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What changed in FIDELITY D & D BANCORP INC's 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of FIDELITY D & D BANCORP INC's 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+276 added−302 removedSource: 10-K (2025-03-13) vs 10-K (2024-03-20)

Top changes in FIDELITY D & D BANCORP INC's 2024 10-K

276 paragraphs added · 302 removed · 208 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

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Biggest changeDiversity and Inclusion The Company is committed to promoting a diverse and inclusive workforce and values the strength it brings to the organization. Hiring practices include outreach to organizations representing groups of color and ethnicity, veteran status, disabled persons and women. Recruitment sources are varied to reach a broad audience.
Biggest changeHiring practices include outreach to organizations representing groups of color and ethnicity, veteran status, disabled persons and women. Recruitment sources are varied to reach a broad audience. These practices have resulted in a continuously increased diverse representation and an enhanced ability to provide for the diverse needs of the communities we serve.
A full list of services provided by the Bank is detailed in the section entitled “Products and Services” contained within the 2023 Annual Report to Shareholders, incorporated by reference.
A full list of services provided by the Bank is detailed in the section entitled “Products and Services” contained within the 2024 Annual Report to Shareholders, incorporated by reference.
The banking business is highly competitive, and the success and profitability of the Company depends principally on its ability to compete in its market area. Competition includes, among other sources: local community banks; savings banks; regional banks; nationwide banks; credit unions; savings & loans; insurance companies; money market funds; mutual funds; small loan companies and other financial services companies.
The banking business is highly competitive, and the success and profitability of the Company depends principally on its ability to compete in its market area. Competition includes, among other sources: local community banks; regional banks; national banks; credit unions; insurance companies; money market funds; mutual funds; small loan companies and other financial services companies.
Economic conditions affect the market value of the underlying collateral as well as the levels of adequate cash flow and revenue generation from income-producing commercial properties. 4 Table of Contents During 2023, the national unemployment rate rose to 3.7% compared to 3.5% at the end of 2022.
Economic conditions affect the market value of the underlying collateral as well as the levels of adequate cash flow and revenue generation from income-producing commercial properties. 4 Table of Contents During 2024, the national unemployment rate rose to 4.1% compared to 3.7% at the end of 2023.
The unemployment rates in the Company’s local statistical markets, Scranton-Wilkes-Barre-Hazleton and Allentown-Bethlehem-Easton, dropped to 3.5% and 3.3%, resp ectively, from 4.5% and 3.7%, respectively, at the end of 2022. The local economy has been volatile in recent years and generally lags the national market trends.
The unemployment rates in the Company’s local statistical markets, Scranton-Wilkes-Barre-Hazleton and Allentown-Bethlehem-Easton, increased to 3.8% and 3.4%, respectively, from 3.5% and 3.3%, respectively, at the end of 2023. The local economy has been volatile in recent years and generally lags the national market trends.
Demographics As of December 31, 2023 , the Company employed 313 bankers within its network located in Northeast and Lehigh Valley, Pennsylvania. The Company employed 22 part-time bankers and 291 full-time bankers. Employment levels are aligned with the needs of the business.
Demographics As of December 31, 2024, the Company employed 320 bankers within its network located in Northeast and Lehigh Valley, Pennsylvania. The Company employed 31 part-time bankers and 289 full-time bankers. Employment levels are aligned with the needs of the business.
Innovative programs, including Fidelity Bank University, leadership training, the education assistance program, enrichment programs through conferences, seminars and workshops and options for certifications are offered to educate bankers at all levels.
The Company has a devoted training team and all bankers are offered and encouraged to participate in continuous training initiatives. Innovative programs, including Fidelity Bank University, leadership training, the education assistance program, enrichment programs through conferences, seminars and workshops and options for certifications are offered to educate bankers at all levels.
Bankers make use of the program for personal and professional struggles and continue to have ongoing access to round-the-clock support at no charge, including confidential counseling, work-life solutions, legal support and financial guidance.
Bankers make use of the program for personal and professional struggles and continue to have ongoing access to round-the-clock support at no charge, including confidential counseling, work-life solutions, legal support and financial guidance. In addition to benefit packages, the Company offers paid time off, as it is an important part of balancing a fulfilling work and personal life.
In 2023, the Company had 15.24% of Lackawanna County’s total deposit market share ranking 3 rd in total deposits, 6.43% of Luzerne County’s total deposit market share ranking 7 th in total deposits and 7.10% of Northampton County’s total deposit market share ranking 6 th in total deposits.
As of June 30, 2024, the Company had 15.70% of Lackawanna County’s total deposit market share ranking 2nd in total deposits, 6.14% of Luzerne County’s total deposit market share ranking 8 th in total deposits, and 7.12% of Northampton County’s total deposit market share ranking 6 th in total deposits.
The Company has a robust program to support community volunteerism and gives all bankers paid time off to spend hours in service to non-profits, schools, elder programs and other organizations. The program helps to create community sustainability through our bankers’ time, talent and treasure and it develops deeper relationships with our bankers who work side-by-side for common causes.
Bankers have opportunities to earn additional days off through various programs. The Company has a robust program to support community volunteerism and gives all bankers paid time off to spend hours in service to non-profits, schools, elder programs and other organizations.
Training and Development The investment into the continuous improvement of all bankers is evident in the bank’s commitment of training dollars and resources. Key Performance Indicators (KPIs), tracked quarterly, outline training goals bank-wide and training dollars spent. The Company has a devoted training team and all bankers are offered and encouraged to participate in continuous training initiatives.
The Affirmative Action Plan monitors the Company's success in creating equal employment opportunities for bankers and applicants and guides staff in hiring practices. Training and Development The investment into the continuous improvement of all bankers is evident in the bank’s commitment of training dollars and resources. Key Performance Indicators (KPIs), tracked quarterly, outline training goals bank-wide and training dollars spent.
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In addition to benefit packages, the Company offers paid time off for vacation, sick and personal time, as it is an important part of balancing a fulfilling work and personal life. Bankers have opportunities to earn additional days off through various programs.
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The program helps to create community sustainability through our bankers’ time, talent and treasure and it develops deeper relationships with our bankers who work side-by-side for common causes. Diversity and Inclusion The Company is committed to promoting a diverse and inclusive workforce and values the strength it brings to the organization.
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These practices have resulted in a continuously increased diverse representation and an enhanced ability to provide for the diverse needs of the communities we serve. The Affirmative Action Plan monitors the Company's success in creating equal employment opportunities for bankers and applicants and guides staff in hiring practices.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeIts business could be harmed and the Company may be exposed to legal liability and reputational risk if the AI the Company uses is or is alleged to be deficient, inaccurate, or biased because the AI algorithms are flawed, insufficient, of poor quality, or reflect unwanted forms of bias, particularly if third party AI integrated with its platforms produces false or “hallucinatory” inferences.
Biggest changeThe Company may be exposed to legal liability and reputational risk if the AI the Company uses is or is alleged to be deficient, inaccurate, or biased because the AI algorithms are flawed, insufficient, of poor quality, or reflect unwanted forms of bias, particularly if third party AI integrated with its platforms produces false or “hallucinatory” inferences.
The remediation costs and any other financial liabilities associated with an environmental hazard could have a material adverse effect on the Company’s financial condition and results of operations. The Company ’ s profitability depends significantly on economic conditions in the Commonwealth of Pennsylvania and the local regions in which it conducts business.
The remediation costs and any other financial liabilities associated with an environmental hazard could have a material adverse effect on the Company’s financial condition and results of operations. The Company ’ s profitability depends significantly on economic conditions in the Commonwealth of Pennsylvania and the markets in which it conducts business.
Additional expenses associated with compliance with the Act, currently and on an ongoing basis, are likely to continue and the effects of full implementation of the Act may limit our ability to pursue certain business opportunities. ITEM 1B: UNRESOLVED STAFF COMMENTS None
Additional expenses associated with compliance with the Act, currently and on an ongoing basis, are likely to continue and the effects of full implementation of the Act may limit our ability to pursue certain business opportunities.
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The Company adopted a new accounting standard update that results in a significant change in how we recognize credit losses and may have a material impact on our financial condition or results of operations.
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In June 2016, the Company adopted a new accounting standard update (“ASU”) entitled “ Financial Instruments-Credit Losses (Topic 326), Measurement of Credit Losses on Financial Instruments ,” which replaced the “incurred loss” model for recognizing credit losses with an “expected loss” model referred to as the Current Expected Credit Loss (“CECL”) model.
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Under the CECL model, banks are required to present certain financial assets carried at amortized cost, such as loans held for investment and held-to-maturity debt securities, at the net amount expected to be collected.
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The measurement of expected credit losses is based on information about past events, including historical experience, current conditions, and reasonable and supportable forecasts that affect the collectability of the reported amount. This measurement will take place at the time the financial asset is first added to the balance sheet and periodically thereafter.
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This differs significantly from the “incurred loss” model required under previous generally accepted accounting principles (“GAAP”), which delays recognition until it is probable a loss has been incurred. The new CECL standard became effective for the Company on January 1, 2023. The CECL model may create more volatility in the level of the allowance for credit losses.
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If the Company is required to materially increase the level of its allowance for credit losses and reserve for unfunded commitments for any reason, such increase could adversely affect its business, financial condition and results of operations.
Removed
The adoption of CECL is discussed further in Footnote 1, "Nature of Operations and Summary of Significant Accounting Policies," of Part II, Item 8 “Financial Statements and Supplementary Data”, which is incorporated herein by reference.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeDuring 2022, the Company purchased the Scranton Electric Building for a future corporate headquarters in Scranton, PA, which is in the process to be placed on the National Register of Historic Places. Demolition of non-historical interior improvements is currently underway to allow for the next phase of planned remodeling with the expected completion ready for 2025.
