Embassy Bancorp's Q2 Net Income Jumps 38% on Strong Loan Growth

TL;DR

**Embassy Bancorp is a buy; strong loan growth and surging net income make it a solid regional bank play.**

AI Summary

Embassy Bancorp, Inc. (EMYB) reported a significant increase in net income for the three months ended June 30, 2025, reaching $3.437 million, up 37.9% from $2.492 million in the prior year. For the six months, net income rose to $6.324 million, a 25.8% increase from $5.028 million in 2024. Total interest income grew to $17.726 million for the quarter, an increase of 9.9% from $16.119 million, primarily driven by a 7.6% rise in loan interest income to $14.404 million. Net interest income after credit for credit losses also saw a healthy increase, reaching $10.597 million for the quarter, up 15.5% from $9.171 million. Total assets expanded to $1.759 billion as of June 30, 2025, from $1.704 billion at December 31, 2024, with loans receivable, net, increasing to $1.270 billion from $1.256 billion. The company's securities available for sale increased to $328.290 million from $280.828 million, though it held $58.658 million in gross unrealized losses on these securities. Total deposits grew by $57.248 million in the six months ended June 30, 2025, reaching $1.610 billion. Stockholders' equity improved to $114.312 million from $106.480 million at year-end 2024, partly due to a positive change in accumulated other comprehensive loss.

Why It Matters

Embassy Bancorp's robust net income growth and expanding asset base signal strong operational performance in a competitive banking landscape, particularly within the Lehigh Valley. For investors, the 37.9% increase in quarterly net income and a dividend hike to $0.48 per share demonstrate financial health and a commitment to shareholder returns. Employees benefit from a growing company, potentially leading to more opportunities and stability. Customers can expect continued service from a bank with increasing lending capacity, as evidenced by the $13.817 million net increase in loans. The bank's ability to manage interest rate risks, as shown by the reduction in unrealized losses on securities, is crucial for its long-term stability and competitive positioning against larger regional banks.

Risk Assessment

Risk Level: medium — While net income is up, Embassy Bancorp holds $58.658 million in gross unrealized losses on securities available for sale as of June 30, 2025, primarily in municipal bonds and mortgage-backed securities. This represents a significant portion of its $328.290 million securities portfolio and could pose a risk if interest rates continue to rise or if the company is forced to sell these securities before recovery.

Analyst Insight

Investors should consider initiating or increasing positions in EMYB, given its strong net income growth and increasing dividends. However, monitor the unrealized losses in the securities portfolio and the broader interest rate environment, as sustained high rates could impact future profitability and asset values.

Financial Highlights

revenue

$17.726M

total Assets

$1.759B

net Income

$3.437M

eps

$0.45

revenue Growth

+9.9%

Revenue Breakdown

Key Numbers

• $3.437M — Net Income (Q2 2025) (Increased 37.9% from $2.492M in Q2 2024)
• $6.324M — Net Income (YTD June 2025) (Increased 25.8% from $5.028M in YTD June 2024)
• $17.726M — Total Interest Income (Q2 2025) (Increased 9.9% from $16.119M in Q2 2024)
• $10.597M — Net Interest Income after Credit for Credit Losses (Q2 2025) (Increased 15.5% from $9.171M in Q2 2024)
• $1.759B — Total Assets (June 30, 2025) (Increased from $1.704B at Dec 31, 2024)
• $1.270B — Loans Receivable, Net (June 30, 2025) (Increased from $1.256B at Dec 31, 2024)
• $58.658M — Gross Unrealized Losses on Securities Available for Sale (June 30, 2025) (Represents a significant portion of the securities portfolio)
• $1.610B — Total Deposits (June 30, 2025) (Increased by $57.248M in six months)
• $0.45 — Basic Earnings Per Share (Q2 2025) (Increased from $0.33 in Q2 2024)
• $0.48 — Dividends Per Share (Q2 2025) (Increased from $0.42 in Q2 2024)

