8-K/A
STEELE BANCORP INC (STLE)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
(Amendment No. 1)
CURRENT REPORT
Pursuant to Section 13 or 15(d) of The Securities Exchange Act of 1934
August 1, 2025
Date of Report (Date of earliest event reported)
STEELE BANCORP, INC.
(Exact name of registrant as specified in its charter)
| Pennsylvania | 333-284191 | 23-2362874 |
|---|---|---|
| (State or other jurisdiction<br><br> <br>of incorporation) | (Commission<br><br> <br>File Number) | (IRS Employer<br><br> <br>Ident. No.) |
| 250 East Chestnut Street, Mifflinburg, Pennsylvania 17844 | ||
| --- | ||
| (Address of principal executive offices) (Zip Code) | ||
| (570) 966-1041<br><br> <br>Registrant’s telephone number, including area code | ||
| Mifflinburg Bancorp, Inc. | ||
| (Former name or former address, if changed since last report.) |
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
☐ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
☐ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
☐ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
☐ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4 (c))
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol | Name of each exchange on which registered |
|---|---|---|
| None | None | None |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (17 CFR §230.405) or Rule 12b-2 of the Securities Exchange Act of 1934 (17 CFR §240.12b-2). ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Explanatory Note
On August 1, 2025, Mifflinburg Bancorp, Inc. ("Mifflinburg") completed its previously announced merger with Northumberland Bancorp ("Northumberland") pursuant to an Agreement and Plan of Merger, dated as of September 24, 2024, as amended December 4, 2024 (the "Merger Agreement"), by and between Mifflinburg and Northumberland. Under the terms of the Merger Agreement, (i) Northumberland merged with and into Mifflinburg, with Mifflinburg being the surviving entity, and (ii) Northumberland's wholly-owned banking subsidiary, The Northumberland National Bank ("Norry Bank"), merged with and into Mifflinburg's wholly-owned banking subsidiary, Mifflinburg Bank and Trust Company ("Mifflinburg Bank"), with Mifflinburg Bank being the surviving bank (the "Mergers"). In connection with the Mergers, Mifflinburg changed its name to Steele Bancorp, Inc. (“Steele”) and Mifflinburg Bank changed its name to Central Penn Bank & Trust (“Central Penn”).
On August 01, 2025, Steele filed a Current Report on Form 8-K reporting the completion of the Mergers (the “Original Report”). This Amendment No. 1 to the Original Report is being filed with the Securities and Exchange Commission (the “Commission”) solely to amend and supplement Item 9.01 of the Original Report, as described in Item 9.01 below. This Amendment No. 1 makes no other amendments to the Original Report.
Item 9.01 Financial Statements and Exhibits
| (a) | Financial Statements of Business Acquired |
|---|
Pursuant to General Instruction B.3 of Form 8-K, the audited consolidated financial statements of Northumberland as of and for the years ended December 31, 2024 and 2023, including the independent auditor’s report, are filed herewith as Exhibit 99.1 and incorporated by reference into this Item 9.01(a).
The unaudited consolidated financial statements Northumberland as of June 30, 2025 and December 31, 2024 and for the six-month periods ended June 30, 2025 and 2024 are filed herewith as Exhibit 99.2 and incorporated by reference into this Item 9.01(a).
| (b) | Pro-Forma Financial Information |
|---|
The unaudited pro forma condensed consolidated combined financial information required by this Item 9.01(b) is filed herewith as Exhibit 99.3 and is incorporated by reference into this Item 9.01(b).
| (d) | Exhibits |
|---|
The following Exhibits are filed with this report on Form 8-K:
99.3 Unaudited Pro forma Condensed Consolidated Combined Financial Information
104 Cover Page Interactive Data File (embedded in the cover page formatted in Inline XBRL)
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| STEELE BANCORP, INC. | |||
|---|---|---|---|
| Dated: October 10, 2025 | |||
| By: | /s/ Thomas C. Graver, Jr. | ||
| Thomas C. Graver, Jr. | |||
| Senior Executive Vice President and<br><br> <br>Chief Financial Officer |
ex_864425.htm
Exhibit 99.1
NORTHUMBERLAND
BANCORP
Consolidated Financial Statements
December 31, 2024 and 2023
Northumberland Bancorp
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR DECEMBER 31, 2024 & 2023
TABLE OF CONTENTS
| TABLE OF CONTENTS | 1 | |
|---|---|---|
| INDEPENDENT AUDITOR’S REPORT | 2 | |
| CONSOLIDATED BALANCE SHEETS | 4 | |
| CONSOLIDATED STATEMENTS OF INCOME | 5 | |
| CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) | 6 | |
| CONSOLIDATED STATEMENTS OF STOCKHOLDERS’EQUITY | 7 | |
| CONSOLIDATED STATEMENTS OF CASH FLOWS | 8 | |
| 1. | Summary of Significant Accounting Policies | 9 |
| 2. | Investment Securities | 17 |
| 3. | Loans | 20 |
| 4. | Allowance for Credit Loss | 20 |
| 5. | Premises and Equipment | 30 |
| 6. | Leases | 30 |
| 7. | Deposits | 31 |
| 8. | Borrowings and Subordinated Debt | 32 |
| 9. | Employee Stock Ownership Plan | 33 |
| 10. | Revenue Recognition | 34 |
| 11. | Income Taxes | 36 |
| 12. | Commitments and Contingencies | 38 |
| 13. | Regulatory Matters | 39 |
| 14. | Fair Value Measurements | 41 |
| 15. | Fair Value of Financial Instruments | 42 |
| 16. | Related Party Transactions | 44 |
| 17. | Segment information | 44 |
| 18. | Condensed Parent Company Statements | 45 |
| 19. | Pendng Sale | 47 |
| 20. | Subsequent Events | 47 |
Page 1 | 47
Northumberland Bancorp
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR DECEMBER 31, 2024 & 2023
INDEPENDENT AUDITOR’S REPORT
| Crowe LLP<br><br> <br>Independent Member Crowe Global |
|---|
INDEPENDENT AUDITOR'S REPORT
Board of Directors and Stockholders
Northumberland Bancorp
Northumberland, Pennsylvania
Opinion
We have audited the consolidated financial statements of Northumberland Bancorp, which comprise the consolidated balance sheets as of December 31, 2024 and 2023, and the related consolidated statements of income, comprehensive income (loss), stockholders’ equity, and cash flows for the years then ended, and the related notes to the financial statements.
In our opinion, the accompanying consolidated financial statements present fairly, in all material respects, the financial position of Northumberland Bancorp as of December 31, 2024 and 2023, and the results of its operations and its cash flows for the years then ended in accordance with accounting principles generally accepted in the United States of America.
Basis for Opinion
We conducted our audits in accordance with auditing standards generally accepted in the United States of America (GAAS). Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Statements section of our report. We are required to be independent of Northumberland Bancorp and to meet our other ethical responsibilities, in accordance with the relevant ethical requirements relating to our audits. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Responsibilities of Management for the Financial Statements
Management is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with accounting principles generally accepted in the United States of America, and for the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the consolidated financial statements, management is required to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about Northumberland Bancorp’s ability to continue as a going concern for one year from the date the consolidated financial statements are available to be issued*.*
(Continued)
Page 2 | 47
Northumberland Bancorp
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR DECEMBER 31, 2024 & 2023
Auditor’s Responsibilities for the Audit of the Financial Statements
Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance but is not absolute assurance and therefore is not a guarantee that an audit conducted in accordance with GAAS will always detect a material misstatement when it exists. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Misstatements are considered material if there is a substantial likelihood that, individually or in the aggregate, they would influence the judgment made by a reasonable user based on the consolidated financial statements.
In performing an audit in accordance with GAAS, we:
| ● | Exercise professional judgment and maintain professional skepticism throughout the audit. |
|---|---|
| ● | Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud or error, and design and perform audit procedures responsive to those risks. Such procedures include examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. |
| --- | --- |
| ● | Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of Northumberland Bancorp’s internal control. Accordingly, no such opinion is expressed. |
| --- | --- |
| ● | Evaluate the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluate the overall presentation of the consolidated financial statements. |
| --- | --- |
| ● | Conclude whether, in our judgment, there are conditions or events, considered in the aggregate, that raise substantial doubt about Northumberland Bancorp’s ability to continue as a going concern for a reasonable period of time. |
| --- | --- |
We are required to communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit, significant audit findings, and certain internal control–related matters that we identified during the audit.
 <br><br> <br><br><br> <br>Crowe LLP |
|---|
Washington, D.C.
March 31, 2025
Page 3 | 47
Northumberland Bancorp
CONSOLIDATED BALANCE SHEETS
(amounts in thousands except share and per share data)
| Years ended December 31, | 2024 | 2023 | ||||
|---|---|---|---|---|---|---|
| ASSETS | **** | **** | **** | **** | **** | **** |
| Cash and due from banks | $ | 8,924 | 10,473 | |||
| Interest-bearing deposits in other banks | $ | 15,143 | 8,541 | |||
| Total cash and cash equivalents | $ | 24,067 | **** | 19,014 | ||
| Investment securities available-for-sale | $ | 174,777 | 188,114 | |||
| Investment securities held-to-maturity (fair value 2024 - $2,591, 2023 - $3,909) | $ | 2,565 | 4,008 | |||
| Equity Securities | $ | 205 | 167 | |||
| Total investment securities | $ | 177,547 | **** | 192,289 | ||
| Restricted stock, at cost | $ | 2,782 | 2,926 | |||
| Loans held-for-sale | $ | 288 | 629 | |||
| Loans | $ | 433,187 | 429,782 | |||
| Less allowance for credit losses | $ | 3,869 | 4,023 | |||
| Net loans | $ | 429,318 | **** | 425,759 | ||
| Premises and equipment | $ | 7,842 | 8,445 | |||
| Bank-owned life insurance | $ | 14,630 | 15,110 | |||
| Accrued interest and other assets | $ | 9,982 | 10,559 | |||
| Total Assets | $ | 666,456 | **** | 674,731 | ||
| Liabilities and Stockholders' Equity | **** | **** | **** | **** | **** | **** |
| Liabilities | **** | **** | **** | **** | **** | **** |
| Deposits: | ||||||
| Noninterest-bearing demand | $ | 137,631 | 140,423 | |||
| Interest-bearing demand | $ | 140,673 | 164,766 | |||
| Savings | $ | 91,524 | 96,489 | |||
| Time deposits | $ | 213,515 | 191,685 | |||
| Total deposits | $ | 583,343 | **** | 593,363 | ||
| Borrowings | $ | 20,000 | 20,000 | |||
| Subordinated Debt, less unamortized issuance costs | $ | 9,870 | 9,850 | |||
| Accrued interest and other liabilities | $ | 2,390 | 2,403 | |||
| Total liabilities | $ | 615,603 | **** | 625,616 | ||
| Commitments and Contingencies | **** | **** | **** | **** | **** | **** |
| Redeemable common stock held by employee stock ownership plan (ESOP), net of unearned ESOP Shares (see Note 9) | $ | 1,453 | 598 | |||
| Stockholders' Equity | **** | **** | **** | **** | **** | **** |
| Common stock, par value $0.10; 5,000,000 shares authorized, 1,502,500 shares issued in 2024 and 2023 and 1,311,858 shares outstanding in 2024 and 2023 | $ | 150 | 150 | |||
| Capital surplus | $ | 3,832 | 3,832 | |||
| Retained earnings | $ | 63,499 | 62,944 | |||
| Unearned ESOP shares | $ | (397 | ) | (1,008 | ) | |
| Accumulated other comprehensive income (loss) | $ | (13,466 | ) | (14,038 | ) | |
| Treasury stock, at cost (190,642 shares in 2024 and 2023) | $ | (2,765 | ) | (2,765 | ) | |
| Total Stockholders' Equity | $ | 50,853 | 49,115 | |||
| Less maximum cash obligations related to ESOP Shares, net of unearned ESOP shares (see Note 9) | $ | 1,453 | 598 | |||
| Total Stockholders' Equity Less Maximum Cash Obligations Related to ESOP Shares | $ | 49,400 | 48,517 | |||
| Total Liabilities and Stockholders' Equity | $ | 666,456 | **** | 674,731 |
See accompanying notes to consolidated financial statements.
Page 4 | 47
Northumberland Bancorp
CONSOLIDATED STATEMENTS OF INCOME
(amounts in thousands except share and per share data)
| Years ended December 31, | 2024 | 2023 | |||
|---|---|---|---|---|---|
| Interest and Dividend Income | **** | **** | **** | **** | **** |
| Interest and fees on loans: | **** | **** | **** | **** | **** |
| Taxable | $ | 22,188 | 19,382 | ||
| Tax-exempt | $ | 548 | 430 | ||
| Interest on interest-bearing deposits in other banks | $ | 1,165 | 450 | ||
| Interest and dividends on investment securities: | **** | **** | **** | **** | **** |
| Taxable | $ | 4,532 | 4,573 | ||
| Tax-exempt | $ | 549 | 560 | ||
| Dividends | $ | 260 | 233 | ||
| Total Interest and Dividend Income | $ | 29,242 | **** | 25,628 | |
| Interest Expense | **** | **** | **** | **** | **** |
| Deposits | $ | 12,004 | 8,362 | ||
| Borrowings | $ | 896 | 884 | ||
| Subordinated Debt, less unamortized issuance costs | $ | 470 | 450 | ||
| Total Interest Expense | $ | 13,370 | **** | 9,696 | |
| Net Interest Income | $ | 15,872 | 15,932 | ||
| Provision (Credit) for Credit Losses | $ | 0 | (48 | ) | |
| Net Interest Income After Provision (Credit) for Credit Losses | $ | 15,872 | **** | 15,980 | |
| Noninterest Income | **** | **** | **** | **** | **** |
| Service charges on deposit accounts | $ | 1,521 | 1,509 | ||
| Trust services income | $ | 1,360 | 1,151 | ||
| Investment securities gains (loss), net | $ | 1 | (316 | ) | |
| Gains on sales of loans | $ | 194 | 155 | ||
| Earnings on bank-owned life insurance | $ | 805 | 355 | ||
| Change in fair value of equity securities | $ | 38 | 20 | ||
| Other income | $ | 866 | 907 | ||
| Total Noninterest Income | $ | 4,785 | **** | 3,781 | |
| Noninterest Expense | **** | **** | **** | **** | **** |
| Salaries and employee benefits | $ | 11,150 | 10,230 | ||
| Occupancy expenses, net | $ | 872 | 843 | ||
| Equipment expenses | $ | 1,361 | 1,442 | ||
| Professional fees | $ | 1,415 | 884 | ||
| Data processing | $ | 717 | 881 | ||
| Shares tax | $ | 395 | 448 | ||
| Federal deposit insurance expense | $ | 336 | 314 | ||
| Other expense | $ | 2,534 | 2,649 | ||
| Total Noninterest Expense | $ | 18,780 | **** | 17,691 | |
| Income before income taxes | $ | 1,877 | 2,070 | ||
| Income Taxes | $ | 115 | 178 | ||
| Net Income | $ | 1,762 | **** | 1,892 | |
| Earnings Per Share | $ | 1.37 | **** | 1.47 | |
| Weighted-Average Shares Outstanding | $ | 1,284,827 | **** | 1,287,113 |
See accompanying notes to consolidated financial statements.