Biggest changeDuring 2022, the Company purchased the Scranton Electric Building for a future corporate headquarters in Scranton, PA, which is in the process to be placed on the National Register of Historic Places. Demolition of non-historical interior improvements is complete and the planned remodeling is underway, with the expected completion ready for 2026, see premises and equipemt discussion within Item 7.
The Company also operates a wealth management office in Minersville, PA under a short-term lease agreement. 17 Table of Contents Additionally, the Company has a limited production office in Scranton, PA that is currently leased for certain commercial lenders and credit department employees. The Company acquired a leased building in Scranton from the merger with Landmark.
The Company also operates a wealth management office in Minersville, PA under a short-term lease agreement. 17 Table of Contents Additionally, the Company has a limited production office in Scranton, PA that is currently leased for certain commercial lenders and credit department employees. The Company acquired a leased building in Scranton from the merger with Landmark Community Bank.
ITEM 2: PROPERTIES As of December 31, 2023, the Company and the Bank operated 21 full-service banking offices, of which eleven were owned and ten were leased. The Pittston branch property is subject to a lease with a company of which director, William J. Joyce, Sr., is a partner.
ITEM 2: PROPERTIES As of December 31, 2024, the Company and the Bank operated 21 full-service banking offices, of which eleven were owned and ten were leased. The Pittston branch property is subject to a lease with a company of which director, William J. Joyce, Sr., is a partner.
The branch in the building was closed in September 2021 and the building was converted into a training center during 2022. Foreclosed assets held-for-sale includes other real estate owned (ORE). The Company had one ORE property as of December 31, 2023. Upon possession, foreclosed properties are recorded on the Company’s balance sheet at the lower of cost or fair value.
The branch in the building was closed in September 2021 and the building was converted into a training center during 2022. Foreclosed assets held-for-sale includes other real estate owned (ORE). The Company had three ORE property as of December 31, 2024. Upon possession, foreclosed properties are recorded on the Company’s balance sheet at the lower of cost or fair value.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeThe administrator may purchase shares directly from the Company, in the open market, in negotiated transactions with third parties or using a combination of these methods. The Company had approximat ely 1,631 sh areholders at December 31, 2023 an d 1,623 sh areholders as of February 29, 2024.
Biggest changeThe administrator may purchase shares directly from the Company, in the open market, in negotiated transactions with third parties or using a combination of these methods. The Company had approximately 1,585 shareholders at December 31, 2024 and 1,592 shareholders as of February 28, 2025. The number of shareholders is the actual number of distinct shareholders of record.
Each security depository is considered a single shareholder for purposes of determining the approximate number of shareholders. 19 Table of Contents Performance graph The following graph and table compare the cumulative total shareholder return on the Company’s common stock against the cumulative total return of the NASDAQ Composite and KBW NASDAQ Bank index (the KBW NASDAQ index) for the period of five fiscal years commencing January 1, 2019, and ending December 31, 2023.
Each security depository is considered a single shareholder for purposes of determining the approximate number of shareholders. 19 Table of Contents Performance graph The following graph and table compare the cumulative total shareholder return on the Company’s common stock against the cumulative total return of the Russell 3000 and KBW NASDAQ Bank index (the KBW NASDAQ index) for the period of five fiscal years commencing January 1, 2020, and ending December 31, 2024.
The graph illustrates the cumulative investment return to shareholders, based on the assumption that a $100 investment was made on December 31, 2018, in each of: the Company’s common stock, the NASDAQ Composite and the KBW NASDAQ index. As of December 31, 2023, the KBW NASDAQ index consiste d of 24 bank s.
The graph illustrates the cumulative investment return to shareholders, based on the assumption that a $100 investment was made on December 31, 2019, in each of: the Company’s common stock, the Russell 3000 and the KBW NASDAQ index. As of December 31, 2024, the KBW NASDAQ index consisted of 24 banks.
The shareholder return shown on the graph and table below is not necessarily indicative of future performance: Period Ending Index 12/31/18 12/31/19 12/31/20 12/31/21 12/31/22 12/31/23 Fidelity D & D Bancorp, Inc. 100.00 98.62 104.47 98.00 80.81 102.56 NASDAQ Composite Index 100.00 136.69 198.10 242.03 163.28 236.17 KBW NASDAQ Bank Index 100.00 136.13 122.09 168.88 132.75 131.57 20 Table of Contents ITEM 6: [Reserved]
The shareholder return shown on the graph and table below is not necessarily indicative of future performance: Period Ending Index 12/31/19 12/31/20 12/31/21 12/31/22 12/31/23 12/31/24 Fidelity D & D Bancorp, Inc. 100.00 105.93 99.37 81.94 104.00 90.24 Russell 3000 Index 100.00 120.89 151.91 122.73 154.59 191.39 KBW NASDAQ Bank Index 100.00 89.69 124.06 97.52 96.65 132.60 20 Table of Contents ITEM 6: [Reserved]
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The number of shareholders is the actual number of distinct shareholders of record.

Item 6. [Reserved]

Selected Financial Data — reserved (removed by SEC in 2021)

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Biggest changeItem 6. [Reserved] 21 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operation 21 Item 7A. Quantitative and Qualitative Disclosures About Market Risk 58 Item 8. Report of Independent Registered Public Accounting Firm 59 Item 8. Financial Statements and Supplementary Data 59
Biggest changeItem 6. [Reserved] 21 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operation 21 Item 7A. Quantitative and Qualitative Disclosures About Market Risk 59 Item 8. Report of Independent Registered Public Accounting Firm 60 Item 8. Financial Statements and Supplementary Data 60

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

184 edited+67 added−84 removed172 unchanged
Biggest changeTax-exempt income was not converted to a tax-equivalent basis on the rate/volume analysis: Years ended December 31, (dollars in thousands) 2023 compared to 2022 2022 compared to 2021 Increase (decrease) due to Volume Rate Total Volume Rate Total Interest income: Interest-bearing deposits $ (1,142 ) $ 712 $ (430 ) $ (116 ) $ 854 $ 738 Restricted investments in bank stock 37 88 125 17 40 57 Investments: Agency - GSE (78 ) (38 ) (116 ) 407 110 517 MBS - GSE residential (493 ) 261 (232 ) 1,106 630 1,736 State and municipal (707 ) (86 ) (793 ) 1,483 84 1,567 Total investments (1,278 ) 137 (1,141 ) 2,996 824 3,820 Loans and leases: Residential real estate 2,638 2,808 5,446 3,652 492 4,144 C&I and CRE 2,303 6,857 9,160 3,020 199 3,219 Consumer 795 1,208 2,003 1,343 (117 ) 1,226 Total loans and leases 5,736 10,873 16,609 8,015 574 8,589 Total interest income 3,353 11,810 15,163 10,912 2,292 13,204 Interest expense: Deposits: Interest-bearing checking (227 ) 7,848 7,621 316 395 711 Savings and clubs (29 ) 434 405 21 130 151 Money market 161 10,284 10,445 236 1,756 1,992 Certificates of deposit 268 4,062 4,330 (30 ) (136 ) (166 ) Total deposits 173 22,628 22,801 543 2,145 2,688 Secured borrowings (38 ) 304 266 (4 ) 57 53 Overnight borrowings 2,319 4 2,323 33 11 44 FHLB advances - - - (26 ) - (26 ) Total interest expense 2,454 22,936 25,390 546 2,213 2,759 Net interest income $ 899 $ (11,126 ) $ (10,227 ) $ 10,366 $ 79 $ 10,445 Provision for credit losses The provision for credit losses represents the necessary amount to charge against current earnings, the purpose of which is to increase the allowance for credit losses to a level that represents management’s best estimate of expected credit losses in the Company’s loan portfolio.
Biggest changeTax-exempt income was not converted to a tax-equivalent basis on the rate/volume analysis: Years ended December 31, (dollars in thousands) 2024 compared to 2023 2023 compared to 2022 Increase (decrease) due to Volume Rate Total Volume Rate Total Interest income: Interest-bearing deposits $ 1,048 $ 40 $ 1,088 $ (1,142 ) $ 712 $ (430 ) Restricted investments in bank stock (19 ) 32 13 37 88 125 Investments: Agency - GSE 12 (13 ) (1 ) (78 ) (38 ) (116 ) MBS - GSE residential (403 ) 240 (163 ) (493 ) 261 (232 ) State and municipal (723 ) 333 (390 ) (707 ) (86 ) (793 ) Total investments (1,114 ) 560 (554 ) (1,278 ) 137 (1,141 ) Loans and leases: Residential real estate 1,736 1,745 3,481 2,638 2,808 5,446 C&I and CRE 5,314 3,642 8,956 2,303 6,857 9,160 Consumer (1,257 ) 1,460 203 795 1,208 2,003 Total loans and leases 5,793 6,847 12,640 5,736 10,873 16,609 Total interest income 5,708 7,479 13,187 3,353 11,810 15,163 Interest expense: Deposits: Interest-bearing checking 137 4,745 4,882 (227 ) 7,848 7,621 Savings and clubs (71 ) (3 ) (74 ) (29 ) 434 405 Money market 496 2,301 2,797 161 10,284 10,445 Certificates of deposit 3,636 2,979 6,615 268 4,062 4,330 Total deposits 4,198 10,022 14,220 173 22,628 22,801 Secured borrowings (42 ) 2 (40 ) (38 ) 304 266 Overnight borrowings (835 ) 24 (811 ) 2,319 4 2,323 Total interest expense 3,321 10,048 13,369 2,454 22,936 25,390 Net interest income $ 2,387 $ (2,569 ) $ (182 ) $ 899 $ (11,126 ) $ (10,227 ) Provision for credit losses The provision for credit losses represents the necessary amount to charge against current earnings, the purpose of which is to adjust the allowance for credit losses to a level that represents management’s best estimate of expected credit losses in the Company’s loan portfolio.
