Equibles

8-K

ISABELLA BANK CORP (ISBA)

8-K 2024-10-24 For: 2024-10-24
View Original
Added on April 07, 2026

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 OR 15(d) of The Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): October 24, 2024

ISABELLA BANK CORPORATION

(Exact name of registrant as specified in its charter)

Michigan 000-18415 38-2830092
(State or other jurisdiction<br>of incorporation) (Commission<br>File Number) (IRS Employer<br>Identification No.) 401 North Main Street Mt. Pleasant Michigan 48858-1649
--- --- --- ---
(Address of principal executive offices) (Zip Code)

Registrant’s telephone number, including area code: (989) 772-9471

Not Applicable

(Former name or former address, if changed since last report.)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

| ☐ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) | | --- | --- || ☐ | Soliciting material pursuant to Rule l4a-12 under the Exchange Act (17 CFR 240.l4a-l2) | | --- | --- || ☐ | Pre-commencement communications pursuant to Rule l4d-2(b) under the Exchange Act (17 CFR 240.l4d-2(b)) | | --- | --- || ☐ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.l3e-4(c)) | | --- | --- |

Securities registered pursuant to Section 12(b) of the Act:

Title of each class Trading<br>Symbol(s) Name of each exchange on which registered
None N/A N/A

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Section 2 - Financial Information

Item 2.02 Results of Operations and Financial Condition.

On October 24, 2024, Isabella Bank Corporation issued a press release announcing its financial results for the quarter ended September 30, 2024.

A copy of the press release is filed as Exhibit 99.1 to this Form 8-K and is incorporated herein by reference.

The information in this Item 2.02 of Form 8-K and Exhibit 99.1 attached hereto shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, nor shall it be deemed incorporated by reference in any filing made by the registrant under the Securities Act of 1933, whether made before or after the date hereof, except as shall be expressly set forth by specific reference in such filing.

Section 9 - Financial Statements and Exhibits

Item 9.01 Financial Statements and Exhibits.

(d) Exhibits:

Exhibit<br>No. Description
99.1 Press release issuedearningsrelease_20240930xe.htmOctober24, 2024
104 Cover page interactive data file - the cover page XBRL tags are embedded within the inline XBRL document

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

ISABELLA BANK CORPORATION
Dated: October 24, 2024 By: /s/ Jerome E. Schwind
Jerome E. Schwind, President and CEO

INDEX TO EXHIBITS

Exhibit<br>No. Description
99.1 Press release issuedOctober24, 2024
104 Cover page interactive data file - the cover page XBRL tags are embedded within the inline XBRL document

Document

Exhibit 99.1

logo.jpg

Isabella Bank Corporation Reports Third Quarter 2024 Results

MT. PLEASANT, MICHIGAN — October 24, 2024 — Isabella Bank Corporation (OTCQX: ISBA) (the “Company” or "we") reported third quarter 2024 net income of $3.3 million, or $0.44 per diluted share, compared to $4.4 million or $0.58 per diluted share in the same quarter of 2023. The non-GAAP measure of core earnings in the third quarter 2024 totaled $4.6 million, or $0.61 per diluted share, compared to $4.4 million or $0.58 per diluted share for the same quarter of 2023.

THIRD QUARTER 2024 HIGHLIGHTS

•Return on assets of 0.62%, core return on assets of 0.87% (non-GAAP measure)

•Loan growth of 12% annualized

•Deposit growth of 14% annualized

•Net interest margin of 2.98%

•Nonaccrual loans to total loans ratio of 0.04%

“Profitability from operations improved during the third quarter as we delivered quarter-over-quarter expansion in net interest income with strong growth on both sides of the balance sheet while maintaining our disciplined approach to credit quality," said Isabella Bank Corporation's Chief Executive Officer Jerome Schwind. "Core earnings increased 31% over the second quarter 2024. That benefit was offset by a $1.6 million charge, as previously announced, related to overdrawn deposit accounts from a customer.

"Along with higher loan yields, our quarterly results include the benefit of recovering two previously charged-off commercial loans,” he added. "With continued improvement in our top-line results, our focus is on opportunities to boost return on assets and lower the efficiency ratio. I am proud of our teamwork, dedication to risk management, and our commitment to provide consistent, sustainable long-term earnings.”

FINANCIAL CONDITION (September 30, 2024 compared to June 30, 2024)

Total assets grew $46.8 million to $2.1 billion primarily due to loan growth funded by growth in deposits during the third quarter. Excess cash generated during the quarter was used to pay off wholesale borrowings totaling $24.7 million.

