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What changed in NORWOOD FINANCIAL CORP's 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of NORWOOD FINANCIAL CORP'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.

+171 added−166 removedSource: 10-K (2025-03-14) vs 10-K (2024-03-14)

Top changes in NORWOOD FINANCIAL CORP's 2024 10-K

171 paragraphs added · 166 removed · 122 edited across 8 sections

Item 1. Business

Business — how the company describes what it does

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Biggest changeThe description does not purport to be complete and is qualified in its entirety by reference to applicable laws and regulations. Regulation of the Company General. The Company, as a bank holding company registered under the Bank Holding Company Act of 1956, as amended (“BHCA”), is subject to regulation and supervision by the Federal Reserve.
Biggest changeRegulation Set forth below is a brief description of certain laws which relate to the regulation of the Company and the Bank. The description does not purport to be complete and is qualified in its entirety by reference to applicable laws and regulations. Regulation of the Company General.
At the effective time of the Merger, each outstanding share of the common stock of Delaware was converted, at the election of the holder but subject to the limitations and allocation and proration provisions set forth in the Delaware Agreement, into either $16.68 in cash or 0.6221 of a share of the Company’s common stock, par value $0.10 per share (the “Common Stock”).
At the effective time of the Merger, each outstanding share of the common stock of Delaware was converted, at the election of the holder but subject to the limitations and allocation and proration provisions set forth in the Delaware Agreement, into either $16.68 in cash or 0.6221 of a share of the Company’s 2 common stock, par value $0.10 per share (the “Common Stock”).
As long as their bank subsidiaries are well capitalized, such bank holding companies need only maintain a pro forma debt to equity ratio of less than 1.0 in order to pay dividends and repurchase stock and to be eligible for expedited treatment on applications. Regulation of the Bank General.
As long as their bank subsidiaries are well capitalized, such bank holding companies need only maintain a pro forma debt to equity ratio of less than 1.0 in order to pay dividends and repurchase stock and to be eligible for expedited treatment on applications. 4 Regulation of the Bank General.
In the aggregate, the merger consideration paid to Delaware shareholders consisted of approximately $3,860,000 in cash and 431,605 shares of the Common Stock. 2 North Penn Bancorp, Inc. On May 31, 2011, the Company completed the acquisition of North Penn Bancorp, Inc. (“North Penn”) and its wholly owned subsidiary, North Penn Bank.
In the aggregate, the merger consideration paid to Delaware shareholders consisted of approximately $3,860,000 in cash and 431,605 shares of the Common Stock. North Penn Bancorp, Inc. On May 31, 2011, the Company completed the acquisition of North Penn Bancorp, Inc. (“North Penn”) and its wholly owned subsidiary, North Penn Bank.
A notification incident is a “computer-security incident” that has materially disrupted or degraded, or is reasonably likely to materially disrupt or degrade, the banking 7 organization’s ability to deliver services to a material portion of its customer base, jeopardize the viability of key operations of the banking organization, or impact the stability of the financial sector.
A notification incident is a “computer-security incident” that has materially disrupted or degraded, or is reasonably likely to materially disrupt or degrade, the banking organization’s ability to deliver services to a material portion of its customer base, jeopardize the viability of key operations of the banking organization, or impact the stability of the financial sector.
Further, loans and other extensions of credit generally are required to be secured by eligible collateral in specified amounts. Transactions with non-affiliates may be treated as transactions with an affiliate to the extent that proceeds from the transaction are used to benefit the affiliate.
Further, loans and other extensions of credit generally are required to be secured by eligible collateral in specified amounts. Transactions with non-affiliates may be treated 6 as transactions with an affiliate to the extent that proceeds from the transaction are used to benefit the affiliate.
The federal and state laws and regulations applicable to banks regulate, among other things, the 4 scope of their business, their investments, the reserves required to be kept against deposits, the timing of the availability of deposited funds and the nature and amount of and collateral for certain loans.
The federal and state laws and regulations applicable to banks regulate, among other things, the scope of their business, their investments, the reserves required to be kept against deposits, the timing of the availability of deposited funds and the nature and amount of and collateral for certain loans.
An institution’s risk-based capital requirements are measured against risk-weighted assets, which 5 equal the sum of each on-balance-sheet asset and the credit-equivalent amount of each off-balance-sheet item after being multiplied by an assigned risk weight.
An institution’s risk-based capital requirements are measured against risk-weighted assets, which equal the sum of each on-balance-sheet asset and the credit-equivalent amount of each off-balance-sheet item after being multiplied by an assigned risk weight.
In addition, provisions of the USA PATRIOT Act require the federal bank regulatory agencies to consider the effectiveness of a bank’s anti-money laundering activities when reviewing mergers and acquisitions. Privacy Regulations and Cybersecurity.
In addition, provisions of the USA PATRIOT Act require the federal bank regulatory agencies to consider the effectiveness of a bank’s anti-money laundering activities when reviewing mergers and acquisitions. 7 Privacy Regulations and Cybersecurity.
WCB Realty Corp., a Pennsylvania corporation, is a wholly owned real estate subsidiary of the Bank whose principal asset is the administrative offices of the Company, which also includes the Main Office of the Bank. WTRO Properties Inc.
WCB Realty Corp., a Pennsylvania corporation, is a wholly owned real estate subsidiary of the Bank whose principal asset is the administrative offices of the Company, which also includes the Main Office of the Bank. 3 WTRO Properties Inc.
In addition, the Department has the supervisory discretion to require higher leverage ratio for any institutions based on the institution’s substandard performance in any of a number of areas. The Bank was in compliance with both the FDIC and the Pennsylvania capital requirements in effect as of December 31, 2023. Prompt Corrective Regulatory Action .
In addition, the Department has the supervisory discretion to require higher leverage ratio for any institutions based on the institution’s substandard performance in any of a number of areas. The Bank was in compliance with both the FDIC and the Pennsylvania capital requirements in effect as of December 31, 2024. Prompt Corrective Regulatory Action .
At December 31, 2023, the Bank was in compliance with this requirement. Restrictions on Dividends . The Pennsylvania Banking Code states, in part, that dividends may be declared and paid only out of accumulated net earnings and may not be declared or paid unless surplus (retained earnings) is at least equal to contributed capital.
At December 31, 2024, the Bank was in compliance with this requirement. Restrictions on Dividends . The Pennsylvania Banking Code states, in part, that dividends may be declared and paid only out of accumulated net earnings and may not be declared or paid unless surplus (retained earnings) is at least equal to contributed capital.
The increase reflects growth and improved market valuations during 2023, such as stock market performance which can affect the value of a customer’s investment portfolio. Subsidiary Activities The Bank, a Pennsylvania chartered bank, is the only wholly owned subsidiary of the Company. Norwood Investment Corp.
The increase reflects growth and improved market valuations during 2024, such as stock market performance which can affect the value of a customer’s investment portfolio. Subsidiary Activities The Bank, a Pennsylvania chartered bank, is the only wholly owned subsidiary of the Company. Norwood Investment Corp.
At December 31, 2023, the Bank qualified as “well capitalized” under the prompt corrective action rules. Affiliate Transaction Restrictions. Federal laws strictly limit the ability of banks to engage in transactions with their affiliates, including their bank holding companies.
At December 31, 2024, the Bank qualified as “well capitalized” under the prompt corrective action rules. Affiliate Transaction Restrictions. Federal laws strictly limit the ability of banks to engage in transactions with their affiliates, including their bank holding companies.
The Bank primarily serves the northeastern Pennsylvania counties of Wayne, Pike, Monroe, Lackawanna and Luzerne and, to a much lesser extent, Susquehanna County in addition to the New York counties of Delaware, Sullivan, Ontario, Otsego and Yates. In addition, the Bank operates automated teller machines at twenty-nine branch facilities plus one machine at an off-site location.
The Bank primarily serves the northeastern Pennsylvania counties of Wayne, Pike, Monroe, Lackawanna and Luzerne and, to a much lesser extent, Susquehanna County in addition to the New York counties of Delaware, Sullivan, Ontario, Otsego and Yates. In addition, the Bank operates automated teller machines at thirty branch facilities plus one machine at an off-site location.
The Bank is an independent community bank with fifteen offices in Northeastern Pennsylvania and fourteen offices in Delaware, Sullivan, Ontario, Otsego and Yates Counties, New York.
The Bank is an independent community bank with sixteen offices in Northeastern Pennsylvania and fourteen offices in Delaware, Sullivan, Ontario, Otsego and Yates Counties, New York.
The Company’s main office is located at 717 Main Street, Honesdale, Pennsylvania and its main telephone number is (570) 253-1455. The Company maintains a website at waynebank.com. Information on our website should not be treated as part of this Annual Report on Form 10-K.
The Company’s main office is located at 717 Main Street, Honesdale, Pennsylvania and its main telephone number is (570) 253-1455. The Company maintains a website at wayne.bank. Information on our website should not be treated as part of this Annual Report on Form 10-K.
The Bank received a “satisfactory” CRA rating in its most recent CRA performance evaluation by the FDIC in May 2022.
The Bank received a “satisfactory” CRA rating in its most recent CRA performance evaluation by the FDIC in July 2022.
Loan competition varies depending upon market conditions and comes from other insured financial institutions such as commercial banks, thrift institutions, credit unions, multi-state regional banks, and mortgage bankers. Personnel As of December 31, 2023, the Bank had 261 full - time and four part - time employees. None of the Bank’s employees are represented by a collective bargaining group.
Loan competition varies depending upon market conditions and comes from other insured financial institutions such as commercial banks, thrift institutions, credit unions, multi-state regional banks, and mortgage bankers. Personnel As of December 31, 2024, the Bank had 264 full - time and seven part - time employees. None of the Bank’s employees are represented by a collective bargaining group.
LPL is a registered broker/dealer and a member of FINRA and the SIPC. NIC generated gross revenues for the Company of $296,000 and $119,000 in 2023 and 2022, respectively, which is included in Other Income.
LPL is a registered broker/dealer and a member of FINRA and the SIPC. NIC generated gross revenues for the Company of $407,000 and $296,000 in 2024 and 2023, respectively, which is included in Other Income.
Trust Activities The Bank operates a Wealth Management/Trust Department which provides estate planning, investment management and financial planning to customers for which it is generally compensated based on a percentage of assets under management. As of December 31, 2023, the Bank had $192.4 million of assets under management compared to $184.9 million as of December 31, 2022.
Trust Activities The Bank operates a Wealth Management/Trust Department which provides estate planning, investment management and financial planning to customers for which it is generally compensated based on a percentage of assets under management. As of December 31, 2024, the Bank had $205.1 million of assets under management compared to $192.4 million as of December 31, 2023.
As of December 31, 2023, the Bank’s loans-to-one-borrower limitation was $32.5 million and the Bank was in compliance with such limitation. 6 Federal Home Loan Bank System. The Bank is a member of the FHLB of Pittsburgh, which is one of 11 regional FHLBs. Each FHLB serves as a reserve or central bank for its members within its assigned region.
As of December 31, 2024, the Bank’s loans-to-one-borrower limitation was $35.4 million and the Bank was in compliance with such limitation. Federal Home Loan Bank System. The Bank is a member of the FHLB of Pittsburgh, which is one of 11 regional FHLBs. Each FHLB serves as a reserve or central bank for its members within its assigned region.
The Bank was originally chartered on February 17, 1870, as Wayne County Savings Bank and changed its name to Wayne County Bank and Trust in December 1943. In September 1993, the Bank adopted the name Wayne Bank.
Wayne Bank is a Pennsylvania chartered bank and trust company headquartered in Honesdale, Pennsylvania. The Bank was originally chartered on February 17, 1870, as Wayne County Savings Bank and changed its name to Wayne County Bank and Trust in December 1943. In September 1993, the Bank adopted the name Wayne Bank.
Based on data compiled by the FDIC as of June 30, 2023 (the latest date for which such data is available), the Bank had the third largest share of FDIC-insured deposits in Wayne County with approximately 22.64%, the second largest share in Pike County with 18.88%, seventh largest share in Monroe County with 3.51%, the eleventh largest share in Lackawanna County with 1.13% and the seventeenth largest share in Luzerne County with 0.34%.
Based on data compiled by the FDIC as of June 30, 2024 (the latest date for which such data is available), the Bank had the third largest share of FDIC-insured deposits in Wayne County with approximately 21.54%, the second largest share in Pike County with 18.85%, seventh largest share in Monroe County with 3.64%, the eleventh largest share in Lackawanna County with 1.17% and the seventeenth largest share in Luzerne County with 0.33%.
The Company is required to file periodic reports of its operations with, and is subject to examination by, the Federal Reserve. This regulation and oversight is generally intended to ensure that the Company limits its activities to those allowed by law and that it operates in a safe and sound manner without endangering the financial health of its subsidiary bank.
This regulation and oversight is generally intended to ensure that the Company limits its activities to those allowed by law and that it operates in a safe and sound manner without endangering the financial health of its subsidiary bank.
As of December 31, 2023, the Company had total consolidated assets of $2.201 billion, consolidated deposits of $1.795 billion, and consolidated stockholders’ equity of $181.1 million. The Company’s ratio of average equity to average assets was 8.14%, 8.87%, and 10.04% for fiscal years 2023, 2022 and 2021, respectively.
As of December 31, 2024, the Company had total consolidated assets of $2.317 billion, consolidated deposits of $1.859 billion, and consolidated stockholders’ equity of $213.5 million. The Company’s ratio of average equity to average assets was 8.26%, 8.14%, and 8.87% for fiscal years 2024, 2023 and 2022, respectively.
At June 30, 2023, the Bank had the largest share of FDIC-insured deposits in Delaware County, New York, with 30.55% and the fifth largest share in Sullivan County, New York, with 8.68%. The Bank’s market share in Ontario, Otsego and Yates Counties were 3.50%, 17.21% and 9.81%, respectively.
At June 30, 2024, the Bank had the largest share of FDIC-insured deposits in Delaware County, New York, with 32.0% and the fourth largest share in Sullivan County, New York, with 9.53%. The Bank’s market share in Ontario, Otsego and Yates Counties were 3.82%, 17.36% and 13.21%, respectively.
Under the Basel III Capital Rules, banks are required to meet four minimum capital standards: (1) a “Tier 1” or “core” capital leverage ratio equal to at least 4% of total adjusted assets; (2) a common equity Tier 1 capital ratio equal to 4.5% of risk-weighted assets; (3) a Tier 1 risk-based ratio equal to 6% of risk-weighted assets; and (4) a total capital ratio equal to 8% of total risk-weighted assets.
The Basel III Capital Rules apply to all depository institutions as well as to all top-tier bank and savings and loan holding companies that are not subject to the Federal Reserve Small Bank Holding Company Policy Statement. 5 Under the Basel III Capital Rules, banks are required to meet four minimum capital standards: (1) a “Tier 1” or “core” capital leverage ratio equal to at least 4% of total adjusted assets; (2) a common equity Tier 1 capital ratio equal to 4.5% of risk-weighted assets; (3) a Tier 1 risk-based ratio equal to 6% of risk-weighted assets; and (4) a total capital ratio equal to 8% of total risk-weighted assets.
(“WTRO”), a Pennsylvania corporation, is a wholly owned real estate subsidiary of the Bank established to hold title to certain real estate upon which the Bank has foreclosed.
(“WTRO”), a Pennsylvania corporation, is a wholly owned real estate subsidiary of the Bank established to hold title to certain real estate upon which the Bank has foreclosed. As of December 31, 2024 and 2023, the outstanding balance of foreclosed properties on which WTRO held title totaled $0 and $0, respectively.
Removed
The decrease in the 2023 level was due to the impact of rising interest rates and the related decrease in accumulated other comprehensive income (loss). Wayne Bank is a Pennsylvania chartered bank and trust company headquartered in Honesdale, Pennsylvania.
Added
The Company, as a bank holding company registered under the Bank Holding Company Act of 1956, as amended (“BHCA”), is subject to regulation and supervision by the Federal Reserve. The Company is required to file periodic reports of its operations with, and is subject to examination by, the Federal Reserve.
Removed
As of December 31, 2023 and 2022, the outstanding balance of foreclosed properties on which WTRO held title totaled $0 and $346,000, respectively. 3 Regulation Set forth below is a brief description of certain laws which relate to the regulation of the Company and the Bank.
Removed
The Basel III Capital Rules apply to all depository institutions as well as to all top-tier bank and savings and loan holding companies that are not subject to the Federal Reserve Small Bank Holding Company Policy Statement.

Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeItem 1C. Cybersecu rity Incident Response Policy The Board of Directors is responsible for overseeing the risks from cybersecurity threats. Each month, the Board is presented with the executive overview of the Cybersecurity Continuous Monitoring Review Report (“Report”) prepared by the Company’s third-party chief information security officer.
Biggest changeItem 1C. Cybersecu rity Incident Response Policy The Board of Directors is responsible for overseeing the risks from cybersecurity threats. Each month, the Board is presented with the executive overview of the Cybersecurity Continuous Monitoring Review Report (“ Report ”) prepared by the Company’s third-party chief information security officer.
The Board of Directors reviews the Report each month and, if warranted, directs senior management of the Company to take necessary and appropriate actions in accordance with the IR Policy (as defined below). Wayne Bank has adopted an Incident Response Policy (the “IR Policy”) for responding to cybersecurity incidents. This IR Policy applies to both potential and actual incidents.
The Board of Directors reviews the Report each month and, if warranted, directs senior management of the Company to take necessary and appropriate actions in accordance with the IR Policy (as defined below). 8 Wayne Bank has adopted an Incident Response Policy (the “IR Policy”) for responding to cybersecurity incidents. This IR Policy applies to both potential and actual incidents.
If an incident is confirmed, an incident response 8 team is formed, and the team takes steps to contain the incident to limit damage, eradicate the incident to restore our full control of all Bank systems and eliminate unauthorized access, and recover data and full functionality.
If an incident is confirmed, an incident response team is formed, and the team takes steps to contain the incident to limit damage, eradicate the incident to restore our full control of all Bank systems and eliminate unauthorized access, and recover data and full functionality.
During the fiscal year ended December 31, 2023, the risks from cybersecurity threats, including as a result of any previous cybersecurity incidents , have not materially affected the Company, its business strategy, results of operations, or financial condition.
During the fiscal year ended December 31, 2024, the risks from cybersecurity threats, including as a result of any previous cybersecurity incidents , have not materially affected the Company, its business strategy, results of operations, or financial condition .

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeItem 2. Properties . The Bank operates from its main office located at 717 Main Street, Honesdale, Pennsylvania and twenty-eight additional branch offices in Northeastern Pennsylvania and upstate New York. The Bank’s total investment in office property and equipment is $38.2 million with a net book value of $17.8 million as of December 31, 2023.
Biggest changeItem 2. Properties. The Bank operates from its main office located at 717 Main Street, Honesdale, Pennsylvania and twenty-nine additional branch offices in Northeastern Pennsylvania and upstate New York. The Bank’s total investment in office property and equipment is $41.3 million with a net book value of $19.7 million as of December 31, 2024.
The Bank currently operates automated teller machines at all of its community office facilities, as well as one off-site ATM. The Bank leases eight of its locations.
The Bank currently operates automated teller machines at all of its community office facilities, as well as one off-site ATM. The Bank leases nine of its locations.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeWhile we continue to measure the impact of this cyber-incident, including certain remediation expenses and other potential liabilities, we do not currently believe this incident will have a material adverse effect on our business, operations, or financial results.
Biggest changeWhile we continue to measure the impact of this cyber-incident, including certain remediation expenses 9 and other potential liabilities, we do not currently believe this incident will have a material adverse effect on our business, operations, or financial results.
Removed
In December 2023, in accordance with applicable laws and regulations, the Bank began notifying its affected customers of the cyber incident and arranged for its affected customers to receive free identity monitoring service for two years. The identity monitoring services included credit monitoring, fraud consultation, and identity theft restoration.
Added
The MOVEit cases have since been transferred and consolidated in the United States District Court for the District of Massachusetts (the “Court”) and are now entitled MOVEit Customer Data Security Breach Litigation.
Added
On July 23, 2024, on behalf of all of the Defendants (including the Company) in this case, an omnibus Motion to Dismiss the cases for lack of Article III standing pursuant to Rule 12(b)(1) of the Federal Rules of Civil Procedure was filed with the Court. A hearing on this motion was held on October 9, 2024.
Added
On December 12, 2024, Judge Burroughs denied the defendants’ Rule 12(b)(1) motion in large part. The Court has ordered that a bellwether process be used to test claims and defenses. Because Wayne Bank is not a bellwether defendant, its obligations will be much lessened but will include, among other things, modest discovery.

Item 4. Mine Safety Disclosures

Mine Safety Disclosures — required of mining issuers

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Biggest changeFinancial Statements and Supplementary Data. 27 Item 9 Changes in and Disagreements with Accountants on Accounting and Financial Disclosure. 73 Item 9A. Controls and Procedures. 74
Biggest changeFinancial Statements and Supplementary Data. 30 Item 9 Changes in and Disagreements with Accountants on Accounting and Financial Disclosure. 79 Item 9A. Controls and Procedures. 79 Item 9B. Other Information. 80
Item 4. Mine Safety Disclosures. 9 Part II Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities. 9 Item 6. Selected Financial Data 11 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations. 12 Item 7A. Quantitative and Qualitative Disclosure about Market Risk. 25 Item 8.
Item 4. Mine Safety Disclosures. 10 Part II Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities. 10 Item 6. Reserved 11 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations. 12 Item 7A. Quantitative and Qualitative Disclosure about Market Risk. 27 Item 8.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeAs of December 31, 2023, the closing stock price was $32.91 per share, compared to $33.44 as of December 31, 2022. TRANSFER AGENT Computershare provides Transfer Agent services for the Company. Stockholders who may have questions regarding their stock ownership should contact the Transfer Agent at 800-662-7232, by regular mail at P.O.
Biggest changeStockholders who may have questions regarding their stock ownership should contact the Transfer Agent at 800-662-7232, by regular mail at P.O. Box 43006, Providence, RI 02940-3006, or by overnight delivery at 150 Royall St, Suite 101, Canton, MA 02021.
AUTOMATIC DIVIDEND REINVESTMENT PLAN The Plan, open to all shareholders, provides the opportunity to have dividends automatically reinvested into the Company’s common stock. Participants in the Plan may also elect to make cash contributions to purchase additional shares of common stock. Stockholders of the Company may contact the transfer agent for additional information. (b) Use of Proceeds. Not applicable.
Business-Regulation.” AUTOMATIC DIVIDEND REINVESTMENT PLAN The Plan, open to all shareholders, provides the opportunity to have dividends automatically reinvested into the Company’s common stock. Participants in the Plan may also elect to make cash contributions to purchase additional shares of common stock. Stockholders of the Company may contact the transfer agent for additional information. (b) Use of Proceeds. Not applicable.
Set forth below is information regarding the Company’s stock repurchases during the fourth quarter of the fiscal year ended December 31, 2023. 10 Issuer Purchases of Equity Securities Total Number of Shares (or Units) purchased Average Price Paid Per Share (or Unit) Total Number of Shares (or Units) Purchased as Part of Publicly Announced Plans or Programs * Maximum Number (or Approximate Dollar Value) of Shares (or Units) that May Yet be Purchased Under the Plans or Programs October 1 – 31, 2023 — $ — — 274,094 November 1 – 30, 2023 — — — 274,094 December 1 – 31, 2023 — — — 274,094 Total — $ — — 274,094
Set forth below is information regarding the Company’s stock repurchases during the fourth quarter of the fiscal year ended December 31, 2024. 10 Issuer Purchases of Equity Securities Total Number of Shares (or Units) Purchased Average Price Paid Per Share (or Unit) Total Number of Shares (or Units) Purchased as Part of Publicly Announced Plans or Programs * Maximum Number (or Approximate Dollar Value) of Shares (or Units) that May Yet be Purchased Under the Plans or Programs October 1 – 31, 2024 — $ — — 257,905 November 1 – 30, 2024 — — — 257,905 December 1 – 31, 2024 — — — 257,905 Total — $ — — 257,905
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities . (a) Market Information 9 STOCK LISTING Norwood Financial Corp stock is traded on the Nasdaq Global Market under the symbol NWFL. As of December 31, 2023, there were approximately 1,250 registered stockholders based on the records of our transfer agent.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities . (a) Market Information STOCK LISTING Norwood Financial Corp stock is traded on the Nasdaq Global Market under the symbol NWFL. As of December 31, 2024, there were approximately 1,220 registered stockholders based on the records of our transfer agent.
The following firms are known to make a market in the Company’s stock: Janney Montgomery Scott, LLC ‎ Philadelphia, PA 19103 215-665-6566 RBC Capital Markets Philadelphia, PA 19103 215-832-1500 Stifel Nicolaus St,.
The following firms are known to make a market in the Company’s stock: Janney Montgomery Scott, LLC ‎ Philadelphia, PA 19103 215-665-6566 RBC Capital Markets Philadelphia, PA 19103 215-832-1500 Stifel Nicolaus St,. Louis, MO 63102 314-342-2000 TRANSFER AGENT Computershare provides Transfer Agent services for the Company.
Box 43006, Providence, RI 02940-3006, or by overnight delivery at 150 Royall St, Suite 101, Canton, MA 02021. DIVIDEND CALENDAR Dividends on the Company’s common stock, if approved by the Board of Directors, are customarily paid on or about February 1, May 1, August 1 and November 1.
DIVIDEND CALENDAR Dividends on the Company’s common stock, if approved by the Board of Directors, are customarily paid on or about February 1, May 1, August 1 and November 1.
Removed
Louis, MO 63102 314-342-2000 The following table sets forth the price range and cash dividends declared per share regarding common stock for the periods indicated: Closing Price Range High Low Cash dividend Year 2023 Declared per share First Quarter $ 34.69 $ 28.65 $ 0.29 Second Quarter 32.08 24.00 0.29 Third Quarter 32.98 25.76 0.29 Fourth Quarter 34.49 24.27 0.30 Year 2022 First Quarter $ 28.85 $ 26.23 $ 0.28 Second Quarter 29.00 23.44 0.28 Third Quarter 28.01 24.04 0.28 Fourth Quarter 34.25 26.58 0.29 The book value of the common stock was $22.99 per share as of December 31, 2023 compared to $20.86 per share as of December 31, 2022.
Added
Certain shares of the Company are held in “street” name and accordingly, the number of beneficial owners of such shares is not known or included in the foregoing number.
Added
The Company’s ability to pay dividends may also depend on the receipt of dividends from the Bank, which is subject to a variety of limitations under state and federal banking regulations regarding the payment of dividends. For discussion of the regulatory limitations applicable to the payment of dividends, see “Item 1.