Generally, deposits are obtained from consumers, businesses and public entities within the communities that surround the Company’s 21 branch offices and all deposits are insured by the FDIC up to the full extent permitted by law. Deposit products consist of transaction accounts including: savings; clubs; interest-bearing checking; money market and non-interest bearing checking (DDA).
Generally, deposits are obtained from consumers, businesses and public entities within the communities that surround the Company’s 21 branch offices and all deposits are insured by the FDIC up to the full extent permitted by law. Deposit products consist of transaction accounts including: savings; clubs; interest-bearing checking; money market; non-interest bearing checking (DDA).
Due to volatility in the levels of borrowings during October 2023 and the increasing expected dependency on borrowing capacity from experiencing deposit fluctuations while funding loan growth, the Company evaluated a liquidity strategy to deleverage the reliance on short-term borrowings.
Due to volatility in the levels of borrowings during October 2023 and the increasing expected dependency on borrowing capacity from experiencing deposit fluctuations while funding loan growth, the Company evaluated a liquidity strategy to deleverage the reliance on short-term borrowings.
For a discussion on the provision for loan losses, see the “Provision for loan losses,” located in the results of operations section of management’s discussion and analysis contained herein. The allowance for credit losses can generally absorb losses throughout the loan portfolio. However, in some instances an allocation is made for specific loans or groups of loans.
For a discussion on the provision for credit losses, see the “Provision for credit losses,” located in the results of operations section of management’s discussion and analysis contained herein. The allowance for credit losses can generally absorb losses throughout the loan portfolio. However, in some instances an allocation is made for specific loans or groups of loans.
This process measures and quantifies the impact on net interest income through varying interest rate changes and balance sheet compositions. The use of this model assists the ALCO in gauging the effects of interest rate changes on interest-sensitive assets and liabilities in order to determine what impact these rate changes will have upon the net interest spread.
This process measures and quantifies the impact on net interest income through varying interest rate changes and balance sheet compositions. The use of this model assists ALCO in gauging the effects of interest rate changes on interest-sensitive assets and liabilities in order to determine what impact these rate changes will have upon the net interest spread.
ITEM 7: MANAGEMENT ’ S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION Critical accounting policies The presentation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect many of the reported amounts and disclosures. Actual results could differ from these estimates.
ITEM 7: MANAGEMENT ’ S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION Critical accounting estimates The presentation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect many of the reported amounts and disclosures. Actual results could differ from these estimates.
Dodd-Frank permits states to adopt consumer protection laws and standards that are more stringent than those adopted at the federal level and, in certain circumstances, permits state attorneys general to enforce compliance with both the state and federal laws and regulations. 56 Table of Contents In summary, the Dodd-Frank Act provides for sweeping financial regulatory reform and may have the effect of increasing the cost of doing business, limiting or expanding permissible activities and affect the competitive balance between banks and other financial intermediaries.
Dodd-Frank permits states to adopt consumer protection laws and standards that are more stringent than those adopted at the federal level and, in certain circumstances, permits state attorneys general to enforce compliance with both the state and federal laws and regulations. 57 Table of Contents In summary, the Dodd-Frank Act provides for sweeping financial regulatory reform and may have the effect of increasing the cost of doing business, limiting or expanding permissible activities and affect the competitive balance between banks and other financial intermediaries.
The effective maturities presented are the recommended maturity distribution limits for non-maturing deposits based on historical deposit studies. 52 Table of Contents Earnings at Risk and Economic Value at Risk Simulations . The Company recognizes that more sophisticated tools exist for measuring the interest rate risk in the balance sheet that extend beyond static re-pricing gap analysis.
The effective maturities presented are the recommended maturity distribution limits for non-maturing deposits based on historical deposit studies. 53 Table of Contents Earnings at Risk and Economic Value at Risk Simulations . The Company recognizes that more sophisticated tools exist for measuring the interest rate risk in the balance sheet that extend beyond static re-pricing gap analysis.
The Company does not expect to have any FHLB advances in 2024. Funds Deployed: Investment Securities The Company’s investment policy is designed to complement its lending activities, provide monthly cash flow, manage interest rate sensitivity and generate a favorable return without incurring excessive interest rate and credit risk while managing liquidity at acceptable levels.
The Company does not expect to have any FHLB advances in 2025. Funds Deployed: Investment Securities The Company’s investment policy is designed to complement its lending activities, provide monthly cash flow, manage interest rate sensitivity and generate a favorable return without incurring excessive interest rate and credit risk while managing liquidity at acceptable levels.
During January 2023 with the 10-year U.S. Treasury yield declining, $31.2 million of securities were able to be sold yielding 3.62% (FTE yield of 4.33%) at a breakeven level. These proceeds were used to pay down FHLB overnight borrowings costing 4.80% at that time.
During January 2023 with the 10-year U.S. Treasury yield declining, $31.2 million of securities were sold yielding 3.62% (FTE yield of 4.33%) at a breakeven level. These proceeds were used to pay down FHLB overnight borrowings costing 4.80% at that time.
Recoveries from previously charged-off loans are added to the allowance when received. 35 Table of Contents The methodology to analyze the adequacy of the ACL is based on seven primary components: ● Data: The quality of the Company’s data is critically important as a foundation on which the ACL estimate is generated.
Recoveries from previously charged-off loans are added to the allowance when received. 36 Table of Contents The methodology to analyze the adequacy of the ACL is based on seven primary components: ● Data: The quality of the Company’s data is critically important as a foundation on which the ACL estimate is generated.
Debt securities AFS are carried at fair value on the consolidated balance sheets with unrealized gains and losses, net of deferred income taxes, reported separately within shareholders’ equity as a component of accumulated other comprehensive income (AOCI).
Debt securities designated as AFS are carried at fair value on the consolidated balance sheets with unrealized gains and losses, net of deferred income taxes, reported within shareholders’ equity as a component of accumulated other comprehensive income (AOCI).
Since some of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. In addition to lending commitments, the Company has contractual obligations related to operating lease and capital lease commitments.
Since some of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. In addition to lending commitments, the Company has contractual obligations related to operating lease and finance lease commitments.
Dodd-Frank additionally requires that bank regulators issue countercyclical capital requirements so that the required amount of capital increases in times of economic expansion and decreases in times of economic contraction, consistent with safety and soundness. 55 Table of Contents Deposit Insurance.
Dodd-Frank additionally requires that bank regulators issue countercyclical capital requirements so that the required amount of capital increases in times of economic expansion and decreases in times of economic contraction, consistent with safety and soundness. 56 Table of Contents Deposit Insurance.
In keeping with its risk appetite and relationship management strategy, the Company avoids speculative commercial office space and prefers loans to projects that have sufficient equity, or loan to value, and have either S&P rated tenants with long term leases, loans structured with personal guarantees of owners whose personal financial strength provides meaningful cash flow support to supplement rental income volatility, residential projects with stable rents in desirable locations, or projects with sufficient diversity and industries proven to provide lower risk over the long term.
In keeping with its risk appetite and relationship management strategy, the Company avoids speculative commercial office space and prefers loans for projects with the following characteristics: sufficient equity, or loan to value, and have either S&P rated tenants with long term leases, loans structured with personal guarantees of owners whose personal financial strength provides meaningful cash flow support to supplement rental income volatility, residential projects with stable rents in desirable locations, or projects with sufficient diversity and industries proven to provide lower risk over the long term.
At December 31, 2023, there were a total of 32 non-accrual loans to 26 unrelated borrowers with balances that ranged from less than $1 thousand to $1.3 million, or $3.3 million in the aggregate.
On December 31, 2023, there were a total of 32 non-accrual loans to 26 unrelated borrowers with balances that ranged from less than $1 thousand to $1.3 million, or $3.3 million in the aggregate.
As of December 31, 2023, the unallocated reserve, representing the portion of the allowance not specifically identified with a loan or groups of loans, was less than 1% of the total allowance for credit losses, unchanged from December 31, 2022.
As of December 31, 2024, the unallocated reserve, representing the portion of the allowance not specifically identified with a loan or groups of loans, was less than 1% of the total allowance for credit losses, unchanged from December 31, 2023.
Within the table, interest income was FTE adjusted, using the corporate federal tax rate of 21% for 2023, 2022 and 2021, to recognize the income from tax-exempt interest-earning assets as if the interest was taxable. See “Non-GAAP Financial Measures” within this management’s discussion and analysis for the FTE adjustments. This treatment allows a uniform comparison among yields on interest-earning assets.
Within the table, interest income was FTE adjusted, using the corporate federal tax rate of 21% for 2024 and 2023, to recognize the income from tax-exempt interest-earning assets as if the interest was taxable. See “Non-GAAP Financial Measures” within this management’s discussion and analysis for the FTE adjustments. This treatment allows a uniform comparison among yields on interest-earning assets.
Recent Legislation and Rulemaking 54 Table of Contents Regulatory Capital Changes In July 2013, the federal banking agencies issued final rules to implement the Basel III regulatory capital reforms and changes required by the Dodd-Frank Act.