Securities available-for-sale increased $1.2 million to $506.8 million at the end of third quarter 2024. The increase was due to a $13.1 million improvement in the net unrealized loss, which was offset by $11.9 million of principal paydowns on mortgage-related securities and municipal security maturities. Net unrealized losses on securities totaled $21 million and $34 million at the end of the third and second quarters, respectively. Net unrealized losses as a percentage of total available-for-sale securities improved to 4% from 6% at the end of the second quarter of 2024 mostly due to a decrease in short-term bond yields. While bond rates may vary from quarter to quarter, we expect unrealized losses will continue to decrease as the bonds approach their maturity dates over the next three years.

Total loans grew $42.6 million to $1.42 billion at the end of the third quarter, led by a $36.9 million increase in advances to mortgage brokers. Residential loans increased $4.7 million on steady new volume and continued slowing of prepayments. Excluding advances to mortgage brokers, commercial loans increased $4.2 million due to continued growth in commercial and industrial loans and agricultural loans. At the end of September, $12.6 million

of additional commercial real estate construction loans closed and the majority are expected to be funded early in the fourth quarter.

The allowance for credit losses decreased $460,000 to $12.6 million at the end of third quarter of 2024. Most of the decrease is due to improvement in historical loss experience, driven by the recovery of two previously charged-off loans in the quarter totaling $314,000. Nonaccrual loan balances decreased by $447,000 to $547,000 at the end of the third quarter of 2024. Past due and accruing accounts between 30 to 89 days as a percentage of total loans was 0.16% compared to 0.05% at the end of third quarter of 2023. The increase is mostly the result of one agricultural loan with a balance of $1.1 million that is now current.

Total deposits were up $59.5 million to $1.78 billion at the end of the third quarter. The increase is consistent with normal seasonal patterns at the end of the third quarter that are generally experienced in money market accounts due to an inflow from businesses and municipalities. Certificates of Deposit accounts (CDs) were up $15.1 million, attributed to new accounts and customers’ anticipation of lower deposit rates going into the fourth quarter 2024. Demand for retail CDs continues because of the rate environment.

Tangible book value per share was $22.14 as of September 30, 2024, compared to $20.60 on June 30, 2024. Net unrealized losses on available-for-sale securities reduced tangible book value per share by $2.23 and $3.60 for the respective periods. Share repurchases totaled 53,000 during the third quarter for a value of $1.0 million at an average price of $19.23.

RESULTS OF OPERATIONS (September 30, 2024 to September 30, 2023 quarterly comparison, unless otherwise noted)

Net interest margin as a percentage of earning assets (NIM) was 2.98%, compared to 2.85% last quarter and 2.99% in the third quarter of 2023. During the third quarter, we recovered the full contractual interest from two commercial loans that previously were charged off, which contributed 6 basis points to NIM. The book yield from securities was 2.21% and 2.23% during third quarters of 2024 and 2023, respectively. The weighted average maturity of our U.S. Treasury portfolio is less than 2 years, and the proceeds are expected to be reinvested in market rate loans and securities, or to pay off borrowed funds. The yield on loans expanded to 5.73% in third quarter, up from 5.17% in the same quarter of 2023. Excluding loan recoveries, the yield on loans was 5.65%. The expansion in loan yields is a result of higher rates on new loans and fixed rate commercial loans that have and continue repricing to variable rates. At the end of the third quarter, approximately 41% of commercial loans are fixed at rates that are lower than current market rates, but the majority will contractually reprice to variable rates over the next three to five years. Cost of interest-bearing liabilities increased to 2.43% from 1.77% in the third quarter of 2023, but have stabilized compared to the cost in the previous quarter of 2.39%.

The provision for credit losses was $946,000 in the third quarter, compared to a credit of $292,000 for the same period in 2023. The current year quarter includes the impact from the recovery of the contractual principal of two previously charged-off commercial loans totaling $314,000. That benefit was offset by a $1.6 million charge related to overdrawn deposit accounts from a single customer. The loans to the customer and related parties are well collateralized, and no additional credit provisioning was necessary in the third quarter. The credit in the prior year quarter mostly reflects loan recoveries in excess of charge-off activity.

Noninterest income was $3.5 million compared to $3.4 million in the third quarter of 2023. Customer service fees grew $99,000 based on a higher number of transactional accounts. Wealth management income increased $145,000, or 17%, due to higher assets under management (AUM). AUM increased $89.2 million over the prior year quarter driven by growth in new accounts and higher security valuations.

Noninterest expenses were $13.2 million in the third quarter 2024 compared to $12.7 million in same quarter of 2023. Compensation and benefit expenses increased $612,000 reflecting annual merit increases in 2024, and higher incentive compensation as compared to the third quarter of 2023.

