MERCANTILE BANK CORP

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; 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.

Current wording

Future Factors include, among others, our inability to successfully combine with Eastern Michigan Financial Corporation; 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 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.

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 June 30, 2025 and December 31, 2024 and the results of operations for the three and six months ended June 30, 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 $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.

Current wording

Commercial loans increased $114 million during the first six months of 2025, providing for an annualized growth rate of about 6%. Commercial and industrial loans grew $88.1 million and multi-family and residential rental property loans increased $43.3 million, largely reflecting enhanced use of lines of credit and draws on multi-family construction loans, respectively. Non-owner occupied commercial real estate (“CRE”) loans grew $5.6 million while owner occupied CRE loans were down $23.7 million; both CRE loan segments were impacted by the full payoffs and partial paydowns of certain larger relationships largely stemming from sales of the underlying properties. Land development and construction loans expanded by $0.6 million. As a percent of total commercial loans, commercial and industrial loans and owner occupied CRE loans combined equaled 55.0% as of June 30, 2025, compared to 54.9% as of December 31, 2024. The commercial loan pipeline remains strong, and as of June 30, 2025, we had $237 million in unfunded loan commitments on commercial construction and development loans that are in the construction phase. We do anticipate several relatively large CRE-related loan payoffs that will negatively impact commercial loan growth during the remainder of 2025.

Previous 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.

Current wording

Residential mortgage loans decreased $28.2 million during the first six months of 2025, as aggregate payoffs and scheduled monthly payments exceeded new loans added to the portfolio. Residential mortgage loan originations totaled $242 million during the first six 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 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.

Current wording

The overall quality of our loan portfolio remains strong, with nonperforming loans equaling 0.21% of total loans as of June 30, 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 six months of 2025, while recoveries of prior period loan charge-offs aggregated $0.3 million, providing for a net loan recovery of $0.2 million. We recorded provision expense of $3.7 million during the first six months of 2025, primarily reflecting increased allocations on specific financially stressed lending relationships, 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 $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.

Current wording

Interest-earning assets, a vast majority of which is comprised of funds on deposit with the Federal Reserve Bank of Chicago, averaged $230 million during the first six months of 2025, compared to $166 million during the first six 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 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.

Current wording

Total deposits increased $12.1 million during the first six months of 2025. Aggregate net growth in almost all interest-bearing deposit types offset a significant portion of the reduction in business noninterest-bearing and interest-bearing checking accounts primarily reflecting seasonal and customary customers' tax and bonus payments and partnership distributions. Securities sold under agreements to repurchase (“sweep accounts”) increased $121 million during the first six months 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 $30.9 million during the first six months of 2025. Wholesale funds, comprised of out-of-area deposits and FHLBI advances, totaled $555 million, or about 10% of total funds, as of June 30, 2025, compared to $537 million, or about 10% of total funds, as of December 31, 2024.

Previous wording

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 wording

Net interest income increased $2.4 million and $3.6 million during the second quarter and first six months of 2025, respectively, compared to the same prior-year time periods, reflecting the net impact of $3.1 million and $6.7 million increases in interest income and $0.7 million and $3.1 million increases in interest expense, during the respective periods. Our net interest margin declined 14 basis points and 19 basis points during the second quarter and first six months of 2025, respectively, compared to the same prior-year time periods. Our yield on earning assets declined 30 basis points during both the second quarter and first six months of 2025, and our cost of funds declined 16 basis points and 11 basis points during those respective time periods. 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 solid loan growth between the second quarters of 2024 and 2025. Total loans averaged $4.70 billion and $4.40 billion during the second quarters of 2025 and 2024, respectively, reflecting growth of $299 million, or about 7%.

Previous 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.

Current wording

Noninterest expense totaled $33.4 million and $64.5 million during the second quarter and first six months of 2025, respectively, compared to $29.7 million and $59.7 million during the second quarter and first six months of 2024, respectively. The higher level of noninterest expense during both time periods primarily resulted from increased compensation and benefit costs along with higher data processing expenses.

Previous 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.

Current wording

Our total assets increased $129 million during the first six months of 2025, and totaled $6.18 billion as of June 30, 2025. Total loans grew $97.2 million, securities available for sale increased $96.1 million and other assets were up $22.1 million, while interest-earning assets declined $139 million during the first six months of 2025. Sweep accounts grew $121 million and total deposits increased $12.1 million, while FHLBI advances decreased $30.9 million during the first six months of 2025.