Recent Legislation and Rulemaking 55 Table of Contents Regulatory Capital Changes In July 2013, the federal banking agencies issued final rules to implement the Basel III regulatory capital reforms and changes required by the Dodd-Frank Act.
A material estimate that is particularly susceptible to significant change relates to the determination of the allowance for credit losses. Management believes that the allowance for credit losses at December 31, 2023 is adequate and reasonable to cover expected losses.
A material estimate that is particularly susceptible to significant change relates to the determination of the allowance for credit losses. Management believes that the allowance for credit losses at December 31, 2024 is adequate and reasonable to cover expected losses.
The sale removes a 422 basis point negative spread and will contribute towards incrementally improving net interest income, earnings per share and NIM every year starting in 2024.
The sale removes a 422 basis point negative spread and will contribute toward incrementally improving net interest income, earnings per share and NIM every year starting in 2024.
The following discussion and analysis presents the significant changes in the financial condition and in the results of operations of the Company as of December 31, 2023 and 2022 and for each of the years then ended.
The following discussion and analysis presents the significant changes in the financial condition and in the results of operations of the Company as of December 31, 2024 and 2023 and for each of the years then ended.
The following table sets forth the maturity distribution of select commercial and construction components of the loan portfolio at December 31, 2023. The determination of maturities is based on contractual terms. Non-contractual rollovers or extensions are included in one year or less category of the maturity classification.
The following table sets forth the maturity distribution of commercial and construction components of the loan portfolio at December 31, 2024. The determination of maturities is based on contractual terms. Non-contractual rollovers or extensions are included in one year or less category of the maturity classification.
If a decline in value is deemed to be a credit loss, a contra-asset is recorded on both HTM and AFS securities, limited by the amount that the fair value is less than the amortized cost basis. During the year ended December 31, 2023, the Company did not incur any credit losses on debit securities from its investment securities portfolio.
If a decline in value is deemed to be a credit loss, a contra-asset is recorded on both HTM and AFS securities, limited by the amount that the fair value is less than the amortized cost basis. During the year ended December 31, 2024, the Company did not incur any credit losses on debt securities from its investment securities portfolio.
The committee is comprised of management, including credit administration officers, loan officers, loan workout officers and collection personnel. 45 Table of Contents Management continuously reviews the risks inherent in the loan portfolio.
The committee is comprised of management, including credit administration officers, loan officers, loan workout officers and collection personnel. 46 Table of Contents Management continuously reviews the risks inherent in the loan portfolio.
On December 31, 2023, 34% of the carrying value of the investment portfolio was comprised of U.S. Government Sponsored Enterprise residential mortgage-backed securities (MBS – GSE residential or mortgage-backed securities) that amortize and provide monthly cash flow that the Company can use for reinvestment, loan demand, unexpected deposit outflow, facility expansion or operations.
On December 31, 2024, 33% of the carrying value of the investment portfolio was comprised of U.S. Government Sponsored Enterprise residential mortgage-backed securities (MBS – GSE residential or mortgage-backed securities) that amortize and provide monthly cash flow that the Company can use for reinvestment, loan demand, unexpected deposit outflow, facility expansion or operations.
If the federal corporate tax rate is increased, the Company’s net deferred tax liabilities and deferred tax assets will be re-valued upon adoption of the new tax rate. A federal tax rate increase will increase net deferred tax assets with a corresponding decrease to provision for income taxes.
If the federal corporate tax rate decreased, the Company’s net deferred tax liabilities and deferred tax assets will be re-valued upon adoption of the new tax rate. A federal tax rate decrease will decrease net deferred tax assets with a corresponding increase to provision for income taxes.
In addition, there is an annual process to review the interest rate risk policy with the board of directors which includes limits on the impact to earnings from shifts in interest rates. 50 Table of Contents Interest Rate Risk Measurement.
In addition, there is an annual process to review the interest rate risk policy with the board of directors which includes limits on the impact to earnings from shifts in interest rates. Interest Rate Risk Measurement.
The Company’s policy prescribes permissible investment categories that meet the policy standards and management is responsible for structuring and executing the specific investment purchases within these policy parameters. Management buys and sells investment securities from time-to-time depending on market conditions, business trends, liquidity needs, capital levels and structuring strategies.
The Company’s policy prescribes permissible investment categories that meet the policy standards and management is responsible for structuring and executing the specific investment purchases within these policy parameters. Management buys and sells investment securities periodically depending on market conditions, business trends, liquidity needs, capital levels and structuring strategies.
Key loss driver assumptions included the median Federal Open Market Committee (FOMC) National Gross Domestic Product (GDP) and unemployment rate forecasts, the Federal Housing Finance Agency (FHFA) House Price Index (HPI), prepayment and curtailment rates, and estimated remaining loan lives.
Key loss driver assumptions used in the allowance estimate included the median Federal Open Market Committee (FOMC) National Gross Domestic Product (GDP) and unemployment rate forecasts, the Federal Housing Finance Agency (FHFA) House Price Index (HPI), prepayment and curtailment rates, and estimated remaining loan lives.
This analysis assumed that the adjusted interest-earning asset and interest-bearing liability levels at December 31, 2023 remained constant.
This analysis assumed that the adjusted interest-earning asset and interest-bearing liability levels at December 31, 2024 remained constant.
Management believes the Company’s interest rate risk measurement framework is sound and provides an effective means to measure, monitor, analyze, identify and control interest rate risk in the balance sheet. The Company is subject to the interest rate risks inherent in its lending, investing and financing activities.
Management believes the Company’s interest rate risk measurement framework is sound and provides an effective means to measure, monitor, analyze, identify and control interest rate risk in the balance sheet. 51 Table of Contents The Company is subject to the interest rate risks inherent in its lending, investing and financing activities.
The overall credit ratings of these municipal bonds was as follows: 36% AAA, 63% AA, and 1% A. For municipal securities HTM, the Company utilized a third-party model to analyze whether a credit loss reserve is needed for these bonds.
The overall credit ratings of these municipal bonds was as follows: 37% AAA, 61% AA, and 1% A. For HTM municipal securities, the Company utilized a third-party model to analyze whether a credit loss reserve is needed for these bonds.
If the non-accrual loans that were outstanding as of December 31, 2023 had been performing in accordance with their original terms, the Company would have recognized interest income with respect to such loans of $319 thousand.
If the non-accrual loans that were outstanding as of December 31, 2024 had been performing in accordance with their original terms, the Company would have recognized interest income with respect to such loans of $354 thousand.
There is no assurance that future realized and unrealized losses will not be recognized from the Company’s portfolio of investment securities. To help maintain a healthy capital position, the Company can issue stock to participants in the DRP and ESPP plans.
There is no assurance that future realized and unrealized losses will not be recognized from the Company’s portfolio of investment securities. To help maintain a healthy capital position, the Company can issue stock to participants in the Dividend Reinvestment Plan (DRP) and Employee Stock Purchase Plan (the ESPP) plans.
The $29.1 million in proceeds received were used to retire short-term borrowings with a cost of approximately 5.50%. While the Company has ample funding sources available, management felt it prudent to create additional capacity for the borrowings over the near term should the banking industry again experience funding pressures as it did in March of this past year.
The $29.1 million in proceeds received were used to retire short-term borrowings with a cost of approximately 5.50%. While the Company has ample funding sources available, management felt it prudent to create additional capacity for the borrowings over the near term should the banking industry again experience funding pressures.
Loans include loans held-for-sale (HFS) and non-accrual loans but exclude the allowance for credit losses. HELOC are included in the residential real estate category since they are secured by real estate. Net deferred loan (cost amortization)/ fee accretion of ($0.9 million) in 2023, $0.2 million in 2022 and $3.8 million in 2021, respectively, are included in interest income from loans.
Loans include loans held-for-sale (HFS) and non-accrual loans but exclude the allowance for credit losses. HELOC are included in the residential real estate category since they are secured by real estate. Net deferred loan (cost amortization)/ fee accretion of ($0.9 million) in 2024 and ($0.9 million) in 2023, respectively, are included in interest income from loans.
Renewing CDs are currently expected to re-price to higher market rates depending on the rate on the maturing CD, the pace and direction of interest rate movements, the shape of the yield curve, competition, the rate profile of the maturing accounts and depositor preference for alternative, non-term products.
Renewing CDs are currently expected to reprice to lower market rates depending on the rate on the maturing CD, the pace and direction of interest rate movements, the shape of the yield curve, competition, the rate profile of the maturing accounts and depositor preference for alternative, non-term products.
Interest income is generated from yields earned on interest-earning assets, which consist principally of loans and investment securities. Interest expense is incurred from rates paid on interest-bearing liabilities, which consist of deposits and borrowings.
Net interest income is the difference between interest income and interest expense. Interest income is generated from yields earned on interest-earning assets, which consist principally of loans and investment securities. Interest expense is incurred from rates paid on interest-bearing liabilities, which consist of deposits and borrowings.
The median home values in the Scranton-Wilkes-Barre-Hazleton metro and Allentown-Bethlehem-Easton metro each increased 5.9% and 6.3% from a year ago, according to Zillow, an online database advertising firm providing access to its real estate search engines to various media outlets, and values are expected to grow 5.8% and 5.4% in the next year.
The median home values in the Scranton-Wilkes-Barre-Hazleton metro and Allentown-Bethlehem-Easton metro each increased 7.0% and 5.4% from a year ago, according to Zillow, an online database advertising firm providing access to its real estate search engines to various media outlets, and values are expected to grow 1.8% and 2.8% in the next year.
Conversely, in a decreasing interest rate environment, net interest income could be positively impacted because more liabilities than assets will re-price downward during the one-year period. Certain shortcomings are inherent in the method of analysis discussed above and presented in the next table.
