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What changed in LINKBANCORP, Inc.'s 10-K — 2023 vs 2024

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

+287 added−260 removedSource: 10-K (2025-03-31) vs 10-K (2024-03-29)

Top changes in LINKBANCORP, Inc.'s 2024 10-K

287 paragraphs added · 260 removed · 218 edited across 8 sections

Item 1. Business

Business — how the company describes what it does

76 edited+12 added−8 removed136 unchanged
Biggest changeApproximately 56.0% of the loan portfolio earns interest at a fixed rate and the remaining approximately 44.0% of the loan portfolio earns interest at a rate that varies or adjusts based on an underlying index at December 31, 2023. 5 The following table sets forth the composition of the Bank’s loan portfolio by type of loan as of December 31, 2023: (In Thousands) December 31, 2023 Percent Agriculture loans $ 65,861 2.94 % Construction loans 178,483 7.96 Commercial & industrial loans 238,343 10.63 Commercial real estate loans Multifamily 180,788 8.07 Owner occupied 501,732 22.39 Non-owner occupied 580,972 25.92 Residential real estate loans First liens 402,433 17.95 Second liens and lines of credit 70,747 3.16 Consumer and other loans 16,756 0.75 Municipal loans 5,244 0.23 2,241,359 100 % Deferred costs 174 Allowance for credit losses (23,767 ) Total $ 2,217,766 Commercial Business (C&I) Lending .
Biggest changeThe following table sets forth the composition of the Bank’s loan portfolio by type of loan held for investment as of December 31, 2024: (In Thousands) December 31, 2024 Percent Agriculture loans $ 67,741 3.00 % Construction loans 152,619 6.77 Commercial & industrial loans 245,833 10.90 Commercial real estate loans Multifamily 211,778 9.39 Owner occupied 477,742 21.19 Non-owner occupied 628,237 27.86 Residential real estate loans First liens 373,469 16.56 Second liens and lines of credit 76,713 3.40 Consumer and other loans 17,086 0.76 Municipal loans 3,886 0.17 2,255,104 100 % Deferred costs 645 Allowance for credit losses (26,435 ) Total $ 2,229,314 Commercial Real Estate Lending .
The Bank's operations are also subject to federal laws applicable to credit transactions, such as the: ▪ Truth-In-Lending Act, governing disclosures of credit terms to consumer borrowers; ▪ Real Estate Settlement Procedures Act, requiring that borrowers for mortgage loans for one-to four-family residential real estate receive various disclosures, including good faith estimates of settlement costs, lender servicing and escrow account practices, and prohibiting certain practices that increase the cost of settlement services; ▪ Home Mortgage Disclosure Act, requiring financial institutions to provide information to enable the public and public officials to determine whether a financial institution is fulfilling its obligation to help meet the housing needs of the community it serves; ▪ Equal Credit Opportunity Act, prohibiting discrimination on the basis of race, creed or other prohibited factors in extending credit; ▪ Fair Credit Reporting Act, governing the use and provision of information to credit reporting agencies; ▪ Fair Debt Collection Act, governing the manner in which consumer debts may be collected by collection agencies; ▪ Truth in Savings Act; and ▪ Rules and regulations of the various federal agencies charged with the responsibility of implementing such federal laws.
The Bank's operations are also subject to federal laws applicable to credit transactions, such as the: ▪ Truth-In-Lending Act, governing disclosures of credit terms to consumer borrowers; ▪ Real Estate Settlement Procedures Act, requiring that borrowers for mortgage loans for one-to four-family residential real estate receive various disclosures, including good faith estimates of settlement costs, lender servicing and escrow account practices, and prohibiting certain practices that increase the cost of settlement services; ▪ Home Mortgage Disclosure Act, requiring financial institutions to provide information to enable the public and public officials to determine whether a financial institution is fulfilling its obligation to help meet the housing needs of the community it serves; ▪ Equal Credit Opportunity Act, prohibiting discrimination on the basis of race, creed or other prohibited factors in extending credit; ▪ Fair Credit Reporting Act, governing the use and provision of information to credit reporting agencies; ▪ Fair Debt Collection Act, governing the manner in which consumer debts may be collected by collection agencies; and ▪ Rules and regulations of the various federal agencies charged with the responsibility of implementing such federal laws.
A company loses emerging growth company status on the earlier of: (i) the last day of the fiscal year of the company during which it had total annual gross revenues of $1.235 billion or more; (ii) the last day of the fiscal year of the issuer following the fifth anniversary of the date of the first sale of common equity securities of the company pursuant to an effective registration statement under the Securities Act of 1933; (iii) the date on which such company has, during the previous three-year period, issued more than $1.0 billion in non-convertible debt; or (iv) the date on which such company is deemed to be a “large accelerated filer” under Securities and Exchange Commission regulations (generally, at least $700 million of voting and non- voting equity held by non-affiliates).
A company loses emerging growth company status on the earlier of: (i) the last day of the fiscal year of the company during which it had total annual gross revenues of $1.235 billion or more; (ii) the last day of the fiscal year of the issuer following the fifth 16 anniversary of the date of the first sale of common equity securities of the company pursuant to an effective registration statement under the Securities Act of 1933; (iii) the date on which such company has, during the previous three-year period, issued more than $1.0 billion in non-convertible debt; or (iv) the date on which such company is deemed to be a “large accelerated filer” under Securities and Exchange Commission regulations (generally, at least $700 million of voting and non- voting equity held by non-affiliates).
The allowance for credit losses is evaluated on a quarterly basis by management, with assistance from a third-party provider and incorporates a discounted cash flow model utilizing Federal Open Market Committee forecasts and is impacted by the size and composition of the loan portfolio, adverse situations that may affect the borrower’s ability to repay, estimated value of any underlying collateral, and prevailing economic conditions.
The allowance for credit losses is evaluated on a quarterly basis by management, with assistance from a third-party provider and primarily incorporates a discounted cash flow model utilizing Federal Open Market Committee forecasts and is impacted by the size and composition of the loan portfolio, adverse situations that may affect the borrower’s ability to repay, estimated value of any underlying collateral, and prevailing economic conditions.
Separate regulatory guidance provides for prior consultation with Federal Reserve staff concerning dividends in certain circumstances such as where the company’s net income for the past four quarters, net of dividends previously paid over that period, is insufficient to fully fund the dividend or the company’s overall rate or earnings retention is inconsistent with the company’s capital needs and overall 15 financial condition.
Separate regulatory guidance provides for prior consultation with Federal Reserve staff concerning dividends in certain circumstances such as where the company’s net income for the past four quarters, net of dividends previously paid over that period, is insufficient to fully fund the dividend or the company’s overall rate or earnings retention is inconsistent with the company’s capital needs and overall financial condition.
Of this amount, $20.3 million was acquired in the Gratz Merger and bear interest at a fixed interest rate of 5.0% per year for five years and then float at an index tied to the Secured Overnight Finance Rate ("SOFR"). The notes have a term of ten years, with a maturity date of October 1, 2030.
Of this amount, $20.1 million was acquired in the Gratz Merger and bear interest at a fixed interest rate of 5.0% per year for five years and then float at an index tied to the Secured Overnight Finance Rate ("SOFR"). The notes have a term of ten years, with a maturity date of October 1, 2030.
In addition, extensions of credit in excess of certain limits must be approved by the Bank’s Board. Extensions of credit to executive officers are subject to additional limits based on the type of extension involved. 12 Standards for Safety and Soundness Federal law requires each federal banking agency to prescribe certain standards for all insured depository institutions.
In addition, extensions of credit in excess of certain limits must be approved by the Bank’s Board. Extensions of credit to executive officers are subject to additional limits based on the type of extension involved. Standards for Safety and Soundness Federal law requires each federal banking agency to prescribe certain standards for all insured depository institutions.
The FDIC has primary federal enforcement responsibility over non-member state banks and has authority to bring actions against the institution and all institution-affiliated parties, including shareholders, and any attorneys, appraisers and accountants who knowingly or recklessly participate in wrongful actions likely to have an adverse effect on the bank.
The FDIC has primary federal enforcement responsibility over non-member state banks and has authority to bring actions against the institution and all institution-affiliated 13 parties, including shareholders, and any attorneys, appraisers and accountants who knowingly or recklessly participate in wrongful actions likely to have an adverse effect on the bank.
In addition, the Director’s Loan Committee (DLC) has authority to approve loans over $15 million up to the legal lending limit of the Bank (with the exception of Regulation O (insider) loans which need to be approved by the Board of Directors). The loan approval structure prohibits any single signature loan authority.
In addition, the Directors Loan Committee (DLC) has authority to approve loans over $15 million up to the legal lending limit of the Bank (with the exception of Regulation O (insider) loans which need to be approved by the Board of Directors). The loan approval structure prohibits any single signature loan authority.
As one example of these efforts, in 2019 we launched and continue to support The LINK Foundation, established as a separate legal entity and governed by a distinct board of directors, but fully aligned with the 4 Company’s mission.
As one example of these efforts, in 2019 we launched and continue to support The LINK Foundation, established as a separate legal entity and governed by a distinct board of directors, but fully aligned with the Company’s mission.
Based on the nature of the borrower and the related size of the loan, we may choose to retain these loans as part of our loan portfolio or sell these loans to the secondary market, which could include sales to the Federal Home Loan Bank of Pittsburgh.
Based on the nature of the borrower and the related size of the loan, we may choose to retain these loans as part of our loan portfolio or sell these loans to the secondary market, which could include sales to the Federal Home Loan Bank of Pittsburgh ("FHLB").
In addition, federal regulations prohibit a state-chartered bank from lending to any of its affiliates that are engaged in activities that are not permissible for bank holding companies and from purchasing the securities of any affiliate, other than a subsidiary.
In addition, federal regulations prohibit a state-chartered bank from lending to any of its affiliates that are engaged in activities that are not permissible for bank holding companies and from purchasing the securities of any affiliate, other than a 12 subsidiary.
Lending Activities Our principal lending activity has been the origination of commercial real estate loans, commercial business loans, and to a lesser extent, commercial real estate construction and land development loans, residential real estate loans, home equity loans, consumer loans and agriculture loans.
Lending Activities Our principal lending activity has been the origination of commercial real estate loans, commercial business loans, and to a lesser extent, commercial real estate construction and land development loans, residential real estate loans, home equity loans, consumer 5 loans and agriculture loans.
At December 31, 2023, the Bank exceeded all regulatory capital requirements and was considered to be well-capitalized based on FDIC guidelines. Loans-to-One Borrower Generally, a Pennsylvania-chartered commercial bank may not make a loan or extend credit to a single or related group of borrowers in excess of 15% of capital.
At December 31, 2024, the Bank exceeded all regulatory capital requirements and was considered to be well-capitalized based on FDIC guidelines. Loans-to-One Borrower Generally, a Pennsylvania-chartered commercial bank may not make a loan or extend credit to a single or related group of borrowers in excess of 15% of capital.
An additional amount may be loaned, equal to 10% of unimpaired capital and surplus, if the loan is secured by readily marketable collateral, which generally does not include real estate. As of December 31, 2023, the Bank was in compliance with the loans-to-one borrower limitations.
An additional amount may be loaned, equal to 10% of unimpaired capital and surplus, if the loan is secured by readily marketable collateral, which generally does not include real estate. As of December 31, 2024, the Bank was in compliance with the loans-to-one borrower limitations.
The Company has policies, procedures and systems designed to comply with these 16 regulations, and will review and document such policies, procedures and systems to ensure continued compliance with these regulations. 17
The Company has policies, procedures and systems designed to comply with these regulations, and will review and document such policies, procedures and systems to ensure continued compliance with these regulations. 17
Such institutions that meet the community bank leverage ratio and certain other qualifying criteria will automatically be deemed to be well-capitalized. Eligible institutions may opt 11 into and out of the community bank ratio framework on their quarterly call report. The Bank did not elect to follow the community bank leverage ratio as of December 31, 2023.
Such institutions that meet the community bank leverage ratio and certain other qualifying criteria will automatically be deemed to be well-capitalized. Eligible institutions may opt into and out of the community bank ratio 11 framework on their quarterly call report. The Bank did not elect to follow the community bank leverage ratio as of December 31, 2024.
Dual signatures are in effect up to $7.5 million. The Chief Executive Officer and Chief Credit Officer have been given dual signature authority up to $15 million in situations where timing is essential. These approvals must be ratified by OLC at the next meeting. Ongoing Credit Risk Management.
Dual signatures are in effect up to $7.5 million. The Chief Executive Officer and Chief Credit Officer have been given dual signature authority up to $15 million in situations where timing is essential. These approvals must be ratified by SLC at the next meeting. Ongoing Credit Risk Management.
At December 31, 2023, the Company had a portfolio of investment securities available for sale which is reported at fair value and a portfolio of held to maturity investment securities that were carried at amortized cost. Source of Funds Generally, deposits are the Company’s primary source of funds for use in lending and investment activities.
At December 31, 2024, the Company had a portfolio of investment securities available for sale which is reported at fair value and a portfolio of held to maturity investment securities that were carried at amortized cost. Source of Funds Generally, deposits are the Company’s primary source of funds for use in lending and investment activities.
The Bank has established the Senior Loan Committee (SLC) to be able to more efficiently service our commercial customers, prudently manage credit risks, and effectively insure that credit policies are followed. The SLC requires a quorum of the Chief Executive Officer, President, Chief Credit Officer, Senior Credit Officer, and Market Chief Executive Officers.
The Bank has established the Senior Loan Committee (SLC) to be able to more efficiently service our commercial customers, prudently manage credit risks, and effectively insure that credit policies are followed. The SLC requires a quorum of the Chief Executive Officer, Holding Company President, Bank President, Chief Credit Officer, Senior Credit Officers, and Market Chief Executive Officers.
At December 31, 2023, the Bank met the criteria for being considered “well capitalized.” Enforcement The PADOBS maintains enforcement authority over the Bank, including the power to issue cease and desist orders and civil money penalties and to remove directors, officers or employees.
At December 31, 2024, the Bank met the criteria for being considered “well capitalized.” Enforcement The PADOBS maintains enforcement authority over the Bank, including the power to issue cease and desist orders and civil money penalties and to remove directors, officers or employees.
The notes are redeemable at the option of the Company, in whole or in part, subject to any required regulatory approvals after five years. Subordinated notes with carrying value of $21.1 million were assumed in the Partners Merger within two tranches of debt issuances.
The notes are redeemable at the option of the Company, in whole or in part, subject to any required regulatory approvals after five years or October 1, 2025. Subordinated notes with carrying value of $21.9 million were assumed in the Partners Merger within two tranches of debt issuances.
As a member of the FHLB of Pittsburgh, the Bank is required to acquire and hold shares of capital stock in the FHLB. As of December 31, 2023, the Bank was in compliance with this requirement. The Bank also is able to borrow from the FHLB of Pittsburgh, which provides an additional source of liquidity for the Bank.
As a member of the FHLB of Pittsburgh, the Bank is required to acquire and hold shares of capital stock in the FHLB. As of December 31, 2024, the Bank was in compliance with this requirement. The Bank is able to borrow from the FHLB of Pittsburgh, which provides an additional source of liquidity for the Bank.