Previous 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.

Current wording

Commercial loans increased $114 million during the first six months of 2025, providing for an annualized growth rate of about 6%. Commercial and industrial loans grew $88.1 million and multi-family and residential rental property loans increased $43.3 million, largely reflecting enhanced use of lines of credit and draws on multi-family construction loans, respectively. Non-owner occupied CRE loans grew $5.6 million while owner occupied CRE loans were down $23.7 million; both CRE loan segments were impacted by the full payoffs and partial paydowns of certain larger relationships largely stemming from sales of the underlying properties. Land development and construction loans expanded by $0.6 million. As a percent of total commercial loans, commercial and industrial loans and owner occupied CRE loans combined equaled 55.0% as of June 30, 2025, compared to 54.9% as of December 31, 2024. Commercial loans totaled $3.82 billion, or 81.3% of total loans, as of June 30, 2025, compared to $3.71 billion, or 80.6% of total loans, as of December 31, 2024.

Previous 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.

Current wording

We had $237 million in unfunded loan commitments on commercial construction and development loans that are in the construction phase as of June 30, 2025, which we expect to be drawn over the next 12 to 18 months. Our current pipeline reports indicate approximately $165 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 six months of 2025, compared to approximately 42% during all of 2024.

Previous wording

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 wording

Residential mortgage loans totaled $799 million, or 17.0% of total loans, as of June 30, 2025. Residential mortgage loans decreased $28.2 million during the first six months of 2025, as aggregate payoffs and scheduled monthly payments exceeded new loans added to the portfolio. Residential mortgage loan originations totaled $242 million during the first six months of 2025, of which about 80% were originated with the intent to sell.

Previous 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.

Current wording

Other consumer-related loans, primarily comprised of home equity lines of credit, totaled $77.4 million, or 1.7% of total loans, as of June 30, 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 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.

Current wording

Nonperforming loans totaled $9.7 million, or 0.2% of total loans, as of June 30, 2025, compared to $5.7 million, or 0.1% of total loans, as of December 31, 2024. We had no loans past due 90 days or more and accruing interest or foreclosed properties as of June 30, 2025, or December 31, 2024. The volume of nonperforming loans has remained under 0.3% of total loans since year-end 2015. Given the low levels of nonperforming loans and accruing loans delinquent 30 to 89 days, combined with what we believe are strong credit administration practices, we are pleased with the overall quality of the loan portfolio.

Previous 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.

Current wording

Gross loan charge-offs totaled $0.1 million during the first six months of 2025, while recoveries of prior period loan charge-offs aggregated $0.3 million, providing for a net loan recovery of $0.2 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. We recorded provision expense of $3.7 million during the first six months of 2025, primarily reflecting increased allocations on specific financially stressed lending relationships, changes to the economic forecast and loan growth.

Previous 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.

Current wording

The allowance equaled $58.4 million, or 1.24% of total loans and 599% of nonperforming loans, as of June 30, 2025. The allowance was comprised of $54.5 million in general reserves relating to performing loans and $3.9 million in specific reserves on other loans, primarily nonperforming loans, as of June 30, 2025. Loans with an aggregate carrying value of $0.4 million as of June 30, 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 June 30, 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 three months ended March 31, 2025.

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 six months ended June 30, 2025.

Previous 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.

Current wording

Securities available for sale increased $96.1 million during the first six months of 2025, totaling $826 million, or 13.4% of total assets, as of June 30, 2025. Purchases of U.S. Government agency bonds during the first six months of 2025 aggregated $91.7 million, while proceeds from maturities and calls totaled $18.0 million. There were no purchases of U.S. Government agency guaranteed mortgage-backed securities during the first six months of 2025, while proceeds from principal paydowns aggregated $1.8 million. Purchases of municipal bonds totaled $12.9 million during the first six months of 2025, while maturities totaled $8.4 million. As of June 30, 2025, the portfolio was primarily comprised of U.S. Government agency bonds (71%), municipal bonds (26%) 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 June 30, 2025 totaled $826 million, including a net unrealized loss of $45.3 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 $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.

Current wording

Interest-earning assets, a vast majority of which is comprised of funds on deposit with the Federal Reserve Bank of Chicago, averaged $230 million during the first six months of 2025, compared to $166 million during the first six 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 $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.