Conversely, in an increasing interest rate environment, net interest income could be positively impacted because more assets than liabilities will re-price upward during the one-year period. Certain shortcomings are inherent in the method of analysis discussed above and presented in the next table.
Information with respect to the Company’s short-term borrowing’s maximum and average outstanding balances and interest rates are contained in Note 8, “Short-term Borrowings,” of the notes to consolidated financial statements incorporated by reference in Part II, Item 8. 27 Table of Contents Secured borrowings As of December 31, 2023 and 2022, the Company had 8 secured borrowing agreements with third parties with a carrying value of $7.4 million and $7.6 million, respectively, related to certain sold loan participations that did not qualify for sales treatment acquired from Landmark.
Information with respect to the Company’s short-term borrowings' maximum and average outstanding balances and interest rates are contained in Note 8, “Short-term Borrowings,” of the notes to consolidated financial statements incorporated by reference in Part II, Item 8. 27 Table of Contents Secured borrowings As of December 31, 2024, the Company had 5 secured borrowing agreements with third parties with a carrying value of $6.2 million compared to 8 secured borrowing agreements with third parties with a carrying value of $7.4 million as of December 31, 2023, related to certain sold loan participations that did not qualify for sales treatment.
Operating lease commitments are obligations under various non-cancelable operating leases on buildings and land used for office space and banking purposes. Capital lease commitments are obligations on buildings and equipment. The following table presents, as of December 31, 2023, the Company’s significant determinable contractual obligations and significant commitments by payment date.
Operating lease commitments are obligations under various non-cancelable operating leases on buildings and land used for office space and banking purposes. Finance lease commitments are obligations on buildings and equipment. 48 Table of Contents The following table presents, as of December 31, 2024, the Company’s significant determinable contractual obligations and significant commitments by payment date.
The impact of the rate movements was developed by simulating the effect of the rate change over a twelve-month period from the December 31, 2023 levels: % change Rates +200 Rates -200 Earnings at risk: Net interest income (7.7 )% (3.5 )% Net income (18.7 ) (10.9 ) Economic value at risk: Economic value of equity (23.1 ) 7.8 Economic value of equity as a percent of total assets (2.1 ) 0.7 In the scenarios in the above table, the Board-approved policy has the following guidelines: net interest income within +/- 10%, net income within +/- 25%, economic value of equity within +/- 25%, economic value of equity as a percent of total assets within +/-5%.
The impact of the rate movements was developed by simulating the effect of the rate change over a twelve-month period from the December 31, 2024 levels: % change Rates +200 Rates -200 Earnings at risk: Net interest income (0.6 )% (4.7 )% Net income (0.4 ) (12.7 ) Economic value at risk: Economic value of equity (5.2 ) (0.3 ) Economic value of equity as a percent of total assets (0.7 ) (0.1 ) In the scenarios in the above table, the Board-approved policy has the following guidelines: net interest income within +/- 10%, net income within +/- 25%, economic value of equity within +/- 25%, economic value of equity as a percent of total assets within +/-5%.
As of December 31, 2023 and 2022, loans HFS consisted of residential mortgages with carrying amounts of $1.5 million and $1.6 million, respectively, which approximated their fair values.
As of December 31, 2024 and 2023, loans HFS consisted of residential mortgages with carrying amounts of $2.1 million and $1.5 million, respectively, which approximated their fair values.
Pennsylvania state law requires the Company to maintain pledged securities on public and trust deposits or otherwise obtain a FHLB letter of credit or FDIC insurance for these customers. The Company also pledges securities for derivative instruments and certain borrowed funds. As of December 31, 2023, the balance of pledged securities required was $380.7 million, or 67% of total securities.
Pennsylvania state law requires the Company to maintain pledged securities on public and trust deposits or otherwise obtain a FHLB letter of credit or FDIC insurance for these customers. The Company also pledges securities for derivative instruments and certain borrowed funds. As of December 31, 2024, the balance of pledged securities required was $322.1 million, or 58% of total securities.
The Company’s sources (uses) of capital during the previous five years are indicated below: Cash Other retained Total DRP Issuance of Changes in Net dividends earnings earnings and ESPP common stock AOCI and Capital (dollars in thousands) income declared adjustments retained infusion for acquisition other changes retained (utilized) 2023 $ 18,210 $ (8,387 ) $ (1,326 ) $ 8,497 $ 1,938 $ - $ 16,094 $ 26,529 2022 30,021 (7,709 ) - 22,312 252 - (71,343 ) (48,779 ) 2021 24,008 (6,608 ) - 17,400 270 35,056 (7,667 ) 45,059 2020 13,035 (5,378 ) - 7,657 219 45,408 6,551 59,835 2019 11,576 (4,037 ) (91 ) 7,448 175 - 5,655 13,278 48 Table of Contents As of December 31, 2023, the Company reported a net unrealized loss position of $56.5 million, net of tax, from the securities portfolio compared to a net unrealized loss of $71.2 million as of December 31, 2022.
The Company’s sources (uses) of capital during the previous five years are indicated below: Cash Other retained Total DRP Issuance of Changes in Net dividends earnings earnings and ESPP common stock AOCI and Capital (dollars in thousands) income declared adjustments retained infusion for acquisition other changes retained (utilized) 2024 $ 20,794 $ (8,932 ) $ - $ 11,862 $ 363 $ - $ 2,265 $ 14,490 2023 18,210 (8,387 ) (1,326 ) 8,497 1,938 - 16,094 26,529 2022 30,021 (7,709 ) - 22,312 252 - (71,343 ) (48,779 ) 2021 24,008 (6,608 ) - 17,400 270 35,056 (7,667 ) 45,059 2020 13,035 (5,378 ) - 7,657 219 45,408 6,551 59,835 As of December 31, 2024, the Company reported a net unrealized loss position of $55.6 million, net of tax, from the securities portfolio compared to a net unrealized loss of $56.5 million as of December 31, 2023.
As of December 31, 2023, the Company recorded the fair value of the swap of $2.2 million in accrued interest payable and other liabilities on the consolidated balance sheet offset by a $2.2 million increase to the carrying value of designated investment securities. 28 Table of Contents As of December 31, 2023, the carrying value of investment securities amounted to $568.3 million, or 23% of total assets, compared to $643.6 million, or 27% of total assets, as of December 31, 2022.
As of December 31, 2024, the Company recorded the fair value of the swap as $1.0 million in accrued interest payable and other liabilities on the consolidated balance sheet offset by a $1.0 million increase to the carrying value of designated investment securities. 28 Table of Contents As of December 31, 2024, the carrying value of investment securities amounted to $557.2 million, or 22% of total assets, compared to $568.3 million, or 23% of total assets, as of December 31, 2023.
As of December 31, 2023 and December 31, 2022, the Company had no other repossessed assets held-for-sale. 40 Table of Contents Cash surrender value of bank owned life insurance The Company maintains bank owned life insurance (BOLI) for a chosen group of employees at the time of purchase, namely its officers, where the Company is the owner and sole beneficiary of the policies.
There were no other repossessed assets held-for-sale at December 31, 2023. Cash surrender value of bank owned life insurance The Company maintains bank owned life insurance (BOLI) for a chosen group of employees at the time of purchase, namely its officers, where the Company is the owner and sole beneficiary of the policies.
Cash inflow from interest-earning assets, the sale of securities, short-term borrowings and loan payments were used to fund the loan portfolio, invest in bank premises and equipment and make net dividend payments. The Company received a large amount of public deposits over the past six years.
Cash inflow from interest-earning assets, deposit growth and loan payments were used to fund the loan portfolio, pay down short-term borrowings, invest in bank premises and equipment and make net dividend payments. The Company received a large amount of public deposits over the past few years.
During the year ended December 31, 2023, residential mortgage loans with principal balances of $52.0 million were sold into the secondary market and the Company recognized net gains of $1.0 million, compared to $78.8 million and $1.6 million, respectively, during the year ended December 31, 2022. The Company retains mortgage servicing rights (MSRs) on loans sold into the secondary market.
During the year ended December 31, 2024, residential mortgage loans with principal balances of $59.3 million were sold into the secondary market and the Company recognized net gains of $1.0 million, compared to $52.0 million and $0.9 million, respectively, during the year ended December 31, 2023. The Company retains mortgage servicing rights (MSRs) on loans sold into the secondary market.
Secured borrowings are expected to decrease for 2024 from scheduled amortization and, when possible, early pay-offs. FHLB advances The Company had no FHLB advances as of December 31, 2023 and 2022. As of December 31, 2023, the Company had the ability to borrow up to $656.8 million from the FHLB, net of any overnight borrowings utilized.
Secured borrowings are expected to decrease throughout 2025 from scheduled amortization and, when possible, early pay-offs. FHLB advances The Company had no FHLB advances as of December 31, 2024 and 2023. As of December 31, 2024, the Company had the ability to borrow up to $733.2 million from the FHLB, net of any overnight borrowings utilized.
In addition, the Company’s non-GAAP measures may not be comparable to non-GAAP measures of other companies. The Company’s tax rate used to calculate the fully-taxable equivalent (FTE) adjustment was 21% at December 31, 2023, 2022, 2021, 2020 and 2019.
In addition, the Company’s non-GAAP measures may not be comparable to non-GAAP measures of other companies. The Company’s tax rate used to calculate the fully-taxable equivalent (FTE) adjustment was 21% as of December 31, 2024 and 2023.