Assessments for most insured depository institutions are now based on financial measures and supervisory ratings derived from statistical modeling estimating the probability of failure within three years. The assessment range (inclusive of possible adjustments) is for institutions of the Bank’s size 3.5 basis points to 32 basis points as of December 31, 2023.
Assessments for most insured depository institutions are now based on financial measures and supervisory ratings derived from statistical modeling estimating the probability of failure within three years. The assessment range (inclusive of possible adjustments) is for institutions of the Bank’s size 2.5 basis points to 32 basis points as of December 31, 2024.
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.
Acquisition of Control of the Company Under the Change in Bank Control Act, no person may acquire control of a bank holding company such as the Company unless the Federal Reserve has prior written notice and has not issued a notice disapproving the proposed acquisition.
Acquisition of Control of the Company Under the Change in Bank Control Act, no person or group of persons may acquire control of a bank holding company such as the Company unless the Federal Reserve has prior written notice and has not issued a notice disapproving the proposed acquisition.
The notes are redeemable at the option of the Company, in whole or in part, subject to any required regulatory approvals after five years. Competition Commercial banking in our locations is extremely competitive.
The notes are redeemable at the option of the Company, in whole or in part, subject to any required regulatory approvals after five years, or April 15, 2027. Competition Commercial banking in our locations is extremely competitive.
The Bank has ten solutions centers in Chester, Cumberland, Dauphin, Lancaster, Northumberland and Schuylkill counties in Pennsylvania, and loan production offices in Chester and York Counties in Pennsylvania, eight solutions centers in Wicomico, Charles, Anne Arundel, and Worcester counties in Maryland and a loan production office in Anne Arundel county in Maryland, four solutions centers and a loan production office in Sussex county in Delaware, three solutions centers in Camden and Burlington counties in New Jersey, one solutions center in Spotsylvania county in Virginia, and three solutions centers in the cities of Fredericksburg and Reston, Virginia.
The Bank has eight solutions centers in Chester, Cumberland, Dauphin, Lancaster, Northumberland and Schuylkill counties in Pennsylvania, and loan production offices in Chester and York Counties in Pennsylvania, eight solutions centers in Wicomico, Charles, Anne Arundel, and Worcester counties in Maryland, four solutions centers and a loan production office in Sussex county in Delaware, three solutions centers in Camden and Burlington counties in New Jersey, three solutions centers in Spotsylvania and Fairfax counties in Virginia, and one solutions center in the city of Fredericksburg, Virginia.
The operations of the Bank also are subject to the: ▪ Right to Financial Privacy Act, which imposes a duty to maintain confidentiality of consumer financial records and prescribes procedures for complying with administrative subpoenas of financial records; ▪ Electronic Funds Transfer Act and Regulation E promulgated thereunder, which govern automatic deposits to and withdrawals from deposit accounts and customers' rights and liabilities arising from the use of automated teller machines and other electronic banking services; ▪ Check Clearing for the 21st Century Act (also known as "Check 21"), which gives "substitute checks," such as digital check images and copies made from that image, the same legal standing as the original paper check; 14 ▪ USA PATRIOT Act, which requires banks operating to, among other things, establish broadened anti-money laundering compliance programs, due diligence policies and controls to ensure the detection and reporting of money laundering.
The operations of the Bank also are subject to the: 14 ▪ Truth In Savings Act, which requires banks to provide consumers with disclosures about terms and cost of deposit accounts and imposes requirements for deposit account advertisements; ▪ Right to Financial Privacy Act, which imposes a duty to maintain confidentiality of consumer financial records and prescribes procedures for complying with administrative subpoenas of financial records; ▪ Electronic Funds Transfer Act and Regulation E promulgated thereunder, which govern automatic deposits to and withdrawals from deposit accounts and customers' rights and liabilities arising from the use of automated teller machines and other electronic banking services; ▪ Check Clearing for the 21st Century Act (also known as "Check 21"), which gives "substitute checks," such as digital check images and copies made from that image, the same legal standing as the original paper check; ▪ USA PATRIOT Act, which requires banks operating to, among other things, establish broadened anti-money laundering compliance programs, due diligence policies and controls to ensure the detection and reporting of money laundering.
Construction, land and land development loans represented 71.1% of total risk based capital. Management has implemented and continues to maintain heightened risk management procedures and prudent underwriting criteria with respect to its commercial real estate portfolio.
Construction, land and land development loans represented 55.97% of total risk based capital. Management has implemented and continues to maintain heightened risk management procedures and prudent underwriting criteria with respect to its commercial real estate portfolio.
An emerging growth company also is not subject to the requirement that its auditors attest to the effectiveness of the company’s internal control over financial reporting, and can provide scaled disclosure regarding executive compensation; however, the Company will also not be subject to the auditor attestation requirement or additional executive compensation disclosure so long as it remains a “non-accelerated filer” and a “smaller reporting company,” respectively, under Securities and Exchange Commission regulations (generally less than $75 million and $250 million, respectively, of voting and non-voting equity held by non-affiliates or less than $100.0 million in annual revenue).
An emerging growth company also is not subject to the requirement that its auditors attest to the effectiveness of the company’s internal control over financial reporting, and can provide scaled disclosure regarding executive compensation; however, the Company will also not be subject to additional executive compensation disclosure so long as it remains a “smaller reporting company” under Securities and Exchange Commission regulations (generally less than $250 million of voting and non-voting equity held by non-affiliates or less than $100.0 million in annual revenue).
We are committed to increasing our market share in the communities we serve by continuing to leverage available technology, existing branch locations, and new branch locations, and by considering other strategic growth opportunities throughout Central and Southeastern Pennsylvania, the counties of Wicomico, Charles, Anne Arundel, and Worcester counties in Maryland, Sussex county in Delaware, Camden and Burlington counties in New Jersey, Spotsylvania county in Virginia, and the cities of Fredericksburg and Reston, Virginia and surrounding areas.
We are committed to increasing our market share in the communities we serve by continuing to leverage available technology, existing branch locations, and new branch locations, and by considering other strategic growth opportunities throughout Central and Southeastern Pennsylvania, the counties of Wicomico, Charles, Anne Arundel, and Worcester counties in Maryland, Sussex county in Delaware, Spotsylvania and Fairfax counties in Virginia, and the city of Fredericksburg, Virginia and surrounding areas.
This evaluation is inherently subjective as it requires estimates that are susceptible to significant revision as more information becomes available. As of December 31, 2023, the allowance for credit losses measured 1.06% of total loans. Investments The Company’s board of directors is responsible for approving and overseeing the investment policy.
This evaluation is inherently subjective as it requires estimates that are susceptible to significant revision as more information becomes available. As of December 31, 2024, the allowance for credit losses was 1.17% of total loans. Investments The Company’s board of directors is responsible for approving and overseeing the investment policy.
At December 31, 2023, our largest credit relationship totaled $25 million, comprised of nine separate facilities, most of which are secured by real estate. Each of these loans was performing in accordance with its terms at December 31, 2023. Our lending activities follow written, nondiscriminatory underwriting standards and loan origination procedures established by our board of directors and management.
At December 31, 2024, our largest credit relationship totaled $24.1 million, comprised of four separate facilities, most of which are secured by real estate. Each of these loans was performing in accordance with its terms at December 31, 2024. Our lending activities follow written, nondiscriminatory underwriting standards and loan origination procedures established by our board of directors and management.
For example, as of June 30, 2023 (the most recent date for which data is available), data provided by the FDIC Deposit Market Share Report indicated that within the Company's current physical locations, there were 117 different FDIC-insured institutions operating a total of 1,323 offices.
For example, as of June 30, 2024 (the most recent date for which data is available), data provided by the FDIC Deposit Market Share Report indicated that within the Company's current physical locations, there were 112 different FDIC-insured institutions operating a total of 1,307 offices.
Notwithstanding the foregoing, the FDIC finalized a rule, effective January 1, 2020, that established a community bank leverage ratio (tier 1 capital to average consolidated assets) at 9% for institutions under $10 billion in assets that such institutions may elect to utilize in lieu of the general applicable risk-based capital requirements under Basel III.
Notwithstanding the foregoing, the FDIC established the community bank leverage ratio (tier 1 capital to average consolidated assets) at 9% for institutions under $10 billion in assets that such institutions may elect to utilize in lieu of the general applicable risk-based capital requirements under Basel III.
At December 31, 2023, we had $70.7 million of home equity loans reported within residential real estate loans, representing 3.16% of our total loan portfolio. Home equity loans consists of either revolving lines of credit, term, or second mortgage loans secured by one-to-four family residential real estate.
At December 31, 2024, we had $76.7 million of home equity loans reported within residential real estate loans, representing 3.4% of our total loan portfolio. Home equity loans consists of either revolving lines of credit, term, or second mortgage loans secured by one-to-four family residential real estate.
Of these, $129.3 million were for commercial development and land loans and $49.2 million were for residential development. We offer both fixed-rate and adjustable-rate construction and land loans, although most of these loans have fixed interest rates. The maximum loan-to-value of these loans is generally 80% of the lesser of the appraised value or the purchase price of the property.
Of these, $108.8 million were for commercial development and land loans and $43.8 million were for residential development. We offer both fixed-rate and adjustable-rate construction and land loans, although most of these loans have fixed interest rates. The maximum loan-to-value of these loans is generally 80% of the lesser of the appraised value or the purchase price of the property.
Strategy and Recent Growth Our core strategy is to further our mission of “positively impacting lives” through community banking by building strong relationships that bring value to our customers, employees, the communities we serve and our shareholders.
The address of the site is www.sec.gov. 4 Strategy and Recent Growth Our core strategy is to further our mission of “positively impacting lives” through community banking by building strong relationships that bring value to our customers, employees, the communities we serve and our shareholders.
We may also use borrowings, primarily Federal Home Loan Bank of Pittsburgh advances, to supplement cash flow needs, as necessary. In addition, we receive funds from scheduled loan payments, loan prepayments, and income on interest-earning assets.
We may also use borrowings, primarily FHLB advances, to supplement cash flow needs, as necessary. In addition, we receive funds from scheduled loan payments, loan prepayments, and income on interest-earning assets.
The SEC maintains an Internet web site that contains reports, proxy statements, and other information about issuers, like us, who file electronically with the SEC. The address of the site is www.sec.gov.
The SEC maintains an Internet web site that contains reports, proxy statements, and other information about issuers, like us, who file electronically with the SEC.
As of December 31, 2023, the Company had 342 full-time and 36 part time employees. 10 REGULATION AND SUPERVISION LINKBANCORP, is a bank holding company within the meaning of the Bank Holding Company Act of 1956, as amended (the “BHC Act”).
As of December 31, 2024, the Company had 298 full-time and 29 part time employees. 10 REGULATION AND SUPERVISION LINKBANCORP, is a bank holding company within the meaning of the Bank Holding Company Act of 1956, as amended (the “BHC Act”).
The Company, like many community banks, has a concentration in commercial real estate loans, and the Company has experienced growth in its commercial real estate portfolio in recent years, including through the recently completed Partners Merger. At December 31, 2023, non-owner-occupied commercial real estate loans (including construction, land and land development loans) represented 374.5% of total risk based capital.
The Company, like many community banks, has a concentration in commercial real estate loans, and the Company has experienced growth in its commercial real estate portfolio in recent years, including through the Partners Merger. At December 31, 2024, non-owner-occupied commercial real estate loans (including construction, land and land development loans, and multifamily) represented 365.65% of total risk based capital.
Our legal lending limit was $37.2 million at December 31, 2023. In addition, we have established an in-house target that is less than the legal limits on loans to one borrower. Our in-house target was $25 million at December 31, 2023.
Our legal lending limit was $42.4 million at December 31, 2024. In addition, we have established an in-house target that is less than the legal limits on loans to one borrower. Our in-house target was $25.0 million at December 31, 2024.
The Company also uses the investment portfolio to collateralize municipal deposits. The asset liability management committee, which consists of our President and Chief Risk Officer, Chief Executive Officer, Bank President, Chief Financial Officer, Chief Credit Officer, and Treasurer oversees the Company’s investing activities and strategies.
The Company also uses the investment portfolio to collateralize municipal deposits. The asset liability management committee, which consists of our Chief Executive Officer, LINKBANCORP President, LINKBANK President and Executive Vice President of LINKBANCORP, Chief Financial Officer, Chief Credit Officer, Chief Risk Officer, Chief Operations and Technology Officer, Treasurer, and other market leaders oversees the Company’s investing activities and strategies.
We typically originate commercial business loans on the basis of the borrower’s ability to make repayment from the cash flow of the borrower’s business, the experience and stability of the borrower’s management team, earnings projections and the underlying assumptions, and the value and marketability of any collateral securing the loan.
We generally obtain personal guarantees with respect to all commercial business lines of credit. 6 We typically originate commercial business loans on the basis of the borrower’s ability to make repayment from the cash flow of the borrower’s business, the experience and stability of the borrower’s management team, earnings projections and the underlying assumptions, and the value and marketability of any collateral securing the loan.
Emerging Growth Company Status The Jumpstart Our Business Startups Act (the “JOBS Act”), which was enacted in April 2012, has made numerous changes to the federal securities laws to facilitate access to capital markets.
Emerging Growth Company Status The Jumpstart Our Business Startups Act (the “JOBS Act”), made numerous changes to the federal securities laws to facilitate access to capital markets.
In addition to the loan types discussed above, the Company also originates agricultural loans and municipal loans. At December 31, 2023, our agricultural loan portfolio totaled $65.9 million or 2.94% of our total loan portfolio and municipal loans totaled $5.2 million or 0.23% of our total loan portfolio.
In addition to the loan types discussed above, the Company also originates agricultural loans and municipal loans. At December 31, 2024, our agricultural loan portfolio totaled $67.7 million or 3.0% of our total loan portfolio and municipal loans totaled 7 $3.9 million or 0.2% of our total loan portfolio.
Although we maintain a cautious credit outlook due to continued uncertainty in the economic environment, we believe the Bank is very well positioned for the months ahead given a strong loan loss reserve, application of prudent underwriting standards and a diverse loan portfolio, which does not include a significant concentration of loans in office, restaurants, lodging or other industries that are perceived to be at higher risk in the current economic environment. 8 Allowance for Credit Losses.