Page 5 | 47
Northumberland Bancorp
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(amounts in thousands)
| Years ended December 31, | 2024 | 2023 | ||||
|---|---|---|---|---|---|---|
| Net Income | $ | 1,762 | **** | 1,892 | ||
| Other Comprehensive Income / (Loss) | **** | **** | **** | **** | **** | **** |
| Change in unrealized holding gains/(losses) on investment securities available-for-sale | $ | 725 | 5,148 | |||
| Tax effect | $ | (152 | ) | (1,081 | ) | |
| Reclassification adjustment for investment securities (gains) / losses recognized in net income | $ | (1 | ) | 316 | ||
| Tax effect | $ | (0 | ) | (66 | ) | |
| Other Comprehensive Income (Loss), Net of Tax | $ | 572 | **** | 4,317 | ||
| Comprehensive Income (Loss) | $ | 2,334 | **** | 6,209 |
See accompanying notes to consolidated financial statements.
Page 6 | 47
Northumberland Bancorp
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(amounts in thousands except share and per share data)
| Capital<br><br> <br>Surplus | Retained<br><br> <br>Earnings | Accum.<br><br> <br>Comp Inc | Treasury<br><br> <br>Stock | Unearned<br><br> <br>ESOP<br><br> <br>Shares | Maximum Cash Obligation<br><br> <br>related to ESOP Shares, net of unearned ESOP Shares | Total Stockholders' Equity<br><br> <br>Less Maximum Cash<br><br> <br>Obligation Related to the<br><br> <br>ESOP Shares | |||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Balance December 31, 2022 | 150 | **** | 3,832 | **** | 62,875 | **** | (18,355 | ) | **** | (2,765 | ) | **** | (837 | ) | **** | (775 | ) | **** | 44,125 | ||
| Reclassification related to the adoption of ASU 2016-13 | (595 | ) | **** | **** | **** | **** | **** | **** | **** | **** | **** | **** | **** | **** | **** | (595 | ) | ||||
| Net Income | 1,892 | **** | **** | **** | **** | **** | **** | **** | **** | **** | **** | **** | **** | **** | 1,892 | ||||||
| Other Comprehensive Income (Loss) | 4,317 | **** | **** | **** | **** | **** | **** | **** | **** | **** | **** | 4,317 | |||||||||
| Shares purchased for ESOP (24,307 shares) | (559 | ) | (559 | ) | **** | (1,118 | ) | ||||||||||||||
| ESOP shares committed to be released (10,557 shares) | (21 | ) | 388 | 388 | **** | 755 | |||||||||||||||
| Change related to ESOP Shares | 348 | **** | 348 | ||||||||||||||||||
| Dividends declared (0.92 per share) | (1,207 | ) | **** | **** | **** | **** | **** | **** | **** | **** | **** | **** | **** | **** | **** | (1,207 | ) | ||||
| Balance December 31, 2023 | 150 | **** | 3,832 | **** | 62,944 | **** | (14,038 | ) | **** | (2,765 | ) | **** | (1,008 | ) | **** | (598 | ) | **** | 48,517 | ||
| Net Income | 1,762 | **** | **** | **** | **** | **** | **** | **** | **** | **** | **** | **** | **** | **** | 1,762 | ||||||
| Other Comprehensive Income (Loss) | 572 | **** | **** | **** | **** | **** | **** | **** | **** | **** | **** | 572 | |||||||||
| ESOP shares committed to be released (23,930 shares) | 611 | **** | **** | **** | **** | 611 | |||||||||||||||
| Change related to ESOP Shares | (855 | ) | **** | (855 | ) | ||||||||||||||||
| Dividends declared (0.92 per share) | (1,207 | ) | **** | **** | **** | **** | **** | **** | **** | **** | **** | **** | **** | **** | **** | (1,207 | ) | ||||
| Balance December 31, 2024 | 150 | **** | 3,832 | **** | 63,499 | **** | (13,466 | ) | **** | (2,765 | ) | **** | (397 | ) | **** | (1,453 | ) | **** | 49,400 |
All values are in US Dollars.
See accompanying notes to consolidated financial statements.
Page 7 | 47
Northumberland Bancorp
CONSOLIDATED STATEMENTS OF CASH FLOWS
(amounts in thousands)
| Years ended December 31, | 2024 | 2023 | ||||
|---|---|---|---|---|---|---|
| Cash Flows from Operating Activities | **** | **** | **** | **** | **** | **** |
| Net Income | $ | 1,762 | **** | 1,892 | ||
| Adjustments to reconcile net income to net cash provided by operating activities: | ||||||
| Change in fair value of Equity Securities | $ | 38 | 20 | |||
| Provision (credit) for credit losses | $ | 0 | (48 | ) | ||
| Share based compensation expense | $ | 611 | 367 | |||
| Depreciation, amortization, and accretion, net | $ | 2,273 | 2,778 | |||
| Proceeds from sales of loans held for sale | $ | 8,673 | 6,476 | |||
| Gains on sales of loans | $ | (194 | ) | (155 | ) | |
| Originations of residential loans held for sale | $ | (8,139 | ) | (6,598 | ) | |
| Investment securities (losses) gains, net | $ | 1 | (316 | ) | ||
| Deferred income tax benefit | $ | 87 | 99 | |||
| Earnings on bank-owned life insurance | $ | (377 | ) | (355 | ) | |
| Gain(Loss) on the Sale of OREO | $ | 3 | 0 | |||
| Increase in accrued interest receivable | $ | (3 | ) | (210 | ) | |
| Decrease in accrued interest payable | $ | 47 | 186 | |||
| Other, net | $ | 318 | 298 | |||
| Net Cash Provided by Operating Activities | $ | 5,100 | **** | 4,434 | ||
| Cash Flows from Investing Activities | **** | **** | **** | **** | **** | **** |
| Investment securities available-for-sale: | **** | **** | **** | **** | **** | **** |
| Proceeds from sales | $ | 0 | 12,268 | |||
| Proceeds from maturities or redemptions | $ | 25,309 | 24,705 | |||
| Purchases | $ | (13,166 | ) | (5,715 | ) | |
| Investment securities held-to-maturity: | **** | **** | **** | **** | **** | **** |
| Proceeds from maturities or redemptions | $ | 2,447 | 8,000 | |||
| Purchases | $ | (1,000 | ) | (9,792 | ) | |
| Increase in loans, net | $ | (3,354 | ) | (8,150 | ) | |
| Purchases of premises and equipment, net | $ | (107 | ) | (409 | ) | |
| Purchases of restricted stock | $ | 0 | (1,719 | ) | ||
| Redemptions of restricted stock | $ | 145 | 1,591 | |||
| Proceeds from Bank Owned Life Insurance Death Benefit | 857 | 0 | ||||
| Proceeds from sale of other real estate owned | 29 | 0 | ||||
| Net Cash Provided by (Used in) Investing Activities | $ | 11,160 | **** | 20,779 | ||
| Cash Flows from Investing Activities | **** | **** | **** | **** | **** | **** |
| Net Increase (Decrease) in deposits | $ | (10,020 | ) | (28,862 | ) | |
| Net Increase (Decrease) in borrowings | $ | 20 | 7,020 | |||
| Purchase of common stock - ESOP | $ | 0 | (559 | ) | ||
| Cash dividends paid | $ | (1,207 | ) | (1,207 | ) | |
| Net Cash Provided by Financing Activities | $ | (11,207 | ) | **** | (23,608 | ) |
| Increase in cash and cash equivalents | $ | 5,053 | 1,605 | |||
| Cash and Cash Equivalents, Beginning of Year | $ | 19,014 | 17,409 | |||
| Cash and Cash Equivalents, End of Period | $ | 24,067 | **** | 19,014 |
See accompanying notes to consolidated financial statements.
Page 8 | 47
Northumberland Bancorp
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR DECEMBER 31, 2024 & 2023
| 1. | Summary of Significant Accounting Policies |
|---|
A summary of significant accounting and reporting policies applied in the presentation of the accompanying consolidated financial statements follows:
Nature of Operations and Basis of Presentation
Northumberland Bancorp (the "Company") is a Pennsylvania corporation and is registered under the Bank Holding Company Act. The Company was organized as the holding company of its wholly owned subsidiary, The Northumberland National Bank (the "Bank"). The Bank is a nationally chartered commercial bank located in Northumberland, Pennsylvania. The Bank's service area includes portions of Northumberland, Snyder, and Union counties in Pennsylvania. The Company and the Bank derive substantially all their income from banking and bank-related services, which include interest earnings on commercial, commercial mortgage, residential real estate, and consumer loan financing as well as interest earnings on investment securities and deposit and trust services to their customers. The Company is supervised by the Federal Reserve Board, while the Bank is subject to regulation and supervision by the Office of the Comptroller of the Currency.
The consolidated financial statements include the accounts of the Company and its wholly owned subsidiary, the Bank. Intercompany activity has been eliminated in consolidation.
Use of Estimates
The consolidated financial statements have been prepared in conformity with U.S. generally accepted accounting principles (“U.S. GAAP”) and with general practice within the banking industry. In preparing the financial statements, management makes estimates and assumptions based upon available information. These estimates and assumptions affect the amounts reported in financial statements and the disclosures provided. Actual results could differ significantly from those estimates.
Investment Securities
Investment securities are classified at the time of purchase, based on management's intention and ability, as securities held-to-maturity or securities available-for-sale. Debt securities acquired with the intent and ability to hold to maturity are stated at cost adjusted for amortization of premium and accretion of discount that are computed using the level yield method and recognized as adjustments of interest income. Certain other debt securities have been classified as available-for- sale to serve principally as a source of liquidity. Equity securities are measured at fair value with changes in fair value recognized in the current period earnings. Unrealized holding gains and losses for available-for-sale securities are reported as a separate component of stockholders' equity, net of tax, until realized. Realized securities gains and losses are computed using the specific identification method. Interest and dividends on investment securities are recognized as income when earned.
Allowance for Credit Losses – Held-to-Maturity Securities: Management measures expected credit losses on held-to-maturity debt securities on a collective basis by major security type [and any other risk characteristics used to segment the portfolio]. The estimate of expected credit losses considers historical credit loss information that is adjusted for current conditions and reasonable and supportable forecasts.
Allowance for Credit Losses – Available-For-Sale Securities: For available-for-sale debt securities in an unrealized loss position, the Company first assesses whether it intends to sell, or it is more likely than not that it will be required to sell the security before recovery of its amortized cost basis. If either of the criteria regarding intent or requirement to sell is met, the security’s amortized cost basis is written down to fair value through income. For debt securities available-for-sale that do not meet the aforementioned criteria, the Company evaluates whether the decline in fair value has resulted from credit losses or other factors. In making this assessment, management considers the extent to which fair value is less than amortized cost, any changes to the rating of the security by a rating agency, and adverse conditions specifically related to the security, among other factors. If this assessment indicates that a credit loss exists, the present value of cash flows expected to be collected from the security are compared to the amortized cost basis of the security. If the present value of cash flows expected to be collected is less than the amortized cost basis, a credit loss exists and an allowance for credit losses is recorded for the credit loss, limited by the amount that the fair value is less than the amortized cost basis. Any impairment that has not been recorded through an allowance for credit losses is recognized in other comprehensive income.
Page 9 | 47
Northumberland Bancorp
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR DECEMBER 31, 2024 & 2023
Changes in the allowance for credit losses are recorded as credit loss expense (or reversal). Losses are charged against the allowance when management believes the uncollectibility of an available-for-sale security is confirmed or when either of the criteria regarding intent or requirement to sell is met.
Federal Home Loan Bank Stock
The Bank is a member of the Federal Home Loan Bank ("FHLB") of Pittsburgh and, as such, is required to maintain a minimum investment in stock of the FHLB that varies with the level of advances outstanding with the FHLB, as well as a minimum level of mortgages in the Mortgage Partnership Finance (“MPF”) program. FHLB Stock is carried at cost, classified as restricted securities, and periodically evaluated for impairment based on the ultimate recovery of par value. Both cash and stock dividends are reported as income.
Loans Held for Sale and Loans Serviced
Loans held for sale are carried at a lower of cost or fair value, as determined on an aggregate basis. Gains and losses on sales of mortgage loans are determined by the difference between the sale proceeds and the carrying value of the loans. All sales are made with limited recourse. Loans held for sale were $288,000 and $629,000 at December 31, 2024 and 2023, respectively. At December 31, 2024 and 2023, the amounts of loans serviced by the Company for the benefit of others were $111,696,000 and $120,856,000, respectively. These loans are not included on the Company’s consolidated balance sheets.
Mortgage Servicing Rights ("MSRs")
The Company has agreements for the express purpose of selling loans in the secondary market. The Company maintains servicing rights for certain loans. Originated MSRs are recorded by allocating total costs incurred between the loan and servicing rights based on their relative fair values. MSRs are amortized in proportion to the estimated servicing income over the estimated life of the servicing portfolio. Annually, the Company performs an impairment review of the MSRs and recognizes impairment through a valuation account. No impairment was recognized in 2024 or 2023. MSRs are a component of other assets on the consolidated balance sheets. The balance of loan servicing assets was $266,300 and $369,300 at December 31, 2024 and 2023, respectively.
Loans
Loans originated with the intention to hold to maturity are reported at their principal amount, net of unearned income and the allowance for credit losses. Interest income on all loans is recognized on an accrual basis. Nonrefundable loan fees and certain direct costs are deferred and amortized over the life of the loans using the interest method. The amortization is reflected as an interest yield adjustment, and the deferred portion of the net fees and costs is reflected as part of the loan balance.
