes specific allocations for two nonperforming non-real-estate-related commercial loan relationships that were established during the first and second quarters, along with allocations necessitated by net loan growth.
Previous report
Net interest income declined $0.7 million and $2.2 million during the third quarter and first nine months of 2024, respectively, compared to the same prior-year time periods, reflecting the net impact of $12.2 million and $41.4 million increases in interest income and $12.9 million and $43.6 million increases in interest expense, during the respective periods. Our net interest margin declined 46 basis points and 48 basis points during the third quarter and first nine months of 2024, respectively, compared to the same prior-year time periods. Although our yield on earning assets increased 30 basis points and 47 basis points, respectively, during those time periods, our cost of funds was up 76 basis points and 95 basis points, respectively. While we experienced rapid growth in our earning asset yield during the period of March of 2022 through July of 2023 when the Federal Open Market Committee (“FOMC”) raised the targeted federal funds rate by 525 basis points, meaningful increases in our cost of funds did not begin to materialize until the latter part of 2022 when competition for deposit balances increased deposit rates, and depositors began to move funds from no- and lower-costing deposit types to higher-costing deposit products. Our net interest margin peaked during the latter part of 2022 and early stages of 2023.
Previous report
Noninterest income totaled $9.7 million and $30.2 million during the third quarter and first nine months of 2024, respectively, compared to $9.2 million and $23.8 million during the third quarter and first nine months of 2023, respectively. The higher level of noninterest income during both time periods primarily stemmed from increases in service charges on deposit accounts, primarily reflecting growth in treasury management fees, and mortgage banking income. Growth in payroll service income and revenue associated with a private equity investment also benefited noninterest income during both time periods, and benefit claims on bank owned life insurance policies were recorded during the first quarter of 2024.
Previous report
Residential mortgage loans increased $6.7 million during the first nine months of 2024, representing an annualized growth rate of about 1%. Residential mortgage loan originations totaled $364 million during the first nine months of 2024, of which almost 77% were originated with the intent to sell. Residential mortgage loan originations totaled $298 million during the first nine months of 2023, of which about 49% were originated with the intent to sell. In mid-2023, we altered our residential mortgage loan pricing strategy to encourage borrowers to select fixed rate residential mortgage loan products that we could sell rather than selecting adjustable rate residential mortgage loan products that we had to fund on our balance sheet. The strategy not only provided for less residential mortgage loans being funded on our balance sheet, but also resulted in higher mortgage banking income.
Previous report
Noninterest-bearing deposits decreased $65.4 million during the first nine months of 2024, in large part reflecting the aforementioned customary level of customers’ tax and bonus payments and partnership distributions in early 2024. Interest-bearing checking accounts increased $75.0 million, primarily reflecting growth in and transfers from noninterest-bearing checking accounts to the IntraFi insured cash sweep account product. Savings deposits were down $32.5 million, in large part reflecting transfers to higher-costing money market deposit and time deposit accounts. Money market deposit accounts increased $484 million, and local time deposits were up $139 million, primarily reflecting growth in deposits from existing customers and initial deposits from new customers stemming from our strategic initiative to grow local deposits to lower the loan-to-deposit ratio. Out-of-area deposits were down $45.2 million from year-end 2023.
Previous report
The lower levels of net income during the third quarter and first nine months of 2024 compared to the respective 2023 periods resulted from increased overhead costs and decreased net interest income, which more than offset higher levels of noninterest income. The increase in noninterest expense during the 2024 periods mainly resulted from larger salary and data processing costs; increased contributions to the Foundation also contributed to the higher level of overhead costs during the first nine months of 2024. Net interest income declined during the 2024 periods as higher yields on, along with growth in, earning assets were more than offset by an increased cost of funds. The growth in noninterest income during the 2024 periods primarily resulted from increased mortgage banking income and treasury management fees; higher levels of payroll service fees also contributed to the increased noninterest income during the periods. Revenue associated with a private equity investment and benefit claims on bank owned life insurance policies positively impacted noninterest income during the first nine months of 2024. The provision expense recorded during the third quarter of 2024 primarily reflected an increase in environmental factor allocations and allocations necessitated by net loan growth, which were partially offset by decreases in the calculated allowance due primarily from the payoffs of two larger problem commercial lending relationships previously included in the collective evaluation. The provision expense recorded during the first nine months of 2024 mainly reflected individual allocations assigned to two different nonperforming nonreal-estate-related commercial loan relationships and allocations necessitated by net loan growth, which were partly offset by the aforementioned reduction in the calculated allowance. The provision expense recorded during the prior-year third quarter mainly reflected the establishment of a specific reserve for a distressed commercial loan relationship, a qualitative factor assessment for local economic conditions, allocations necessitated by net loan growth, and a higher reserve for residential mortgage loans stemming from slower principal prepayment rates and the resulting extended average life of the portfolio. The provision expense recorded during the first nine months of 2023 generally reflected allocations necessitated by net loan growth, adjustments to historical loss information to better represent our expectations for future credit losses, and the previously mentioned higher reserve for residential mortgage loans.
Previous report
Interest income during the first nine months of 2024 was $239 million, an increase of $41.5 million, or 21.0%, from the $198 million earned during the first nine months of 2023. The increase stemmed from growth in, and a higher yield on, average earning assets. Average earning assets equaled $5.25 billion during the first nine months of 2024, up $520 million, or 11.0%, from the level of $4.73 billion during the first nine months of 2023; average loans increased $387 million, average interest-earning deposits were up $104 million, and average securities grew $28.7 million. The yield on average earning assets was 6.06% during the first nine months of 2024, up from 5.59% during the respective 2023 period. The higher yield mainly resulted from an increased yield on loans, which rose from 6.16% during the first nine months of 2023 to 6.66% during the first nine months of 2024 primarily due to higher interest rates on variable-rate commercial loans stemming from FOMC rate hikes and a substantial level of commercial loans being originated since the beginning of 2023 in the higher interest rate environment. The FOMC increased the targeted federal funds rate by 100 basis points during the period of February 2023 through July 2023, during which time average variable-rate commercial loans represented approximately 65% of average total commercial loans. The positive impact of the rate hikes was somewhat mitigated by the FOMC’s lowering of the targeted federal funds rate by 50 basis points in mid-September 2024. An increased yield on securities, reflecting the higher interest rate environment, also contributed to the improved yield on average earning assets.
Previous report
Interest expense during the third quarter of 2024 was $35.1 million, an increase of $12.9 million, or 58.3%, from the $22.2 million expensed during the third quarter of 2023. The increase is mainly attributable to a higher average weighted cost of interest-bearing liabilities, which grew from 2.69% during the third quarter of 2023 to 3.53% during the current-year third quarter primarily due to higher rates on deposits and borrowings. A change in funding mix, mainly consisting of a decrease in noninterest-bearing and lower-cost deposits and an increase in higher-cost money market accounts and time deposits stemming from deposit migration and new deposit relationships, also contributed to the increased cost of funds. Reflecting the higher interest rate environment, the cost of interest-bearing, non-time deposits increased from 2.17% during the third quarter of 2023 to 2.96% during the third quarter of 2024, while the cost of time deposits increased from 3.85% to 4.79% during the respective periods. The heightened cost of interest-bearing, non-time deposits primarily resulted from increased rates paid on, and levels of, higher-cost money market and interest-bearing business checking accounts. The cost of borrowed funds increased from 2.98% during the third quarter of 2023 to 3.75% during the third quarter of 2024 mainly due to higher costs of sweep accounts and FHLBI advances. The cost of sweep accounts increased from 1.33% during the third quarter of 2023 to 3.73% during the third quarter of 2024, while the cost of FHLBI advances increased from 2.78% to 3.00% during the respective periods, reflecting the higher interest rate environment. Growth in interest-bearing liabilities also contributed to the increase in interest expense during the third quarter of 2024 compared to the prior-year third quarter. Average interest-bearing liabilities totaled $3.94 billion during the third quarter of 2024, compared to $3.27 billion during the third quarter of 2023, representing an increase of $669 million, or 20.4%.