Current wording

Net premises and equipment equaled $54.8 million as of June 30, 2025, compared to $53.4 million as of December 31, 2024. Depreciation expense totaled $2.5 million during the first six months of 2025, while investments associated with renovations of existing facilities and equipment purchases aggregated $3.9 million.

Previous 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.

Current wording

Total deposits increased $12.1 million during the first six months of 2025. Aggregate net growth in almost all interest-bearing deposit types offset a significant portion of the reduction in business noninterest-bearing and interest-bearing checking accounts primarily reflecting seasonal and customary customers' tax and bonus payments and partnership distributions. Sweep accounts increased $121 million during the first six months of 2025, largely reflecting the return of funds that had been withdrawn during the fourth quarter of 2024. FHLBI advances declined $30.9 million during the first six months of 2025. Wholesale funds, comprised of out-of-area deposits and FHLBI advances, totaled $555 million, or about 10% of total funds, as of June 30, 2025, compared to $537 million, or about 10% of total funds, as of December 31, 2024.

Previous 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.

Current wording

Uninsured deposits totaled approximately $2.4 billion, or about 52% of total deposits, as of June 30, 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 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.

Current wording

Sweep accounts increased $121 million during the first six months 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 $232 million during the first six months of 2025, with a high daily balance of $286 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 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.

Current wording

FHLBI advances declined $30.9 million during the first six months of 2025, totaling $356 million as of June 30, 2025. New bullet advances totaled $20.0 million, while bullet advance maturities aggregated $50.0 million during the first six 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 $698 million, as of June 30, 2025.

Previous 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.

Current wording

Shareholders’ equity increased $47.0 million during the first six months of 2025, equaling $632 million as of June 30, 2025. Positively impacting shareholders’ equity during the first six months of 2025 was net income of $42.2 million, which was partially offset by the payment of cash dividends totaling $11.8 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 $2.6 million. A $14.1 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 six 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 $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.

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 $555 million, or about 10% of total funds, as of June 30, 2025, compared to $537 million, or about 10% of total funds, as of December 31, 2024.

Previous 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.

Current wording

Sweep accounts increased $121 million during the first six months 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 $232 million during the first six months of 2025, with a high daily balance of $286 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 March 31, 2025 and during the first three months of 2025 is as follows:

Current wording

Information regarding our repurchase agreements as of June 30, 2025 and during the first six months of 2025 is as follows:

Previous 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.

Current wording

FHLBI advances declined $30.9 million during the first six months of 2025, totaling $356 million as of June 30, 2025. New bullet advances totaled $20.0 million, while bullet advance maturities aggregated $50.0 million during the first six 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 $698 million, as of June 30, 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 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.

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 had limited activity on these lines of credit during the first six months of 2025. In contrast, our interest-earning deposit balance with the Federal Reserve Bank of Chicago averaged $208 million during the first six 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 June 30, 2025. We did not utilize this line of credit during the first six 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 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.

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 June 30, 2025, we had a total of $1.99 billion in unfunded loan commitments and $26.4 million in unfunded standby letters of credit. Of the total unfunded loan commitments, $1.83 billion were commitments available as lines of credit to be drawn at any time as customers’ cash needs vary, and $165 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 $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.

Current wording

Shareholders’ equity increased $47.0 million during the first six months of 2025, equaling $632 million as of June 30, 2025. Positively impacting shareholders’ equity during the first six months of 2025 was net income of $42.2 million, which was partially offset by the payment of cash dividends totaling $11.8 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 $2.6 million. A $14.1 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 six 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 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.

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 June 30, 2025, our bank’s total risk-based capital ratio was 13.9%, unchanged from December 31, 2024. Our bank’s total regulatory capital increased $20.1 million during the first six months of 2025, in large part reflecting net income totaling $47.5 million, which was partially offset by cash dividends paid to us aggregating $31.2 million. As of June 30, 2025, our bank’s total regulatory capital equaled $779 million, or $218 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 June 30, 2025 and December 31, 2024 are disclosed in Note 13 of the Notes to Consolidated Financial Statements.

Previous wording

We recorded net income of $19.5 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.