Accrual of interest is discontinued when, in the opinion of management, reasonable doubt exists as to the collectability of additional interest. Loans are returned to accrual status when past due interest is collected and the collection of principal is probable. Commercial and commercial real estate loans are considered for nonaccrual status when they are 90 days past due, unless the loan is well-secured and in the process of collection. Residential mortgages are considered for nonaccrual when they are 180 days past due, unless they are well secured and in the process of collection. Consumer loans continue to accrue interest until they are charged off after they have reached 120 days past due. Past due status is based upon the contractual terms of the loan. In all cases, loans are placed on non-accrual or charged off at an earlier date if collection of principal or interest is considered doubtful. Nonaccrual loans and loans past due 90 days and still accruing may include smaller balance homogeneous loans that are collectively evaluated for impairment and individually evaluated loans. The fair value of the underlying collateral at the reporting date is used to determine any possible loss.
Page 10 | 47
Northumberland Bancorp
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR DECEMBER 31, 2024 & 2023
Allowance for Credit Losses – Loans
The allowance for credit losses is a valuation account that is deducted from or added to, the loans’ amortized cost basis to present the net amount expected to be collected on the loans. Loans are charged off against the allowance when management believes the uncollectibility of a loan balance is confirmed. Expected recoveries do not exceed the aggregate of amounts previously charged-off and expected to be charged-off.
Management estimates the allowance balance using relevant available information, from internal and external sources, relating to past events, current conditions, and reasonable and supportable forecasts. Historical credit loss experience provides the basis for the estimation of expected credit losses.
Adjustments to historical loss information are made for differences in current loan-specific risk characteristics such as differences in underwriting standards, delinquency level, or term as well as for changes in environmental conditions, such as changes in unemployment rates, property values, or other relevant factors. On a quarterly basis the bank’s Loan Quality Committee meets to discuss current and suggested updated credit ratings, general reviews of credit relationships, updates on required relationship monitoring and other of the loan portfolio and its quality. This committee will also review and assess the current fair market value estimate for all loans to be individually analyzed. Within this meeting, current adjustments to the Qualitative Factors and general reasonable forecasting for the future periods will be discussed as well. These decisions will then be incorporated into the quarterly updated calculation for the Current Expected Credit Loss (CECL) model as required in ASU 2016-13 Financial Instruments – Credit Losses (Topic 326).
The allowance for credit losses is measured on a collective (pool) basis when similar risk characteristics exist. The Company has identified the following portfolio segments and measures the allowance for credit losses using the following methods: Loans that are not identified for individual analysis are evaluated based on a pooled approach, using “Call Report Classifications” as the segmentations. The bank uses the “Weighted Average Remaining Life/Maturity” Loss Rate Methodology (or WARM). Under this methodology, the remaining life of loans in the pool is determined based on the contractual terms as adjusted for expected annual prepayment rates. The Remaining Life calculator within the software aims to identify the remaining life of a given pool of loans given that pool’s historical experiences. In other terms, the methodology takes a calculated loss rate and applies that rate to a pool of loans on a periodic basis based on the remaining life expectation of said pool. The software contains an attrition calculator that performs quarterly, cohort-based attrition measurements. Estimated loss rates are determined using a custom “Peer Group” approach. The bank has selected a peer group of similar-sized community banks in its geography or the general central Pennsylvania region to capture this loss data.
Loans that do not share risk characteristics are evaluated on an individual basis. Loans evaluated individually are not included in the collective evaluation. When management determines that foreclosure is probable expected credit losses are based on the fair value of the collateral at the reporting date, adjusted for discounted selling costs as appropriate.
Expected credit losses are estimated over the contractual term of the loans, adjusted for expected prepayments when appropriate. 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 borrower is experiencing financial difficulties and the resulting extension or renewal options are either included in the original or modified contract at the reporting date or a new loan is executed.
Page 11 | 47
Northumberland Bancorp
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR DECEMBER 31, 2024 & 2023
Allowance for Credit Losses on Off-Balance Sheet Credit Exposures: The Company estimates expected credit losses over the contractual period in which the Company is exposed to credit risk via a contractual obligation to extend credit, unless that obligation is unconditionally cancellable by the Company. The allowance for credit losses on off-balance sheet credit exposures is adjusted through credit loss expense. The estimate includes consideration of the likelihood that funding will occur and an estimate of expected credit losses on commitments expected to be funded over its estimated life. The estimate of expected credit losses should take into consideration the likelihood that funding will occur as well as the amount expected to be funded over the estimated remaining contractual term of the off-balance-sheet credit exposures. The bank should not record an estimate of expected credit losses for off-balance-sheet exposures that are unconditionally cancellable by the issuer. The bank evaluates expected credit losses for off-balance-sheet credit exposures as of each reporting date. This is addressed within the software and the resulting calculation performed by the bank utilizes benchmark funding rates within the Peer Group or as provided by the software through its analysis of corresponding call report segments. While the process for estimating expected credit losses for these exposures is similar to the one used for on-balance-sheet financial assets, these estimated credit losses are not recorded as part of the ACLs because cash has not yet been disbursed to fund the contractual obligation to extend credit. Instead, the expected credit loss estimate for off-balance sheet credit exposures is recorded as a liability on the balance sheet (separate from any allowance for credit losses associated with recognized financial assets, the ACL) with changes in the estimate reported as credit loss expense (or credit adjustment to the expense) in the statement of net income each reporting period.
Premises and Equipment
Land is carried at cost. Premises and equipment are stated at cost less accumulated depreciation. Depreciation is computed on the straight-line method over the estimated useful lives of the assets, which range from 3 to 20 years for furniture, fixtures, and equipment and 15 to 50 years for buildings and building improvements. Expenditures for maintenance and repairs are charged against income as incurred. Costs of major additions, improvements are capitalized.
Other Real Estate Owned (“OREO”)
Other real estate owned acquired in settlement of foreclosed loans is carried as a component of other assets at fair value minus estimated cost to sell. Prior to foreclosure, the estimated collectible value of the collateral is evaluated to determine whether a partial charge-off of the loan balance is necessary. After transfer to real estate owned, any subsequent write-downs are charged against other operating expenses. Direct costs incurred in the foreclosure process and subsequent holding costs incurred on such properties are recorded as expenses of current operations.
Bank Owned Life Insurance
The Company invests in bank owned life insurance (“BOLI”) as a source of funding for employee benefit expenses. BOLI involves purchasing life insurance on a select group of employees. The Company is the owner and beneficiary of the policies. This life insurance investment is carried at the cash surrender value of the underlying policies. Income from the increase in cash surrender value of the policies or from death benefits realized is included in other income on the consolidated statements of income.
Loan Commitments and Related Financial Instruments
Financial instruments include off-balance sheet credit instruments, such as commitments to make loans and commercial letters of credit, issued to meet financing needs of customers. The face amount for these items represents the exposure to loss, before considering customer ability to repay. Such financial instruments are recorded when they are funded.
Advertising Expenses
Advertising expenses are expensed as costs are incurred. Advertising expenses were $81,000 and $90,000 in 2024 and 2023, respectively.
Income Taxes
The Company and the Bank file a consolidated federal income tax return. Deferred tax assets or liabilities are computed based on the difference between the financial statement and income tax basis of assets and liabilities using the enacted marginal tax rates. Deferred income tax expenses or benefits are based on the changes in the deferred tax asset or liability from period to period.
Page 12 | 47
Northumberland Bancorp
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR DECEMBER 31, 2024 & 2023
A tax position is recognized as a benefit only if it is “more likely than not” that the tax position would be sustained in a tax examination, with a tax examination being presumed to occur. The amount recognized is the largest amount of tax benefit that is greater than 50% likely of being realized on examination. For tax positions not meeting the “more likely than not” test, no tax benefit is recorded.
Employee Benefit Plans – 401(k) and Employee Stock Ownership Plan
401(k)
The Company has a defined contribution benefit plan in the form of a 401(k) plan, that covers all eligible employees. During 2019, the Company amended the 401(k) plan to include Roth elective deferral contributions by employees. The amendment also included employer Safe Harbor Matching Contributions by the Company for both traditional 401(k) employee contributions and Roth contributions. The Bank matches 100% of employee contributions up to 3%, and 50% of employee contributions that exceed 3% up to a maximum of 5%.
Employee Stock Ownership Plan (“ESOP”)
The Company established an ESOP in 2023 to provide additional benefits to employees. The ESOP borrowed money from the Company to purchase shares, which are eligible to be allocated to employees. The Company makes discretionary contributions to the ESOP, as well as paying dividends on unallocated shares to the ESOP, and the ESOP uses funds it receives to repay the loan. When loan payments are made, ESOP shares are allocated to participants based on relative compensation and expense is recorded. Dividends on allocated shares increase participant accounts. Participants receive their allocated shares at the end of employment. A participant may require stock received to be repurchased unless the stock is traded on an established market. See footnote 9 to the consolidated financial statements for additional information.
The Company has applied Accounting Standard Codification ASC 480-10-S99-3A(2) that requires equity securities be classified in temporary equity if they are redeemable at the option of the holder or upon the occurrence of an event not solely within the issuer control. Thus, shares of common stock held by an ESOP, whether non-leveraged or leveraged, that are redeemable at the option of the participant must be classified within temporary equity and classified as Redeemable Common Stock Held By Employee Stock Ownership Plan. Changes in the value of the redeemable ESOP shares are recognized in the Maximum Cash Obligation Related to ESOP shares as a component of stockholders’ equity.
The Maximum Cash Obligation related to ESOP shares, net of unearned ESOP shares contra stockholders’ equity account, was $1,453,000 as of December 31, 2024, versus, $598,000 as of December 31, 2024 and the Redeemable Common Stock Held By Employee Stock Ownership Plan, temporary equity, was $1,453,000 as of December 31, 2024, versus $598,0000 as of December 31, 2023. The change was effected as of the earliest period presented.
Common Stock Held by ESOP: The Company’s maximum cash obligation related to these shares is classified outside stockholders’ equity because the shares are not readily traded and could be put to the Company for cash. This maximum cash obligation is presented net of the unearned ESOP shares.
Trust Assets
Assets held by the Company in a fiduciary or agency capacity for its customers are not included in the accompanying consolidated financial statements, since such items are not assets of the Company. The fair value of trust assets under administration were $195,179,000 and $185,313,000 as of December 31, 2024 and 2023, respectively.
Comprehensive Income (Loss)
The Company is required to present comprehensive income (loss) and its components in a full set of general-purpose financial statements for all periods presented. Other comprehensive income (loss) is comprised of net unrealized holding gains or losses on its available-for-sale investment securities, net of tax.
Page 13 | 47
Northumberland Bancorp
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR DECEMBER 31, 2024 & 2023
Earnings Per Share
The Company currently maintains a simple capital structure; therefore, there are no dilutive effects on earnings per share. As such, earnings per share are calculated using the weighted-average number of shares outstanding for the periods. Shares purchased by the ESOP are excluded from weighted-average shares, but shares allocated to participants in the ESOP are included in weighted-average shares. Treasury stock shares are excluded from weighted-average shares.
Loss contingencies
Loss contingencies, including claims and legal actions arising in the ordinary course of business, are recorded as liabilities when the likelihood of loss is probable, and an amount or range of loss can be reasonably estimated. No loss contingency liabilities have been recorded at December 31, 2024 or December 31, 2023.
Page 14 | 47
Northumberland Bancorp
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR DECEMBER 31, 2024 & 2023
Cash Flow Information
The Company has defined cash and cash equivalents as those amounts included in the consolidated balance sheet captions “cash and due from banks,” and “interest-bearing deposits in other banks,” with original maturities of 90 days or less. The following are supplemental disclosures for the consolidated statements of cash flows (in thousands):
| Years ended December, 31 | 2024 | 2023 | ||
|---|---|---|---|---|
| Cash paid during the year for: | ||||
| Interest | $ | 12,900 | 9,683 | |
| Income Taxes | $ | 250 | 0 |
Reclassification of Comparative Amounts
Certain comparative amounts for the prior year have been reclassified to conform to current-year classifications. Reclassifications had no effect on prior year stockholders' equity or net income.
Accounting Standards Update (ASU) – Current Expected Credit Losses
On January 1, 2024, the Company adopted ASU 2016-13 Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, as amended, which replaces the incurred loss methodology with an expected loss methodology that is referred to as the current expected credit loss (CECL) methodology. The measurement of expected credit losses under the CECL methodology is applicable to financial assets measured at amortized cost, including loan receivables and held-to-maturity debt securities. It also applies to off-balance sheet credit exposures not accounted for as insurance (loan commitments, standby letters of credit, financial guarantees, and other similar instruments) and net investments in leases recognized by a lessor in accordance with Topic 842 on leases. In addition, ASC 326 made changes to the accounting for available-for-sale debt securities. One such change is to require credit losses to be presented as an allowance rather than as a write-down on available-for-sale debt securities management does not intend to sell or believes that it is more likely than not they will be required to sell.
The Company adopted ASC 326 using the modified retrospective method for all financial assets measured at amortized cost, [net investments in leases] and off-balance-sheet (OBS) credit exposures. Results for reporting periods beginning after January 1, 2024, are presented under ASC 326 while prior period amounts continue to be reported in accordance with previously applicable GAAP. On January 1, 2024, the Company recorded an increase to its allowance for credit losses in the amount of $502,000 and a liability of $250,000 for off-balance sheet exposures. This resulted in The Company recording a net decrease to retained earnings of $595,000 as of January 1, 2024 for the cumulative effect of adopting ASC 326. The transition adjustment includes a $397,000 impact due to the allowance for credit losses on the banks’ outstanding loan portfolio and a $198,000 impact related to recording a liability for off-balance sheet exposures. Both entries are net of the impact to the deferred tax asset in the amounts of $105,000 and $53,000 respectively.
The Company adopted ASC 326 using the prospective transition approach for debt securities for which other-than-temporary impairment had been recognized prior to January 1, 2024. As a result, the amortized cost basis remains the same before and after the effective date of ASC 326. The effective interest rate on these debt securities was not changed. Amounts previously recognized in accumulated other comprehensive income as of January 1, 2024 relating to improvements in cash flows expected to be collected will be accreted into income over the remaining life of the asset. Recoveries of amounts previously written off relating to improvements in cash flows after January 1, 2024 will be recorded in earnings when received.
As allowed by ASC 326, the Company elected to maintain pools of loans accounted for under ASC 310-30. In accordance with the standard, management did not reassess whether modifications to individual acquired financial assets accounted for in pools were troubled debt restructurings as of the date of adoption.