Previous report
Interest expense during the first nine months of 2024 was $96.3 million, an increase of $43.6 million, or 82.9%, from the $52.7 million expensed during the first nine months of 2023. The increase primarily stemmed from a higher average weighted cost of interest-bearing liabilities, which rose from 2.28% during the first nine months of 2023 to 3.40% during the respective 2024 period mainly due to higher rates on deposits and borrowings. A change in funding mix, mainly comprising of a decline in noninterest-bearing and lower-cost deposits and an increase in higher-cost money market accounts and time deposits stemming from deposit migration and new deposit relationships, also contributed to the increased cost of funds. Reflecting the higher interest rate environment, the cost of interest-bearing, non-time deposits increased from 1.77% during the first nine months of 2023 to 2.80% during the first nine months of 2024, while the cost of time deposits increased from 3.25% to 4.71% during the respective periods. The higher cost of interest-bearing, non-time deposits primarily resulted from increased rates paid on, and amounts of, money market and interest-bearing business checking accounts. The cost of borrowed funds increased from 2.82% during the first nine months of 2023 to 3.60% during the first nine months of 2024 mainly due to higher costs of sweep accounts and FHLBI advances. The cost of sweep accounts increased from 1.22% during the first nine months of 2023 to 3.32% during the first nine months of 2024, while the cost of FHLBI advances increased from 2.57% to 2.96% during the respective periods, reflecting the higher interest rate environment. Growth in interest-bearing liabilities also contributed to the increase in interest expense during the first nine months of 2024 compared to the respective 2023 period. Average interest-bearing liabilities totaled $3.77 billion during the first nine months of 2024, compared to $3.08 billion during the first nine months of 2023, representing an increase of $688 million, or 22.3%.
Previous report
Net interest income during the first nine months of 2024 was $143 million, a decline of $2.2 million, or 1.5%, from the $145 million earned during the respective 2023 period. The decrease reflected a lower net interest margin, which more than offset growth in earning assets. The net interest margin was 3.62% in the first nine months of 2024, down from 4.10% in the first nine months of 2023 due to an increased cost of funds, which more than offset a higher yield on earning assets. The cost of funds equaled 2.44% in the first nine months of 2024, up from 1.49% in the respective prior-year period mainly due to higher costs of deposits and borrowed funds, reflecting the impact of the heightened interest rate environment, and a change in funding mix, comprising of a decline in noninterest-bearing and lower-cost deposits and an increase in higher-cost money market accounts and time deposits resulting from deposit migration and new deposit relationships. The increased yield on average earning assets primarily resulted from a higher yield on commercial loans mainly stemming from the aforementioned FOMC rate hikes and a substantial level of commercial loans being originated since the beginning of 2023 in the higher interest rate environment.
Previous report
Provisions for credit losses of $1.1 million and $3.3 million were recorded during the third quarters of 2024 and 2023, respectively, and $5.9 million during both the first nine months of 2024 and 2023. The provision expense recorded during the current-year third quarter primarily reflected an increase in environmental factor allocations and allocations necessitated by net loan growth, which were partially offset by reductions in the calculated allowance due primarily from the payoffs of two larger problem commercial lending relationships previously included in the collective evaluation. The provision expense recorded during the first nine months of 2024 mainly reflected individual allocations assigned to two different nonperforming nonreal-estate-related commercial loan relationships and allocations necessitated by net loan growth, which were partly offset by the previously mentioned decrease in the calculated allowance. The provision expense recorded during the third quarter of 2023 mainly reflected the establishment of a specific reserve for a distressed commercial loan relationship, a qualitative factor assessment for local economic conditions, allocations necessitated by net loan growth, and a higher reserve for residential mortgage loans resulting from slower principal prepayment rates and the resulting extended average life of the portfolio. The provision expense recorded during the first nine months of 2023 generally reflected allocations necessitated by net loan growth, adjustments to historical loss information to better represent our expectations for future credit losses, and the aforementioned higher reserve for residential mortgage loans. Sustained strength in loan quality metrics, including low levels of loan charge-offs, during the 2024 and 2023 periods largely mitigated additional reserves associated with the above-mentioned factors.
Previous report
Noninterest income totaled $30.2 million during the first nine months of 2024, compared to $23.8 million during the first nine months of 2023. Noninterest income during the first nine months of 2024 included bank owned life insurance death benefit claims and gains on the sales of other real estate owned totaling $0.7 million and $0.4 million, respectively, while noninterest income during the respective 2023 period included a gain on the sale of other real estate owned of $0.4 million. Excluding these transactions, noninterest income increased $5.6 million, or 24.0%, in the first nine months of 2024 compared to the first nine months of 2023. The growth primarily stemmed from higher levels of mortgage banking income, mainly reflecting increases in the percentage of residential mortgage loans originated with the intent to sell and total loan production, and treasury management fees, in large part reflecting customers’ expanded use of cash management products. The percentage of residential mortgage loans originated with the intent to sell increased from approximately 49% during the first nine months of 2023 to approximately 77% during the first nine months of 2024, and total loans originated were up nearly 22% during the respective periods. Increases in payroll service fees, along with revenue associated with a private equity investment, also contributed to the growth in noninterest income.
Previous report
Noninterest expense totaled $32.3 million during the third quarter of 2024, compared to $28.9 million during the prior-year third quarter. Noninterest expense totaled $92.0 million during the first nine months of 2024, compared to $85.3 million during the first nine months of 2023. The increases during the 2024 periods primarily resulted from larger salary costs, reflecting annual merit pay increases, market adjustments, higher residential mortgage lender commissions and incentives, and lower residential mortgage loan deferred salary costs; an increased bonus accrual also contributed to the higher salary costs in the current-year third quarter compared to the prior-year third quarter. Higher levels of data processing costs, mainly reflecting increased transaction volume and software support costs, and health insurance claims also contributed to the rises in noninterest expense during both 2024 periods. A reduced credit reserve for unfunded loan commitments during the first nine months of 2024 compared to the first nine months of 2023 partially mitigated the increases in the overhead costs noted above in the respective periods. Noninterest expense during the third quarter of 2023, first nine months of 2024, and first nine months of 2023 included contributions to the Foundation totaling $0.4 million, $0.7 million, and $0.4 million, respectively, while overhead costs during the first nine months of 2023 included a $0.4 million write-down of a former branch facility.
Reworded paragraphs (38)
Previous wording
Future Factors include, among others, adverse changes in interest rates and interest rate relationships; increasing rates of inflation and slower growth rates or recession; significant declines in the value of commercial real estate; market volatility; demand for products and services; climate impacts; labor markets; the degree of competition by traditional and non-traditional financial services companies; changes in banking regulation or actions by bank regulators; changes in tax laws and other laws and regulations applicable to us; changes in prices, levies, and assessments; the impact of technological advances; potential cyber-attacks, information security breaches, and other criminal activities; litigation liabilities; governmental and regulatory policy changes; the outcomes of existing or future contingencies; trends in customer behavior as well as their ability to repay loans; changes in local real estate values; damage to our reputation resulting from adverse publicity, regulatory actions, litigation, operational failures, and the failure to meet client expectations and other facts; the transition from Libor to SOFR; changes in the national and local economies; unstable political and economic environments; disease outbreaks, such as the Covid-19 pandemic or similar public health threats, and measures implemented to combat them; and other risk factors, including those described in our annual report on Form 10-K for the year ended December 31, 2023. These are representative of the Future Factors that could cause a difference between an ultimate actual outcome and a forward-looking statement.
