MERCANTILE BANK CORP

Previous 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.

Current wording

Future Factors include, among others, our ability to successfully combine with Eastern Michigan Financial Corporation; our ability to maintain adequate levels of allowance for credit losses; 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 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.

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 September 30, 2025 and December 31, 2024 and the results of operations for the three and nine months ended September 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

We reported net income of $22.6 million, or $1.39 per diluted share, for the second quarter of 2025, compared with net income of $18.8 million, or $1.17 per diluted share, during the second quarter of 2024. Net income during the first six months of 2025 totaled $42.2 million, or $2.60 per diluted share, compared to $40.3 million, or $2.50 per diluted share, during the first six months of 2024. Growth in net income during both time frames reflected increased net interest income, lower provision expense and reduced federal income tax expense, which more than offset increased overhead costs. A higher level of noninterest income also contributed to the increase in net income during the second quarter of 2025.

Current wording

We reported net income of $23.8 million, or $1.46 per diluted share, for the third quarter of 2025, compared with net income of $19.6 million, or $1.22 per diluted share, during the third quarter of 2024. Net income during the first nine months of 2025 totaled $65.9 million, or $4.06 per diluted share, compared to $60.0 million, or $3.72 per diluted share, during the first nine months of 2024. Growth in net income during both time frames reflected increased net interest income and noninterest income, lower provision expense and reduced federal income tax expense, which more than offset increased overhead costs.

Previous 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.

Current wording

Commercial loans increased $43.0 million during the first nine months of 2025, providing for an annualized growth rate of about 2%. Commercial and industrial loans grew $50.4 million and multi-family and residential rental property loans increased $45.3 million. Non-owner occupied commercial real estate (“CRE”) loans declined $37.2 million while owner occupied CRE loans were down $19.4 million; both CRE loan segments were impacted by the payoffs of several larger relationships largely stemming from sales of the underlying properties and refinancings to the secondary market. Land development and construction loans expanded by $3.9 million. As a percent of total commercial loans, commercial and industrial loans and owner occupied CRE loans combined equaled 55.1% as of September 30, 2025, compared to 54.9% as of December 31, 2024. The commercial loan pipeline remains strong, and as of September 30, 2025, we had $216 million in unfunded loan commitments on commercial construction and development loans that are in the construction phase. As anticipated, we did experience several relatively large CRE-related loan payoffs, as well as a reduction in line of credit usage, both of which negatively impacted commercial loan growth during the third quarter of 2025.

Previous 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.

Current wording

Residential mortgage loans decreased $46.7 million during the first nine months of 2025, as aggregate payoffs and scheduled monthly payments exceeded new loans added to the portfolio. Residential mortgage loan originations totaled $379 million during the first nine 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 0.21% 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.

Current wording

The overall quality of our loan portfolio remains strong, with nonperforming loans equaling 0.21% of total loans as of September 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 $0.3 million during the first nine months of 2025, while recoveries of prior period loan charge-offs aggregated $1.1 million, providing for a net loan recovery of $0.8 million. We recorded provision expense of $3.9 million during the first nine months of 2025, primarily reflecting a $4.6 million net increase in specific allocations driven by $5.5 million in total allocations for a commercial construction loan relationship that was placed on nonaccrual during the second quarter of 2025, a $1.9 million reserve increase related to changes to the economic forecast, and a $1.7 million net increase in qualitative factors stemming from changes in the makeup of the loan portfolio.

Previous 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.

Current wording

Interest-earning deposits, a vast majority of which is comprised of funds on deposit with the Federal Reserve Bank of Chicago, averaged $284 million and $206 million during the first nine months of 2025 and 2024, or almost 5% and 4% of average total assets, respectively. We have generally operated with about 1% to 2% of total assets comprised of interest-earning deposits. The higher average balance of interest-earning deposits 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 $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.

Current wording

Total deposits increased $113 million during the first nine months of 2025. Aggregate growth in money market deposit accounts totaled $149 million, and interest-bearing checking accounts grew $23.5 million. Noninterest-bearing checking accounts declined $81.7 million; however, excluding the expected withdrawal of funds in early January that had been deposited by a single depositor near the end of 2024, these accounts increased by about $10 million. Securities sold under agreements to repurchase (“sweep accounts”) increased $130 million during the first nine 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 $40.9 million during the first nine months of 2025. Wholesale funds, comprised of out-of-area deposits and FHLBI advances, totaled $525 million, or about 10% of total funds, as of September 30, 2025, compared to $537 million, or about 10% of total funds, as of December 31, 2024.

Previous 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%.

