[10-Q] FIRST NORTHERN COMMUNITY BANCORP Quarterly Earnings Report
First Northern Community Bancorp reported steady third‑quarter performance. Net income was $6,013 thousand, up from $5,488 thousand a year ago, and basic EPS was $0.39 versus $0.35. Net interest income came in at $16,847 thousand, slightly above last year, with no provision for credit losses this quarter compared with a $(550) thousand reversal a year ago.
Non‑interest income was $1,658 thousand, while non‑interest expense rose to $11,923 thousand from $10,934 thousand, reflecting higher operating costs. For the nine months, net income reached $15,150 thousand versus $14,188 thousand.
Total assets were $1,908,208 thousand at September 30, 2025. Loans, net, were $1,055,971 thousand and deposits totaled $1,686,416 thousand. Stockholders’ equity increased to $204,769 thousand, aided by a smaller accumulated other comprehensive loss of $(17,907) thousand versus $(33,851) thousand at year‑end, as unrealized losses on available‑for‑sale securities narrowed to $28,357 thousand from $48,851 thousand. Cash and cash equivalents rose to $149,510 thousand.
- None.
- None.
Insights
Stable quarter with modest earnings growth and improved AOCI.
FNRN delivered Q3 net income of
Balance sheet metrics were resilient: assets at
Earnings durability continues to hinge on deposit costs, operating efficiency, and securities marks. Subsequent filings may provide additional detail on margin trends and credit quality.
Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark one)
For the Quarterly Period Ended
OR
For the transition period from _______________ to _______________
Commission File Number
First Northern Community Bancorp
(Exact name of registrant as specified in its charter)
| | |
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification Number) |
| | |
| (Address of principal executive offices) | (Zip Code) |
(Registrant’s telephone number including area code)
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading symbols(s) | Name of each exchange on which registered | ||
| None | Not Applicable | Not Applicable |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or Section 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days.
| | No ☐ |
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
| | No ☐ |
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and "emerging growth company" in Rule 12b-2 of the Exchange Act.
| Large accelerated filer ☐ | Accelerated filer ☐ |
| | Smaller reporting company |
| 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. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
| Yes | No ☒ |
The number of shares of Common Stock outstanding as of November 3, 2025 was
FIRST NORTHERN COMMUNITY BANCORP
INDEX
| Page |
|
| PART I – Financial Information |
3 |
| ITEM I. – Financial Statements (Unaudited) |
3 |
| Condensed Consolidated Balance Sheets (Unaudited) |
3 |
| Condensed Consolidated Statements of Income (Unaudited) |
4 |
| Condensed Consolidated Statements of Comprehensive Income (Unaudited) |
5 |
| Condensed Consolidated Statements of Stockholders’ Equity (Unaudited) |
6 |
| Condensed Consolidated Statements of Cash Flows (Unaudited) |
7 |
| Notes to Condensed Consolidated Financial Statements |
8 |
| ITEM 2. – MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
33 |
| ITEM 3. – QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK |
51 |
| ITEM 4. – CONTROLS AND PROCEDURES |
51 |
| PART II – OTHER INFORMATION |
51 |
| ITEM 1. – LEGAL PROCEEDINGS |
51 |
| ITEM 1A. – RISK FACTORS |
51 |
| ITEM 2. – UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS |
57 |
| ITEM 3. – DEFAULTS UPON SENIOR SECURITIES |
57 |
| ITEM 4. – MINE SAFETY DISCLOSURES |
57 |
| ITEM 5. – OTHER INFORMATION |
57 |
| ITEM 6. – EXHIBITS |
58 |
| SIGNATURES |
59 |
PART I – FINANCIAL INFORMATION
FIRST NORTHERN COMMUNITY BANCORP
ITEM I. – FINANCIAL STATEMENTS (UNAUDITED)
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
| (in thousands, except share amounts) |
September 30, 2025 |
December 31, 2024 |
||||||
| Assets |
||||||||
| Cash and cash equivalents |
$ | $ | ||||||
| Certificates of deposit |
||||||||
| Investment securities – available-for-sale, at estimated fair value, net of allowance for credit losses of $0; amortized cost of $627,245 at September 30, 2025 and $682,346 at December 31, 2024 |
||||||||
| Loans, net of allowance for credit losses of $15,699 at September 30, 2025 and $15,885 at December 31, 2024 |
||||||||
| Stock in Federal Home Loan Bank and other equity securities, at cost |
||||||||
| Premises and equipment, net |
||||||||
| Other real estate owned |
||||||||
| Core deposit intangible, net |
||||||||
| Interest receivable and other assets |
||||||||
| Total Assets |
$ | $ | ||||||
| Liabilities and Stockholders’ Equity |
||||||||
| Liabilities: |
||||||||
| Deposits: |
||||||||
| Demand deposits |
$ | $ | ||||||
| Interest-bearing transaction deposits |
||||||||
| Savings and MMDA's |
||||||||
| Time, $250,000 or less |
||||||||
| Time, over $250,000 |
||||||||
| Total deposits |
||||||||
| Interest payable and other liabilities |
||||||||
| Total Liabilities |
||||||||
| Commitments and contingencies (Note 7) |
||||||||
| Stockholders' Equity: |
||||||||
| Common stock, no par value; 32,000,000 shares authorized; 15,720,784 shares issued and outstanding at September 30, 2025 and 15,943,051 shares issued and outstanding at December 31, 2024 |
||||||||
| Additional paid-in capital |
||||||||
| Retained earnings |
||||||||
| Accumulated other comprehensive loss, net |
( |
) | ( |
) | ||||
| Total Stockholders’ Equity |
||||||||
| Total Liabilities and Stockholders’ Equity |
$ | $ | ||||||
See notes to unaudited condensed consolidated financial statements.
FIRST NORTHERN COMMUNITY BANCORP
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
| Three months ended |
Three months ended |
Nine months ended |
Nine months ended |
|||||||||||||
| (in thousands, except per share amounts) |
September 30, 2025 |
September 30, 2024 |
September 30, 2025 |
September 30, 2024 |
||||||||||||
| Interest and dividend income: |
||||||||||||||||
| Loans |
$ | $ | $ | $ | ||||||||||||
| Due from banks interest bearing accounts |
||||||||||||||||
| Investment securities: |
||||||||||||||||
| Taxable |
||||||||||||||||
| Non-taxable |
||||||||||||||||
| Other earning assets |
||||||||||||||||
| Total interest and dividend income |
||||||||||||||||
| Interest expense: |
||||||||||||||||
| Deposits |
||||||||||||||||
| FHLB advances |
||||||||||||||||
| Total interest expense |
||||||||||||||||
| Net interest income |
||||||||||||||||
| (Reversal of) provision for credit losses |
( |
) | ||||||||||||||
| Net interest income after provision for credit losses |
||||||||||||||||
| Non-interest income: |
||||||||||||||||
| Service charges on deposit accounts |
||||||||||||||||
| Gains on sales of loans held-for-sale |
||||||||||||||||
| Investment and brokerage services income |
||||||||||||||||
| Mortgage brokerage income |
||||||||||||||||
| Loan servicing income |
||||||||||||||||
| Debit card income |
||||||||||||||||
| Losses on sales/calls of available-for-sale securities |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
| Other income |
||||||||||||||||
| Total non-interest income |
||||||||||||||||
| Non-interest expenses: |
||||||||||||||||
| Salaries and employee benefits |
||||||||||||||||
| Occupancy and equipment |
||||||||||||||||
| Data processing |
||||||||||||||||
| Stationery and supplies |
||||||||||||||||
| Advertising |
||||||||||||||||
| Directors’ fees |
||||||||||||||||
| Amortization of core deposit intangible |
||||||||||||||||
| Other expense |
||||||||||||||||
| Total non-interest expenses |
||||||||||||||||
| Income before provision for income taxes |
||||||||||||||||
| Provision for income taxes |
||||||||||||||||
| Net income |
$ | $ | $ | $ | ||||||||||||
| Basic earnings per common share |
$ | $ | $ | $ | ||||||||||||
| Diluted earnings per common share |
$ | $ | $ | $ | ||||||||||||
See notes to unaudited condensed consolidated financial statements.
FIRST NORTHERN COMMUNITY BANCORP
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)
| Three months ended | Three months ended | Nine months ended | Nine months ended | |||||||||||||
| (in thousands) | September 30, 2025 | September 30, 2024 | September 30, 2025 | September 30, 2024 | ||||||||||||
| Net income | $ | $ | $ | $ | ||||||||||||
| Other comprehensive income, net of tax: | ||||||||||||||||
| Unrealized holding gains arising during the period, net of tax effect of $1,939 and $5,084 for the three months ended September 30, 2025 and September 30, 2024, respectively and $6,762 and $4,462 for the nine months ended September 30, 2025 and September 30, 2024, respectively | ||||||||||||||||
| Less: reclassification adjustment due to losses realized on sales of securities, net of tax effect of $17 and $22 for the three months ended September 30, 2025 and September 30, 2024, respectively and $44 and $46 for the nine months ended September 30, 2025 and September 30, 2024, respectively | ||||||||||||||||
| Other comprehensive income, net of tax | $ | $ | $ | $ | ||||||||||||
| Comprehensive income | $ | $ | $ | $ | ||||||||||||
See notes to unaudited condensed consolidated financial statements.
FIRST NORTHERN COMMUNITY BANCORP
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (UNAUDITED)
| Accumulated |
||||||||||||||||||||||||
| Additional |
Other |
|||||||||||||||||||||||
| (in thousands, except share data) |
Common Stock |
Paid-in |
Retained |
Comprehensive |
||||||||||||||||||||
| Shares |
Amounts |
Capital |
Earnings |
Loss, net of tax |
Total |
|||||||||||||||||||
| Balance at December 31, 2023 |
$ | $ | $ | $ | ( |
) | $ | |||||||||||||||||
| Net income |
||||||||||||||||||||||||
| Other comprehensive loss, net of taxes |
( |
) | ( |
) | ||||||||||||||||||||
| Stock dividend adjustment |
( |
) | — | |||||||||||||||||||||
| Cash in lieu of fractional shares |
( |
) | ( |
) | ( |
) | ||||||||||||||||||
| Stock-based compensation |
||||||||||||||||||||||||
| Common shares issued related to restricted stock grants, net of restricted stock forfeited |
||||||||||||||||||||||||
| Stock options exercised, net of swapped shares |
||||||||||||||||||||||||
| Balance at March 31, 2024 |
$ | $ | $ | $ | ( |
) | $ | |||||||||||||||||
| Net income |
||||||||||||||||||||||||
| Other comprehensive income, net of taxes |
||||||||||||||||||||||||
| Stock-based compensation |
||||||||||||||||||||||||
| Common shares issued related to restricted stock grants |
— | |||||||||||||||||||||||
| Stock repurchase and retirement |
( |
) | ( |
) | ( |
) | ||||||||||||||||||
| Stock options exercised, net of swapped shares |
||||||||||||||||||||||||
| Balance at June 30, 2024 |
$ | $ | $ | $ | ( |
) | $ | |||||||||||||||||
| Net income |
||||||||||||||||||||||||
| Other comprehensive income, net of taxes |
||||||||||||||||||||||||
| Stock-based compensation |
||||||||||||||||||||||||
| Restricted stock forfeited |
( |
) | — | — | ||||||||||||||||||||
| Stock repurchase and retirement |
( |
) | ( |
) | ( |
) | ||||||||||||||||||
| Balance at September 30, 2024 |
$ | $ | $ | $ | ( |
) | $ | |||||||||||||||||
| Balance at December 31, 2024 |
$ | $ | $ | $ | ( |
) | $ | |||||||||||||||||
| Net income |
||||||||||||||||||||||||
| Other comprehensive income, net of taxes |
||||||||||||||||||||||||
| Stock dividend adjustment |
( |
) | ( |
) | ||||||||||||||||||||
| Cash in lieu of fractional shares |
( |
) | ( |
) | ( |
) | ||||||||||||||||||
| Stock-based compensation |
||||||||||||||||||||||||
| Common shares issued related to restricted stock grants |
||||||||||||||||||||||||
| Stock options exercised, net of swapped shares |
||||||||||||||||||||||||
| Stock repurchase and retirement |
( |
) | ( |
) | ( |
) | ||||||||||||||||||
| Balance at March 31, 2025 |
$ | $ | $ | $ | ( |
) | $ | |||||||||||||||||
| Net income |
||||||||||||||||||||||||
| Other comprehensive income, net of taxes |
||||||||||||||||||||||||
| Stock-based compensation |
||||||||||||||||||||||||
| Stock options exercised, net of swapped shares |
||||||||||||||||||||||||
| Stock repurchase and retirement |
( |
) | ( |
) | ( |
) | ||||||||||||||||||
| Balance at June 30, 2025 |
$ | $ | $ | $ | ( |
) | $ | |||||||||||||||||
| Net income |
||||||||||||||||||||||||
| Other comprehensive income, net of taxes |
||||||||||||||||||||||||
| Stock-based compensation |
||||||||||||||||||||||||
| Stock repurchase and retirement |
( |
) | ( |
) | ( |
) | ||||||||||||||||||
| Balance at September 30, 2025 |
$ | $ | $ | $ | ( |
) | $ | |||||||||||||||||
See notes to unaudited condensed consolidated financial statements.
FIRST NORTHERN COMMUNITY BANCORP
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
| Nine months ended |
Nine months ended |
|||||||
| (in thousands) |
September 30, 2025 |
September 30, 2024 |
||||||
| Cash Flows From Operating Activities |
||||||||
| Net income |
$ | $ | ||||||
| Adjustments to reconcile net income to net cash provided by operating activities: |
||||||||
| Depreciation |
||||||||
| Accretion and amortization of investment securities premiums and discounts, net |
( |
) | ||||||
| (Increase) decrease in deferred loan origination fees and costs, net |
( |
) | ||||||
| Amortization of core deposit intangible |
||||||||
| Provision for credit losses |
||||||||
| Stock-based compensation |
||||||||
| Losses on sales/calls of available-for-sale securities |
||||||||
| Amortization of operating lease right-of-use asset |
||||||||
| Gains on sales of loans held-for-sale |
( |
) | ( |
) | ||||
| Proceeds from sales of loans held-for-sale |
||||||||
| Originations of loans held-for-sale |
( |
) | ( |
) | ||||
| Gain on purchase of tax credits |
( |
) | ||||||
| Purchase of tax credits |
( |
) | ||||||
| Changes in assets and liabilities: |
||||||||
| Increase in interest receivable and other assets |
( |
) | ( |
) | ||||
| Increase (decrease) in interest payable and other liabilities |
( |
) | ||||||
| Net cash (used in) provided by operating activities |
( |
) | ||||||
| Cash Flows From Investing Activities |
||||||||
| Proceeds from calls or maturities of available-for-sale securities |
||||||||
| Proceeds from sales of available-for-sale securities |
||||||||
| Principal repayments on available-for-sale securities |
||||||||
| Purchases of available-for-sale securities |
( |
) | ( |
) | ||||
| Proceeds from maturities of certificates of deposit |
||||||||
| Purchases of certificates of deposit |
( |
) | ( |
) | ||||
| Net (increase) decrease in loans |
( |
) | ||||||
| Purchases of Federal Home Loan Bank stock and other equity securities, at cost |
( |
) | ||||||
| Purchases of premises and equipment |
( |
) | ( |
) | ||||
| Net cash provided by (used in) investing activities |
( |
) | ||||||
| Cash Flows From Financing Activities |
||||||||
| Net (decrease) increase in deposits |
( |
) | ||||||
| Cash dividends paid in lieu of fractional shares |
( |
) | ( |
) | ||||
| Repurchases of common stock |
( |
) | ( |
) | ||||
| Net cash (used in) provided by financing activities |
( |
) | ||||||
| Net increase in Cash and Cash Equivalents |
||||||||
| Cash and Cash Equivalents, beginning of period |
||||||||
| Cash and Cash Equivalents, end of period |
$ | $ | ||||||
| Supplemental Disclosures of Cash Flow Information: |
||||||||
| Cash paid during the period for: |
||||||||
| Interest |
$ | $ | ||||||
| Income taxes |
||||||||
| Supplemental disclosures of non-cash investing and financing activities: |
||||||||
| Stock dividend distributed |
||||||||
| Unrealized holding gains on available-for-sale securities, net of taxes |
||||||||
| Market value of shares tendered in-lieu of cash to pay for exercise of options |
||||||||
| Recognition of right-of-use assets obtained in exchange for operating lease liabilities |
||||||||
| Transfer of premises and equipment to other real estate owned |
||||||||
See notes to unaudited condensed consolidated financial statements.
FIRST NORTHERN COMMUNITY BANCORP
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2025 and 2024 and December 31, 2024
1. BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements of First Northern Community Bancorp (the “Company”) have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission. Accordingly, they do not include all of the information and notes required by GAAP for complete financial statements. In the opinion of management, all adjustments considered necessary for a fair presentation have been included. The results of operations for any interim period are not necessarily indicative of results expected for the full year. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto contained in the Company’s Annual Report on Form 10-K for the year ended December 31, 2024 as filed with the Securities and Exchange Commission ("SEC"). The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements as well as reported amounts of revenue and expense during the reporting period. Actual results could differ from those estimates. All material intercompany balances and transactions have been eliminated in consolidation.
2. ACCOUNTING POLICIES
The most significant accounting policies followed by the Company are presented in Note 1 to the audited consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2024. These policies, along with the disclosures presented in the other financial statement notes and in this discussion, provide information on how significant assets and liabilities are valued in the financial statements and how those values are determined.
Recently Issued Accounting Pronouncements
In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures. Among other things, these amendments provide additional transparency into an entity’s income tax disclosures primarily related to the rate reconciliation and income taxes paid information. The standard requires that public business entities disclose, on an annual basis, specific categories in the rate reconciliation and additional information for reconciling items meeting a certain quantitative threshold. The amendments also require that entities disclose on an annual basis: 1) income taxes paid (net of refunds received) disaggregated by federal (national), state, and foreign taxes and 2) the income taxes paid (net of refunds received) disaggregated by individual jurisdictions exceeding 5% of total income taxes paid (net of refunds received). The amendments are effective for public business entities for annual periods beginning after December 15, 2024. The Company has evaluated this ASU and does not expect the adoption to have a material impact on the Company's consolidated financial statements.
In March 2024, the FASB issued guidance within ASU 2024-01, Compensation—Stock Compensation (Topic 718): Scope Application of Profits Interest and Similar Awards. The amendments in the ASU apply to companies that provide employees and non-employees with profits interest and similar awards to align compensation with a company’s operating performance and provide those holders with the opportunity to participate in future profits and/or equity appreciation of the company. The purpose of the ASU is to clarify the application of the scope guidance in Accounting Standards Codification (ASC) paragraph 718-10-15-3 in determining if a profit interest award should be accounted for in accordance with Topic 718: Compensation—Stock Compensation. The amendment in ASC paragraph 718-10-15-3 is solely intended to improve the overall clarity and does not change the guidance. The ASU is effective for annual periods beginning after December 15, 2024. Early adoption is permitted for both interim and annual financial statements that have not yet been issued or made available for issuance. If a company adopts the amendments in an interim period, it should adopt them as of the beginning of the annual period that includes the interim period. The amendments should be applied either (1) retrospectively to all prior periods presented in the financial statements or (2) on a prospective basis. The Company has evaluated this ASU and does not expect the adoption to have a material impact on the Company’s consolidated financial statements, as the Company does not typically provide these types of awards.
In November 2024, the FASB issued ASU 2024-03, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses. This ASU requires public companies to disclose, in the notes to financial statements, specified information about certain costs and expenses at each interim and annual reporting period.
In January 2025, the FASB issued ASU 2025-01, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40): Clarifying the Effective Date. ASU 2025-01 amends the effective date of ASU 2024-03 to clarify that all public business entities are required to adopt the guidance in annual reporting periods beginning after December 15, 2026, and interim periods within annual reporting periods beginning after December 15, 2027. Early adoption of ASU 2024-03 is permitted. The Company is evaluating the accounting and disclosure requirements of this update and the impact of adopting the new guidance on the consolidated financial statements.