Item 7. Management's Discussion & Analysis

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

68 edited+21 added−27 removed47 unchanged
Biggest changeThe following table reconciles net interest income to net interest income on a fully taxable-equivalent basis: (dollars in thousands) Years ended December 31, 2023 2022 Net interest income $ 62,067 $ 68,397 Tax-equivalent basis adjustment using a 21% marginal tax rate 749 767 Net interest income on a fully taxable equivalent basis $ 62,816 $ 69,164 23 CONSOLIDATED AVERAGE BALANCE SHEETS WITH RESULTANT INTEREST AND RATES (Tax-Equivalent Basis, dollars in thousands) Year Ended December 31 2023 2022 Average Average Average Average Balance Interest Rate Balance Interest Rate (2) (1) (2) (1) ASSETS Interest-earning assets: Interest-bearing deposits with banks $ 7,537 $ 409 5.43 % $ 77,496 $ 602 0.78 % Securities available for sale: Taxable 411,633 8,390 2.04 405,374 7,262 1.79 Tax-exempt 70,598 1,940 2.75 78,224 2,265 2.90 Total securities available for sale 482,231 10,330 2.14 483,598 9,527 1.97 Loans receivable (3)(4) 1,565,665 85,550 5.46 1,401,003 66,304 4.73 Total interest-earning assets 2,055,433 96,289 4.68 1,962,097 76,433 3.90 Noninterest earning assets: Cash and due from banks 26,633 24,560 Allowance for credit losses (18,122) (16,854) Other assets 64,626 77,800 Total noninterest earning assets 73,137 85,506 TOTAL ASSETS $ 2,128,570 $ 2,047,603 LIABILITIES AND STOCKHOLDERS’ EQUITY Interest-bearing liabilities: Interest-bearing demand and money market $ 466,329 5,824 1.25 $ 539,518 1,506 0.28 Savings 248,629 378 0.15 298,933 242 0.08 Time 610,726 19,827 3.25 487,674 4,723 0.97 Total interest-bearing deposits 1,325,684 26,029 1.96 1,326,125 6,471 0.49 Short-term borrowings 93,455 3,048 3.26 69,711 524 0.75 Other borrowings 94,931 4,396 4.63 11,045 274 2.48 Total interest-bearing liabilities 1,514,070 33,473 2.21 1,406,881 7,269 0.52 Noninterest-bearing liabilities: Noninterest-bearing demand deposits 418,631 442,607 Other liabilities 22,595 16,616 Total noninterest-bearing liabilities 441,226 459,223 Stockholders’ equity 173,274 181,499 TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY $ 2,128,570 $ 2,047,603 Net Interest Income/spread (tax equivalent basis) 62,816 2.47 % 69,164 3.38 % Tax-equivalent basis adjustment (749) (767) Net Interest Income $ 62,067 $ 68,397 Net interest margin (tax equivalent basis) 3.06 % 3.53 % (1) Interest and yields are presented on a tax-equivalent basis using a marginal tax rate of 21%.
Biggest changeThe following table reconciles net interest income to net interest income on a fully taxable-equivalent basis: (dollars in thousands) Years ended December 31, 2024 2023 Net interest income $ 62,191 $ 62,067 Tax-equivalent basis adjustment using a 21% marginal tax rate 819 749 Net interest income on a fully taxable equivalent basis $ 63,010 $ 62,816 24 The following table provides a reconciliation between certain GAAP financial measures (net interest income and other expense) and the related non-GAAP measures to derive the efficiency ratio measure: (dollars in thousands) Years ended December 31, 2024 2023 Net interest income $ 62,191 $ 62,067 Other income (11,151) 8,124 Add back net realized (losses) gains on sales of securities (19,962) 209 Total adjusted revenue $ 71,002 $ 69,982 Other Expenses $ 48,625 $ 43,497 Efficiency ratio 68.48% 62.15% 25 CONSOLIDATED AVERAGE BALANCE SHEETS WITH RESULTANT INTEREST AND RATES (Tax-Equivalent Basis, dollars in thousands) Year Ended December 31 2024 2023 Average Average Average Average Balance Interest Rate Balance Interest Rate (2) (1) (1) (2) (1) (1) ASSETS Interest-earning assets: Interest-bearing deposits with banks $ 51,433 $ 2,768 5.38 % $ 7,537 $ 409 5.43 % Securities available for sale: Taxable 400,050 8,948 2.24 411,633 8,390 2.04 Tax-exempt (1) 68,041 1,868 2.75 70,598 1,940 2.75 Total securities available for sale 468,091 10,816 2.31 482,231 10,330 2.14 Loans receivable (1)(3)(4) 1,646,128 99,815 6.06 1,565,665 85,550 5.46 Total interest-earning assets 2,165,652 113,399 5.24 2,055,433 96,289 4.68 Noninterest earning assets: Cash and due from banks 26,629 26,633 Allowance for credit losses (18,450) (18,122) Other assets 76,340 64,626 Total noninterest earning assets 84,519 73,137 TOTAL ASSETS $ 2,250,171 $ 2,128,570 LIABILITIES AND STOCKHOLDERS’ EQUITY Interest-bearing liabilities: Interest-bearing demand and money market $ 476,106 10,506 2.21 $ 466,329 5,824 1.25 Savings 220,190 711 0.32 248,629 378 0.15 Time 744,895 31,117 4.18 610,726 19,827 3.25 Total interest-bearing deposits 1,441,191 42,334 2.94 1,325,684 26,029 1.96 Short-term borrowings 54,867 1,363 2.48 93,455 3,048 3.26 Other borrowings 146,195 6,692 4.58 94,931 4,396 4.63 Total interest-bearing liabilities 1,642,253 50,389 3.07 1,514,070 33,473 2.21 Noninterest-bearing liabilities: Noninterest-bearing demand deposits 393,616 418,631 Other liabilities 28,350 22,595 Total noninterest-bearing liabilities 421,966 441,226 Stockholders’ equity 185,952 173,274 TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY $ 2,250,171 $ 2,128,570 Net Interest Income/spread (tax equivalent basis) 63,010 2.17 % 62,816 2.47 % Tax-equivalent basis adjustment (819) (749) Net Interest Income $ 62,191 $ 62,067 Net interest margin (tax equivalent basis) 2.91 % 3.06 % (1) Interest and yields are presented on a tax-equivalent basis using a marginal tax rate of 21%.
The remaining deficiency is usually turned over to a collection agency. 13 There are additional risks associated with indirect lending since we must rely on the dealer to provide accurate information to us and accurate disclosures to the borrowers. These loans are principally done on a non-recourse basis.
The remaining deficiency is usually turned over to a collection agency. There are additional risks associated with indirect lending since we must rely on the dealer to provide accurate information to us and accurate disclosures to the borrowers. These loans are principally done on a non-recourse basis.
Revenue obligations are backed solely by revenues generated by the project financed and repayment may be affected by the success of the project. Due to the type and nature of the collateral, consumer lending generally involves more credit risk when compared with residential real estate lending.
Revenue obligations are backed solely by revenues generated by the project financed and repayment may be affected by the success of the project. 14 Due to the type and nature of the collateral, consumer lending generally involves more credit risk when compared with residential real estate lending.
The portfolio contained no private label mortgage-backed securities, collateralized debt obligations (CDOs), or trust preferred securities, and no off-balance sheet derivatives were in use. As of December 31, 2023, the portfolio did not contain any step-up bonds.
The portfolio contained no private label mortgage-backed securities, collateralized debt obligations (CDOs), or trust preferred securities, and no off-balance sheet derivatives were in use. As of December 31, 2024, the portfolio did not contain any step-up bonds.
(4) Loan yields include the effect of amortization of purchased credit marks and deferred fees net of costs. ‎ 24 RATE/VOLUME ANALYSIS The following table shows the fully taxable equivalent effect of changes in volumes and rates on interest income and interest expense.
(4) Loan yields include the effect of amortization of purchased credit marks and deferred fees net of costs. ‎ 26 RATE/VOLUME ANALYSIS The following table shows the fully taxable equivalent effect of changes in volumes and rates on interest income and interest expense.
Introduction This Management’s Discussion and Analysis and related financial data are presented to assist in the understanding and evaluation of the financial condition and results of operations for the Company and the Bank, as of December 31, 2023 and 2022, and for the years ended December 31, 2023 and 2022.
Introduction This Management’s Discussion and Analysis and related financial data are presented to assist in the understanding and evaluation of the financial condition and results of operations for the Company and the Bank, as of December 31, 2024 and 2023, and for the years ended December 31, 2024 and 2023.
Other services the Bank offers its customers include IntraFi CDARS and ICS, cash management, direct deposit, Remote Deposit Capture, mobile deposit capture, Zelle and Automated Clearing House (ACH) activity. The Bank operates thirty automated teller machines and is affiliated with the MoneyPass® ATM network. Internet banking including bill-pay is offered through the website at www.waynebank.com.
Other services the Bank offers its customers include IntraFi CDARS and ICS, cash management, direct deposit, Remote Deposit Capture, mobile deposit capture, Zelle and Automated Clearing House (ACH) activity. The Bank operates thirty automated teller machines and is affiliated with the MoneyPass® ATM network. Internet banking including bill-pay is offered through the website at www.wayne.bank.
The borrower must provide proof of fire, flood (if applicable) and casualty insurance on the property serving as collateral and title insurance, and these applicable insurances must be maintained during the full term of the loan. The following table sets forth maturities and interest rate sensitivity for selected categories of loans as of December 31, 2023.
The borrower must provide proof of fire, flood (if applicable) and casualty insurance on the property serving as collateral and title insurance, and these applicable insurances must be maintained during the full term of the loan. 15 The following table sets forth maturities and interest rate sensitivity for selected categories of loans as of December 31, 2024.
The following table sets forth certain information regarding securities not carried at fair value through earnings, weighted average yields, and maturities of the Company’s securities portfolio as of December 31, 2023 and 2022. Yields on tax-exempt securities are stated on a fully taxable equivalent basis using a Federal tax rate of 21%.
The following table sets forth certain information regarding securities not carried at fair value through earnings, weighted average yields, and maturities of the Company’s securities portfolio as of December 31, 2024. Yields on tax-exempt securities are stated on a fully taxable equivalent basis using a Federal tax rate of 21%.
At December 31, 2023, the Company had no concentrations of loans in any one industry exceeding 10% of its total loan portfolio.
At December 31, 2024, the Company had no concentrations of loans in any one industry exceeding 10% of its total loan portfolio.
Cash management accounts in the form of securities sold under agreements to repurchase included in short-term borrowings, totaled $54.1 million at December 31, 2023 compared to $51.0 million as of December 31, 2022. These balances represent commercial and municipal customers’ funds invested in overnight securities. The Company considers these accounts as a source of core funding.
Cash management accounts in the form of securities sold under agreements to repurchase included in short-term borrowings, totaled $36.3 million at December 31, 2024 compared to $54.1 million as of December 31, 2023. These balances represent commercial and municipal customers’ funds invested in overnight securities. The Company considers these accounts as a source of core funding.
Construction projects are inspected by contracted inspectors or bank personnel. Construction loans are underwritten on the basis of the estimated value of the property as completed. For commercial projects, the Bank typically also provides the permanent financing after the construction period, as a commercial mortgage. The Bank also, from time to time, originates loans secured by undeveloped land.