Key Players & Entities

• Embassy Bancorp, Inc. (company) — registrant
• Embassy Bank For The Lehigh Valley (company) — principal operating subsidiary
• SEC (regulator) — Securities and Exchange Commission
• FHLBank of Pittsburgh (company) — source of restricted bank stock
• Atlantic Community Bankers Bank (company) — source of restricted bank stock
• $3.437 million (dollar_amount) — Net Income for Q2 2025
• $6.324 million (dollar_amount) — Net Income for six months ended June 30, 2025
• $1.759 billion (dollar_amount) — Total Assets as of June 30, 2025
• $58.658 million (dollar_amount) — Gross unrealized losses on securities available for sale as of June 30, 2025
• $0.48 (dollar_amount) — Dividend declared per share for Q2 2025

FAQ

Risk Factors

• Unrealized Losses on Securities [medium — financial]: Embassy Bancorp holds $328.290 million in securities available for sale, with $58.658 million in gross unrealized losses as of June 30, 2025. A significant portion of these losses, $57.419 million, are on securities held for 12 months or more, primarily in municipal bonds ($13.821 million) and residential mortgage-backed securities ($43.577 million). Management believes these are temporary impairments due to rising interest rates.
• Loan Portfolio Concentration [medium — financial]: The loan portfolio is heavily concentrated in residential real estate (52.88% or $677.392 million) and commercial real estate (42.99% or $550.735 million) as of June 30, 2025. While the majority of loans are rated 'Pass', there are minor amounts in 'Substandard' categories, particularly in commercial real estate ($1.183 million) and residential real estate ($789 thousand).
• Interest Rate Sensitivity [medium — market]: The company's investment portfolio, particularly mortgage-backed securities, is sensitive to interest rate fluctuations, as evidenced by the significant unrealized losses. Changes in market interest rates can impact the fair value of these securities and potentially affect net interest income and capital levels.
• Credit Risk Management [medium — operational]: The company manages credit risk through internal rating systems and an allowance for credit losses. While gross charge-offs were minimal ($152 thousand for the period), continued monitoring of loan quality, especially in concentrated sectors like commercial and residential real estate, is crucial.
• Bank Holding Company Regulations [low — regulatory]: As a registered bank holding company, Embassy Bancorp is subject to regulations under the Bank Holding Company Act of 1956. Compliance with capital requirements, liquidity standards, and other regulatory mandates is essential for its operations and growth.

Industry Context

Embassy Bancorp operates within the community banking sector, characterized by a focus on local markets and relationship-based lending. The industry is currently navigating a landscape shaped by rising interest rates, which impact loan demand, investment portfolio valuations, and net interest margins. Competition remains robust from larger financial institutions and fintech companies, necessitating a strong focus on customer service and efficient operations.

Regulatory Implications

As a bank holding company, Embassy Bancorp is subject to stringent regulatory oversight, including capital adequacy requirements and risk management standards. The current economic environment, with potential for interest rate volatility and credit cycle shifts, requires robust compliance and proactive risk mitigation to maintain regulatory compliance and financial stability.

What Investors Should Do

1. Monitor the impact of unrealized losses on securities
2. Analyze loan portfolio quality and concentration
3. Evaluate net interest margin trends
4. Assess capital adequacy and equity growth

Key Dates

• 2025-06-30: Quarter End — Reporting period for the 10-Q, showing increased net income, assets, and deposits.
• 2025-03-17: Form 10-K Filed — Provided audited financial statements for the year ended December 31, 2024, serving as a basis for comparison.
• 2025-07: Subsequent Event - Securities Purchase — Company purchased $15.0 million in Treasury bonds, mortgage-backed securities, and government agency bonds, indicating ongoing portfolio management.

Glossary

Bank Holding Company Act (BHC Act)

A U.S. federal law that regulates bank holding companies, which are companies that own or control one or more banks. (Embassy Bancorp is registered as a bank holding company, making this act the primary regulatory framework for its corporate structure and operations.)

Securities Available For Sale

Investments in debt or equity securities that are not classified as held-to-maturity or trading securities. They are reported at fair value, with unrealized gains and losses included in other comprehensive income. (A significant portion of Embassy Bancorp's assets, with notable unrealized losses reported, impacting its other comprehensive income.)

Allowance for Credit Losses

A contra-asset account that reduces the carrying amount of loans to their estimated net realizable value. It reflects expected credit losses over the life of the loans. (Indicates management's assessment of potential loan defaults and impacts the reported net value of the company's loan portfolio.)