Current wording
Future Factors include, among others, adverse changes in interest rates and interest rate relationships; increasing rates of inflation and slower growth rates or recession; significant declines in the value of commercial real estate; market volatility; demand for products and services; climate impacts; labor markets; the degree of competition by traditional and non-traditional financial services companies; changes in banking regulation or actions by bank regulators; changes in tax laws and other laws and regulations applicable to us; changes in prices, levies, and assessments; the impact of technological advances; potential cyber-attacks, information security breaches, and other criminal activities; litigation liabilities; governmental and regulatory policy changes; the outcomes of existing or future contingencies; trends in customer behavior as well as their ability to repay loans; changes in local real estate values; damage to our reputation resulting from adverse publicity, regulatory actions, litigation, operational failures, and the failure to meet client expectations and other facts; changes in the national and local economies; unstable political and economic environments; disease outbreaks, such as the Covid-19 pandemic or similar public health threats, and measures implemented to combat them; and other risk factors, including those described in our annual report on Form 10-K for the year ended December 31, 2024. These are representative of the Future Factors that could cause a difference between an ultimate actual outcome and a forward-looking statement.
Previous wording
The following discussion compares the financial condition of Mercantile Bank Corporation and its consolidated subsidiaries, including Mercantile Community Partners, LLC ("MCP") and Mercantile Bank (“our bank”) and its subsidiaries, including Mercantile Insurance Center, Inc. at September 30, 2024 and December 31, 2023 and the results of operations for the three and nine months ended September 30, 2024 and 2023. This discussion should be read in conjunction with the interim consolidated financial statements and footnotes included in this report. Unless the text clearly suggests otherwise, references in this report to “us,” “we,” “our” or “the company” include Mercantile Bank Corporation and its consolidated subsidiaries referred to above.
Current wording
The following discussion compares the financial condition of Mercantile Bank Corporation and its consolidated subsidiaries, including Mercantile Community Partners, LLC ("MCP") and Mercantile Bank (“our bank”) and its subsidiaries, including Mercantile Insurance Center, Inc. at March 31, 2025 and December 31, 2024 and the results of operations for the three months ended March 31, 2025 and 2024. This discussion should be read in conjunction with the interim consolidated financial statements and footnotes included in this report. Unless the text clearly suggests otherwise, references in this report to “us,” “we,” “our” or “the company” include Mercantile Bank Corporation and its consolidated subsidiaries referred to above.
Previous wording
Commercial loans increased $233 million during the first nine months of 2024, providing for an annualized growth rate of about 9%. Multi-family and residential rental property loans increased $93.8 million, in large part reflecting draws on multi-family construction loans, while non-owner occupied commercial real estate (“CRE”) loans grew $60.3 million, commercial and industrial loans increased $58.2 million and owner occupied CRE loans were up $29.0 million. As a percent of total commercial loans, commercial and industrial loans and owner occupied CRE loans combined equaled 56.5% as of September 30, 2024, compared to 57.7% at December 31, 2023. The commercial loan pipeline remains strong, and as of September 30, 2024, we had $241 million in unfunded loan commitments on commercial construction and development loans that are in the construction phase.
Current wording
Commercial loans increased $44.3 million during the first three months of 2025, providing for an annualized growth rate of about 5%. Non-owner occupied commercial real estate (“CRE”) loans grew $55.3 million, commercial and industrial loans increased $27.1 million, multi-family and residential rental property loans were up $3.2 million and land development and construction loans expanded by $1.9 million, while owner occupied CRE loans declined $43.2 million. As a percent of total commercial loans, commercial and industrial loans and owner occupied CRE loans combined equaled 53.8% as of March 31, 2025, compared to 54.9% as of December 31, 2024. While the “in discussion” segment of our commercial loan pipeline remains strong, the “committed and accepted” segment is relatively low, the latter generally reflecting customer reaction to the uncertain economic environment associated with United States tariff changes and negotiations. As of March 31, 2025, we had $210 million in unfunded loan commitments on commercial construction and development loans that are in the construction phase.
Previous wording
Residential mortgage loans increased $6.7 million during the first nine months of 2024, representing an annualized growth rate of about 1%. Residential mortgage loan originations totaled $364 million during the first nine months of 2024, of which almost 77% were originated with the intent to sell.
Current wording
Residential mortgage loans decreased $10.4 million during the first three months of 2025, as aggregate payoffs and scheduled monthly payments exceeded new loans added to the portfolio during the first quarter. Residential mortgage loan originations totaled $100 million during the first three months of 2025, of which about 80% were originated with the intent to sell.
Previous wording
The overall quality of our loan portfolio remains strong, with nonperforming loans equaling 0.22% of total loans as of September 30, 2024. Accruing loans past due 30 to 89 days remain very low, and we had no foreclosed properties at quarter end. Gross loan charge-offs totaled less than $0.1 million during the first nine months of 2024, while recoveries of prior period loan charge-offs aggregated $0.8 million.
Current wording
The overall quality of our loan portfolio remains strong, with nonperforming loans equaling only 0.12% of total loans as of March 31, 2025. Accruing loans past due 30 to 89 days remain very low, and we had no foreclosed properties at quarter end. Gross loan charge-offs totaled $0.1 million during the first three months of 2025, while recoveries of prior period loan charge-offs aggregated $0.2 million, providing for a net loan recovery of $0.1 million. We recorded a provision expense of $2.1 million during the first three months of 2025, primarily reflecting an increased allocation necessitated by changes to the economic forecast and loan growth.
Previous wording
Interest-earning deposits, a vast majority of which is comprised of funds on deposit with the Federal Reserve Bank of Chicago, averaged $206 million during the first nine months of 2024, compared to $102 million during the first nine months of 2023. The higher average balance primarily reflects an increase in deposits and our desire to maintain higher levels of on balance sheet liquidity.
Current wording
Interest-earning deposits, a vast majority of which is comprised of funds on deposit with the Federal Reserve Bank of Chicago, averaged $267 million during the first three months of 2025, compared to $150 million during the first three months of 2024. The higher average balance primarily reflects our strategy to reduce the loan-to-deposit ratio via local deposit growth exceeding loan and investment growth, as well as our desire to maintain higher levels of on-balance sheet liquidity.
Previous wording
Total deposits increased $555 million during the first nine months of 2024, providing for an annualized growth rate of about 19%. Growth in money market deposit accounts and local time deposits more than offset a reduction in business noninterest-bearing checking accounts primarily reflecting the customary level of customers’ tax and bonus payments and partnership distributions during the early part of each first quarter. Federal Home Loan Bank of Indianapolis (“FHLBI”) advances declined $50.8 million during the first nine months of 2024. Wholesale funds, comprised of out-of-area deposits and FHLBI advances, totaled $540 million, or about 11% of total funds, as of September 30, 2024.
Current wording
Total deposits declined $16.6 million during the first three months of 2025. Aggregate net growth in almost all interest-bearing deposit types offset a significant portion of the reduction in business noninterest-bearing checking accounts primarily reflecting the customary level of customers’ tax and bonus payments and partnership distributions during the early part of each first quarter. Securities sold under agreements to repurchase (“sweep accounts”) increased $121 million during the first quarter of 2025, largely reflecting the return of funds that had been withdrawn during the fourth quarter of 2024. Federal Home Loan Bank of Indianapolis (“FHLBI”) advances declined $20.9 million during the first three months of 2025. Wholesale funds, comprised of out-of-area deposits and FHLBI advances, totaled $516 million, or about 10% of total funds, as of March 31, 2025.
Previous wording
Noninterest expense totaled $32.3 million and $92.0 million during the third quarter and first nine months of 2024, respectively, compared to $28.9 million and $85.3 million during the third quarter and first nine months of 2023, respectively. The higher level of noninterest expense primarily resulted from increased compensation and benefit costs along with higher data processing expenses. Contributions to The Mercantile Bank Foundation ("Foundation") totaled $0.7 million during the first quarter of 2024 and $0.4 million during the third quarter of 2023.