Page 15 | 47
Northumberland Bancorp
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR DECEMBER 31, 2024 & 2023
The following table illustrates the impact of ASC 326:
| January 1, 2023 | As Reported<br><br> <br>Under ASC 326 | Pre-ASC 326<br><br> <br>Adoption | Impact of ASC<br><br> <br>326 Adoption | |||
|---|---|---|---|---|---|---|
| Assets: | **** | **** | **** | **** | **** | **** |
| Allowance for credit losses on debt securities held-to-maturity | ||||||
| Mortgage-backed: residential | $ | 0 | 0 | 0 | ||
| Other | $ | 0 | 0 | 0 | ||
| Loans | ||||||
| Commercial | $ | 1,828 | 857 | 971 | ||
| Commercial real estate | $ | 1,152 | 629 | 523 | ||
| Residential real estate | $ | 1,077 | 1,779 | -702 | ||
| Consumer | $ | 87 | 30 | 57 | ||
| Unallocated | $ | 0 | 346 | -346 | ||
| Allowance for credit losses on loans | $ | 4,144 | 3,641 | 503 | ||
| Liabilities: | **** | **** | **** | **** | **** | **** |
| Allowance for credit losses on OBS credit exposures | $ | 250 | 0 | 250 |
Page 16 | 47
Northumberland Bancorp
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR DECEMBER 31, 2024 & 2023
| 2. | Investment Securities |
|---|
The amortized cost and fair values of investment securities are as follows (in thousands):
| December 31, 2024 | Amortized Cost | Gross Unrealized<br><br> <br>Gains | Gross Unrealized Losses | Approximate Fair Value | ||||||
|---|---|---|---|---|---|---|---|---|---|---|
| Available-for-sale: | ||||||||||
| Obligations of states and political subdivisions | $ | 74,425 | 9 | (7,251 | ) | 67,183 | ||||
| Mortgage-backed securities in government sponsored entities | $ | 117,398 | 86 | (9,890 | ) | 107,594 | ||||
| Total | $ | 191,823 | **** | 95 | **** | (17,141 | ) | **** | 174,777 | |
| December 31, 2023 | ****** | ****** | ****** | ****** | ****** | ****** | ****** | ****** | ****** | |
| Available-for-sale: | ||||||||||
| Obligations of states and political subdivisions | $ | 75,258 | 0 | (7,620 | ) | 67,638 | ||||
| Mortgage-backed securities in government sponsored entities | $ | 130,626 | 557 | (10,707 | ) | 120,476 | ||||
| Total | $ | 205,884 | **** | 557 | **** | (18,327 | ) | **** | 188,114 | |
| December 31, 2024 | Amortized Cost | Gross Unrecognized Gains | Gross Unrecognized Losses | Approximate Fair Value | ||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| Held-to-maturity: | ||||||||||
| Obligations of states and political subdivisions | $ | 1,565 | 0 | (54 | ) | 1,511 | ||||
| Corporates/other | $ | 1,000 | 80 | 0 | 1,080 | |||||
| Total | $ | 2,565 | **** | 80 | **** | (54 | ) | **** | 2,591 | |
| December 31, 2023 | ****** | ****** | ****** | ****** | ****** | ****** | ****** | ****** | ****** | |
| Held-to-maturity: | ||||||||||
| Obligations of states and political subdivisions | $ | 4,008 | 0 | (81 | ) | 3,927 | ||||
| Corporates/other | 0 | 0 | 0 | 0 | ||||||
| Total | $ | 4,008 | **** | 0 | **** | (81 | ) | **** | 3,927 |
Page 17 | 47
Northumberland Bancorp
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR DECEMBER 31, 2024 & 2023
The following table summarizes debt securities available-for-sale in an unrealized loss position for which an allowance for credit losses has not been recorded at December 31, 2024 and December 31, 2023, aggregated by major security type and length of time in a continuous unrealized loss position:
| Less than 12 Months | 12 Months or Longer | Total | |||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| December 31, 2024 | Fair<br><br> <br>Value | Unrealized<br><br> <br>Losses | Fair<br><br> <br>Value | Unrealized<br><br> <br>Losses | Fair<br><br> <br>Value | Unrealized<br><br> <br>Losses | |||||||||
| Available-for-sale: | |||||||||||||||
| Obligations of states and political subdivisions | $ | 499 | (1 | ) | 63,682 | (7,250 | ) | 64,181 | (7,251 | ) | |||||
| Mortgage-backed securities in government sponsored entities | $ | 14,514 | (80 | ) | 78,852 | (9,810 | ) | 93,366 | (9,890 | ) | |||||
| Total | $ | 15,013 | **** | (81 | ) | **** | 142,534 | **** | (17,060 | ) | **** | 157,547 | **** | (17,141 | ) |
| Held-to-maturity: | Fair<br><br> <br>Value | Unrecognized<br><br> <br>Losses | Fair<br><br> <br>Value | Unrecognized<br><br> <br>Losses | Fair<br><br> <br>Value | Unrecognized<br><br> <br>Losses | |||||||||
| Obligations of states and political subdivisions | $ | - | - | 1,517 | (44 | ) | 1,517 | (44 | ) | ||||||
| Total | $ | - | - | 1,517 | (44 | ) | 1,517 | (44 | ) | ||||||
| Less than 12 Months | 12 Months or Longer | Total | |||||||||||||
| December 31, 2023 | Fair<br><br> <br>Value | Unrealized<br><br> <br>Losses | Fair<br><br> <br>Value | Unrealized<br><br> <br>Losses | Fair<br><br> <br>Value | Unrealized<br><br> <br>Losses | |||||||||
| Available-for-sale: | |||||||||||||||
| Obligations of states and political subdivisions | $ | 0 | 0 | 67,138 | (7,620 | ) | 67,138 | (7,620 | ) | ||||||
| Mortgage-backed securities in government sponsored entities | $ | 8,305 | (169 | ) | 87,179 | (10,538 | ) | 95,484 | (10,707 | ) | |||||
| Total | $ | 8,305 | **** | (169 | ) | **** | 154,317 | **** | (18,158 | ) | **** | 162,622 | **** | (18,327 | ) |
| Held-to-maturity: | Fair<br><br> <br>Value | Unrecognized<br><br> <br>Losses | Fair<br><br> <br>Value | Unrecognized<br><br> <br>Losses | Fair<br><br> <br>Value | Unrecognized<br><br> <br>Losses | |||||||||
| Obligations of states and political subdivisions | $ | 1,958 | (1 | ) | 1,958 | (80 | ) | 3,916 | (81 | ) | |||||
| Total | $ | 1,958 | **** | (1 | ) | **** | 1,958 | **** | (80 | ) | **** | 3,916 | **** | (81 | ) |
There were 361 and 348 positions that were temporarily impaired at December 31, 2024 and 2023, respectively. The Company must evaluate if a decline in the fair value below amortized cost resulted from credit loss or other factors. The analysis should consider the guidance in ASC 326-30-35-6 and ASC 326-30-55-1 through 55-4 when determining whether a credit loss exists. Unrealized losses on corporate bonds have not been recognized into income because the issuer(s) bonds are of high credit quality, management does not intend to sell and it is likely that management will not be required to sell the securities prior to their anticipated recovery, and the decline in fair value is largely due to changes in interest rates and other market conditions. The issuer(s) continues to make timely principal and interest payments on the bonds. The fair value is expected to recover as the bond(s) approach maturity. As of December 31, 2024, the Company has not recognized any allowance for credit losses on debt securities either designated as available for sale or held to maturity.
Page 18 | 47
Northumberland Bancorp
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR DECEMBER 31, 2024 & 2023
The amortized cost and fair value of debt securities at December 31, 2024, by contractual maturity, are shown below. Securities not due at a single maturity date are shown separately. Expected maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties (in thousands).
| December 31, 2024 | Available-for-Sale | Held-to-Maturity | ||||||
|---|---|---|---|---|---|---|---|---|
| Amortized Cost | Fair Value | Amortized Cost | Fair Value | |||||
| Due in one year or less | $ | 6,149 | 6,112 | 509 | 502 | |||
| Due after one year through five years | $ | 31,986 | 29,648 | 1,056 | 1,009 | |||
| Due after five years through ten years | $ | 36,290 | 31,423 | 1,000 | 1,080 | |||
| Due after ten years | $ | 0 | 0 | 0 | 0 | |||
| Mortgage Backed Securities | $ | 117,398 | 107,594 | 0 | 0 | |||
| Total | $ | 191,823 | **** | 174,777 | **** | 2,565 | **** | 2,591 |
Proceeds from the sales of available-for-sale securities during 2024 amounted to $3,706,000 resulting in gross gains and gross losses of $1 and $0, respectively. Proceeds from the sales of available-for-sale securities during 2023 amounted to $12,268,000, resulting in gross gains and gross losses of $0 and $316,000, respectively. Investment securities with fair values of $83,236,000 and $100,070,000 at December 31, 2024 and 2023, respectively, were pledged to secure public deposits and other purposes as required by law.
The Company monitors the credit quality of debt securities held-to-maturity through the use of credit rating. The Company monitors the credit rating on a monthly basis. The following table summarizes the amortized cost of debt securities held-to-maturity at December 31, 2024, aggregated by credit quality indicator.
| Held-to-Maturity | ||||
|---|---|---|---|---|
| As of December 31, 2024 | Obligations of<br><br> <br>states and<br><br> <br>political<br><br> <br>subdivisions | Corporates/other | ||
| AAA/AA/A | $ | 1,565 | 0 | |
| BBB/BB/B | $ | 0 | 0 | |
| Unrated | $ | 0 | 1,000 | |
| Total | $ | 1,565 | **** | 1,000 |
A security is considered to be past due once it is 90+ days contractually past due under the terms of the agreement. As of December 31, 2024, the Company did not have any past-due debt securities that are held-to-maturity.
Page 19 | 47
Northumberland Bancorp
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR DECEMBER 31, 2024 & 2023
| 3. | Loans |
|---|
Major classifications of loans are summarized as follows (in thousands):
| December 31, 2024 | December 31, 2023 | |||
|---|---|---|---|---|
| Commercial | $ | 87,076 | 89,570 | |
| Commercial Real Estate | $ | 99,653 | 97,205 | |
| Residential Real Estate | $ | 240,105 | 235,847 | |
| Consumer | $ | 6,353 | 7,160 | |
| $ | 433,187 | 429,782 | ||
| Allowance for credit loss | $ | 3,869 | 4,023 | |
| Net Loans | $ | 429,318 | **** | 425,759 |
The Company grants residential, commercial, and consumer loans to customers throughout its trade area, which is concentrated in North Central Pennsylvania. Although the Company has a diversified loan portfolio at December 31, 2024 and 2023, a substantial portion of its debtors' ability to honor their loan agreements is dependent upon the economic stability of its immediate trade area.
| 4. | Allowance for Credit Loss |
|---|
Changes in the allowance for credit losses by portfolio segment are as follows (in thousands):
| December 31, 2024 | Commercial | Commercial<br><br> <br>Real Estate | Residential<br><br> <br>Real Estate | Consumer | Unallocated | Total | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Beginning Balance | 1,015 | 1,023 | 94 | 0 | 4,023 | ||||||||||||
| Loans charged off | (64 | ) | (7 | ) | (108 | ) | 0 | (179 | ) | ||||||||
| Recoveries collected | 0 | 7 | 18 | 0 | 25 | ||||||||||||
| Provision (credit) | ) | 94 | 114 | 86 | 0 | 0 | |||||||||||
| Ending Balance | **** | 1,045 | **** | 1,137 | **** | 90 | **** | 0 | **** | 3,869 | |||||||
| December 31, 2023 | Commercial | Commercial<br><br> <br>Real Estate | Residential<br><br> <br>Real Estate | Consumer | Unallocated | Total | |||||||||||
| Beginning Balance prior to adoption of ASC 326 | 629 | 1,779 | 30 | 346 | 3,641 | ||||||||||||
| Impact of adopting ASC 326 | 523 | (702 | ) | 57 | (346 | ) | 503 | ||||||||||
| Loans charged off | (14 | ) | (61 | ) | (75 | ) | |||||||||||
| Recoveries collected | 2 | 1 | 3 | ||||||||||||||
| Provision (credit) | (137 | ) | (42 | ) | 67 | (49 | ) | ||||||||||
| Ending Balance | **** | 1,015 | **** | 1,023 | **** | 94 | **** | 0 | **** | 4,023 |
All values are in US Dollars.
The total allowance reflects management's estimate of credit losses inherent in the loan portfolio at the consolidated balance sheet date.
Page 20 | 47
Northumberland Bancorp
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR DECEMBER 31, 2024 & 2023
Credit Quality Information
The Company's internally assigned loan grades are as follows:
Pass loans are protected by the current net worth and paying capacity of the obligor or by the value of the underlying collateral. There are five sub-grades within the pass category to further distinguish the loan.
Special Mention loans are loans for which a potential weakness or risk exists, which could cause a more serious problem if not corrected.
Substandard loans have a well-defined weakness based on objective evidence and are characterized by the distinct possibility that the bank will sustain some loss if the deficiencies are not corrected.
Doubtful loans have all the weaknesses inherent in a substandard asset. In addition, these weaknesses make collection or liquidation in full highly questionable and improbable, based on existing circumstances.
Loss loans are considered uncollectible, or of such value that continuance as an asset is not warranted.