3. INVESTMENT SECURITIES
The amortized cost, unrealized gains and losses, estimated fair values, and allowance for credit losses (ACL) of investments in debt and other securities at September 30, 2025 are summarized as follows:
| Amortized | Unrealized | Unrealized | Estimated | |||||||||||||||||
| (in thousands) | cost | gains | losses | fair value | ACL | |||||||||||||||
| Investment securities available-for-sale: | ||||||||||||||||||||
| U.S. Treasury securities | $ | $ | $ | ( | ) | $ | $ | |||||||||||||
| Securities of U.S. government agencies and corporations | ( | ) | ||||||||||||||||||
| Obligations of states and political subdivisions | ( | ) | ||||||||||||||||||
| Collateralized mortgage obligations | ( | ) | ||||||||||||||||||
| Mortgage-backed securities | ( | ) | ||||||||||||||||||
| Total debt securities | $ | $ | $ | ( | ) | $ | $ | |||||||||||||
The amortized cost, unrealized gains and losses and estimated fair values of investments in debt and other securities at December 31, 2024 are summarized as follows:
| Amortized | Unrealized | Unrealized | Estimated | |||||||||||||||||
| (in thousands) | cost | gains | losses | fair value | ACL | |||||||||||||||
| Investment securities available-for-sale: | ||||||||||||||||||||
| U.S. Treasury securities | $ | $ | $ | ( | ) | $ | $ | |||||||||||||
| Securities of U.S. government agencies and corporations | ( | ) | ||||||||||||||||||
| Obligations of states and political subdivisions | ( | ) | ||||||||||||||||||
| Collateralized mortgage obligations | ( | ) | ||||||||||||||||||
| Mortgage-backed securities | ( | ) | ||||||||||||||||||
| Total debt securities | $ | $ | $ | ( | ) | $ | $ | |||||||||||||
The Company generated $
The amortized cost and estimated fair value of debt and other securities at September 30, 2025, by contractual maturity, are shown in the following table:
| Amortized | Estimated | |||||||
| (in thousands) | cost | fair value | ||||||
| Maturity in years: | ||||||||
| Due in one year or less | $ | $ | ||||||
| Due after one year through five years | ||||||||
| Due after five years through ten years | ||||||||
| Due after ten years | ||||||||
| Subtotal | ||||||||
| Mortgage-backed securities & collateralized mortgage obligations | ||||||||
| Total | $ | $ | ||||||
Expected maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties. In addition, factors such as prepayments and interest rates may affect the yield on the carrying value of mortgage-related securities.
An analysis of gross unrealized losses of the available-for-sale investment securities portfolio as of September 30, 2025, follows:
| (in thousands) | Less than 12 months | 12 months or more | Total | |||||||||||||||||||||
| Unrealized | Unrealized | Unrealized | ||||||||||||||||||||||
| Fair Value | losses | Fair Value | losses | Fair Value | losses | |||||||||||||||||||
| U.S. Treasury securities | $ | $ | ( | ) | $ | $ | ( | ) | $ | $ | ( | ) | ||||||||||||
| Securities of U.S. government agencies and corporations | ( | ) | ( | ) | ( | ) | ||||||||||||||||||
| Obligations of states and political subdivisions | ( | ) | ( | ) | ( | ) | ||||||||||||||||||
| Collateralized mortgage obligations | ( | ) | ( | ) | ( | ) | ||||||||||||||||||
| Mortgage-backed securities | ( | ) | ( | ) | ( | ) | ||||||||||||||||||
| Total | $ | $ | ( | ) | $ | $ | ( | ) | $ | $ | ( | ) | ||||||||||||
Fifty-two securities, all considered investment grade, which had an aggregate fair value of $
The fair value of investment securities could decline in the future if the general economy deteriorates, inflation and interest rates increase, credit ratings decline, the issuer's financial condition deteriorates, or the liquidity for securities declines. As a result, an allowance for credit loss may occur in the future.
An analysis of gross unrealized losses of the available-for-sale investment securities portfolio as of December 31, 2024, follows:
| (in thousands) | Less than 12 months | 12 months or more | Total | |||||||||||||||||||||
| Unrealized | Unrealized | Unrealized | ||||||||||||||||||||||
| Fair Value | losses | Fair Value | losses | Fair Value | losses | |||||||||||||||||||
| U.S. Treasury Securities | $ | $ | ( | ) | $ | $ | ( | ) | $ | $ | ( | ) | ||||||||||||
| Securities of U.S. government agencies and corporations | ( | ) | ( | ) | ( | ) | ||||||||||||||||||
| Obligations of states and political subdivisions | ( | ) | ( | ) | ( | ) | ||||||||||||||||||
| Collateralized Mortgage obligations | ( | ) | ( | ) | ( | ) | ||||||||||||||||||
| Mortgage-backed securities | ( | ) | ( | ) | ( | ) | ||||||||||||||||||
| Total | $ | $ | ( | ) | $ | $ | ( | ) | $ | $ | ( | ) | ||||||||||||
Investment securities carried at $
4. LOANS AND ALLOWANCE FOR CREDIT LOSSES
The composition of the Company’s loan portfolio, by loan class, as of September 30, 2025 and December 31, 2024 was as follows:
| (in thousands) | September 30, 2025 | December 31, 2024 | ||||||
| Commercial | $ | $ | ||||||
| Commercial Real Estate | ||||||||
| Agriculture | ||||||||
| Residential Mortgage | ||||||||
| Residential Construction | ||||||||
| Consumer | ||||||||
| Allowance for credit losses | ( | ) | ( | ) | ||||
| Deferred origination fees and costs, net | ||||||||
| Loans, net | $ | $ | ||||||
At September 30, 2025 and December 31, 2024, all loans were pledged under a blanket collateral lien to secure actual or potential borrowings from the Federal Home Loan Bank (“FHLB”).
Allowance for Credit Losses
The following tables summarize the activity in the allowance for credit losses on loans which is recorded as a contra asset, and the reserve for unfunded commitments which is recorded on the condensed consolidated balance sheet within other liabilities, as of and for the three and nine months ended September 30, 2025.
| Allowance for Credit Losses – Three months ended September 30, 2025 | ||||||||||||||||||||
| Beginning | Provision | Ending | ||||||||||||||||||
| (in thousands) | Balance | Charge-offs | Recoveries | (Recovery) | Balance | |||||||||||||||
| Commercial | $ | $ | ( | ) | $ | $ | $ | |||||||||||||
| Commercial Real Estate | ||||||||||||||||||||
| Agriculture | ( | ) | ( | ) | ||||||||||||||||
| Residential Mortgage | ||||||||||||||||||||
| Residential Construction | ( | ) | ||||||||||||||||||
| Consumer | ( | ) | ( | ) | ||||||||||||||||
| Allowance for credit losses on loans | ( | ) | ||||||||||||||||||
| Reserve for unfunded commitments | ( | ) | ||||||||||||||||||
| Total | $ | $ | ( | ) | $ | $ | $ | |||||||||||||
| Allowance for Credit Losses – Nine months ended September 30, 2025 | ||||||||||||||||||||
| Beginning | Provision | Ending | ||||||||||||||||||
| (in thousands) | Balance | Charge-offs | Recoveries | (Recovery) | Balance | |||||||||||||||
| Commercial | $ | $ | ( | ) | $ | $ | $ | |||||||||||||
| Commercial Real Estate | ( | ) | ( | ) | ||||||||||||||||
| Agriculture | ( | ) | ||||||||||||||||||
| Residential Mortgage | ( | ) | ( | ) | ||||||||||||||||
| Residential Construction | ||||||||||||||||||||
| Consumer | ( | ) | ||||||||||||||||||
| Allowance for credit losses on loans | ( | ) | ||||||||||||||||||
| Reserve for unfunded commitments | ||||||||||||||||||||
| Total | $ | $ | ( | ) | $ | $ | $ | |||||||||||||
The Company utilizes three economic variables, forecasted unemployment, gross domestic product and single-family home prices, as loss drivers for its allowance for credit losses. During the quarter ended September 30, 2025, the levels of forecasted economic variables remained relatively stable. This coupled with an increase in loans receivable contributed to an increase in reserves for collectively evaluated loans during the quarter ended September 30, 2025. This was offset by a decrease in specific reserves due to a decrease in nonaccrual loans requiring specific reserves. Specific reserves recorded during the quarter ended June 30, 2025 were released during the quarter ended September 30, 2025 primarily due to charge-offs of nonaccrual loans and paydowns on a nonaccrual loan relationship. The Company recorded
The following tables summarize the activity in the allowance for credit losses on loans which is recorded as a contra asset, and the reserve for unfunded commitments which is recorded on the balance sheet within other liabilities as of and for the three and nine months ended September 30, 2024.
| Allowance for Credit Losses – Three months ended September 30, 2024 | ||||||||||||||||||||
| Beginning | Provision | Ending | ||||||||||||||||||
| (in thousands) | Balance | Charge-offs | Recoveries | (Recovery) | Balance | |||||||||||||||
| Commercial | $ | $ | ( | ) | $ | $ | ( | ) | $ | |||||||||||
| Commercial Real Estate | ||||||||||||||||||||
| Agriculture | ( | ) | ||||||||||||||||||
| Residential Mortgage | ||||||||||||||||||||
| Residential Construction | ||||||||||||||||||||
| Consumer | ( | ) | ( | ) | ||||||||||||||||
| Allowance for credit losses on loans | ( | ) | ( | ) | ||||||||||||||||
| Reserve for unfunded commitments | ||||||||||||||||||||
| Total | $ | $ | ( | ) | $ | $ | ( | ) | $ | |||||||||||
| Allowance for Credit Losses - Nine months ended September 30, 2024 | ||||||||||||||||||||
| Beginning | Provision | Ending | ||||||||||||||||||
| (in thousands) | Balance | Charge-offs | Recoveries | (Recovery) | Balance | |||||||||||||||
| Commercial | $ | $ | ( | ) | $ | $ | $ | |||||||||||||
| Commercial Real Estate | ( | ) | ||||||||||||||||||
| Agriculture | ||||||||||||||||||||
| Residential Mortgage | ( | ) | ||||||||||||||||||
| Residential Construction | ||||||||||||||||||||
| Consumer | ( | ) | ( | ) | ||||||||||||||||
| Allowance for credit losses on loans | ( | ) | ||||||||||||||||||
| Reserve for unfunded commitments | ( | ) | ||||||||||||||||||
| Total | $ | $ | ( | ) | $ | $ | $ | |||||||||||||
Collateral-Dependent Loans
In accordance with ASC 326, a loan is considered collateral-dependent when the borrower is experiencing financial difficulty and repayment is expected to be provided substantially through the operation or sale of the collateral. All loans individually analyzed were collateral-dependent loans as of September 30, 2025 and December 31, 2024. The following table presents the amortized cost basis of collateral-dependent loans by class, which are individually evaluated to determine expected credit losses, as of September 30, 2025 and December 31, 2024:
September 30, 2025
| (in thousands) | Secured by 1-4 Family Residential Properties-1st lien | Secured by 1-4 Family Residential Properties-junior lien | Secured by 1-4 Family Residential Properties-revolving | Commercial | Construction and Land Development | |||||||||||||||
| Commercial | $ | $ | $ | $ | $ | |||||||||||||||
| Commercial Real Estate | ||||||||||||||||||||
| Agriculture | ||||||||||||||||||||
| Residential Mortgage | ||||||||||||||||||||
| Residential Construction | ||||||||||||||||||||
| Consumer | ||||||||||||||||||||
| Total | $ | $ | $ | $ | $ | |||||||||||||||
| Loans Secured by | Loans Secured by | |||||||||||||||||||
| Owner-occupied, | Other | |||||||||||||||||||
| Agriculture | Nonfarm | Nonfarm | ||||||||||||||||||
| Secured by | Production | Nonresidential | Nonresidential | |||||||||||||||||
| (in thousands) | Farmland | Loans | Properties | Properties | Total | |||||||||||||||
| Commercial | $ | $ | $ | $ | $ | |||||||||||||||
| Commercial Real Estate | ||||||||||||||||||||
| Agriculture | ||||||||||||||||||||
| Residential Mortgage | ||||||||||||||||||||
| Residential Construction | ||||||||||||||||||||
| Consumer | ||||||||||||||||||||
| Total | $ | $ | $ | $ | $ | |||||||||||||||
December 31, 2024
| (in thousands) | Secured by 1-4 Family Residential Properties-1st lien | Secured by 1-4 Family Residential Properties-junior lien | Secured by 1-4 Family Residential Properties-revolving | Commercial | Construction and Land Development | |||||||||||||||
| Commercial | $ | $ | $ | $ | $ | |||||||||||||||
| Commercial Real Estate | ||||||||||||||||||||
| Agriculture | ||||||||||||||||||||
| Residential Mortgage | ||||||||||||||||||||
| Residential Construction | ||||||||||||||||||||
| Consumer | ||||||||||||||||||||
| Total | $ | $ | $ | $ | $ | |||||||||||||||
| Loans Secured by | Loans Secured by | |||||||||||||||||||
| Owner-occupied, | Other | |||||||||||||||||||
| Nonfarm | Nonfarm | |||||||||||||||||||
| Secured by | Agriculture | Nonresidential | Nonresidential | |||||||||||||||||
| (in thousands) | Farmland | Production Loans | Properties | Properties | Total | |||||||||||||||
| Commercial | $ | $ | $ | $ | $ | |||||||||||||||
| Commercial Real Estate | ||||||||||||||||||||
| Agriculture | ||||||||||||||||||||
| Residential Mortgage | ||||||||||||||||||||
| Residential Construction | ||||||||||||||||||||
| Consumer | ||||||||||||||||||||
| Total | $ | $ | $ | $ | $ | |||||||||||||||
Foreclosure Proceedings
The Company had no residential real estate property in the process of foreclosure at September 30, 2025 and December 31, 2024.
Non-accrual and Past Due Loans
The Company’s loans by delinquency and non-accrual status, as of September 30, 2025 and December 31, 2024, was as follows:
| 90 days | Total | |||||||||||||||||||||||||||||||
| 30-59 days | 60-89 days | or More | Past Due & | Current & | Nonaccrual | |||||||||||||||||||||||||||
| Past Due & | Past Due & | Past Due & | Nonaccrual | Nonaccrual | Accruing | Total | Loans with | |||||||||||||||||||||||||
| (in thousands) | Accruing | Accruing | Accruing | Loans | Loans | Loans | Loans | No ACL | ||||||||||||||||||||||||
| September 30, 2025 | ||||||||||||||||||||||||||||||||
| Commercial | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
| Commercial Real Estate | ||||||||||||||||||||||||||||||||
| Agriculture | ||||||||||||||||||||||||||||||||
| Residential Mortgage | ||||||||||||||||||||||||||||||||
| Residential Construction | ||||||||||||||||||||||||||||||||
| Consumer | ||||||||||||||||||||||||||||||||
| Total | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
| December 31, 2024 | ||||||||||||||||||||||||||||||||
| Commercial | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
| Commercial Real Estate | ||||||||||||||||||||||||||||||||
| Agriculture | ||||||||||||||||||||||||||||||||
| Residential Mortgage | ||||||||||||||||||||||||||||||||
| Residential Construction | ||||||||||||||||||||||||||||||||
| Consumer | ||||||||||||||||||||||||||||||||
| Total | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
The Company recognized $
Loan Modifications
Occasionally, the Company modifies loans to borrowers in financial difficulty by providing principal forgiveness, term extension, payment delays or interest rate reduction. When principal forgiveness is provided, the amount of forgiveness is charged-off against the ACL.
In some cases, the Company provides multiple types of concessions on one loan. Typically, one type of concession, such as a term extension, is granted initially. If the borrower continues to experience financial difficulty, another concession, such as principal forgiveness, may be granted. For the loans included in the “combination” columns below, multiple types of modifications have been made on the same loan within the current reporting period. The combination is at least two of the following: a term extension, principal forgiveness, an other-than-insignificant payment delay and/or an interest rate reduction.
The following tables present the amortized cost basis of loans that were experiencing both financial difficulty and modification during the periods indicated, by class and by type of modification. The percentage of the amortized cost basis of loans that were modified to borrowers in financial difficulty as compared to the amortized cost basis of each class of financing receivable is also presented below.
The amortized cost basis of loans that were experiencing both financial difficulty and modification during the three months ended September 30, 2025 were as follows:
| (in thousands, except percentages) | Term Extension | Combination Term Extension and Interest Rate Reduction | Total Class of Financing Receivable | |||||||||
| Commercial | $ | $ | % | |||||||||
| Commercial Real Estate | % | |||||||||||
| Agriculture | % | |||||||||||
| Residential Mortgage | ||||||||||||
| Residential Construction | ||||||||||||
| Consumer | ||||||||||||
| Total | $ | $ | % | |||||||||
The amortized cost basis of loans that were experiencing both financial difficulty and modification during the nine months ended September 30, 2025 were as follows:
| (in thousands, except percentages) | Term Extension | Combination Term Extension and Interest Rate Reduction | Combination Term Extension and Payment Delay | Total Class of Financing Receivable | ||||||||||||
| Commercial | $ | $ | $ | % | ||||||||||||
| Commercial Real Estate | % | |||||||||||||||
| Agriculture | % | |||||||||||||||
| Residential Mortgage | ||||||||||||||||
| Residential Construction | ||||||||||||||||
| Consumer | ||||||||||||||||
| Total | $ | $ | $ | % | ||||||||||||
The amortized cost basis of loans that were experiencing both financial difficulty and modification during the three months ended September 30, 2024 were as follows:
| Combination | ||||||||||||
| Term Extension and | Total Class of | |||||||||||
| (in thousands, except percentages) | Term Extension | Interest Rate Reduction | Financing Receivable | |||||||||
| Commercial | $ | $ | % | |||||||||
| Commercial Real Estate | ||||||||||||
| Agriculture | ||||||||||||
| Residential Mortgage | ||||||||||||
| Residential Construction | ||||||||||||
| Consumer | ||||||||||||
| Total | $ | $ | % | |||||||||
The amortized cost basis of loans that were experiencing both financial difficulty and modification during the nine months ended September 30, 2024 were as follows:
| Combination | ||||||||||||
| Term Extension and | Total Class of | |||||||||||
| (in thousands, except percentages) | Term Extension | Interest Rate Reduction | Financing Receivable | |||||||||
| Commercial | $ | $ | % | |||||||||
| Commercial Real Estate | ||||||||||||
| Agriculture | ||||||||||||
| Residential Mortgage | ||||||||||||
| Residential Construction | ||||||||||||
| Consumer | ||||||||||||
| Total | $ | $ | % | |||||||||
The Company had no commitments to lend additional funds to borrowers whose loans were modified at September 30, 2025 and September 30, 2024.
The following table presents the financial effect of the loan modifications to borrowers experiencing financial difficulty during the three-month period ended September 30, 2025:
| Weighted-Average | Weighted-Average | |||||||
| Interest Rate | Term Extension | |||||||
| Reduction | (in months) | |||||||
| Commercial | ||||||||
| Commercial Real Estate | ||||||||
| Agriculture | % | |||||||
| Residential Mortgage | — | |||||||
| Residential Construction | — | |||||||
| Consumer | — | |||||||
| Total | % | |||||||
The following table presents the financial effect of the loan modifications to borrowers experiencing financial difficulty during the nine-month period ended September 30, 2025:
| Weighted-Average | Weighted-Average | |||||||
| Interest Rate | Term Extension | |||||||
| Reduction | (in months) | |||||||
| Commercial | ||||||||
| Commercial Real Estate | ||||||||
| Agriculture | % | |||||||
| Residential Mortgage | — | |||||||
| Residential Construction | — | |||||||
| Consumer | — | |||||||
| Total | % | |||||||
The following table presents the financial effect of the loan modifications to borrowers experiencing financial difficulty during the three-month period ended September 30, 2024:
| Weighted-Average | Weighted-Average | |||||||
| Interest Rate | Term Extension | |||||||
| Reduction | (in months) | |||||||
| Commercial | % | |||||||
| Commercial Real Estate | — | |||||||
| Agriculture | — | |||||||
| Residential Mortgage | — | |||||||
| Residential Construction | — | |||||||
| Consumer | — | |||||||
| Total | % | |||||||
The following table presents the financial effect of the loan modifications to borrowers experiencing financial difficulty during the nine-month period ended September 30, 2024:
| Weighted-Average | Weighted-Average | |||||||
| Interest Rate | Term Extension | |||||||
| Reduction | (in months) | |||||||
| Commercial | % | |||||||
| Commercial Real Estate | — | |||||||
| Agriculture | — | |||||||
| Residential Mortgage | — | |||||||
| Residential Construction | — | |||||||
| Consumer | — | |||||||
| Total | % | |||||||
A commercial real estate loan modified within the previous twelve months totaling $
Upon the Company's determination that a modified loan (or portion of a loan) has subsequently become uncollectible, the loan (or a portion of the loan) is written off. Therefore, the amortized cost basis of the loan is reduced by the uncollectible amount and the ACL is adjusted by the same amount.