About the Corporation

Isabella Bank Corporation (OTCQX: ISBA) is the parent holding company of Isabella Bank, a state-chartered community bank headquartered in Mt. Pleasant, Michigan. Isabella Bank was established in 1903 and has been committed to serving its customers' and communities' local banking needs for over 120 years. The Bank offers personal and commercial lending and deposit products, as well as investment, trust, and estate planning services. The Bank has locations throughout eight Mid-Michigan counties: Bay, Clare, Gratiot, Isabella, Mecosta, Midland, Montcalm, and Saginaw.

For more information about Isabella Bank Corporation, visit the Investor Relations link at www.isabellabank.com. Isabella Bank Corporation common stock is quoted on the OTCQX tier of the OTC Markets Group, Inc.’s electronic quotation system (www.otcmarkets.com) under the symbol “ISBA.” The Corporation’s investor relations firm is Stonegate Capital Partners, Inc. (www.stonegateinc.com).

Contact

Lori Peterson, Director of Marketing

Phone: 989-779-6333 Fax: 989-775-5501

Forward-Looking Statements

Information in this release contains certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Rule 175 promulgated thereunder, and Section 21E of the Securities Exchange Act of 1934, as amended and Rule 3b-6 promulgated thereunder. We intend such forward looking statements to be covered by the safe harbor provisions for forward looking statements contained in the Private Securities Litigation Reform Act of 1995, and are included in this statement for purposes of these safe harbor provisions. Forward-looking statements generally relate to losses, impact of events, financial condition, plans, objectives, outlook for earnings, revenues, expenses, capital and liquidity levels and ratios, asset levels, asset quality, financial position, and other matters regarding or affecting the Company and its future business and operations. Forward-looking statements are typically identified by words or phrases such as “will likely result", “expect”, “plan”, “believe”, “estimate”, “anticipate”, “strategy”, “trend”, “forecast”, “outlook”, “project”, “intend”, “assume”, “outcome”, “continue”, “remain”, “potential”, “opportunity”, “comfortable”, “current”, “position”, “maintain”, “sustain”, “seek”, “achieve” and variations of such words and similar expressions, or future or conditional verbs such as will, would, should, could or may. Although we believe the assumptions upon which these forward-looking statements are based are reasonable, any of these assumptions could prove to be inaccurate and the forward-looking statements based on these assumptions could be incorrect. The matters discussed in these forward-looking statements are subject to various risks, uncertainties and other factors that could cause actual results and trends to differ materially from those made, projected, or implied in or by the forward-looking statements depending on a variety of uncertainties or other factors described in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023, or included in any subsequent filing by the Company with the Securities and Exchange Commission. Forward-looking statements are based on beliefs and assumptions using information available at the time the statements are made. The Company cautions you not to unduly rely on forward-looking statements because the assumptions, beliefs, expectations, and projections about future events may, and often do, differ materially from actual results. Any forward-looking statement speaks only as to the date on which it is made, and we undertake no obligation to update any forward-looking statement to reflect developments occurring after the statement is made.

Non-GAAP Financial Measures

This document contains certain non-GAAP financial measures in addition to results presented in accordance with accounting principles generally accepted in the United States of America (“GAAP”). These non-GAAP measures are intended to provide the reader with additional supplemental perspectives on operating results, performance trends, and financial condition. Non-GAAP financial measures are not a substitute for GAAP measures; they should be read and used in conjunction with the Company's GAAP financial information. Because non-GAAP financial measures presented in this document are not measurements determined in accordance with GAAP and are susceptible to varying calculations, these non-GAAP financial measures, as presented, may not be comparable to other similarly titled measures presented by other companies. A reconciliation of non-GAAP financial measures to GAAP measures is provided in this release.

Table Index Consolidated Financial Schedules (Unaudited)
A Selected Financial Data
B Consolidated Balance Sheets - Quarterly Trend
C Consolidated Statements of Income
D Consolidated Statements of Income - Quarterly Trend
E Average Yields and Costs
F Average Balances
G Asset Quality Analysis
H Consolidated Loan and Deposit Analysis
I Reconciliation of Non-GAAP Financial Measures

SELECTED FINANCIAL DATA (UNAUDITED)

(Dollars in thousands except per share amounts and ratios)