Current wording

We recorded net income of $22.6 million, or $1.39 per basic and diluted share, for the second quarter of 2025, compared with net income of $18.8 million, or $1.17 per basic and diluted share, for the second quarter of 2024. We recorded net income of $42.2 million, or $2.60 per basic and diluted share, for the first six months of 2025, compared with net income of $40.3 million, or $2.50 per basic and diluted share, for the first six months of 2024. Diluted earnings per share increased $0.22, or 18.8%, during the second quarter of 2025, and $0.10, or 4.0%, during the first six months of 2025, compared with the respective prior-year periods.

Previous wording

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 wording

The increases in net income during the 2025 periods compared to the respective 2024 periods primarily reflected growth in net interest income, reduced federal income tax expense, and lower provision expense, which more than offset higher noninterest expense. A higher level of noninterest income, mainly reflecting growth in mortgage banking income, interest rate swap income, treasury management fees, and payroll service fees, also contributed to the increase in net income during the second quarter of 2025. Net interest income increased as earning asset expansion and a decrease in the cost of funds outweighed a lower yield on earning assets and growth in interest-bearing liabilities. The decreases in federal income tax expense primarily resulted from the recognition of tax benefits stemming from the acquisition of transferable energy tax credits during the second quarter of 2025. The provision expense recorded during the 2025 periods mainly reflected a net increase in individual allocations driven by a commercial construction loan that was placed on nonaccrual during the second quarter and allocations necessitated by loan growth; the net impact of changes to the economic forecast also contributed to the provision expense recorded during the first six months of 2025. Noninterest expense increased during the 2025 periods primarily due to higher levels of salary and benefit and data processing costs and allocations to the reserve for unfunded loan commitments.

Previous 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.

Current wording

Interest income during the second quarter of 2025 was $82.0 million, an increase of $3.1 million, or 3.9%, from the $78.9 million earned during the second 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 $5.71 billion during the second quarter of 2025, up $494 million, or 9.5%, from the level of $5.22 billion during the prior-year second quarter; average loans were up $299 million, average securities increased $184 million, and average interest-earning assets grew $11.0 million. The yield on average earning assets was 5.77% during the current-year second quarter, a decrease from 6.07% 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 6.32% during the second quarter of 2025, down from 6.64% during the second 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. Reflecting the success of a strategic initiative to reduce the loan-to-deposit ratio and increase on-balance sheet liquidity, higher-yielding loans represented a decreased percentage of earning assets and lower-yielding securities accounted for an increased percentage of earning assets in the second quarter of 2025 compared to the second quarter of 2024. The yield on securities equaled 2.97% during the second quarter of 2025, up from 2.30% during the prior-year second quarter.

Previous wording

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 wording

Interest expense during the second quarter of 2025 was $32.5 million, an increase of $0.7 million, or 2.1%, from the $31.8 million expensed during the second 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 $4.21 billion during the second quarter of 2025, compared to $3.76 billion during the prior-year second quarter, representing an increase of $455 million, or 12.1%. The weighted average cost of interest-bearing liabilities declined from 3.40% during the second quarter of 2024 to 3.09% during the second quarter of 2025 mainly due to lower rates paid on money market accounts and time deposits, 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 decreases in average noninterest-bearing checking accounts and lower-cost non-time deposits and increases in average higher-cost money market accounts and time deposits as a percentage of total funding sources, negatively impacted the weighted average cost of interest-bearing liabilities during the second quarter of 2025. The increases in money market accounts and time deposits reflected new deposit relationships, growth in existing deposit relationships, and deposit migration.

Previous 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.

Current wording

Net interest income during the second quarter of 2025 was $49.5 million, an increase of $2.4 million, or 5.1%, from the $47.1 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 3.49% in the current-year second quarter, down from 3.63% in the second quarter of 2024 due to a decreased yield on average 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 2.28% in the second quarter of 2025, down from 2.44% in the prior-year second quarter primarily due to lower costs of money market accounts and time deposits, reflecting the decreasing interest rate environment over the last four months of 2024.

Previous 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.

Current 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 second quarters and first six months 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 second quarters and first six months 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 $255,000 and $60,000 in the second quarters of 2025 and 2024, respectively, and $510,000 and $120,000 in the first six months of 2025 and 2024, respectively, for this non-GAAP, but industry standard, adjustment. These adjustments equated to increases in our net interest margin of approximately two basis points for each of the 2025 periods and less than one basis point for each of the 2024 periods.