Page 21 | 47
Northumberland Bancorp
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR DECEMBER 31, 2024 & 2023
The following tables represent credit exposures for commercial real estate and commercial loans by internally assigned grades for the years ended December 31, 2024 and 2023. The grading analysis estimates the capability of the borrower to repay the contractual obligations of the loan agreements as scheduled or at all. The Company's internal credit risk grading system is based on experiences with similarly graded loans (in thousands).
| Term Loans | **** | **** | **** | **** | **** | **** | ||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| As of December 31, 2024 | Amortized Cost Basis by Origination Year and Risk Grades | **** | **** | **** | **** | **** | **** | |||||||
| Dollars in thousands | 2024 | 2023 | 2022 | Prior | Revolving Loans Amortized Cost Basis | Revolving loans converted to<br><br> <br>term Amortized Cost Basis | Total | |||||||
| Commercial | **** | **** | **** | **** | **** | **** | **** | **** | **** | **** | **** | **** | **** | **** |
| Pass | 7,396 | 6,558 | 7,731 | 61,271 | 0 | 0 | 82,956 | |||||||
| Special Mention | 0 | 0 | 14 | 2,452 | 0 | 0 | 2,466 | |||||||
| Substandard | 0 | 83 | 1,119 | 452 | 0 | 0 | 1,654 | |||||||
| Total Commercial Loans | 7,396 | 6,641 | 8,864 | 64,175 | 0 | 0 | 87,076 | |||||||
| Current Period Net write-offs | 0 | 0 | 0 | 0 | 0 | 0 | 0 | |||||||
| Commercial Real Estate | **** | **** | **** | **** | **** | **** | **** | **** | **** | **** | **** | **** | **** | **** |
| Pass | 10,870 | 10,591 | 31,474 | 39,254 | 0 | 0 | 92,189 | |||||||
| Special Mention | 0 | 0 | 0 | 4,735 | 0 | 0 | 4,735 | |||||||
| Substandard | 0 | 12 | 0 | 2,717 | 0 | 0 | 2,729 | |||||||
| Total Commercial Real Estate Loans | 10,870 | 10,603 | 31,474 | 46,706 | 0 | 0 | 99,653 | |||||||
| Current Period Net write-offs | 0 | 0 | 0 | 64 | 0 | 0 | 64 |
Page 22 | 47
Northumberland Bancorp
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR DECEMBER 31, 2024 & 2023
| Term Loans | **** | **** | **** | **** | **** | **** | ||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| As of December 31, 2024 | Amortized Cost Basis by Origination Year and Risk Grades | **** | **** | **** | **** | **** | **** | |||||||
| Dollars in thousands | 2024 | 2023 | 2022 | Prior | Revolving Loans Amortized Cost Basis | Revolving loans converted to<br><br> <br>term Amortized Cost Basis | Total | |||||||
| Residential Real Estate | **** | **** | **** | **** | **** | **** | **** | **** | **** | **** | **** | **** | **** | **** |
| Performing | 37,205 | 28,179 | 48,867 | 123,385 | 0 | 0 | 237,636 | |||||||
| Nonperforming | 26 | 199 | 66 | 2,178 | 0 | 0 | 2,469 | |||||||
| Total Residential Loans | 37,321 | 28,378 | 48,933 | 125,563 | 0 | 0 | 240,105 | |||||||
| Current Period Net write-offs | 0 | 0 | 0 | 0 | 0 | 0 | 0 | |||||||
| Consumer | **** | **** | **** | **** | **** | **** | **** | **** | **** | **** | **** | **** | **** | **** |
| Performing | 2,303 | 1,905 | 1,173 | 898 | 0 | 0 | 6,279 | |||||||
| Nonperforming | 2 | 11 | 36 | 25 | 0 | 0 | 74 | |||||||
| Total Consumer Loans | 2,305 | 1,916 | 1,209 | 923 | 0 | 0 | 6,353 | |||||||
| Current Period Net write-offs | 0 | 52 | 35 | 3 | 0 | 0 | 90 | |||||||
| Portfolio Total | 57,802 | 47,538 | 90,480 | 237,367 | 0 | 0 | 433,187 | |||||||
| Current Period Net write-offs | 0 | 52 | 35 | 67 | 0 | 0 | 154 |
Page 23 | 47
Northumberland Bancorp
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR DECEMBER 31, 2024 & 2023
| Term Loans | **** | **** | **** | **** | **** | **** | ||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| As of December 31, 2023 | Amortized Cost Basis by Origination Year and Risk Grades | **** | **** | **** | **** | **** | **** | |||||||
| Dollars in thousands | 2023 | 2022 | 2021 | Prior | Revolving Loans Amortized Cost Basis | Revolving loans converted to<br><br> <br>term Amortized<br><br> <br>Cost Basis | Total | |||||||
| Commercial | **** | **** | **** | **** | **** | **** | **** | **** | **** | **** | **** | **** | **** | **** |
| Pass | 8,275 | 8,769 | 29,133 | 41,805 | 0 | 0 | 87,982 | |||||||
| Special Mention | 0 | 15 | 0 | 0 | 0 | 0 | 15 | |||||||
| Substandard | 97 | 1,132 | 0 | 344 | 0 | 0 | 1,573 | |||||||
| Total Commercial Loans | 8,372 | 9,916 | 29,133 | 42,149 | 0 | 0 | 89,570 | |||||||
| Current Period Net write-offs | 0 | 0 | 0 | 0 | 0 | 0 | 0 | |||||||
| Commercial Real Estate | **** | **** | **** | **** | **** | **** | **** | **** | **** | **** | **** | **** | **** | **** |
| Pass | 9,685 | 33,368 | 21,403 | 29,815 | 0 | 0 | 94,271 | |||||||
| Special Mention | 18 | 0 | 0 | 0 | 0 | 0 | 18 | |||||||
| Substandard | 0 | 0 | 0 | 2,916 | 0 | 0 | 2,916 | |||||||
| Total Commercial Real Estate Loans | 9,703 | 33,368 | 21,403 | 32,731 | 0 | 0 | 97,205 | |||||||
| Current Period Net write-offs | 0 | 0 | 0 | 0 | 0 | 0 | 0 |
Page 24 | 47
Northumberland Bancorp
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR DECEMBER 31, 2024 & 2023
| Term Loans | **** | **** | **** | **** | **** | **** | ||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| As of December 31, 2023 | Amortized Cost Basis by Origination Year and Risk Grades | **** | **** | **** | **** | **** | **** | |||||||
| Dollars in thousands | 2023 | 2022 | 2021 | Prior | Revolving Loans Amortized Cost Basis | Revolving loans converted to<br><br> <br>term Amortized<br><br> <br>Cost Basis | Total | |||||||
| Residential Real Estate | **** | **** | **** | **** | **** | **** | **** | **** | **** | **** | **** | **** | **** | **** |
| Performing | 38,180 | 55,268 | 39,144 | 102,266 | 0 | 0 | 234,858 | |||||||
| Nonperforming | 0 | 0 | 0 | 989 | 0 | 0 | 989 | |||||||
| Total Residential Loans | 38,180 | 55,268 | 39,144 | 103,255 | 0 | 0 | 235,847 | |||||||
| Current Period Net write-offs | 0 | 0 | 0 | 12 | 0 | 0 | 12 | |||||||
| Consumer | **** | **** | **** | **** | **** | **** | **** | **** | **** | **** | **** | **** | **** | **** |
| Performing | 3,422 | 2,186 | 601 | 880 | 0 | 0 | 7,089 | |||||||
| Nonperforming | 0 | 47 | 19 | 5 | 0 | 0 | 71 | |||||||
| Total Consumer Loans | 3,422 | 2,233 | 620 | 885 | 0 | 0 | 7,160 | |||||||
| Current Period Net write-offs | 11 | 19 | 29 | 1 | 0 | 0 | 60 | |||||||
| Portfolio Total | 59,677 | 100,785 | 90,300 | 179,020 | 0 | 0 | 429,782 | |||||||
| Current Period Net write-offs | 11 | 19 | 29 | 13 | 0 | 0 | 72 |
Page 25 | 47
Northumberland Bancorp
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR DECEMBER 31, 2024 & 2023
The Company evaluates credit quality for residential real estate and consumer loans based upon the aging status of the loan, which is presented below, and by payment activity. The following tables present performing and nonperforming residential real estate and consumer loans based on payment activity for the years ended December 31, 2024 and 2023 (in thousands):
| December 31, 2024 | First<br><br> <br>Mortgages | Home Equity<br><br> <br>Loans | Consumer | Total | ||||
|---|---|---|---|---|---|---|---|---|
| Performing | $ | 210,307 | 27,329 | 6,279 | 243,914 | |||
| Nonperforming (Nonaccrual loans) | $ | 2,311 | 158 | 74 | 2,544 | |||
| Total | $ | 212,618 | **** | 27,487 | **** | 6,353 | **** | 246,458 |
| December 31, 2023 | First<br><br> <br>Mortgages | Home Equity<br><br> <br>Loans | Consumer | Total | ||||
| Performing | $ | 212,380 | 22,478 | 7,089 | 241,947 | |||
| Nonperforming (Nonaccrual loans) | $ | 955 | 34 | 71 | 1,060 | |||
| Total | $ | 213,335 | **** | 22,512 | **** | 7,160 | **** | 243,007 |
Page 26 | 47
Northumberland Bancorp
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR DECEMBER 31, 2024 & 2023
Following are tables which include an aging analysis of the recorded investment of past-due loans as of December 31, 2024 and 2023 (in thousands):
| December 31, 2024 | Loans Past Due (Days) | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 30 - 59 | 60 - 89 | 90 + | Total | Current | Total Loans | |||||||
| Commercial: | ||||||||||||
| Obligations of state and political subdivisions | $ | 0 | 0 | 0 | 0 | 12,044 | **** | 12,044 | ||||
| Other commercial loans | $ | 220 | 0 | 1,383 | 1,603 | 73,429 | **** | 75,032 | ||||
| $ | 220 | 0 | 1,383 | 1,602 | 85,474 | **** | 87,076 | |||||
| Commercial Real Estate: | ||||||||||||
| Loans for investment property | $ | 0 | 0 | 0 | 0 | 7,036 | **** | 7,036 | ||||
| Other commercial real estate loans | $ | 0 | 10 | 12 | 22 | 92,595 | **** | 92,617 | ||||
| $ | 0 | 10 | 12 | 22 | 99,631 | **** | 99,653 | |||||
| Residential Mortgage Loans: | ||||||||||||
| First Mortgage | $ | 1,500 | 704 | 1,494 | 3,698 | 208,920 | **** | 212,618 | ||||
| Home equity loans | $ | 317 | 0 | 72 | 389 | 27,098 | **** | 27,487 | ||||
| $ | 1,817 | 704 | 1,566 | 4,087 | 236,018 | **** | 240,105 | |||||
| Consumer: | $ | 92 | 10 | 36 | 138 | 6,215 | **** | 6,353 | ||||
| Ending Balance | $ | 2,129 | **** | 724 | **** | 2,996 | **** | 5,849 | **** | 427,338 | **** | 433,187 |
| December 31, 2023 | Loans Past Due (Days) | |||||||||||
| 30 - 59 | 60 - 89 | 90 + | Total | Current | Total Loans | |||||||
| Commercial: | ||||||||||||
| Obligations of state and political subdivisions | $ | 0 | 0 | 0 | 0 | 13,778 | **** | 13,778 | ||||
| Other commercial loans | $ | 3 | 5 | 1,418 | 1,426 | 74,366 | **** | 75,792 | ||||
| $ | 3 | 5 | 1,418 | 1,426 | 88,144 | **** | 89,570 | |||||
| Commercial Real Estate: | ||||||||||||
| Loans for investment property | $ | 0 | 0 | 0 | 0 | 7,370 | **** | 7,370 | ||||
| Other commercial real estate loans | $ | 125 | 18 | 0 | 143 | 89,692 | **** | 89,835 | ||||
| $ | 125 | 18 | 0 | 143 | 97,062 | **** | 97,205 | |||||
| Residential Mortgage Loans: | ||||||||||||
| First Mortgage | $ | 1,558 | 251 | 1,847 | 3,656 | 209,679 | **** | 213,335 | ||||
| Home equity loans | $ | 186 | 21 | 83 | 290 | 22,222 | **** | 22,512 | ||||
| $ | 1,744 | 272 | 1,930 | 3,946 | 231,901 | **** | 235,847 | |||||
| Consumer: | $ | 109 | 31 | 71 | 211 | 6,949 | **** | 7,160 | ||||
| Ending Balance | $ | 1,981 | **** | 326 | **** | 3,419 | **** | 5,726 | **** | 424,056 | **** | 429,782 |
Impaired Loans
Management evaluates commercial loans and commercial real estate loans which are 90 days or more past due and considers them to be impaired. Loans rated substandard or doubtful are also evaluated for impairment. These loans are analyzed to determine whether it is probable that all amounts will not be collected according to the contractual terms of the loan agreement. If management determines that the value of the impaired loan is less than the recorded investment in the loan (net of previous charge-offs, deferred loan fees, or costs and unamortized premium or discount), impairment is recognized through an allowance estimate or a charge-off to the allowance.
Page 27 | 47
Northumberland Bancorp
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR DECEMBER 31, 2024 & 2023
Nonaccrual Loans
Loans are considered for nonaccrual status when they are 90 days past due. When a loan is placed on nonaccrual status, previously accrued but unpaid interest is deducted from interest income.
The following tables present loans that are on nonaccrual status and that are 90 days past due and still accruing interest by portfolio segment as of December 31 (in thousands):
| December 31. 2024 | Nonaccrual With<br><br> <br>No Allowance for<br><br> <br>Credit Loss | Nonaccrual With an<br><br> <br>Allowance | Past Due 90 Days or<br><br> <br>More and Still Accruing | |||
|---|---|---|---|---|---|---|
| Commercial Loans: | ||||||
| Obligations of states and political subdivisions | $ | 0 | $ | 0 | 0 | |
| Other commercial loans | $ | 1,091 | $ | 30 | 262 | |
| Commercial Reat Estate: | ||||||
| Loans for investment properties | $ | 0 | $ | 0 | 0 | |
| Other commercial real estate loans | $ | 0 | $ | 12 | 0 | |
| Residential Mortgage Loans: | ||||||
| First Mortgages | $ | 214 | $ | 148 | 1,132 | |
| Home equity loans | $ | 0 | $ | 0 | 72 | |
| Consumer Loans | $ | 0 | $ | 36 | 0 | |
| Net Loans | $ | 1,305 | $ | 226 | **** | 1,466 |
| December 31, 2023 | Nonaccrual With<br><br> <br>No Allowance or<br><br> <br>Credit Loss | Nonaccrual With an<br><br> <br>Allowance | Past Due 90 Days or<br><br> <br>More and Still Accruing | |||
| Commercial Loans: | ||||||
| Obligations of states and political subdivisions | 0 | $ | 0 | 0 | ||
| Other commercial loans | 1,094 | $ | 324 | 0 | ||
| Commercial Reat Estate: | ||||||
| Loans for investment properties | 0 | $ | 0 | 0 | ||
| Other commercial real estate loans | 0 | $ | 0 | 0 | ||
| Residential Mortgage Loans: | ||||||
| First Mortgages | 135 | $ | 820 | 892 | ||
| Home equity loans | 0 | $ | 34 | 49 | ||
| Consumer Loans | 0 | $ | 71 | 0 | ||
| Net Loans | **** | 1,229 | $ | 1,249 | **** | 941 |
Page 28 | 47
Northumberland Bancorp
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR DECEMBER 31, 2024 & 2023
The following table presents the amortized cost basis of collateral-dependent loans by class as of December 31, 2024 and 2023:
| December 31, 2024 | Real<br><br> <br>Estate<br><br> <br>Collateral | Other<br><br> <br>Collateral | ||
|---|---|---|---|---|
| Commercial Loans: | ||||
| Obligations of states and political subdivisions | $ | 0 | 0 | |
| Other commercial loans | $ | 1,091 | 0 | |
| Commercial Reat Estate: | ||||
| Loans for investment properties | $ | 0 | 0 | |
| Other commercial real estate loans | $ | 0 | 0 | |
| Residential Mortgage Loans: | ||||
| First Mortgages | $ | 1,624 | 0 | |
| Home equity loans | $ | 0 | 0 | |
| Consumer Loans | $ | 0 | 0 | |
| Net Loans | $ | 2,715 | **** | 0 |
| December 31, 2023 | Real<br><br> <br>Estate<br><br> <br>Collateral | Other<br><br> <br>Collateral | ||
| --- | --- | --- | --- | --- |
| Commercial Loans: | ||||
| Obligations of states and political subdivisions | $ | 0 | 0 | |
| Other commercial loans | $ | 1,094 | 345 | |
| Commercial Reat Estate: | ||||
| Loans for investment properties | $ | 0 | 0 | |
| Other commercial real estate loans | $ | 2,916 | 0 | |
| Residential Mortgage Loans: | ||||
| First Mortgages | $ | 834 | 0 | |
| Home equity loans | $ | 0 | 0 | |
| Consumer Loans | $ | 0 | 0 | |
| Net Loans | $ | 4,844 | **** | 345 |
Interest income on nonaccrual loans not recognized during 2024 and 2023 was $76,500 and $63,400, respectively.