We strive to identify potential problem loans early in an effort to aggressively seek resolution of these situations before the loans create a loss, record any necessary charge-offs promptly and maintain adequate allowance for credit losses levels. 8 Although we maintain a cautious credit outlook due to continued uncertainty in the economic environment, we believe the Bank is very well positioned for the months ahead given a strong credit loss reserve, application of prudent underwriting standards and a diverse loan portfolio, which does not include a significant concentration of loans in office, restaurants, lodging or other industries that are perceived to be at higher risk in the current economic environment.
Any significant increases would have an adverse effect on the operating expenses and results of operations of the Bank. Management cannot predict what assessment rates will be in the future.
The FDIC has authority to increase insurance assessments and also to issue special assessments. Any significant increases would have an adverse effect on the operating expenses and results of operations of the Bank. Management cannot predict what assessment rates will be in the future.
At December 31, 2023, our consumer loan portfolio totaled $16.8 million, or 0.75% of our total loan portfolio, and $11.0 million of our consumer loans were unsecured (excluding overdraft accounts).
At December 31, 2024, our consumer loan portfolio totaled $17.1 million, or 0.8% of our total loan portfolio, and $6.8 million of our consumer loans were unsecured (excluding overdraft accounts).
Accordingly, as opportunities arise, we will consider growth through acquisition including whole institutions, branches or additional lines of business that are aligned with our strategy and mission, as demonstrated by our merger with Partners completed on November 30, 2023.
The Company’s management team has significant experience in successfully executing bank growth strategies, including through bank mergers and acquisitions. Accordingly, as opportunities arise, we will consider growth through acquisition including whole institutions, branches or additional lines of business that are aligned with our strategy and mission, as demonstrated by our merger with Partners completed on November 30, 2023.
As of December 31, 2023, we had $238.3 million in commercial business loans, representing 10.63% of total loans. Our business strategy is to increase our originations of commercial business loans.
As of December 31, 2024, we had $245.8 million in commercial business loans, representing 10.9% of total loans. Our business strategy is to increase our originations of commercial business loans.
Our commercial real estate and multi-family loans generally have amortization terms of 15 to 25 years and have adjustable interest rates. The adjustable rate loans are typically fixed for the first five years and either adjust annually thereafter or have a balloon payment due at the end of the fixed term.
The adjustable rate loans are typically fixed for the first five years and either adjust annually thereafter or have a balloon payment due at the end of the fixed term. Our commercial real estate and multi-family loans are generally tied to a margin at or above the appropriate three or five year treasury or the Prime Rate.
We require property and casualty insurance and flood insurance if the property is in a flood zone area. In addition, borrowers are required to obtain title insurance unless the balance of the loan is less than $250,000.
We require property and casualty insurance and flood insurance if the property is in a flood zone area. In addition, borrowers are required to obtain title insurance unless the balance of the loan is less than $250,000. In such cases, we will require an ownership and encumbrance report relating to the title of the property. Commercial Business (C&I) Lending .
Our commercial lines of credit are typically adjustable-rate and are generally priced on a floating rate basis utilizing the prime rate. We generally obtain personal guarantees with respect to all commercial business lines of credit.
Our commercial lines of credit are typically adjustable-rate and are generally priced on a floating rate basis utilizing the prime rate.
One-to-four family Residential Real Estate Lending. At December 31, 2023, we had $402.4 million in residential real estate loans, representing 17.95% of total loans.
One-to-four family Residential Real Estate Lending. At December 31, 2024, we had $373.5 million in residential real estate loans, representing 16.6% of total loans.
The agricultural loan portfolio consists of loans to local farmers and agricultural businesses that are generally secured by farmland and equipment.
The agricultural loan portfolio consists of loans to local farmers and agricultural businesses that are generally secured by farmland and equipment. The municipal loan portfolio consists of loans to qualified local municipalities, which are generally supported by the taxing authority of the borrowing municipality, and is frequently secured by collateral.
LINKBANK, a Pennsylvania-chartered, non-Federal Reserve member bank, is subject to regulation and supervision by the Pennsylvania Department of Banking and Securities ("PADOBS") and the Federal Deposit Insurance Corporation ("FDIC"). LINKBANCORP is the Bank’s sole shareholder.
LINKBANCORP common stock is traded on the Nasdaq Capital Market under the trading symbol “LNKB” and is subject to Nasdaq's rules for listed companies. LINKBANK, a Pennsylvania-chartered, non-Federal Reserve member bank, is subject to regulation and supervision by the Pennsylvania Department of Banking and Securities ("PADOBS") and the FDIC. LINKBANCORP is the Bank’s sole shareholder.
Acquisition of more than 10% of any class of a bank holding company’s voting stock constitutes a rebuttable presumption of control under the regulations under certain circumstances.
Acquisition of more than 10% of any class of a bank holding company’s voting stock constitutes a rebuttable presumption of control under the regulations under certain circumstances including where, as is the case with the Company, the issuer has registered securities under Section 12 of the Securities Exchange Act of 1934.
Source of Strength The Federal Reserve has issued regulations requiring that all bank holding companies serve as a source of strength to their subsidiary depository institutions by providing financial, managerial and other support in times of an institution’s distress. Dividends and Stock Repurchases The Federal Reserve has issued a policy statement regarding the payment of dividends by holding companies.
Consequently, bank holding companies such as the Company with less than $3.0 billion of consolidated assets are not subject to the consolidated holding company capital requirements unless otherwise directed by the Federal Reserve. 15 Source of Strength The Federal Reserve has issued regulations requiring that all bank holding companies serve as a source of strength to their subsidiary depository institutions by providing financial, managerial and other support in times of an institution’s distress.
Our commercial real estate and multi-family loans are generally tied to a margin at or above the appropriate three or five year treasury or the Prime Rate. The maximum loan-to-value ratio of our commercial real estate and multifamily loans is generally 80% of the lower of cost or appraised value of the property securing the loan.
The maximum loan-to-value ratio of our commercial real estate and multifamily loans is generally 80% of the lower of cost or appraised value of the property securing the loan. Our commercial real estate loans are typically secured by multi-family, hotel, agricultural, medical, retail, churches or other commercial properties.
In addition, commercial business loans often result in larger outstanding balances to single borrowers, or related groups of borrowers, and also generally require substantially greater evaluation and oversight efforts. Commercial Real Estate Lending . As of December 31, 2023, we had $1.26 billion in commercial real estate and multi-family loans, representing 56.4% of total loans.
In addition, commercial business loans often result in larger outstanding balances to single borrowers, or related groups of borrowers, and also generally require substantially greater evaluation and oversight efforts. Construction and Land Development Lending . At December 31, 2024, $152.6 million, or 6.8% of our total loan portfolio, consisted of construction and land loans.
As of December 31, 2023 we had $10 million in outstanding FHLB advances. At December 31, 2023, we had remaining available capacity with FHLB, subject to certain collateral restrictions, of approximately $305.7 million.
At December 31, 2024, we had remaining available capacity with FHLB, subject to certain collateral restrictions, of approximately $723.8 million. At December 31, 2024, the Company had subordinated notes outstanding with a carrying value of $62.0 million.
The applicability date for the majority of the provisions in the CRA regulations is January 1, 2026, and additional requirements will be applicable on January 1, 2027. The Community Reinvestment Act requires all institutions insured by the FDIC to publicly disclose their rating. The Bank received a “satisfactory” rating in its most recent federal examination.
Ultimately, if and when the injunctive effect of the litigation is lifted, the implementation date will subject to an additional tolling period commensurate with the period the preliminary injunction was in effect. The Community Reinvestment Act requires all institutions insured by the FDIC to publicly disclose their rating. The Bank received a “satisfactory” rating in its most recent federal examination.
LINKBANCORP has no material operations and conducts no business on its own other than owning the Bank. In December 2023, subsidiary GNB Investment Corp. was dissolved. LINKBANCORP common stock is traded on the Nasdaq Capital Market under the trading symbol “LNKB” and is subject to Nasdaq's rules for listed companies.
The Bank anticipates the Transaction will be completed on March 31, 2025. LINKBANCORP has no material operations and conducts no business on its own other than owning the Bank. In December 2023, the GNB Investment Corp. subsidiary was dissolved.
During the year ended December 31, 2023, the Company achieved the following accomplishments: • Completed the merger with Partners as of November 30, 2023; • Total deposits grew from $946.8 million at December 31, 2022 to $2.30 billion at December 31, 2023, resulting in a growth rate of 142.9%; • Total loans grew 141.4% from $927.9 million at December 31, 2022 to $2.24 billion at December 31, 2023; • Maintained strong credit quality, with total nonperforming assets at 0.32% of total assets at December 31, 2023; and • In a year of net interest margin compression throughout the industry, the Company was able to limit compression to 30 basis points year over year.
During the year ended December 31, 2024, the Company achieved the following accomplishments: • Total deposits grew from $2.20 billion at December 31, 2023 to $2.36 billion at December 31, 2024, resulting in a growth rate of 7.36%; • Total loans held for investment grew 5.99% from $2.13 billion at December 31, 2023 to $2.26 billion at December 31, 2024; • Maintained strong credit quality, with total nonperforming assets at 0.60% of total assets at December 31, 2024; and • Net interest margin for the year ended December 31, 2024 was 3.88% compared to 3.09% for the year ended December 31, 2023.
Our commercial real estate loans are typically secured by multi-family, hotel, agricultural, medical, retail, churches or other commercial properties. At December 31, 2023, our commercial real estate loans were 46.0% non-owner occupied, 39.7% owner-occupied, and 14.3% multifamily. We consider a number of factors in originating commercial real estate and multi-family loans.
At December 31, 2024, our commercial real estate loans were 47.67% non-owner occupied, 36.25% owner-occupied, and 16.08% multifamily. We consider a number of factors in originating commercial real estate and multi-family loans.
The municipal loan portfolio consists of loans to qualified local municipalities, which are generally supported by the taxing authority of the borrowing municipality, and is frequently secured by collateral. 7 Lending Concentrations The federal banking regulators have issued guidance for those institutions which are deemed to have concentrations in commercial real estate lending.
Lending Concentrations The federal banking regulators have issued guidance for those institutions which are deemed to have concentrations in commercial real estate lending.
The Bank is predominantly oriented towards commercial customers, with approximately 67.0% of the portfolio in various types of commercial loans and 33.0% in residential real estate, consumer, and other loans at December 31, 2023. Our commercial customers are primarily small- and medium-sized businesses.
The Bank classifies its loan portfolio based on the collateral securing the loan, consistent with the reporting requirements of the Call Report filed with the FDIC. The Bank is predominantly oriented towards commercial customers, with approximately 79.28% of the portfolio in various types of commercial loans and 20.72% in residential real estate, consumer, and other loans at December 31, 2024.
Current Market Area We currently conduct our business principally through ten Customer Solutions Centers in Chester, Cumberland, Dauphin, Lancaster, Northumberland and Schuylkill Counties, Pennsylvania. In 2021 and 2022 respectively, we established loan production offices in York and Chester Counties in Pennsylvania.
Current Market Area We currently conduct our business principally through eight customer solutions centers located in Dauphin, Chester, Cumberland, Lancaster, Northumberland, and Schuylkill Counties, and loan production offices located in Chester and York Counties, in Pennsylvania, eight solutions centers in Wicomico, Charles, Anne Arundel, and Worcester counties in Maryland, four solutions centers and a loan production office in Sussex county in Delaware, three solutions centers in Camden and Burlington counties in New Jersey, three solutions centers in Spotsylvania and Fairfax counties in Virginia, and one solutions center in the city of Fredericksburg, Virginia.
At December 31, 2023, our core deposits (which includes all deposits except for time deposit accounts greater than $250,000 and brokered deposits) totaled $2.04 billion or 88.9% of our total deposits, and our average cost of funds for 2023 on this stable funding source was 1.72%.
At December 31, 2024, our core deposits (which includes all deposits except for time deposit accounts greater than $250,000, brokered deposits, and the deposits currently classified as held for sale) totaled $2.09 billion or 88.62% of our total deposits. At December 31, 2024, we had $103.6 million in brokered deposits, all maturing in the first half of 2025.
Control, as defined under federal law, means ownership, control of or holding irrevocable proxies representing more than 25% of any class of voting stock, control in any manner of the election of a majority of the company’s directors, or a determination by the regulator that the acquirer has the power to direct, or directly or indirectly to exercise a controlling influence over, the management or policies of the institution.
Control, as defined under federal law, means ownership, control of or holding irrevocable proxies representing more than 25% of any class of voting stock.
At December 31, 2023, we had $119.4 million in brokered deposits, all maturing in the first half of 2024. Our reciprocal CDARS and ICS deposits totaled $145.6 million at December 31, 2023. Management utilizes brokered deposits as a supplement to core deposit funding from time to time and does not consider brokered deposits to be a primary source of funding.
Management utilizes brokered deposits as a supplement to core deposit funding from time to time and does not consider brokered deposits to be a primary source of funding. 9 The following table sets forth the distribution of total deposits for the Bank by account type as of December 31, 2024.
Borrowings. We obtain advances from the Federal Home Loan Bank of Pittsburgh upon the security of our capital stock in the Federal Home Loan Bank of Pittsburgh and certain of our loans. Such advances may be made pursuant to several different credit programs, each of which has its own interest rate and range of maturities.
Such advances may be made pursuant to several different credit programs, each of which has its own interest rate and range of maturities. As of December 31, 2024 we had $50.0 million in outstanding FHLB advances, of which $10 million matured in January 2025 and $40 million matures in February 2026.
In addition to these banking activities, the Bank owns a 51% share in Johnson Mortgage Company LLC, which was acquired in the Partners Merger. As of December 31, 2023, the Company had total consolidated assets of approximately $2.67 billion, total loans of approximately $2.24 billion, total deposits of approximately $2.30 billion and total consolidated shareholders’ equity of approximately $265.8 million.
As of December 31, 2024, the Company had total consolidated assets of approximately $2.88 billion, total loans of approximately $2.26 billion, total deposits of approximately $2.36 billion and total consolidated shareholders’ equity of approximately $280.2 million.
Removed
Net interest margin for the year ended December 31, 2023 was 3.09% compared to 3.39% for the year ended December 31, 2022. The Company’s management team has significant experience in successfully executing bank growth strategies, including through bank mergers and acquisitions.
Added
On May 9, 2024, the Bank entered into a purchase and assumption agreement (the “Agreement”) with American Heritage Federal Credit Union (“AHFCU”) pursuant to which AHFCU will purchase certain assets and assume certain liabilities (the “Transaction”) of the New Jersey operations of the Bank, including all three branch locations (including two branch leases).
Removed
As a result of the Partners Merger, we entered the counties of Wicomico, Charles, Anne Arundel, and Worcester counties in Maryland, Sussex county in Delaware, Camden and Burlington counties in New Jersey, Spotsylvania county in Virginia, and the cities of Fredericksburg and Reston, Virginia.
Added
Under the Agreement, AHFCU will acquire substantially all of the loans, three branch locations (along with associated personal property and fixtures) and will assume substantially all of the deposits. The Federal Deposit Insurance Corporation ("FDIC") and the National Credit Union Administration ("NCUA") have approved the Transaction which remains subject to customary closing conditions.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