The Company had $1.4 million and $0 in CDARs as of December 31, 2023 and 2022, respectively. As of December 31, 2023 and 2022, ICS reciprocal deposits represented $151.4 million and $26.3 million, or 7% and 1%, of total deposits which are included in interest-bearing checking accounts in the table above.
The Company had $49.4 million and $1.4 million in CDARs as of December 31, 2024 and 2023, respectively. As of December 31, 2024 and 2023, ICS reciprocal deposits represented $150.6 million and $151.4 million, or 6% and 7%, respectively, of total deposits which are included in interest-bearing checking accounts in the table above.
In light of these expectations, we are uncertain if real estate values could continue to increase at these levels with the current elevated rate environment, however we will continue to monitor the economic climate in our region and scrutinize growth prospects with credit quality as a principal consideration.
In light of these expectations, we believe the real estate values could continue to increase at these levels with the declining rate environment. Management will continue to monitor the economic climate in our region and scrutinize growth prospects with credit quality as a principal consideration.
The CFP outlines required monitoring tools, acceptable alternative funding sources and required actions during various liquidity scenarios. Thus, the Company has implemented a proactive means for the measurement and resolution for handling potentially significant adverse liquidity conditions.
The Company established guidelines for identifying, measuring, monitoring and managing the resolution of potentially serious liquidity crises. The CFP outlines required monitoring tools, acceptable alternative funding sources and required actions during various liquidity scenarios. Thus, the Company has implemented a proactive means for the measurement and resolution for handling potentially significant adverse liquidity conditions.
MSRs are retained so that the Company can foster relationships. At December 31, 2023 and 2022, the servicing portfolio balance of sold residential mortgage loans was $477.7 million and $465.7 million, respectively, with mortgage servicing rights of $1.5 million and $1.6 million for the same periods, respectively.
MSRs are retained so that the Company can foster relationships. As of December 31, 2024 and 2023, the servicing portfolio balance of sold residential mortgage loans was $495.4 million and $477.7 million, respectively, with mortgage servicing rights of $1.3 million and $1.5 million for the same periods, respectively.
Correspondingly, when interest rates decline, the market values of the Company’s debt securities portfolio could be subject to market value increases. As of December 31, 2023, the Company had $294.8 million in public deposits, or 14% of total deposits.
Correspondingly, when interest rates decline, the market values of the Company’s debt securities portfolio could be subject to market value increases. As of December 31, 2024, the Company had $287.1 million in public deposits, or 12% of total deposits.
Loans past due 90 days or more accruing totaled $14 thousand, which was comprised of one direct finance lease as of December 31, 2023 compared to one direct finance lease and one non-recourse auto loan totaling $33 thousand as of December 31, 2022. All loans were well secured and in the process of collection.
Loans past due 90 days or more accruing totaled $32 thousand, which was comprised of two direct finance leases as of December 31, 2024, compared to one direct finance lease totaling $14 thousand as of December 31, 2023. All loans were well secured and in the process of collection.
As of December 31, 2023, the carrying value of held-to-maturity securities was $224.2 million, net of $15.7 million in remaining transferred discount. The Company utilized a fair value hedge to designate and swap a portion of the fixed rate AFS portfolio.
As of December 31, 2024, the carrying value of held-to-maturity securities was $225.8 million, net of $13.8 million in remaining transferred discount. The Company utilized a fair value hedge to designate and swap a portion of the fixed rate AFS portfolio.
The residential loan portfolio consisted primarily of held-for-investment residential loans for primary residences, including approximately $380 million in fixed-rate and $85 million in adjustable-rate mortgages as of December 31, 2023. The Company considers its portfolio segmentation, including the real estate secured portfolio, to be normal and reasonably diversified.
The residential real estate loan portfolio (non-construction) consisted primarily of held-for-investment residential loans for primary residences, including approximately $401 million in fixed-rate and $104 million in adjustable-rate mortgages as of December 31, 2024. 35 Table of Contents The Company considers its portfolio segmentation, including the real estate secured portfolio, to be normal and reasonably diversified.
The assessment process also includes the review of all loans on a non-accruing basis as well as a review of certain loans to which the lenders or the Company’s Credit Administration function have assigned a criticized or classified risk rating. 36 Table of Contents The following table sets forth the activity in the allowance for credit losses on loans and certain key ratios for the periods indicated: (dollars in thousands) 2023 2022 Balance at beginning of period $ 17,149 $ 15,624 Charge-offs: Commercial and industrial (320 ) (371 ) Commercial real estate (91 ) (67 ) Consumer (463 ) (377 ) Residential - - Total (874 ) (815 ) Recoveries: Commercial and industrial 57 11 Commercial real estate 44 153 Consumer 165 74 Residential 30 2 Total 296 240 Net charge-offs (578 ) (575 ) Impact of adopting ASC 326 618 - Initial allowance on loans purchased with credit deterioration 126 - Provision for credit losses on loans 1,491 2,100 Balance at end of period $ 18,806 $ 17,149 Allowance for credit losses to total loans 1.12 % 1.10 % Net charge-offs to average total loans outstanding 0.04 % 0.04 % Average total loans $ 1,635,286 $ 1,500,796 Loans 30 - 89 days past due and accruing $ 4,487 $ 1,838 Loans 90 days or more past due and accruing $ 14 $ 33 Non-accrual loans $ 3,308 $ 2,535 Allowance for credit losses to non-accrual loans 5.69 x 6.76 x Allowance for credit losses to non-performing loans 5.66 x 6.68 x For the twelve months ended December 31, 2023, the allowance increased $1.6 million, or 10%, to $18.8 million from $17.2 million at December 31, 2022.
The assessment process also includes the review of all loans on a non-accruing basis as well as a review of certain loans to which the lenders or the Company’s Credit Administration function have assigned a criticized or classified risk rating. 37 Table of Contents The following table sets forth the activity in the allowance for credit losses on loans and certain key ratios for the periods indicated: (dollars in thousands) 2024 2023 Balance at beginning of period $ 18,806 $ 17,149 Charge-offs: Commercial and industrial (399 ) (320 ) Commercial real estate (132 ) (91 ) Consumer (419 ) (463 ) Residential - - Total (950 ) (874 ) Recoveries: Commercial and industrial 12 57 Commercial real estate 352 44 Consumer 76 165 Residential 45 30 Total 485 296 Net charge-offs (465 ) (578 ) Impact of adopting ASC 326 - 618 Initial allowance on loans purchased with credit deterioration - 126 Provision for credit losses on loans 1,325 1,491 Balance at end of period $ 19,666 $ 18,806 Allowance for credit losses to total loans 1.09 % 1.12 % Net charge-offs to average total loans outstanding 0.03 % 0.04 % Average total loans $ 1,741,349 $ 1,635,286 Loans 30 - 89 days past due and accruing $ 5,349 $ 4,487 Loans 90 days or more past due and accruing $ 32 $ 14 Non-accrual loans $ 7,343 $ 3,308 Allowance for credit losses to non-accrual loans 2.68 x 5.69 x Allowance for credit losses to non-performing loans 2.67 x 5.66 x For the twelve months ended December 31, 2024, the allowance increased $0.9 million, or 5%, to $19.7 million from $18.8 million at December 31, 2023.
Net charge-offs were unchanged as a percentage of the total loan portfolio at 0.04% for the twelve months ended December 31, 2023 compared to 0.04% for the twelve months ended December 31, 2022.
Net charge-offs declined as a percentage of the total loan portfolio to 0.03% for the twelve months ended December 31, 2024 compared to 0.04% for the twelve months ended December 31, 2023.
As of December 31, 2023, the Company had the ability to borrow an additional $70.4 million from the Federal Reserve borrower-in-custody program, full availability of $145.9 million in overnight borrowings with the FHLB open-repo line of credit and $20.0 million from lines of credit with correspondent banks.
As of December 31, 2024, the Company had the ability to borrow $157.3 million from the Federal Reserve borrower-in-custody program, full availability of $150.0 million in overnight borrowings with the FHLB open-repo line of credit and $20.0 million from lines of credit with correspondent banks.
Future Outlook The Company is highly impacted by local economic factors that could influence the performance and strength of our loan portfolios and results of operations. Economic uncertainty continues due to inflationary pressures, fluctuating interest rates and global risks such as war, terrorism and geopolitical instability. A consensus of economists predicts falling short-term rates during the second half of 2024.
Future Outlook The Company is highly impacted by local economic factors that could influence the performance and strength of our loan portfolios and results of operations. Economic uncertainty continues due to fluctuating interest rates and global risks such as war, terrorism and geopolitical instability.
The following table sets forth non-performing assets at December 31: (dollars in thousands) 2023 2022 Loans past due 90 days or more and accruing $ 14 $ 33 Non-accrual loans 3,308 2,535 Total non-performing loans 3,322 2,568 Other real estate owned and repossessed assets 1 168 Total non-performing assets $ 3,323 $ 2,736 Total loans, including loans held-for-sale $ 1,686,555 $ 1,565,811 Total assets $ 2,503,159 $ 2,378,372 Non-accrual loans to total loans 0.20 % 0.16 % Non-performing loans to total loans 0.20 % 0.16 % Non-performing assets to total assets 0.13 % 0.12 % Management continually monitors the loan portfolio to identify loans that are either delinquent or are otherwise deemed by management unable to repay in accordance with contractual terms.