Construction loans are underwritten on the basis of the estimated value of the property as completed. For commercial projects, the Bank typically also provides the permanent financing after the construction period, as a commercial mortgage. The Bank also, from time to time, originates loans secured by undeveloped land.
As of December 31, 2023, the Company held 336 investment securities in a loss position, which had a combined unrealized loss of $60.6 million. Management believes that these losses are principally due to changes in interest rates and concluded that the decline in the value of these securities was not indicative of a credit loss.
As of December 31, 2024, the Company held 215 investment securities in a loss position, which had a combined unrealized loss of $42.6 million. Management believes that these losses are principally due to changes in interest rates and concluded that the decline in the value of these securities was not indicative of a credit loss.
Net charge-offs for 2023 totaled $6,078,000 and represented 0.39% of average loans compared to $343,000 and 0.02% of average loans in 2022. Management reviews the loan portfolio on a quarterly basis using a defined, consistently applied process in order to make appropriate and timely adjustments to the allowance for credit losses.
Net charge-offs for 2024 totaled $1,671,000 and represented 0.10% of average loans compared to $6,078,000 and 0.39% of average loans in 2023. Management reviews the loan portfolio on a quarterly basis using a defined, consistently applied process in order to make appropriate and timely adjustments to the allowance for credit losses.
The yield on securities increased 17 basis points in 2023 due primarily to higher yields on new securities purchased during the year ended December 31, 2023. During the year ended December 31, 2023, while average securities outstanding decreased $1.4 million, interest income (fte) from securities outstanding, increased $803,000 from the year ended December 31, 2022.
The yield on securities increased 17 basis points in 2024 due primarily to higher yields on new securities purchased during the year ended December 31, 2024. During the year ended December 31, 2024, while average securities outstanding decreased $14.1 million, interest income (fte) from securities outstanding, increased $486,000 from the year ended December 31, 2023.
As of December 31, 2023, $406.3 million of securities were so classified and carried at their fair value, with unrealized losses, 17 net of tax, of $47.8 million included in accumulated other comprehensive income (loss) as a component of stockholders’ equity. The Company considers its investment portfolio a source of earnings and liquidity.
As of December 31, 2024, $397.8 million of securities were so classified and carried at their fair value, with unrealized losses, net of tax, of $33.5 million included in accumulated other comprehensive income (loss) as a component of stockholders’ equity. The Company considers its investment portfolio a source of earnings and liquidity.
As of December 31, 2023, the Company had $16,805,000 million of junior lien home equity loans. For the year ended December 31, 2023, there were $0 of charge-offs for this portfolio, with recoveries of $0 in 2023.
As of December 31, 2024, the Company had $19,070,000 million of junior lien home equity loans. For the year ended December 31, 2024, there were $0 of charge-offs in this portfolio, with recoveries of $41,000 in 2024.
Home equity lines of credit tied to the prime rate are also offered. The Bank also offers indirect dealer financing of automobiles (new and used), boats, and recreational vehicles through a limited network of dealers in Northeast Pennsylvania and the Southern Tier of New York. At December 31, 2023, there were $247.7 million of indirect loans in the portfolio.
Home equity lines of credit tied to the prime rate are also offered. The Bank also offers indirect dealer financing of automobiles (new and used), boats, and recreational vehicles through a limited network of dealers in Northeast Pennsylvania and the Southern Tier of New York.
During the year ended December 31, 2023, the resulting net interest spread (fte) decreased to 2.47% compared to 3.38% at December 31, 2022, as a 0.78% increase in the yield earned was offset by a 1.69% increase in the cost of funds.
During the year ended December 31, 2024, the resulting net interest spread (fte) decreased to 2.17% compared to 2.47% at December 31, 2023, as a 0.56% increase in the yield earned was offset by a 0.86% increase in the cost of funds.
Management strives to operate within the thresholds set forth above. As of December 31, 2023, the Company had $675.2 million of commercial real estate loans, which represented 42.1% of total loans outstanding. Non-owner occupied commercial real estate loans totaled $294.9 million, or 18.4% of total loans outstanding and 134.8% of regulatory capital requirements.
Management strives to operate within the thresholds set forth above. As of December 31, 2024, the Company had $716.9 million of commercial real estate loans, which represented 41.8% of total loans outstanding. Non-owner occupied commercial real estate loans totaled $189.8 million, or 11.1% of total loans outstanding and 87.2% of regulatory capital requirements.
Interest expense was $33,473,000 for the year ended December 31, 2023, which resulted in an average cost of interest-bearing liabilities of 2.21% compared to total interest expense of $7,269,000 during the year ended December 31, 2022, with an average cost of 0.52%.
Interest expense was $50,389,000 for the year ended December 31, 2024, which resulted in an average cost of interest-bearing liabilities of 3.07% compared to total interest expense of $33,473,000 during the year ended December 31, 2023, with an average cost of 2.21%.
The Bank’s construction lending has primarily involved lending for commercial construction projects and for single-family residences. All loans for the construction of speculative sale homes have a loan-to-value ratio of not more than 80%. For both commercial and single-family projects, loan proceeds are disbursed during the construction phase according to a draw schedule based on the stage of completion.
All loans for the construction of speculative sale homes have a loan-to-value ratio of not more than 80%. For both commercial and single-family projects, loan proceeds are disbursed during the construction phase according to a draw schedule based on the stage of completion. Construction projects are inspected by contracted inspectors or bank personnel.
In connection with the acquisition of UpState in July 2020, we recorded goodwill in the amount of $17.9 million, representing the excess of amounts paid over the fair value of the net assets of the institution acquired at the date of acquisition. Goodwill is tested annually and deemed impaired when the carrying value of goodwill exceeds its implied fair value.
In connection with the acquisition of UpState in July 2020, we recorded goodwill in the amount of $17.9 million, representing the excess of amounts paid over the fair value of the net assets of the institution acquired at the date of acquisition.
Total interest-bearing deposits cost was 1.96% for the year ended December 31, 2023, which was an increase of 147 basis points over the 2022 fiscal year ended.
Total interest-bearing deposits cost was 2.94% for the year ended December 31, 2024, which was an increase of 98 basis points over the 2023 fiscal year ended.
Fluctuations in interest rates during the year ended December 31, 2023, impacted the fair value of the Company’s Available-for-Sale securities, and contributed to $10.0 million increase in accumulated other comprehensive income.
The repositioning of the Company’s Available-for-Sale securities portfolio during the year ended December 31, 2024, impacted the fair value of the portfolio, and contributed to $14.2 million increase in accumulated other comprehensive income.
RESULTS OF OPERATIONS Summary Net income for the Company for the year ended December 31, 2023 was $16,759,000, which was $12,474,000 lower than the $29,233,000 earned in the year ended December 31, 2022. Earnings per share on a fully diluted basis were $2.07 for 2023 compared to $3.58 in 2022.
RESULTS OF OPERATIONS Summary Net loss for the Company for the year ended December 31, 2024 was $160,000, compared to the net income of $16,759,000 earned in the year ended December 31, 2023. Losses per share on a fully diluted basis were $0.02 for 2024 compared to earnings per share on fully diluted basis of $2.07 in 2023.
These deposits are subject to competitive bid and the Company bases its bid on current interest rates, loan demand, investment portfolio structure and the relative cost of other funding sources. As of December 31, 2023, non-interest bearing demand deposits totaled $399.5 million compared to $434.5 million at December 31, 2022.
These deposits are subject to competitive bid and the Company bases its bid on current interest rates, loan demand, investment portfolio structure and the relative cost of other funding sources.
The return on average assets for the year ended December 31, 2023, was 0.79%, and the return on average equity was 9.67%, compared to 1.43% and 16.11%, respectively, for the year ended December 31, 2022. Net interest income decreased $6,330,000 for the year ended December 31, 2023.
The return on average assets for the year ended December 31, 2024, was (0.01)%, and the return on average equity was (0.09)%, compared to 0.79% and 9.67%, respectively, for the year ended December 31, 2023. Net interest income increased $124,000 for the year ended December 31, 2024.
As of December 31, 2023, the Bank does not have any brokered deposits obtained through internet listing services, and no broker deposits which were secured through Cede & Co. The Bank participates in the Jumbo CD ($100,000 and over) markets with local municipalities and school districts which are typically priced on a competitive bid basis.
As of December 31, 2024, broker deposits that were secured through Cede & Co totaled $20.0 million. The Bank participates in the Jumbo CD ($250,000 and over) markets with local municipalities and school districts which are typically priced on a competitive bid basis.
Other Expenses (dollars in thousands) For the year ended December 31 2023 2022 Salaries $ 14,514 $ 13,791 Employee benefits 9,051 8,280 Occupancy 3,864 3,701 Furniture and equipment 1,219 1,266 Data processing and related operations 3,342 2,948 Federal Deposit Insurance Corporation insurance assessment 985 612 Advertising 630 516 Professional fees 1,676 1,719 Postage and telephone 981 959 Taxes, other than income 566 1,013 Foreclosed real estate 129 73 Amortization of intangible assets 85 101 Other 6,455 6,065 Total $ 43,497 $ 41,044 INCOME TAXES Income tax expense for the year ended December 31, 2023 totaled $4,387,000, which resulted in an effective tax rate of 20.7%, compared to $7,152,000 and 19.7% for 2022.
Other Expenses (dollars in thousands) For the year ended December 31 The following table shows total other expenses: 2024 2023 Salaries $ 15,447 $ 14,514 Employee benefits 9,571 9,051 Occupancy 3,928 3,864 Furniture and equipment 1,121 1,219 Data processing and related operations 4,520 3,342 Federal Deposit Insurance Corporation insurance assessment 1,344 985 Advertising 930 630 Professional fees 2,173 1,676 Postage and telephone 1,090 981 Taxes, other than income 615 566 Foreclosed real estate 54 129 Amortization of intangible assets 69 85 Other 7,763 6,455 Total $ 48,625 $ 43,497 INCOME TAXES Income tax benefit for the year ended December 31, 2024 totaled $98,000, which resulted in an effective tax rate of 38.0%, compared to an income tax expense of $4,387,000 and 20.7% for 2023.
Personal lending includes mortgage lending to finance principal residences and, to a lesser extent, second home dwellings.
The Bank’s loan products include loans for personal and business use. Personal lending includes mortgage lending to finance principal residences and, to a lesser extent, second home dwellings.