Credit Quality Indicators
All loans are rated using the credit risk ratings and criteria adopted by the Company. Risk ratings are adjusted as future circumstances warrant. All credits risk rated 1, 2, 3, 4 or 5 equate to a Pass as indicated by Federal and State bank regulatory agencies; a 6 equates to a Special Mention; a 7 equates to Substandard; an 8 equates to Doubtful; and a 9 equates to a Loss. For the definitions of each risk rating, see Note 4 to our consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2024.
The following tables present the loan portfolio by loan class, origination year, and internal risk rating as of September 30, 2025. Generally, existing term loans that were re-underwritten are reflected in the table in the year of renewal. Lines of credit that have a conversion feature at the time of origination, such as construction to permanent loans, are presented by year of origination. Revolving loans converted to term loans totaled $
| (in thousands) | ||||||||||||||||||||||||||||||||
| Term Loans Amortized Cost Basis by Origination Year - As of September 30, 2025 | ||||||||||||||||||||||||||||||||
| Revolving | ||||||||||||||||||||||||||||||||
| Loans | ||||||||||||||||||||||||||||||||
| Amortized | ||||||||||||||||||||||||||||||||
| 2025 | 2024 | 2023 | 2022 | 2021 | Prior | Cost Basis | Total | |||||||||||||||||||||||||
| Commercial | ||||||||||||||||||||||||||||||||
| Pass | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
| Special Mention | ||||||||||||||||||||||||||||||||
| Substandard | ||||||||||||||||||||||||||||||||
| Doubtful/Loss | ||||||||||||||||||||||||||||||||
| Total Commercial loans | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
| Year-to-date Period Charge-offs | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||
| Year-to-date Recoveries | ||||||||||||||||||||||||||||||||
| Year-to-date Net Charge-offs | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||
| Commercial Real Estate | ||||||||||||||||||||||||||||||||
| Pass | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
| Special Mention | ||||||||||||||||||||||||||||||||
| Substandard | ||||||||||||||||||||||||||||||||
| Doubtful/Loss | ||||||||||||||||||||||||||||||||
| Total Commercial Real Estate loans | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
| Year-to-date Charge-offs | ( | ) | ( | ) | ||||||||||||||||||||||||||||
| Year-to-date Recoveries | ||||||||||||||||||||||||||||||||
| Year-to-date Net Charge-offs | ( | ) | ( | ) | ||||||||||||||||||||||||||||
| Agriculture | ||||||||||||||||||||||||||||||||
| Pass | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
| Special Mention | ||||||||||||||||||||||||||||||||
| Substandard | ||||||||||||||||||||||||||||||||
| Doubtful/Loss | ||||||||||||||||||||||||||||||||
| Total Agriculture loans | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
| Year-to-date Charge-offs | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||
| Year-to-date Recoveries | ||||||||||||||||||||||||||||||||
| Year-to-date Net Charge-offs | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||
| (in thousands) | ||||||||||||||||||||||||||||||||
| Term Loans Amortized Cost Basis by Origination Year - As of September 30, 2025 | ||||||||||||||||||||||||||||||||
| Revolving | ||||||||||||||||||||||||||||||||
| Loans | ||||||||||||||||||||||||||||||||
| Amortized | ||||||||||||||||||||||||||||||||
| 2025 | 2024 | 2023 | 2022 | 2021 | Prior | Cost Basis | Total | |||||||||||||||||||||||||
| Residential Mortgage | ||||||||||||||||||||||||||||||||
| Pass | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
| Special Mention | ||||||||||||||||||||||||||||||||
| Substandard | ||||||||||||||||||||||||||||||||
| Doubtful/Loss | ||||||||||||||||||||||||||||||||
| Total Residential Mortgage loans | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
| Year-to-date Charge-offs | ( | ) | ( | ) | ||||||||||||||||||||||||||||
| Year-to-date Recoveries | ||||||||||||||||||||||||||||||||
| Year-to-date Net Charge-offs | ( | ) | ( | ) | ||||||||||||||||||||||||||||
| Residential Construction | ||||||||||||||||||||||||||||||||
| Pass | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
| Special Mention | ||||||||||||||||||||||||||||||||
| Substandard | ||||||||||||||||||||||||||||||||
| Doubtful/Loss | ||||||||||||||||||||||||||||||||
| Total Residential Construction loans | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
| Year-to-date Charge-offs | ||||||||||||||||||||||||||||||||
| Year-to-date Recoveries | ||||||||||||||||||||||||||||||||
| Year-to-date Net Charge-offs | ||||||||||||||||||||||||||||||||
| Consumer | ||||||||||||||||||||||||||||||||
| Pass | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
| Special Mention | ||||||||||||||||||||||||||||||||
| Substandard | ||||||||||||||||||||||||||||||||
| Doubtful/Loss | ||||||||||||||||||||||||||||||||
| Total Consumer loans | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
| Year-to-date Charge-offs | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||
| Year-to-date Recoveries | ||||||||||||||||||||||||||||||||
| Year-to-date Net Charge-offs | ( | ) | ( | ) | ||||||||||||||||||||||||||||
| Total Loans | ||||||||||||||||||||||||||||||||
| Pass | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
| Special Mention | ||||||||||||||||||||||||||||||||
| Substandard | ||||||||||||||||||||||||||||||||
| Doubtful/Loss | ||||||||||||||||||||||||||||||||
| Total Loans | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
| Year-to-date Charge-offs | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | $ | ( | ) | $ | ( | ) | ||||||||||
| Year-to-date Recoveries | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
| Year-to-date Net Charge-offs | $ | ( | ) | $ | ( | ) | $ | $ | ( | ) | $ | ( | ) | $ | $ | ( | ) | $ | ( | ) | ||||||||||||
| (in thousands) | ||||||||||||||||||||||||||||||||
| Term Loans Amortized Cost Basis by Origination Year - As of December 31, 2024 | ||||||||||||||||||||||||||||||||
| Revolving | ||||||||||||||||||||||||||||||||
| Loans | ||||||||||||||||||||||||||||||||
| Amortized | ||||||||||||||||||||||||||||||||
| 2024 | 2023 | 2022 | 2021 | 2020 | Prior | Cost Basis | Total | |||||||||||||||||||||||||
| Commercial | ||||||||||||||||||||||||||||||||
| Pass | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
| Special Mention | ||||||||||||||||||||||||||||||||
| Substandard | ||||||||||||||||||||||||||||||||
| Doubtful/Loss | ||||||||||||||||||||||||||||||||
| Total Commercial loans | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
| Year-to-date Period Charge-offs | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||||
| Year-to-date Recoveries | ||||||||||||||||||||||||||||||||
| Year-to-date Net Charge-offs | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||
| Commercial Real Estate | ||||||||||||||||||||||||||||||||
| Pass | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
| Special Mention | ||||||||||||||||||||||||||||||||
| Substandard | ||||||||||||||||||||||||||||||||
| Doubtful/Loss | ||||||||||||||||||||||||||||||||
| Total Commercial Real Estate loans | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
| Year-to-date Charge-offs | ||||||||||||||||||||||||||||||||
| Year-to-date Recoveries | ||||||||||||||||||||||||||||||||
| Year-to-date Net Charge-offs | ||||||||||||||||||||||||||||||||
| Agriculture | ||||||||||||||||||||||||||||||||
| Pass | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
| Special Mention | ||||||||||||||||||||||||||||||||
| Substandard | ||||||||||||||||||||||||||||||||
| Doubtful/Loss | ||||||||||||||||||||||||||||||||
| Total Agriculture loans | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
| Year-to-date Charge-offs | ||||||||||||||||||||||||||||||||
| Year-to-date Recoveries | ||||||||||||||||||||||||||||||||
| Year-to-date Net Charge-offs | ||||||||||||||||||||||||||||||||
| (in thousands) | ||||||||||||||||||||||||||||||||
| Term Loans Amortized Cost Basis by Origination Year - As of December 31, 2024 | ||||||||||||||||||||||||||||||||
| Revolving | ||||||||||||||||||||||||||||||||
| Loans | ||||||||||||||||||||||||||||||||
| Amortized | ||||||||||||||||||||||||||||||||
| 2024 | 2023 | 2022 | 2021 | 2020 | Prior | Cost Basis | Total | |||||||||||||||||||||||||
| Residential Mortgage | ||||||||||||||||||||||||||||||||
| Pass | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
| Special Mention | ||||||||||||||||||||||||||||||||
| Substandard | ||||||||||||||||||||||||||||||||
| Doubtful/Loss | ||||||||||||||||||||||||||||||||
| Total Residential Mortgage loans | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
| Year-to-date Charge-offs | ||||||||||||||||||||||||||||||||
| Year-to-date Recoveries | ||||||||||||||||||||||||||||||||
| Year-to-date Net Charge-offs | ||||||||||||||||||||||||||||||||
| Residential Construction | ||||||||||||||||||||||||||||||||
| Pass | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
| Special Mention | ||||||||||||||||||||||||||||||||
| Substandard | ||||||||||||||||||||||||||||||||
| Doubtful/Loss | ||||||||||||||||||||||||||||||||
| Total Residential Construction loans | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
| Year-to-date Charge-offs | ||||||||||||||||||||||||||||||||
| Year-to-date Recoveries | ||||||||||||||||||||||||||||||||
| Year-to-date Net Charge-offs | ||||||||||||||||||||||||||||||||
| Consumer | ||||||||||||||||||||||||||||||||
| Pass | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
| Special Mention | ||||||||||||||||||||||||||||||||
| Substandard | ||||||||||||||||||||||||||||||||
| Doubtful/Loss | ||||||||||||||||||||||||||||||||
| Total Consumer loans | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
| Year-to-date Charge-offs | ( | ) | ( | ) | ||||||||||||||||||||||||||||
| Year-to-date Recoveries | ||||||||||||||||||||||||||||||||
| Year-to-date Net Charge-offs | ( | ) | ( | ) | ||||||||||||||||||||||||||||
| Total Loans | ||||||||||||||||||||||||||||||||
| Pass | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
| Special Mention | ||||||||||||||||||||||||||||||||
| Substandard | ||||||||||||||||||||||||||||||||
| Doubtful/Loss | ||||||||||||||||||||||||||||||||
| Total Loans | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
| Year-to-date Charge-offs | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | $ | ( | ) | ||||||||||
| Year-to-date Recoveries | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
| Year-to-date Net Charge-offs | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | $ | $ | ( | ) | ||||||||||||
5. MORTGAGE OPERATIONS
Transfers and servicing of financial assets and extinguishments of liabilities are accounted for and reported based on consistent application of a financial-components approach that focuses on control. Transfers of financial assets that are sales are distinguished from transfers that are secured borrowings. Retained servicing rights on loans sold are measured by allocating the previous carrying amount of the transferred assets between the loans sold and retained interest, if any, based on their relative fair value at the date of transfer. Fair values are estimated using discounted cash flows based on a current market interest rate.
The Company recognizes a gain and a related asset for the fair value of the rights to service loans for others when loans are sold. The Company sold a substantial portion of its portfolio of conforming long-term residential mortgage loans originated during the nine months ended September 30, 2025 for cash proceeds equal to the fair value of the loans. The Company serviced real estate mortgage loans for others totaling $
The recorded value of mortgage servicing rights is amortized in proportion to, and over the period of, estimated net servicing revenues. The Company assesses capitalized mortgage servicing rights for impairment based upon the fair value of those rights at each reporting date. For purposes of measuring impairment, the rights are stratified based upon the product type, term and interest rates. Fair value is determined by discounting estimated net future cash flows from mortgage servicing activities using discount rates that approximate current market rates and estimated prepayment rates, among other assumptions. The amount of impairment recognized, if any, is the amount by which the capitalized mortgage servicing rights for a stratum exceeds their fair value. Impairment, if any, is recognized through a valuation allowance for each individual stratum. Changes in the carrying amount of mortgage servicing rights are reported in earnings under loan servicing income on the condensed consolidated statements of income.
Key assumptions used in measuring the fair value of mortgage servicing rights as of September 30, 2025 and December 31, 2024 were as follows:
| September 30, 2025 | December 31, 2024 | |||||||
| Constant prepayment rate | % | % | ||||||
| Discount rate | % | % | ||||||
| Weighted average life (years) | ||||||||
The following tables summarize the changes to the Company’s mortgage servicing rights assets as of the periods presented. Mortgage servicing rights are included in Interest Receivable and Other Assets on the condensed consolidated balance sheets.
| (in thousands) | June 30, 2025 | Additions | Reductions | September 30, 2025 | ||||||||||||
| Mortgage servicing rights | $ | $ | $ | ( | ) | $ | ||||||||||
| Valuation allowance | ||||||||||||||||
| Mortgage servicing rights, net of valuation allowance | $ | $ | $ | ( | ) | $ | ||||||||||
| (in thousands) | December 31, 2024 | Additions | Reductions | September 30, 2025 | ||||||||||||
| Mortgage servicing rights | $ | $ | $ | ( | ) | $ | ||||||||||
| Valuation allowance | ||||||||||||||||
| Mortgage servicing rights, net of valuation allowance | $ | $ | $ | ( | ) | $ | ||||||||||
At September 30, 2025 and December 31, 2024, the estimated fair market value of the Company’s mortgage servicing rights assets was $
The Company received contractually specified servicing fees of $
6. FAIR VALUE MEASUREMENTS
The Company utilizes fair value measurements to record fair value adjustments to certain assets and liabilities and to determine fair value disclosures. Securities available-for-sale and trading securities are recorded at fair value on a recurring basis. Additionally, from time to time, the Company may be required to record at fair value other assets on a non-recurring basis, such as loans held-for-sale, loans held-for-investment and certain other assets. These non-recurring fair value adjustments typically involve application of lower of cost or market accounting or write-downs of individual assets. Transfers between levels of the fair value hierarchy are recognized on the actual date of the event or circumstances that caused the transfer, which generally corresponds with the Company’s quarterly valuation process.
Assets Recorded at Fair Value on a Recurring Basis
The table below presents the recorded amount of assets and liabilities measured at fair value on a recurring basis as of September 30, 2025 and December 31, 2024.
| Quoted Prices | Significant | |||||||||||||||
| in Active | Other | Significant | ||||||||||||||
| Markets for | Observable | Unobservable | ||||||||||||||
| (in thousands) | Identical Assets | Inputs | Inputs | |||||||||||||
| September 30, 2025 | Fair Value | (Level 1) | (Level 2) | (Level 3) | ||||||||||||
| U.S. Treasury securities | $ | $ | $ | $ | ||||||||||||
| Securities of U.S. government agencies and corporations | ||||||||||||||||
| Obligations of states and political subdivisions | ||||||||||||||||
| Collateralized mortgage obligations | ||||||||||||||||
| Mortgage-backed securities | ||||||||||||||||
| Total investments at fair value | $ | $ | $ | $ | ||||||||||||
| Quoted Prices | Significant | |||||||||||||||
| in Active | Other | Significant | ||||||||||||||
| Markets for | Observable | Unobservable | ||||||||||||||
| (in thousands) | Identical Assets | Inputs | Inputs | |||||||||||||
| December 31, 2024 | Fair Value | (Level 1) | (Level 2) | (Level 3) | ||||||||||||
| U.S. Treasury securities | $ | $ | $ | $ | ||||||||||||
| Securities of U.S. government agencies and corporations | ||||||||||||||||
| Obligations of states and political subdivisions | ||||||||||||||||
| Collateralized mortgage obligations | ||||||||||||||||
| Mortgage-backed securities | ||||||||||||||||
| Total investments at fair value | $ | $ | $ | $ | ||||||||||||
Assets Recorded at Fair Value on a Non-Recurring Basis
Assets measured at fair value on a non-recurring basis are included in the table below by level within the fair value hierarchy as of September 30, 2025.
| (in thousands) | Carrying | |||||||||||||||
| September 30, 2025 | Value | Level 1 | Level 2 | Level 3 | ||||||||||||
| Collateral dependent loans | $ | $ | $ | $ | ||||||||||||
| Total assets at fair value | $ | $ | $ | $ | ||||||||||||
| (in thousands) | Carrying | |||||||||||||||
| December 31, 2024 | Value | Level 1 | Level 2 | Level 3 | ||||||||||||
| Collateral dependent loans | $ | $ | $ | $ | ||||||||||||
| Total assets at fair value | $ | $ | $ | $ | ||||||||||||
There were no liabilities measured at fair value on a recurring or non-recurring basis at September 30, 2025 and December 31, 2024.
Key methods and assumptions used in measuring the fair value of collateral dependent loans as of September 30, 2025 were as follows:
| Method | Assumption Inputs | |||
| Collateral dependent loans | Collateral, market, income, enterprise, liquidation | External appraised values, management assumptions regarding market trends or other relevant factors, selling costs generally ranging from |
The following section describes the valuation methodologies used for assets and liabilities recorded at fair value.
Investment Securities Available-for-Sale
Investment securities available-for-sale are recorded at fair value on a recurring basis. Fair value measurement is based upon quoted market prices, if available. If quoted market prices are not available, fair values are measured using independent pricing models or other model-based valuation techniques such as the present value of future cash flows, adjusted for the security’s credit rating, prepayment assumptions, and other factors such as credit loss assumptions. Level 1 securities include those traded on an active exchange, such as the New York Stock Exchange, U.S. Treasury securities that are traded by dealers or brokers in active over-the-counter markets and money market funds. Level 2 securities include mortgage-backed securities issued by government sponsored entities, municipal bonds and corporate debt securities. Securities classified as Level 3 include asset-backed securities in less liquid markets where valuations include significant unobservable assumptions.
Collateral Dependent Loans
The Company does not record loans at fair value on a recurring basis. Loans that do not share similar risk characteristics are individually evaluated by management for potential impairment. Included in loans individually evaluated are collateral dependent loans. A loan is considered to be collateral dependent when repayment is expected to be provided substantially through the operation or sale of the collateral. Collateral dependent loans are considered to have unique risk characteristics and are individually evaluated. The ACL on collateral dependent loans is measured using the fair value of the underlying collateral, adjusted for costs to sell when applicable, less the amortized cost basis of the financial asset. If the value of underlying collateral is determined to be less than the recorded amount of the loan, a charge-off will be taken. Collateral dependent loans where a charge-off is recorded based on the fair value of collateral require classification in the fair value hierarchy. When a loan is evaluated based on the fair value of the underlying collateral securing the loan, the Company records the collateral dependent loan as non-recurring Level 3 given the valuation includes significant unobservable assumptions.