Occasionally, the Company modifies loans to borrowers in financial distress by providing; principal forgiveness, term extension, an other-than-insignificant payment delay or interest rate reduction. When principal forgiveness is provided, the amount of forgiveness is charged-off against the allowance for credit losses.
In some cases, the Company provides multiple types of concessions on one loan. Typically, one type of concession, such as a term extension, is granted initially. If the borrower continues to experience financial difficulty, another concession, such as principal forgiveness, may be granted.
There were no modifications in 2024 for borrowers experiencing financial difficulty.
Page 29 | 47
Northumberland Bancorp
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR DECEMBER 31, 2024 & 2023
| 5. | Premises and Equipment |
|---|
Major classifications of premises and equipment are summarized as follows (in thousands):
| Years ended December 31, | 2024 | 2023 | ||
|---|---|---|---|---|
| Land and improvements | $ | 1,969 | 1,969 | |
| Buildings and improvements | $ | 10,156 | 10,321 | |
| Furniture, fixtures and equipment | $ | 5,384 | 5,477 | |
| $ | 17,509 | 17,767 | ||
| Less accumulated depreciation | $ | 9,667 | 9,322 | |
| Total | $ | 7,842 | **** | 8,445 |
Depreciation expense for the years ended December 31, 2024 and 2023 was $665,700 and $655,000, respectively.
| 6. | Leases |
|---|
In the normal course of business, the Company leases a property for one of its branch locations. This lease has a remaining term of eight years with no renewal options remaining. This lease was classified as an operating lease as of the commencement date. Lease expense for operating leases is recognized on a straight line basis over the lease term. Right-of-use assets represent our right to use an underlying asset for the lease term, and lease liabilities represent our obligation to make lease payments arising from the lease. Right-of-use assets and lease liabilities are recognized at the lease commencement date based on the estimated present value of lease payments over the lease term.
The Company uses its incremental borrowing rate at lease commencement to calculate the present value of lease payments when the rate implicit in a lease is not known. The Company’s incremental borrowing rate is based on the FHLB amortizing advance rate, adjusted for the lease term and other factors. The incremental borrowing rate used at lease commencement was 3.00%.
Right-of-use assets and lease liabilities by lease type and associated balance sheet captions are as follows (in thousands):
| Years ended December 31, | Balance Sheet Classification | 2024 | 2023 | ||
|---|---|---|---|---|---|
| Right-of-use asset: Operating Lease | Buildings and Improvements | $ | 175 | 244 | |
| Lease Liability: Operating Lease | Other Liabilities | $ | 175 | 244 |
Future undiscounted lease payments as of December 31, 2024 are as follows (in thousands):
| Year ended December 31, | ****** | ****** | ****** | |
|---|---|---|---|---|
| 2025 | $ | 74 | ||
| 2026 | $ | 74 | ||
| 2027 | $ | 74 | ||
| 2028 | $ | 74 | ||
| 2029 | $ | 74 | ||
| Thereafter | $ | 159 | ||
| Total undiscounted lease payments | $ | 529 | ||
| Less imputed interest | $ | (354 | ) | |
| Net lease Liability | $ | 175 |
Page 30 | 47
Northumberland Bancorp
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR DECEMBER 31, 2024 & 2023
| 7. | Deposits |
|---|
The components of deposits at December 31, 2024 and 2023 are as follows (in thousands):
| Years ended December 31, | 2024 | 2023 | ||
|---|---|---|---|---|
| Demand, non-interest bearing | $ | 137,631 | 140,423 | |
| Demand, interest-bearing | $ | 63,084 | 67,910 | |
| Savings | $ | 91,524 | 96,489 | |
| Money Market Accounts | $ | 77,589 | 96,856 | |
| Time, $250 and over | $ | 53,952 | 49,164 | |
| Time, other | $ | 159,563 | 142,521 | |
| Total | $ | 583,343 | **** | 593,363 |
Brokered deposits in the amount of $0 and $9.9 million, are included in the above totals as of December 31, 2024, and December 31, 2023, respectively.
Time deposits and their remaining maturities at December 31, 2024 are as follows (in thousands):
| Year ended December 31, | ****** | ****** |
|---|---|---|
| 2025 | $ | 199,893 |
| 2026 | $ | 8,136 |
| 2027 | $ | 2,738 |
| 2028 | $ | 1,158 |
| 2029 | $ | 1,590 |
| Thereafter | $ | 0 |
| $ | 213,515 |
Page 31 | 47
Northumberland Bancorp
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR DECEMBER 31, 2024 & 2023
| 8. | Borrowings and Subordinated Debt |
|---|
Borrowings
Borrowings at December 31, 2024 and 2023 consisted of the following advances from the Federal Home Loan Bank (dollars in thousands):
| Maturity Date | Interest<br><br> <br>Rate | 2024 | 2023 | ||||
|---|---|---|---|---|---|---|---|
| March 15, 2027 | 4.333 | % | $ | 20,000 | 20,000 | ||
| Total | **** | **** | **** | $ | 20,000 | **** | 20,000 |
Each advance is payable at its maturity date, with a prepayment penalty for fixed rate advances. The advances were collateralized by $371,660,000 and $313,503,000 of mortgage and non-mortgage loans under a blanket lien arrangement at December 31, 2024 and December 31, 2023, respectively. Based on this collateral, and the Company’s holding of FHLB stock, the Company is eligible to borrow up to $262,496,000 at December 31, 2024. Additionally, the Company had unused unsecured lines of credit with correspondent banks which provided another $8,000,000 of available credit at December 31, 2024.
Subordinated Debt
In June 2022, the Company issued $10 million of subordinated debt. The subordinated debt has a term of 10 years, maturing in June 2031, and a contractual fixed interest rate of 4.50% through June 30, 2026. The effective rate is 4.70%, which includes the amortization of issuance costs. Subsequent to June 30, 2026, the interest rate will be floating, based on the 90-day average Secured Overnight Financing Rate (“SOFR”) plus 382 basis points. Interest is paid semi-annually in June and December.
The Company may redeem or prepay any or all of the subordinated debt, in whole or in part, without premium or penalty, at any time on or after June 30, 2026, and prior to the maturity date at a price of 100% of the principal amount, plus interest accrued and unpaid to the date of redemption or prepayment.
Page 32 | 47
Northumberland Bancorp
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR DECEMBER 31, 2024 & 2023
| 9. | Employee Stock Ownership Plan |
|---|
The Company established an Employee Stock Ownership Plan in 2021 to provide additional benefits to employees. In 2021 the ESOP borrowed money from the Company to purchase 24,307 shares of stock at $38.00 per share. In 2022 the ESOP borrowed money from the Company to purchase 24,307 shares of stock at $37.00 per share. In 2023 the ESOP borrowed money from the Company to purchase 24,307 shares of stock at $23.00 per share. The Company did not purchase shares of stock in 2024. The Company makes discretionary contributions to the ESOP, as well as paying dividends on unallocated shares to the ESOP, and the ESOP uses funds it receives to repay the loan. When loan payments are made, ESOP shares are allocated to participants based on relative compensation and expense is recorded. In 2024, the total expense was 7.7% of qualifying compensation, or approximately $575,000. Dividends on allocated shares increase participant accounts.
Participants receive their allocated shares at the end of employment. A participant may require stock received to be repurchased unless the stock is traded on an established market.
| Shares held by the ESOP were as follows: | December 31,<br><br> <br>2024 | December 31,<br><br> <br>2023 | ||
|---|---|---|---|---|
| Allocated to participants | $ | 59,126 | 35,196 | |
| Unallocated | $ | 13,795 | 37,725 | |
| Total ESOP shares | $ | 72,921 | **** | 72,921 |
Fair value of unearned shares at December 31, 2024 $350,117
Since the Company’s common stock is not traded on an established securities market, the ESOP includes a put option for shares of the Company’s common stock. Under the company’s administration of the ESOP’s put option, in the event a terminated plan participant desires to sell his or her shares of the Company stock, or for certain employees who elect to diversify their account balances, the Company may be required to purchase the shares from the participant at fair value. To the extent that shares of common stock held by the ESOP are not readily traded, a sponsor must reflect the maximum cash obligation related to those securities outside of stockholder’s equity.
| Maximum cash obligation related to ESOP shares, net of unearned ESOP shares | December 31,<br><br> <br>2024 | December 31,<br><br> <br>2023 | ||||
|---|---|---|---|---|---|---|
| Shares held by ESOP | 72,921 | 72,921 | ||||
| Fair Value per share | $ | 25.38 | 22.03 | |||
| Maximum cash obligation | $ | 1,850,735 | 1,606,450 | |||
| Less: Unearned ESOP shares | (397,715 | ) | (1,008,000 | ) | ||
| Maximum cash obligation, net of unearned ESOP Shares | $ | 1,453,020 | **** | 598,450 |
Page 33 | 47
Northumberland Bancorp
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR DECEMBER 31, 2024 & 2023
| 10. | Revenue Recognition |
|---|
All the revenue from contracts with customers, within the scope of ASC 606 is recognized in Non Interest Income. The following table presents the Company’s sources of Non-Interest Income for the years ended December 31, 2024 and 2023, respectively. Items outside the scope of ASC 606 are noted as such.
| Years ended December 31, | 2024 | 2023 | |||
|---|---|---|---|---|---|
| Non-Interest Income | |||||
| Service Charges on Deposit Accounts | $ | 489 | 457 | ||
| Trust Services - Asset Management | $ | 1,308 | 1,111 | ||
| Trust Services - Estate Settlement | $ | 52 | 40 | ||
| Debit Card Income | $ | 971 | 991 | ||
| Insurance and Investment Management Fees | $ | 242 | 241 | ||
| ATM Service Charge Income | $ | 62 | 61 | ||
| Loan Servicing income* | $ | 501 | 571 | ||
| Gains on Sales of Loans* | $ | 194 | 155 | ||
| Earnings on Bank-Owned Life Insurance* | $ | 805 | 355 | ||
| Investment Security Gains (Losses)* | $ | 38 | (316 | ) | |
| Other | $ | 123 | 115 | ||
| Total | $ | 4,785 | **** | 3,781 |
“*” Not within the scope of ASC 606
Sources of revenue for the Company which fall within the scope of ASC 606 are described as follows:
| ● | Service Charges on Deposit Accounts – The Bank earns fees from its deposit customers for various services, including transaction-based services and periodic account maintenance. Transaction based services include, but are not limited to stop payment fees, overdraft fees, check cashing fees, wire transfer fees, and early withdrawal penalties. Maintenance fees include account maintenance fees, minimum balance fees, and monthly service charge. Transaction based fees are only recognized when the transaction is complete, and maintenance fees are recognized when the period of the obligation is complete. |
|---|---|
| ● | Trust Services |
| --- | --- |
| o | Asset Management - The Trust department receives fees for providing trust related services including Investment Management, Security Custody, and Other Trust Services. These fees are based upon the value of assets under management and are assessed using a tiered rate schedule. Fees are recognized on a monthly basis when the service obligation is complete. These fees are recognized in trust services income on the Consolidated Statement of Income. |
| --- | --- |
| o | Estate Settlement – The trust department provides estate settlement services. These fees are based on the estimated fair value of the estate according to a tiered rate schedule. Each estate is unique in the nature, size, and complexity, and may include many tasks or milestones to complete. Fees are recognized in proportion to the number of milestones completed which is a judgement made by the trust management team. These fees are included in trust services income on the Consolidated Statements of Income. |
| --- | --- |
| ● | Debit Card Income – The Bank provides electronic funds transfer processing services for the debit cards it offers to its customers. The Bank earns interchange fees from each cardholder transaction conducted through various networks. The fees are transaction based and are earned when the transaction is complete. These fees are recognized in other income on the Consolidated Statements of Income. |
| --- | --- |
Page 34 | 47
Northumberland Bancorp
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR DECEMBER 31, 2024 & 2023
| ● | Insurance and Investment Service Fees – The Company sells investments and insurance through its Trust and Wealth Management division. Commissions from the sale of these products are recognized upon the completion of the transaction. These fees are recognized in other income on the Consolidated Statements of Income. |
|---|---|
| ● | ATM Service Charges – ATM service charges are earned when non customers use Bank ATMs. These fees are recognized when the transaction is complete. These fees are recognized in other income on The Consolidated Statements of Income. |
| --- | --- |
| ● | Gains/Losses on the Sale of Other Real Estate – these assets are de-recognized when control of the property transfers to the buyer. These gains/losses are included in other income on the Consolidated Statements of Income. |
| --- | --- |
Page 35 | 47
Northumberland Bancorp
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR DECEMBER 31, 2024 & 2023
| 11. | Income Taxes |
|---|
The provision for Federal income taxes consists of (in thousands):
| Years ended December 31, | 2024 | 2023 | ||
|---|---|---|---|---|
| Current Expense | $ | 28 | 79 | |
| Deferred (benefit) | $ | 87 | 99 | |
| Total | $ | 115 | **** | 178 |
The tax effects of deductible and taxable temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities, respectively, at December 31 are as follows (in thousands):
| Years ended December 31, | 2024 | 2023 | ||
|---|---|---|---|---|
| Deferred tax assets: | ||||
| Allowance for credit losses | $ | 865 | 897 | |
| Nonaccrual loan interest | $ | 27 | 15 | |
| Lease liability | $ | 37 | 51 | |
| Unrealized loss on investment securities | $ | 3,582 | 3,732 | |
| Other | $ | 86 | 251 | |
| Total gross deferred tax assets | $ | 4,597 | 4,946 | |
| Deferred tax liabilities: | ||||
| Premises and equipment | $ | 189 | 247 | |
| Investment accretion | $ | 57 | 38 | |
| Loan origination fees and costs | $ | 50 | 93 | |
| Mortgage servicing rights | $ | 56 | 78 | |
| Right of use asset | $ | 37 | 51 | |
| Other | $ | 10 | 5 | |
| Total gross deferred tax liabilities | $ | 399 | 512 | |
| Net Deferred Tax Asset/(Liability) | $ | 4,198 | 4,434 |
No valuation allowance was established at December 31, 2024 and 2023, in view of the Company’s ability to carryback to taxes paid in previous years and certain tax strategies, coupled with the anticipated future taxable income as evidenced by the Company’s earnings potential. Net deferred tax assets are included in Accrued Interest and Other Assets on the consolidated balance sheets.