Years Ended December 31, 2023 2022 Average Average Balance Rate Paid Balance Rate Paid (dollars in thousands) Noninterest-bearing demand $ 418,631 — % $ 442,607 — % Interest-bearing demand 228,909 1.13 233,000 0.22 Money Market 237,421 1.37 306,518 0.32 Savings 248,629 0.15 298,933 0.08 Time 610,725 3.25 487,674 0.97 Total $ 1,744,315 $ 1,768,732 As of December 31, 2023 and 2022, the total of uninsured deposits of the Company was $644,486,000 and $629,101,000, respectively.
Years Ended December 31, 2024 2023 Average Average Balance Rate Paid Balance Rate Paid (dollars in thousands) Noninterest-bearing demand $ 393,616 — % $ 418,631 — % Interest-bearing demand 279,231 2.25 228,909 1.13 Money Market 196,875 2.15 237,421 1.37 Savings 220,190 0.32 248,629 0.15 Time 744,895 4.18 610,725 3.25 Total $ 1,834,807 $ 1,744,315 As of December 31, 2024 and 2023, the total of uninsured deposits of the Company was $698,357,000 and $644,486,000, respectively.
Loans Receivable As of December 31, 2023, loans receivable totaled $1.604 billion compared to $1.474 billion as of year-end 2022, an increase of $129.7 million due primarily to a $64.2 million increase in consumer loans. Commercial real estate loans increased $23.6 million, while construction loans increased $19.0 million during the year ended December 31, 2023.
Loans Receivable As of December 31, 2024, loans receivable totaled $1.714 billion compared to $1.604 billion as of year-end 2023, an increase of $110.2 million due primarily to a $43.5 million increase in consumer loans and an increase of $41.7 million in commercial real estate loans. Residential real estate loans increased $14.3 million during the year ended December 31, 2024.
The Company does not have trading securities. Securities classified as HTM are those in which the Company has the ability and the intent to hold the security until contractual maturity. As of December 31, 2023, there were no securities carried in the HTM portfolio.
Securities classified as HTM are those in which the Company has the ability and the intent to hold the security until contractual maturity. As of December 31, 2024, there were no securities carried in the HTM portfolio. Securities classified as AFS are eligible to be sold due to liquidity needs or interest rate risk management.
When loans are placed on non-accrual, unpaid interest credited to income in the current year is reversed and unpaid interest accrued in prior years is charged against the allowance for loan losses. As of December 31, 2023, non-performing loans totaled $7,622,000 and represented 0.48% of total loans compared to $1,113,000 or 0.08% as of December 31, 2022.
When loans are placed on non-accrual, unpaid interest credited to income in the current year is reversed and unpaid interest accrued in prior years is charged against the allowance for loan losses.
As of December 31, 2023, the Company had $51.5 million of construction loans, which represented 3.2% of total loans outstanding and 23.5% of regulatory capital requirements. 15 The following table sets forth information with respect to the Bank’s allowance for credit losses as of December 31, 2023 and 2022: As of December 31, 2023 2022 (dollars in thousands) Total loans receivable, net of deferred fees $ 1,603,618 $ 1,473,945 Allowance balance at beginning of period $ 16,999 $ 16,442 Net (charge-offs) recoveries: Real Estate-Residential (28) (42) Real Estate-Commercial (139) 62 Real Estate-Agricultural — — Real Estate-Construction — — Commercial loans (4,932) 30 Other agricultural loans — — Consumer (979) (393) Total (6,078) (343) Impact of Adopting ASC 326 2,466 — Provision Expense 5,581 900 Allowance balance at end of period $ 18,968 $ 16,999 Average loans receivable: Real Estate-Residential $ 306,404 $ 286,545 Real Estate-Commercial 692,681 635,207 Real Estate-Agricultural 67,367 65,937 Real Estate-Construction 38,017 24,472 Commercial loans 197,598 185,687 Other agricultural loans 33,859 36,352 Consumer 229,739 166,803 Total average loans outstanding $ 1,565,665 $ 1,401,003 Net (charge-offs) recoveries as a percent of average loans outstanding Real Estate-Residential (0.01) % (0.01) % Real Estate-Commercial (0.02) 0.01 Real Estate-Agricultural - - Real Estate-Construction - - Commercial loans (2.50) 0.02 Other agricultural loans - - Consumer (0.43) (0.24) Total net charge-offs (0.39) % (0.02) % Credit Quality Ratios: As a percent of year-end loans, net of unearned income: Allowance for credit losses 1.18% 1.15% Nonaccrual loans 0.48% 0.08% Nonperforming loans 0.48% 0.08% Allowance for credit losses to nonaccrual loans 248.86% 1527.31% Allowance for credit losses to nonperforming loans 248.86% 1527.31% 16 During the twelve month period ended December 31, 2023, the Bank recognized a charge-off in the amount of $4,806,000 on one commercial credit relationship resulting from the borrower’s inability to make scheduled contractual payments.
The Company recognized charge offs of $6,000 on commercial rentals and $44,000 on residential rentals in 2023. 17 The following table sets forth information with respect to the Bank’s allowance for credit losses as of December 31, 2024 and 2023: As of December 31, 2024 2023 (dollars in thousands) Total loans receivable, net of deferred fees $ 1,713,638 $ 1,603,618 Allowance balance at beginning of period $ 18,968 $ 16,999 Net (charge-offs) recoveries: Real Estate-Residential 41 (28) Real Estate-Commercial 110 (139) Real Estate-Agricultural — — Real Estate-Construction — — Commercial loans (100) (4,932) Other agricultural loans — — Consumer (1,722) (979) Total (1,671) (6,078) Impact of Adopting ASC 326 — 2,466 Provision Expense 2,546 5,581 Allowance balance at end of period $ 19,843 $ 18,968 Average loans receivable: Real Estate-Residential $ 319,984 $ 306,404 Real Estate-Commercial 691,673 692,681 Real Estate-Agricultural 62,802 67,367 Real Estate-Construction 49,542 38,017 Commercial loans 204,876 197,598 Other agricultural loans 30,988 33,859 Consumer 286,263 229,739 Total average loans outstanding $ 1,646,128 $ 1,565,665 Net (charge-offs) recoveries as a percent of average loans outstanding Real Estate-Residential 0.01 % (0.01) % Real Estate-Commercial 0.02 (0.02) Real Estate-Agricultural - - Real Estate-Construction - - Commercial loans (0.05) (2.50) Other agricultural loans - - Consumer (0.60) (0.43) Total net charge-offs (0.10) % (0.39) % Credit Quality Ratios: As a percent of year-end loans, net of unearned income: Allowance for credit losses 1.16% 1.18% Nonaccrual loans 0.45% 0.48% Nonperforming loans 0.46% 0.48% Allowance for credit losses to nonaccrual loans 257.03% 248.86% Allowance for credit losses to nonperforming loans 252.01% 248.86% 18 During the twelve month period ended December 31, 2024, the Bank recognized charge-offs in the amount of $1,671,000 compared to the $6,078,000 of net charge-offs reported for the twelve months ended December 31, 2023.
Net interest income (fte) totaled $62,816,000 for the year ended December 31, 2023 compared to $69,164,000 for 2022, an decrease of $6,348,000. The resulting fte net interest spread and net interest margin were 2.47% and 3.06%, respectively, in 2023 compared to 3.38% and 3.53%, respectively, in 2022.
The resulting fte net interest spread and net interest margin were 2.17% and 2.91%, respectively, in 2024 compared to 2.47% and 3.06%, respectively, in 2023. Interest income (fte) for the year ended December 31, 2024 totaled $113,399,000 compared to $96,289,000 in 2023.
The following table indicates the amount of time deposits that are uninsured by time remaining until maturity as of December 31, 2023: Amount (in thousands) Three months or less $ 91,837 Over 3 through 6 months 73,208 Over 6 months through 12 months 76,793 Over 12 months 27,661 $ 269,499 Total deposits as of December 31, 2023, were $1.795 billion, an increase of $67.4 million from December 31, 2022.
The following table indicates the amount of time deposits that are uninsured by time remaining until maturity as of December 31, 2024: Amount (in thousands) Three months or less $ 63,145 Over 3 through 6 months 115,304 Over 6 months through 12 months 84,683 Over 12 months 9,836 $ 272,968 Total deposits as of December 31, 2024, were $1.859 billion, an increase of $64.0 million from December 31, 2023.
Additionally, two properties with a carrying value of $387,000 were transferred to foreclosed real estate owned in 2023. Securities The securities portfolio consists of U.S. Treasury securities, U.S. Government agencies, mortgage-backed securities issued by government sponsored entities and municipal obligations. The Company classifies its investments into two categories: held to maturity (HTM) and available for sale (AFS).
Treasury securities, U.S. Government agencies, mortgage-backed securities issued by government sponsored entities and municipal obligations. The Company classifies its investments into two categories: held to maturity (HTM) and available for sale (AFS). The Company does not have trading securities.
Tax-equivalent interest income and net interest income are derived from GAAP interest income and net interest income using a marginal tax rate of 21%.
NON-GAAP FINANCIAL MEASURES This Annual Report contains or references fully taxable-equivalent interest income and net interest income, which are non-GAAP financial measures. Tax-equivalent interest income and net interest income are derived from GAAP interest income and net interest income using a marginal tax rate of 21%.
The Company makes provisions for, or releases of, credit losses in an amount necessary to maintain the allowance for credit losses at an acceptable level under the current expected credit loss methodology analysis. OTHER INCOME Total other income was $8,124,000 for the year ended December 31, 2023, compared to $9,932,000 in 2022, a decrease of $1,808,000.
The Company makes provisions for, or releases of, credit losses in an amount necessary to maintain the allowance for credit losses at an acceptable level under the current expected credit loss methodology analysis.
For the year ended December 31, 2023, fully taxable equivalent (“fte”) net interest income totaled $62,816,000, a decrease of $6,348,000 from the year ended December 31, 2022 total. Average loans outstanding increased $164.7 million in 2023, which contributed to an increase in interest income (fte) of $19.2 million. During the year ended December 31, 2023, average interest-bearing deposits decreased $441,000.
For the year ended December 31, 2024, fully taxable equivalent (“fte”) net interest income totaled $63,010,000, an increase of $194,000 from the year ended December 31, 2023 total. Average loans outstanding increased $80.5 million in 2024, which contributed to an increase in interest income (fte) of $14.3 million.
DEPOSITS The Bank provides a full range of deposit products to its retail and business customers. These include interest-bearing and noninterest bearing transaction accounts, statement savings and money market accounts. Certificate of deposit terms range up to five years for retail instruments.
These include interest-bearing and noninterest bearing transaction accounts, statement savings and money market accounts. Certificate of deposit terms range up to five years for retail instruments. As of December 31, 2024, the Bank did not have any brokered deposits obtained through internet listing services.
As of December 31, 2023 the Company had a leverage capital ratio of 9.00%, a Tier 1 risk-based capital ratio and a common equity Tier 1 risk-based capital ratio of 11.99%, and a total risk-based capital ratio of 13.06%, compared to 9.36%, 12.49% and 13.58%, respectively, at December 31, 2022. 22 NON-GAAP FINANCIAL MEASURES This Annual Report contains or references fully taxable-equivalent interest income and net interest income, which are non-GAAP financial measures.