Disclosures about Fair Value of Financial Instruments
The estimated fair values of the Company’s financial instruments for the periods ended September 30, 2025 and December 31, 2024 were approximately as follows:
| September 30, 2025 | December 31, 2024 | |||||||||||||||||||
| Carrying | Fair | Carrying | Fair | |||||||||||||||||
| Level | amount | value | amount | value | ||||||||||||||||
| (in thousands) | ||||||||||||||||||||
| Financial assets: | ||||||||||||||||||||
| Cash and cash equivalents | 1 | $ | $ | $ | $ | |||||||||||||||
| Certificates of deposit | 2 | $ | ||||||||||||||||||
| Stock in Federal Home Loan Bank and other equity securities | 3 | |||||||||||||||||||
| Loans receivable: | ||||||||||||||||||||
| Net loans | 3 | |||||||||||||||||||
| Interest receivable | 2 | |||||||||||||||||||
| Mortgage servicing rights | 3 | |||||||||||||||||||
| Financial liabilities: | ||||||||||||||||||||
| Time deposits | 3 | |||||||||||||||||||
| Interest payable | 2 | |||||||||||||||||||
Limitations
Fair value estimates are made at a specific point in time, based on relevant market information and information about the financial instrument and expected exit prices. These estimates do not reflect any premium or discount that could result from offering for sale at one time the Company’s entire holdings of a particular financial instrument. Because no market exists for a significant portion of the Company’s financial instruments, fair value estimates are based on judgments regarding future expected loss experience, current economic conditions, risk characteristics of various financial instruments, and other factors. These estimates are subjective in nature and involve uncertainties and matters of significant judgment and therefore cannot be determined with precision. Changes in assumptions could significantly affect the estimates.
Fair value estimates are based on existing on- and off-balance sheet financial instruments without attempting to estimate the value of anticipated future business and the value of assets and liabilities that are not considered financial instruments. Other significant assets and liabilities that are not considered financial assets or liabilities include deferred tax liabilities and premises and equipment. In addition, the tax ramifications related to the realization of the unrealized gains and losses can have a significant effect on fair value estimates and have not been considered in many of the estimates.
7. COMMITMENTS AND CONTINGENCIES
The Company is a party to financial instruments with off-balance sheet risk in the normal course of business to meet the financing needs of its customers. These financial instruments include commitments to extend credit in the form of loans or through standby letters of credit. These instruments involve, to varying degrees, elements of credit and interest rate risk in excess of the amounts recognized in the balance sheet. The contract amounts of those instruments reflect the extent of involvement the Company has in particular classes of financial instruments.
The Bank’s exposure to credit loss in the event of non-performance by the other party to the financial instrument for commitments to extend credit and standby letters of credit is represented by the contractual notional amount of those instruments. The Bank uses the same credit policies in making commitments and conditional obligations as it does for on-balance sheet instruments.
Financial instruments, whose contract amounts represent credit risk at the indicated periods, were as follows:
| (in thousands) | September 30, 2025 | December 31, 2024 | ||||||
| Undisbursed loan commitments | $ | $ | ||||||
| Standby letters of credit | ||||||||
| $ | $ | |||||||
Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Since many of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. The Bank evaluates each customer’s creditworthiness on a case-by-case basis. The amount of collateral obtained, if deemed necessary by the Bank upon extension of credit, is based on management’s credit evaluation. The types of collateral held varies but may include accounts receivable, inventory, property, plant and equipment, and income-producing commercial properties.
Standby letters of credit are conditional commitments issued by the Bank to guarantee the performance of a customer to a third party. The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan facilities to customers. The Bank issues both financial and performance standby letters of credit. The financial standby letters of credit are primarily to guarantee payment to third parties. At September 30, 2025 and December 31, 2024, there were no financial standby letters of credit outstanding. The performance standby letters of credit are typically issued to municipalities as specific performance bonds. Performance standby letters of credit totaled $
Commitments to extend credit and standby letters of credit bear similar credit risk characteristics as outstanding loans. As of September 30, 2025 and December 31, 2024, the Company had no off-balance sheet derivatives requiring additional disclosure.
The Company may enter into interest rate lock commitments in connection with its mortgage banking activities to fund residential mortgage loans within specified times in the future. These commitments expose the Company to the risk that the price of the loan underlying the interest rate lock commitment might decline from the inception of the interest rate lock to the funding of the mortgage loan. To protect against this risk, the Company may enter into commitments to sell loans to economically hedge the risk of potential changes in the value of the loans that would result from the commitment. There were no commitments at September 30, 2025 and December 31, 2024. Mortgage loans sold to investors may be sold with servicing rights retained, for which the Company makes only standard legal representations and warranties as to meeting certain underwriting and collateral documentation standards. Management believes that any liabilities that may result from such recourse provisions are not significant.
8. STOCK PLANS
On
The following table presents the activity related to stock options for the three months ended September 30, 2025.
| Weighted | ||||||||||||||||
| Weighted | Average | |||||||||||||||
| Average | Aggregate | Remaining | ||||||||||||||
| Number of | Exercise | Intrinsic | Contractual | |||||||||||||
| Shares | Price | Value | Term (in years) | |||||||||||||
| Options outstanding at Beginning of Period | $ | |||||||||||||||
| Granted | ||||||||||||||||
| Expired | ||||||||||||||||
| Cancelled / Forfeited | ||||||||||||||||
| Exercised | ||||||||||||||||
| Options outstanding at End of Period | $ | $ | ||||||||||||||
| Exercisable (vested) at End of Period | $ | $ | ||||||||||||||
The following table presents the activity related to stock options for the nine months ended September 30, 2025.
| Weighted | ||||||||||||||||
| Weighted | Average | |||||||||||||||
| Average | Aggregate | Remaining | ||||||||||||||
| Number of | Exercise | Intrinsic | Contractual | |||||||||||||
| Shares | Price | Value | Term (in years) | |||||||||||||
| Options outstanding at Beginning of Period | $ | |||||||||||||||
| Granted | ||||||||||||||||
| Expired | ||||||||||||||||
| Cancelled / Forfeited | ||||||||||||||||
| Exercised | ( | ) | ||||||||||||||
| Options outstanding at End of Period | $ | $ | ||||||||||||||
| Exercisable (vested) at End of Period | $ | $ | ||||||||||||||
The intrinsic value of options exercised was $
As of September 30, 2025, there was $
There was $
The following table presents the activity related to non-vested restricted stock for the three months ended September 30, 2025.
| Weighted | ||||||||||||||||
| Weighted | Average | |||||||||||||||
| Average | Aggregate | Remaining | ||||||||||||||
| Number of | Grant Date | Intrinsic | Contractual | |||||||||||||
| Shares | Fair Value | Value | Term (in years) | |||||||||||||
| Non-vested Restricted stock outstanding at Beginning of Period | $ | |||||||||||||||
| Granted | ||||||||||||||||
| Cancelled / Forfeited | ||||||||||||||||
| Exercised/Released/Vested | ||||||||||||||||
| Non-vested restricted stock outstanding at End of Period | $ | $ | ||||||||||||||
The following table presents the activity related to non-vested restricted stock for the nine months ended September 30, 2025.
| Weighted | ||||||||||||||||
| Weighted | Average | |||||||||||||||
| Average | Aggregate | Remaining | ||||||||||||||
| Number of | Grant Date | Intrinsic | Contractual | |||||||||||||
| Shares | Fair Value | Value | Term (in years) | |||||||||||||
| Non-vested Restricted stock outstanding at Beginning of Period | $ | |||||||||||||||
| Granted | ||||||||||||||||
| Cancelled / Forfeited | ||||||||||||||||
| Exercised/Released/Vested | ( | ) | ||||||||||||||
| Non-vested restricted stock outstanding at End of Period | $ | $ | ||||||||||||||
The weighted average fair value of restricted stock granted during the nine months ended September 30, 2025 was $
As of September 30, 2025, there was $
There was $
The Company has an Employee Stock Purchase Plan (“ESPP”). There are
The ESPP is implemented by participation periods of not more than twenty-seven months each. The Board of Directors determines the commencement date and duration of each participation period. The Board of Directors approved the current participation period of November 24, 2024 to November 23, 2025. An eligible employee is one who has been continually employed for at least 90 days prior to commencement of a participation period. Under the terms of the ESPP, employees can choose to have up to
As of September 30, 2025, there was $
There was $
The weighted average fair value option at issuance date during the nine months ended September 30, 2025 was $
A summary of the weighted average assumptions used in valuing ESPP issuances during the three and nine months ended September 30, 2025 is presented below.
| Three Months Ended | Nine Months Ended | |||||||
| September 30, 2025 | September 30, 2025 | |||||||
| Risk Free Interest Rate | % | % | ||||||
| Expected Dividend Yield | % | % | ||||||
| Expected Life in Years | ||||||||
| Expected Price Volatility | % | % | ||||||
9. ACCUMULATED OTHER COMPREHENSIVE LOSS
The following table details activity in accumulated other comprehensive income (loss) for the three months ended September 30, 2025.
| Accumulated | ||||||||||||||||
| Unrealized | Officers’ | Directors’ | other | |||||||||||||
| losses on | retirement | retirement | comprehensive | |||||||||||||
| (in thousands) | securities | plan | plan | loss | ||||||||||||
| Balance as of June 30, 2025 | $ | ( | ) | $ | $ | $ | ( | ) | ||||||||
| Current period other comprehensive income | ||||||||||||||||
| Balance as of September 30, 2025 | $ | ( | ) | $ | $ | $ | ( | ) | ||||||||
The following table details activity in accumulated other comprehensive income (loss) for the nine months ended September 30, 2025.
| Accumulated | ||||||||||||||||
| Unrealized | Officers’ | Directors’ | other | |||||||||||||
| losses on | retirement | retirement | comprehensive | |||||||||||||
| (in thousands) | securities | plan | plan | loss | ||||||||||||
| Balance as of December 31, 2024 | $ | ( | ) | $ | $ | $ | ( | ) | ||||||||
| Current period other comprehensive income | ||||||||||||||||
| Balance as of September 30, 2025 | $ | ( | ) | $ | $ | $ | ( | ) | ||||||||
The following table details activity in accumulated other comprehensive income (loss) for the three months ended September 30, 2024.
| Accumulated | ||||||||||||||||
| Unrealized | Officers’ | Directors’ | other | |||||||||||||
| losses on | retirement | retirement | comprehensive | |||||||||||||
| (in thousands) | securities | plan | plan | loss | ||||||||||||
| Balance as of June 30, 2024 | $ | ( | ) | $ | ( | ) | $ | $ | ( | ) | ||||||
| Current period other comprehensive income | ||||||||||||||||
| Balance as of September 30, 2024 | $ | ( | ) | $ | ( | ) | $ | $ | ( | ) | ||||||
The following table details activity in accumulated other comprehensive income (loss) for the nine months ended September 30, 2024.
| Accumulated | ||||||||||||||||
| Unrealized | other | |||||||||||||||
| losses on | Officers’ | Directors’ | comprehensive | |||||||||||||
| (in thousands) | securities | retirement plan | retirement plan | loss | ||||||||||||
| Balance as of December 31, 2023 | $ | ( | ) | $ | ( | ) | $ | $ | ( | ) | ||||||
| Current period other comprehensive income | ||||||||||||||||
| Balance as of September 30, 2024 | $ | ( | ) | $ | ( | ) | $ | $ | ( | ) | ||||||
10. OUTSTANDING SHARES AND EARNINGS PER SHARE
On
Earnings Per Share (EPS)
Basic EPS includes no dilution and is computed by dividing net income available to common shareholders by the weighted average number of common shares outstanding for the respective period. Diluted EPS is computed by dividing net income available to common shareholders by the weighted average number of shares outstanding plus dilutive shares for the quarter. Diluted shares include all common stock equivalents (“in-the-money” stock options, unvested restricted stock, stock units, warrants and rights, convertible bonds and preferred stock), which reflects the potential dilution of securities that could share in the earnings of the Company.
The following table presents a reconciliation of basic and diluted EPS for the three and nine months ended September 30, 2025 and 2024:
| Three months ended | Nine months ended | |||||||||||||||
| September 30, | September 30, | |||||||||||||||
| (in thousands, except share and per share amounts): | 2025 | 2024 | 2025 | 2024 | ||||||||||||
| Basic earnings per share: | ||||||||||||||||
| Net income | $ | $ | $ | $ | ||||||||||||
| Weighted average common shares outstanding | ||||||||||||||||
| Basic EPS | $ | $ | $ | $ | ||||||||||||
| Diluted earnings per share: | ||||||||||||||||
| Net income | $ | $ | $ | $ | ||||||||||||
| Weighted average common shares outstanding | ||||||||||||||||
| Effect of dilutive shares | ||||||||||||||||
| Adjusted weighted average common shares outstanding | ||||||||||||||||
| Diluted EPS | $ | $ | $ | $ | ||||||||||||
Stock options which were not included in the computation of diluted earnings per share because they would have had an anti-dilutive effect amounted to
11. LEASES
The Company leases
Most leases include options to renew, with renewal terms that can extend the lease term from
The Company uses its FHLB advance fixed rates, which are its incremental borrowing rates for secured borrowings, as the discount rates to calculate lease liabilities.
The Company had right-of-use assets totaling $
The table below summarizes the maturity of remaining lease liabilities at September 30, 2025:
| (in thousands) | September 30, 2025 | |||
| 2025 (remaining 3 months) | $ | |||
| 2026 | ||||
| 2027 | ||||
| 2028 | ||||
| 2029 | ||||
| 2030 and thereafter | ||||
| Total lease payments | ||||
| Less: interest | ( | ) | ||
| Present value of lease liabilities | $ | |||
The following table presents supplemental cash flow information related to leases for the three and nine months ended September 30, 2025:
| Three months ended | Nine months ended | |||||||||||||||
| September 30, | September 30, | |||||||||||||||
| (in thousands) | 2025 | 2024 | 2025 | 2024 | ||||||||||||
| Cash paid for amounts included in the measurement of lease liabilities | ||||||||||||||||
| Operating cash flows from operating leases | $ | $ | $ | $ | ||||||||||||
| Right-of-use assets obtained in exchange for new operating lease liabilities | $ | $ | $ | $ | ||||||||||||
The following table presents the weighted average operating lease term and discount rate as of September 30, 2025 and December 31, 2024:
| September 30, 2025 | December 31, 2024 | |||||||
| Weighted-average remaining lease term – operating leases, in years | ||||||||
| Weighted-average discount rate – operating leases | % | % | ||||||
12. SEGMENT DISCLOSURES
The Company evaluated its operating segments in accordance with ASC 280, Segment Reporting, and determined it has one reportable segment, banking operations. The Company is engaged in a single line of business, indicative of a traditional banking institution, gathering deposits and originating loans in its primary market areas.
The Company manages its operations, allocates resources and monitors and reports its financials as a single operating segment. The Company's Chief Executive Officer is considered the Chief Operating Decision Maker. The Chief Operating Decision Maker evaluates segment performance using consolidated net income.
Loans, interest bearing accounts, investment securities, deposits, and non-interest income provide the revenues in banking operations and are presented in the Company's consolidated balance sheets. Interest expense, provisions for credit losses, salaries and employee benefits, occupancy and equipment, and data processing provide significant expenses in banking operations and are presented in the Company's consolidated statements of income. Segment performance is evaluated using consolidated net income with the majority of the Company's net income derived from net interest income.
The accounting policies for the segment is consistent with those described in Note 1 - Summary of Significant Accounting Policies to the consolidated financial statements in the Company’s 2024 Form 10-K.
FIRST NORTHERN COMMUNITY BANCORP
ITEM 2. – MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FORWARD-LOOKING STATEMENTS
This report may include forward-looking statements, which may include forecasts of our financial results and condition, expectations for our operations and business, and our assumptions for those forecasts and expectations. Do not rely unduly on forward-looking statements. Actual results might differ significantly compared to our forecasts, if any, and expectations. See Part I, Item 1A. “Risk Factors,” and the other risks described in our 2024 Form 10-K and Part II, Item 1A "Risk Factors" in this Quarterly Report on Form 10-Q and the other risks described in our Quarterly Reports on Form 10-Q, for factors to be considered when reading any forward-looking statements in this filing.
This report and other reports or statements which we may release may include forward-looking statements, which are subject to the “safe harbor” created by section 27A of the Securities Act of 1933, as amended, and section 21E of the Securities Exchange Act of 1934, as amended. We may make forward-looking statements in our Securities and Exchange Commission (SEC) filings, press releases, news articles and when we are speaking on behalf of the Company. Forward-looking statements can be identified by the fact that they do not relate strictly to historical or current facts. Often, they include the words “believe,” “expect,” “target,” “anticipate,” “intend,” “plan,” “seek,” “strive,” “estimate,” “potential,” “project,” or words of similar meaning, or future or conditional verbs such as “will,” “would,” “should,” “could,” “might,” or “may.” These forward-looking statements are intended to provide investors with additional information with which they may assess our future potential. All of these forward-looking statements are based on assumptions about an uncertain future and are based on information available to us at the date of these statements. We do not undertake to update forward-looking statements to reflect facts, circumstances, assumptions or events that occur after the date any forward-looking statements are made, except as may be required by law.
In this document and in other SEC filings or other public statements, for example, we make forward-looking statements relating to the following topics, among others:
| ● |
Our business objectives, strategies and initiatives, our organizational structure, the growth of our business and our competitive position and prospects, and the effect of competition on our business and strategies |
| ● |
Our assessment of significant factors and developments that have affected or may affect our results |
| ● |
Legal and regulatory actions, and future legislative and regulatory developments |
| ● |
Regulatory and compliance controls, processes and requirements and their impact on our business |
| ● |
The costs and effects of legal or regulatory actions |
| ● |
Expectations regarding draws on performance letters of credit and liabilities that may result from recourse provisions in standby letters of credit |
| ● |
Our intent to sell or hold, and the likelihood that we would be required to sell, various investment securities |
| ● |
Our regulatory capital requirements, including the capital rules established after the 2008 financial crisis by the U.S. federal banking agencies and our current intention not to elect to use the community bank leverage ratio framework |
| ● |
Expectations regarding our non-payment of a cash dividend on our common stock in the foreseeable future |
| ● |
Credit quality and provision for credit losses and management of asset quality and credit risk, expectations regarding collections and the timing thereof |
| ● |
Our allowances for credit losses, including the conditions we consider in determining the unallocated allowance and our portfolio credit quality, the adequacy of the allowance for credit losses, underwriting standards, and risk grading |
| ● |
Our assessment of economic conditions and trends and credit cycles and their impact on our business including the imposition of tariffs on imported goods to the U.S. |
| ● |
The seasonal nature of our business |
| ● |
The impact of changes in interest rates and our strategy to manage our interest rate risk profile and the possible effect of changes in residential mortgage interest rates on new originations and refinancing of existing residential mortgage loans |
| ● |
Loan portfolio composition and risk grade trends, expected charge-offs, portfolio credit quality, loan demand, our strategy regarding loan modifications, delinquency rates and our underwriting standards and our expectations regarding our recognition of interest income on loans that were provided payment deferrals upon completion of the payment forbearance period |
| ● |
Our deposit base including renewal of time deposits and the outlook for deposit balances |
| ● |
The impact on our net interest income and net interest margin of changes in interest rates |
| ● |
The effect of possible changes in the initiatives and policies of the federal and state bank regulatory agencies, as well as the Public Company Accounting Oversight Board, the Financial Accounting Standards Board, the Securities and Exchange Commission and other standard setters |
| ● |
Tax rates and the impact of changes in the U.S. tax laws |
| ● |
Our pension and retirement plan costs |
| ● |
Our liquidity strategies and beliefs concerning the adequacy of our liquidity, sources and amounts of funds and ability to satisfactorily manage our liquidity |
| ● |
Critical accounting policies and estimates, the impact or anticipated impact of recent accounting pronouncements or changes in accounting principles |
| ● |
Expected rates of return, maturities, loss exposure, growth rates, yields, and projected results |
| ● |
The possible impact of weather-related or other natural conditions, including drought, fire or flooding, seismic events, and related governmental responses, including related electrical power outages, on economic conditions, especially in the agricultural sector |
| ● |
Maintenance of insurance coverages appropriate for our operations |
| ● |
Threats to the banking sector and our business due to cybersecurity issues and attacks and regulatory expectations related to cybersecurity |
| ● |
The possible effects on community banks and our business from the failures of other banks |
| ● |
The possible adverse impacts on the banking industry and our business from a period of significant, prolonged inflation |
|
|
|
||
| ● |
Descriptions of assumptions underlying or relating to any of the foregoing |
Readers of this document should not rely on any forward-looking statements, which reflect only our management’s belief as of the date of this report. There are numerous risks and uncertainties that could and will cause actual results to differ materially from those discussed in our forward-looking statements. Many of these factors are beyond our ability to control or predict and could have a material adverse effect on our financial condition and results of operations or prospects. Such risks and uncertainties include, but are not limited to those listed in Item 1A “Risk Factors” of Part II of this Form 10-Q, Item 2 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of Part I of this Form 10-Q and "Risk Factors" and “Supervision and Regulation” in our 2024 Form 10-K, and in our other reports to the SEC.