The following table sets forth non-performing assets at December 31: (dollars in thousands) 2024 2023 Loans past due 90 days or more and accruing $ 32 $ 14 Non-accrual loans 7,343 3,308 Total non-performing loans 7,375 3,322 Other real estate owned and repossessed assets 430 1 Total non-performing assets $ 7,805 $ 3,323 Total loans, including loans held-for-sale $ 1,800,856 $ 1,686,555 Total assets $ 2,584,616 $ 2,503,159 Non-accrual loans to total loans 0.41 % 0.20 % Non-performing loans to total loans 0.41 % 0.20 % Non-performing assets to total assets 0.30 % 0.13 % Management continually monitors the loan portfolio to identify loans that are either delinquent or are otherwise deemed by management unable to repay in accordance with contractual terms.
Nationally, the unemployment rate rose from 3.5% at December 31, 2022 to 3.7% at December 31, 2023. The unemployment rates in the Scranton - Wilkes-Barre - Hazleton (market area north) and the Allentown – Bethlehem - Easton (market area south) Metropolitan Statistical Areas (local) decreased with both at a lower level than the national unemployment rate. According to the U.S.
The unemployment rates in the Scranton - Wilkes-Barre - Hazleton (market area north) and the Allentown – Bethlehem - Easton (market area south) Metropolitan Statistical Areas (local) increased with both at a lower level than the national unemployment rate. According to the U.S.
At December 31, 2023, the Company’s risk-based capital ratio was 14.67%.
At December 31, 2024, the Company’s risk-based capital ratio was 14.78%.
As management continues to identify ways to optimize the Company’s balance sheet, the focus is to lend in areas that provide better risk-adjusted returns and improved opportunities to deepen relationships with our customers. This could result in a change in the composition of the loan portfolio in future periods.
As management continues to identify ways to optimize the Company’s balance sheet, the focus is to lend in areas that provide better risk-adjusted returns and improved opportunities to deepen relationships with our customers.
The following table is a comparison of condensed balance sheet data as of December 31: (dollars in thousands) Assets: 2023 % 2022 % Cash and cash equivalents $ 111,949 4.5 % $ 29,091 1.2 % Investment securities 568,273 22.7 643,606 27.1 Restricted investments in bank stock 3,905 0.2 5,268 0.2 Loans and leases, net (including loans HFS) 1,667,749 66.5 1,548,662 65.1 Bank premises and equipment 34,232 1.4 31,307 1.3 Life insurance cash surrender value 54,572 2.2 54,035 2.3 Other assets 62,479 2.5 66,403 2.8 Total assets $ 2,503,159 100.0 % $ 2,378,372 100.0 % Liabilities: Total deposits $ 2,158,425 86.2 % $ 2,166,913 91.1 % Secured borrowings 7,372 0.3 7,619 0.3 Short-term borrowings 117,000 4.7 12,940 0.5 Other liabilities 30,883 1.2 27,950 1.2 Total liabilities 2,313,680 92.4 2,215,422 93.1 Shareholders' equity 189,479 7.6 162,950 6.9 Total liabilities and shareholders' equity $ 2,503,159 100.0 % $ 2,378,372 100.0 % A comparison of net changes in selected balance sheet categories as of December 31, are as follows: Earning Other FHLB (dollars in thousands) Assets % assets* % Deposits % borrowings % advances % 2023 $ 124,787 5 $ 100,726 5 $ (8,488 ) (0 ) $ 103,813 505 $ - - 2022 (40,732 ) (2 ) (35,954 ) (2 ) (2,952 ) (0 ) 9,939 94 - - 2021 719,594 42 682,812 43 660,360 44 10,620 100 (5,000 ) (100 ) 2020 689,583 68 648,880 69 673,768 81 (37,839 ) (100 ) (10,000 ) (67 ) 2019 28,825 3 21,878 2 65,554 9 (38,527 ) (50 ) (16,704 ) (53 ) * Earning assets include interest-bearing deposits with financial institutions, gross loans and leases, loans held-for-sale, available-for-sale and held-to-maturity securities and restricted investments in bank stock excluding loans placed on non-accrual status. 25 Table of Contents For more information about the Company's capital, see Footnote 15, "Regulatory Matters," of Part II, Item 8 “Financial Statements and Supplementary Data”, which is incorporated herein by reference and the "Capital Resources" section of management’s discussion and analysis contained herein.
The following table provides a comparison of condensed balance sheet data as of December 31: (dollars in thousands) Assets: 2024 % 2023 % Cash and cash equivalents $ 83,353 3.2 % $ 111,949 4.5 % Investment securities 557,221 21.6 568,273 22.7 Restricted investments in bank stock 3,961 0.2 3,905 0.2 Loans and leases, net (including loans HFS) 1,781,190 68.8 1,667,749 66.5 Bank premises and equipment 35,914 1.4 34,232 1.4 Life insurance cash surrender value 58,069 2.2 54,572 2.2 Other assets 64,908 2.6 62,479 2.5 Total assets $ 2,584,616 100.0 % $ 2,503,159 100.0 % Liabilities: Total deposits $ 2,340,820 90.6 % $ 2,158,425 86.2 % Secured borrowings 6,266 0.2 7,372 0.3 Short-term borrowings - - 117,000 4.7 Other liabilities 33,561 1.3 30,883 1.2 Total liabilities 2,380,647 92.1 2,313,680 92.4 Shareholders' equity 203,969 7.9 189,479 7.6 Total liabilities and shareholders' equity $ 2,584,616 100.0 % $ 2,503,159 100.0 % A comparison of net changes in selected balance sheet categories as of December 31, are as follows: Earning Other FHLB (dollars in thousands) Assets % assets* % Deposits % borrowings % advances % 2024 $ 81,457 3 $ 73,355 3 $ 182,395 8 $ (118,106 ) (95 ) $ - - 2023 124,787 5 100,726 5 (8,488 ) - 103,813 505 - - 2022 (40,732 ) (2 ) (35,954 ) (2 ) (2,952 ) - 9,939 94 - - 2021 719,594 42 682,812 43 660,360 44 10,620 100 (5,000 ) (100 ) 2020 689,583 68 648,880 69 673,768 81 (37,839 ) (100 ) (10,000 ) (67 ) * Earning assets include interest-bearing deposits with financial institutions, gross loans and leases, loans held-for-sale, available-for-sale and held-to-maturity securities and restricted investments in bank stock excluding loans placed on non-accrual status. 25 Table of Contents For more information about the Company's capital, see Footnote 15, "Regulatory Matters," of Part II, Item 8 “Financial Statements and Supplementary Data”, which is incorporated herein by reference and the "Capital Resources" section of management’s discussion and analysis contained herein.
During the period, the Company’s operations provided approximately $29.7 million mostly from $66.2 million of net cash inflow from the components of net interest income partially offset by net non-interest expense/income related payments of $32.4 million and $2.6 million in quarterly estimated tax payments.
During the year ended December 31, 2024, the Company decreased cash holdings by $28.6 million. During the period, the Company’s operations provided approximately $29.7 million mostly from $65.6 million of net cash inflow from the components of net interest income partially offset by net non-interest expense/income related payments of $32.9 million and $4.4 million in quarterly estimated tax payments.
When estimating the net amount expected to be collected, Management considers the effects of past events, current conditions, and reasonable and supportable forecasts of the collectability of the Company’s financial assets. Those estimates may be susceptible to significant change. Loan losses are charged directly against the allowance when loans are deemed to be uncollectible.
The allowance reflects management’s best estimate of the amount of expected credit losses in the loan portfolio. When estimating the net amount expected to be collected, management considers the effects of past events, current conditions, and reasonable and supportable forecasts of the collectability of the Company’s financial assets. Those estimates may be susceptible to significant change.
At December 31, 2022, there were a total of 39 non-accrual loans to 29 unrelated borrowers with balances that ranged from less than $1 thousand to $0.6 million, or $2.5 million in the aggregate.
On December 31, 2024, there were a total of 33 non-accrual loans to 30 unrelated borrowers with balances that ranged from less than $1 thousand to $2.6 million, or $7.3 million in the aggregate.
We intend to grow all lending portfolios in both the business and retail sectors using growth in market-place low costing deposits to stabilize net interest margin and to enhance revenue performance. 57 Table of Contents
We intend to grow our lending portfolios specifically in commercial and residential sectors using growth in market-place low costing deposits to stabilize net interest margin and to enhance revenue performance. 58 Table of Contents
The estimate of uninsured deposits is based on the same methodologies and assumptions used for regulatory reporting requirements. The Company aggregates deposit products by taxpayer identification number and classifies into ownership categories to estimate amounts over the FDIC insurance limit. As of December 31, 2023, the ratio of uninsured and non-collateralized deposits to total deposits was approximately 23%.
As of December 31, 2024, total uninsured deposits were estimated to be $883.6 million, or 38% of total deposits. The estimate of uninsured deposits is based on the same methodologies and assumptions used for regulatory reporting requirements. The Company aggregates deposit products by taxpayer identification number and classifies them into ownership categories to estimate amounts over the FDIC insurance limit.
At December 31, 2023, the Company maintained a one-year cumulative gap of negative (liability sensitive) $185.5 million, or -7%, of total assets. The effect of this negative gap position provided a mismatch of assets and liabilities which may expose the Company to interest rate risk during periods of rising interest rates.
At December 31, 2024, the Company maintained a one-year cumulative gap of positive (asset sensitive) $9.3 million, or 0.4%, of total assets. The effect of this positive gap position provided a mismatch of assets and liabilities which may expose the Company to interest rate risk during periods of falling interest rates.
The following table reconciles the non-GAAP financial measures of FTE net interest income: (dollars in thousands) 2023 2022 Interest income (GAAP) $ 93,835 $ 78,672 Adjustment to FTE 2,850 2,738 Interest income adjusted to FTE (non-GAAP) 96,685 81,410 Interest expense (GAAP) 31,788 6,398 Net interest income adjusted to FTE (non-GAAP) $ 64,897 $ 75,012 The efficiency ratio is non-interest expenses as a percentage of FTE net interest income plus non-interest income less gain/(loss) on sales of securities.