38 edited+9 added−6 removed183 unchanged
Biggest changeUnlike many larger institutions, the Company is not able to spread the risks of unfavorable local economic conditions across a large number of diversified economies. An economic downturn could, therefore, result in losses that materially and adversely affect the Company’s business. The small- and medium-sized business target market may have fewer financial resources to weather a downturn in the economy.
Biggest changeAn economic downturn could, therefore, result in losses that materially and adversely affect the Company’s business. The small- and medium-sized business target market may have fewer financial resources to weather a downturn in the economy. The Company targets its commercial development and marketing strategy to serve the banking and financial services needs of small- and medium-sized businesses.
The 22 Company’s financial condition and results of operations could be negatively impacted to the extent it relies on financial statements that do not comply with GAAP or are materially misleading. Changes in prevailing interest rates may reduce the Company’s profitability.
The Company’s financial condition and results of operations could be negatively impacted to the extent it relies on financial statements that do not comply with GAAP or are materially misleading. 22 Changes in prevailing interest rates may reduce the Company’s profitability.
During the normal course of the 24 Company’s business, it has experienced and it expects to continue to experience attempts to breach its systems, none of which has been material to the Company to date, and it may be unable to protect sensitive data and the integrity of its systems.
During the normal course of the Company’s business, it has experienced and it expects to continue to experience attempts to breach its systems, none of which has 24 been material to the Company to date, and it may be unable to protect sensitive data and the integrity of its systems.
Federal, state and local laws have been adopted that are intended to eliminate certain lending practices considered “predatory.” These laws prohibit practices such as steering borrowers away from more affordable products, selling unnecessary insurance to borrowers, repeatedly refinancing loans and making loans without a reasonable expectation that the borrowers will be able to repay the 27 loans irrespective of the value of the underlying property.
Federal, state and local laws have been adopted that are intended to eliminate certain lending practices considered “predatory.” These laws prohibit practices such as steering borrowers away from more affordable products, selling unnecessary insurance to borrowers, repeatedly refinancing loans and making loans without a reasonable expectation that the borrowers will be able to repay the loans irrespective of the value of the underlying property.
Whether customer claims and legal action are legitimate or unfounded, if such claims and legal actions are not resolved in the Company’s favor they may result in significant financial liability and/or adversely affect the 28 market perception of it and its products and services as well as impact customer demand for those products and services.
Whether customer claims and legal action are legitimate or unfounded, if such claims and legal actions are not resolved in the Company’s favor they may result in significant financial liability and/or adversely affect the market perception of it and its products and services as well as impact customer demand for those products and services.
At December 31, 2023, no loan participations were delinquent 19 60 days or more. If the Bank underwriting of these participation loans is not sufficient, non-performing loans may increase, and earnings may decrease. The Company may be exposed to risk of environmental liabilities with respect to properties to which it takes title.
At December 31, 2024, no loan 19 participations were delinquent 60 days or more. If the Bank underwriting of these participation loans is not sufficient, non-performing loans may increase, and earnings may decrease. The Company may be exposed to risk of environmental liabilities with respect to properties to which it takes title.
The Bank participates in commercial real estate loans and commercial business loans with other financial institutions from time to time in which it is not the lead lender. The Bank’s commercial real estate loan participations are generally located in Pennsylvania although the Bank has from time to time participated in loans located in the states of Maryland and Virginia.
The Bank participates in commercial real estate loans with other financial institutions from time to time in which it is not the lead lender. The Bank’s commercial real estate loan participations are generally located in Pennsylvania although the Bank has from time to time participated in loans located in the states of Maryland, Delaware and Virginia.
Market conditions may impact the competitive landscape for deposits in the banking industry. The rising interest rate environment and future actions the Federal Reserve may take may impact pricing and demand for deposits in the banking industry.
Market conditions may impact the competitive landscape for deposits in the banking industry. The high interest rate environment and future actions the Federal Reserve may take may impact pricing and demand for deposits in the banking industry.
As of December 31, 2023, a majority of our loan portfolio was secured by real estate and other assets located in the local market.
As of December 31, 2024, a majority of our loan portfolio was secured by real estate and other assets located in the local market.
These provisions, and the corporate and banking laws and regulations applicable to us: • enable the board of directors to increase the size of the board and fill the vacancies created by the increase; • provide that directors may only be removed for cause and by a majority of the votes entitled to be cast; • enable the board of directors to amend our bylaws without shareholder approval, subject, however, to any provision of the articles of incorporation, bylaws, or the Pennsylvania Business Corporation Law that requires action to be taken by the shareholders and the general power of the shareholders to change such action in accordance with the Bylaws and Pennsylvania Business Corporation Law; • require advance notice for shareholder proposals and director nominations; • require a supermajority vote of the shareholders to approve a merger that has not been approved by the board of directors, and to amend certain provisions in the articles of incorporation and the bylaws; and • require prior regulatory approval of any transaction involving control of our organization. 30 The foregoing may discourage potential acquisition proposals and could delay or prevent a change in control.
These provisions, and the corporate and banking laws and regulations applicable to us: • enable the board of directors to increase the size of the board and fill the vacancies created by the increase; • provide that directors may only be removed for cause and by a majority of the votes entitled to be cast; • enable the board of directors to amend our bylaws without shareholder approval, subject, however, to any provision of the articles of incorporation, bylaws, or the Pennsylvania Business Corporation Law that requires action to be taken by the shareholders and the general power of the shareholders to change such action in accordance with the Bylaws and Pennsylvania Business Corporation Law; • require advance notice for shareholder proposals and director nominations; • require a supermajority vote of the shareholders to approve a merger that has not been approved by the board of directors, and to amend certain provisions in the articles of incorporation and the bylaws; and • require prior regulatory approval of any transaction involving control of our organization.
The Company primarily serves individuals, businesses and municipalities located in Chester, Cumberland, Dauphin, Lancaster, Northumberland, Schuylkill, and York Counties in Pennsylvania, Wicomico, Charles, Anne Arundel, and Worcester counties in Maryland, Sussex county in Delaware, Camden and Burlington counties in New Jersey, Spotsylvania county in Virginia, and the cities of Fredericksburg and Reston, Virginia (the "local market").
The Company primarily serves individuals, businesses and municipalities located in Chester, Cumberland, Dauphin, Lancaster, Northumberland, Schuylkill, and York Counties in Pennsylvania, Wicomico, Charles, Anne Arundel, and Worcester counties in Maryland, Sussex county in Delaware, Camden and Burlington counties in New Jersey, Spotsylvania and Fairfax counties in Virginia, and the city of Fredericksburg, Virginia (the "local market").
Such sources include proceeds from Federal Home Loan Bank advances, sales of investment securities and loans, and federal funds lines of credit from correspondent banks, as well as out-of-market time deposits which could cause the Company's overall cost of funding to increase.
Such sources include proceeds from FHLB advances, sales of investment securities and loans, and federal funds lines of credit from correspondent banks, as well as out-of-market time deposits which could cause the Company's overall cost of funding to increase.
Construction loan participations for which the Bank was not the lead lender totaled $14.5 million, or 8.1% of our construction loan portfolio. The Bank underwrites each commercial real estate loan and commercial business loan that it participates in and establishes the loan classification and loan provision using the same criteria it uses for loans the Bank originates.
Construction loan participations for which the Bank was not the lead lender totaled $4.7 million, or 3.1% of our construction loan portfolio. The Bank underwrites each commercial real estate loan, commercial business loan and commercial construction loan that it participates in and establishes the loan classification and loan provision using the same criteria it uses for loans the Bank originates.
If some investors find the Company’s common stock less attractive as a result of these choices, there may be a less active trading market for the Company’s common stock, and the Company’s stock price may be more volatile. Item 1B. Unresolved Staff Comments. None
If some investors find the Company’s common stock less attractive as a result of these choices, there may be a less active trading market for the Company’s common stock, and the Company’s stock price may be more volatile.
Repayment of commercial business loans is often dependent on the cash flows of the borrower, which may be unpredictable, and the collateral securing these loans may fluctuate in value. At December 31, 2023, $238.3 million, or 10.63% of our total loan portfolio, consisted of commercial business loans.
Repayment of commercial business loans is often dependent on the cash flows of the borrower, which may be unpredictable, and the collateral securing these loans may fluctuate in value. At December 31, 2024, $245.8 million, or 10.90% of our total loan portfolio, consisted of commercial business loans.
The Company makes various estimates that affect reported amounts and disclosures. Broadly, those estimates are used in measuring the fair value of certain financial instruments, establishing provision for credit losses and potential litigation liability. Market volatility may make it difficult to determine the fair value for certain of the Company’s assets and liabilities.
Broadly, those estimates are used in measuring the fair value of certain financial instruments, establishing provision for credit losses and potential litigation liability. Market volatility may make it difficult to determine the fair value for certain of the Company’s assets and liabilities.
Commercial real estate loans may increase the Company’s exposure to credit risk. At December 31, 2023, the Company’s commercial real estate loans totaled $1.26 billion, or 56.4%, of our total loan portfolio.
Commercial real estate loans may increase the Company’s exposure to credit risk. At December 31, 2024, the Company’s commercial real estate loans totaled $1.32 billion, or 58.4%, of our total loan portfolio.
From time to time, customers and others make claims and take legal action pertaining to the Company’s performance of fiduciary responsibilities or other matters.
From time to time, customers and others make claims and take legal action pertaining to the Company’s performance of its ongoing obligations to customers or other matters.
At December 31, 2023, commercial real estate loan participations for which the Bank was not the lead lender totaled $73.1 million, or 5.8% of our commercial real estate loan portfolio. Commercial business loan participations for which the Bank was not the lead lender totaled $5.5 million, or 2.3% of our commercial business loan portfolio.
At December 31, 2024, commercial real estate loan participations for which the Bank was not the lead lender totaled $74.8 million, or 5.7% of our commercial real estate loan portfolio. Commercial business loan participations for which the Bank was not the lead lender totaled $14.1 million, or 5.7% of our commercial business loan portfolio.
During 2023, in response to accelerated inflation, the Federal Reserve continued to implement monetary tightening policies, resulting in increased interest rates. The Federal Reserve has signaled that interest rates may remain elevated.
During 2023, in response to accelerated inflation, the Federal Reserve continued to implement monetary tightening policies, resulting in increased interest rates. By the end of 2024, following several interest rate cuts, the Federal Reserve has signaled that interest rates may remain elevated.
At December 31, 2023, non-performing assets, which consist of non-performing loans and other real estate owned, were $7.3 million, or 0.32% of total assets.
At December 31, 2024, non-performing assets, which consist of non-performing loans and other real estate owned, were $17.2 million, or 0.60% of total assets.
Thus, any borrowing that must be done by the holding company in order to make the required capital injection becomes more difficult and expensive and will adversely impact the holding company’s cash flows, financial condition, results of operations and prospects. The Company may be subject to more stringent capital requirements in the future.
Thus, any borrowing that must be done by the holding company in order to make the required capital injection becomes more difficult and expensive and will adversely impact the holding company’s cash flows, financial condition, results of operations and prospects. Changes in the Federal Reserve's monetary or fiscal policies could adversely affect the Company's results of operations and financial conditions.
Furthermore, in recognition of the financial risk and efforts undertook in organizing the Company, certain founding investors were granted warrants to purchase four shares of common stock at a purchase price of $10 per share for every one share the individual purchased during the Company’s initial offering in 2018-2019.
These issuances diluted and future issuances may dilute the ownership interests of shareholders and could potentially dilute the per share book value of the common stock if the issuances are done at a lower per share offering price. 29 Furthermore, in recognition of the financial risk and efforts undertook in organizing the Company, certain founding investors were granted warrants to purchase four shares of common stock at a purchase price of $10 per share for every one share the individual purchased during the Company’s initial offering in 2018-2019.
In the 2015 Statement, the Agencies, among other things, indicate the intent to continue “to pay special attention” to commercial real estate lending activities and concentrations going forward.
In December 2015, the Agencies released a new statement on prudent risk management for commercial real estate lending (the “2015 Statement”). In the 2015 Statement, the Agencies, among other things, indicate the intent to continue “to pay special attention” to commercial real estate lending activities and concentrations going forward.
The Company is an “emerging growth company” under the JOBS Act, and the Company cannot be certain whether the reduced disclosure requirements applicable to emerging growth companies will make the Company’s common stock less attractive to investors.
The foregoing may discourage potential acquisition proposals and could delay or prevent a change in control. The Company is an “emerging growth company” under the JOBS Act, and the Company cannot be certain whether the reduced disclosure requirements applicable to emerging growth companies will make the Company’s common stock less attractive to investors.
The FDIC issued a final rule in October 2022 to increase initial base deposit insurance assessment rates by 2 basis points beginning in the first quarterly assessment period of 2023. If there are financial institution failures, the Bank may be required to pay higher FDIC premiums or special assessments.
As an FDIC-insured institution, the Bank is required to pay quarterly deposit insurance premium assessments to the FDIC. The FDIC issued a final rule in October 2022 to increase initial base deposit insurance assessment rates by 2 basis points beginning in the first quarterly assessment period of 2023.
High inflation, if sustained, could have an adverse effect on our business. The recent increase in interest rates in response to elevated levels of inflation has decreased the value of our securities portfolio, resulting in an increase in unrealized losses recorded in accumulated other comprehensive income (loss) on the shareholders’ equity section of our balance sheet.
The increase in interest rates in response to elevated levels of inflation has decreased the value of our securities portfolio, resulting in an increase in unrealized losses recorded in accumulated other comprehensive income (loss) in the shareholders’ equity section of our balance sheet. In addition, inflation-driven increases in our levels of non-interest expense could negatively impact our results of operations.
Such preferred stock could also have the effect of delaying, deferring or preventing a change in control of the Company, including an extraordinary transaction (such as a merger, tender offer or sale of all or substantially all of the Company’s assets) that might provide a premium price to holders of the Company's common stock.
Such preferred stock could also have the effect of delaying, deferring or preventing a change in control of the Company, including an extraordinary transaction (such as a merger, tender offer or sale of all or substantially all of the Company’s assets) that might provide a premium price to holders of the Company's common stock. 30 The Company’s articles of incorporation and bylaws, and certain banking laws applicable to us, could have an anti-takeover effect that decreases the Company’s chances of being acquired, even if an acquisition is in the shareholders’ best interests.
If the Company experiences an economic downturn or a prolonged economic recession occurs in the economy as a whole, borrowers will be less likely to repay their loans as scheduled.
If the Company experiences an economic downturn or a prolonged economic recession occurs in the economy as a whole, borrowers will be less likely to repay their loans as scheduled. Unlike many larger institutions, the Company is not able to spread the risks of unfavorable local economic conditions across a large number of diversified economies.
Federal, state and local consumer lending laws may restrict the Bank’s ability to originate certain mortgage loans or increase its risk of liability with respect to such loans and could increase its cost of doing business.
The Company’s inability to attract and maintain these customers or its inability to sell loan participations on favorable terms could adversely impact its business, financial condition, results of operation, and the value of its securities. 27 Federal, state and local consumer lending laws may restrict the Bank’s ability to originate certain mortgage loans or increase its risk of liability with respect to such loans and could increase its cost of doing business.
If general economic conditions negatively impact this major economic sector in the markets in which the Company operates, its results of operations and financial condition, as well as the value of its securities, may be adversely affected. Higher FDIC deposit insurance premiums or special assessments could adversely impact the Company’s financial condition.
These businesses generally have fewer financial resources in terms of capital or borrowing capacity than larger entities. If general economic conditions negatively impact this major economic sector in the markets in which the Company operates, its results of operations and financial condition, as well as the value of its securities, may be adversely affected.
The Company relies heavily on its senior management team and the unexpected loss of any of those personnel could adversely affect its operations. The Company is a customer-focused and relationship-driven organization.
High inflation and increasing interest rates could also cause increased volatility in the business environment, which could adversely affect loan demand and borrowers’ ability to repay loans. The Company relies heavily on its senior management team and the unexpected loss of any of those personnel could adversely affect its operations. The Company is a customer-focused and relationship-driven organization.
Regulations relating to privacy, information security and data protection could increase the Company’s and the Bank’s costs, affect or limit how they collect and use personal information and adversely affect their business opportunities. 26 The Company is subject to various privacy, information security and data protection laws, including requirements concerning security breach notification, and it could be negatively impacted by these laws.
The Company is subject to various privacy, information security and data protection laws, including requirements concerning security breach notification, and it could be negatively impacted by these laws.
The national economy continues to experience elevated levels of inflation. As of December 31, 2023, the year over year consumer price index (“CPI”) increase was 3.4%, primarily driven by increases in food and housing prices. As a result, the Federal Reserve raised interest rates by 100 basis points in 2023 to combat rising inflation.
The national economy continues to experience elevated levels of inflation, but not at levels seen in 2022 and 2023. As of December 31, 2024, the year over year consumer price index (“CPI”) increase was 2.9%, primarily driven by increases in food prices.
Commercial real estate loans represent 374.5% of our risk-based capital at December 31, 2023 and the outstanding balance of our commercial real estate loan portfolio has increased by greater than 50% during the 36 months preceding December 31, 2023. In December 2015, the Agencies released a new statement on prudent risk management for commercial real estate lending (the “2015 Statement”).
Non-owner-occupied commercial real estate loans represent 365.7% of our risk-based capital at December 31, 2024 and the outstanding balance of our commercial real estate loan portfolio has increased by greater than 50% during the 36 months preceding December 31, 2024.
In addition, the shares of common stock rank junior to the $20.0 million in subordinated debt that the Company assumed in connection with the Gratz Merger, $22.6 million in subordinated debt that the Company assumed in connection with the Partners Merger, and $20.0 million of subordinated debt that the Company issued in April 2022. 29 Other Risks The use of estimates and valuations may be different from actual results, which could have a material adverse effect on the Company’s consolidated financial statements.
In addition, the shares of common stock rank junior to the $20.0 million in subordinated debt that the Company assumed in connection with the Gratz Merger, $22.6 million in subordinated debt that the Company assumed in connection with the Partners Merger, and $20.0 million of subordinated debt that the Company issued in April 2022.
The Bank's deposits are insured up to applicable limits by the Deposit Insurance Fund ("DIF") of the FDIC and are subject to deposit insurance assessments to maintain deposit insurance. As an FDIC-insured institution, the Bank is required to pay quarterly deposit insurance premium assessments to the FDIC.
Higher FDIC deposit insurance premiums or special assessments could adversely impact the Company’s financial condition. The Bank's deposits are insured up to applicable limits by the Deposit Insurance Fund ("DIF") of the FDIC and are subject to deposit insurance assessments to maintain deposit insurance.
Failure to maintain and implement adequate programs to combat money laundering and terrorist financing could also have serious reputational consequences for the Company.
Failure to maintain and implement adequate programs to combat money laundering and terrorist financing could also have serious reputational consequences for the Company. 26 Regulations relating to privacy, information security and data protection could increase the Company’s and the Bank’s costs, affect or limit how they collect and use personal information and adversely affect their business opportunities.
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In addition, inflation-driven increases in our levels of non-interest expense could negatively impact our results of operations. High inflation and increasing interest rates could also cause increased volatility in the business environment, which could adversely affect loan demand and borrowers’ ability to repay loans.
Added
The Federal Reserve raised interest rates by 100 basis points through July 2023 to combat rising inflation, and reduced rates by 100 basis points beginning in September 2024. High inflation, if sustained, could have an adverse effect on our business.
Removed
Moreover, in many cases the value of the real estate or other collateral that secures the Company’s loans was adversely affected by the economic conditions over the past few years, and an economic downtown or a prolonged economic recession could further negatively affect such values.
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If there are financial institution failures, the Bank may be required to pay higher FDIC premiums or special assessments.
Removed
The Company targets its commercial development and marketing strategy to serve the banking and financial services needs of small- and medium-sized businesses. These businesses generally have fewer financial resources in terms of capital or borrowing capacity than larger entities.
Added
The Company's earnings will be affected by domestic economic conditions and the monetary and fiscal policies of the United States government and its agencies.
Removed
The Company’s inability to attract and maintain these customers or its inability to sell loan participations on favorable terms could adversely impact its business, financial condition, results of operation, and the value of its securities.
Added
The Federal Reserve has, and is likely to continue to have, an important impact on the operating results of banks through its power to implement national monetary policy, among other things, in order to curb inflation or combat a recession.
Removed
These issuances diluted and future issuances may dilute the ownership interests of shareholders and could potentially dilute the per share book value of the common stock if the issuances are done at a lower per share offering price.
Added
The Federal Reserve’s actions affect the levels of bank loans, investments and deposits through its control over the issuance of United States government securities, its regulation of the discount rate applicable to member banks, and its influence on other monetary and fiscal policies.
Removed
The Company’s articles of incorporation and bylaws, and certain banking laws applicable to us, could have an anti-takeover effect that decreases the Company’s chances of being acquired, even if an acquisition is in the shareholders’ best interests.
Added
The monetary policies of the Federal Reserve may be affected by certain policy initiatives of the new Administration, which has announced tariffs on certain U.S. trading partners (and has indicated additional tariffs and retaliatory tariffs against U.S. trading partners may be announced in the future) and has implemented stricter immigration policies.
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Although forecasts have varied, many economists are projecting that such policy initiatives may halt productivity growth and reduce available labor, creating inflationary pressures. Under such a scenario, the Federal Reserve may decide to maintain the federal funds rate at a relatively 28 elevated level for a prolonged period of time.
Added
The extent and timing of the new Administration’s policy changes and their impact on the policies of the Federal Reserve, as well as the Company’s business and financial results, are uncertain at this time. The Company may be subject to more stringent capital requirements in the future.
Added
Other Risks The use of estimates and valuations may be different from actual results, which could have a material adverse effect on the Company’s consolidated financial statements. The Company makes various estimates that affect reported amounts and disclosures.

Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeOversight of the Company’s Information Security Program has been delegated to the Enterprise Risk Management Committee of the Board of Directors. The Enterprise Risk Management Committee receives quarterly reports on the effectiveness and overall performance of the cybersecurity program and provides a report of the same to the full Board of Directors.
Biggest changeThe Enterprise Risk Management Committee reviews comprehensive risk assessments of the Company's information technology, privacy, and cybersecurity programs annually and receives quarterly reports on the effectiveness and overall performance of the cybersecurity program and provides a report of the same to the full Board of Directors.
We leverage a managed service provider to monitor users, application, infrastructure, and network activity on a 24/7/365 basis to detect and alert the cyber security operation team of cyber threats and potential cybersecurity events of concern. The Company relies on third-party vendor solutions to support its operations; many of these vendors have access to sensitive and proprietary information.
We leverage a managed security service provider to monitor users, application, infrastructure, and network activity on a 24/7/365 basis to detect and alert the cyber security operation team of cyber threats and potential cybersecurity events of concern. The Company relies on third-party vendor solutions to support its operations; many of these vendors have access to sensitive and proprietary information.
Cybersecurity Governance The Company has established an Information Security Committee consisting of the Chief Operations & Technology Officer, Chief Risk Officer, Information Security Officer and department representatives across multiple functional areas of the Company to focus on cybersecurity strategic and tactical delivery, policy oversight, monitoring of key cybersecurity risk indicators, and the assessment and management of cyber risk threats.
Cybersecurity Governance The Company has established an Information Security Committee consisting of the Chief Operations & Technology Officer, Chief Risk Officer, and department representatives across multiple functional areas of the Company to focus on cybersecurity strategic and tactical delivery, policy oversight, monitoring of key cybersecurity risk indicators, and the assessment and management of cyber risk threats.
The Committee is assisted by a Virtual Chief Information Security Officer (the “vCISO”) which is provided by a contracted third-party security firm. The Committee’s activities support the overall protection of data and information assets of the Company in accordance with the Information Security Program, regulatory privacy requirements and Federal Financial Institutions Examination Council guidance.
The Committee is assisted by a Virtual Chief Information Security Officer (the “vCISO”) which is provided by a contracted third-party security firm. The Committee’s activities support the overall protection of data and information assets of the Company in accordance with the Information Security Program, regulatory requirements and Federal Financial Institutions Examination Council guidance.
The Company requires contracts of third parties to incorporate industry and regulatory standard clauses requiring reporting to the Company of the occurrence and mitigation of cybersecurity threats and incidents as well as to maintain adequate levels of cybersecurity insurance coverage. In the event of a cyber incident, the Company created and maintains a Business Contingency Program.
The Company requires contracts with third parties to incorporate industry and regulatory standard clauses requiring reporting to the Company of the occurrence and mitigation of cybersecurity threats and incidents as well as to maintain adequate levels of cybersecurity insurance coverage. In the event of a cyber incident, the Company created and maintains a Business Contingency Program.
The Company has not identified any risks from cybersecurity threats, including as a result of previous cybersecurity incidents, that have materially affected or are reasonably likely to materially affect the Company, including its business strategy, financial condition or results of operation.
The Company has not identified risks from cybersecurity threats, including as a result of previous cybersecurity incidents, that have materially affected or are reasonably likely to materially affect the Company, including its business strategy, financial condition or results of operation.
Additionally, we employ innovative technology solutions designed to identify, protect, detect, and mitigate cybersecurity threats through use of firewalls, intrusion detection systems, patching, endpoint detection and response, encryption, multi factor authentication, and data backups to immutable storage. 31 We regularly engage third-party assessors, auditors, and solutions to test and evaluate our controls for managing cybersecurity threats.
Additionally, we employ innovative technology solutions designed to identify, protect, detect, and mitigate cybersecurity threats through the use of firewalls, intrusion detection systems, patching, endpoint detection and response, encryption, multi factor authentication, and data backups to immutable storage. We regularly engage third-party assessors, auditors, and solutions to test and evaluate our controls for managing cybersecurity threats.
This program provides guidance that will be needed to prepare, detect, analyze, remediate and recover business operations quickly and with the least impact to the Company and its customers.
This program provides guidance to prepare, detect, analyze, remediate and recover business operations with the least impact to the Company and its customers.
We exercise a detailed vendor due diligence evaluation during the onboarding, and periodic reviews of these vendors with access to sensitive Company data.
We exercise a detailed vendor due diligence evaluation during the onboarding and periodically review vendors with access to sensitive Company data.
The vCISO has served in various roles in information technology and information security for 20 years, and holds multiple certifications relevant to cybersecurity, including CMMC (Cybersecurity Maturity Model Certification) and Fortinet NSE (Network Security Expert) level 3.
The vCISO has 15 years of information technology and security-based experience, and holds certifications relevant to cybersecurity, including CMMC CCP (Certified Cybersecurity Maturity Model Certification Professional) and CISSP (Certified Information Systems Security Professional).
Added
During the first quarter of 2025, the Company hired an Information Security Manager who is a CISSP-certified cybersecurity professional with over 20 years of experience in information technology, security engineering, 32 and risk management. The Information Security Manager has also been added to the Information Security Committee mentioned above.
Added
Oversight of the Company’s Information Security Program has been delegated to the Enterprise Risk Management Committee of the Board of Directors.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeThe following table sets forth the locations of Bank facilities as of December 31, 2023. 32 Description Address Owned / Leased Pennsylvania Locations: Camp Hill Headquarters 1250 Camp Hill Bypass, Suite 202 Camp Hill, PA 17011 Leased Camp Hill Solutions Center 3045 Market Street Camp Hill, PA 17011 Leased Gratz Solutions Center 32 West Market Street Gratz, PA 17030 Owned Harrisburg Solutions Center 2057 EG Drive Harrisburg, PA 17110 Leased Herndon Solutions Center 4231 State Route 147 Herndon, PA 17830 Owned Lancaster Solutions Center 2010 Fruitville Pike Lancaster, PA 17601 Leased Minersville Solutions Center 260 West Sunbury Street Minersville, PA 17954 Owned Pottsville Solutions Center 2221 West Market Street Pottsville, PA 17901 Leased Treverton Solutions Center 450 West Shamokin Street Trevorton, PA 17881 Owned Valley View Solutions Center 1625 West Main Street Valley View, PA 17983 Owned West Chester Loan Production Office 535 N.
Biggest changeThe following table sets forth the locations of Bank facilities as of December 31, 2024. 33 Description Address Owned / Leased Pennsylvania Locations: Camp Hill Headquarters 1250 Camp Hill Bypass, Suite 202 Camp Hill, PA 17011 Leased Camp Hill Solutions Center 3045 Market Street Camp Hill, PA 17011 Leased Gratz Solutions Center 32 West Market Street Gratz, PA 17030 Owned Harrisburg Solutions Center 2057 EG Drive Harrisburg, PA 17110 Leased Herndon Solutions Center 4231 State Route 147 Herndon, PA 17830 Owned Lancaster Solutions Center 2010 Fruitville Pike Lancaster, PA 17601 Leased Pottsville Solutions Center 2221 West Market Street Pottsville, PA 17901 Owned Valley View Solutions Center 1625 West Main Street Valley View, PA 17983 Owned West Chester Loan Production Office 535 N.
Salisbury, MD 21801 Owned East Salisbury Solutions Center 241 Beaglin Park Drive Salisbury, MD 21804 Owned Eastern Shore Drive Solutions Center 241 Beaglin Park Drive Salisbury, MD 21804 Owned La Plata Solutions Center 115 East Charles Street, La Plata, MD 20646 Land Leased; Building Owned North Salisbury Solutions Center 2727 N.
Salisbury, MD 21801 Owned East Salisbury Solutions Center 241 Beaglin Park Drive Salisbury, MD 21804 Owned Eastern Shore Drive Solutions Center 921 Eastern Shore Drive Salisbury, MD 21804 Owned La Plata Solutions Center 115 East Charles Street, La Plata, MD 20646 Land Leased; Building Owned North Salisbury Solutions Center 2727 N.
We own or lease other premises for use as Solutions Centers and loan production offices in Dauphin, Chester, Cumberland, Lancaster, Northumberland, Schuylkill, and York Counties within Pennsylvania, Wicomico, Charles, Anne Arundel, and Worcester Counties in Maryland, Sussex County in Delaware, Camden and Burlington Counties in New Jersey, Spotsylvania County, Virginia, and the cities of Fredericksburg and Reston, Virginia.
We own or lease other premises for use as Solutions Centers and loan production offices in Dauphin, Chester, Cumberland, Lancaster, Northumberland, Schuylkill, and York Counties within Pennsylvania, Wicomico, Charles, Anne Arundel, and Worcester Counties in Maryland, Sussex County in Delaware, Camden and Burlington Counties in New Jersey, Spotsylvania County, Virginia, and the city of Fredericksburg, Virginia.
Salisbury Boulevard Salisbury, MD 21801 Owned Pecan Square Solutions Center 241 Beaglin Park Drive Salisbury, MD 21804 Owned 26th Street Ocean City Solutions Center 201 B 26th Street, Ocean City, MD 21842 Leased 33 West Ocean City Solutions Center 12720 Ocean Gateway, Unit 4, Ocean City, MD 21842 Leased New Jersey Locations: Cherry Hill Solutions Center 2099 Route 70 East, Cherry Hill, NJ 08003 Leased Evesham Solutions Center 145 North Maple Avenue, Marlton, NJ 08053 Owned Moorestown Client Solutions Center 227 West Camden Avenue, Moorestown, NJ 08057 Leased Virginia Locations: Reston Solutions Center 1821 Michael Faraday Drive, Suite 101, Reston, VA 20190 Leased Salem Church Solutions Center 4210 Plank Road, Fredericksburg, VA 22407 Leased Spotsylvania Solution Center 7415 Laughlin Boulevard, Spotsylvania, VA 22553 Leased William Street Solutions Center 410 William Street, Fredericksburg, VA 22401 50% Owned / 50% Leased 34
Salisbury Boulevard Salisbury, MD 21801 Owned Pecan Square Solutions Center 1206 Nanticoke Road Salisbury, MD 21801 Owned 26th Street Ocean City Solutions Center 201 B 26th Street, Ocean City, MD 21842 Leased New Jersey Locations: Cherry Hill Solutions Center 2099 Route 70 East, Cherry Hill, NJ 08003 Leased Evesham Solutions Center 145 North Maple Avenue, Marlton, NJ 08053 Owned 34 Moorestown Client Solutions Center 227 West Camden Avenue, Moorestown, NJ 08057 Leased Virginia Locations: Reston Solutions Center 1821 Michael Faraday Drive, Suite 101, Reston, VA 20190 Leased Salem Church Solutions Center 4210 Plank Road, Fredericksburg, VA 22407 Leased Spotsylvania Solution Center 7415 Laughlin Boulevard, Spotsylvania, VA 22553 Leased William Street Solutions Center 410 William Street, Fredericksburg, VA 22401 50% Owned / 50% Leased 35
Market Street Laurel, DE 19956 Owned Rehoboth Solutions Center 18572 Coastal Highway, Rehoboth Beach, DE 19971 Leased Rehoboth Loan Production Office 19264 Miller Road, Unit A, Rehoboth Beach, DE 19971 Leased Seaford Solutions Center 910 Norman Eskridge Highway, Seaford, DE 19973 Leased Maryland Locations: Annapolis Loan Production Office 2661 Riva Road, Building 1000, Suite 1035, Annapolis, MD 21404 Leased Delmar Solutions Center 9550 Ocean Highway Delmar, MD 21875 Owned Delmarva Regional Headquarters 2245 Northwood Dr.
Market Street Laurel, DE 19956 Owned Rehoboth Solutions Center 18572 Coastal Highway, Rehoboth Beach, DE 19971 Leased Rehoboth Loan Production Office 19264 Miller Road, Unit A, Rehoboth Beach, DE 19971 Leased Seaford Solutions Center 910 Norman Eskridge Highway, Seaford, DE 19973 Leased Maryland Locations: Annapolis Solutions Center (opened February 2025) 900 Bestgate Road, Suite 104, Annapolis, MD 21401 Leased Delmar Solutions Center 9550 Ocean Highway Delmar, MD 21875 Owned Delmarva Regional Headquarters 2245 Northwood Dr.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeItem 3. Legal Proceedings . At December 31, 2023, the Company is not involved in any pending legal proceedings other than routine legal proceedings occurring in the ordinary course of business, which involve amounts in the aggregate believed by management to be immaterial to the financial condition and operating results of the Company. Item 4. Mine Safety Disclosures .
Biggest changeItem 3. Legal Proceedings . At December 31, 2024, the Company is not involved in any pending legal proceedings other than routine legal proceedings occurring in the ordinary course of business, which involve amounts in the aggregate believed by management to be immaterial to the financial condition and operating results of the Company. Item 4. Mine Safety Disclosures .