Current wording

Net interest income increased $3.7 million and $7.3 million during the third quarter and first nine months of 2025, respectively, compared to the same prior-year time periods. Interest income increased $2.2 million and $8.9 million during third quarter and first nine months of 2025, respectively, compared to the same prior-year time periods, while interest expense declined $1.5 million during the third quarter of 2025 compared to the third quarter of 2024 and increased $1.6 million during the first nine months of 2025 compared to the first nine months of 2024. Our net interest margin declined 2 basis points and 13 basis points during the third quarter and first nine months of 2025, respectively, compared to the same prior-year time periods. Our yield on earning assets declined 33 basis points and 30 basis points during the third quarter and first nine months of 2025 during those same respective time periods, while our cost of funds declined 31 basis points and 17 basis points, respectively. 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, along with an additional 25 basis point reduction in mid-September of 2025. Despite the reductions in the net interest margin, net interest income increased during the 2025 periods primarily due to solid loan growth between the third quarters of 2024 and 2025. Total loans averaged $4.67 billion and $4.47 billion during the third quarters of 2025 and 2024, respectively, reflecting growth of $201 million, or 4.5%.

Previous wording

Noninterest income totaled $11.5 million and $20.2 million during the second quarter and first six months of 2025, respectively, compared to $9.7 million and $20.5 million during the second quarter and first six months of 2024, respectively. We recorded increased service charges on accounts, primarily reflecting growth in treasury management activity, mortgage banking income, credit and debit card fees and payroll services income during both time periods. Interest rate swap income was higher during the second quarter of 2025 compared to the second quarter of 2024, but was lower during the first six months of 2025 compared to the first six months of 2024. Noninterest income during the first six months of 2024 was also enhanced from bank owned life insurance benefit claims and higher revenue associated with a private equity investment.

Current wording

Noninterest income totaled $10.4 million and $30.6 million during the third quarter and first nine months of 2025, respectively, compared to $9.7 million and $30.2 million during the third quarter and first nine months of 2024, respectively. We recorded increased service charges on accounts, primarily reflecting growth in treasury management activity, credit and debit card fees and payroll services income during both time periods. Mortgage banking income was $0.3 million lower during the third quarter of 2025 compared to the third quarter of 2024, but was $1.0 million higher during the first nine months of 2025 compared to the first nine months of 2024. The level of mortgage banking income is generally reflective of the volume of loans originated with the intent to sell, but quarter-end fair value calculations associated with residential mortgage loan commitments can also play a notable role as it did during the second and third quarters of 2025. Interest rate swap income declined during both time periods in 2025 compared to the respective 2024 time frames, generally reflecting a lower volume of new swap transactions.

Previous 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.

Current wording

Noninterest expense totaled $34.8 million and $99.2 million during the third quarter and first nine months of 2025, respectively, compared to $32.3 million and $92.0 million during the third quarter and first nine 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. Expenses associated with the planned acquisition of Eastern Michigan Financial Corporation totaled $0.6 million during the third quarter and first nine months of 2025.

Previous wording

Federal income tax expense totaled $3.3 million and $7.9 million during the second quarter and first six months of 2025, respectively, compared to $4.7 million and $10.2 million during the second quarter and first six months of 2024, respectively. The effective tax rate was 12.9% and 15.7% during the second quarter and first six months of 2025, respectively, compared to 20.1% during both the second quarter and first six months of 2024. The reduction during the 2025 periods compared to the respective 2024 periods reflects the acquisition of transferable energy tax credits during the second quarter of 2025, which provided for a $1.5 million reduction in federal income tax expense.

Current wording

Federal income tax expense totaled $3.7 million and $11.5 million during the third quarter and first nine months of 2025, respectively, compared to $4.9 million and $15.1 million during the third quarter and first nine months of 2024, respectively. The effective tax rate was 13.4% and 14.9% during the third quarter and first nine months of 2025, respectively, compared to 20.1% during both the third quarter and first nine months of 2024. The reduction during the 2025 periods compared to the respective 2024 periods primarily reflects the acquisition of transferable energy tax credits during the second and third quarters of 2025, which provided for a $2.6 million reduction in federal income tax expense.

Previous 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.

Current wording

Our total assets increased $256 million during the first nine months of 2025, and totaled $6.31 billion as of September 30, 2025. Loans grew $14.4 million, securities available for sale increased $125 million and interest-earning deposits were up $82.4 million during the first nine months of 2025. Deposits increased $113 million and sweep accounts grew $130 million, while FHLBI advances decreased $40.9 million during the first nine months of 2025.

Previous 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.