As of December 31, 2024 the Company had a leverage capital ratio of 9.36%, a Tier 1 risk-based capital ratio and a common equity Tier 1 risk-based capital ratio of 12.35%, and a total risk-based capital ratio of 13.45%, compared to 9.00%, 11.99% and 13.06%, respectively, at December 31, 2023.
As of December 31, 2023 and 2022, the Company considered its concentration of credit risk to be acceptable. As of December 31, 2023, the highest concentrations are in commercial rentals and the residential rentals category, with loans outstanding of $149.2 million, or 9.3% of loans outstanding, to commercial rentals, and $115.2 million, or 7.2% of loans outstanding, to residential rentals.
As of December 31, 2024, the highest concentrations are in commercial rentals and the residential rentals category, with loans outstanding of $156.2 million, or 9.1% of loans outstanding, to commercial rentals, and $114.7 million, or 6.7% of loans outstanding, to residential rentals.
The following table sets forth the allocation of the Bank’s allowance for credit losses by loan category and the percent of loans in each category to total loans at the date indicated. The allocation is made for analytical purposes and is not necessarily indicative of the categories in which credit losses may occur.
The allocation is made for analytical purposes and is not necessarily indicative of the categories in which credit losses may occur. The total allowance is available to absorb losses from any type of loan.
The increase in cost was due primarily to time certificates of deposit that repriced to current market rates upon maturity, resulting in an increase in the interest rate paid from 0.97% in 2022 to 3.25% in 2023. Borrowing costs also increased in 2023, reflecting the higher market interest rate environment.
The increase in cost was due primarily to time certificates of deposit that repriced to current market rates upon maturity, resulting in an increase in the interest rate paid from 3.25% in 2023 to 4.18% in 2024, along with an increase in the interest-bearing demand and money market from 1.25% in 2023 to 2.21% in 2024.
The tax-equivalent yield on total loans was 5.46% in 2023, increasing from 4.73% in 2022, while average loans outstanding increased $164.7 million, resulting in an increase in interest income (fte) from loans of $19.2 million.
The fte yield on average earning assets was 5.24%, increasing 56 basis points from the 4.68% reported last year. The tax-equivalent yield on total loans was 6.06% in 2024, increasing from 5.46% in 2023, while average loans outstanding increased $80.5 million, resulting in an increase in interest income (fte) from loans of $14.3 million.
For the year ended December 31, 2023, the Company recognized charge offs of $6,000 on commercial rentals and $44,000 on residential rentals. There were no charge-offs on loans within these concentrations in 2022.
For the year ended December 31, 2024, the Company recognized charge offs of $0 on commercial rentals and $0 on residential rentals.
During the year ended December 31, 2023, however, total interest expense increased $19.6 million due increased market interest rates. The cost of borrowed funds increased $6.6 million in 2023, compared to the prior year due to an increase in borrowings, and higher market interest rates.
During the year ended December 31, 2024, average interest-bearing deposits increased $115.5 million, which contributed to an increase in interest expense of $16.3 million. The cost of borrowed funds increased $611,000 in 2024, compared to the prior year due to an increase in borrowings.
Municipal lending includes both general obligations of local taxing authorities and revenue obligations of specific revenue producing projects such as sewer authorities and educational units. At December 31, 2023, the Bank had approximately $149.2 million in loans on commercial rentals, as well as $115.2 million of loans outstanding on residential rentals, which are its largest lending concentrations.
Also included in commercial loans are municipal finance lending in which the Bank has been active in recent years. Municipal lending includes both general obligations of local taxing authorities and revenue obligations of specific revenue producing projects such as sewer authorities and educational units.
Commercial loans and commercial mortgages are provided to local small and mid-sized businesses at a variety of terms and rate structures. Commercial lending activities include lines of credit, revolving credit, term loans, mortgages, various forms of secured lending and a limited amount of letter of credit facilities.
Commercial lending activities include lines of credit, revolving credit, term loans, mortgages, various forms of secured lending and a limited amount of letter of credit facilities. The rate structure may be fixed, immediately repricing tied to the prime rate or adjustable at set intervals.
The effective tax rate in 2023 was 20.7% compared to 19.7% in 2022. 20 The following table sets forth changes in net income (in thousands): Net income 2022 $ 29,233 Net interest income (6,330) Provision for credit losses (4,648) Net gains on sales of loans and securities (152) Net gains on sales of foreclosed real estate (347) Other income (1,309) Salaries and employee benefits (1,494) Occupancy, furniture and equipment (116) Date processing and related operations (394) Advertising (113) FDIC insurance assessment (373) Indirect dealer fees (547) Shares tax expense 447 Other expenses 137 Income tax expense 2,765 Net income 2023 $ 16,759 NET INTEREST INCOME Net interest income is the most significant source of revenue for the Company and represented 88.4% of total revenue for the year ended December 31, 2023.
The following table sets forth changes in net income (loss) (in thousands): Net income 2023 $ 16,759 Net interest income 124 Provision for credit losses 2,875 Net gains on sales of loans and securities (19,621) Net gains on sales of foreclosed real estate (48) Other income 394 Salaries and employee benefits (1,453) Occupancy, furniture and equipment 34 Data processing and related operations (1,178) Advertising (300) FDIC insurance assessment (359) Indirect dealer fees (426) Shares tax expense (49) Other expenses (1,397) Income tax expense 4,485 Net loss 2024 $ (160) 22 NET INTEREST INCOME Net interest income (fte) totaled $63,010,000 for the year ended December 31, 2024 compared to $62,816,000 for 2023, an increase of $194,000.
CAPITAL AND DIVIDENDS Total stockholders’ equity as of December 31, 2023, was $181.1 million, compared to $167.1 million as of December 31, 2022. Earnings retention, net of a $9.5 million reduction resulting from cash dividends declared, contributed to the increase.
CAPITAL AND DIVIDENDS Total stockholders’ equity as of December 31, 2024, was $213.5 million, compared to $181.1 million as of December 31, 2023. The increase in stockholders’ equity was primarily due to the receipt of approximately $28.1 million in net proceeds from the Offering, partially offset by $10.2 million in cash dividends declared.
As of December 31, 2023 2022 % of % of Loans Loans to Total to Total Amount Loans Amount Loans (dollars in thousands) Real estate – residential $ 1,351 7.1 % $ 2,833 20.3 % Real estate – commercial 11,871 62.6 8,293 44.2 Real estate – agricultural 58 0.3 259 4.7 Real estate – construction 933 4.9 409 2.2 Commercial 1,207 6.4 2,445 12.7 Other agricultural loans 94 0.5 124 2.4 Consumer 3,454 18.2 2,636 13.5 Total $ 18,968 100 % $ 16,999 100 % Additional information about the allowance for credit losses at December 31, 2023 is presented under “Item 1.
As of December 31, 2024 2023 Allowance % of % of Allowance % of % of for Credit ACL Loans for Credit ACL Loans Losses on to Total to Total Losses on to Total to Total Loans ACL Loans Loans ACL Loans (dollars in thousands) Real estate – residential $ 1,146 5.8 % 19.3 % $ 1,351 7.1 % 19.7 Real estate – commercial 11,406 57.5 41.8 11,871 62.6 42.1 Real estate – agricultural 48 0.2 3.7 58 0.3 4.0 Real estate – construction 884 4.5 3.1 933 4.9 3.2 Commercial 1,732 8.7 12.4 1,207 6.4 12.5 Other agricultural loans 162 0.8 1.7 94 0.5 2.0 Consumer 4,465 22.5 18.0 3,454 18.2 16.5 Total $ 19,843 100 % 100 % $ 18,968 100 % 100 Non-Performing Assets Non-performing assets consist of non-performing loans and real estate owned as a result of foreclosure, which is held for sale.
This section should be read in conjunction with the consolidated financial statements and related footnotes. Critical Accounting Policies Note 2 to the Company’s consolidated financial statements lists significant accounting policies used in the development and presentation of its financial statements.
Please see “Financial Condition—Securities” below for more information on the repositioning transactions. Critical Accounting Policies Note 2 to the Company’s consolidated financial statements lists significant accounting policies used in the development and presentation of its financial statements.
Time deposits increased $205.3 million during 2023. 19 Time deposits over $250,000, which consist principally of school district funds, other public funds and short-term deposits from large commercial customers with maturities generally less than one year, totaled $241.8 million as of December 31, 2023, compared to $213.6 million at year-end 2022.
As of December 31, 2024, the total of U.S. time deposits in excess of the Federal Deposit Insurance Corporation insurance limits were $272,968,000. Time deposits over $250,000, which consist principally of school district funds, other public funds and short-term deposits from large commercial customers with maturities are generally less than one year.
The Company’s efficiency ratio, which measures total other expenses as a percentage of net interest income (fte) plus other income, was 61.3% in 2023 compared to 51.9% in 2022.
During the year ended December 31, 2024, all other operating expenses increased $2,000,000, net. The Company’s efficiency ratio, which measures total other expenses as a percentage of net interest income (fte) plus other income excluding losses on securities sales was 68.5% in 2024 compared to 62.1% in 2023.
During the year ended December 31 ,2023, other expenses were $43,497,000, compared to $41,044,000 for the same period in 2022, an increase of $2,453,000. Salaries and benefits costs increased $1,494,000 in 2023, while data processing costs increased $394,000. Taxes, other than income decreased $447,000. All other operating expenses increased $1,012,000, net, in 2023.
Salaries and benefits costs increased $1,453,000 in 2024, while data processing costs increased $1,178,000. Professional fees increased $497,000. All other operating expenses increased $2,000,000, net, in 2024. Income tax benefit for the 2024 year totaled $98,000, compared to income tax expense of $4,387,000 from the 2023 year ended.
Increase/(Decrease) (dollars in thousands) 2023 compared to 2022 Variance due to Volume Rate Net INTEREST-EARNING ASSETS: Interest-bearing deposits $ (818) $ 625 $ (193) Securities available for sale: Taxable 125 1,003 1,128 Tax-exempt securities (216) (109) (325) Total securities available for sale (91) 894 803 Loans receivable 8,474 10,772 19,246 Total interest-earning assets 7,565 12,291 19,856 INTEREST-BEARING LIABILITIES Interest-bearing demand and money market (795) 5,113 4,318 Savings (64) 200 136 Time 3,370 11,734 15,104 Total interest-bearing deposits 2,511 17,047 19,558 Short-term borrowings 626 1,898 2,524 Other borrowings 2,702 1,420 4,122 Total interest-bearing liabilities 5,839 20,365 26,204 Net interest income (tax-equivalent basis) $ 1,726 $ (8,074) $ (6,348) Changes in net interest income that could not be specifically identified as either a rate or volume change were allocated proportionately to changes in volume and changes in rate.