Current wording
Noninterest expense totaled $31.1 million during the first three months of 2025, compared to $29.9 million during the first quarter of 2024. The higher level of noninterest expense primarily resulted from increased compensation and benefit costs along with higher data processing expenses.
Previous wording
Our total assets increased $564 million during the first nine months of 2024, and totaled $5.92 billion as of September 30, 2024. Total loans increased $249 million, interest-earning deposits were up $181 million and securities available for sale grew $86.3 million. Total deposits increased $555 million, while FHLBI advances decreased $50.8 million during the first nine months of 2024.
Current wording
Our total assets increased $89.0 million during the first three months of 2025, and totaled $6.14 billion as of March 31, 2025. Securities available for sale grew $57.2 million and total loans increased $35.8 million, while interest-earning deposits declined $20.9 million during the first quarter of 2025. Sweep accounts grew $121 million, while total deposits declined $16.6 million and FHLBI advances decreased $20.9 million during the first three months of 2025.
Previous wording
Commercial loans increased $233 million during the first nine months of 2024, providing for an annualized growth rate of about 9%. Multi-family and residential rental property loans increased $93.8 million, in large part reflecting draws on multi-family construction loans, while non-owner occupied CRE loans grew $60.3 million, commercial and industrial loans increased $58.2 million and owner occupied CRE loans were up $29.0 million. As a percent of total commercial loans, commercial and industrial loans and owner occupied CRE loans combined equaled 56.5% as of September 30, 2024, compared to 57.7% at December 31, 2023.
Current wording
Commercial loans totaled $3.75 billion, or 80.9% of total loans, as of March 31, 2025. Commercial loans increased $44.3 million during the first three months of 2025, providing for an annualized growth rate of about 5%. Non-owner occupied CRE loans grew $55.3 million, commercial and industrial loans increased $27.1 million, multi-family and residential rental property loans were up $3.2 million and land development and construction loans expanded by $1.9 million, while owner occupied CRE loans declined $43.2 million. As a percent of total commercial loans, commercial and industrial loans and owner occupied CRE loans combined equaled 53.8% as of March 31, 2025, compared to 54.9% as of December 31, 2024.
Previous wording
As of September 30, 2024, we had $241 million in unfunded loan commitments on commercial construction and development loans that are in the construction phase, which we expect to be drawn over the next 12 to 18 months. Our current pipeline reports indicate continued strong commercial loan funding opportunities in future periods, including approximately $236 million in new lending commitments, a majority of which we expect to be accepted and funded over the next 12 to 18 months. Our commercial bankers also report ongoing additional opportunities they are currently discussing with existing and potentially new borrowers. We remain committed to prudent underwriting standards that provide for an appropriate yield and risk relationship, as well as concentration limits we have established within our commercial loan portfolio. Usage of existing commercial lines of credit averaged about 42% during the first nine months of 2024, compared to approximately 40% during all of 2023.
Current wording
As of March 31, 2025, we had $210 million in unfunded loan commitments on commercial construction and development loans that are in the construction phase, which we expect to be drawn over the next 12 to 18 months. While the “in discussion” segment of our commercial loan pipeline remains strong, the “committed and accepted” segment is relatively low, the latter generally reflecting customer reaction to the uncertain economic environment associated with United States tariff changes and negotiations. Our current pipeline reports indicate approximately $234 million in new lending opportunities of which we expect a majority to be accepted and funded over the next 12 to 18 months. We remain committed to prudent underwriting standards that provide for an appropriate yield and risk relationship, as well as concentration limits we have established within our commercial loan portfolio. Usage of existing commercial lines of credit averaged about 45% during the first three months of 2025, compared to approximately 42% during all of 2024.
Previous wording
Other consumer-related loans totaled $60.6 million, or 1.3% of total loans, at September 30, 2024, compared to $51.1 million, or 1.1% of total loans, as of December 31, 2023. We expect this loan portfolio segment to remain relatively stable in dollar amount but decline as a percentage of total loans in future periods as the commercial loan segment grows.
Current wording
Other consumer-related loans totaled $67.7 million, or 1.5% of total loans, as of March 31, 2025, compared to $65.9 million, or 1.4% of total loans, as of December 31, 2024. We expect this loan portfolio segment to remain relatively stable in dollar amount but decline as a percentage of total loans in future periods as the commercial loan segment grows.
Previous wording
Nonperforming loans totaled $9.9 million, or 0.2% of total loans, as of September 30, 2024, compared to $3.4 million, or 0.1% of total loans, as of December 31, 2023. Nonperforming assets, comprised of nonaccrual loans, loans past due 90 days or more and accruing interest and foreclosed properties, totaled $9.9 million (0.2% of total assets) as of September 30, 2024, compared to $3.6 million (0.1% of total assets) as of December 31, 2023. The volume of nonperforming assets has remained under 0.3% of total assets since year-end 2015. Given the low levels of nonperforming loans and accruing loans 30 to 89 days delinquent, combined with what we believe are strong credit administration practices, we are pleased with the overall quality of the loan portfolio.
Current wording
Nonperforming assets, comprised of nonaccrual loans, loans past due 90 days or more and accruing interest and foreclosed properties, totaled $5.4 million (0.1% of total assets) as of March 31, 2025, compared to $5.7 million (0.1% of total assets) as of December 31, 2024. The volume of nonperforming assets has remained under 0.3% of total assets since year-end 2015. Given the low levels of nonperforming loans and accruing loans 30 to 89 days delinquent, combined with what we believe are strong credit administration practices, we are pleased with the overall quality of the loan portfolio.
Previous wording
During the first nine months of 2024, loan charge-offs totaled less than $0.1 million, while recoveries of prior period loan charge-offs equaled $0.8 million. We continue our collection efforts on charged-off loans and expect to record recoveries in future periods; however, given the nature of these efforts, it is not practical to forecast the dollar amount and timing of the recoveries.
Current wording
Loan charge-offs totaled $0.1 million, while recoveries of prior period loan charge-offs equaled $0.2 million, providing for a net loan recovery of $0.1 million during the first three months of 2025. We continue our collection efforts on charged-off loans and expect to record recoveries in future periods; however, given the nature of these efforts, it is not practical to forecast the dollar amount and timing of the recoveries. We recorded a provision expense of $2.1 million during the first three months of 2025, primarily reflecting an increased allocation necessitated by changes to the economic forecast and loan growth.
Previous wording
The allowance equaled $56.6 million, or 1.24% of total loans and 573% of nonperforming loans, as of September 30, 2024. As of September 30, 2024, the allowance was comprised of $50.3 million in general reserves relating to performing loans and $6.3 million in specific reserves on other loans, primarily nonperforming loans. Loans with an aggregate carrying value of $0.3 million as of September 30, 2024 had been subject to previous partial charge-offs aggregating $0.3 million over the past several years. As of September 30, 2024, there were no specific reserves allocated to loans that had been subject to a previous partial charge-off.
Current wording
The allowance equaled $56.7 million, or 1.22% of total loans and 1,057% of nonperforming loans, as of March 31, 2025. The allowance was comprised of $54.3 million in general reserves relating to performing loans and $2.4 million in specific reserves on other loans, primarily nonperforming loans, as of March 31, 2025. Loans with an aggregate carrying value of $0.3 million as of March 31, 2025 had been subject to previous partial charge-offs aggregating $4.1 million over the past several years. There were no specific reserves allocated to loans that had been subject to a previous partial charge-off as of March 31, 2025.
Previous wording
The following table reflects the composition of our allowance for credit losses, nonaccrual loans, and net charge-offs as of and for the nine months ended September 30, 2024.