Page 36 | 47
Northumberland Bancorp
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR DECEMBER 31, 2024 & 2023
The following is a reconciliation of the federal statutory rate and the Company’s effective income tax rate for the years ended December 31 (dollars in thousands):
| 2024 | **** | **** | **** | 2023 | **** | **** | **** | |||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Amount | Percent of<br><br> <br>Pretax<br><br> <br>Income | Amount | Percent of<br><br> <br>Pretax<br><br> <br>Income | |||||||||
| Provision at statutory rate | $ | 394 | 21.0 | % | $ | 435 | 21.0 | % | ||||
| Effect of tax-exempt income | $ | (230 | ) | -12.3 | % | $ | (211 | ) | -10.2 | % | ||
| Nondeductible interest expense | $ | 47 | 2.5 | % | $ | 33 | 1.6 | % | ||||
| Bank Owned Life Insurance | $ | (169 | ) | -9.0 | % | $ | (75 | ) | -3.6 | % | ||
| Other | $ | 73 | 3.9 | % | $ | (4 | ) | -0.2 | % | |||
| Actual Tax Expense and Effective Rate | $ | 115 | **** | 6.1 | % | $ | 178 | **** | 8.6 | % |
The Company prescribes a recognition threshold and a measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. Benefits from tax positions should be recognized in the financial statements only when it is more likely than not that the tax position will be sustained upon examination by the appropriate taxing authority that would have full knowledge of all relevant information. A tax position that meets the more-likely-than-not recognition threshold is measured at the largest amount of benefit that is greater than 50 percent likely of being realized upon ultimate settlement. Tax positions that previously failed to meet the more-likely-than-not recognition threshold should be recognized in the first subsequent financial reporting period in which that threshold is met. Previously recognized tax positions that no longer meet the more-likely-than-not recognition threshold should be derecognized in the first subsequent financial reporting period in which that threshold is no longer met.
There is currently no liability for uncertain tax positions and no known unrecognized tax benefits. The Company recognizes, when applicable, interest and penalties related to unrecognized tax benefits in the provision for income taxes in the consolidated statements of income. With few exceptions, the Company is no longer subject to U.S. federal or state income tax examinations by tax authorities for years before 2021.
Page 37 | 47
Northumberland Bancorp
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR DECEMBER 31, 2024 & 2023
| 12. | Commitments and Contingencies |
|---|
In the normal course of business, the Company makes various commitments that are not reflected in the accompanying consolidated financial statements. These instruments involve, to varying degrees, elements of credit and interest rate risk in excess of the amount recognized in the consolidated balance sheets. The Company's exposure to credit loss in the event of nonperformance by the other parties to the financial instruments is represented by the contractual amounts as disclosed. Losses, if any, are charged to the allowance for credit losses. The Company minimizes its exposure to credit loss under these commitments by subjecting them to credit approval, review procedures, and collateral requirements as deemed necessary.
The off-balance sheet commitments consisted of the following (in thousands):
| Years ended December 31, | 2024 | 2023 | ||
|---|---|---|---|---|
| Commitments to extend credit | $ | 80,413 | 86,245 | |
| Standby letters of credit | $ | 2,613 | 4,145 | |
| Total | $ | 83,026 | **** | 90,390 |
Commitments to extend credit are agreements to lend to a customer if there is no violation of any condition established in the loan agreement. These commitments are composed primarily of available commercial lines of credit and mortgage loan commitments. The Company uses the same credit policies in making loan commitments and conditional obligations as it does for on-balance sheet instruments. The Company evaluates each customer's creditworthiness on a case-by-case basis. The amount of collateral obtained, as deemed necessary, is based upon management credit evaluation in compliance with the Company's lending policy guidelines. Customers use credit commitments to ensure funds will be available for working capital purposes, for capital expenditures, and to ensure access to funds at specified terms and conditions.
Standby letters of credit are conditional commitments issued by the Company to guarantee the performance of a customer to a third party. Performance letters of credit represent conditional commitments issued by the Company to guarantee the performance of a customer to a third party. These instruments are issued primarily to support bid or performance-related contracts. The coverage period for these instruments is typically a one-year period with an annual renewal option subject to prior approval by management. Fees earned from the issuance of these letters are recognized over the coverage period. For secured letters of credit, the collateral is typically company deposit instruments or customer business assets.
Page 38 | 47
Northumberland Bancorp
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR DECEMBER 31, 2024 & 2023
| 13. | Regulatory Matters |
|---|
Cash and Due from Banks
The Bank is required to maintain average cash reserve balances in vault cash or with the Federal Reserve Bank. There are no required reserves at December 31, 2024 or December 31, 2023.
Loans
Federal law prevents the Company from borrowing from the Bank unless the loans are secured by specific collateral. Further, such secured loans are limited in amount to 10 percent of the Bank's common stock and capital surplus.
Dividends
The Company is subject to a dividend restriction that generally limits the amount of dividends that can be paid by a national bank. Prior approval of the Office of the Comptroller of the Currency ("OCC") is required if the total of all dividends declared by a national bank in any calendar year exceeds net profits, as defined for the year, combined with its retained net profits for the two preceding calendar years less any required transfers to surplus. Using this formula, the amount available for payment of dividends by the Bank in 2024, without approval of the OCC, is approximately $2,199,000 plus 2024 net profits retained up to the date of the dividend declaration.
Capital Requirements
The Bank is subject to various regulatory capital requirements administered by the federal banking agencies. Failure to meet the minimum capital requirements can initiate certain mandatory and possibly additional discretionary-actions by regulators that, if undertaken, could have a direct material effect on the Bank’s financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Bank must meet specific capital guidelines that involve quantitative measures of the Bank’s assets, liabilities, and certain off-balance sheet items as calculated under regulatory accounting practices. The Bank’s capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk‑weightings and other factors.
Information presented for December 31, 2024 and 2023, reflects the Basel III capital requirements. Under these capital requirements and the regulatory framework for prompt corrective action, the Bank must meet specific capital guidelines that involve quantitative measures of the Bank’s assets, liabilities and certain off-balance-sheet items as calculated under regulatory accounting practices. The Bank’s capital amounts and classifications are also subject to qualitative judgments by regulators about components, risk-weightings and other factors.
Page 39 | 47
Northumberland Bancorp
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR DECEMBER 31, 2024 & 2023
The risk-based capital rules adopted effective January 1, 2015 require that banks and holding companies maintain a “capital conservation buffer” of 250 basis points in excess of the “minimum capital ratio.” The minimum capital ratio is equal to the prompt corrective action adequately capitalized threshold ratio. The capital conservation buffer is 2.5% for 2019 and thereafter. Failure to maintain the required capital conservation buffer will result in limitations on capital distributions and on discretionary bonuses to executive officers.
Effective January 1, 2024, the capital levels required for the Bank to avoid these limitations were as follows:
| ● | Common Equity Tier 1 capital ratio of 7.00% |
|---|---|
| ● | Tier 1 risk based capital ratio of 8.50% |
| --- | --- |
| ● | Total risk based capital ratio of 10.50% |
| --- | --- |
As of December 31, 2024, the Bank had a conservation buffer greater than 2.5%.
In addition to the capital requirements, the Federal Deposit Insurance Corporation Improvement Act ("FDICIA") established five capital categories ranging from "well capitalized" to "critically undercapitalized." Should any institution fail to meet the requirements to be considered "adequately capitalized," it would become subject to a series of increasingly restrictive regulatory actions.
As of December 31, 2024 and 2023, the OCC categorized the Bank as well-capitalized under the regulatory framework for prompt corrective action. To be classified as a well-capitalized financial institution, Common equity Tier 1, Total risk-based, Tier I risk-based, and Tier I leverage capital ratios must be at least 6.5 percent, 10.0 percent, 8.0 percent, and 5.0 percent, respectively.
The following table presents the Bank’s Capital Ratios as of the dates indicated (dollars in thousands).
| Actual | To be Adequately Capitalized<br><br> <br>under Prompt Corrective Action<br><br> <br>Provisions | To be Well Capitalized under<br><br> <br>Prompt Corrective Action<br><br> <br>Provisions | |||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| December 31, 2024 | Amount | Ratio | Amount | Ratio | Amount | Ratio | |||||||||||
| Common equity Tier 1 (total risk-weighted assets) | $ | 66,791 | 15.90 | % | $ | > | 18,900 | > | 4.50 | % | $ | > | 27,300 | > | 6.50 | % | |
| Total capital (to risk-weighted assets) | $ | 70,910 | 16.88 | % | $ | > | 33,600 | > | 8.00 | % | $ | > | 42,000 | > | 10.00 | % | |
| Tier 1 capital (to risk-weighted assets) | $ | 66,791 | 15.90 | % | $ | > | 25,200 | > | 6.00 | % | $ | > | 33,600 | > | 8.00 | % | |
| Tier 1 capital (to average assets) | $ | 66,791 | 9.69 | % | $ | > | 27,569 | > | 4.00 | % | $ | > | 34,462 | > | 5.00 | % | |
| December 31, 2023 | Amount | Ratio | Amount | Ratio | Amount | Ratio | |||||||||||
| Common equity Tier 1 (total risk-weighted assets) | $ | 65,750 | 15.71 | % | $ | > | 18,835 | > | 4.50 | % | $ | > | 27,205 | > | 6.50 | % | |
| Total capital (to risk-weighted assets) | $ | 70,023 | 16.73 | % | $ | > | 33,484 | > | 8.00 | % | $ | > | 41,855 | > | 10.00 | % | |
| Tier 1 capital (to risk-weighted assets) | $ | 65,750 | 15.71 | % | $ | > | 25,113 | > | 6.00 | % | $ | > | 33,484 | > | 8.00 | % | |
| Tier 1 capital (to average assets) | $ | 65,750 | 9.72 | % | $ | > | 27,070 | > | 4.00 | % | $ | > | 33,838 | > | 5.00 | % |
Page 40 | 47
Northumberland Bancorp
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR DECEMBER 31, 2024 & 2023
| 14. | Fair Value Measurements |
|---|
The following disclosures show the hierarchal disclosure framework associated with the level of pricing observations utilized in measuring assets and liabilities at fair value. The three broad levels of pricing observations are as follows:
Level 1: Quoted prices are available in active markets for identical assets or liabilities as of the reported date.
Level 2: Pricing inputs are other than the quoted prices in active markets, which are either directly or indirectly observable as of the reported date. The nature of these assets and liabilities includes items for which quoted prices are available but traded less frequently and items that are fair-valued using other financial instruments, the parameters of which can be directly observed.
Level 3: Valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable.
This hierarchy requires the use of observable market data when available.
| Balance December 31, 2024 | Level 1 | Level 2 | Level 3 | TOTAL | ||||
|---|---|---|---|---|---|---|---|---|
| Assets measured on a recurring basis: | ||||||||
| Investment securities available-for-sale | $ | 0 | $ | 0 | $ | 0 | $ | 0 |
| Obligations of states and political subdivisions | $ | 0 | $ | 67,183 | $ | 0 | $ | 67,183 |
| Mortgage-backed securities in government-sponsored entities | $ | 0 | $ | 107,594 | $ | 0 | $ | 107,594 |
| Equity securities in financial institutions | $ | 205 | $ | 0 | $ | 0 | $ | 205 |
| Total | $ | 205 | $ | 174,777 | $ | 0 | $ | 174,982 |
| Balance December 31, 2023 | **** | **** | **** | **** | **** | **** | **** | **** |
| Assets measured on a recurring basis: | ||||||||
| Investment securities available-for-sale | $ | 0 | $ | 0 | $ | 0 | $ | 0 |
| Obligations of states and political subdivisions | $ | 0 | $ | 67,638 | $ | 0 | $ | 67,638 |
| Mortgage-backed securities in government-sponsored entities | $ | 0 | $ | 120,476 | $ | 0 | $ | 120,476 |
| Equity securities in financial institutions | $ | 167 | $ | 0 | $ | 0 | $ | 167 |
| Total | $ | 167 | $ | 188,114 | $ | 0 | $ | 188,281 |
Page 41 | 47
Northumberland Bancorp
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR DECEMBER 31, 2024 & 2023
| 15. | Fair Value of Financial Instruments |
|---|
The fair values at December 31 of the Company’s financial instruments are as follows (in thousands):
| Balance December 31, 2024 | Carrying<br><br> <br>Value | Fair<br><br> <br>Value | Level 1 | Level 2 | Level 3 | |||||
|---|---|---|---|---|---|---|---|---|---|---|
| Financial Assets: | **** | **** | **** | **** | **** | **** | **** | **** | **** | **** |
| Cash and cash equivalents | $ | 24,067 | $ | 24,067 | $ | 24,067 | ||||
| Investment securities: | ||||||||||
| Available-for-sale | $ | 174,777 | $ | 174,777 | $ | 174,777 | ||||
| Held-to-maturity | $ | 2,565 | $ | 2,591 | $ | 2,591 | ||||
| Equity securities | $ | 205 | $ | 205 | $ | 205 | ||||
| Loans held for sale | $ | 288 | $ | 288 | $ | 288 | ||||
| Net loans | $ | 429,318 | $ | 415,998 | $ | 415,998 | ||||
| Restricted stock | $ | 2,782 | $ | N/A | $ | N/A | $ | N/A | ||
| Mortgage servicing rights | $ | 266 | $ | 1,138 | $ | 1,138 | ||||
| Accrued interest receivable | $ | 2,320 | $ | 2,320 | $ | 2,320 | ||||
| Financial Liabilities: | **** | **** | **** | **** | **** | **** | **** | **** | **** | **** |
| Deposits | $ | 583,343 | $ | 581,919 | $ | 581,919 | ||||
| Borrowings | $ | 20,000 | $ | 20,000 | $ | 20,000 | ||||
| Accrued interest payable | $ | 456 | $ | 456 | $ | 456 | ||||
| Balance December 31, 2023 | Carrying Value | Fair Value | Level 1 | Level 2 | Level 3 | |||||
| Financial Assets: | **** | **** | **** | **** | **** | **** | **** | **** | **** | **** |
| Cash and cash equivalents | $ | 19,014 | $ | 19,014 | $ | 19,014 | ||||
| Investment securities: | ||||||||||
| Available-for-sale | $ | 188,144 | $ | 188,114 | $ | 188,114 | ||||
| Held-to-maturity | $ | 4,008 | $ | 4,008 | $ | 4,008 | ||||
| Equity securities | $ | 167 | $ | 167 | $ | 167 | ||||
| Loans held for sale | $ | 629 | $ | 629 | $ | 629 | ||||
| Net loans | $ | 425,759 | $ | 404,457 | $ | 404,457 | ||||
| Restricted stock | $ | 2,926 | $ | N/A | $ | N/A | $ | N/A | ||
| Mortgage servicing rights | $ | 369 | $ | 1,288 | $ | 1,288 | ||||
| Accrued interest receivable | $ | 2,317 | $ | 2,317 | $ | 2,317 | ||||
| Financial Liabilities: | **** | **** | **** | **** | **** | **** | **** | **** | **** | **** |
| Deposits | $ | 593,362 | $ | 543,754 | $ | 543,754 | ||||
| Borrowings | $ | 20,000 | $ | 20,000 | $ | 20,000 | ||||
| Accrued interest payable | $ | 366 | $ | 366 | $ | 366 |
Financial instruments are defined as cash, evidence of ownership interest in an entity, or a contract that creates an obligation or right to receive or deliver cash or another financial instrument from/to a second entity on potentially favorable or unfavorable terms.