Three Months Ended
September 30<br>2024 June 30<br>2024 March 31<br>2024 December 31<br>2023 September 30<br>2023
PER SHARE
Basic earnings $ 0.44 $ 0.47 $ 0.42 $ 0.51 $ 0.59
Diluted earnings 0.44 0.46 0.42 0.51 0.58
Core diluted earnings (2) 0.61 0.46 0.41 0.50 0.58
Dividends 0.28 0.28 0.28 0.28 0.28
Book value (1) 28.63 27.06 26.80 27.04 24.71
Tangible book value (1) 22.14 20.60 20.35 20.59 18.27
Market price (1) 21.21 18.20 19.40 21.50 21.05
Common shares outstanding (1) (3) 7,438,720 7,474,016 7,488,101 7,485,889 7,490,557
Average number of diluted common shares outstanding (3) 7,473,184 7,494,828 7,507,739 7,526,514 7,570,374
PERFORMANCE RATIOS
Return on average total assets 0.62 % 0.68 % 0.61 % 0.73 % 0.86 %
Core return on average total assets (2) 0.87 % 0.68 % 0.60 % 0.73 % 0.85 %
Return on average shareholders' equity 6.26 % 6.97 % 6.19 % 7.98 % 9.17 %
Core return on average shareholders' equity (2) 8.70 % 6.96 % 6.08 % 7.97 % 9.05 %
Return on average tangible shareholders' equity 8.15 % 9.19 % 8.12 % 10.73 % 12.27 %
Core return on average tangible shareholders' equity (2) 11.32 % 9.17 % 7.97 % 10.71 % 12.11 %
Net interest margin yield (fully taxable equivalent) (2) 2.98 % 2.85 % 2.79 % 2.83 % 2.99 %
Efficiency ratio (2) 72.30 % 73.93 % 74.84 % 68.41 % 70.56 %
Gross loan to deposit ratio (1) 79.93 % 80.22 % 77.22 % 78.29 % 75.43 %
Shareholders' equity to total assets (1) 10.11 % 9.82 % 9.75 % 9.83 % 8.74 %
Tangible shareholders' equity to tangible assets (1) 8.00 % 7.65 % 7.58 % 7.66 % 6.61 %
ASSETS UNDER MANAGEMENT
Wealth assets under management (1) 679,858 647,850 660,645 641,027 590,666
ASSET QUALITY
Nonaccrual loans (1) 547 994 1,283 982 520
Foreclosed assets (1) 546 629 579 406 509
Net loan charge-offs (recoveries) 1,359 393 46 381 (254)
Net loan charge-offs (recoveries) to average loans outstanding 0.10 % 0.03 % 0.00 % 0.03 % (0.02) %
Nonperforming loans to gross loans (1) 0.04 % 0.07 % 0.09 % 0.08 % 0.04 %
Nonperforming assets to total assets (1) 0.06 % 0.08 % 0.09 % 0.07 % 0.05 %
Allowance for credit losses to gross loans (1) 0.89 % 0.95 % 0.98 % 0.97 % 0.96 %
CAPITAL RATIOS (1)
Tier 1 leverage 8.77 % 8.83 % 8.80 % 8.76 % 8.77 %
Common equity tier 1 capital 12.08 % 12.37 % 12.36 % 12.54 % 12.43 %
Tier 1 risk-based capital 12.08 % 12.37 % 12.36 % 12.54 % 12.43 %
Total risk-based capital 14.90 % 15.29 % 15.31 % 15.52 % 15.39 %

(1) At end of period

(2) Non-GAAP financial measure; refer to the Reconciliation of Non-GAAP Financial Measures (Unaudited) in table I

(3) Whole shares

A

CONSOLIDATED BALANCE SHEETS (UNAUDITED)

(Dollars in thousands)