Current wording
The following table reflects the composition of our allowance for credit losses, nonaccrual loans, and net charge-offs as of and for the three months ended March 31, 2025.
Previous wording
Securities available for sale increased $86.3 million during the first nine months of 2024, totaling $703 million as of September 30, 2024. Purchases of U.S. Government agency bonds during the first nine months of 2024 aggregated $83.6 million, while proceeds from maturities totaled $22.0 million. There were no purchases of U.S. Government agency guaranteed mortgage-backed securities during the first nine months of 2024, while proceeds from principal paydowns aggregated $2.6 million. Purchases of municipal bonds totaled $20.9 million during the first nine months of 2024, while proceeds from matured municipal bonds aggregated $12.0 million. At September 30, 2024, the portfolio was primarily comprised of U.S. Government agency bonds (67%), municipal bonds (29%) and U.S. Government agency guaranteed mortgage-backed securities (4%). All of our securities are currently designated as available for sale, and are therefore stated at fair value. The fair value of securities designated as available for sale at September 30, 2024 totaled $703 million, including a net unrealized loss of $45.7 million. The net unrealized loss equaled $63.9 million as of December 31, 2023. After we considered whether the securities were issued by the federal government or its agencies and whether downgrades by bond rating agencies had occurred, we determined that the unrealized losses were due to changing interest rate environments. We maintain the securities portfolio at levels to provide adequate pledging and secondary liquidity for our daily operations. In addition, the securities portfolio serves a primary interest rate risk management function. We expect any upcoming purchases to generally consist of U.S. Government agency bonds and municipal bonds, with the securities portfolio maintained at about 12% to 15% of total assets.
Current wording
Securities available for sale increased $57.2 million during the first three months of 2025, totaling $788 million as of March 31, 2025. Purchases of U.S. Government agency bonds during the first three months of 2025 aggregated $46.0 million, while proceeds from maturities totaled $6.0 million. There were no purchases of U.S. Government agency guaranteed mortgage-backed securities during the first three months of 2025, while proceeds from principal paydowns aggregated $0.8 million. Purchases of municipal bonds totaled $5.7 million during the first three months of 2025; there were no maturities. As of March 31, 2025, the portfolio was primarily comprised of U.S. Government agency bonds (70%), municipal bonds (27%) and U.S. Government agency guaranteed mortgage-backed securities (3%). All of our securities are currently designated as available for sale, and are therefore stated at fair value. The fair value of securities designated as available for sale as of March 31, 2025, totaled $788 million, including a net unrealized loss of $51.5 million. The net unrealized loss equaled $63.1 million as of December 31, 2024. After we considered whether the securities were issued by the federal government or its agencies and whether downgrades by bond rating agencies had occurred, we determined that the unrealized losses were due to changing interest rate environments. We maintain the securities portfolio at levels to provide adequate pledging and secondary liquidity for our daily operations. In addition, the securities portfolio serves a primary interest rate risk management function. We expect any upcoming purchases to generally consist of U.S. Government agency bonds and municipal bonds, with the securities portfolio maintained at about 13% to 16% of total assets.
Previous wording
Interest-earning deposits, a vast majority of which is comprised of funds on deposit with the Federal Reserve Bank of Chicago, averaged $206 million during the first nine months of 2024, compared to $102 million during the first nine months of 2023. The higher average balance primarily reflects an increase in local deposits and our desire to maintain higher levels of on balance sheet liquidity. Historically, we have maintained interest-earning deposits at approximately $75.0 million.
Current wording
Interest-earning deposits, a vast majority of which is comprised of funds on deposit with the Federal Reserve Bank of Chicago, averaged $267 million during the first three months of 2025, compared to $150 million during the first three months of 2024. The higher average balance primarily reflects our strategy to reduce the loan-to-deposit ratio via local deposit growth exceeding loan and investment growth, as well as our desire to maintain higher levels of on-balance sheet liquidity.
Previous wording
Net premises and equipment equaled $54.2 million at September 30, 2024, compared to $50.9 million as of December 31, 2023. Depreciation expense totaled $4.6 million during the first nine months of 2024, while investments associated with the purchase of an office building that will house certain administrative functions and renovations of existing facilities totaled $7.9 million.
Current wording
Net premises and equipment equaled $53.7 million as of March 31, 2025, compared to $53.4 million as of December 31, 2024. Depreciation expense totaled $1.3 million during the first three months of 2025, while investments associated with renovations of existing facilities and equipment purchases aggregated $1.6 million.
Previous wording
Total deposits increased $555 million during the first nine months of 2024, providing for an annualized growth rate of about 19%. Growth in money market deposit accounts and local time deposits more than offset a reduction in business noninterest-bearing checking accounts primarily reflecting the customary level of customers’ tax and bonus payments and partnership distributions during the early part of each first quarter. FHLBI advances declined $50.8 million during the first nine months of 2024. Wholesale funds, comprised of out-of-area deposits and FHLBI advances, totaled $540 million, or about 11% of total funds, as of September 30, 2024.
Current wording
Total deposits declined $16.6 million during the first three months of 2025. Aggregate net growth in almost all interest-bearing deposit types offset a significant portion of the reduction in business noninterest-bearing checking accounts primarily reflecting the expected large withdrawal of funds that had been deposited in late 2024 and the customary level of customers’ tax and bonus payments and partnership distributions during the early part of each first quarter. Out-of-area deposits were unchanged, while FHLBI advances declined $20.9 million during the first three months of 2025. Wholesale funds, comprised of out-of-area deposits and FHLBI advances, totaled $516 million, or about 10% of total funds, as of March 31, 2025.
Previous wording
Uninsured deposits totaled approximately $2.3 billion, or about 53% of total deposits, as of September 30, 2024, compared to approximately $1.9 billion, or 49% of total deposits, as of December 31, 2023. The uninsured amounts are estimates based on the methodologies and assumptions we use for regulatory reporting requirements.
Current wording
Uninsured deposits totaled approximately $2.5 billion, or about 53% of total deposits, as of March 31, 2025, compared to approximately $2.2 billion, or 46% of total deposits, as of December 31, 2024. The uninsured amounts are estimates based on the methodologies and assumptions we use for regulatory reporting requirements.
Previous wording
Sweep accounts decreased $8.8 million during the first nine months of 2024, totaling $221 million as of September 30, 2024. The aggregate balance of sweep accounts is subject to relatively large daily fluctuations given the nature of the customers utilizing this product and the sizable balances that many of the customers maintain. The average balance of sweep accounts equaled $226 million during the first nine months of 2024, with a high daily balance of $278 million and a low balance of $166 million. Our sweep account program entails transferring collected funds from certain business noninterest-bearing checking accounts and savings deposits into overnight interest-bearing repurchase agreements. Such sweep accounts are not deposit accounts and are not afforded federal deposit insurance, and are accounted for as secured borrowings. All of our repurchase agreements are accounted for as secured borrowings.
Current wording
Sweep accounts increased $121 million during the first quarter of 2025, largely reflecting the return of funds that had been withdrawn during the fourth quarter of 2024. In addition, the aggregate balance of sweep accounts is subject to relatively large daily fluctuations given the nature of the customers utilizing this product and the sizable balances that many of the customers maintain. The average balance of sweep accounts equaled $221 million during the first three months of 2025, with a high daily balance of $284 million and a low daily balance of $115 million. Our sweep account program entails transferring collected funds from certain business noninterest-bearing checking accounts and savings deposits into overnight interest-bearing repurchase agreements. Such sweep accounts are not deposit accounts and are not afforded federal deposit insurance. All of our repurchase agreements are accounted for as secured borrowings.