INTRODUCTION
This overview of Management’s Discussion and Analysis highlights selected information in this report and may not contain all of the information that is important to you. For a more complete understanding of trends, events, commitments, uncertainties, liquidity, capital resources and critical accounting estimates, you should carefully read this entire report and our other reports to the SEC, together with our Consolidated Financial Statements and the Notes to Consolidated Financial Statements included in our 2024 Form 10-K.
Our subsidiary, First Northern Bank of Dixon (the “Bank”), is a California state-chartered bank that derives most of its revenues from lending and deposit taking in the Sacramento Valley region of Northern California. Interest rates, business conditions and customer confidence all affect our ability to generate revenues. In addition, the regulatory and compliance environment and competition can present challenges to our ability to generate those revenues.
Significant results and developments during the third quarter and year-to-date 2025 included:
| ● |
Net income of $15.2 million for the nine months ended September 30, 2025, up 6.8% from net income of $14.2 million earned for the same period last year. Net income of $6.0 million for the three months ended September 30, 2025, up 9.6% from net income of $5.5 million earned for the same period last year. |
| ● |
Diluted income per share of $0.96 for the nine months ended September 30, 2025, up 9.0% from diluted income per share of $0.88 for the same period last year. Diluted income per share of $0.38 for the three months ended September 30, 2025, up 11.8% from diluted income per share of $0.34 for the same period last year. |
| ● |
Net interest income of $49.7 million for the nine months ended September 30, 2025, up 4.0% from net interest income of $47.8 million for the same period last year. Net interest income of $16.8 million for the three months ended September 30, 2025, up 2.1% from net interest income of $16.5 million for the same period last year. |
| ● |
Net interest margin of 3.75% for the nine months ended September 30, 2025, increased 15 basis points from net interest margin of 3.60% for the same period last year. Net interest margin of 3.75% for the three months ended September 30, 2025, increased 10 basis points from net interest margin of 3.65% for the same period last year. |
| ● |
Provision for credit losses of $0.9 million for the nine months ended September 30, 2025, up 325.0% from provision for credit losses of $0.2 million for the same period last year. No provision for credit losses for the three months ended September 30, 2025 compared to a reversal of provision for credit losses of $0.6 million for the same period last year. |
| ● |
Total assets of $1.91 billion as of September 30, 2025, up 0.9% from $1.89 billion as of December 31, 2024. |
| ● |
Total net loans (including loans held-for-sale) of $1.06 billion as of September 30, 2025, up 0.9% from $1.05 billion as of December 31, 2024. |
| ● |
Total investment securities of $601.5 million as of September 30, 2025, down 5.1% from $633.9 million as of December 31, 2024. |
| ● |
Total deposits of $1.69 billion as of September 30, 2025, down 0.8% from $1.70 billion as of December 31, 2024. |
SUMMARY FINANCIAL DATA
The Company recorded net income of $15,150,000 for the nine months ended September 30, 2025, representing an increase of $962,000, or 6.8%, from net income of $14,188,000 for the same period in 2024. The Company recorded net income of $6,013,000 for the three months ended September 30, 2025, representing an increase of $525,000, or 9.6%, from net income of $5,488,000 for the same period in 2024.
The following tables present a summary of the results for the three and nine months ended September 30, 2025 and 2024, and a summary of financial condition at September 30, 2025 and December 31, 2024.
| Three Months Ended |
Three Months Ended |
Nine Months Ended |
Nine Months Ended |
|||||||||||||
| September 30, 2025 |
September 30, 2024 |
September 30, 2025 |
September 30, 2024 |
|||||||||||||
| (in thousands, except per share amounts and ratios) |
||||||||||||||||
| For the Period: |
||||||||||||||||
| Net Income |
$ | 6,013 | $ | 5,488 | $ | 15,150 | $ | 14,188 | ||||||||
| Basic Earnings Per Common Share |
$ | 0.39 | $ | 0.35 | $ | 0.97 | $ | 0.89 | ||||||||
| Diluted Earnings Per Common Share |
$ | 0.38 | $ | 0.34 | $ | 0.96 | $ | 0.88 | ||||||||
| Return on Average Assets (annualized) |
1.27 | % | 1.15 | % | 1.08 | % | 1.01 | % | ||||||||
| Return on Average Equity (annualized) |
12.15 | % | 12.73 | % | 10.80 | % | 11.50 | % | ||||||||
| Average Equity to Average Assets |
10.43 | % | 9.02 | % | 10.02 | % | 8.77 | % | ||||||||
| September 30, 2025 |
December 31, 2024 |
|||||||
| (in thousands, except ratios) |
||||||||
| At Period End: |
||||||||
| Total Assets |
$ | 1,908,208 | $ | 1,891,722 | ||||
| Total Investment Securities, at fair value |
$ | 601,502 | $ | 633,853 | ||||
| Total Loans, Net (including loans held-for-sale) |
$ | 1,055,971 | $ | 1,046,852 | ||||
| Total Deposits |
$ | 1,686,416 | $ | 1,700,089 | ||||
| Loan-To-Deposit Ratio |
62.6 | % | 61.6 | % | ||||
FIRST NORTHERN COMMUNITY BANCORP
Distribution of Average Statements of Condition and Analysis of Net Interest Income
| Three months ended |
Three months ended |
|||||||||||||||||||||||
| September 30, 2025 |
September 30, 2024 |
|||||||||||||||||||||||
| Average |
Yield/ |
Average |
Yield/ |
|||||||||||||||||||||
| (in thousands, except percentages) |
Balance | Interest | Rate (4) | Balance | Interest | Rate (4) | ||||||||||||||||||
| Assets |
||||||||||||||||||||||||
| Interest-earning assets: |
||||||||||||||||||||||||
| Loans (1) |
$ | 1,055,924 | $ | 14,589 | 5.48 | % | $ | 1,048,639 | $ | 14,315 | 5.43 | % | ||||||||||||
| Certificate of deposits |
14,332 | 152 | 4.21 | % | 18,052 | 188 | 4.14 | % | ||||||||||||||||
| Interest bearing due from banks |
105,545 | 1,071 | 4.03 | % | 126,903 | 1,632 | 5.12 | % | ||||||||||||||||
| Investment securities, taxable |
545,004 | 4,068 | 2.96 | % | 550,360 | 3,586 | 2.59 | % | ||||||||||||||||
| Investment securities, non-taxable (2) |
52,042 | 419 | 3.19 | % | 42,736 | 312 | 2.90 | % | ||||||||||||||||
| Other interest earning assets |
10,870 | 245 | 8.94 | % | 10,518 | 261 | 9.87 | % | ||||||||||||||||
| Total average interest-earning assets |
1,783,717 | 20,544 | 4.57 | % | 1,797,208 | 20,294 | 4.49 | % | ||||||||||||||||
| Non-interest-earning assets: |
||||||||||||||||||||||||
| Cash and due from banks |
32,326 | 40,401 | ||||||||||||||||||||||
| Premises and equipment, net |
8,133 | 9,470 | ||||||||||||||||||||||
| Interest receivable and other assets |
59,211 | 55,357 | ||||||||||||||||||||||
| Total average assets |
$ | 1,883,387 | $ | 1,902,436 | ||||||||||||||||||||
| Liabilities and Stockholders’ Equity: |
||||||||||||||||||||||||
| Interest-bearing liabilities: |
||||||||||||||||||||||||
| Interest-bearing transaction deposits |
390,689 | 767 | 0.78 | % | 381,356 | 718 | 0.75 | % | ||||||||||||||||
| Savings and MMDA’s |
459,869 | 1,723 | 1.49 | % | 431,446 | 1,443 | 1.33 | % | ||||||||||||||||
| Time, $250,000 or less |
84,002 | 758 | 3.58 | % | 117,985 | 1,341 | 4.52 | % | ||||||||||||||||
| Time, over $250,000 |
51,446 | 449 | 3.46 | % | 38,453 | 296 | 3.06 | % | ||||||||||||||||
| Total average interest-bearing liabilities |
986,006 | 3,697 | 1.49 | % | 969,240 | 3,798 | 1.56 | % | ||||||||||||||||
| Non-interest-bearing liabilities: |
||||||||||||||||||||||||
| Non-interest-bearing demand deposits |
685,713 | 745,700 | ||||||||||||||||||||||
| Interest payable and other liabilities |
15,265 | 15,924 | ||||||||||||||||||||||
| Total liabilities |
1,686,984 | 1,730,864 | ||||||||||||||||||||||
| Total average stockholders’ equity |
196,403 | 171,572 | ||||||||||||||||||||||
| Total average liabilities and stockholders’ equity |
$ | 1,883,387 | $ | 1,902,436 | ||||||||||||||||||||
| Net interest income and net interest margin (3) |
$ | 16,847 | 3.75 | % | $ | 16,496 | 3.65 | % | ||||||||||||||||
| (1) |
Average balances for loans include loans held-for-sale and non-accrual loans and are net of the allowance for credit losses, but non-accrued interest thereon is generally excluded. Loan interest income includes loan fees, net of deferred costs of approximately $50 and $4 for the three months ended September 30, 2025 and 2024, respectively. |
| (2) |
Interest income and yields on tax-exempt securities are not presented on a taxable-equivalent basis. |
| (3) |
Net interest margin is computed by dividing net interest income by total average interest-earning assets. |
| (4) |
For disclosure purposes, yield /rates are annualized by dividing the number of days in the reported period by 365. |
FIRST NORTHERN COMMUNITY BANCORP
Distribution of Average Statements of Condition and Analysis of Net Interest Income
| Nine months ended |
Nine months ended |
|||||||||||||||||||||||
| September 30, 2025 |
September 30, 2024 |
|||||||||||||||||||||||
| Average |
Yield/ |
Average |
Yield/ |
|||||||||||||||||||||
| (in thousands, except percentages) |
Balance | Interest | Rate (4) | Balance | Interest | Rate (4) | ||||||||||||||||||
| Assets |
||||||||||||||||||||||||
| Interest-earning assets: |
||||||||||||||||||||||||
| Loans (1) |
$ | 1,047,737 | $ | 42,820 | 5.46 | % | $ | 1,045,710 | $ | 41,620 | 5.32 | % | ||||||||||||
| Certificate of deposits |
15,098 | 470 | 4.16 | % | 17,935 | 542 | 4.04 | % | ||||||||||||||||
| Interest bearing due from banks |
87,409 | 2,808 | 4.30 | % | 127,030 | 5,077 | 5.34 | % | ||||||||||||||||
| Investment securities, taxable |
563,964 | 12,553 | 2.98 | % | 531,871 | 9,519 | 2.39 | % | ||||||||||||||||
| Investment securities, non-taxable (2) |
50,653 | 1,203 | 3.18 | % | 39,600 | 825 | 2.78 | % | ||||||||||||||||
| Other interest earning assets |
10,734 | 767 | 9.55 | % | 10,518 | 784 | 9.96 | % | ||||||||||||||||
| Total average interest-earning assets |
1,775,595 | 60,621 | 4.56 | % | 1,772,664 | 58,367 | 4.40 | % | ||||||||||||||||
| Non-interest-earning assets: |
||||||||||||||||||||||||
| Cash and due from banks |
32,473 | 38,716 | ||||||||||||||||||||||
| Premises and equipment, net |
8,378 | 9,654 | ||||||||||||||||||||||
| Interest receivable and other assets |
55,197 | 57,104 | ||||||||||||||||||||||
| Total average assets |
$ | 1,871,643 | $ | 1,878,138 | ||||||||||||||||||||
| Liabilities and Stockholders’ Equity: |
||||||||||||||||||||||||
| Interest-bearing liabilities: |
||||||||||||||||||||||||
| Interest-bearing transaction deposits |
386,818 | 2,151 | 0.74 | % | 375,090 | 1,851 | 0.66 | % | ||||||||||||||||
| Savings and MMDA’s |
452,813 | 4,875 | 1.44 | % | 429,227 | 3,910 | 1.22 | % | ||||||||||||||||
| Time, $250,000 or less |
86,588 | 2,620 | 4.05 | % | 114,847 | 3,908 | 4.55 | % | ||||||||||||||||
| Time, over $250,000 |
53,031 | 1,157 | 2.92 | % | 37,430 | 862 | 3.08 | % | ||||||||||||||||
| FHLB advances |
2,198 | 75 | 4.56 | % | — | — | 0.00 | % | ||||||||||||||||
| Total average interest-bearing liabilities |
981,448 | 10,878 | 1.48 | % | 956,594 | 10,531 | 1.47 | % | ||||||||||||||||
| Non-interest-bearing liabilities: |
||||||||||||||||||||||||
| Non-interest-bearing demand deposits |
688,446 | 740,261 | ||||||||||||||||||||||
| Interest payable and other liabilities |
14,235 | 16,523 | ||||||||||||||||||||||
| Total liabilities |
1,684,129 | 1,713,378 | ||||||||||||||||||||||
| Total average stockholders’ equity |
187,514 | 164,760 | ||||||||||||||||||||||
| Total average liabilities and stockholders’ equity |
$ | 1,871,643 | $ | 1,878,138 | ||||||||||||||||||||
| Net interest income and net interest margin (3) |
$ | 49,743 | 3.75 | % | $ | 47,836 | 3.60 | % | ||||||||||||||||
| (1) |
Average balances for loans include loans held-for-sale and non-accrual loans and are net of the allowance for credit losses, but non-accrued interest thereon is generally excluded. Loan interest income includes loan fees, net of deferred costs of approximately $75 and $(448) for the nine months ended September 30, 2025 and 2024, respectively. |
| (2) |
Interest income and yields on tax-exempt securities are not presented on a taxable-equivalent basis. |
| (3) |
Net interest margin is computed by dividing net interest income by total average interest-earning assets. |
| (4) |
For disclosure purposes, yield /rates are annualized by dividing the number of days in the reported period by 365. |
FIRST NORTHERN COMMUNITY BANCORP
Distribution of Average Statements of Condition and Analysis of Net Interest Income
| Three months ended |
Three months ended |
|||||||||||||||||||||||
| September 30, 2025 |
June 30, 2025 |
|||||||||||||||||||||||
| Average |
Yield/ |
Average |
Yield/ |
|||||||||||||||||||||
| (in thousands, except percentages) |
Balance | Interest | Rate | Balance | Interest | Rate (4) | ||||||||||||||||||
| Assets |
||||||||||||||||||||||||
| Interest-earning assets: |
||||||||||||||||||||||||
| Loans (1) |
$ | 1,055,924 | $ | 14,589 | 5.48 | % | $ | 1,044,581 | $ | 14,629 | 5.62 | % | ||||||||||||
| Certificates of deposit |
14,332 | 152 | 4.21 | % | 15,112 | 157 | 4.17 | % | ||||||||||||||||
| Interest bearing due from banks |
105,545 | 1,071 | 4.03 | % | 85,828 | 1,010 | 4.72 | % | ||||||||||||||||
| Investment securities, taxable |
545,004 | 4,068 | 2.96 | % | 560,021 | 4,137 | 2.96 | % | ||||||||||||||||
| Investment securities, non-taxable (2) |
52,042 | 419 | 3.19 | % | 49,497 | 391 | 3.17 | % | ||||||||||||||||
| Other interest earning assets |
10,870 | 245 | 8.94 | % | 10,808 | 250 | 9.28 | % | ||||||||||||||||
| Total average interest-earning assets |
1,783,717 | 20,544 | 4.57 | % | 1,765,847 | 20,574 | 4.67 | % | ||||||||||||||||
| Non-interest-earning assets: |
||||||||||||||||||||||||
| Cash and due from banks |
32,326 | 30,777 | ||||||||||||||||||||||
| Premises and equipment, net |
8,133 | 7,866 | ||||||||||||||||||||||
| Interest receivable and other assets |
59,211 | 53,556 | ||||||||||||||||||||||
| Total average assets |
$ | 1,883,387 | $ | 1,858,046 | ||||||||||||||||||||
| Liabilities and Stockholders’ Equity: |
||||||||||||||||||||||||
| Interest-bearing liabilities: |
||||||||||||||||||||||||
| Interest-bearing transaction deposits |
390,689 | 767 | 0.78 | % | 383,761 | 693 | 0.72 | % | ||||||||||||||||
| Savings and MMDA’s |
459,869 | 1,723 | 1.49 | % | 447,276 | 1,602 | 1.44 | % | ||||||||||||||||
| Time, $250,000 and under |
84,002 | 758 | 3.58 | % | 88,024 | 889 | 4.05 | % | ||||||||||||||||
| Time, over $250,000 |
51,446 | 449 | 3.46 | % | 51,942 | 362 | 2.80 | % | ||||||||||||||||
| FHLB advances |
— | — | 0.00 | % | 6,593 | 75 | 4.56 | % | ||||||||||||||||
| Total average interest-bearing liabilities |
986,006 | 3,697 | 1.49 | % | 977,596 | 3,621 | 1.49 | % | ||||||||||||||||
| Non-interest-bearing liabilities: |
||||||||||||||||||||||||
| Non-interest-bearing demand deposits |
685,713 | 679,144 | ||||||||||||||||||||||
| Interest payable and other liabilities |
15,265 | 13,505 | ||||||||||||||||||||||
| Total liabilities |
1,686,984 | 1,670,245 | ||||||||||||||||||||||
| Total average stockholders’ equity |
196,403 | 187,801 | ||||||||||||||||||||||
| Total average liabilities and stockholders’ equity |
$ | 1,883,387 | $ | 1,858,046 | ||||||||||||||||||||
| Net interest income and net interest margin (3) |
$ | 16,847 | 3.75 | % | $ | 16,953 | 3.85 | % | ||||||||||||||||
| (1) |
Average balances for loans include loans held-for-sale and non-accrual loans and are net of the allowance for credit losses, but non-accrued interest is generally excluded. Loan interest income includes loan fees, net of deferred costs of approximately $50 and $33 for the three months ended September 30, 2025 and June 30, 2025, respectively. |
| (2) |
Interest income and yields on tax-exempt securities are not presented on a taxable equivalent basis. |
| (3) |
Net interest margin is computed by dividing net interest income by total average interest-earning assets. |
| (4) |
For disclosure purposes, yield/rates are annualized by dividing the number of days in the reported period by 365. |
Analysis of Changes
in Interest Income and Interest Expense
Following is an analysis of changes in interest income and expense (dollars in thousands) for the three months ended September 30, 2025 over the three months ended September 30, 2024, the nine months ended September 30, 2025 over the nine months ended September 30, 2024, and the three months ended September 30, 2025 over the three months ended June 30, 2025. Changes not solely due to interest rate or volume have been allocated proportionately to interest rate and volume.