Gross Unrealized Losses

The total amount by which the fair value of a security is below its amortized cost, without considering any potential recovery or impairment charges. (Highlights potential risks within the investment portfolio, particularly when they are substantial or persistent.)

Accumulated Other Comprehensive Income (Loss)

A component of stockholders' equity that includes unrealized gains and losses on certain investments, foreign currency translation adjustments, and other items not included in net income. (The change in this account, particularly a positive change due to reduced unrealized losses, contributed to the improvement in stockholders' equity.)

Year-Over-Year Comparison

Embassy Bancorp has demonstrated strong performance compared to the prior year, with net income for Q2 2025 up 37.9% to $3.437 million and year-to-date net income up 25.8% to $6.324 million. Total interest income grew 9.9%, driven by loan interest, and net interest income after credit for credit losses saw a 15.5% increase. Total assets expanded to $1.759 billion, and total deposits grew by $57.248 million in the first half of the year. Stockholders' equity also improved, reflecting positive operational and financial momentum.

Key Financial Figures

• $1.00 — res outstanding as of August 8, 2025 ($1.00 Par Value) 7,645,249 (Title Class)

Filing Documents

• emyb-20250630x10q.htm (10-Q) — 7832KB
• emyb-20250630xex31_1.htm (EX-31.1) — 18KB
• emyb-20250630xex31_2.htm (EX-31.2) — 18KB
• emyb-20250630xex32.htm (EX-32) — 13KB
• 0001449794-25-000020.txt ( ) — 28789KB
• emyb-20250630.xsd (EX-101.SCH) — 38KB
• emyb-20250630_cal.xml (EX-101.CAL) — 87KB
• emyb-20250630_def.xml (EX-101.DEF) — 214KB
• emyb-20250630_lab.xml (EX-101.LAB) — 399KB
• emyb-20250630_pre.xml (EX-101.PRE) — 404KB
• emyb-20250630x10q_htm.xml (XML) — 9112KB

– Financial Information

Part I – Financial Information 3

– Financial Statements

Item 1 – Financial Statements Consolidated Balance Sheets (Unaudited) 3 Consolidated Statements of Income (Unaudited) 4 Consolidated Statements of Comprehensive Income (Loss) (Unaudited) 5 Consolidated Statements of Stockholders' Equity (Unaudited) 6 Consolidated Statements of Cash Flows (Unaudited) 8

Notes to Consolidated Financial Statements (Unaudited)

Notes to Consolidated Financial Statements (Unaudited) 9

– Management's Discussion and Analysis of Financial Condition and Results of Operations

Item 2 – Management's Discussion and Analysis of Financial Condition and Results of Operations 28

– Quantitative and Qualitative Disclosures About Market Risk

Item 3 – Quantitative and Qualitative Disclosures About Market Risk 40

– Controls and Procedures

Item 4 – Controls and Procedures 41

- Other Information

Part II - Other Information 41

- Legal Proceedings

Item 1 - Legal Proceedings 41

- Risk Factors

Item 1A - Risk Factors 41

- Unregistered Sales of Equity Securities and Use of Proceeds

Item 2 - Unregistered Sales of Equity Securities and Use of Proceeds 41

- Defaults Upon Senior Securities

Item 3 - Defaults Upon Senior Securities 41

– Mine Safety Disclosures

Item 4 – Mine Safety Disclosures 41

- Other Information

Item 5 - Other Information 41

- Exhibits

Item 6 - Exhibits 42

Signatures

Signatures 43 2 Embassy Bancorp, Inc.