Previous wording
FHLBI advances decreased $50.8 million during the first nine months of 2024, totaling $417 million as of September 30, 2024. Bullet advances aggregating $10.0 million were obtained during the first nine months of 2024, while bullet advance maturities aggregated $60.0 million. Payments on amortizing FHLBI advances totaled $0.8 million. Bullet FHLBI advances are generally obtained to provide funds for loan growth and are used to assist in managing interest rate risk, while amortizing FHLBI advances are generally acquired to match-fund specific longer-term fixed rate commercial loans, with the dollar amount and amortization structure of the underlying advances reflective of the associated commercial loans. FHLBI advances are collateralized by residential mortgage loans, first mortgage liens on multi-family residential property loans, first mortgage liens on commercial real estate property loans, and substantially all other assets of our bank, under a blanket lien arrangement. Our borrowing line of credit as of September 30, 2024 totaled $1.03 billion, with remaining availability based on collateral equaling $607 million.
Current wording
FHLBI advances declined $20.9 million during the first three months of 2025, totaling $366 million as of March 31, 2025. Bullet advance maturities aggregated $20.0 million, while no new bullet advances were obtained, during the first three months of 2025. Payments on amortizing FHLBI advances totaled $0.9 million. Bullet FHLBI advances are generally obtained to provide funds for loan growth and are used to assist in managing interest rate risk, while amortizing FHLBI advances are generally acquired to match-fund specific longer-term fixed rate commercial loans, with the dollar amount and amortization structure of the underlying advances reflective of the associated commercial loans. FHLBI advances are collateralized by residential mortgage loans, first mortgage liens on multi-family residential property loans, first mortgage liens on commercial real estate property loans, and substantially all other assets of our bank, under a blanket lien arrangement. Our borrowing line of credit totaled $1.06 billion, with remaining availability based on collateral equaling $674 million, as of March 31, 2025.
Previous wording
Shareholders’ equity increased $61.2 million during the first nine months of 2024, equaling $583 million at September 30, 2024. Positively impacting shareholders’ equity during the first nine months of 2024 was net income of $60.0 million, which was partially offset by the payment of cash dividends totaling $16.8 million. Activity relating to the issuance and sale of common stock through various stock-based compensation programs and our dividend reinvestment plan positively impacted shareholders’ equity by $3.6 million. A $14.4 million after-tax increase in the market value of our available for sale securities portfolio, reflecting a decline in market interest rates, positively impacted shareholders’ equity during the first nine months of 2024.
Current wording
Shareholders’ equity increased $23.8 million during the first three months of 2025, equaling $608 million as of March 31, 2025. Positively impacting shareholders’ equity during the first three months of 2025 was net income of $19.5 million, which was partially offset by the payment of cash dividends totaling $5.9 million. Activity relating to the issuance and sale of common stock through various stock-based compensation programs and our dividend reinvestment plan positively impacted shareholders’ equity by $1.0 million. A $9.2 million after-tax increase in the market value of our available for sale securities portfolio, reflecting a decline in market interest rates, positively impacted shareholders’ equity during the first three months of 2025.
Previous wording
To assist in providing needed funds and managing interest rate risk, we periodically obtain monies from wholesale funding sources. Wholesale funds, comprised of out-of-area deposits and FHLBI advances, totaled $540 million, or about 11% of total funds, as of September 30, 2024, compared to $636 million, or about 14% of total funds, as of December 31, 2023.
Current wording
To assist in providing needed funds and managing interest rate risk, we periodically obtain monies from wholesale funding sources. Wholesale funds, comprised of out-of-area deposits and FHLBI advances, totaled $516 million, or about 10% of total funds, as of March 31, 2025, compared to $537 million, or about 10% of total funds, as of December 31, 2024.
Previous wording
Securities sold under agreements to repurchase (“sweep accounts”) decreased $8.8 million during the first nine months of 2024, totaling $221 million as of September 30, 2024. The aggregate balance of sweep accounts is subject to relatively large daily fluctuations given the nature of the customers utilizing this product and the sizable balances that many of the customers maintain. The average balance of sweep accounts equaled $226 million during the first nine months of 2024, with a high daily balance of $278 million and a low balance of $166 million. Our sweep account program entails transferring collected funds from certain business noninterest-bearing checking accounts and savings deposits into overnight interest-bearing repurchase agreements. Such sweep accounts are not deposit accounts and are not afforded federal deposit insurance, and are accounted for as secured borrowings. All of our repurchase agreements are accounted for as secured borrowings.
Current wording
Sweep accounts increased $121 million during the first quarter of 2025, largely reflecting the return of funds that had been withdrawn during the fourth quarter of 2024. In addition, the aggregate balance of sweep accounts is subject to relatively large daily fluctuations given the nature of the customers utilizing this product and the sizable balances that many of the customers maintain. The average balance of sweep accounts equaled $221 million during the first three months of 2025, with a high daily balance of $284 million and a low daily balance of $115 million. Our sweep account program entails transferring collected funds from certain business noninterest-bearing checking accounts and savings deposits into overnight interest-bearing repurchase agreements. Such sweep accounts are not deposit accounts and are not afforded federal deposit insurance. All of our repurchase agreements are accounted for as secured borrowings.
Previous wording
Information regarding our repurchase agreements as of September 30, 2024 and during the first nine months of 2024 is as follows:
Current wording
Information regarding our repurchase agreements as of March 31, 2025 and during the first three months of 2025 is as follows:
Previous wording
FHLBI advances decreased $50.8 million during the first nine months of 2024, totaling $417 million as of September 30, 2024. Bullet advances aggregating $10.0 million were obtained during the first nine months of 2024, while bullet advance maturities aggregated $60.0 million. Payments on amortizing FHLBI advances totaled $0.8 million. Bullet FHLBI advances are generally obtained to provide funds for loan growth and are used to assist in managing interest rate risk, while amortizing FHLBI advances are generally acquired to match-fund specific longer-term fixed rate commercial loans, with the dollar amount and amortization structure of the underlying advances reflective of the associated commercial loans. FHLBI advances are collateralized by residential mortgage loans, first mortgage liens on multi-family residential property loans, first mortgage liens on commercial real estate property loans, and substantially all other assets of our bank, under a blanket lien arrangement. Our borrowing line of credit as of September 30, 2024 totaled $1.03 billion, with remaining availability based on collateral equaling $607 million.
Current wording
FHLBI advances declined $20.9 million during the first three months of 2025, totaling $366 million as of March 31, 2025. Bullet advance maturities aggregated $20.0 million, while no new bullet advances were obtained, during the first three months of 2025. Payments on amortizing FHLBI advances totaled $0.9 million. Bullet FHLBI advances are generally obtained to provide funds for loan growth and are used to assist in managing interest rate risk, while amortizing FHLBI advances are generally acquired to match-fund specific longer-term fixed rate commercial loans, with the dollar amount and amortization structure of the underlying advances reflective of the associated commercial loans. FHLBI advances are collateralized by residential mortgage loans, first mortgage liens on multi-family residential property loans, first mortgage liens on commercial real estate property loans, and substantially all other assets of our bank, under a blanket lien arrangement. Our borrowing line of credit totaled $1.06 billion, with remaining availability based on collateral equaling $674 million, as of March 31, 2025.
Previous wording
We also have the ability to borrow up to an aggregate $70.0 million on a daily basis through correspondent banks using established unsecured federal funds purchased lines of credit. We did not access these lines of credit during the first nine months of 2024. In contrast, our interest-earning deposit balance with the Federal Reserve Bank of Chicago averaged $192 million during the first nine months of 2024. We also have a line of credit through the Discount Window of the Federal Reserve Bank of Chicago. Using certain municipal bonds as collateral, we could have borrowed up to $158 million as of September 30, 2024. We did not utilize this line of credit during the first nine months of 2024 or at any time during the previous 15 fiscal years, and do not plan to access this line of credit in future periods.