| Three Months Ended |
Nine Months Ended |
Three Months Ended |
||||||||||||||||||||||||||||||||||
| September 30, 2025 |
September 30, 2025 |
September 30, 2025 |
||||||||||||||||||||||||||||||||||
| Over |
Over |
Over |
||||||||||||||||||||||||||||||||||
| Three Months Ended |
Nine Months Ended |
Three Months Ended |
||||||||||||||||||||||||||||||||||
| September 30, 2024 |
September 30, 2024 |
June 30, 2025 |
||||||||||||||||||||||||||||||||||
| Interest |
Interest |
Interest |
||||||||||||||||||||||||||||||||||
| Volume |
Rate |
Change |
Volume |
Rate |
Change |
Volume |
Rate |
Change |
||||||||||||||||||||||||||||
| (in thousands) |
||||||||||||||||||||||||||||||||||||
| Increase (Decrease) in Interest Income: |
||||||||||||||||||||||||||||||||||||
| Loans |
118 | $ | 156 | $ | 274 | $ | 82 | $ | 1,118 | $ | 1,200 | $ | 210 | $ | (250 | ) | $ | (40 | ) | |||||||||||||||||
| Certificates of Deposit |
(39 | ) | 3 | (36 | ) | (89 | ) | 17 | (72 | ) | (7 | ) | 2 | (5 | ) | |||||||||||||||||||||
| Due From Banks |
(248 | ) | (313 | ) | (561 | ) | (1,397 | ) | (872 | ) | (2,269 | ) | 218 | (157 | ) | 61 | ||||||||||||||||||||
| Investment Securities - Taxable |
(34 | ) | 516 | 482 | 596 | 2,438 | 3,034 | (69 | ) | — | (69 | ) | ||||||||||||||||||||||||
| Investment Securities - Non-taxable |
73 | 34 | 107 | 250 | 128 | 378 | 24 | 4 | 28 | |||||||||||||||||||||||||||
| Other Assets |
9 | (25 | ) | (16 | ) | 16 | (33 | ) | (17 | ) | 2 | (7 | ) | (5 | ) | |||||||||||||||||||||
| (121 | ) | $ | 371 | $ | 250 | $ | (542 | ) | $ | 2,796 | $ | 2,254 | $ | 378 | $ | (408 | ) | $ | (30 | ) | ||||||||||||||||
| Increase (Decrease) in Interest Expense: |
||||||||||||||||||||||||||||||||||||
| Deposits: |
||||||||||||||||||||||||||||||||||||
| Interest-Bearing Transaction Deposits |
$ | 19 | $ | 30 | $ | 49 | $ | 61 | $ | 239 | $ | 300 | $ | 14 | $ | 60 | $ | 74 | ||||||||||||||||||
| Savings & MMDAs |
100 | 180 | 280 | 226 | 739 | 965 | 54 | 67 | 121 | |||||||||||||||||||||||||||
| Time Certificates |
(281 | ) | (149 | ) | (430 | ) | (486 | ) | (507 | ) | (993 | ) | (96 | ) | 52 | (44 | ) | |||||||||||||||||||
| FHLB advances |
— | — | — | 75 | — | 75 | (75 | ) | — | (75 | ) | |||||||||||||||||||||||||
| $ | (162 | ) | $ | 61 | $ | (101 | ) | $ | (124 | ) | $ | 471 | $ | 347 | $ | (103 | ) | $ | 179 | $ | 76 | |||||||||||||||
| Increase (Decrease) in Net Interest Income: |
$ | 41 | $ | 310 | $ | 351 | $ | (418 | ) | $ | 2,325 | $ | 1,907 | $ | 481 | $ | (587 | ) | $ | (106 | ) | |||||||||||||||
CHANGES IN FINANCIAL CONDITION
The assets of the Company set forth in the Unaudited Condensed Consolidated Balance Sheets reflect a $30,062,000, or 25.2%, increase in cash and cash equivalents, a $3,184,000, or 19.8%, decrease in certificates of deposit, a $32,351,000, or 5.1%, decrease in investment securities available-for-sale, a $9,119,000, or 0.9%, increase in net loans held-for-investment, and a $12,521,000, or 23.9%, increase in interest receivable and other assets from December 31, 2024 to September 30, 2025. The increase in cash and cash equivalents was primarily due to a decrease in investment securities due to net proceeds from calls, maturities, and sales of available-for-sale securities and principal repayments on available-for-sale securities, which was partially offset by an increase in loans due to net loan originations coupled with a decrease in deposit balances. The decrease in certificates of deposits was due to net maturities and repayments of certificates of deposit. The increase in loans held-for-investment was primarily due to net originations of commercial loans, which was partially offset by net payoffs of commercial real estate and residential mortgage loans. The increase in interest receivable and other assets was primarily due to an increase in current tax receivable associated with the purchase of investment tax credits during the third quarter of 2025.
The liabilities of the Company set forth in the Unaudited Condensed Consolidated Balance Sheets reflect a decrease in total deposits of $13,673,000, or 0.8%, from December 31, 2024 to September 30, 2025. The overall decrease in total deposits was primarily due to seasonal fluctuations due to changes in market conditions and monetary policy coupled with the payoff of brokered CDs.
CHANGES IN RESULTS OF OPERATIONS
Interest Income
The Federal Open Market Committee decreased the Federal Reserve's benchmark rate by 25 basis points to a range of 4.00% to 4.25% during the nine months ended September 30, 2025.
Interest income on loans for the nine months ended September 30, 2025 was up 2.9% from the same period in 2024, increasing from $41,620,000 to $42,820,000 and was up 1.9% for the three months ended September 30, 2025 over the same period in 2024, increasing from $14,315,000 to $14,589,000. The increase in interest income on loans for the nine months ended September 30, 2025 as compared to the same period a year ago was primarily due to a 14 basis point increase in yield on loans coupled with an increase in average balance of loans. The increase in interest income on loans for the three months ended September 30, 2025 as compared to the same period a year ago was primarily due to a 5 basis point increase in yield on loans coupled with an increase in average balance of loans.
Interest income on certificates of deposit for the nine months ended September 30, 2025 was down 13.3% from the same period in 2024, decreasing from $542,000 to $470,000, and was down 19.1% for the three months ended September 30, 2025 over the same period in 2024, decreasing from $188,000 to $152,000. The decrease in interest income on certificates of deposit for the nine months ended September 30, 2025 as compared to the same period a year ago was primarily due to a decrease in average balances of certificates of deposit, which was partially offset by a 12 basis point increase in yield on certificates of deposit. The decrease in interest income on certificates of deposit for the three months ended September 30, 2025 as compared to the same period a year ago was primarily due to a decrease in average balances of certificates of deposit, which was partially offset by a 7 basis point increase in yield on certificates of deposit.
Interest income on interest-bearing due from banks for the nine months ended September 30, 2025 was down 44.7% from the same period in 2024, decreasing from $5,077,000 to $2,808,000, and was down 34.4% for the three months ended September 30, 2025 over the same period in 2024, decreasing from $1,632,000 to $1,071,000. The decrease in interest income on interest-bearing due from banks for the nine months ended September 30, 2025 as compared to the same period a year ago was primarily due to a decrease in average balances of interest-bearing due from banks, coupled with a 104 basis point decrease in yield on interest-bearing due from banks. The decrease in interest income on interest-bearing due from banks for the three months ended September 30, 2025 as compared to the same period a year ago was primarily due to a decrease in average balances of interest-bearing due from banks, coupled with a 109 basis point decrease in yield on interest-bearing due from banks.
Interest income on investment securities available-for-sale for the nine months ended September 30, 2025 was up 33.0% from the same period in 2024, increasing from $10,344,000 to $13,756,000, and was up 15.1% for the three months ended September 30, 2025 over the same period in 2024, increasing from $3,898,000 to $4,487,000. The increase in interest income on investment securities for the nine months ended September 30, 2025 as compared to the same period a year ago was primarily due to an increase in average investment securities, coupled with a 57 basis point increase in investment yields. The increase in interest income on investment securities for the three months ended September 30, 2025 as compared to the same period a year ago was primarily due to an increase in average investment securities, coupled with a 37 basis point increase in investment yields.
Interest income on other earning assets for the nine months ended September 30, 2025 was down 2.2% from the same period in 2024, decreasing from $784,000 to $767,000, and was down 6.1% for the three months ended September 30, 2025 over the same period in 2024, decreasing from $261,000 to $245,000. This income is primarily derived from dividends received from the Federal Home Loan Bank. The decrease in interest income on other earning assets for the nine months ended September 30, 2025 as compared to the same period a year ago was primarily due to a 41 basis point decrease in yield on other earning assets, which was partially offset by an increase in average balances of other earning assets. The decrease in interest income on other earning assets for the three months ended September 30, 2025 as compared to the same period a year ago was due to a 93 basis point decrease in yield on other earning assets, which was partially offset by an increase in average balances of other earning assets.
The Company had no Federal Funds sold balances during the three and nine months ended September 30, 2025 and September 30, 2024.
Interest Expense
Interest expense on interest-bearing liabilities for the nine months ended September 30, 2025 was up 3.3% from the same period in 2024, increasing from $10,531,000 to $10,878,000, and was down 2.7% for the three months ended September 30, 2025 over the same period in 2024, decreasing from $3,798,000 to $3,697,000. The increase in interest expense for the nine months ended September 30, 2025 as compared to the same period a year ago was primarily due to a 1 basis point increase in average interest-bearing liabilities yield, coupled with an increase in average balance of interest-bearing liabilities. The decrease in interest expense for the three months ended September 30, 2025 as compared to the same period a year ago was primarily due to a 7 basis point decrease in average interest-bearing deposit yield, which was partially offset by an increase in average balance of interest-bearing liabilities.
Provision for Credit Losses
Provision for credit losses for the nine months ended September 30, 2025 was up 325.0% from the same period in 2024, increasing from $200,000 to $850,000. There was no provision for credit losses for the three months ended September 30, 2025, compared to a reversal of provision of $550,000 for the same period last year. Negative trends in forecast factors coupled with an increase in loans receivable contributed to an increase in reserves for collectively evaluated loans during the quarter ended September 30, 2025. This was offset by a decrease in specific reserves due to a decrease in nonaccrual loans requiring specific reserves. Specific reserves recorded during the quarter ended June 30, 2025 were released during the quarter ended September 30, 2025 primarily due to charge-offs of nonaccrual loans and paydowns on a nonaccrual loan relationship. The provision recorded for the nine months ended September 30, 2025 was primarily due to increases in loans receivable and unfunded commitments coupled with the negative trends in forecast factors.
Non-Interest Income
Non-interest income was up 2.6% for the nine months ended September 30, 2025 from the same period in 2024, increasing from $4,529,000 to $4,648,000. The increase was primarily driven by increases in other income, primarily merchant fees and bank owned life insurance income, which was partially offset by decreases in service charges on deposit accounts, mortgage brokerage income and debit card income.
Non-interest income was up 7.8% for the three months ended September 30, 2025 from the same period in 2024, increasing from $1,538,000 to $1,658,000. The increase was primarily due to increases in other income, primarily merchant fees and bank owned life insurance income, which was partially offset by decreases in gains on sales of loans held-for-sale and debit card income.
Non-Interest Expenses
Total non-interest expenses were up 6.0% for the nine months ended September 30, 2025 from the same period in 2024, increasing from $32,460,000 to $34,406,000. The increase was primarily due to increases in salaries and employee benefits, occupancy and equipment, data processing and other expenses. The increase in salaries and employee benefits is primarily due to an increase in full-time equivalent employees. The increase in occupancy and equipment was primarily due to an increase in service contracts related to maintaining facilities. The increase in data processing was primarily due to an increase in costs of service contracts. The increase in other expenses is primarily due to increases in contributions, legal and consulting fees.
Total non-interest expenses were up 9.0% for the three months ended September 30, 2025 from the same period in 2024, increasing from $10,934,000 to $11,923,000. The increase was primarily due to increases in salaries and employee benefits, occupancy and equipment, data processing and other expenses. The increase in salaries and employee benefits is primarily due to an increase in full-time equivalent employees. The increase in occupancy and equipment was primarily due to an increase in service contracts related to maintaining facilities. The increase in data processing was primarily due to an increase in costs of service contracts. The increase in other expenses was primarily due to increases in contributions and loan origination expense.
The following table sets forth other non-interest expenses by category for the three and nine months ended September 30, 2025 and 2024.
| Three months ended |
Three months ended |
Nine months ended |
Nine months ended |
|||||||||||||
| (in thousands) |
September 30, 2025 | September 30, 2024 | September 30, 2025 | September 30, 2024 | ||||||||||||
| Other non-interest expenses |
||||||||||||||||
| FDIC assessments |
$ | 220 | $ | 210 | $ | 644 | $ | 633 | ||||||||
| Contributions |
264 | 76 | 468 | 242 | ||||||||||||
| Legal fees |
82 | 59 | 443 | 238 | ||||||||||||
| Accounting and audit fees |
181 | 151 | 519 | 472 | ||||||||||||
| Consulting fees |
331 | 313 | 1,019 | 768 | ||||||||||||
| Postage expense |
20 | 36 | 88 | 114 | ||||||||||||
| Telephone expense |
45 | 35 | 137 | 108 | ||||||||||||
| Public relations |
92 | 42 | 225 | 222 | ||||||||||||
| Training expense |
39 | 43 | 122 | 127 | ||||||||||||
| Loan origination expense (recovery) |
135 | (39 | ) | 126 | 89 | |||||||||||
| Sundry losses |
142 | 167 | 352 | 421 | ||||||||||||
| Loan collection expense |
60 | 102 | 98 | 132 | ||||||||||||
| Debit card expense |
315 | 323 | 854 | 949 | ||||||||||||
| Other non-interest expense |
545 | 460 | 1,795 | 1,524 | ||||||||||||
| Total other non-interest expenses |
$ | 2,471 | $ | 1,978 | $ | 6,890 | $ | 6,039 | ||||||||
Income Taxes
The Company’s tax rate, the Company’s income before taxes and the amount of tax relief provided by non-taxable earnings affect the Company’s provision for income taxes. Provision for income taxes decreased 27.8% for the nine months ended September 30, 2025 from the same period in 2024, decreasing from $5,517,000 to $3,985,000, and decreased 73.7% for the three months ended September 30, 2025 from the same period in 2024, decreasing from $2,162,000 to $569,000. The effective tax rate was 20.8% and 28.0% for the nine months ended September 30, 2025 and September 30, 2024, respectively. The effective tax rate was 8.6% and 28.3% for the three months ended September 30, 2025 and September 30, 2024, respectively. The reduction in provision for income taxes and effective tax rate for the three and nine months ended September 30, 2025 as compared to the same periods a year ago was due to the execution of a tax planning strategy that involved purchasing investment tax credits tied to alternative energy projects. The investment tax credits were acquired at a discount and recognized as a reduction to income tax expense in the quarter ended September 30, 2025.
Off-Balance Sheet Commitments
The following table shows the distribution of the Company’s undisbursed loan commitments at the dates indicated.
| (in thousands) |
September 30, 2025 |
December 31, 2024 |
||||||
| Undisbursed loan commitments |
$ | 128,776 | $ | 140,092 | ||||
| Standby letters of credit |
234 | 922 | ||||||
| $ | 129,010 | $ | 141,014 | |||||
The reserve for unfunded lending commitments amounted to $1,050,000 and $700,000 as of September 30, 2025 and December 31, 2024, respectively. The reserve for unfunded lending commitments is included in other liabilities on the Condensed Consolidated Balance Sheets. See Note 7 of the Notes to Condensed Consolidated Financial Statements of this Form 10-Q, "Commitments and Contingencies," for additional information.
Asset Quality
The Company manages asset quality and credit risk by maintaining diversification in its loan portfolio and through review processes that include analysis of credit requests and ongoing examination of outstanding loans and delinquencies, with particular attention to portfolio dynamics and loan mix. The Company strives to identify loans experiencing difficulty early enough to correct the problems, to record charge-offs promptly based on realistic assessments of collectability and current collateral values and to maintain an adequate allowance for credit losses at all times. Asset quality reviews of loans and other non-performing assets are administered using credit risk-rating standards and criteria similar to those employed by state and federal banking regulatory agencies. The federal bank regulatory agencies utilize the following definitions for assets adversely classified for supervisory purposes:
| ● |
Substandard Assets – A substandard asset is inadequately protected by the current sound worth and paying capacity of the obligor or of the collateral pledged, if any. Assets so classified have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that the institution will sustain some loss if the deficiencies are not corrected. |
| ● |
Doubtful Assets – An asset classified doubtful has all the weaknesses inherent in one classified substandard with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions, and values, highly questionable or improbable. |
Other Real Estate Owned and loans rated Substandard and Doubtful are deemed "classified assets". This category, which includes both performing and non-performing assets, receives an elevated level of attention regarding collection.
The following table summarizes the Company’s non-accrual loans net of guarantees of the State of California and U.S. Government by loan category at September 30, 2025 and December 31, 2024:
| At September 30, 2025 |
At December 31, 2024 |
|||||||||||||||||||||||
| Gross |
Guaranteed |
Net |
Gross |
Guaranteed |
Net |
|||||||||||||||||||
| (in thousands) |
||||||||||||||||||||||||
| Commercial |
$ | 401 | $ | 401 | $ | — | $ | 139 | $ | 139 | $ | — | ||||||||||||
| Commercial real estate |
672 | — | 672 | 7,993 | — | 7,993 | ||||||||||||||||||
| Agriculture |
4,942 | 825 | 4,117 | 2,236 | — | 2,236 | ||||||||||||||||||
| Residential mortgage |
180 | — | 180 | 202 | — | 202 | ||||||||||||||||||
| Residential construction |
— | — | — | — | — | — | ||||||||||||||||||
| Consumer |
608 | — | 608 | 642 | — | 642 | ||||||||||||||||||
| Total non-accrual loans |
$ | 6,803 | $ | 1,226 | $ | 5,577 | $ | 11,212 | $ | 139 | $ | 11,073 | ||||||||||||
It is generally the Company’s policy to discontinue interest accruals once a loan is past due for a period of 90 days as to interest or principal payments unless the loan is well secured and in process of collection. When a loan is placed on non-accrual, interest accruals cease and uncollected accrued interest is reversed and charged against current income. Payments received on non-accrual loans are applied against principal. A loan may only be restored to an accruing basis when it again becomes well secured and in the process of collection or all past due amounts have been collected or there is an extended period of positive performance and a high probability that the loan will continue to pay according to original terms.
Non-accrual loans amounted to $6,803,000 at September 30, 2025 and were comprised of two commercial loans totaling $401,000, one commercial real estate loan totaling $672,000, four agriculture loans totaling $4,942,000, three residential mortgage loans totaling $180,000 and four consumer loans totaling $608,000. Non-accrual loans amounted to $11,212,000 at December 31, 2024 and were comprised of one commercial loan totaling $139,000, one commercial real estate loan totaling $7,993,000, two agriculture loans totaling $2,336,000, three residential mortgage loans totaling $202,000 and four consumer loans totaling $642,000.
A loan is considered to be collateral dependent when repayment is expected to be provided substantially through the operation or sale of the collateral. The ACL on collateral dependent loans is measured using the fair value of the underlying collateral, adjusted for costs to sell when applicable, less the amortized cost basis of the financial asset. It is generally the Company’s policy that if the value of the underlying collateral is determined to be less than the recorded amount of the loan, a charge-off will be taken.
As the following table illustrates, total non-performing assets, net of guarantees of the State of California and U.S. Government, including its agencies and its government-sponsored agencies, decreased $4,255,000, or 38.4%, to $6,818,000 during the first nine months of 2025. Non-performing assets, net of guarantees, represented 0.4% of total assets at September 30, 2025.
| At September 30, 2025 |
At December 31, 2024 |
|||||||||||||||||||||||
| Gross |
Guaranteed |
Net |
Gross |
Guaranteed |
Net |
|||||||||||||||||||
| (dollars in thousands) |
||||||||||||||||||||||||
| Non-accrual loans |
$ | 6,803 | $ | 1,226 | $ | 5,577 | $ | 11,212 | $ | 139 | $ | 11,073 | ||||||||||||
| Loans 90 days past due and still accruing |
— | — | — | — | — | — | ||||||||||||||||||
| Total non-performing loans |
6,803 | 1,226 | $ | 5,577 | 11,212 | 139 | $ | 11,073 | ||||||||||||||||
| Other real estate owned |
1,241 | — | 1,241 | — | — | — | ||||||||||||||||||
| Total non-performing assets |
$ | 8,044 | $ | 1,226 | $ | 6,818 | $ | 11,212 | $ | 139 | $ | 11,073 | ||||||||||||
| Non-performing loans (net of guarantees) to total loans |
0.5 | % | 1.0 | % | ||||||||||||||||||||
| Non-performing assets (net of guarantees) to total assets |
0.4 | % | 0.6 | % | ||||||||||||||||||||
| Allowance for credit losses to non-performing loans (net of guarantees) |
281.5 | % | 143.5 | % | ||||||||||||||||||||
The Company had no loans that were 90 days or more past due and still accruing as of September 30, 2025 and December 31, 2024.