Item 4. Mine Safety Disclosures

Mine Safety Disclosures — required of mining issuers

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Biggest changeItem 4. Mine Safety Disclosures 35 PART II Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 36 Item 6. Reserved 36 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 37
Biggest changeItem 4. Mine Safety Disclosures 36 PART II Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 37 Item 6. Reserved 37 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 38

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeItem 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities . Market Information The common stock of LINKBANCORP, Inc. is traded under the symbol "LNKB" on the Nasdaq Capital Market. As of the close of business on March 25, 2024, there were approximately 786 shareholders of record.
Biggest changeItem 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities . Market Information The common stock of LINKBANCORP, Inc. is traded under the symbol "LNKB" on the Nasdaq Capital Market. As of the close of business on March 24, 2025, there were approximately 820 shareholders of record.
The Company declared and paid cash dividends equal to $0.30 per share of common stock for the years ended December 31, 2023 and 2022, respectively.
The Company declared and paid cash dividends equal to $0.30 per share of common stock for the years ended December 31, 2024 and 2023, respectively.
During the quarter ended December 31, 2023, the Company repurchased no shares of its common stock.
During the quarter ended December 31, 2024, the Company repurchased no shares of its common stock.

Item 7. Management's Discussion & Analysis

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

84 edited+46 added−28 removed37 unchanged
Biggest change(In Thousands) Provision Expense (Benefit) Net (Charge-Offs) Recoveries Average Loans Ratio of Annualized Net (Charge-Offs) Recoveries to Average Loans 2023 Agriculture and farmland loans $ (77 ) $ — $ 53,708 — % Construction loans 133 — 66,509 — Commercial & industrial loans 1,970 (199 ) 119,104 (0.17 ) Commercial real estate loans Multifamily 566 — 117,865 — Owner occupied 3,361 — 172,012 — Non-owner occupied (475 ) — 297,944 — Residential real estate loans First liens 3,018 54 195,063 0.03 Second liens and lines of credit 589 61 33,942 0.18 Consumer and other loans 69 — 11,352 — Municipal loans 73 — 4,365 — Total $ 9,227 $ (84 ) $ 1,071,864 (0.01 )% 2022 Agriculture loans $ 10 $ — $ 10,946 — % Commercial loans (30 ) 31 96,517 0.03 Paycheck Protection Program ("PPP") loans — — 7,740 — Commercial real estate loans 1,663 — 430,235 — Residential real estate loans (292 ) 194 245,505 0.08 Consumer and other loans 19 (1 ) 8,824 (0.01 ) Municipal loans (3 ) — 5,812 — Unallocated (77 ) — — Total $ 1,290 $ 224 $ 805,579 0.03% Excluding PPP loans $ 1,290 $ 224 $ 797,839 0.03% Total deposits grew by $1.35 billion or 142.8%, from $946.8 million at December 31, 2022 to $2.30 billion at December 31, 2023 primarily as a result of deposits assumed in the Partners Merger.
Biggest change(In Thousands) Provision Expense (Benefit) Net (Charge-Offs) Recoveries Average Loans Ratio of Annualized Net (Charge-Offs) Recoveries to Average Loans 2024 Agriculture and farmland loans $ (1 ) $ — $ 66,156 — % Construction loans (70 ) 4 183,336 0.00 Commercial & industrial loans 1,216 (63 ) 239,797 (0.03 ) Commercial real estate loans Multifamily 320 2 199,993 0.00 Owner occupied (933 ) (28 ) 494,221 (0.01 ) Non-owner occupied 1,315 (43 ) 609,536 (0.01 ) Residential real estate loans First liens (1,405 ) 22 403,828 0.01 Second liens and lines of credit 77 5 72,613 0.01 Consumer and other loans 154 (173 ) 16,677 (1.04 ) Municipal loans (31 ) — 4,461 — Total $ 642 $ (274 ) $ 2,290,618 (0.01 )% 2023 Agriculture and farmland loans $ (77 ) $ — $ 53,708 — % Construction loans 133 — 66,230 — Commercial & industrial loans 1,970 (199 ) 118,923 (0.17 ) Commercial real estate loans Multifamily 566 — 117,786 — Owner occupied 3,361 — 170,825 — Non-owner occupied (475 ) — 296,944 — Residential real estate loans First liens 3,018 54 193,648 0.03 Second liens and lines of credit 589 61 33,895 0.18 Consumer and other loans 69 — 11,352 — Municipal loans 73 — 4,365 — Total $ 9,227 $ (84 ) $ 1,067,676 (0.01 )% Total deposits grew by $161.8 million or 7.4%, from $2.20 billion at December 31, 2023 to $2.36 billion at December 31, 2024.
The contractual term excludes expected extensions, renewals, and modifications unless either of the following applies: management has a reasonable expectation at the reporting date that a restructured loan will be executed with an individual borrower or the extension or renewal options are included in the original or modified contract at the reporting date and are not unconditionally cancelable by the Company.
The contractual term excludes expected extensions, renewals, and modifications unless either of the following applies: management has a reasonable expectation at the reporting date that a restructured loan will be executed with an individual borrower or the extension or renewal options are included in the original or modified contract at the reporting date and are not unconditionally cancelable by the 51 Company.
Management’s determination of the adequacy of the allowance for credit losses is based on periodic evaluations of past 50 events, including historical credit loss experience on financial assets with similar risk characteristics, historical credit losses experienced by peer institutions on financial assets with similar risk characteristics, current conditions, and reasonable and supportable forecasts that affect the collectability of the remaining cash flows over the contractual term of the financial assets.
Management’s determination of the adequacy of the allowance for credit losses is based on periodic evaluations of past events, including historical credit loss experience on financial assets with similar risk characteristics, historical credit losses experienced by peer institutions on financial assets with similar risk characteristics, current conditions, and reasonable and supportable forecasts that affect the collectability of the remaining cash flows over the contractual term of the financial assets.
Our attempts to maintain adequate liquidity, and liquidity management is both a daily and long-term function of the Company’s business management. We manage our liquidity in accordance with a board of directors-approved asset liability policy, which is administered by the Company’s asset-liability committee (“ALCO”).
Our attempts to maintain adequate liquidity, and liquidity management is both a daily and long-term function of the Company’s business management. We manage our liquidity in accordance with a board of 50 directors-approved asset liability policy, which is administered by the Company’s asset-liability committee (“ALCO”).
The loan was refinanced on April 30, 2015 with a twenty-five year amortization. The interest rate is fixed at 3.60% for the first 10 years, and then becomes a variable rate of 3.0% plus the 10 year Treasury rate until maturity. Subordinated debt with a carrying value of $21.1 million was assumed as part of the Partners Merger.
The loan was refinanced on April 30, 2015 with a twenty-five year amortization. The interest rate is fixed at 3.60% for the first 10 years, and then becomes a variable rate of 3.0% plus the 10 year Treasury rate until maturity. Subordinated debt with a carrying value of $21.9 million was assumed as part of the Partners Merger.
The Bank offers a full suite of deposit products and cash management services focused on the small business and nonprofit segments. 37 Our revenues consist primarily of interest income earned on loans and investments. Interest income is partially offset by interest expense incurred on deposits, borrowings and other interest-bearing liabilities.
The Bank offers a full suite of deposit products and cash management services focused on the small business and nonprofit segments. 38 Our revenues consist primarily of interest income earned on loans and investments. Interest income is partially offset by interest expense incurred on deposits, borrowings and other interest-bearing liabilities.
As of December 31, 2023 and 2022, the Bank met the capital requirements to be considered “well capitalized.” See Note 16 within the Notes to the Consolidated Financial Statements for more information regarding our capital resources.
As of December 31, 2024 and 2023, the Bank met the capital requirements to be considered “well capitalized.” See Note 16 within the Notes to the Consolidated Financial Statements for more information regarding our capital resources.
Off-Balance Sheet Arrangements and Contractual Obligations See Note 17 within the Notes to the Consolidated Financial Statements beginning for more information regarding the Company’s off-balance sheet arrangements. For disclosures of the Company’s future obligations under operating leases, please see Note 8 within the Notes to the Consolidated Financial Statements.
Off-Balance Sheet Arrangements and Contractual Obligations See Note 17 within the Notes to the Consolidated Financial Statements beginning for more information regarding the Company’s off-balance sheet arrangements. For disclosures of the Company’s future obligations under operating leases, please see Note 7 within the Notes to the Consolidated Financial Statements.
Sound household balance sheets and a strong labor market have allowed U.S. consumers to increase their spending at a pace similar to prior expansions. Residential investment continued to be a drag on GDP, as high mortgage rates and the short supply of single-family homes weighed on the housing market.
Sound household balance sheets and a strong labor markets have allowed U.S. consumers to increase their spending at a pace similar to prior expansions. Residential investment continued to be a drag on GDP, as high mortgage rates and the short supply of single-family homes continues to weigh on the housing market.
Year Ended December 31, 2023 vs. 2022 Increase (Decrease) Due To: (Dollars in thousands) Rate Volume Net Interest Income: Int. Earn.
Year Ended December 31, 2024 vs. 2023 Increase (Decrease) Due To: (Dollars in thousands) Rate Volume Net Interest Income: Int. Earn.
In 2023 as a result of the completion of the Partners Merger, we entered the counties of Wicomico, Charles, Anne Arundel, and Worcester counties in Maryland, Sussex county in Delaware, Camden and Burlington counties in New Jersey, Spotsylvania county in Virginia, and the cities of Fredericksburg and Reston, Virginia. Our operations and lending are influenced by local economic conditions.
In 2023 as a result of the completion of the Partners Merger, we entered the counties of Wicomico, Charles, Anne Arundel, and Worcester counties in Maryland, Sussex county in Delaware, Camden and Burlington counties in New Jersey, Spotsylvania and Fairfax counties in Virginia, and the city of Fredericksburg, Virginia. Our operations and lending are influenced by local economic conditions.
By some estimates, the average corporate borrowing rate had increased to nearly 7% by the end of 2023, up from a low of 2.3% in 2020. The effect of a higher-rate environment produced steep unrealized losses for fixed-rate security holders such as banks.
By some estimates, the average corporate borrowing rate had increased to around 7% by the end of 2024, up from a low of 2.3% in 2020. The effect of a higher-rate environment produced steep unrealized losses for fixed-rate security holders such as banks.
Partners indemnified the indemnities, who are the personal guarantors of the deed of trust loan in the amount of $886 thousand, which was one-half of the outstanding balance of the loan as of the purchase date. The Company has a remaining obligation under the note payable of $500 thousand as of December 31, 2023.
Partners indemnified the indemnities, who are the personal guarantors of the deed of trust loan in the amount of $886 thousand, which was one-half of the outstanding balance of the loan as of the purchase date. The Company has a remaining obligation under the note payable of $565 thousand as of December 31, 2024.
Yields on earning assets are shown on a fully taxable-equivalent basis assuming a tax rate of 21%. 46 For the Year Ended December 31, 2023 2022 (Dollars in thousands) Avg Bal Interest (2) Yield/Rate Avg Bal Interest (2) Yield/Rate Int. Earn.
Yields on earning assets are shown on a fully taxable-equivalent basis assuming a tax rate of 21%. 47 For the Year Ended December 31, 2024 2023 (Dollars in thousands) Avg Bal Interest (2) Yield/Rate Avg Bal Interest (2) Yield/Rate Int. Earn.
As of December 31, 2023, the total uninsured deposits includes $41.2 million of municipal deposits that exceed the FDIC insurance limits. These municipal deposits are fully secured with pledged securities from our available for sale securities portfolio.
As of December 31, 2024, the total uninsured deposits includes $44.2 million of municipal deposits that exceed the FDIC insurance limits. These municipal deposits are fully secured with pledged securities from our available for sale securities portfolio.
As provided for under accounting principles generally accepted in the United States of America, management has up to 12 months following the date of the acquisition to finalize the fair values of acquired assets and assumed liabilities. Management continues to finalize the fair values of acquired assets and assumed liabilities.
As provided for under accounting principles generally accepted in the United States of America, management has up to 12 months following the date of the acquisition to finalize the fair values of acquired assets and assumed liabilities. Management has finalized the fair values of acquired assets and assumed liabilities from the Partners Merger.
Asset quality remained strong at December 31, 2023 with non-performing assets, which is defined as non-accrual loans, loans delinquent greater than 90 days and still accruing interest, and other real estate owned, was $7.3 million or 0.32% of total gross loans.
Asset quality remained strong at December 31, 2024 with non-performing assets, which is defined as non-accrual loans, loans delinquent greater than 90 days and still accruing interest, and other real estate owned, was $17.2 million or 0.76% of total gross loans.
This is compared to $2.7 million of non-performing assets at December 31, 2022, which equated to 0.29% of gross loans. The increase in non-performing assets was due primarily to the Partners Merger. 43 Additional information related to the provision for credit losses and net (charge-offs) recoveries is presented in the table below.
This is compared to $7.3 million of non-performing assets at December 31, 2023, which equated to 0.34% of gross loans. The increase in non-performing assets was due primarily to loans acquired in the Partners Merger. 44 Additional information related to the provision for credit losses and net (charge-offs) recoveries is presented in the table below.
There were $10.0 million in short-term FHLB advances outstanding at December 31, 2023. In addition to our available borrowing capacity at the FHLB, the Company has bank-level lines of credit with multiple financial institutions and a line at the Federal Reserve Bank Discount Window that provides additional liquidity at December 31, 2023.
There were $40.0 million in long-term FHLB advances outstanding at December 31, 2024, scheduled to mature in February 2026. In addition to our available borrowing capacity at the FHLB, the Company has bank-level lines of credit with multiple financial institutions and a line at the Federal Reserve Bank Discount Window that provides additional liquidity at December 31, 2024.
Subordinated debt with a carrying value of $20.3 million was assumed as part of the Gratz Merger. These notes bear interest at a fixed interest rate of 5.0% per year for five years and then float at an index tied to SOFR. The notes have a term of ten years, with a maturity date of October 1, 2030.
Subordinated debt with a carrying value of $20.1 million was assumed as part of the Gratz Merger. These notes bear interest at a fixed interest rate of 5.0% per year for five years or until October 1, 2025 and then float at an index tied to SOFR.
The notes are redeemable at the option of the Company, in whole or in part, subject to any required regulatory approvals after five years. Additionally, on April 8, 2022, the Company issued subordinated debt with a carrying value of $20.0 million.
The notes have a term of ten years, with a maturity date of October 1, 2030. The notes are redeemable at the option of the Company, in whole or in part, subject to any required regulatory approvals after five years. 46 Additionally, on April 8, 2022, the Company issued subordinated debt with a carrying value of $20.0 million.
Structural changes in markets and the economy may have changed the ways that firms and individuals respond to higher rates since the last similar rate environment, about 15 years ago. The general sentiment among market participants based on the Federal Open Market Committee (FOMC) “dot plot” and other expectations is that the target rate will be lowered sometime in 2024.
Structural changes in markets and the economy may have changed the ways that firms and individuals respond to higher rates since the last similar rate environment, about 15 years ago. 39 The general sentiment among market participants based on the Federal Open Market Committee (FOMC) “dot plot” and other expectations is that the target rate will be relatively stable in 2025 with rate cuts currently being paused.
The increase in the average balances of interest earning assets and interest-bearing liabilities was the result of the completion of the Partners Merger. The net interest margin decreased 30 basis points to 3.09% for the year ended December 31, 2023 from 3.39% for the year ended December 31, 2022.
The increase in average balances of interest earning assets and interest bearing liabilities was a result of the completion of the Partners Merger. The net interest margin increased 79 basis points to 3.88% for the year ended December 31, 2024 from 3.09% for the year ended December 31, 2023.
From 2022 to 2023, Consumer Price Index (CPI) inflation decreased by 2 percentage points and core CPI inflation, which excludes the more volatile categories of energy and food, decreased by 3 percentage points. A resilient labor market and strong economic activity along with declining inflation are consistent with a “soft landing” scenario. But challenges remain.
From 2023 to 2024, Consumer Price Index ("CPI") decreased by 50 basis points and core CPI inflation, which excludes the more volatile categories of energy and food, decreased by 70 basis points. A resilient labor market and strong economic activity along with a lower stabilized inflation rate are consistent with a “soft landing” scenario. But challenges remain.
This increase was partially offset by an increase in interest expense resulting from increased average rates paid on interest-bearing liabilities as a result of the rising interest rate environment and an increase in the average balance of deposits.
This increase was partially offset by an increase in interest expense resulting from increased average rates paid on interest-bearing liabilities due to the higher interest rate environment and an increase in the average balance of interest bearing liabilities.
The Company's common stock trades on the Nasdaq Capital Market under the symbol "LNKB." Overview and Strategy The Company’s core strategy is to further its mission of “positively impacting lives” through community banking by building strong relationships that bring value to its customers, employees, the communities it serves and its shareholders.
Overview and Strategy The Company’s core strategy is to further its mission of “positively impacting lives” through community banking by building strong relationships that bring value to its customers, employees, the communities it serves and its shareholders.
Income Tax Benefit/Expense: Income tax benefit for the year ended December 31, 2023 totaled $3.4 million compared to an income tax expense of $1.2 million for 2022 as a result of a decrease in income before income tax expense.
Income Tax Expense/Benefit: Income tax expense for the year ended December 31, 2024 totaled $7.4 million compared to an income tax benefit of $3.4 million for 2023 primarily as a result of an increase in income before income tax expense.
The income tax benefit recognized for the year ended December 31, 2023 was partially the result of our net income adjusted for tax free income and non-deductible expenses. We recognized income tax benefit for the year ended December 31, 2023 at an effective tax rate of 21.9% which is greater than our statutory tax rate of 21%.
The income tax expense recognized for the year ended December 31, 2024 was the direct result of our net income adjusted for tax free income and non-deductible merger related expenses. We recognized income tax expense for the year ended December 31, 2024 at an effective tax rate of 22.0% which is greater than our statutory tax rate of 21%.