Current wording
We also have the ability to borrow up to an aggregate $70.0 million on a daily basis through correspondent banks using established unsecured federal funds purchased lines of credit. We did not access these lines of credit during the first three months of 2025. In contrast, our interest-earning deposit balance with the Federal Reserve Bank of Chicago averaged $248 million during the first three months of 2025. We also have a line of credit through the Discount Window of the Federal Reserve Bank of Chicago. Using certain municipal bonds as collateral, we could have borrowed up to $153 million as of March 31, 2025. We did not utilize this line of credit during the first three months of 2025 or at any time during the previous 16 fiscal years, and do not plan to access this line of credit in future periods.
Previous wording
In addition to normal loan funding and deposit flow, we must maintain liquidity to meet the demands of certain unfunded loan commitments and standby letters of credit. As of September 30, 2024, we had a total of $1.98 billion in unfunded loan commitments and $19.1 million in unfunded standby letters of credit. Of the total unfunded loan commitments, $1.74 billion were commitments available as lines of credit to be drawn at any time as customers’ cash needs vary, and $236 million were for loan commitments generally expected to close and become funded within the next 12 to 18 months. We regularly monitor fluctuations in loan balances and commitment levels, and include such data in our overall liquidity management.
Current wording
In addition to normal loan funding and deposit flow, we must maintain liquidity to meet the demands of certain unfunded loan commitments and standby letters of credit. As of March 31, 2025, we had a total of $2.01 billion in unfunded loan commitments and $27.2 million in unfunded standby letters of credit. Of the total unfunded loan commitments, $1.78 billion were commitments available as lines of credit to be drawn at any time as customers’ cash needs vary, and $234 million were for loan commitments generally expected to close and become funded within the next 12 to 18 months. We regularly monitor fluctuations in loan balances and commitment levels and include such data in our overall liquidity management.
Previous wording
Shareholders’ equity increased $61.2 million during the first nine months of 2024, equaling $583 million at September 30, 2024. Positively impacting shareholders’ equity during the first nine months of 2024 was net income of $60.0 million, which was partially offset by the payment of cash dividends totaling $16.8 million. Activity relating to the issuance and sale of common stock through various stock-based compensation programs and our dividend reinvestment plan positively impacted shareholders’ equity by $3.6 million. A $14.4 million after-tax increase in the market value of our available for sale securities portfolio, reflecting a decline in market interest rates, positively impacted shareholders’ equity during the first nine months of 2024.
Current wording
Shareholders’ equity increased $23.8 million during the first three months of 2025, equaling $608 million as of March 31, 2025. Positively impacting shareholders’ equity during the first three months of 2025 was net income of $19.5 million, which was partially offset by the payment of cash dividends totaling $5.9 million. Activity relating to the issuance and sale of common stock through various stock-based compensation programs and our dividend reinvestment plan positively impacted shareholders’ equity by $1.0 million. A $9.2 million after-tax increase in the market value of our available for sale securities portfolio, reflecting a decline in market interest rates, positively impacted shareholders’ equity during the first three months of 2025.
Previous wording
We and our bank are subject to regulatory capital requirements administered by state and federal banking agencies. Failure to meet the various capital requirements can initiate regulatory action that could have a direct material effect on the financial statements. As of September 30, 2024, our bank’s total risk-based capital ratio was 13.9%, compared to 13.4% at December 31, 2023. Our bank’s total regulatory capital increased $52.6 million during the first nine months of 2024, in large part reflecting net income totaling $68.2 million, which was partially offset by cash dividends paid to us aggregating $21.8 million. Our bank’s total risk-based capital ratio was also impacted by a $202 million increase in total risk-weighted assets, in large part reflecting net growth in commercial loans. As of September 30, 2024, our bank’s total regulatory capital equaled $747 million, or $209 million in excess of the 10.0% minimum that is among the requirements to be categorized as “well capitalized.” Our and our bank’s capital ratios as of September 30, 2024 and December 31, 2023 are disclosed in Note 12 of the Notes to Consolidated Financial Statements.
Current wording
We and our bank are subject to regulatory capital requirements administered by state and federal banking agencies. Failure to meet the various capital requirements can initiate regulatory action that could have a direct material effect on the financial statements. As of March 31, 2025, our bank’s total risk-based capital ratio was 14.0%, compared to 13.9% as of December 31, 2024. Our bank’s total regulatory capital increased $3.0 million during the first three months of 2025, in large part reflecting net income totaling $22.3 million, which was partially offset by cash dividends paid to us aggregating $20.8 million. As of March 31, 2025, our bank’s total regulatory capital equaled $762 million, or $217 million in excess of the 10.0% minimum that is among the requirements to be categorized as “well capitalized.” Our and our bank’s capital ratios as of March 31, 2025 and December 31, 2024 are disclosed in Note 13 of the Notes to Consolidated Financial Statements.
Previous wording
We recorded net income of $19.6 million, or $1.22 per basic and diluted share, for the third quarter of 2024, compared with net income of $20.9 million, or $1.30 per basic and diluted share, for the third quarter of 2023. We recorded net income of $60.0 million, or $3.72 per basic and diluted share, for the first nine months of 2024, compared with net income of $62.2 million, or $3.89 per basic and diluted share, for the first nine months of 2023. Diluted earnings per share decreased $0.08, or 6.2%, during the third quarter of 2024, and $0.17, or 4.4%, during the first nine months of 2024, compared with the respective prior-year periods.
Current wording
We recorded net income of $19.5 million, or $1.21 per basic and diluted share, for the first quarter of 2025, compared with net income of $21.6 million, or $1.34 per basic and diluted share, for the first quarter of 2024. Diluted earnings per share decreased $0.13, or 9.7%, during the first quarter of 2025, compared with the prior-year first quarter.
Previous wording
Interest income during the third quarter of 2024 was $83.4 million, an increase of $12.3 million, or 17.2%, from the $71.1 million earned during the third quarter of 2023. The increase resulted from growth in, and a higher yield on, average earning assets. Average earning assets equaled $5.45 billion during the third quarter of 2024, up $561 million, or 11.5%, from the level of $4.89 billion during the prior-year third quarter; average loans were up $413 million, average interest-earning deposits grew $75.3 million, and average securities increased $73.2 million. The yield on average earning assets was 6.08% during the third quarter of 2024, up from 5.78% during the respective 2023 period. The higher yield primarily resulted from an increased yield on loans. The yield on loans was 6.69% during the third quarter of 2024, up from 6.37% during the third quarter of 2023 mainly due to higher interest rates on variable-rate commercial loans resulting from the FOMC raising the targeted federal funds rate in an effort to curb elevated inflation levels and a significant level of commercial loans being originated over the past 15 months in the higher interest rate environment. The FOMC increased the targeted federal funds rate by 25 basis points in July of 2023, at which time average variable-rate commercial loans represented approximately 65% of average total commercial loans. The positive impact of the rate hike was partially mitigated by the FOMC’s lowering of the targeted federal funds rate by 50 basis points in mid-September 2024. Increased yields on securities and interest-earning deposits, reflecting the higher interest rate environment, also contributed to the improved yield on average earning assets.