September 30<br>2024 June 30<br>2024 March 31<br>2024 December 31<br>2023 September 30<br>2023
ASSETS
Cash and demand deposits due from banks $ 27,019 $ 22,690 $ 22,987 $ 25,628 $ 48,862
Fed Funds sold and interest bearing balances due from banks 359 869 2,231 8,044 67,017
Total cash and cash equivalents 27,378 23,559 25,218 33,672 115,879
Available-for-sale securities, at fair value 506,806 505,646 517,585 528,148 516,897
Federal Home Loan Bank stock 12,762 12,762 12,762 12,762 12,762
Mortgage loans held-for-sale 504 637 366 — 105
Loans 1,424,283 1,381,636 1,365,508 1,349,463 1,334,674
Less allowance for credit losses 12,635 13,095 13,390 13,108 12,767
Net loans 1,411,648 1,368,541 1,352,118 1,336,355 1,321,907
Premises and equipment 27,674 27,843 27,951 27,639 26,960
Bank-owned life insurance policies 34,625 34,382 34,131 33,892 33,654
Goodwill and other intangible assets 48,283 48,283 48,284 48,284 48,285
Other assets 37,221 38,486 39,161 38,216 42,041
Total assets $ 2,106,901 $ 2,060,139 $ 2,057,576 $ 2,058,968 $ 2,118,490
LIABILITIES AND SHAREHOLDERS’ EQUITY
Liabilities
Demand deposits $ 421,493 $ 412,193 $ 413,272 $ 428,505 $ 445,043
Interest bearing demand deposits 376,592 338,329 349,401 320,737 363,558
Savings 600,150 603,328 639,491 628,079 628,795
Certificates of deposit 383,597 368,449 366,143 346,374 332,078
Total deposits 1,781,832 1,722,299 1,768,307 1,723,695 1,769,474
Short-term borrowings 52,434 44,194 42,998 46,801 52,330
Federal Home Loan Bank advances 15,000 45,000 — 40,000 65,000
Subordinated debt, net of unamortized issuance costs 29,402 29,380 29,357 29,335 29,312
Total borrowed funds 96,836 118,574 72,355 116,136 146,642
Other liabilities 15,248 17,017 16,240 16,735 17,251
Total liabilities 1,893,916 1,857,890 1,856,902 1,856,566 1,933,367
Shareholders’ equity
Common stock 125,218 126,126 126,656 127,323 127,680
Shares to be issued for deferred compensation obligations 3,981 3,951 3,890 3,693 3,641
Retained earnings 101,065 99,808 98,318 97,282 95,533
Accumulated other comprehensive income (loss) (17,279) (27,636) (28,190) (25,896) (41,731)
Total shareholders’ equity 212,985 202,249 200,674 202,402 185,123
Total liabilities and shareholders' equity $ 2,106,901 $ 2,060,139 $ 2,057,576 $ 2,058,968 $ 2,118,490

B

CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)

(Dollars in thousands except per share amounts)

Nine Months Ended <br> September 30
2024 2023
Interest income
Loans $ 57,150 $ 48,090
Available-for-sale securities 8,437 9,230
Federal Home Loan Bank stock 472 226
Federal funds sold and other 750 1,029
Total interest income 66,809 58,575
Interest expense
Deposits 22,107 11,953
Short-term borrowings 1,026 604
Federal Home Loan Bank advances 1,597 887
Subordinated debt, net of unamortized issuance costs 799 799
Total interest expense 25,529 14,243
Net interest income 41,280 44,332
Provision for credit losses 1,508 (55)
Net interest income after provision for credit losses 39,772 44,387
Noninterest income
Service charges and fees 6,333 6,085
Wealth management fees 2,990 2,625
Earnings on bank-owned life insurance policies 748 681
Net gain on sale of mortgage loans 138 232
Other 395 688
Total noninterest income 10,604 10,311
Noninterest expenses
Compensation and benefits 21,236 19,789
Occupancy and equipment 7,970 7,743
Other professional services 1,628 1,764
ATM and debit card fees 1,459 1,280
FDIC insurance premiums 823 689
Other 5,683 6,130
Total noninterest expenses 38,799 37,395
Income before income tax expense 11,577 17,303
Income tax expense 1,684 2,939
Net income $ 9,893 $ 14,364
Earnings per common share
Basic $ 1.32 $ 1.91
Diluted 1.32 1.89
Cash dividends per common share 0.84 0.84

C

CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)

(Dollars in thousands except per share amounts)

Three Months Ended
September 30<br>2024 June 30<br>2024 March 31<br>2024 December 31<br>2023 September 30<br>2023
Interest income
Loans $ 20,230 $ 18,863 $ 18,057 $ 17,580 17,270
Available-for-sale securities 2,749 2,804 2,884 2,926 2,963
Federal Home Loan Bank stock 168 158 146 129 91
Federal funds sold and other 194 263 293 421 161
Total interest income 23,341 22,088 21,380 21,056 20,485
Interest expense
Deposits 7,631 7,313 7,163 6,399 5,015
Short-term borrowings 384 321 321 357 284
Federal Home Loan Bank advances 571 638 388 422 617
Subordinated debt, net of unamortized issuance costs 267 266 266 266 267
Total interest expense 8,853 8,538 8,138 7,444 6,183
Net interest income 14,488 13,550 13,242 13,612 14,302
Provision for credit losses 946 170 392 684 (292)
Net interest income after provision for credit losses 13,542 13,380 12,850 12,928 14,594
Noninterest income
Service charges and fees 2,159 2,128 2,046 2,212 2,060
Wealth management fees 1,003 1,048 939 932 858
Earnings on bank-owned life insurance policies 252 253 243 239 229
Net gain on sale of mortgage loans 37 67 34 85 109
Other 77 112 206 48 158
Total noninterest income 3,528 3,608 3,468 3,516 3,414
Noninterest expenses
Compensation and benefits 7,251 6,970 7,015 6,116 6,639
Occupancy and equipment 2,645 2,619 2,706 2,554 2,535
Other professional services 588 527 513 576 672
ATM and debit card fees 503 487 469 487 471
FDIC insurance premiums 291 280 252 233 228
Other 1,950 2,012 1,721 1,949 2,113
Total noninterest expenses 13,228 12,895 12,676 11,915 12,658
Income before income tax expense 3,842 4,093 3,642 4,529 5,350
Income tax expense 561 612 511 726 937
Net income $ 3,281 $ 3,481 $ 3,131 $ 3,803 $ 4,413
Earnings per common share
Basic $ 0.44 $ 0.47 $ 0.42 $ 0.51 $ 0.59
Diluted 0.44 0.46 0.42 0.51 0.58
Cash dividends per common share 0.28 0.28 0.28 0.28 0.28