The increase in total assets was primarily attributable to the increases in loans receivable of 141.6%, from $927.9 million at December 31, 2022 to $2.24 billion at December 31, 2023 and cash and cash equivalents which increased $50.2 million, from $30.0 million at December 31, 2022 to $80.2 million at December 31, 2023.
The increase in total assets was primarily attributable to the increases in loans receivable of 6.0%, from $2.13 billion at December 31, 2023 to $2.26 billion at December 31, 2024 and cash and cash equivalents which increased $85.9 million, from $80.2 million at December 31, 2023 to $166.1 million at December 31, 2024.
The unemployment rate remained below 4% for the entire year. Labor force participation rates also increased from 2022 to 2023. Resilience in consumer spending measured by retail sales (excluding auto and gas) increased 4.9%. Consumer spending largely accounted for the increase in GDP growth over the past year.
Labor force participation rates were relatively stable from 2023 to 2024. Resilience in consumer spending measured by retail sales (excluding auto and gas) increased 3.4%. Consumer spending largely accounted for the increase in GDP growth over the past year.
Certificates of deposit due within one year of December 31, 2023 totaled $568.3 million, or 91% of our certificates of deposit, and 25% of total deposits. Of these certificates of deposits, $119.4 million are brokered deposits, of which $75 million relate to our interest rate swap.
Certificates of deposit due within one year of December 31, 2024 totaled $582.0 million, or 91.4% of our certificates of deposit, and 24.7% of total deposits. Of these certificates of deposits, $103.6 million are brokered deposits, of which $75 million relate to our interest rate swap.
The securities available-for-sale portfolio had a net unrealized loss of $4.9 million at December 31, 2023 compared with a net unrealized loss of $8.1 million at December 31, 2022. Partially offsetting the increase in securities available-for-sale were proceeds from principal repayments of $8.3 million.
The securities available-for-sale portfolio had a net unrealized loss of $7.5 million at December 31, 2024 compared with a net unrealized loss of $4.9 million at December 31, 2023. Partially offsetting the increase in securities available-for-sale were proceeds from principal repayments, sales, calls, and maturities of $25.2 million.
The growth in the average balance of interest earning assets which increased $279.1 million to $1.25 billion for the year ended December 31, 2023 compared to $971.7 million for the year ended December 31, 2022 contributed $12.7 million in growth of interest income.
The growth in the average balance of interest earning assets which increased $1.32 billion to $2.57 billion for the year ended December 31, 2024 compared to $1.25 billion for the year ended December 31, 2023 contributed $70.6 million in growth of interest income.
(4) Includes the effect of the interest rate swap, which reduced interest expense by $392,000 during the current fiscal year. 47 Rate/Volume Analysis The following table reflects the sensitivity of the Company’s interest income and interest expense to changes in volume and in yields on interest-earning assets and costs of interest-bearing liabilities during the years indicated.
(4) Includes the balances of loans held for sale (5) Includes the balances of deposits held for sale (6) Includes the effect of the interest rate swap, which reduced interest expense by $1.42 million during the year. 48 Rate/Volume Analysis The following table reflects the sensitivity of the Company’s interest income and interest expense to changes in volume and in yields on interest-earning assets and costs of interest-bearing liabilities during the years indicated.
ALCO reports interest rate sensitivity, liquidity, capital and investment-related matters on a quarterly basis to the Company’s board of directors. 49 The Company reviews cash flow projections regularly and updates them in order to maintain liquid assets at levels believed to meet the requirements of normal operations, including loan commitments and potential deposit outflows from maturing certificates of deposit and savings withdrawals.
The Company reviews cash flow projections regularly and updates them in order to maintain liquid assets at levels believed to meet the requirements of normal operations, including loan commitments and potential deposit outflows from maturing certificates of deposit and savings withdrawals.
The US economy however was surprisingly resilient, not only avoiding recession, but growing at a positive pace as measured by several indicators such as gross domestic product (GDP), the unemployment rate, personal consumption expenditures (PCE), disposable personal income, and private nonresidential investment. Real GDP accelerated to a pace of 3.1% during the year.
In spite of uncertainty, the U.S. economy was surprisingly resilient, not only avoiding a recession, but growing as measured by several indicators such as gross domestic product (GDP), the unemployment rate, personal consumption expenditures (PCE), disposable personal income, and private nonresidential investment. Real GDP increased by 2.3% during the year. The unemployment rate remained below 4.5% for the entire year.
These dynamics were a factor in the failures of Silicon Valley Bank, Signature Bank, and First Republic Bank. This has also led to a tightening of credit conditions and caused many financial institutions to have a renewed focus on liquidity and increased deposit gathering costs.
This has also led to a tightening of credit conditions and caused many financial institutions to have a renewed focus on liquidity and increased deposit gathering costs.
During 2023, return of principal on held to maturity securities totaled $3.4 million.
During 2024, return of principal on held to maturity securities totaled $5.1 million.
The following table shows the Company’s available liquidity at December 31, 2023.
The following table shows the Company’s available borrowing capacity at December 31, 2024.
This increase in rates was also impacted by an increase in the average balances of interest bearing liabilities, which increased $176.3 million to $939.6 million for the year ended December 31, 2023 compared to $763.3 million for the year ended December 31, 2022 as a result of the increase in the average balance of our deposits and borrowings due to the completion of the Partners Merger.
The increase in interest expense was primarily due to the increase in the average balance of interest-bearing liabilities, which increased $883.8 million to $1.82 billion for the year ended December 31, 2024 compared to $939.6 million for the year ended December 31, 2023 as a result of the increase in the average balance of our deposits and borrowings due to the completion of the Partners Merger.
December 31, 2023 December 31, 2022 (In Thousands) Average Balance Average Rate Paid Average Balance Average Rate Paid Demand, noninterest-bearing $ 245,703 0.00 % $ 173,938 0.00 % Demand, interest-bearing 269,615 2.11 % 271,681 0.63 % Money market and savings 278,418 2.53 % 229,979 0.83 % Time deposits, other 301,101 3.29 % 205,636 0.83 % Total Deposits $ 1,094,837 2.07 % $ 881,234 0.61 % The Company has deposits that exceed the FDIC insurance limit of $250,000 of $713.4 million and $408.4 million at December 31, 2023 and 2022, respectively.
December 31, 2024 December 31, 2023 (In Thousands) Average Balance Average Rate Paid Average Balance Average Rate Paid Demand, noninterest-bearing $ 653,966 0.00 % $ 245,703 0.00 % Demand, interest-bearing 476,686 2.17 % 269,615 2.11 % Money market and savings 579,232 2.24 % 278,418 2.53 % Time deposits, other 617,894 4.48 % 301,101 3.29 % Total Deposits $ 2,327,778 2.19 % $ 1,094,837 2.07 % The Company has deposits that exceed the FDIC insurance limit of $250,000 of $807.5 million and $713.4 million at December 31, 2024 and 2023, respectively.
We recognized income tax expense for the year ended December 31, 2022 at an effective tax rate of 17.9% which is less than our statutory tax rate of 21%. Liquidity, Commitments, and Capital Resources The Company’s liquidity, represented by cash and due from banks, is a product of our operating, investing and financing activities.
This is as compared to an income tax benefit for the year ended December 31, 2023 as a result of our net loss, which resulted in an effective tax rate of 21.9%. Liquidity, Commitments, and Capital Resources The Company’s liquidity, represented by cash and due from banks, is a product of our operating, investing and financing activities.
Interest Income: Interest income increased to $65.2 million for the year ended December 31, 2023, compared with $40.3 million for the year ended December 31, 2022 primarily due to an increase in interest income on loans as a result of the growth in average loans, following the completion of the Partners Merger.
Interest Income: Interest income increased to $158.7 million for the year ended December 31, 2024, compared with $65.2 million for the year ended December 31, 2023 primarily due to an increase in interest income on loans as a result of the growth in average loans as well as the increase in average yields earned on all categories of interest earning assets.
This increase can be mostly attributed to an increase in interest income resulting from a higher average balance in loans as well as a 106 basis points increase in the average yield on interest-earning assets.
This increase can be attributed to an increase in interest income resulting from a higher average balance in interest-earning assets and an increase in the average yield on interest earning assets as compared to the year ended December 31, 2023.
We believe, however, based on past experience that a significant portion of such deposits will remain with us. We have the ability to attract and retain deposits by adjusting the interest rates offered.
We believe, however, based on past experience that a significant portion of such deposits will remain with us. We have the ability to attract and retain deposits by adjusting the interest rates offered. While deposits are the Company’s primary source of funds, when needed the Company is also able to generate cash through borrowings from the FHLB.
At December 31, 2023, the scheduled maturities of time deposits that meet or exceed the FDIC insurance limit or otherwise uninsured were as follows: (In Thousands) December 31, 2023 Due within 3 months or less $ 59,161 Due after 3 months and within 6 months 32,081 Due after 6 months and within 12 months 28,022 Due after 12 months 15,060 $ 134,324 At December 31, 2023 and 2022, other borrowings consisted of $10.0 million and $20.9 million, respectively in short-term FHLB Advances.
At December 31, 2024, the scheduled maturities of time deposits that meet or exceed the FDIC insurance limit or otherwise uninsured were as follows: (In Thousands) December 31, 2024 Due within 3 months or less $ 38,059 Due after 3 months and within 6 months 61,288 Due after 6 months and within 12 months 47,456 Due after 12 months 9,986 $ 156,789 At both December 31, 2024 and 2023, short-term borrowings were $10.0 million, in short-term FHLB advances.
In contrast, investment in nonresidential structures boomed last year, increasing 14.8% concentrated in manufacturing structures. The year’s growth was also supported by a jump in government spending, especially at the state and local level. The S&P 500 finished 2023 up 26.3% and the Russell 2000 index finished 2023 up 16.9%. Meanwhile, progress in lowering inflation was substantial.
The year’s growth was also supported by a jump in government spending, especially at the state and local level. The S&P 500 finished 2024 up 23.3% and the Russell 2000 index finished 2024 up 10.0%. Meanwhile, progress in lowering inflation was substantial.
Non-interest Income: Non-interest income decreased by $1.9 million to $1.1 million for the year ended December 31, 2023, from the $3.0 million recognized during 2022.
Non-interest Income: Non-interest income increased by $7.8 million to $8.9 million for the year ended December 31, 2024, from $1.1 million for the year ended December 31, 2023.
The balance of loan delinquencies increased $1.5 million at December 31, 2023 when compared to December 31, 2022, however, total delinquencies decreased as a percentage of total loans from 0.63% at December 31, 2022 to 0.33% at December 31, 2023.
The balance of loan delinquencies increased $6.5 million at December 31, 2024 when compared to December 31, 2023, and as a percentage of total loans, delinquencies increased from 0.35% at December 31, 2023 to 0.61% at December 31, 2024. Total nonperforming loans increased $9.9 million when comparing December 31, 2024 to December 31, 2023.
This evaluation has subjective components requiring material estimates, including forecasted national economic conditions such as GDP and unemployment, expected default probabilities, the expected loss given default, and the amounts and timing of expected future cash flows. All of these factors may be susceptible to significant change.
This evaluation has subjective components requiring material estimates, including forecasted national economic conditions such as U.S. GDP and U.S civilian unemployment rate, expected default probabilities, the expected loss given default, and the amounts and timing of expected future cash flows. This evaluation is also subject to adjustment through qualitative factor considerations.
In addition, the allowance for credit losses on PCD loans acquired in the Partners Merger was $4.3 million. Management noted that the Company experienced increases in both overall loan delinquencies and non-performing loans when comparing December 31, 2023 to December 31, 2022 and attributes the majority of these increases to loans acquired in the Partners Merger.
The Company experienced increases in both overall loan delinquencies and non-performing loans when comparing December 31, 2024 to December 31, 2023 and attributed the majority of these increases to loans acquired in the Partners Merger.
The balance of subordinated debt was $61.4 million and $40.5 million at December 31, 2023 and 2022, respectively. Total shareholders’ equity increased by $127.2 million, or 91.8%, from $138.6 million at December 31, 2022, to $265.8 million at December 31, 2023.
The balance of subordinated debt was $62.0 million and $61.4 million at December 31, 2024 and 2023, respectively. Total shareholders’ equity increased by $14.4 million, or 5.43%, from $265.8 million at December 31, 2023, to $280.2 million at December 31, 2024. The increase was primarily attributable to net income of $26.2 million for the year ended December 31, 2024.
These increases were partially offset by a net loss of $12.0 million, and dividends paid of $4.9 million. 45 Comparison of Results of Operations for the Years Ended December 31, 2023 and 2022 General: Net loss was $12.0 million for the year ended December 31, 2023, or ($0.67) per diluted share, a decrease of $17.6 million compared to net income of $5.6 million, or $0.49 per diluted share, for the year ended December 31, 2022.
Comparison of Results of Operations for the Years Ended December 31, 2024 and 2023 General: Net income was $26.2 million for the year ended December 31, 2024, or $0.71 per diluted share, an increase of $38.2 million compared to a net loss of $12.0 million, or ($0.67) per diluted share, for the year ended December 31, 2023.
The decrease in net income for the year ended December 31, 2023 as compared to the prior year was primarily the result of an increase in interest expense of $19.2 million, an increase in noninterest expense of $18.0 million due primarily to expenses related to the Partners Merger, and an increase in provision for credit losses of $8.0 million.
The increase in net income for the year ended December 31, 2024 as compared to the prior year was primarily the result of an increase in interest and dividend income of $93.5 million and an increase in noninterest income of $7.8 million.
Cash $ 55,501 $ 1,966 3.54 % $ 56,783 $ 533 0.94 % Securities Taxable (1) 84,860 3,260 3.84 % 78,629 2,175 2.77 % Tax-Exempt 38,591 1,495 3.87 % 40,388 1,468 3.63 % Total Securities 123,451 4,755 3.85 % 119,017 3,643 3.06 % Total Cash Equiv. and Investments 178,952 6,721 3.76 % 175,800 4,176 2.38 % Total Loans (3) 1,071,864 58,791 5.48 % 795,908 36,396 4.57 % Total Interest-Earning Assets 1,250,816 65,512 5.24 % 971,708 40,572 4.18 % Other Assets 106,267 88,485 Total Assets $ 1,357,083 $ 1,060,193 Interest bearing demand $ 269,615 $ 5,684 2.11 % $ 271,681 $ 1,713 0.63 % Money market demand 278,418 7,053 2.53 % 229,979 1,911 0.83 % Time deposits 301,101 9,901 3.29 % 205,636 1,713 0.83 % Total Borrowings (4) 90,468 3,849 4.25 % 55,980 1,942 3.47 % Total Interest-Bearing Liabilities 939,602 26,487 2.82 % 763,276 7,279 0.95 % Non Int Bearing Deposits 245,703 173,938 Total Cost of Funds $ 1,185,305 $ 26,487 2.23 % $ 937,214 $ 7,279 0.78 % Other Liabilities 19,850 15,806 Total Liabilities $ 1,205,155 $ 953,020 Shareholders' Equity $ 151,928 $ 107,173 Total Liabilities & Shareholders' Equity $ 1,357,083 $ 1,060,193 Net Interest Income/Spread (FTE) 39,025 2.42 % 33,293 3.22 % Tax-Equivalent Basis Adjustment (314 ) (308 ) Net Interest Income $ 38,711 $ 32,985 Net Interest Margin 3.09 % 3.39 % (1) Taxable income on securities includes income from available for sale securities and income from certificates of deposits with other banks.
Cash $ 111,790 $ 4,890 4.37 % $ 55,501 $ 1,966 3.54 % Securities Taxable (1) 128,140 6,206 4.84 % 84,860 3,260 3.84 % Tax-Exempt 43,134 1,839 4.26 % 38,591 1,495 3.87 % Total Securities 171,274 8,045 4.70 % 123,451 4,755 3.85 % Total Cash Equiv. and Investments 283,064 12,935 4.57 % 178,952 6,721 3.76 % Total Loans (3)(4) 2,290,618 146,175 6.38 % 1,071,864 58,791 5.48 % Total Interest-Earning Assets 2,573,682 159,110 6.18 % 1,250,816 65,512 5.24 % Other Assets 205,568 106,267 Total Assets $ 2,779,250 $ 1,357,083 Interest bearing demand (5) $ 476,686 $ 10,344 2.17 % $ 269,615 $ 5,684 2.11 % Money market demand (5) 579,232 12,981 2.24 % 278,418 7,053 2.53 % Time deposits (5) 617,894 27,708 4.48 % 301,101 9,901 3.29 % Total Borrowings (6) 149,572 7,797 5.21 % 90,468 3,849 4.25 % Total Interest-Bearing Liabilities 1,823,384 58,830 3.23 % 939,602 26,487 2.82 % Non Int Bearing Deposits (5) 653,966 245,703 Total Cost of Funds $ 2,477,350 $ 58,830 2.37 % $ 1,185,305 $ 26,487 2.23 % Other Liabilities 29,515 19,850 Total Liabilities $ 2,506,865 $ 1,205,155 Shareholders' Equity $ 272,385 $ 151,928 Total Liabilities & Shareholders' Equity $ 2,779,250 $ 1,357,083 Net Interest Income/Spread (FTE) 100,280 2.95 % 39,025 2.42 % Tax-Equivalent Basis Adjustment (386 ) (314 ) Net Interest Income $ 99,894 $ 38,711 Net Interest Margin 3.88 % 3.09 % (1) Taxable income on securities includes income from available for sale securities and income from certificates of deposits with other banks.
Also, some high-profile large companies have announced large scale layoffs in efforts to reduce costs. 38 In 2023, financial markets were impacted by the rate on the benchmark 10-year Treasury note remaining high relative to the past 10 years. This trend has resulted in higher borrowing costs for businesses, consumers, and the government.
This has the potential to lead to other economic factors including a slowing of economic growth which would affect businesses and consumers alike. In 2024, financial markets were impacted by the rate on the benchmark 10-year Treasury note remaining high relative to the past 10 years. This trend has resulted in higher borrowing costs for businesses, consumers, and the government.
For the year ended December 31, 2023, the provision for credit losses consisted of $9.3 million related to loans, $90 thousand related to unfunded commitments, and a credit of $21 thousand related to securities. The amount of the provision for credit losses recognized during 2023 can be attributed to a few factors.
For the year ended December 31, 2024, the provision for credit losses consisted of $642 thousand related to loans, a credit of $332 thousand related to unfunded commitments, and a credit of $53 thousand related to securities.
The increase was primarily due to: Primary Cash Inflows • Proceeds from sales of available for sale investment securities of $91.4 million; • Net cash acquired in the Partners Merger of $41.7 million; • Net increase in deposits of $51.8 million; • Net cash from investment securities (calls, maturities, and principal repayments) of $11.7 million; • Proceeds from redemption of certificates of deposits with other banks of $5.6 million; and • Net proceeds from issuance of common stock of $10.1 million.
The increase was primarily due to: Primary Cash Inflows • Net increase in deposits of $153.4 million; • Proceeds from long-term borrowings of $40.0 million; • Cash from operating activities of $25.4 million; • Net cash from investment securities (calls, maturities, and principal repayments) of $28.5 million; and • Proceeds from sales of available for sale investment securities of $1.7 million.