Current wording
Interest income during the first quarter of 2025 was $80.3 million, an increase of $3.6 million, or 4.7%, from the $76.7 million earned during the first quarter of 2024. The increase resulted from growth in average earning assets, which more than offset a lower yield on average earning assets. Average earning assets equaled $5.68 billion during the first quarter of 2025, up $597 million, or 11.7%, from the level of $5.08 billion during the prior-year first quarter; average loans were up $330 million, average securities increased $150 million, and average interest-earning deposits grew $117 million. The yield on average earning assets was 5.74% during the current-year first quarter, a decrease from 6.06% during the respective 2024 period. The lower yield mainly resulted from a decreased yield on loans and a change in earning asset mix, which more than offset an enhanced yield on securities stemming from reinvestment and portfolio expansion activities in a higher interest rate environment. The yield on loans was 6.31% during the first quarter of 2025, down from 6.65% during the first quarter of 2024 primarily due to lower interest rates on variable-rate commercial loans resulting from the Federal Open Market Committee (“FOMC”) lowering the targeted federal funds rate. The FOMC decreased the targeted federal funds rate by 50 basis points in September of 2024 and 25 basis points in each of November and December of 2024, during which time average variable-rate commercial loans represented approximately 73% of average total commercial loans. Signifying the success of a strategic initiative to reduce the loan-to-deposit ratio and increase on-balance sheet liquidity, higher-yielding loans represented a reduced percentage of earning assets and lower-yielding securities and interest-earning deposits accounted for increased percentages of earning assets in the first quarter of 2025 compared to the first quarter of 2024. The yield on securities equaled 2.79% during the first three months of 2025, up from 2.20% during the first three months of 2024.
Previous wording
Net interest income during the third quarter of 2024 was $48.3 million, a decrease of $0.7 million, or 1.4%, from the $49.0 million earned during the respective 2023 period. The decline reflected a lower net interest margin, which more than offset growth in earning assets. The net interest margin was 3.52% in the third quarter of 2024, down from 3.98% in the prior-year third quarter due to a higher cost of funds, which more than offset an increased yield on earning assets. The cost of funds equaled 2.56% in the third quarter of 2024, up from 1.80% in the third quarter of 2023 primarily due to higher costs of deposits and borrowed funds, reflecting the impact of the higher interest rate environment, and a change in funding mix, mainly consisting of a decrease in noninterest-bearing and lower-cost deposits and an increase in higher-cost money market accounts and time deposits stemming from deposit migration and new deposit relationships. The increased yield on average earning assets mainly resulted from a higher yield on commercial loans primarily stemming from the previously mentioned FOMC rate hike and a significant level of commercial loans being originated over the past 15 months in the higher interest rate environment.
Current wording
Net interest income during the first quarter of 2025 was $48.5 million, an increase of $1.2 million, or 2.5%, from the $47.3 million earned during the respective 2024 period. The increase reflected growth in earning assets, which more than offset a lower net interest margin. The net interest margin was 3.47% in the first quarter of 2025, down from 3.74% in the prior-year first quarter due to a decreased yield on earning assets, which more than offset a decline in the cost of funds. The lower yield on average earning assets mainly resulted from a decreased yield on commercial loans, largely reflecting the impact of the previously mentioned FOMC rate cuts. The cost of funds equaled 2.27% in the first quarter of 2025, down from 2.32% in the first quarter of 2024 primarily due to lower costs of money market accounts, reflecting the decreasing interest rate environment over the last four months of 2024.
Previous wording
The following tables set forth certain information relating to our consolidated average interest-earning assets and interest-bearing liabilities and reflect the average yield on assets and average cost of liabilities for the third quarters and first nine months of 2024 and 2023. Such yields and costs are derived by dividing income or expense by the average daily balance of assets or liabilities, respectively, for the period presented. Tax-exempt securities interest income and yield for the third quarters and first nine months of 2024 and 2023 have been computed on a tax equivalent basis using a marginal tax rate of 21.0%. Securities interest income was increased by $60,000 in the third quarter of both 2024 and 2023 and $180,000 in the first nine months of both 2024 and 2023 for this non-GAAP, but industry standard, adjustment. These adjustments equated to increases in our net interest margin of less than one basis point for each of the 2024 and 2023 periods.
Current wording
The following table sets forth certain information relating to our consolidated average interest-earning assets and interest-bearing liabilities and reflects the average yield on assets and average cost of liabilities for the first quarters of 2025 and 2024. Such yields and costs are derived by dividing income or expense by the average daily balance of assets or liabilities, respectively, for the period presented. Tax-exempt securities interest income and yield for the first quarters of 2025 and 2024 have been computed on a tax equivalent basis using a marginal tax rate of 21.0%. Securities interest income was increased by $60,000 in the first quarters of 2025 and 2024 for this non-GAAP, but industry standard, adjustment. These adjustments equated to increases in our net interest margin of less than one basis point for both periods.
Previous wording
Noninterest income totaled $9.7 million during the third quarter of 2024, up $0.4 million, or 4.6%, from the $9.3 million recorded during the third quarter of 2023. The growth primarily resulted from increases in mortgage banking income, treasury management fees, and payroll service fees. The higher level of mortgage banking income mainly resulted from increases in the percentage of loans originated with the intent to sell, which rose from approximately 64% during the third quarter of 2023 to approximately 80% during the third quarter of 2024, and total loan originations, which were up approximately 48% in the current-year third quarter compared to the respective 2023 period. The increase in treasury management fees primarily stemmed from customers’ expanded use of cash management products. Growth in bank owned life insurance income and credit and debit card income also contributed to the higher level of noninterest income. Noninterest income during the third quarter of 2023 included a $0.4 million gain on sale of other real estate owned.
Current wording
Noninterest income totaled $8.7 million during the first quarter of 2025, down from $10.9 million during the respective 2024 period as growth in treasury management fees, mortgage banking income, and payroll service fees was more than offset by lower levels of interest rate swap income, revenue generated from an investment in a private equity fund, and bank owned life insurance income. The increase in treasury management fees mainly reflected customers’ expanded use of products and services and the successful marketing of these offerings to existing and new clients. The higher level of mortgage banking income primarily resulted from increases in the percentage of loans originated with the intent to sell, which equaled approximately 80% during the current-year first quarter compared to approximately 74% during the first quarter of 2024, and total loan originations, which were up approximately 26% during the first quarter of 2025 compared to the corresponding 2024 period. During the first quarter of 2025, interest rate swap income, which sometimes varies greatly from period to period due to the timing of closing transactions, was negatively impacted by the ongoing uncertainty surrounding economic and operating conditions and the associated reduction in commercial loan activity. Noninterest income during the first three months of 2024 included bank owned life insurance claims totaling $0.7 million.
Previous wording
During the third quarter of 2024, we recorded income before federal income tax of $24.5 million and a federal income tax expense of $4.9 million. During the third quarter of 2023, we recorded income before federal income tax of $26.0 million and a federal income tax expense of $5.1 million. During the first nine months of 2024, we recorded income before federal income tax of $75.1 million and a federal income tax expense of $15.1 million. During the first nine months of 2023, we recorded income before federal income tax of $77.5 million and a federal income tax expense of $15.3 million. The decreases in federal income tax expense during the 2024 periods compared to the respective prior-year periods primarily resulted from a lower level of income before federal income tax. Our election to apply the proportional amortization method to our tax credit equity investments during the fourth quarter of 2023 resulted in $0.1 million and $0.3 million in tax expense being recorded during the third quarter and first nine months of 2024, respectively. Amortization costs related to tax credit equity investments were included in noninterest expense in the first nine months of 2023. Our effective tax rate was 20.1% during the third quarter and first nine months of 2024, compared to 19.7% during the respective 2023 periods. The tax credit equity investments-related tax election negatively impacted the effective tax rate in the 2024 periods, while the previously mentioned bank owned life insurance death benefit claims, substantially all of which were nontaxable, positively impacted the effective tax rate in the first nine months of 2024.
Current wording
During the first quarter of 2025, we recorded income before federal income tax of $24.0 million and a federal income tax expense of $4.5 million. During the first quarter of 2024, we recorded income before federal income tax of $27.0 million and a federal income tax expense of $5.4 million. The $0.9 million decrease in federal income tax expense in the first three months of 2025 compared to the respective 2024 period primarily resulted from the lower level of income before federal income tax. The aforementioned bank owned life insurance claims, substantially all of which were nontaxable, positively impacted the effective tax rate in the first three months of 2024.