D

AVERAGE YIELDS AND COSTS (UNAUDITED)

The following schedules present yield and daily average amounts outstanding for each major category of interest earning assets, non-earning assets, interest bearing liabilities, and noninterest bearing liabilities. For analytical purposes, interest income is reported on a fully taxable equivalent (FTE) basis using a federal income tax rate of 21%. Federal Reserve Bank restricted equity holdings are included in other interest earning assets.

Three Months Ended
September 30<br>2024 June 30<br>2024 March 31<br>2024 December 31<br>2023 September 30<br>2023
INTEREST EARNING ASSETS
Loans (1) 5.73 % 5.52 % 5.38 % 5.20 % 5.17 %
Available-for-sale securities 2.21 % 2.24 % 2.26 % 2.23 % 2.23 %
Federal Home Loan Bank stock 5.24 % 4.98 % 4.60 % 4.04 % 2.83 %
Fed funds sold 5.55 % 5.51 % 5.72 % 5.71 % 5.47 %
Other 5.29 % 7.53 % 4.67 % 6.20 % 3.62 %
Total interest earning assets 4.77 % 4.61 % 4.47 % 4.35 % 4.27 %
INTEREST BEARING LIABILITIES
Interest bearing demand deposits 0.33 % 0.39 % 0.48 % 0.63 % 0.28 %
Savings 2.28 % 2.18 % 2.11 % 1.76 % 1.44 %
Certificates of deposit 4.13 % 4.01 % 3.84 % 3.60 % 3.20 %
Short-term borrowings 3.17 % 3.18 % 3.18 % 2.83 % 2.42 %
Federal Home Loan Bank advances 5.60 % 5.64 % 5.64 % 5.64 % 5.51 %
Subordinated debt, net of unamortized issuance costs 3.61 % 3.64 % 3.65 % 3.60 % 3.62 %
Total interest bearing liabilities 2.43 % 2.39 % 2.28 % 2.11 % 1.77 %
Net yield on interest earning assets (FTE) (2) 2.98 % 2.85 % 2.79 % 2.83 % 2.99 %
Net interest spread 2.34 % 2.22 % 2.19 % 2.24 % 2.50 %

(1) Includes loans held-for-sale and nonaccrual loans

(2) Non-GAAP financial measure; refer to the Reconciliation of Non-GAAP Financial Measures (Unaudited) in table I

E

AVERAGE BALANCES (UNAUDITED)

(Dollars in thousands)

Three Months Ended
September 30<br>2024 June 30<br>2024 March 31<br>2024 December 31<br>2023 September 30<br>2023
INTEREST EARNING ASSETS
Loans (1) $ 1,403,810 $ 1,375,523 $ 1,348,749 $ 1,340,271 $ 1,325,455
Available-for-sale securities (2) 536,379 545,827 557,030 564,068 572,038
Federal Home Loan Bank stock 12,762 12,762 12,762 12,762 12,762
Fed funds sold 4 7 7 13 13
Other (3) 14,597 14,054 25,210 26,823 17,638
Total interest earning assets 1,967,552 1,948,173 1,943,758 1,943,937 1,927,906
NONEARNING ASSETS
Allowance for credit losses (13,125) (13,431) (13,100) (12,780) (12,937)
Cash and demand deposits due from banks 25,903 23,931 24,018 23,244 25,287
Premises and equipment 27,868 27,999 28,022 27,444 26,629
Other assets 87,002 80,539 84,059 71,592 74,244
Total assets $ 2,095,200 $ 2,067,211 $ 2,066,757 $ 2,053,437 $ 2,041,129
INTEREST BEARING LIABILITIES
Interest bearing demand deposits $ 358,383 $ 342,931 $ 345,842 $ 317,996 $ 342,175
Savings 599,679 613,601 633,904 634,539 595,372
Certificates of deposit 375,936 366,440 357,541 338,852 324,399
Short-term borrowings 48,151 40,593 40,623 50,049 46,574
Federal Home Loan Bank advances 40,588 45,510 27,692 29,674 44,429
Subordinated debt, net of unamortized issuance costs 29,388 29,365 29,342 29,320 29,298
Total interest bearing liabilities 1,452,125 1,438,440 1,434,944 1,400,430 1,382,247
NONINTEREST BEARING LIABILITIES AND SHAREHOLDERS' EQUITY
Demand deposits 418,973 411,282 412,228 446,747 451,123
Other liabilities 15,658 16,755 16,151 17,302 16,802
Shareholders’ equity 208,444 200,734 203,434 188,958 190,957
Total liabilities and shareholders’ equity $ 2,095,200 $ 2,067,211 $ 2,066,757 $ 2,053,437 $ 2,041,129