Excluding non-performing loans, loans totaling $18,533,000 and $11,643,000 were classified as substandard or doubtful loans, representing potential problem loans at September 30, 2025 and December 31, 2024, respectively. Management believes that the allowance for credit losses at September 30, 2025 and December 31, 2024 appropriately reflected expected credit losses in the loan portfolio at that date. The ratio of the allowance for credit losses to total loans was 1.47% at each of the periods ended September 30, 2025 and December 31, 2024.
Other real estate owned (“OREO”) consists of property that the Company has acquired by deed in lieu of foreclosure or through foreclosure proceedings, and property that the Company does not hold title to but is in actual control of, known as in-substance foreclosure. OREO also consists of property held by the Company that is no longer intended for future development. The estimated fair value of the property is determined prior to transferring the balance to OREO. The balance transferred to OREO during the nine months ended September 30, 2025 was transferred at the lower of the carrying amount of the property as compared to the fair value less costs to sell. The Company had OREO totaling $1,241,000 and $0 as of September 30, 2025 and December 31, 2024, respectively. OREO as of September 30, 2025 represented land, transferred from premises and equipment, that the Company determined is no longer intended for future development and is currently under contract for a sales price in excess of carrying value and is expected to close in 2026.
Allowance for Credit Losses (ACL)
The Company's ACL is maintained at a level believed by management to appropriately reflect expected credit losses inherent in the loan portfolio. The ACL is increased by provisions charged to operating expense and reduced by net charge-offs. The Company contracts with vendors for credit reviews of the loan portfolio and utilizes historical loss trends and the remaining contractual lives of the loan portfolios to determine estimated credit losses through a reasonable and supportable forecast period. The ACL is based on estimates, and actual losses may vary from current estimates.
The following table summarizes the ACL of the Company during the nine months ended September 30, 2025 and 2024, and for the year ended December 31, 2024:
Analysis of the Allowance for Credit Losses
| Nine months ended |
Year ended |
|||||||||||
| September 30, |
December 31, |
|||||||||||
| 2025 |
2024 |
2024 |
||||||||||
| (in thousands, except ratios) |
||||||||||||
| Balance at beginning of period |
$ | 15,885 | $ | 16,596 | $ | 16,596 | ||||||
| Provision for credit losses |
500 | 400 | 200 | |||||||||
| Loans charged-off: |
||||||||||||
| Commercial |
(456 | ) | (606 | ) | (956 | ) | ||||||
| Commercial Real Estate |
(26 | ) | — | — | ||||||||
| Agriculture |
(474 | ) | — | — | ||||||||
| Residential Mortgage |
(5 | ) | — | — | ||||||||
| Residential Construction |
— | — | — | |||||||||
| Consumer |
(19 | ) | (19 | ) | (28 | ) | ||||||
| Total charged-off |
(980 | ) | (625 | ) | (984 | ) | ||||||
| Recoveries: |
||||||||||||
| Commercial |
267 | 47 | 60 | |||||||||
| Commercial Real Estate |
— | — | — | |||||||||
| Agriculture |
— | — | — | |||||||||
| Residential Mortgage |
— | — | — | |||||||||
| Residential Construction |
— | — | — | |||||||||
| Consumer |
27 | 4 | 13 | |||||||||
| Total recoveries |
294 | 51 | 73 | |||||||||
| Net charge-offs |
(686 | ) | (574 | ) | (911 | ) | ||||||
| Balance at end of period |
$ | 15,699 | $ | 16,422 | $ | 15,885 | ||||||
| Ratio of net charge-offs to average loans outstanding during the period (annualized) |
(0.09 | )% | (0.07 | )% | (0.09 | )% | ||||||
| Allowance for credit losses to total loans |
1.47 | % | 1.55 | % | 1.49 | % | ||||||
| Nonaccrual loans to total loans |
0.63 | % | 0.38 | % | 1.06 | % | ||||||
| Allowance for credit losses to nonaccrual loans |
230.8 | % | 409.0 | % | 141.7 | % | ||||||
Deposits
Deposits are one of the Company’s primary sources of funds. At September 30, 2025 and December 31, 2024, the Company had the following deposit mix:
| September 30, 2025 |
December 31, 2024 |
|||||||
| Non-interest bearing transaction |
41.5 | % | 42.1 | % | ||||
| Interest-bearing transaction |
22.8 | % | 22.1 | % | ||||
| Savings and MMDA |
27.3 | % | 27.0 | % | ||||
| Time |
8.4 | % | 8.8 | % | ||||
The Company obtains deposits primarily from the communities it serves. The Company believes that no material portion of its deposits has been obtained from or is dependent on any one person or industry. The Company accepts deposits in excess of $250,000 from customers. These deposits are priced to remain competitive.
Maturities of time certificates of deposit of over $250,000 outstanding at September 30, 2025 and December 31, 2024 are summarized as follows:
| (in thousands) |
September 30, 2025 | December 31, 2024 | ||||||
| Three months or less |
$ | 23,917 | $ | 11,741 | ||||
| Over three to six months |
13,093 | 14,051 | ||||||
| Over six to twelve months |
13,084 | 13,180 | ||||||
| Over twelve months |
3,956 | 2,400 | ||||||
| Total |
$ | 54,050 | $ | 41,372 | ||||
Approximately 42% and 40% of our deposits were uninsured as of September 30, 2025 and December 31, 2024, respectively.
Liquidity and Capital Resources
In order to serve our market area and comply with banking regulations, the Company must maintain adequate liquidity and adequate capital. Liquidity refers to the Company’s ability to provide funds at an acceptable cost to meet loan demand and deposit withdrawals, as well as contingency plans to meet unanticipated funding needs or loss of funding sources. These objectives can be met from either the asset or liability side of the balance sheet.
Asset liquidity sources consist of the repayments and maturities of loans, selling of loans, short-term money market investments, maturities of securities and sales of securities from the available-for-sale portfolio. These activities are generally summarized as investing activities in the Condensed Consolidated Statements of Cash Flows. For the nine months ended September 30, 2025, net liquidity provided by investing activities totaled $47,693,000.
The Company’s available-for-sale investment securities plus cash and cash equivalents in excess of reserve requirements and certificates of deposit totaled $763,902,000 on September 30, 2025, which was 40.0% of assets at that date. This was a decrease of $5,473,000 from $769,375,000 and 40.7% of assets as of December 31, 2024. The Company’s investment securities are generally shorter term in nature to provide ongoing cash flows for liquidity needs and/or reinvestment for interest rate risk management. On September 30, 2025, the effective duration of our investment securities was 3.10 with projected principal cashflow of $46,442,000 for the remainder of 2025 available for reinvestment or liquidity needs. The Company had no held-to-maturity securities as of September 30, 2025 and December 31, 2024.
Liquidity may also be impacted from liabilities through changes in deposits and borrowings outstanding. These activities are included under financing activities in the Condensed Consolidated Statements of Cash Flows. As of September 30, 2025, the Company had $0 in borrowings outstanding. For the nine months ended September 30, 2025, net liquidity used in financing activities totaled $16,951,000, primarily due to a net decrease in deposits and repurchases of common stock. While these sources of funds are expected to continue to provide significant amounts of funds in the future, their mix, as well as the possible use of other sources, will depend on future economic and market conditions.
Liquidity is also provided or used through the results of operating activities. For the nine months ended September 30, 2025, net cash used in operating activities totaled $680,000, primarily as a result of an increase in other assets due to the increase in current tax receivable associated with the tax planning strategy implemented in the third quarter of 2025.
Liquidity is measured by various ratios, in management’s opinion, the most common being the ratio of net loans to deposits (including loans held-for-sale). This ratio was 62.6% and 61.6% as of September 30, 2025 and December 31, 2024, respectively.
Loan demand during the remainder of 2025 will depend in part on economic and competitive conditions. The Company emphasizes the solicitation of non-interest-bearing demand deposits and money market checking accounts, which are the least sensitive to interest rates. The outlook for deposit balances during the remainder of 2025 is subject to actions by the Federal Reserve and heightened competition.
To meet unanticipated funding requirements, the Company maintains short-term unsecured lines of credit with other banks which totaled $130,000,000 at September 30, 2025. Additionally, the Company has a line of credit with the FHLB, with a remaining borrowing capacity at September 30, 2025 of $393,040,000; credit availability is subject to certain collateral requirements.
The Company’s primary source of liquidity on a stand-alone basis is dividends from the Bank. Dividends from the Bank are subject to regulatory restrictions.
In July 2013, the Federal Reserve and the other U.S. federal banking agencies adopted final rules making significant changes to the U.S. regulatory capital framework for U.S. banking organizations and to conform this framework to the guidelines published by the Basel Committee known as the Basel III Global Regulatory Framework for Capital and Liquidity. The Basel Committee is a committee of banking supervisory authorities from major countries in the global financial system which formulates broad supervisory standards and guidelines relating to financial institutions for implementation on a country-by-country basis. These rules adopted by the Federal Reserve and the other federal banking agencies (the U.S. Basel III Capital Rules) replaced the federal banking agencies’ general risk-based capital rules, advanced approaches rule, market risk rule, and leverage rules, in accordance with certain transition provisions.
Banks, such as First Northern, became subject to the final rules on January 1, 2015. The final rules implemented higher minimum capital requirements, included a new common equity Tier 1 capital requirement, and established criteria that instruments must meet in order to be considered common equity Tier 1 capital, additional Tier 1 capital, or Tier 2 capital. The final rules provide for increased minimum capital ratios as follows: (a) a common equity Tier 1 capital ratio of 4.5%; (b) a Tier 1 capital ratio of 6%; (c) a total capital ratio of 8%; and (d) a Tier 1 leverage ratio to average consolidated assets of 4%. Under these rules, in order to avoid certain limitations on capital distributions, including dividend payments and certain discretionary bonus payments to executive officers, a banking organization must hold a capital conservation buffer composed of common equity Tier 1 capital above its minimum risk-based capital requirements (equal to 2.5% of total risk-weighted assets). The capital conservation buffer is designed to absorb losses during periods of economic stress.
Pursuant to the Economic Growth, Regulatory Relief and Consumer Protection Act ("EGRRCPA"), the FRB adopted a final rule, effective August 31, 2018, amending the Small Bank Holding Company and Savings and Loan Holding Company Policy Statement (the “policy statement”) to increase the consolidated assets threshold to qualify to utilize the provisions of the policy statement from $1 billion to $3 billion. Bank holding companies, such as the Company, are subject to capital adequacy requirements of the FRB; however, bank holding companies which are subject to the policy statement are not subject to compliance with the regulatory capital requirements until they hold $3 billion or more in consolidated total assets. As a consequence, as of December 31, 2018, the Company was not required to comply with the FRB’s regulatory capital requirements until such time that its consolidated total assets equal $3 billion or more or if the FRB determines that the Company is no longer deemed to be a small bank holding company. However, if the Company had been subject to these regulatory capital requirements, it would have exceeded all regulatory requirements.
In August of 2020, the Federal banking agencies adopted the final version of the community bank leverage ratio framework rule (the “CBLR”), implementing two interim final rules adopted in April of 2020. The rule provides an optional, simplified measure of capital adequacy. Under the optional CBLR framework, the CBLR was 8.5% through calendar year 2021 and is 9% thereafter. The rule is applicable to all non-advanced approaches FDIC-supervised institutions with less than $10 billion in total consolidated assets. Banks not electing the CBLR framework will continue to be subject to the generally applicable risk-based capital rule. At the present time, the Company and the Bank do not intend to elect to use the CBLR framework.
As of September 30, 2025, the Bank’s capital ratios exceeded applicable regulatory requirements. The following table presents the capital ratios for the Bank, compared to the regulatory standards for well-capitalized depository institutions, as of September 30, 2025.
| Actual |
Well Capitalized |
|||||||||||
| Ratio |
||||||||||||
| (in thousands except ratios) |
Capital | Ratio | Requirement | |||||||||
| Leverage |
$ | 218,233 | 11.47 | % | 5.0 | % | ||||||
| Common Equity Tier 1 |
$ | 218,233 | 17.35 | % | 6.5 | % | ||||||
| Tier 1 Risk-Based |
$ | 218,233 | 17.35 | % | 8.0 | % | ||||||
| Total Risk-Based |
$ | 233,965 | 18.60 | % | 10.0 | % | ||||||
ITEM 3. – QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company believes that there have been no material changes in the quantitative and qualitative disclosures about market risk as of September 30, 2025, from those presented in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2024, which are incorporated by reference herein.
ITEM 4. – CONTROLS AND PROCEDURES
(a) We maintain “disclosure controls and procedures,” as such term is defined in Rule 13a-15(e) under the Securities Exchange Act of 1934 (the “Exchange Act”), that are designed to ensure that information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in Securities and Exchange Commission rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating our disclosure controls and procedures, management recognized that disclosure controls and procedures, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the disclosure controls and procedures are met. Our disclosure controls and procedures have been designed to meet reasonable assurance standards. Additionally, in designing disclosure controls and procedures, our management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible disclosure controls and procedures. The design of any disclosure controls and procedures also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Our Chief Executive Officer (principal executive officer) and Chief Financial Officer (principal financial officer) have concluded that the design and operation of our disclosure controls and procedures are effective as of September 30, 2025. This conclusion is based on an evaluation conducted under the supervision and with the participation of management.
(b) During the quarter ended September 30, 2025, there were no changes in our internal controls over financial reporting that materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.
PART II – OTHER INFORMATION
ITEM 1. – LEGAL PROCEEDINGS
Neither the Company nor the Bank is a party to any material pending legal proceeding, nor is any of their property the subject of any material pending legal proceeding, except ordinary routine litigation arising in the ordinary course of the Bank’s business and incidental to its business, none of which is expected to have a material adverse impact upon the Company’s or the Bank’s business, financial position or results of operations.
ITEM 1A. – RISK FACTORS
We are subject to various risks and uncertainties, which could materially affect our business, results of operations, financial condition, future results, and the trading price of our common stock. You should read carefully the following information together with the information appearing in Part I, Item 1A, “Risk Factors” in our 2024 Form 10-K. The following information supplements and, to the extent inconsistent, supersedes some of the information appearing in the “Risk Factors” section of our 2024 Form 10‑K. These risk factors, as well as our condensed consolidated financial statements and notes thereto and the other information appearing in this Report, should be reviewed carefully for important information regarding risks that affect us.
Changes in U.S. and Foreign Government Policies, Including the Imposition of or Further Increases in Tariffs and Changes to Existing Trade Agreements, Could Have a Material Adverse Effect on the Bank’s Customers, Which, in Turn, Could Adversely Affect Our Business, Financial Condition and Results of Operations
In February 2025, the new Trump Administration announced that it would be imposing increases in tariffs on goods imported to the U.S. from Canada, Mexico, and China, and, in April 2025, the Administration announced the imposition of increased tariffs on goods imported to the U.S. from other countries. As a consequence, other countries, in retaliation to the U.S.’s tariff measures, announced the imposition of increased levels of tariffs on goods exported to such countries by companies in the U.S. The Administration subsequently announced a delay of 90 days in the implementation of those increased tariffs for most other countries, leaving in place, however, a 10% baseline tariff that went into effect on April 5 and that applies to nearly all imports from all countries. The 90-day pause on the implementation of nearly all of the country-specific tariffs was initially set to expire on July 8, 2025, but was extended to August 1, 2025, to provide additional time to negotiate and finalize bilateral trade agreements with key countries. On July 31, 2025, the Trump Administration issued an Executive Order further adjusting the tariff rates to be applied against nearly 70 countries, effective August 7, 2025. The Trump Administration has announced agreements in principle regarding tariffs with certain significant trading partners of the United States, including (among others) the European Union, the United Kingdom, Japan and South Korea. It remains uncertain whether such agreements in principle will lead to definitive agreements with such trading partners and, if so, on what terms and whether agreements with other trading partners will eventually be consummated. More recently, the U.S. government has introduced new tariffs and tariff-related measures and has indicated that other potential tariff measures and modifications to existing tariffs continue to be under consideration. The tariff environment continues to remain highly dynamic, and the specific tariffs applicable to goods imported into the U.S. continue to evolve, as do import tariffs charged by other countries. These tariffs could be of particular concern to U.S. companies operating in the agricultural sector who export agricultural goods to other countries. The Company’s customers include a number of agricultural businesses, which could be negatively affected.
As a result of these changes to U.S. and foreign government trade policies, there may be changes to existing trade agreements, greater restrictions on free trade generally, the imposition of or significant further increases in tariffs on goods imported into the U.S., and adverse responses by foreign governments to U.S. trade policies, among other possible changes. The extent and duration of any tariffs, and the resulting impact on economic conditions generally and on our customers’ businesses in particular are uncertain and depend on various factors, such as negotiations between the U.S. and other countries, the responses of such countries, and exemptions or exclusions that may be granted. A significant trade disruption or the establishment or further increase of any tariffs, trade protection measures or restrictions could result in lost sales, adversely impacting our banking customers and their businesses, including our agricultural business customers. In addition, international trade disputes, including those related to tariffs, could result in inflationary pressures and/or adversely impact global supply chains, which could increase the costs of doing business for our banking customers. Changes in U.S. social, political, regulatory and economic conditions or in laws and policies governing foreign trade, manufacturing, development and investment in the countries where our banking customers currently sell products, including agricultural products, and any resulting negative sentiments towards the U.S. and U.S. businesses as a result of such changes, could also have a material adverse effect on our banking customers’ business, financial condition, results of operations and cash flows. If these events negatively affect our banking clients, or general economic conditions nationally, in California, or in the markets we serve, our business, financial condition and results of operations could be adversely affected.
Negative Developments in the Banking Industry, and any Legislative and/or Bank Regulatory Actions that may Result, Could Adversely Affect our Business Operations, Results of Operations and Financial Condition.
The high-profile bank failures of Silicon Valley Bank, Signature Bank and First Republic Bank in 2023, and related negative media attention, generated significant market trading volatility among publicly-traded bank holding companies and, in particular, regional and community banks, such as the Company. These developments negatively impacted customer confidence in the safety and soundness of regional and community banks. Defaults by, or even rumors or questions about, one or more financial institutions or the financial services industry generally, may lead to market-wide liquidity problems and losses of client, creditor and counterparty confidence and could lead to losses or defaults by us or by other financial institutions.
While we currently do not anticipate liquidity constraints of the kind that caused these other financial services institutions to fail or require external support, constraints on our liquidity could occur as a result of customers choosing to maintain their deposits with larger financial institutions or to invest in higher yielding short-term fixed income securities, which could materially adversely impact our liquidity, cost of funding, loan funding capacity, net interest margin, capital and results of operations. If we were required to sell a portion of our securities portfolio to address liquidity needs, we may incur losses, including as a result of the negative impact of rising interest rates on the value of our securities portfolio, which could negatively affect our earnings and our capital. While the Company has taken actions which aim to maintain adequate and diversified sources of funding and management believes that its liquidity measures are reasonable in light of the nature of the Bank’s customer base, there can be no assurance that such actions will be sufficient in the event of a sudden liquidity crisis.
These bank failures may also result in potentially adverse changes to laws or regulations governing banks and bank holding companies, enhanced regulatory supervision and examination policies and priorities, and/or the imposition of restrictions through regulatory supervisory or enforcement activities, including higher capital requirements and/or an increase in the Bank’s deposit insurance assessments. The FDIC has proposed that Congress consider, and legislation has been introduced in Congress proposing, various changes in the FDIC insurance program, including possible increases in the deposit insurance limit for certain types of accounts, such as business payment accounts. Although these legislative and regulatory actions cannot be predicted with certainty, any of these potential legislative or regulatory actions could, among other things, subject us to additional costs, limit the types of financial services and products we may offer, and reduce our profitability, any of which could materially and adversely affect our business, results of operations or financial condition.