Current wording

Commercial loans increased $43.0 million during the first nine months of 2025, providing for an annualized growth rate of about 2%. Commercial and industrial loans grew $50.4 million and multi-family and residential rental property loans increased $45.3 million. Non-owner occupied CRE loans declined $37.2 million while owner occupied CRE loans were down $19.4 million; both CRE loan segments were impacted by the payoffs of several larger relationships largely stemming from sales of the underlying properties and refinancings to the secondary market. Land development and construction loans expanded by $3.9 million. As a percent of total commercial loans, commercial and industrial loans and owner occupied CRE loans combined equaled 55.1% as of September 30, 2025, compared to 54.9% as of December 31, 2024. Commercial loans totaled $3.75 billion, or 81.3% of total loans, as of September 30, 2025, compared to $3.71 billion, or 80.6% of total loans, as of December 31, 2024. As anticipated, we did experience several relatively large CRE-related loan payoffs, as well as a reduction in line of credit usage, which negatively impacted commercial loan growth during the third quarter of 2025.

Previous 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.

Current wording

We had $216 million in unfunded loan commitments on commercial construction and development loans that were in the construction phase as of September 30, 2025, which we expect to be drawn over the next 12 to 18 months. Our current pipeline reports indicate approximately $307 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 nine months of 2025, compared to approximately 42% during all of 2024.

Previous 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.

Current wording

Residential mortgage loans totaled $781 million, or 16.9% of total loans, as of September 30, 2025. Residential mortgage loans decreased $46.7 million during the first nine months of 2025, as aggregate payoffs and scheduled monthly payments exceeded new loans added to the portfolio. Residential mortgage loan originations totaled $379 million during the first nine months of 2025, of which about 80% were originated with the intent to sell.

Previous 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.

Current wording

Other consumer-related loans, primarily comprised of home equity lines of credit, totaled $83.9 million, or 1.9% of total loans, as of September 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 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.

Current wording

Nonperforming loans totaled $9.8 million, or 0.2% of total loans, as of September 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 September 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

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.

Current wording

Gross loan charge-offs totaled $0.3 million during the first nine months of 2025, while recoveries of prior period loan charge-offs aggregated $1.1 million, providing for a net loan recovery of $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. We recorded provision expense of $3.9 million during the first nine months of 2025, primarily reflecting a $4.6 million net increase in specific allocations driven by $5.5 million in total allocations for a commercial construction loan relationship that was placed on nonaccrual during the second quarter of 2025, a $1.9 million reserve increase related to changes to the economic forecast, and a $1.7 million net increase in qualitative factors stemming from changes in the makeup of the loan portfolio.

Previous 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.

Current wording

The allowance equaled $59.1 million, or 1.28% of total loans and 601% of nonperforming loans, as of September 30, 2025. The allowance was comprised of $52.3 million in general reserves relating to performing loans and $6.8 million in specific reserves on other loans, primarily nonperforming loans, as of September 30, 2025. Loans with an aggregate carrying value of $0.8 million as of September 30, 2025 had been subject to previous partial charge-offs aggregating $0.5 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 September 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 six months ended June 30, 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 nine months ended September 30, 2025.

Previous 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.

Current wording

Securities available for sale increased $125 million during the first nine months of 2025, totaling $855 million, or 13.6% of total assets, as of September 30, 2025. Purchases of U.S. Government agency bonds during the first nine months of 2025 aggregated $122 million, while proceeds from maturities and calls totaled $36.0 million. There were no purchases of U.S. Government agency guaranteed mortgage-backed securities during the first nine months of 2025, while proceeds from principal paydowns aggregated $3.1 million. Purchases of municipal bonds totaled $20.8 million during the first nine months of 2025, while maturities totaled $9.5 million. As of September 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 September 30, 2025 totaled $855 million, including a net unrealized loss of $36.1 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 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.

Current wording

Interest-earning deposits, a vast majority of which is comprised of funds on deposit with the Federal Reserve Bank of Chicago, averaged $284 million and $206 million during the first nine months of 2025 and 2024, or almost 5% and 4% of average total assets, respectively. We have generally operated with about 1% to 2% of total assets comprised of interest-earning deposits. The higher average balance of interest-earning deposits 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 $54.8 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.

Current wording

Net premises and equipment equaled $56.2 million as of September 30, 2025, compared to $53.4 million as of December 31, 2024. Depreciation expense totaled $3.8 million during the first nine months of 2025, while investments associated with renovations of existing facilities and equipment purchases aggregated $6.6 million.

Previous 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.

Current wording

Uninsured deposits totaled approximately $2.6 billion, or about 54% of total deposits, as of September 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 bank regulatory reporting requirements.