(1) Includes loans held-for-sale and nonaccrual loans

(2) Average balances for available-for-sale securities are based on amortized cost

(3) Includes average interest-bearing deposits with other banks, net of Federal Reserve daily cash letter

F

ASSET QUALITY ANALYSIS (UNAUDITED)

(Dollars in thousands)

The following table outlines our quarter-to-date asset quality analysis as of, and for the three-month periods ended:

September 30<br>2024 June 30<br>2024 March 31<br>2024 December 31<br>2023 September 30<br>2023
NONPERFORMING ASSETS
Commercial and industrial $ 120 $ 271 $ 567 $ 491 $ 17
Commercial real estate — — 234 — —
Agricultural — 167 189 205 208
Residential real estate 427 556 293 286 295
Consumer — — — — —
Total nonaccrual loans 547 994 1,283 982 520
Accruing loans past due 90 days or more 64 15 — 87 —
Total nonperforming loans 611 1,009 1,283 1,069 520
Foreclosed assets 546 629 579 406 509
Debt securities 12 12 12 12 77
Total nonperforming assets $ 1,169 $ 1,650 $ 1,874 $ 1,487 $ 1,106
Nonperforming loans to gross loans 0.04 % 0.07 % 0.09 % 0.08 % 0.04 %
Nonperforming assets to total assets 0.06 % 0.08 % 0.09 % 0.07 % 0.05 %
Allowance for credit losses as a % of nonaccrual loans 2,309.87 % 1,317.40 % 1,043.65 % 1,334.83 % 2,455.19 %
ALLOWANCE FOR CREDIT LOSSES
Allowance at beginning of period $ 13,095 $ 13,390 $ 13,108 $ 12,767 $ 12,833
Charge-offs 1,767 527 191 452 179
Recoveries 408 134 145 71 433
Net loan charge-offs (recoveries) 1,359 393 46 381 (254)
Provision for credit losses - loans 899 98 328 722 (320)
Allowance at end of period $ 12,635 $ 13,095 $ 13,390 $ 13,108 $ 12,767
Allowance for credit losses to gross loans 0.89 % 0.95 % 0.98 % 0.97 % 0.96 %
Reserve for unfunded commitments 498 450 379 315 352
Provision for credit losses - unfunded commitments 47 72 64 (38) 28
Reserve to unfunded commitments 0.15 % 0.14 % 0.11 % 0.10 % 0.11 %
NET LOAN CHARGE-OFFS (RECOVERIES)
Commercial and industrial $ (6) $ 334 $ (2) $ 242 $ (41)
Commercial real estate (318) (29) (6) (3) (3)
Agricultural — — (2) (6) —
Residential real estate (20) (19) (63) (14) (266)
Consumer 1,703 107 119 162 56
Total $ 1,359 $ 393 $ 46 $ 381 $ (254)
Net (recoveries) charge-offs (Quarter to Date annualized to average loans) 0.39 % 0.11 % 0.01 % 0.11 % (0.08) %
Net (recoveries) charge-offs (Year to Date annualized to average loans) 0.17 % 0.00 % 0.00 % 0.00 % (0.03) %
DELINQUENT AND NONACCRUAL LOANS
Accruing loans 30-89 days past due $ 2,226 $ 1,484 $ 7,938 $ 3,895 $ 715
Accruing loans past due 90 days or more 64 15 — 87 —
Total accruing past due loans 2,290 1,499 7,938 3,982 715
Nonaccrual loans 547 994 1,283 982 520
Total past due and nonaccrual loans $ 2,837 $ 2,493 $ 9,221 $ 4,964 $ 1,235

G

CONSOLIDATED LOAN AND DEPOSIT ANALYSIS (UNAUDITED)

(Dollars in thousands)