– Financial Information

Part I – Financial Information

– Fi nan cial Statements

Item 1 – Fi nan cial Statements Consolidated Balance Sheets (Current Period Unaudited) June 30, December 31, ASSETS 2025 2024 (In Thousands, Except Share Data) Cash and due from banks $ 17,824 $ 16,399 Interest bearing demand deposits with banks 72,993 79,123 Federal funds sold 1,000 1,000 Cash and Cash Equivalents 91,817 96,522 Securities available for sale 328,290 280,828 Restricted investment in bank stock 1,051 1,663 Loans receivable, net of allowance for credit losses of $ 11,905 in 2025; $ 12,166 in 2024 1,270,028 1,256,256 Premises and equipment, net of accumulated depreciation 3,168 3,322 Bank owned life insurance 37,287 36,652 Accrued interest receivable 4,108 3,604 Other assets 23,566 25,573 Total Assets $ 1,759,315 $ 1,704,420 LIABILITIES AND STOCKHOLDERS' EQUITY Liabilities: Deposits: Non-interest bearing $ 350,263 $ 351,371 Interest bearing 1,259,944 1,201,588 Total Deposits 1,610,207 1,552,959 Securities sold under agreements to repurchase 7,927 4,895 Short-term borrowings - 15,625 Accrued interest payable 7,429 7,812 Other liabilities 19,440 16,649 Total Liabilities 1,645,003 1,597,940 Stockholders' Equity: Common stock, $ 1 par value; authorized 20,000,000 shares; 2025 issued 7,811,611 shares; outstanding 7,645,249 shares; 2024 issued 7,792,654 shares; outstanding 7,626,292 shares; 7,812 7,793 Surplus 29,143 28,802 Retained earnings 125,914 123,259 Accumulated other comprehensive loss ( 45,818 ) ( 50,635 ) Treasury stock, at cost: 166,362 shares at June 30, 2025 and December 31, 2024, respectively ( 2,739 ) ( 2,739 ) Total Stockholders' Equity 114,312 106,480 Total Liabilities and Stockholders' Equity $ 1,759,315 $ 1,704,420 See notes to consolidated financial statements (unaudited). 3 Embassy Bancorp, Inc. Consolidated Statements of Income

Notes to Consolidated Financial Statements (Unaudited )

Notes to Consolidated Financial Statements (Unaudited ) Note 1 – Basis of Presentation Embassy Bancorp, Inc. (the "Company") is a Pennsylvania corporation organized in 2008 and registered as a bank holding company pursuant to the Bank Holding Company Act of 1956, as amended (the "BHC Act"). The Company was formed for purposes of acquiring Embassy Bank For The Lehigh Valley (the "Bank") in connection with the reorganization of the Bank into a bank holding company structure, which was consummated on November 11, 2008. Accordingly, the Company owns all of the capital stock of the Bank, giving the organization more flexibility in meeting its capital needs as the Company continues to grow. Embassy Holdings, LLC (the "LLC") is a wholly-owned subsidiary of the Bank organized to engage in the holding of property acquired by the Bank in satisfaction of debts previously contracted. As such, the consolidated financial statements contained herein include the accounts of the Company, the Bank and the LLC. All significant intercompany transactions and balances have been eliminated. The Bank, which is the Company's principal operating subsidiary, was originally incorporated as a Pennsylvania bank on May 11, 2001 and opened its doors on November 6, 2001. It was formed by a group of local business persons and professionals with significant prior experience in community banking in the Lehigh Valley area of Pennsylvania, the Bank's primary market area. The accompanying unaudited financial statements have been prepared in accordance with United States of America generally accepted accounting principles ("US GAAP") for interim financial information and in accordance with instructions for Form 10-Q and Rule 10-01 of the Securities and Exchange Commission Regulation S-X. Accordingly, they do not include all of the information and footnotes required by US GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals)

Notes to Consolidated Financial Statements (Unaudited )