Previous 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.

Current wording

Sweep accounts increased $130 million during the first nine months of 2025, largely reflecting the return of funds in early 2025 that had been withdrawn during the fourth quarter of 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 $239 million during the first nine 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 $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.

Current wording

FHLBI advances declined $40.9 million during the first nine months of 2025, totaling $346 million as of September 30, 2025. New bullet advances totaled $20.0 million, while bullet advance maturities aggregated $60.0 million during the first nine 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 amounts and amortization structures 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 $1.08 billion, with remaining availability based on collateral equaling $725 million, as of September 30, 2025.

Previous 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.

Current wording

Shareholders’ equity increased $73.1 million during the first nine months of 2025, equaling $658 million as of September 30, 2025. Positively impacting shareholders’ equity during the first nine months of 2025 was net income of $65.9 million, which was partially offset by the payment of cash dividends totaling $17.9 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 $3.8 million. A $21.3 million after-tax increase in the market value of our available for sale securities portfolio, reflecting a decline in market interest rates, also positively impacted shareholders’ equity during the first nine 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 $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.

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 $525 million, or about 10% of total funds, as of September 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 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.

Current wording

Sweep accounts increased $130 million during the first nine months of 2025, largely reflecting the return of funds in early 2025 that had been withdrawn during the fourth quarter of 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 $239 million during the first nine 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 June 30, 2025 and during the first six months of 2025 is as follows:

Current wording

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

Previous 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.

Current wording

FHLBI advances declined $40.9 million during the first nine months of 2025, totaling $346 million as of September 30, 2025. New bullet advances totaled $20.0 million, while bullet advance maturities aggregated $60.0 million during the first nine 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 amounts and amortization structures 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 $1.08 billion, with remaining availability based on collateral equaling $725 million, as of September 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 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.

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. Draws on these lines of credit during the first nine months of 2025 averaged less than $0.1 million. In contrast, our interest-earning deposit balance with the Federal Reserve Bank of Chicago averaged $260 million during the first nine 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 $156 million as of September 30, 2025. We did not utilize this line of credit during the first nine 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 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.

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 September 30, 2025, we had a total of $2.19 billion in unfunded loan commitments and $26.3 million in unfunded standby letters of credit. Of the total unfunded loan commitments, $1.89 billion were commitments available as lines of credit to be drawn at any time as customers’ cash needs vary, and $307 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 $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.

Current wording

Shareholders’ equity increased $73.1 million during the first nine months of 2025, equaling $658 million as of September 30, 2025. Positively impacting shareholders’ equity during the first nine months of 2025 was net income of $65.9 million, which was partially offset by the payment of cash dividends totaling $17.9 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 $3.8 million. A $21.3 million after-tax increase in the market value of our available for sale securities portfolio, reflecting a decline in market interest rates, also positively impacted shareholders’ equity during the first nine 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 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.

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 September 30, 2025, our bank’s total risk-based capital ratio was 14.3%, compared to 13.9% as of December 31, 2024. Our bank’s total regulatory capital increased $33.4 million during the first nine months of 2025, in large part reflecting net income totaling $74.1 million, which was partially offset by cash dividends paid to us aggregating $45.5 million. As of September 30, 2025, our bank’s total regulatory capital equaled $793 million, or $236 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, 2025 and December 31, 2024 are disclosed in Note 13 of the Notes to Consolidated Financial Statements.

Previous 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.

Current wording

We recorded net income of $23.8 million, or $1.46 per basic and diluted share, for the third quarter of 2025, compared with net income of $19.6 million, or $1.22 per basic and diluted share, for the third quarter of 2024. We recorded net income of $65.9 million, or $4.06 per basic and diluted share, for the first nine months of 2025, compared with net income of $60.0 million, or $3.72 per basic and diluted share, for the first nine months of 2024. Diluted earnings per share increased $0.24, or 19.7%, during the third quarter of 2025, and $0.34, or 9.1%, during the first nine months of 2025, compared with the respective prior-year periods.

Previous 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.

Current wording

The increases in net income during the 2025 periods compared to the respective 2024 periods primarily reflected growth in net interest income and lower levels of federal income tax expense and provisions for credit losses, which more than offset increased noninterest expense. Higher levels of noninterest income, mainly reflecting growth in treasury management fees and payroll services fees during both 2025 periods and an increase in mortgage banking income during the first nine months of 2025, also contributed to the increases in net income. 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 and third quarter of 2025; net benefits from investments in tax credit structures also positively impacted federal income tax expense during the current-year third quarter. The provisions for credit losses recorded during the 2025 periods mainly reflected a net increase in specific allocations driven by a commercial construction loan that was placed on nonaccrual during the second quarter and a net increase in qualitative factor allocations reflecting changes in the composition of the loan portfolio. The net impact of changes to the economic forecast also contributed to the provision expense recorded during the first nine 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. Acquisition costs related to the previously announced partnership with Eastern Michigan Bank Corporation also contributed to the increases in noninterest expense during the 2025 periods.