The following table reconciles the non-GAAP financial measures of FTE net interest income: (dollars in thousands) 2024 2023 Interest income (GAAP) $ 107,022 $ 93,835 Adjustment to FTE 3,036 2,850 Interest income adjusted to FTE (non-GAAP) 110,058 96,685 Interest expense (GAAP) 45,157 31,788 Net interest income adjusted to FTE (non-GAAP) $ 64,901 $ 64,897 The efficiency ratio is non-interest expenses as a percentage of FTE net interest income plus non-interest income less gain/(loss) on sales of securities.
Both the DRP and the ESPP plans have been a consistent source of capital from the Company’s loyal employees and shareholders and their participation in these plans will continue to help strengthen the Company’s balance sheet.
The DRP affords the Company the option to acquire shares in open market purchases and/or issue shares directly from the Company to plan participants. Both the DRP and the ESPP plans have been a consistent source of capital from the Company’s loyal employees and shareholders and their participation in these plans will continue to help strengthen the Company’s balance sheet.
The following table reconciles the non-GAAP financial measures of the efficiency ratio to GAAP: (dollars in thousands) 2023 2022 Efficiency Ratio (non-GAAP) Non-interest expenses (GAAP) $ 51,870 $ 51,361 Net interest income (GAAP) 62,047 72,274 Plus: taxable equivalent adjustment 2,850 2,738 Non-interest income (GAAP) 11,405 16,642 Less: (Loss) gain on sales of securities (6,468 ) 4 Net interest income (FTE) plus adjusted non-interest income (non-GAAP) $ 82,770 $ 91,650 Efficiency ratio (non-GAAP) 62.67 % 56.04 % The following table provides a reconciliation of the tangible common equity (non-GAAP) and the calculation of tangible book value per share, tangible common equity ratio and adjusted tangible common equity ratio: (dollars in thousands) 2023 2022 Tangible Book Value per Share (non-GAAP) Total assets (GAAP) $ 2,503,159 $ 2,378,372 Less: Intangible assets, primarily goodwill (20,812 ) (21,168 ) Tangible assets 2,482,347 2,357,204 Total shareholders' equity (GAAP) 189,479 162,950 Less: Intangible assets, primarily goodwill (20,812 ) (21,168 ) Tangible common equity $ 168,667 $ 141,782 Common shares outstanding, end of period 5,703,636 5,630,794 Tangible Common Book Value per Share (non-GAAP) $ 29.57 $ 25.18 Tangible Common Equity Ratio (non-GAAP) 6.79 % 6.01 % Unrealized losses on held-to-maturity securities, net of tax (21,375 ) (28,017 ) Adjusted tangible common equity ratio (non-GAAP) 5.93 % 4.83 % 22 Table of Contents The following tables provides a reconciliation of the Company’s earnings results under GAAP to comparative non-GAAP results excluding gain/loss on the sale of available-for-sale debt securities: 2023 (dollars in thousands except per share data) Income before income taxes Provision for income taxes Net income Diluted earnings per share Results of operations (GAAP) $ 20,256 $ 2,046 $ 18,210 $ 3.19 Add: Loss (gain) on the sale of available-for-sale debt securities 6,468 1,358 5,110 0.89 Adjusted earnings (non-GAAP) $ 26,724 $ 3,404 $ 23,320 $ 4.08 2022 (dollars in thousands except per share data) Income before income taxes Provision for income taxes Net income Diluted earnings per share Results of operations (GAAP) $ 35,468 $ 5,447 $ 30,021 $ 5.29 Add: Loss (gain) on the sale of available-for-sale debt securities (4 ) (1 ) (3 ) - Adjusted earnings (non-GAAP) $ 35,464 $ 5,446 $ 30,018 $ 5.29 The following table provides a reconciliation of pre-provision net revenue (PPNR) to average assets (non-GAAP): (dollars in thousands) 2023 2022 Pre-Provision Net Revenue to Average Assets Income before taxes (GAAP) $ 20,256 $ 35,468 Plus: Provision for credit losses 1,326 2,087 Total pre-provision net revenue (non-GAAP) $ 21,582 $ 37,555 Average assets $ 2,405,096 $ 2,399,576 Pre-Provision Net Revenue to Average Assets (non-GAAP) 0.90 % 1.57 % 23 Table of Contents Comparison of Financial Condition as of December 31, 2023 and 2022 and Results of Operations for each of the Years then Ended Executive Summary The Company generated $18.2 million in net income in 2023, or $3.19 diluted earnings per share, down $11.8 million, or 39%, from $30.0 million, or $5.29 diluted earnings per share, in 2022.
The following table reconciles the non-GAAP financial measures of the efficiency ratio to GAAP: (dollars in thousands) 2024 2023 Efficiency Ratio (non-GAAP) Non-interest expenses (GAAP) $ 55,541 $ 51,870 Net interest income (GAAP) 61,865 62,047 Plus: taxable equivalent adjustment 3,036 2,850 Non-interest income (GAAP) 19,013 11,405 Less: (Loss) gain on sales of securities - (6,468 ) Net interest income (FTE) plus adjusted non-interest income (non-GAAP) $ 83,914 $ 82,770 Efficiency ratio (non-GAAP) 66.19 % 62.67 % The following table provides a reconciliation of the tangible common equity (non-GAAP) and the calculation of tangible book value per share, tangible common equity ratio and adjusted tangible common equity ratio: (dollars in thousands) 2024 2023 Tangible Book Value per Share (non-GAAP) Total assets (GAAP) $ 2,584,616 $ 2,503,159 Less: Intangible assets (20,504 ) (20,812 ) Tangible assets 2,564,112 2,482,347 Total shareholders' equity (GAAP) 203,969 189,479 Less: Intangible assets (20,504 ) (20,812 ) Tangible common equity $ 183,465 $ 168,667 Common shares outstanding, end of period 5,736,252 5,703,636 Tangible Common Book Value per Share (non-GAAP) $ 31.98 $ 29.57 Tangible Common Equity Ratio (non-GAAP) 7.16 % 6.79 % Unrealized losses on held-to-maturity securities, net of tax (24,640 ) (21,375 ) Adjusted tangible common equity ratio (non-GAAP) 6.19 % 5.93 % 22 Table of Contents The following tables provides a reconciliation of the Company’s earnings results under GAAP to comparative non-GAAP results excluding gain/loss on the sale of available-for-sale debt securities: 2024 (dollars in thousands except per share data) Income before income taxes Provision for income taxes Net income Diluted earnings per share Results of operations (GAAP) $ 23,872 $ 3,078 $ 20,794 $ 3.60 Add: Loss (gain) on the sale of available-for-sale debt securities - - - - Adjusted earnings (non-GAAP) $ 23,872 $ 3,078 $ 20,794 $ 3.60 2023 (dollars in thousands except per share data) Income before income taxes Provision for income taxes Net income Diluted earnings per share Results of operations (GAAP) $ 20,256 $ 2,046 $ 18,210 $ 3.19 Add: Loss (gain) on the sale of available-for-sale debt securities 6,468 1,358 5,110 0.89 Adjusted earnings (non-GAAP) $ 26,724 $ 3,404 $ 23,320 $ 4.08 The following table provides a reconciliation of pre-provision net revenue (PPNR) to average assets (non-GAAP): (dollars in thousands) 2024 2023 Pre-Provision Net Revenue to Average Assets Income before taxes (GAAP) $ 23,872 $ 20,256 Plus: Provision for credit losses 1,465 1,326 Total pre-provision net revenue (non-GAAP) $ 25,337 $ 21,582 Average assets $ 2,493,659 $ 2,405,096 Pre-Provision Net Revenue to Average Assets (non-GAAP) 1.02 % 0.90 % 23 Table of Contents Comparison of Financial Condition as of December 31, 2024 and 2023 and Results of Operations for each of the Years then Ended Executive Summary The Company generated $20.8 million in net income in 2024, or $3.60 diluted earnings per share, an increase of $2.6 million, or 14%, from $18.2 million, or $3.19 diluted earnings per share, in 2023.
Collateral values may be determined using invoices, inventory reports, accounts receivable aging reports, independent collateral appraisals, etc. 32 Table of Contents For the twelve months ended December 31, 2023, commercial and industrial (non-municipal) loans increased $11.5 million, or 8%, from $141.1 million at December 31, 2022 to $152.6 million at December 31, 2023, which was the result of originations and advances outpacing scheduled payments and curtailments.
Collateral values may be determined using invoices, inventory reports, accounts receivable aging reports, independent collateral appraisals, etc. 33 Table of Contents For the twelve months ended December 31, 2024, commercial and industrial (non-municipal) loans increased $20.2 million, or 13%, from $152.6 million as of December 31, 2023 to $172.8 million as of December 31, 2024, which was due to originations of two commercial & industrial borrowers totaling $17 million, along with originations and advances outpacing scheduled payments and curtailments.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeITEM 7A: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK The information required by 7A is set forth at Item 7, under “Liquidity” and “Management of interest rate risk and market risk analysis,” contained within management’s discussion and analysis of financial condition and results of operations and incorporated herein by reference. 58 Table of Contents
Biggest changeITEM 7A: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK The information required by 7A is set forth at Item 7, under “Liquidity” and “Management of interest rate risk and market risk analysis,” contained within management’s discussion and analysis of financial condition and results of operations and incorporated herein by reference. 59 Table of Contents

Other FDBC 10-K year-over-year comparisons