Notes to Consolidated Financial Statements (Unaudited ) Note 3 – Securities Available For Sale At June 30, 2025 and December 31, 2024, respectively, the amortized cost and fair values of securities available-for-sale were as follows: Gross Gross Amortized Unrealized Unrealized Fair Cost Gains Losses Value (In Thousands) June 30, 2025: U.S. Treasury securities $ 77,723 $ 550 $ ( 43 ) $ 78,230 U.S. Government agency obligations 19,072 91 ( 17 ) 19,146 Municipal bonds 72,627 19 ( 15,021 ) 57,625 U.S. Government Sponsored Enterprise (GSE) - Mortgage-backed securities - residential 216,865 1 ( 43,577 ) 173,289 Total $ 386,287 $ 661 $ ( 58,658 ) $ 328,290 December 31, 2024: U.S. Treasury securities $ 34,777 $ 10 $ ( 47 ) $ 34,740 U.S. Government agency obligations 12,499 3 ( 56 ) 12,446 Municipal bonds 72,669 13 ( 14,682 ) 58,000 U.S. Government Sponsored Enterprise (GSE) - Mortgage-backed securities - commercial 508 - ( 72 ) 436 U.S. Government Sponsored Enterprise (GSE) - Mortgage-backed securities - residential 224,470 - ( 49,264 ) 175,206 Total $ 344,923 $ 26 $ ( 64,121 ) $ 280,828 The amortized cost and fair value of securities as of June 30, 2025, by contractual maturity, are shown below. Expected maturities may differ from contractual maturities because borrowers may have the right to prepay obligations with or without any penalties. Amortized Fair Cost Value (In Thousands) June 30, 2025: Due in one year or less $ 33,276 $ 33,243 Due after one year through five years 66,131 66,660 Due after five years through ten years 7,596 7,136 Due after ten years 62,419 47,962 169,422 155,001 U.S. Government Sponsored Enterprise (GSE) - Mortgage-backed securities - residential 216,865 173,289 Total $ 386,287 $ 328,290 There were no sales of se

Notes to Consolidated Financial Statements (Unaudited )

Notes to Consolidated Financial Statements (Unaudited ) The following table shows the Company's investments' gross unrealized losses and fair value, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position as of June 30, 2025 and December 31, 2024: Less Than 12 Months 12 Months or More Total Fair Value Unrealized Losses Fair Value Unrealized Losses Fair Value Unrealized Losses June 30, 2025: (In Thousands) U.S. Treasury securities $ 32,260 $ ( 35 ) $ 2,492 $ ( 8 ) $ 34,752 $ ( 43 ) U.S. Government agency obligations 7,492 ( 4 ) 2,484 ( 13 ) 9,976 ( 17 ) Municipal bonds 11,547 ( 1,200 ) 43,476 ( 13,821 ) 55,023 ( 15,021 ) U.S. Government Sponsored Enterprise (GSE) - Mortgage -backed securities - residential 3 - 173,247 ( 43,577 ) 173,250 ( 43,577 ) Total Temporarily Impaired Securities $ 51,302 $ ( 1,239 ) $ 221,699 $ ( 57,419 ) $ 273,001 $ ( 58,658 ) . December 31, 2024: U.S. Treasury securities $ - $ - $ 9,946 $ ( 47 ) $ 9,946 $ ( 47 ) U.S. Government agency obligations 5,009 ( 8 ) 2,437 ( 48 ) 7,446 ( 56 ) Municipal bonds 13,433 ( 1,248 ) 43,888 ( 13,434 ) 57,321 ( 14,682 ) U.S. Government Sponsored Enterprise (GSE) - Mortgage -backed securities - commercial - - 436 ( 72 ) 436 ( 72 ) U.S. Government Sponsored Enterprise (GSE) - Mortgage -backed securities - residential 18 - 175,149 ( 49,264 ) 175,167 ( 49,264 ) Total Temporarily Impaired Securities $ 18,460 $ ( 1,256 ) $ 231,856 $ ( 62,865 ) $ 250,316 $ ( 64,121 ) The Company had two hundred ( 200 ) securities in an unrealized loss position at June 30, 2025 and one hundred ninety-seven ( 197 ) securities in an unrealized loss position at December 31, 2024. The Company reviews its investment portfolio o

Notes to Consolidated Financial Statements (Unaudited )

Notes to Consolidated Financial Statements (Unaudited ) as (1) the significance of the decline in net assets of the issuer as compared to the capital stock amount for the issuer and the length of time this situation has persisted, (2) commitments by the issuer to make payments required by law or regulation and the level of such payments in relation to the operating performance of the issuer, and (3) the impact of legislative and regulatory changes on institutions and, accordingly, on the customer base of the issuer. Based upon its evaluation of the foregoing criteria, management believes no impairment charge is necessary related to the FHLB or ACBB stock as of June 30, 2025. Note 5 – Loans and Credit Quality The following table presents the composition of loans receivable at June 30, 2025 and December 31, 2024, respectively: June 30, 2025 December 31, 2024 Percentage of Percentage of Balance total Loans Balance total Loans (Dollars in Thousands) Commercial real estate $ 550,735 42.99 % $ 536,594 42.33 % Commercial construction 17,462 1.36 % 22,556 1.78 % Commercial 34,966 2.73 % 39,384 3.10 % Residential real estate 677,392 52.88 % 668,725 52.75 % Consumer 511 0.04 % 475 0.04 % Total loans 1,281,066 100.00 % 1,267,734 100.00 % Unearned origination fees 867 688 Allowance for credit losses ( 11,905 ) ( 12,166 ) Net Loans $ 1,270,028 $ 1,256,256 12 Embassy Bancorp, Inc.