The decrease in net realized gain (loss) on the sale of debt securities was primarily the result of a loss on the sale of an investment in the subordinated notes of Signature Bank which was taken into FDIC receivership during the first quarter of 2023.
Additionally, the Company recognized a loss on the sale of an investment in the subordinated notes of Signature Bank which was taken into FDIC receivership in the first quarter of 2023. The Company sold our investment and recognized a loss of $2.4 million during the year ended December 31, 2023.
Additionally, total nonperforming loans increased $4.6 million when comparing December 31, 2023 to December 31, 2022, however, as a percentage of total loans, the increase in non-performing loans only increased three basis points, indicating a continued strong performance on an overall portfolio basis. The loans that were individually assessed required a specific reserve of only $133 thousand.
As a percentage of total loans non-performing loans increased from 33 basis points at December 31, 2023 to 76 basis points at December 31, 2024. The loans that were individually assessed required a specific reserve of $4.9 million at December 31, 2024, compared to $133 thousand December 31, 2023.
Recent Market Conditions The Company’s financial condition and performance are all highly dependent on the business environment in the market area in which we operate and in the United States as a whole. 2023’s major economic headwinds included the spring banking crisis, slower but still stubbornly high inflation, rising interest rates, and mounting geopolitical risks, including the war in Ukraine and the Israeli/Hamas war in Gaza.
Recent Market Conditions The Company's financial condition and performance are all highly dependent on the business environment in the market area in which we operate and in the United States as a whole.
Management utilizes brokered deposits as a supplement to core deposit funding from time to time and does not consider brokered deposits to be a primary source of funding. 44 The table below presents the daily average balances by deposit type and weighted average rates paid thereon for the years ended December 31, 2023 and 2022.
Management utilizes brokered deposits as a supplement to core deposit funding from time to time and does not consider brokered deposits to be a primary source of funding.
Weighted average yields have been computed on a fully taxable-equivalent basis using a tax rate of 21%. Mortgage-backed securities are included in maturity categories based on their contractual maturity date. 39 Expected maturities may differ from contractual maturities because issuers may have the right to call or prepay obligations.
The following table summarizes the maturity distribution schedule with corresponding weighted-average yields of securities available for sale and held-to-maturity as of December 31, 2024, at carrying value. Weighted average yields have been computed on a fully taxable-equivalent basis using a tax rate of 21%. Mortgage-backed securities are included in maturity categories based on their contractual maturity date.
Consistent with the Company’s goals to operate as a sound and profitable financial institution, the Company actively seeks to maintain the Bank's status as a well-capitalized institution in accordance with regulatory standards.
(In Thousands) Liquidity Source Capacity Outstanding Available Federal Home Loan Bank $ 773,832 $ 50,000 $ 723,832 Federal Reserve Bank Discount Window 24,070 — 24,070 Correspondent Banks 77,000 — 77,000 Total $ 874,902 $ 50,000 $ 824,902 Consistent with the Company’s goals to operate as a sound and profitable financial institution, the Company actively seeks to maintain the Bank's status as a well-capitalized institution in accordance with regulatory standards.
The table below excludes certain investment securities that have no scheduled maturity date.
Expected maturities may differ from contractual maturities because issuers may have the right to call or prepay obligations. The table below excludes certain investment securities that have no scheduled maturity date.
This Management’s Discussion and Analysis is presented in the following sections: • Completion of Partners Merger • Completion of Gratz Merger • Completion of Initial Public Offering • Overview and Strategy • Recent Market Conditions • Comparison of Financial Condition at December 31, 2023 and 2022 • Comparison of Operating Results for the Years Ended December 31, 2023 and 2022 • Liquidity, Commitments, and Capital Resources • Off-Balance Sheet Arrangements • Critical Accounting Estimates • Recently Issued Accounting Standards Completion of Partners Merger On November 30, 2023, the LINKBANCORP completed its merger with Partners Bancorp ("Partners"), and its wholly owned subsidiaries, The Bank of Delmarva and Virginia Partners Bank, pursuant to which Partners merged with and into the Company with the Company as the surviving corporation (the "Partners Merger").
This Management’s Discussion and Analysis is presented in the following sections: • Pending Sale of New Jersey Solutions Centers • Completion of Partners Merger • Overview and Strategy • Recent Market Conditions • Comparison of Financial Condition at December 31, 2024 and 2023 • Comparison of Operating Results for the Years Ended December 31, 2024 and 2023 • Liquidity, Commitments, and Capital Resources • Off-Balance Sheet Arrangements • Critical Accounting Estimates • Recently Issued Accounting Standards Pending Sale of New Jersey Solutions Centers On May 9, 2024, the Bank entered into a purchase and assumption agreement (the “Agreement”) with American Heritage Federal Credit Union (“AHFCU”) pursuant to which AHFCU will purchase certain assets and assume certain liabilities (the “Transaction” or "New Jersey Branch Sale") of the New Jersey operations of the Bank, including all three branch locations (including two branch leases).
Generally, loans that do not share similar risk characteristics are collateral-dependent and impairment is measured through the collateral method. When the measurement of these loans is less than the recorded investment in the loan, the shortfall is recorded through the allowance for credit losses.
Generally, loans that do not share similar risk characteristics are collateral-dependent and impairment is measured through the collateral method. Appraisals of the underlying value of property securing loans are critical in determining impairment. Assumptions used in appraisals could affect the valuation of a property securing a loan and the related allowance determined.
The average balance of loans increased $276.0 million during the year ended December 31, 2023 as compared to the prior year due primarily to the loan growth that the Company achieved as a result of the closing of the Partners Merger.
The growth in the average balance of interest earning assets was due primarily to the increase in the average balance of loans which increased $1.22 billion to $2.29 billion for the year ended December 31, 2024 as compared to 2023 as a result of growth in the commercial loan portfolio primarily due to the completion of the Partners Merger.
This growth included an increase in the average yield on interest earning assets which increased 106 basis points from 4.18% for the year ended December 31, 2022 to 5.24% for the year ended December 31, 2023.
The average yield of loans increased 90 basis points from 5.48% for the year ended December 31, 2023 to 6.38% for the year ended December 31, 2024 which contributed $20.6 million to the increase in interest income.
The increase in interest expense was due to the increase in the average rates paid on interest bearing liabilities, which increased 187 basis points from 0.95% for the year ended December 31, 2022 to 2.82% for the year ended December 31, 2023 primarily as a result of the increase in rates of our money market demand deposits, interest bearing demand deposits and time deposits.
The average rate paid on interest bearing liabilities increased 41 basis points from 2.82% for the year ended December 31, 2023 to 3.23% for the year ended December 31, 2024 due to the higher interest rate environment and in particular its impact on deposit costs, specifically time deposits.
(In Thousands) Amount of Allowance Allocated Percent of Loans in Each Category to Total Loans Total Loans Ratio of Allowance Allocated to Loans in Each Category December 31, 2023 Agriculture loans $ 12 2.94 % $ 65,861 0.02 % Construction loans 959 7.96 % 178,483 0.54 % Commercial & industrial loans 2,940 10.63 % 238,343 1.23 % Commercial real estate loans - Multifamily 1,483 8.07 % 180,788 0.82 % Owner occupied 6,572 22.39 % 501,732 1.31 % Non-owner occupied 5,773 25.92 % 580,972 0.99 % Residential real estate loans - First liens 4,778 17.95 % 402,433 1.19 % Second liens and lines of credit 1,072 3.16 % 70,747 1.52 % Consumer and other loans 99 0.75 % 16,756 0.59 % Municipal loans 79 0.23 % 5,244 1.51 % Total $ 23,767 100.00 % $ 2,241,359 1.06 % December 31, 2022 Agriculture loans $ 33 1.68 % $ 15,591 0.21 % Commercial & industrial loans 583 11.20 % 103,874 0.56 % Paycheck Protection Program ("PPP") loans - 0.10 % 881 — Commercial real estate loans 2,462 58.31 % 540,914 0.46 % Residential real estate loans 1,536 27.04 % 250,832 0.61 % Consumer and other loans 40 1.08 % 10,057 0.40 % Municipal loans 12 0.59 % 5,466 0.22 % Total $ 4,666 100.00 % $ 927,615 0.50 % The allowance for credit losses increased $19.1 million from $4.7 million at December 31, 2022 to $23.8 million at December 31, 2023.
(In Thousands) Amount of Allowance Allocated Percent of Loans in Each Category to Total Loans Total Loans Ratio of Allowance Allocated to Loans in Each Category December 31, 2024 Agriculture loans $ 11 3.00 % $ 67,741 0.02 % Construction loans 893 6.77 % 152,619 0.59 % Commercial & industrial loans 4,093 10.90 % 245,833 1.66 % Commercial real estate loans Multifamily 1,805 9.39 % 211,778 0.85 % Owner occupied 5,611 21.19 % 477,742 1.17 % Non-owner occupied 9,345 27.86 % 628,237 1.49 % Residential real estate loans First liens 3,395 16.56 % 373,469 0.91 % Second liens and lines of credit 1,154 3.40 % 76,713 1.50 % Consumer and other loans 80 0.76 % 17,086 0.47 % Municipal loans 48 0.17 % 3,886 1.24 % Total $ 26,435 100.00 % $ 2,255,104 1.17 % December 31, 2023 Agriculture loans $ 12 3.10 % $ 65,861 0.02 % Construction loans 959 7.60 % 161,825 0.59 % Commercial & industrial loans 2,940 10.92 % 232,412 1.26 % Commercial real estate loans Multifamily 1,483 8.31 % 176,843 0.84 % Owner occupied 6,572 22.32 % 474,964 1.38 % Non-owner occupied 5,773 25.91 % 551,481 1.05 % Residential real estate loans First liens 4,778 17.67 % 376,092 1.27 % Second liens and lines of credit 1,072 3.13 % 66,648 1.61 % Consumer and other loans 99 0.79 % 16,740 0.59 % Municipal loans 79 0.25 % 5,244 1.51 % Total $ 23,767 100.00 % $ 2,128,110 1.12 % The allowance for credit losses increased $2.7 million from $23.8 million at December 31, 2023 to $26.4 million at December 31, 2024.
Provision for Credit Losses: The provision for credit losses increased by $8.0 million from $1.3 million for the year ended December 31, 2022 to $9.3 million for the year ended December 31, 2023. The provision for credit losses consists of provisions related to maintaining appropriate reserves for estimated future losses related to loans, unfunded commitments, and held-to-maturity securities.
Provision for Credit Losses: The provision for credit losses decreased by $9.0 million from $9.3 million for the year ended December 31, 2023 to $257 thousand for the year ended December 31, 2024.
Primary Cash Outflows • Net increase in loans receivable of $65.9 million; • Net decrease in short-term borrowings of $65.6 million; • Purchase of investment securities held to maturity of $11.3 million; and • Payment of dividends of $4.9 million.
Primary Cash Outflows • Net increase in loans receivable of $91.4 million; • Purchase of investment securities available for sale of $57.3 million; and • Payment of dividends of $11.1 million. Securities available-for-sale increased by $30.1 million, or 26.1%, to $145.6 million at December 31, 2024 from $115.5 million at December 31, 2023 due to purchases of $57.3 million.
The Company sold our investment and recognized a loss of $2.4 million during the three months ended March 31, 2023. Non-interest Expenses: Non-interest expenses increased $18.0 million or 64.7%, from $27.8 million for the year ended December 31, 2022, to $45.8 million for the year ended December 31, 2023.
Non-interest Expenses: Non-interest expenses increased $29.1 million or 63.4%, from $45.8 million for the year ended December 31, 2023, to $74.9 million for the year ended December 31, 2024.
Within 1 Year 1-5 Years 5-10 Years After 10 Years Total (in thousands) Amount Weighted Average Yield Amount Weighted Average Yield Amount Weighted Average Yield Amount Weighted Average Yield Amount Weighted Average Yield Available for Sale: US Government Agency securities $ 1,964 0.22% $ 6,062 2.46% $ 3,026 0.16% $ 1,933 0.27% $ 12,985 1.26% US Government Treasury securities 4,942 0.27% — — — — — — 4,942 0.27% Obligations of state and political subdivisions 1,241 3.14% 6,124 3.36% 15,833 2.81% 23,847 3.27% 47,045 3.12% Mortgage-backed securities in government-sponsored entities — — 672 3.72% 15,329 3.80% 32,180 3.09% 48,181 3.33% Other securities 13 — — — 388 12.07% 213 10.68% 614 11.33% Total $ 8,160 0.70% $ 12,858 2.95% $ 34,576 3.12% $ 58,173 3.10% $ 113,767 2.92% Held to Maturity: Corporate debentures $ — — $ 6,000 8.52% $ 9,000 8.02% $ — — $ 15,000 8.22% Structured mortgage-backed securities — — 1,757 9.83% — — 19,978 5.43% 21,735 6.95% Total $ — — $ 7,757 8.81% $ 9,000 8.02% $ 19,978 5.43% $ 36,735 7.47% In 2023, the Company purchased investment securities classified as held to maturity of $11.3 million.
Within 1 Year 1-5 Years After 5-10 Years After 10 Years Total (in thousands) Amount Weighted Average Yield Amount Weighted Average Yield Amount Weighted Average Yield Amount Weighted Average Yield Amount Weighted Average Yield Available for Sale: US Government Agency securities $ — — $ 4,823 4.85% $ 7,154 5.22% $ 1,096 6.12% $ 13,073 5.16% Obligations of state and political subdivisions 655 2.95% 8,956 2.89% 13,774 3.24% 23,816 3.95% 47,201 3.53% Mortgage-backed securities in government-sponsored entities 39 2.47% 367 2.70% 16,691 2.25% 67,686 4.62% 84,783 4.15% Other securities — — 377 5.31% — — 156 (13.75)% 533 (2.00)% Total $ 694 2.93% $ 14,523 3.58% $ 37,619 3.18% $ 92,754 4.44% $ 145,590 4.02% Held to Maturity: Corporate debentures $ 3,000 8.50% $ 3,000 4.38% $ 9,250 5.29% $ — — $ 15,250 5.81% Structured mortgage-backed securities — — — — — — 16,717 4.63% 16,717 4.63% Total $ 3,000 8.50% $ 3,000 4.38% $ 9,250 5.31% $ 16,717 4.63% $ 31,967 5.19% 40 In 2024, the Company purchased an investment security classified as held to maturity of $250 thousand.
These rate increases coupled with new loan originations in 2023 resulted in the higher average yield on loans compared to 2022. Interest Expense: Interest expense increased by $19.2 million or 263.9% to $26.5 million for the year ended December 31, 2023, compared to $7.3 million for the year ended December 31, 2022.
Interest Expense: Interest expense increased by $32.3 million or 122.11% to $58.8 million for the year ended December 31, 2024, compared to $26.5 million for the year ended December 31, 2023.
Completion of Gratz Merger On September 18, 2021, LINKBANCORP completed its merger with GNB Financial Services, Inc. (the “Gratz Merger”), with LINKBANCORP as the surviving corporation. Immediately following the Gratz Merger, LINKBANK, a wholly-owned subsidiary of LINKBANCORP, merged with and into The Gratz Bank, a wholly-owned subsidiary of GNBF, with The Gratz Bank as the surviving bank.
Completion of Partners Merger On November 30, 2023, LINKBANCORP completed its merger with Partners Bancorp ("Partners"), and its wholly owned subsidiaries, The Bank of Delmarva and Virginia Partners Bank, pursuant to which Partners merged with and into the Company with the Company as the surviving corporation (the "Partners Merger").
December 31, 2023 Non-Accrual Loans (In Thousands) Total Loans Amount Percent of Loans in Category Agriculture loans $ 65,861 $ — — Construction loans 178,483 191 0.11 % Commercial & industrial loans 238,343 61 0.03 % Commercial real estate loans Multifamily 180,788 — — Owner occupied 501,732 2,548 0.51 % Non-owner occupied 580,972 1,229 0.21 % Residential real estate loans First liens 402,433 2,707 0.67 % Second liens and lines of credit 70,747 294 0.42 % Consumer and other loans 16,756 7 0.04 % Municipal loans 5,244 - — Total $ 2,241,359 $ 7,037 0.31 % Allowance for credit losses $ 23,767 Ratio of allowance for credit losses to total loans 1.06 % Ratio of non-accrual loans to total loans 0.31 % Ratio of allowance for credit losses to non-accrual loans 337.74 % December 31, 2022 Non-Accrual Loans Total Loans Amount Percent of Loans in Category Agriculture loans $ 15,591 $ — — Commercial & industrial loans 103,874 35 0.03 % Paycheck Protection Program ("PPP") 881 — — Commercial real estate loans 540,914 231 0.04 % Residential real estate loans 250,832 1,652 0.66 % Consumer and other loans 10,057 — — Municipal loans 5,466 — — Total $ 927,615 $ 1,918 0.21 % Excluding PPP loans $ 926,734 $ 1,918 Allowance for credit losses $ 4,666 Ratio of allowance for credit losses to total loans 0.50 % Ratio of non-accrual loans to total loans 0.21 % Ratio of allowance for credit losses to non-accrual loans 243.27 % 42 The table below provides an allocation of the allowance for credit losses by loan category at December 31, 2023 and 2022.
December 31, 2024 Non-Accrual Loans (In Thousands) Total Loans Amount Percent of Loans in Category Agriculture loans $ 67,741 $ — — Construction loans 152,619 9 0.01 % Commercial & industrial loans 245,833 132 0.05 % Commercial real estate loans Multifamily 211,778 — — Owner occupied 477,742 9,752 2.04 % Non-owner occupied 628,237 4,329 0.69 % Residential real estate loans First liens 373,469 1,975 0.53 % Second liens and lines of credit 76,713 482 0.63 % Consumer and other loans 17,086 — — Municipal loans 3,886 — — Total $ 2,255,104 $ 16,679 0.74 % Allowance for credit losses $ 26,435 Ratio of allowance for credit losses to total loans 1.17 % Ratio of non-accrual loans to total loans 0.74 % Ratio of allowance for credit losses to non-accrual loans 158.49 % December 31, 2023 Non-Accrual Loans Total Loans Amount Percent of Loans in Category Agriculture loans $ 65,861 $ — — Construction loans 161,825 191 0.12 % Commercial & industrial loans 232,412 61 0.03 % Commercial real estate loans Multifamily 176,843 — — Owner occupied 474,964 2,548 0.54 % Non-owner occupied 551,481 1,229 0.22 % Residential real estate loans First liens 376,092 2,707 0.72 % Second liens and lines of credit 66,648 294 0.44 % Consumer and other loans 16,740 7 0.04 % Municipal loans 5,244 — — Total $ 2,128,110 $ 7,037 0.33 % Allowance for credit losses $ 23,767 Ratio of allowance for credit losses to total loans 1.12 % Ratio of non-accrual loans to total loans 0.33 % Ratio of allowance for credit losses to non-accrual loans 337.74 % 43 The table below provides an allocation of the allowance for credit losses by loan category at December 31, 2024 and 2023.
Cash $ 1,445 $ (12 ) $ 1,433 Securities Taxable 912 173 1,085 Tax-Exempt 92 (65 ) 27 Total Securities 1,004 108 1,112 Total Loans 9,754 12,641 22,395 Total Interest-Earning Assets 12,203 12,737 24,940 Interest Expense: Interest bearing demand 3,984 (13 ) 3,971 Money market demand 4,740 402 5,142 Time deposits 7,396 792 8,188 Total Borrowings 706 1,201 1,907 Total Interest-Bearing Liabilities 16,826 2,382 19,208 Change in Net Interest Income $ (4,623 ) $ 10,355 $ 5,732 Net Interest Income: Net interest income before provision for credit losses increased by $5.7 million, or 17.36%, to $38.7 million for the year ended December 31, 2023, compared to $33.0 million for the year ended December 31, 2022.
Cash $ 928 $ 1,996 $ 2,924 Securities Taxable 1,281 1,665 2,946 Tax-Exempt 168 176 344 Total Securities 1,449 1,841 3,290 Total Loans 20,616 66,768 87,384 Total Interest-Earning Assets 22,993 70,605 93,598 Interest Expense: Interest bearing demand 286 4,374 4,660 Money market demand (1,680 ) 7,608 5,928 Time deposits 7,353 10,454 17,807 Total Borrowings 1,436 2,512 3,948 Total Interest-Bearing Liabilities 7,395 24,948 32,343 Change in Net Interest Income $ 15,598 $ 45,657 $ 61,255 Net Interest Income: Net interest income before provision for credit losses increased by $61.2 million, or 158.05%, to $99.9 million for the year ended December 31, 2024, compared to $38.7 million for the year ended December 31, 2023.
Also see Note 5 - Allowance for Credit Losses in the accompanying notes to the consolidated financial statements included elsewhere in this report. The balances at December 31, 2022 were reclassified on January 1, 2023 in connection with the adoption of ASU 2016-13 as described in Note 1 of the Consolidated Financial Statements.
The table below does not include loans that are held for sale related to the New Jersey Branch Sale. Also see Note 5 - Allowance for Credit Losses in the accompanying notes to the consolidated financial statements included elsewhere in this report.

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