Loan Analysis

September 30<br>2024 June 30<br>2024 March 31<br>2024 December 31<br>2023 September 30<br>2023 Annualized Growth %<br>Quarter to Date
Commercial and industrial $ 240,589 $ 238,245 $ 226,281 $ 209,738 $ 195,814 3.94 %
Commercial real estate 547,038 547,005 561,123 564,244 566,639 0.02 %
Advances to mortgage brokers 76,187 39,300 29,688 18,541 24,807 N/M
Agricultural 96,794 94,996 93,695 99,994 99,233 7.57 %
Total commercial loans 960,608 919,546 910,787 892,517 886,493 17.86 %
Residential real estate 369,846 365,188 356,658 356,418 348,196 5.10 %
Consumer 93,829 96,902 98,063 100,528 99,985 (12.68) %
Gross loans $ 1,424,283 $ 1,381,636 $ 1,365,508 $ 1,349,463 $ 1,334,674 12.35 %

Deposit Analysis

September 30<br>2024 June 30<br>2024 March 31<br>2024 December 31<br>2023 September 30<br>2023 Annualized Growth %<br>Quarter to Date
Noninterest bearing demand deposits $ 421,493 $ 412,193 $ 413,272 $ 428,505 $ 445,043 9.02 %
Interest bearing demand deposits 376,592 338,329 349,401 320,737 363,558 45.24 %
Savings 600,150 603,328 639,491 628,079 628,795 (2.11) %
Certificates of deposit 383,597 368,449 366,143 346,374 332,078 16.45 %
Total deposits $ 1,781,832 $ 1,722,299 $ 1,768,307 $ 1,723,695 $ 1,769,474 13.83 %

H

RECONCILIATION OF NON-GAAP FINANCIAL MEASURES (UNAUDITED)

(Dollars in thousands except per share amounts and ratios)

Three Months Ended
September 30<br>2024 June 30<br>2024 March 31<br>2024 December 31<br>2023 September 30<br>2023
Net income $ 3,281 $ 3,481 $ 3,131 $ 3,803 $ 4,413
Nonrecurring items:
Net gains on sale of available-for-sale securities — — — — —
Net gains (losses) on foreclosed assets 4 6 69 8 75
Other (1,622) — — — —
Income tax impact 340 (1) (14) (2) (16)
Total nonrecurring items (1,278) 5 55 6 59
Core net income (A) $ 4,559 $ 3,476 $ 3,076 $ 3,797 $ 4,354
Noninterest expenses $ 13,228 $ 12,895 $ 12,676 $ 11,915 $ 12,658
Amortization of acquisition intangibles — 1 — 1 —
Core noninterest expense (B) $ 13,228 $ 12,894 $ 12,676 $ 11,914 $ 12,658
Net interest income $ 14,488 $ 13,550 $ 13,242 $ 13,612 $ 14,302
Tax equivalent adjustment for net interest margin 232 237 246 246 250
Net interest income (FTE) (C) 14,720 13,787 13,488 13,858 14,552
Noninterest income 3,528 3,608 3,468 3,516 3,414
Tax equivalent adjustment for efficiency ratio 53 53 51 50 48
Core revenue (FTE) 18,301 17,448 17,007 17,424 18,014
Nonrecurring items
Net gains on sale of available-for-sale securities — — — — —
Net gains (losses) on foreclosed assets 4 6 69 8 75
Total nonrecurring items 4 6 69 8 75
Core revenue (D) $ 18,297 $ 17,442 $ 16,938 $ 17,416 $ 17,939
Efficiency ratio (B/D) 72.30 % 73.93 % 74.84 % 68.41 % 70.56 %
Average earning assets (E) 1,967,552 1,948,173 1,943,758 1,943,937 1,927,906
Net yield on interest earning assets (FTE) (C/E) 2.98 % 2.85 % 2.79 % 2.83 % 2.99 %
Average assets (F) 2,095,200 2,067,211 2,066,757 2,053,437 2,041,129
Average shareholders' equity (G) 208,444 200,734 203,434 188,958 190,957
Average tangible shareholders' equity (H) 160,161 152,451 155,150 140,674 142,672
Average diluted shares outstanding (1) (I) 7,473,184 7,494,828 7,507,739 7,526,515 7,570,374
Core diluted earnings per share (A/I) $ 0.61 $ 0.46 $ 0.41 $ 0.50 $ 0.58
Core return on average assets (A/F) 0.87 % 0.68 % 0.60 % 0.73 % 0.85 %
Core return on average shareholders' equity (A/G) 8.70 % 6.96 % 6.08 % 7.97 % 9.05 %
Core return on average tangible shareholders' equity (A/H) 11.32 % 9.17 % 7.97 % 10.71 % 12.11 %

(1) Whole shares

I

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