Notes to Consolidated Financial Statements (Unaudited )

Notes to Consolidated Financial Statements (Unaudited ) The following table presents the classes of the loan portfolio summarized by the aggregate pass rating and the classified ratings of special mention (potential weakness), substandard (well defined weakness) and doubtful (full collection unlikely) within the Company's internal risk rating system as of June 30, 2025 by year of origination: 2025 2024 2023 2022 2021 Prior Revolving Total (In Thousands) Commercial real estate Pass $ 30,674 $ 51,355 $ 58,139 $ 140,184 $ 51,498 $ 209,976 $ 7,726 $ 549,552 Special Mention - - - - - - - - Substandard - - - - - 1,183 - 1,183 Total 30,674 51,355 58,139 140,184 51,498 211,159 7,726 550,735 Commercial construction Pass 263 2,627 6,710 7,544 - 26 - 17,170 Special Mention - - - - - - - - Substandard - - - - - 237 55 292 Total 263 2,627 6,710 7,544 - 263 55 17,462 Commercial Pass 2,343 6,761 1,324 2,775 473 9,895 8,189 31,760 Special Mention - 162 - 283 244 77 2,440 3,206 Substandard - - - - - - - - Total 2,343 6,923 1,324 3,058 717 9,972 10,629 34,966 Residential real estate Pass 40,797 71,591 60,150 83,663 138,139 255,617 26,239 676,196 Special Mention - - - - - 407 - 407 Substandard - - - 137 196 456 - 789 Total 40,797 71,591 60,150 83,800 138,335 256,480 26,239 677,392 Consumer Pass 86 86 48 44 3 - 244 511 Special Mention - - - - - 0 0 - Substandard - - - - - 0 0 - Total 86 86 48 44 3 - 244 511 Total Loans Receivable $ 74,163 $ 132,582 $ 126,371 $ 234,630 $ 190,553 $ 477,874 $ 44,893 $ 1,281,066 The Company had gross charge-offs of

Notes to Consolidated Financial Statements (Unaudited )

Notes to Consolidated Financial Statements (Unaudited ) The following table presents the classes of the loan portfolio summarized by the aggregate pass rating and the classified ratings of special mention (potential weakness), substandard (well defined weakness) and doubtful (full collection unlikely) within the Company's internal risk rating system as of December 31, 2024 by year of origination: 2024 2023 2022 2021 2020 Prior Revolving Total (In Thousands) Commercial real estate Pass $ 52,579 $ 59,016 $ 145,905 $ 48,420 $ 57,430 $ 164,989 $ 6,920 $ 535,259 Special Mention - - - 136 - - - 136 Substandard - - - - - 1,199 - 1,199 Total 52,579 59,016 145,905 48,556 57,430 166,188 6,920 536,594 Commercial construction Pass 4,438 5,092 7,544 5,161 - 28 - 22,263 Special Mention - - - - - - - - Substandard - - - - - 238 55 293 Total 4,438 5,092 7,544 5,161 - 266 55 22,556 Commercial Pass 7,407 1,501 3,290 606 2,534 11,507 9,309 36,154 Special Mention 182 - 372 354 118 19 2,185 3,230 Substandard - - - - - - - - Total 7,589 1,501 3,662 960 2,652 11,526 11,494 39,384 Residential real estate Pass 77,507 64,392 87,315 143,578 128,226 144,049 22,419 667,486 Special Mention - - - - - 419 - 419 Substandard - - 42 196 - 582 - 820 Total 77,507 64,392 87,357 143,774 128,226 145,050 22,419 668,725 Consumer Pass 106 64 72 9 - 1 223 475 Specia

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