Economic Conditions in the U.S. May Soften or Become Recessionary with Resultant Adverse Consequences for the U.S. Financial Services Industry and for the Bank
Following the financial crisis of 2008, adverse financial and economic developments impacted U.S. and global economies and financial markets and presented challenges for the banking and financial services industry and for us. These developments included a general recession both globally and in the U.S. accompanied by substantial volatility in the financial markets. In response, various significant economic and monetary stimulus measures were implemented by the U.S. government. The FRB also pursued a highly accommodative monetary policy aimed at keeping interest rates at historically low levels, In January 2022, due to elevated levels of inflation and corresponding pressure to raise interest rates, the FRB began slowing the pace of its bond purchasing and increasing the target range for the federal funds rate over time, before beginning to reduce interest rates in 2024, which reductions have continued in 2025. Monetary policy has contributed to and may continue to result in elevated market interest rates and a flat and/or inverted yield curve. Changes to monetary policy may adversely impact U.S. economic activity and have adverse consequences on our customers’ and our earnings and operations. A prolonged federal government shutdown, as well as broader issues surrounding the federal budgeting process and governance, may also contribute to market volatility and disruptions and recessionary risk.
As noted previously, the Trump Administration recently imposed increased tariffs on goods imported to the U.S. from other countries. As a consequence, other countries, in retaliation to the U.S.’s tariff measures, announced the imposition of increased levels of tariffs on goods exported to such countries by companies in the U.S. More recently, the U.S. government has introduced agreements in principle regarding tariffs with certain trading partners of the United States, new tariffs and tariff-related measures and has indicated that other potential tariff measures and modifications to existing tariffs continue to be under consideration. The tariff environment continues to remain highly dynamic, and the specific tariffs applicable to goods imported into the U.S. continue to evolve, as do import tariffs charged by other countries. See “Changes in U.S. and Foreign Government Policies, Including the Imposition of or Further Increases in Tariffs and Changes to Existing Trade Agreements, Could Have a Material Adverse Effect on the Bank’s Customers, Which, in Turn, Could Adversely Affect Our Business, Financial Condition and Results of Operations,” above in these “Risk Factors” in this Quarterly Report on Form 10-Q. International trade disputes, including those related to tariffs, could result in inflationary pressures and/or adversely impact global supply chains, which could increase the costs of doing business for our banking customers. Political tensions as a result of trade policies could reduce trade volume, investment, technological exchange, and other economic activities between major international economies, resulting in a material adverse effect on global economic conditions and the stability of global financial markets, which could have resulting material adverse effects on general economic conditions nationally, in California, or in our local markets. Some economists have predicted that the Administration’s steep new tariffs could curtail growth and result in price increases for American consumers, ultimately increasing the likelihood of a U.S. recession. Any of these developments could adversely affect our business, financial condition and results of operations.
We, and other financial services companies, are impacted to a significant degree by current economic conditions. If the U.S. economy weakens, our growth and profitability from our lending, deposit and investment operations could be constrained and our asset quality, deposit levels, loan demand and results of operations may be adversely affected.
The U.S. government continues to face significant fiscal and budgetary challenges which, if not resolved, could result in renewed adverse U.S. economic conditions. These challenges may be intensified over time if federal budget deficits were to increase and Congress and the Administration cannot effectively work to address them. The overall level of the federal government's debt, the extensive political disagreements regarding the government's statutory debt limit and the continuing substantial federal budget deficits led to a downgrade from “AAA” to “AA+” of the long-term sovereign credit rating of United States debt by one credit rating agency in 2023. In May 2025, Moody’s lowered the U.S. government’s long-term issuer and senior unsecured ratings from “Aaa” to “Aa1”. This downgrade means that all three major credit rating agencies have downgraded the U.S. credit rating below their top rating. This risk could be exacerbated over time.
If substantial federal budget deficits were to continue or increase in the years ahead, further downgrades by the credit rating agencies with respect to the obligations of the U.S. federal government could occur. A prolonged federal government shutdown, as well as broader issues surrounding the federal budgeting process and governance, may further contribute to the possibility of a downgrade of the U.S. sovereign credit rating. Any such further downgrades could increase over time the U.S. federal government’s cost of borrowing, which may worsen its fiscal challenges, as well as generate further upward pressure on interest rates generally in the U.S. which could, in turn, have adverse consequences for borrowers and the level of business activity. The long-term impact of this situation, including the impact on the Bank's investment securities portfolio and other assets, cannot be predicted.
Adverse Economic Factors Affecting Certain Industries the Bank Serves Could Adversely Affect Our Business
The Bank is subject to certain industry-specific economic factors. For example, a portion of the Bank’s total loan portfolio is related to residential and commercial real estate, especially in California. Increases in residential mortgage loan interest rates could have an adverse effect on the Bank’s operations by depressing new mortgage loan originations, which in turn could negatively impact the Bank’s title and escrow deposit levels. Additionally, a downturn in the residential real estate and housing industries in California could have an adverse effect on the Bank’s operations and the quality of its real estate and construction loan portfolio. Although the Bank does not engage in subprime or negative amortization lending, we are not immune to volatility in the real estate market. Real estate valuations are influenced by demand, and demand is driven by economic factors such as employment rates and interest rates. These factors could adversely impact the quality of the Bank’s residential construction, residential mortgage and construction related commercial portfolios in various ways, including by decreasing the value of the collateral for our loans, and thereby negatively affecting the Bank’s overall loan portfolio.
The Bank provides financing to, and receives deposits from, businesses in a number of other industries that may be particularly vulnerable to industry-specific economic factors, including the home building, commercial real estate, retail, agricultural, industrial, and commercial industries. Following the financial crisis of 2008, the home building industry in California was especially adversely impacted by the deterioration in residential real estate markets, which lead the Bank to take additional provisions and charge-offs against credit losses in this portfolio. The recessionary economic and market conditions resulting from the COVID-19 pandemic also significantly affected the commercial and residential real estate markets in the U.S. generally, and in California in particular, decreasing property values, increasing the risk of defaults and reducing the value of real estate collateral. Continued volatility in fuel prices and energy costs and return of drought conditions in California could also adversely affect businesses in several of these industries.
As noted previously, the Trump Administration recently imposed increased tariffs on goods imported to the U.S. from other countries. As a consequence, other countries, in retaliation to the U.S.’s tariff measures, announced the imposition of increased levels of tariffs on goods exported to such countries by companies in the U.S. More recently, the U.S. government has introduced agreements in principle regarding tariffs with certain trading partners of the United States, new tariffs and tariff-related measures and has indicated that other potential tariff measures and modifications to existing tariffs continue to be under consideration. The tariff environment continues to remain highly dynamic, and the specific tariffs applicable to goods imported into the U.S. continue to evolve, as do import tariffs charged by other countries. Such tariffs could be of particular concern to U.S. companies operating in the agricultural sector who export agricultural goods to other countries. The Company’s customers include a number of agricultural businesses, which could be negatively affected. See “Changes in U.S. and Foreign Government Policies, Including the Imposition of or Further Increases in Tariffs and Changes to Existing Trade Agreements, Could Have a Material Adverse Effect on the Bank’s Customers, Which, in Turn, Could Adversely Affect Our Business, Financial Condition and Results of Operations,” above in these “Risk Factors” in this Quarterly Report on Form 10-Q.
Industry specific risks are beyond the Bank’s control and could adversely affect the Bank’s portfolio of loans, potentially resulting in an increase in non-performing loans or charge-offs and a slowing of growth or reduction in our loan portfolio.
In recent years, wildfires across California and in our market areas resulted in significant damage and destruction of property and equipment. The fire damage resulted in adverse economic impacts to those affected markets and beyond and on the Bank's customers. In addition, the major electric utility company in our region has adopted programs of electrical power shut-offs, often for multiple days, in wide areas of Northern California during periods of high winds and high fire danger. Shut-offs of power by this utility have adversely impacted the business of some of our customers and also have resulted in some of our branches being temporarily closed. It can be expected that these events will continue to occur from time to time in the areas served by the Bank, and that the consequences of these natural disasters, including programs of public utility public safety power outages when weather conditions and fire danger warrant, may adversely affect the Bank’s business and that of its customers. It is also possible that climate change may be increasing the severity or frequency of adverse weather conditions, thus increasing the impact of these types of natural disasters on our business and that of our customers. For additional information, see "Our Operations, Business and Customers Could be Materially Adversely Affected by the Physical Effects of Climate Change, as well as Governmental and Societal Responses to Climate Change," in "Risk Factors" in our 2024 Form 10-K.
The long-term impact of these developments on the markets we serve cannot be predicted at this time.
The Bank is Subject to Interest Rate Risk
The income of the Bank depends to a great extent on “interest rate differentials” and the resulting net interest margins (i.e., the difference between the interest rates earned on the Bank’s interest-earning assets such as loans and investment securities, and the interest rates paid on the Bank’s interest-bearing liabilities such as deposits and borrowings). Changes in the relationship between short-term and long-term market interest rates or between different interest rate indices can impact our interest rate differential, possibly resulting in a decrease in our interest income relative to interest expense. Interest rates are highly sensitive to many factors, which are beyond the Bank’s control, including, but not limited to, general economic conditions and the policies of various governmental and regulatory agencies, in particular, the FRB. Changes in monetary policy, including changes in interest rates, influence the origination of loans, the purchase of investments and the generation of deposits and affect the rates received on loans and investment securities and paid on deposits. In addition, an increase in interest rates could adversely affect clients’ ability to pay the principal or interest on existing loans or reduce their borrowings. This may lead to an increase in our non-performing assets, a decrease in loan originations, or a reduction in the value of and income from our loans, any of which could have a material and negative effect on our operations.
Fluctuations in market rates and other market disruptions are neither predictable nor controllable and may adversely affect our financial condition and earnings. Since 2022, inflationary pressures have affected many aspects of the U.S. economy, including gasoline and fuel prices, and global and domestic supply-chain issues have also had a disruptive effect on many industries, including the agricultural industry. In January 2022, due to elevated levels of inflation and corresponding pressure to raise interest rates, the FRB announced after several periods of historically low federal funds rates and yields on Treasury notes that it would be slowing the pace of its bond purchasing and increasing the target range for the federal funds rate over time. The FOMC increased the target range 525 basis points from March 2022 through July 2023. The target range remained unchanged through much of 2024 until the FOMC decreased the rate 100 basis points, to a target range of 4.25% to 4.50%, during the last four months of the year. The FOMC further decreased the Federal Reserve's benchmark rate by 25 basis points to a range of 4.00% to 4.25% during the nine months ended September 30, 2025, and, on October 29, 2025, the FOMC announced a further 25 basis point decrease in the benchmark rate. It remains uncertain whether the FOMC will further decrease the target range for the federal funds rate to attain a monetary policy sufficiently restrictive to return inflation to more normalized levels, begin to increase the federal funds rate or leave the rate at its current elevated level for a lengthy period of time. Factors such as inflation, productivity, oil prices, unemployment rates, and global demand play a role in the FOMC's consideration of future rate adjustments. As noted previously, the Trump Administration recently imposed increased tariffs on goods imported to the U.S. from other countries. As a consequence, other countries, in retaliation to the U.S.’s tariff measures, announced the imposition of increased levels of tariffs on goods exported to such countries by companies in the U.S. More recently, the U.S. government has introduced agreements in principle regarding tariffs with certain trading partners of the United States, new tariffs and tariff-related measures and has indicated that other potential tariff measures and modifications to existing tariffs continue to be under consideration. The tariff environment continues to remain highly dynamic, and the specific tariffs applicable to goods imported into the U.S. continue to evolve, as do import tariffs charged by other countries. Such tariffs could result in increased inflationary pressures on the U.S. economy. These developments could adversely affect our banking customers’ businesses, which, in turn, could adversely affect our business, financial condition and results of operations. See “Economic Conditions in the U.S. May Soften or Become Recessionary with Resultant Adverse Consequences for the U.S. Financial Services Industry and for the Bank,” above in these “Risk Factors” in this Quarterly Report on Form 10-Q.
Beginning in 2021, the U.S. Economy Began to Reflect Relatively Rapid Rates of Increase in the Consumer Price Index and Other Economic Indices; a Prolonged Elevated Rate of Inflation Could Present Risks for the U.S. Banking Industry and Our Business.
Beginning in 2021, the U.S. economy exhibited relatively rapid rates of increase in the consumer price index and other economic indices. If the U.S. economy encounters a significant, prolonged rate of inflation, this could pose higher relative risks to the banking industry and our business. Such inflationary periods have historically corresponded with relatively weaker earnings and higher credit losses for banks. In the past, inflationary environments have caused financing conditions to tighten and have increased borrowing costs for some marginal borrowers which, in turn, has impacted bank credit quality and loan growth. Additionally, a sustained period of inflation well above the FRB’s long-term target could prompt broad-based selling of longer-duration, fixed-rate debt, which could have negative implications for equity and real estate markets. Lower interest rates enable less credit-worthy borrowers to more readily meet their debt obligations. Small businesses and leveraged loan borrowers can be challenged in a materially higher-rate environment. Higher interest rates can also present challenges for commercial real estate projects, pressuring valuations and loan-to-value ratios. The FRB initiated a series of significant interest rate increases in response to the recent economic developments. For additional information, see "Management's Discussion and Analysis of Financial Condition and Results of Operations - Results of Operations - Net Interest Income" in our 2024 Form 10-K and "-Interest Income" in this Quarterly Report on Form 10-Q.
In addition, the war between Russia and Ukraine and global reactions thereto have increased U.S. domestic and global energy prices. Oil supply disruptions related to the Russia-Ukraine conflict, and sanctions and other measures taken by the U.S. or its allies, could lead to higher costs for gas, food and goods in the U.S. and exacerbate the inflationary pressures on the economy. As noted previously, the Trump Administration recently imposed increased tariffs on goods imported to the U.S. from other countries. As a consequence, other countries, in retaliation to the U.S.’s tariff measures, announced the imposition of increased levels of tariffs on goods exported to such countries by companies in the U.S. More recently, the U.S. government has introduced agreements in principle regarding tariffs with certain trading partners of the United States, new tariffs and tariff-related measures and has indicated that other potential tariff measures and modifications to existing tariffs continue to be under consideration. The tariff environment continues to remain highly dynamic, and the specific tariffs applicable to goods imported into the U.S. continue to evolve, as do import tariffs charged by other countries. Such tariffs could result in increased inflationary pressures on the U.S. economy. These developments could adversely affect our banking customers’ businesses, which, in turn, could adversely affect our business, financial condition and results of operations. See “Economic Conditions in the U.S. May Soften or Become Recessionary with Resultant Adverse Consequences for the U.S. Financial Services Industry and for the Bank,” above in these “Risk Factors” in this Quarterly Report on Form 10-Q.
Changes in the U.S. Tax Laws Have Impacted, and May Impact, Our Business and Results of Operations in a Variety of Ways, Some of Which Are Positive, and Others Which May Be Negative
The Tax Cuts and Jobs Act (“TCJA”), signed into law on December 22, 2017, enacted sweeping changes to the U.S. federal tax laws generally effective January 1, 2018. These changes have impacted our business and results of operations in a variety of ways, some of which are positive and others which are negative. The TCJA reduced the corporate tax rate to 21% from 35%, which resulted in a net reduction in our annual income tax expense and which has also benefited many of our corporate and other small business borrowers. However, our ability to utilize tax credits, such as those arising from low-income housing and alternative energy investments, is constrained by the lower tax rate. Increases in the U.S. corporate tax rate could adversely impact our profitability and that of our business and commercial customers. On July 4, 2025, the One Big Beautiful Bill Act was enacted into law, which included certain modifications to U.S. tax law. The Company is currently evaluating the provisions of this Act but does not expect it to have a material impact on our consolidated financial statements.
ITEM 2. – UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
Issuer Purchases of Equity Securities
The Company made the following purchases of its common stock during the three months ended September 30, 2025:
| (a) |
(b) |
(c) |
(d) |
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| Period |
Total number of shares purchased | Average price paid per share | Number of shares purchased as part of publicly announced plans or programs | Maximum number of shares that may yet be purchased under the plans or programs(1) | ||||||||||||
| July 1 - July 31, 2025 |
— | — | — | 348,931 | ||||||||||||
| August 1 - August 31, 2025 |
80,954 | $ | 11.37 | 80,954 | 267,977 | |||||||||||
| September 1 - September 30, 2025 |
16,590 | $ | 12.04 | 16,590 | 251,387 | |||||||||||
| Total |
97,544 | 97,544 | ||||||||||||||
| (1) |
On March 27, 2024, the Company approved a stock repurchase program effective May 1, 2024. The stock repurchase program, which remains in effect until April 30, 2026 unless terminated sooner, allows repurchases by the Company in an aggregate amount of no more than 6% of the Company’s 15,550,731 outstanding shares of common stock as of March 21, 2024. This represented total shares of 979,695 eligible for repurchase at May 1, 2024. The total number of shares eligible for repurchase has been adjusted to give retroactive effect to stock dividends and stock splits, including the 5% stock dividend declared on January 23, 2025, paid on March 25, 2025 to shareholders of record as of February 28, 2025. |
ITEM 3. – DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. – MINE SAFETY DISCLOSURES
Not applicable.
ITEM 5. – OTHER INFORMATION
During the three months ended September 30, 2025, no director or officer (as defined in Rule 16a-1(f) under the Exchange Act) of the Company adopted, modified, or terminated a “Rule 10b5-1 trading arrangement” or a “non-Rule 10b5-1 trading arrangement” as each term is defined in Item 408(a) of Regulation S-K.
ITEM 6. – EXHIBITS
| Exhibit Number |
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Description of Document |
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| 3.1 | Amended and Restated Bylaws of First Northern Community Bancorp, as amended September 17, 2025 - incorporated herein by reference to Exhibit 3.1 to the Company's Current Report on Form 8-K dated September 17, 2025. | |
| 10.45 | Executive Retirement/Retention Participation Agreement for Brett Hamilton, Executive Vice President and Chief Credit Officer, between First Northern Bank and Mr. Hamilton dated as of April 1, 2024 - provided herewith* | |
| 31.1 |
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Rule 13a — 14(a) Certification of Chief Executive Officer |
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| 31.2 |
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Rule 13a — 14(a) Certification of Chief Financial Officer |
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| 32.1** |
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Statement of the Chief Executive Officer under Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. Section 1350) |
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| 32.2** |
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Statement of the Chief Financial Officer under Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. Section 1350) |
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| 101 |
Interactive data files pursuant to Rule 405 of Regulation S-T: (i) the Condensed Consolidated Balance Sheets, (ii) the Condensed Consolidated Statements of Income, (iii) the Condensed Consolidated Statements of Comprehensive Income/Loss, (iv) the Condensed Consolidated Statement of Stockholders’ Equity, (v) the Condensed Consolidated Statements of Cash Flows and (vi) the Notes to Condensed Consolidated Financial Statements. The XBRL instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document. |
|
| 104 |
Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101). |
* Management contract or compensatory plan, contract or arrangement.
** In accordance with Item 601(b)(32)(ii) of Regulation S-K and SEC Release No. 34-47986, the certifications furnished in Exhibits 32.1 and 32.2 hereto are deemed to accompany this Form 10-Q and will not be deemed “filed” for purposes of Section 18 of the Exchange Act. Such certifications will not be deemed to be incorporated by reference into any filing under the Securities Act or the Exchange Act.
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 thereunto duly authorized.
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FIRST NORTHERN COMMUNITY BANCORP |
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| Date: |
November 7, 2025 |
By: |
/s/ Kevin Spink |
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Kevin Spink, Executive Vice President / Chief Financial Officer |
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(Principal Financial Officer and Duly Authorized Officer) |
FAQ
What was FNRN’s Q3 2025 net income and EPS?
How did First Northern’s net interest income trend in Q3 2025?
What were FNRN’s deposits and loans as of September 30, 2025?
How did accumulated other comprehensive loss change year to date?
What were total assets and equity at quarter‑end?
How did unrealized losses on AFS securities change?