Increase/(Decrease) (dollars in thousands) 2024 compared to 2023 Variance due to Volume Rate Net INTEREST-EARNING ASSETS: Interest-bearing deposits $ 2,385 $ (26) $ 2,359 Securities available for sale: Taxable (255) 813 558 Tax-exempt securities (72) — (72) Total securities available for sale (327) 813 486 Loans receivable 4,715 9,550 14,265 Total interest-earning assets 6,773 10,337 17,110 INTEREST-BEARING LIABILITIES Interest-bearing demand and money market 211 4,471 4,682 Savings (81) 414 333 Time 5,051 6,239 11,290 Total interest-bearing deposits 5,181 11,124 16,305 Short-term borrowings (1,164) (521) (1,685) Other borrowings 2,368 (72) 2,296 Total interest-bearing liabilities 6,385 10,531 16,916 Net interest income (tax-equivalent basis) $ 388 $ (194) $ 194 Changes in net interest income that could not be specifically identified as either a rate or volume change were allocated proportionately to changes in volume and changes in rate.
Total other income for the year ended December 31, 2023 was $8,124,000, compared to $9,932,000 in the prior year, a decrease of $1,808,000. During the year ended December 31, 2023, gains on the sale of loans and investment securities decreased $152,000 in the aggregate, while gains on the sale of foreclosed real estate owned decreased $347,000.
Total other income was a loss of $11,151,000 for the year ended December 31, 2024, compared to income of $8,124,000 in the prior year, a decrease of $19,275,000.
Investment securities may also be pledged to secure public deposits and customer repurchase agreements. As of December 31, 2023, the average life of the portfolio was 6.7 years. The Company has maintained a relatively short average life in the portfolio in order to generate cash flow to support loan growth and maintain liquidity levels.
Investment securities may also be pledged to secure public deposits and customer repurchase agreements. As of December 31, 2024, the average life of the portfolio was 7.1 years. Purchases for the year totaled $208.1 million, while maturities and principal reductions totaled $58.7 million and proceeds from sales were $155.4 million.
The Company did not recognize any credit losses on the available-for-sale debt securities for the twelve months ended December 31, 2023, nor did they recognize any other-than- temporary-impairment charges for the twelve months ended December 31, 2022.
The Company did not recognize any credit losses on the available-for-sale debt securities for the twelve months ended December 31, 2024 and 2023. In December 2024, the Company repositioned its available-for-sale debt securities portfolio. The repositioning was accomplished by the sale of debt securities with an amortized cost basis of approximately $175 million and an average yield of 1.98%.
During 2023, gains on the sale of loans and investment securities decreased $152,000 in the aggregate, while all other items of other income decreased $893,000, net, due primarily to $1.1 million of income recognized in 2022 on previously acquired purchased impaired loans that were carried at a discount. 21 Other Income (dollars in thousands) For the year ended December 31 2023 2022 Service charges on deposit accounts $ 428 $ 420 ATM Fees 446 452 Overdraft Fees 1,344 1,155 Safe deposit box rental 92 93 Loan related service fees 706 928 Debit card 2,301 2,495 Fiduciary activities 898 845 Commissions on mutual funds & annuities 296 118 Earnings on and proceeds from bank-owned life insurance 1,012 1,087 Other income 667 1,906 8,190 9,499 Net realized (losses) gains on sales of securities (209) 3 Gains on sales of loans 63 3 Gains on sales of foreclosed real estate owned 80 427 Total $ 8,124 $ 9,932 OTHER EXPENSES Other expenses totaled $43,497,000 for the year ended December 31, 2023, compared to $41,044,000 in the 2022 fiscal year.
Other Income (dollars in thousands) For the year ended December 31 The following table shows total other income: 2024 2023 Service charges and fees $ 5,959 $ 5,613 Income from fiduciary activities 943 898 Net realized (losses) gains on sales of securities (19,962) (209) Net gain on sale of loans 195 63 Net gain on sale of foreclosed real estate owned 32 80 Earnings and proceeds on life insurance policies 1,056 1,012 Other 626 667 Total $ (11,151) $ 8,124 OTHER EXPENSES Other expenses totaled $48,625,000 for the year ended December 31, 2024, compared to $43,497,000 in the 2023 fiscal year.
As a result of this charge-off and transfer to nonperforming loans, the provision for credit losses increased to $5,548,000 for the twelve months ended December 31, 2023, compared to $900,000 for the twelve months ended December 31, 2022.
The provision for credit losses decreased to $2,673,000 for the twelve months ended December 31, 2024, compared to $5,548,000 for the twelve months ended December 31, 2023. The following table sets forth the allocation of the Bank’s allowance for credit losses by loan category and the percent of loans in each category to total loans at the date indicated.
The decrease in net income for the year ended December 31, 2023, is primarily attributable to a $4,648,000 increase in the provision for credit losses, a $1,808,000 decrease in other income, and a $2,453,000 increase in other expenses.
PROVISION FOR CREDIT LOSSES The provision for credit losses was $2,673,000 in 2024 compared to $5,548,000 in 2023. Net charge-offs for the year ended December 31, 2024 decreased to $1,671,000 from net charge-offs of $6,078,000 for the year ended December 31, 2023.
FINANCIAL CONDITION Total Assets Total assets as of December 31, 2023 were $2.201 billion compared to $2.047 billion as of year-end 2022, an increase of $154.0 million. The increase in assets was primarily attributable to a $129.7 million increase in loans receivable.
The increase in total assets was primarily attributable to a $109.1 million increase in loans receivable.
Salaries and employee benefits costs increased $1,494,000 in 2023, while data processing costs increased $394,000. FDIC insurance assessments increased $373,000. During the year ended December 31, 2023, all other operating expenses increased $192,000, net.
For the year ended December 31, 2024, salaries and employee benefits increased $1,453,000 to $25,018,000, while data processing costs increased $1,178,000 million to $4,520,000, as compared to the year ended December 31, 2023. Professional fees increased 23 $497,000 to $2,173,000 during the year ended December 31, 2024, compared to $1,676,000 for the year ended December 31, 2023.
Removed
The deferred income taxes reflect temporary differences in the recognition of the revenue and expenses for tax reporting and financial statement purposes, principally because certain items are recognized in different periods for financial reporting and tax return purposes. Although realization is not assured, the Company believes it is more likely than not that all deferred tax assets will be realized.
Added
This section should be read in conjunction with the consolidated financial statements and related footnotes. RECENT TRANSACTIONS During the year ended December 31, 2024, the Company’s financial condition and results of operations were significantly impacted by two transactions.
Removed
The fair value of financial instruments is based upon quoted market prices, when available. For those instances where a quoted price is not available, fair values are based upon observable market based parameters, as well as unobservable parameters. Any such valuation is applied consistently over time. The Bank’s loan products include loans for personal and business use.
Added
On December 23, 2024, the Company completed the underwritten public offering and sale of 1,150,000 shares of its common stock at $26.00 per share, resulting in net proceeds to the Company of approximately $28 million (the “Offering”).
Removed
The rate structure may be fixed, immediately repricing tied to the prime rate 12 or adjustable at set intervals. Also included in commercial loans are municipal finance lending in which the Bank has been active in recent years.
Added
Immediately subsequent to the Offering, the Company utilized a portion of the net proceeds from the Offering to reposition a substantial portion of the Company’s available-for-sale debt securities portfolio. The Company undertook the repositioning transactions with the objective of increasing the profitability of its investment portfolio, improving liquidity, strengthening its capital position and supporting future growth.
Removed
One Year After One to After Five Years After or Less Five Years Through 15 years 15 years Total (dollars in thousands) Real Estate: Residential $ 42,432 $ 118,830 $ 115,031 $ 40,253 $ 316,546 Commercial 70,547 179,159 340,895 84,555 675,156 Agricultural 4,309 16,808 31,868 10,874 63,859 Construction 2,602 7,253 22,160 19,438 51,453 Commercial loans 85,865 85,367 24,849 4,495 200,576 Other agricultural loans 11,803 16,597 3,290 276 31,966 Consumer loans 99,549 151,510 12,470 792 264,321 Total $ 317,107 $ 575,524 $ 550,563 $ 160,683 $ 1,603,877 Loans with fixed rates $ 34,440 $ 181,822 $ 394,898 $ 232,780 $ 843,940 Loans with floating rates 219,481 490,418 50,038 - 759,937 Total $ 253,921 $ 672,240 $ 444,936 $ 232,780 $ 1,603,877 14 allowance for CREDIT Losses The allowance for credit losses totaled $18,968,000 as of December 31, 2023, and represented 1.18% of total loans receivable compared to $16,999,000 and 1.15% of total loans as of year-end 2022.
Added
Goodwill is tested annually and deemed impaired when the carrying value of goodwill exceeds its implied fair value. 12 OVERVIEW The following table provides an overview of selected financial data: For the years ended December 31, 2024 2023 2022 Net interest income $62,191 $62,067 $68,397 Provision for credit losses 2,673 5,548 900 Other income before (losses) gains on sales of loans and investments 8,616 8,270 9,926 Net realized (losses) gains on sales of loans and securities (19,767) (146) 6 Other expenses 48,625 43,497 41,044 (Loss) Income before income taxes (258) 21,146 36,385 Income tax (benefit) expense (98) 4,387 7,152 NET (LOSS) INCOME (160) 16,759 29,233 Net (loss) income per share-Basic ($0.02) $2.08 $3.59 -Diluted ($0.02) $2.07 $3.58 Cash dividends paid 9,719 9,417 9,159 Dividend pay-out ratio -6074.38% 56.19% 31.33% Return on average assets -0.01% 0.79% 1.43% Return on average equity -0.09% 9.67% 16.11% BALANCES AT YEAR-END Total assets 2,317,462 2,201,079 2,047,070 Loans receivable 1,713,638 1,603,618 1,473,945 Allowance for credit losses 19,843 18,968 16,999 Total deposits 1,859,163 1,795,159 1,727,727 Stockholders’ equity 213,508 181,070 167,085 Trust assets under management 205,097 192,374 184,855 Book value per share $23.02 $22.33 $20.86 Tier 1 Capital to risk-adjusted assets 12.35% 11.99% 12.49% Total Capital to risk-adjusted assets 13.45% 13.06% 13.58% Allowance for credit losses to total loans 1.16% 1.18% 1.15% Non-performing assets to total assets 0.34% 0.35% 0.07% FINANCIAL CONDITION Total Assets Total assets as of December 31, 2024 were $2.317 billion compared to $2.201 billion as of year-end 2023, an increase of $116.4 million.
Removed
This isolated event contributed to an increase in net charge-offs for the twelve months ended December 31, 2023 to $6,078,000 from the $343,000 of net charge-offs reported for the twelve months ended December 31, 2022. As of December 31, 2023, the remaining carrying value of the credit was $4,150,000, which was classified as a nonaccrual loan.
Added
At December 31, 2024, there were $293.0 million of indirect loans in the consumer loan portfolio. 13 Commercial loans and commercial mortgages are provided to local small and mid-sized businesses at a variety of terms and rate structures.
Removed
The total allowance is available to absorb losses from any type of loan.
Added
At December 31, 2024, the Bank had approximately $156.2 million in loans on commercial rentals, as well as $114.7 million of loans outstanding on residential rentals, which are its largest lending concentrations. The Bank’s construction lending has primarily involved lending for commercial construction projects and for single-family residences.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