Previous 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.

Current wording

Interest income during the third quarter of 2025 was $85.6 million, an increase of $2.2 million, or 2.7%, from the $83.4 million earned during the third 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 $5.92 billion during the third quarter of 2025, up $469 million, or 8.6%, from the level of $5.45 billion during the prior-year third quarter; average loans were up $201 million, average securities increased $163 million, and average interest-earning deposits grew $105 million. The yield on average earning assets was 5.75% during the current-year third quarter, a decrease from 6.08% during the respective 2024 period. The lower yield mainly stemmed from a reduced yield on loans and a change in earning asset mix, which more than offset an improved yield on securities resulting from the reinvestment of relatively low-yielding bonds and portfolio expansion activities. The yield on loans was 6.38% during the third quarter of 2025, down from 6.69% during the third quarter of 2024 primarily due to lower interest rates on variable-rate commercial loans resulting from the 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. A further 25 basis point reduction in the targeted federal funds, which was approved by the FOMC in September of 2025, also contributed to the reduced loan yield. Signifying the success of a strategic initiative to lower 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 third quarter of 2025 compared to the third quarter of 2024. A lower yield on interest-earning deposits, reflecting the decreased interest rate environment, also contributed to the reduced yield on average earning assets. The yield on securities equaled 3.04% during the third quarter of 2025, up from 2.43% during the prior-year third quarter.

Previous wording

Interest income during the first six months of 2025 was $162 million, an increase of $6.7 million, or 4.3%, from the $156 million earned during the first six months of 2024. The increase resulted from a higher level of average earning assets, which more than offset a lower yield on average earning assets. Average earning assets equaled $5.70 billion during the first six months of 2025, up $546 million, or 10.6%, from the level of $5.15 billion during the respective 2024 period; average loans increased $315 million, average securities grew $167 million, and average interest-earning assets were up $63.6 million. The yield on average earning assets was 5.76% during the first six months of 2025, a decline from 6.06% during the first six months of 2024. The decreased yield mainly resulted from a lower yield on loans and a change in earning asset mix, which more than offset an improved yield on securities reflecting reinvestment and portfolio expansion activities in a higher interest rate environment. The yield on loans was 6.31% during the first six months of 2025, down from 6.65% during the respective prior-year period largely due to reduced interest rates on variable-rate commercial loans stemming from the aforementioned FOMC interest rate cuts. Higher-yielding loans accounted for a decreased percentage of earning assets and lower-yielding securities and other interest-earning assets represented increased percentages of earning assets in the first six months of 2025 compared to the first six months of 2024. The yield on securities equaled 2.93% during the first six months of 2025, up from 2.25% during the respective 2024 period.

Current wording

Interest income during the first nine months of 2025 was $248 million, an increase of $8.9 million, or 3.7%, from the $239 million earned during the first nine months of 2024. The increase resulted from a higher level of average earning assets, which more than offset a lower yield on average earning assets. Average earning assets equaled $5.77 billion during the first nine months of 2025, up $520 million, or 9.9%, from the level of $5.25 billion during the first nine months of 2024; average loans increased $276 million, average securities grew $166 million, and average interest-earning deposits were up $77.7 million. The yield on average earning assets was 5.76% during the first nine months of 2025, a decline from 6.06% during the respective 2024 period. The decreased yield mainly resulted from a lower yield on loans and a change in earning asset mix, which more than offset an improved yield on securities reflecting the reinvestment of relatively low-yielding bonds and portfolio expansion activities. The yield on loans was 6.33% during the first nine months of 2025, down from 6.66% during the first nine months of 2024 largely due to reduced interest rates on variable-rate commercial loans stemming from the aforementioned FOMC interest rate cuts. Higher-yielding loans accounted for a decreased percentage of earning assets and lower-yielding securities and interest-earning deposits represented increased percentages of earning assets in the first nine months of 2025 compared to the first nine months of 2024. A decreased yield on interest-earning deposits, reflecting the lower interest rate environment, also contributed to the reduced yield on average earning assets. The yield on securities equaled 2.97% during the first nine months of 2025, up from 2.31% during the respective 2024 period.