10 edited+22 added−12 removed4 unchanged
Biggest changeInterest rate risk is monitored and managed by using financial modeling techniques to measure the impact of changes in interest rates. Net interest income, which is the primary source of the Company’s earnings, is impacted by changes in interest rates and the relationship of different interest rates.
Biggest changeOur primary earnings source is net interest income, which is affected by changes in the level of interest rates, the relationship between rates, the impact of interest rate fluctuations on asset prepayments, the level and composition of deposits and liabilities, and the credit quality of earning assets.
The Company’s primary sources of liquidity include deposit generation, asset maturities, cash flow from payments on loans and 26 securities and access to borrowing from the Federal Reserve Discount Window, the Federal Home Loan Bank and other correspondent banks.
The Company’s primary sources of liquidity include deposit generation, asset maturities, cash flow from payments on loans and securities and access to borrowing from the Federal Reserve Discount Window, the Federal Home Loan Bank and other correspondent banks.
The total available credit under all lines was $199.1 million, which consists of $32.1 million with the Federal Reserve Bank, $150.0 million with the Federal Home Loan Bank of Pittsburgh, $7.0 million with the Atlantic Community Bankers Bank, and $10.0 million with PNC Bank.
The total available credit under all lines was $192.0 million, which consists of $25.0 million with the Federal Reserve Bank, $150.0 million with the Federal Home Loan Bank of Pittsburgh, $7.0 million with the Atlantic Community Bankers Bank, and $10.0 million with PNC Bank.
As of December 31, 2023, the Company had cash and cash equivalents of $66.1 million in the form of cash, due from banks, balances with the Federal Reserve Bank, and short-term deposits with other institutions. In addition, at December 31, 2023, the Company had securities available for sale of $406.3 million, which could be used for liquidity needs.
As of December 31, 2024, the Company had cash and cash equivalents of $72.3 million in the form of cash, due from banks, balances with the Federal Reserve Bank, and short-term deposits with other institutions. In addition, at December 31, 2024, the Company had securities available for sale of $397.8 million, which could be used for liquidity needs.
As of December 31, 2023, the Company had $30.0 million of term borrowings from the Federal Reserve Bank under the Bank Term Funding Program, and $114.2 million in borrowings from the FHLB, compared to $0 and $40.0 million, respectively, at December 31, 2022.
As of December 31, 2024, the Company had $20.0 million of term borrowings from the Federal Reserve Bank under the Bank Term Funding Program, and $158.5 million in borrowings from the FHLB, compared to $30.0 and $114.2 million, respectively, at December 31, 2023.
This results in the Company having total liquidity at December 31, 2023 of $472.4 million, or 21.5% of total assets as, of December 31, 2023, compared to total liquidity of $450.8 million, or 22.0% of total assets as of December 31, 2022. The Company also monitors other liquidity measures for compliance with Company policy guidelines.
This results in the Company having total liquidity at December 31, 2024 of $470.1 million, or 20.3% of total assets as, of December 31, 2024, compared to total liquidity of $472.4 million, or 21.5% of total assets as of December 31, 2023. The Company also monitors other liquidity measures for compliance with Company policy guidelines.
Outstanding Letters of Credit to secure public funds totaled $136.6 million and $92.9 million at December 31, 2023 and 2022, respectively.
Outstanding Letters of Credit to secure public funds totaled $147.0 million and $136.6 million at December 31, 2024 and 2023, respectively. 29
As of December 31, 2023 and December 31, 2022, there was $124.2 million and $42.3 million outstanding respectively. The maximum borrowing capacity from FHLB at December 31, 2023 was $682.4 million.
As of December 31, 2024 and December 31, 2023, there was $178.5 million and $124.2 million outstanding respectively. The maximum borrowing capacity from FHLB at December 31, 2024 was $654.8 million.
The purpose of the study was to estimate the average lives of various deposit types and their pricing sensitivity to movements in market interest rates. INFLATION Substantially all of the Company's assets and liabilities relate to banking activities and are monetary. The consolidated financial statements and related financial data are presented following GAAP.
Furthermore, the sensitivity analysis does not reflect actions that management might take in responding to, or anticipating, changes in interest rates and market conditions. INFLATION Substantially all of the Company's assets and liabilities relate to banking activities and are monetary. The consolidated financial statements and related financial data are presented following GAAP.
Item 7A. Quantitative and Qualitative Disclosure About Market Risk . MARKET RISK Interest rate sensitivity and the repricing characteristics of assets and liabilities are managed by the Asset and Liability Management Committee (ALCO). The principal objective of the ALCO is to maximize net interest income within acceptable levels of risk, which are established by policy.
Item 7A. Quantitative and Qualitative Disclosure About Market Risk . ASSET /LIABILITY MANAGEMENT Management considers interest rate risk to be our most significant market risk. Market risk is the risk of loss from adverse changes in market prices and rates.
Removed
To manage the impact of the rate changes, the balance sheet should be structured so that repricing opportunities exist for both assets and liabilities at approximately the same time intervals. The Company uses net interest simulation to assist in interest rate risk management. The process includes simulating various interest rate environments and their impact on net interest income.
Added
Interest rate risk is the exposure to adverse changes in our net income as a result of changes in interest rates.
Removed
As of December 31, 2023, the level of net interest income at risk in a ± 200 basis points increase was within the Company’s policy limit of a decline less than 10% of net interest income. Imbalances in repricing opportunities at a given point in time reflect interest-sensitivity gaps measured as the difference between rate-sensitive assets and rate-sensitive liabilities.
Added
Our asset and liability management objectives are to maintain a strong, stable net interest margin, to utilize our capital effectively without taking undue risks, to maintain adequate liquidity, and to reduce vulnerability of our operations to changes in interest rates.
Removed
These are static gap measurements that do not take into account any future activity, and as such are principally used as early indicators of potential interest rate exposures over specific intervals. At December 31, 2023, the Bank had a negative 90-day interest sensitivity gap of $43.6 million or 1.98% of total assets.
Added
Our Asset and Liability Committee evaluates periodically, but at least four times a year, the impact of changes in market interest rates on assets and liabilities, net interest margin, capital and liquidity. Risk assessments are governed by policies and limits established by senior management, which are reviewed and approved by the full Board of Directors at least annually.
Removed
A negative gap indicates that the balance sheet has a higher level of rate-sensitive liabilities (RSL) than rate-sensitive assets (RSA) at the specific time interval. This would indicate that in an increasing rate environment, the cost of interest-bearing liabilities would increase faster than the yield on interest-earning assets in the 90-day period.
Added
The economic environment continually presents uncertainties as to future interest rate trends. The Asset and Liability Committee regularly utilizes a model that projects net interest income based on increasing or decreasing interest rates, in order to be better able to respond to changes in interest rates.
Removed
The level of RSA and RSL for an interval is managed by ALCO strategies, including adjusting the average life of the investment portfolio through purchases and sales, pricing of deposit liabilities to attract long or short-term time deposits, utilizing borrowings to fund loan growth, loan pricing to encourage variable-rate products and evaluation of loan sales of long-term, fixed-rate mortgages.
Added
Changes in interest rates affect the value of our interest-earning assets and, in particular, our securities portfolio. Generally, the value of securities fluctuates inversely with changes in interest rates. Increases in interest rates could result in decreases in the market value of interest-earning assets, which could adversely affect our stockholders' equity and results of operations if sold.
Removed
The Company analyzes and measures the time periods in which RSA and RSL will mature or reprice in accordance with their contractual terms and assumptions. Management believes that the assumptions used are reasonable.
Added
We are also subject to reinvestment risk associated with changes in interest rates. Changes in market interest rates also could affect the type (fixed-rate or adjustable-rate) and amount of loans we originate and the average life of loans and securities, which can impact the yields earned on our loans and securities.
Removed
The interest rate sensitivity of assets 25 and liabilities could vary substantially if differing assumptions were used or if actual experience differs from the assumptions used in the analysis. For example, although certain assets and liabilities may have similar maturities or periods to repricing, they may react in differing degrees to changes in market interest rates.
Added
In periods of decreasing interest rates, the average life of loans and securities we hold may be shortened to the extent increased prepayment activity occurs during such periods which, in turn, may result in the investment of funds from such 27 prepayments in lower yielding assets.
Removed
The interest rates on certain types of assets and liabilities may fluctuate in advance of changes in market interest rates, while interest rates on other types may lag behind changes in market rates. Interest rates may change at different rates changing the shape of the yield curve.
Added
Under these circumstances, we are subject to reinvestment risk to the extent that we are unable to reinvest the cash received from such prepayments at rates that are comparable to the rates on existing loans and securities.
Removed
The level of rates on the investment securities may also be affected by the spread relationship between different investments. Further, in the event of a significant change in interest rates, prepayment and early withdrawal levels would likely deviate significantly from those assumed.
Added
Additionally, increases in interest rates may result in decreasing loan prepayments with respect to fixed rate loans (and therefore an increase in the average life of such loans), may result in a decrease in loan demand, and may make it more difficult for borrowers to repay adjustable rate loans.
Removed
Finally, the ability of borrowers to service their adjustable-rate debt may decrease in the event of an interest rate increase. It should be noted that the operating results of the Company are not subject to foreign currency exchange or commodity price risk.
Added
We utilize the results of a detailed and dynamic simulation model to quantify the estimated exposure of net interest income to sustained interest rate changes. Management routinely monitors simulated net interest income sensitivity over a rolling two-year horizon.
Removed
The following table displays interest-sensitivity as of December 31, 2023 (dollars in thousands): 3 Months 3-12 Over Or Less Months 1-3 Years 3 Years Total Federal funds sold and interest-bearing deposits $ 37,587 $ — $ — $ — $ 37,587 Securities 16,099 41,137 65,648 283,375 406,259 Loans Receivable 237,678 257,551 559,921 548,468 1,603,618 Total Rate Sensitive Assets (RSA) $ 291,364 $ 298,688 $ 625,569 $ 831,843 $ 2,047,464 Non-maturity interest-bearing deposits $ 104,379 $ 107,882 $ 286,392 $ 187,852 $ 686,505 Time Deposits 185,991 398,767 116,845 7,506 709,109 Borrowings 44,595 47,784 88,030 17,903 198,312 Total Rate Sensitive Liabilities (RSL) $ 334,965 $ 554,433 $ 491,267 $ 213,261 $ 1,593,926 Interest sensitivity gap $ (43,601) $ (255,745) $ 134,302 $ 618,582 $ 453,538 Cumulative gap (43,601) (299,346) (165,044) 453,538 RSA/RSL-cumulative 86.9 % 66.3 % 88.1 % 128.5 % As of December 31, 2022 Interest sensitivity gap $ (46,676) $ (158,452) $ 27,463 $ 647,143 $ 469,478 Cumulative gap (46,676) (205,128) (177,665) 469,478 RSA/RSL-cumulative 83.1 % 70.3 % 85.0 % 138.5 % Certain interest-bearing deposits with no stated maturity dates are included in the interest-sensitivity table above.
Added
The simulation model captures the impact of changing interest rates on the interest income received and the interest expense paid on all assets and liabilities reflected on our consolidated balance sheet.
Removed
The balances allocated to the respective time periods represent an estimate of the total outstanding balance that has the potential to migrate either through withdrawal or transfer to time deposits, thereby impacting the interest-sensitivity position of the Company. The estimates were derived from a non-maturity deposit study, which was prepared by an independent third party provider.
Added
This sensitivity analysis is compared to the asset and liability policy limits that specify a maximum tolerance level for net interest income exposure over a one-year horizon given 100 through 300-basis point upward and 100 through 200 basis point downward shifts in interest rates. A parallel and pro-rata shift in rates over a twelve-month period is assumed.
Added
In addition to the above scenarios, we consider other non-parallel rate shifts that would also exert pressure on earnings. Since the fourth quarter of 2023 the U.S. Treasury yield curve has transitioned from being inverted to a more normalized positive slope. During the twelve months ended December 31, 2024, the yield on U.S.
Added
Treasury 5-year notes increased 54 basis points from 3.84% to 4.38%, while the yield on 3-month Treasury bills decreased 103 basis points from 5.40% to 4.37%. The 3-month/5-year Treasury spread increased from a negative 156 basis points at December 31, 2023 to a positive 1 basis point at December 31, 2024.
Added
A continued increase in the spread between short-term and long-term rates would be beneficial for the Company’s net interest margin. However, there is no certainty on the direction of interest rates. The Federal Reserve Open Market Committee has indicated that it will take a measured stance toward further lowering short-term rates.
Added
The following table reflects our net interest income sensitivity analysis at December 31,2024 and December 31, 2023 (dollars in thousands): December 31, 2024 Potential Change in Future Net Changes in Interest Interest Income Rates in Basis Points Year 1 Year 2 (Dollars in thousands) $ Change % Change $ Change % Change +300 (6,364) -7.9% (4,164) -4.5% +200 (4,131) -5.1% (2,500) -2.7% +100 (1,963) -2.4% (1,043) -1.1% Static - 0.0% - 0.0% (100) 1,438 1.8% (380) -0.4% (200) 1,441 1.8% (4,472) -4.8% December 31, 2023 Potential Change in Future Net Changes in Interest Interest Income Rates in Basis Points Year 1 Year 2 (Dollars in thousands) $ Change % Change $ Change % Change +300 (4,363) -6.8% (3,847) -5.1% +200 (2,788) -4.4% (2,371) -3.1% +100 (1,310) -2.0% (1,049) -1.4% Static - 0.0% - 0.0% (100) 931 1.5% 169 0.2% (200) 1,166 1.8% (1,420) -1.9% As noted in the table above, a 200-basis point increase in interest rates is projected to decrease net interest income by 5.1% in year 1 and decrease net interest income by 2.7% in year 2.
Added
Our balance sheet sensitivity to such a move in interest rates at December 28 31, 2024 increased as compared to December 31, 2023 (which was a decrease of 4.4% in net interest income over a twelve-month period). This decrease is the result of a higher portion of our liabilities repricing higher.
Added
Overall, our strategy has been to proactively take advantage of the drop in short-term by aggressively lowering deposit costs, ultimately dampening the effect of variable and adjustable-rate loan repricing and additional fixed rate loan refinancing.
Added
Over the intervening year, the effective duration (a measure of price sensitivity to interest rates) of the bond portfolio remained steady at 5.5 years at December 31, 2023 and December 31, 2024. The preceding sensitivity analysis does not represent a Company forecast and should not be relied on as being indicative of expected operating results.
Added
These hypothetical estimates are based on numerous assumptions including, but not limited to, the nature and timing of interest rate levels and yield curve shapes, prepayments on loans and securities, deposit decay rates, pricing decisions on loans and deposits, and reinvestment and replacement of asset and liability cash flows.
Added
While assumptions are developed based on perceived current economic and local market conditions, we cannot make any assurances as to the predictive nature of these assumptions including how customer preferences or competitor influences may change.
Added
Also, as market conditions vary from those assumed in the sensitivity analysis, actual results will also differ due to prepayment and refinancing levels likely deviating from those assumed, the varying impact of interest rate change caps or floors on adjustable rate assets, the potential effect of changing debt service levels on customers with adjustable rate loans, depositor early withdrawals, prepayment penalties and product preference changes and other internal and external variables.

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