Fair value is defined as the amount at which a financial instrument could be exchanged in a current transaction between willing parties other than in a forced or liquidation sale. If a quoted market price is available for a financial instrument, the estimated fair value would be calculated based upon the market price per trading unit of the instrument.
Page 42 | 47
Northumberland Bancorp
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR DECEMBER 31, 2024 & 2023
If no readily available market exists, the fair value estimates for financial instruments should be based upon management's judgment regarding current economic conditions, interest rate risk, expected cash flows, future estimated losses, and other factors as determined through various option pricing formulas. As many of these assumptions result from judgments made by management based upon estimates that are inherently uncertain, the resulting estimated fair values may not be indicative of the amount realizable in the sale of a particular financial instrument. In addition, changes in assumptions on which the estimated fair values are based may have a significant impact on the resulting estimated fair values.
In accordance with Accounting Standards Update (ASU) 2016-01, Recognition and Measurement of Financial Assets and Liabilities, the Company has considered the exit price notion when measuring the fair value of financial instruments.
The Company employed simulation modeling in determining the estimated fair value of financial instruments for which quoted market prices were not available based upon the following assumptions:
Investment Securities
The fair market value of investment securities is equal to the available quoted market price. If no quoted market price is available, fair value is estimated using the quoted market price for similar securities. Fair values for certain corporate bonds were determined utilizing discounted cash flow models, due to the absence of a current market to provide reliable market quotes for the instruments.
Mortgage Servicing Rights
The fair value for mortgage servicing rights is estimated by discounting contractual cash flows and adjusting for prepayment estimates. Discount rates are based upon rates generally charged for such loans with similar characteristics.
Commitments to Extend Credit and Commercial Letters of Credit
These financial instruments are generally not subject to sale, and estimated fair values are not readily available.
The carrying value, represented by the net deferred fee arising from the unrecognized commitment or letter of credit, and the fair value, determined by discounting the remaining contractual fee over the term of the commitment using fees currently charged to enter into similar agreements with similar credit risk, are not considered material for disclosure. The contractual amounts of unfunded commitments and letters of credit are presented in Note 12.
Page 43 | 47
Northumberland Bancorp
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR DECEMBER 31, 2024 & 2023
| 16. | Related Party Transactions |
|---|
Certain officers, directors and other related parties have loans and conduct other transactions with the Company. Deposits of related parties totaled $7,050,000 and $5,094,000 at December 31, 2024 and 2023, respectively. The aggregate dollar amount of loans to related parties, along with an analysis of the activity for December 31, 2024 and 2023 are as follows (in thousands):
| Years ended December 31, | 2024 | 2023 | ||||
|---|---|---|---|---|---|---|
| Balance, beginning | $ | 1,356 | 1,078 | |||
| Additions | $ | 15 | 406 | |||
| Repayments | $ | (1,215 | ) | (128 | ) | |
| Effect of changes in composition of related parties | $ | 4,970 | 0 | |||
| Balance, ending | $ | 5,126 | **** | 1,356 |
As of December 31, 2024 the Company was owed $4,385,000 of loans, net of participation balances, that is currently classified as special mention. The loans are not and never have been past due and have not been placed on nonaccrual. The relationship has available line of credit of $1,290,000.
| 17. | Segment Information |
|---|
The Company’s reportable segment is determined by the Chief Financial Officer and the Chief Executive Officer, who are the designated chief decision makers, based upon information provided about the Company’s products and services offered, primarily banking operations. The segment is also distinguished by the level of information provided to the chief decision makers, who use such information to review performance of various components of the business (such as branches and the subsidiary bank), which are then aggregated if operating performance, products/services, and customers are similar. The chief operating decision makers will evaluate the financial performance of the company’s business components such as by evaluating revenue streams, significant expenses, and budget to actual results in assessing the Company’s segment and in the determination of allocating resources. The chief operating decision makers use revenue streams to evaluate product pricing and significant expenses to assess performance and evaluate return on assets. The chief operating decision makers use consolidated net income to benchmark the Company against its competitors. The benchmarking analysis coupled with monitoring of budget to actual results are used in assessment performance and in establishing compensation. Loans, investments, banking services and deposits provide the revenue in the banking operations. Interest expense, provisions for credit losses, and payroll provide the significant expenses in the banking operation. All operations are domestic.
Accounting policies for segments are the same as those described in Note 1. Segment performance is evaluated using consolidated net income. Information reported internally for the performance assessment by the chief operating decision makers is shown with the Consolidated Statements of Income presentation on page 7 of this report.
Page 44 | 47
Northumberland Bancorp
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR DECEMBER 31, 2024 & 2023
| 18. | Condensed Parent Company Statements | |||
|---|---|---|---|---|
| Years ended December 31, | 2024 | 2023 | ||
| --- | --- | --- | --- | --- |
| Assets: | **** | **** | **** | **** |
| Cash and cash equivalents | $ | 4,325 | $ | 3,301 |
| Investment in subsidiary | 52,833 | 50,658 | ||
| Investment securities available-for-sale | 2,502 | 3,489 | ||
| Loan receivable - ESOP | 484 | 1,056 | ||
| Equity securities | 205 | 167 | ||
| Other assets | 374 | 295 | ||
| Total Assets | $ | 60,723 | $ | 58,966 |
| Liabilities and Stockholders’ Equity: | **** | **** | **** | **** |
| Borrowings | 9,870 | 9,850 | ||
| Other Liabilities | 0 | 1 | ||
| Total Liabilities | **** | 9,870 | **** | 9,851 |
| Redeemable common stock held by employee | ||||
| stock ownership plan (ESOP), net of unearned ESOP shares | 1,453 | 598 | ||
| Total Stockholders’ Equity | 50,853 | 49,115 | ||
| Less maximum cash obligations related to ESOP Shares, net of unearned ESOP shares | 1,453 | 598 | ||
| Total Stockholders’ Equity Less Maximum Cash Obligation Related to ESOP Shares | $ | 49,400 | $ | 48,517 |
| Total Liabilities and Stockholders’ Equity | $ | 60,723 | $ | 58,966 |
Page 45 | 47
Northumberland Bancorp
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR DECEMBER 31, 2024 & 2023
| Years ended December 31, | 2024 | 2023 | ||||
|---|---|---|---|---|---|---|
| Income: | **** | **** | **** | **** | **** | **** |
| Equity in undistributed earnings of subsidiary | $ | 1,040 | $ | 911 | ||
| Dividends from subsidiary | 890 | 1,146 | ||||
| Dividend income | 302 | 308 | ||||
| Net investment securities gains (losses) | 39 | 20 | ||||
| Total Income | **** | 2,271 | **** | 2,385 | ||
| Expenses: | **** | **** | **** | **** | **** | **** |
| Interest expense holding company | 470 | 470 | ||||
| Other operating expenses | 95 | 74 | ||||
| Total Expenses | **** | 565 | **** | 544 | ||
| Income before income taxes | 1,706 | 1,841 | ||||
| Income tax benefit | (56 | ) | (51 | ) | ||
| $ | 1,762 | $ | 1,892 | |||
| Net Income | **** | **** | **** | **** | **** | **** |
| Years ended December 31, | 2024 | 2023 | ||||
| --- | --- | --- | --- | --- | --- | --- |
| Cash Flows From Operating Activities: | ||||||
| Net income | $ | 1,792 | $ | 1,892 | ||
| Equity in undistributed earnings of subsidiary | (1,040 | ) | (911 | ) | ||
| Net (gain) loss on sale of securities | 1 | 0 | ||||
| Change in fair value of Equity Services | 38 | 20 | ||||
| Share based compensation expense | 610 | 367 | ||||
| Other, net | (169 | ) | (75 | ) | ||
| Net Cash Provided By Operating Activities | **** | 1,232 | **** | 1,293 | ||
| Cash Flows From Investing Activities: | ||||||
| Security purchases | 0 | (1,994 | ) | |||
| Proceeds from maturities of available-for-sale securities | 999 | 484 | ||||
| Net Cash Provided By Investing Activities | **** | 999 | **** | (1,510 | ) | |
| Cash Flows From Financing Activities: | ||||||
| Purchase of ESOP shares | 0 | (559 | ) | |||
| Dividends paid | (1,207 | ) | (1,207 | ) | ||
| Net Cash Used In Financing Activities | **** | (1,207 | ) | **** | (1,766 | ) |
| Net Increase (Decrease) in Cash and Cash Equivalents | 1,024 | (1,983 | ) | |||
| Cash and Cash Equivalents, Beginning of Year | 3,301 | 5,284 | ||||
| Cash and Cash Equivalents, End of Year | $ | 4,325 | $ | 3,301 |
Page 46 | 47
Northumberland Bancorp
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR DECEMBER 31, 2024 & 2023
| 19. | Pending Sale |
|---|
On September 25, 2024, The Northumberland National Bank, announced a Merger of Equals with Mifflinburg Bank & Trust, with an anticipated close in the 2^nd^ or 3^rd^ Quarter of 2025.
| 20. | Subsequent Events |
|---|
Management has reviewed events occurring through March 31, 2025, the date the financial statements were available to be issued for items that should potentially be recognized or disclosed in these consolidated financial statements.
Page 47 | 47
ex_867084.htm
Exhibit 99.2
| Northumberland Bancorp | |||||
|---|---|---|---|---|---|
| Consolidated Balance Sheets<br><br> <br>(in thousands, except share and per share data) | |||||
| **** | **** | **** | |||
| --- | --- | --- | --- | --- | --- |
| December 31, | |||||
| 2024 * | |||||
| Assets | |||||
| Cash and due from banks | 12,261 | $ | 8,924 | ||
| Interest-bearing demand deposits | 34,730 | 15,143 | |||
| Total cash and cash equivalents | 46,991 | 24,067 | |||
| Debt securities available-for-sale, at fair value | 164,787 | 174,777 | |||
| Debt securities held-to-maturity, at amortized cost, net of allowance for credit losses of 0 (fair value 2025- 2,615; 2024-2,591) | 2,573 | 2,565 | |||
| Marketable equity securities, at fair value | 208 | 205 | |||
| Restricted stock, at cost | 2,728 | 2,782 | |||
| Loans held-for-sale | 345 | 288 | |||
| Loans | 446,411 | 433,187 | |||
| Allowance for credit losses | (3,866 | ) | (3,869 | ) | |
| Loans, net | 442,545 | 429,318 | |||
| Premises and equipment, net | 7,510 | 7,842 | |||
| Accrued interest receivable | 2,163 | 2,320 | |||
| Bank owned life insurance | 14,817 | 14,630 | |||
| Net deferred tax asset | 3,321 | 4,198 | |||
| Other assets | 3,435 | 3,464 | |||
| Total Assets | 691,423 | $ | 666,456 | ||
| Liabilities and Stockholders' Equity | **** | **** | **** | **** | **** |
| Liabilities | **** | **** | **** | **** | **** |
| Deposits: | |||||
| Noninterest-bearing deposits | 143,695 | $ | 137,631 | ||
| Interest-bearing deposits | 459,825 | 445,712 | |||
| Total deposits | 603,520 | 583,343 | |||
| Federal Home Loan Bank advances | 20,000 | 20,000 | |||
| Subordinated Debt, less unamortized issuance costs | 9,880 | 9,870 | |||
| Accrued Interest and Other liabilities | 2,425 | 2,390 | |||
| Total Liabilities | 635,825 | 615,603 | |||
| Commitments and Contingencies | |||||
| Redeemable Common Stock Held By Employee Stock Ownership Plan | 1,553 | 1,453 | |||
| Stockholders' Equity | **** | **** | **** | **** | **** |
| Common stock, par value 0.10 per share; authorized 5,000,000 shares; issued 1,502,500 shares; outstanding 1,311,858 shares as of June 30, 2025 and December 31, 2024 | 150 | 150 | |||
| Capital surplus | 3,832 | 3,832 | |||
| Retained earnings | 64,888 | 63,499 | |||
| Accumulated other comprehensive loss | (10,110 | ) | (13,466 | ) | |
| Unearned ESOP Shares | (397 | ) | (397 | ) | |
| Treasury stock, at cost:190,642 shares as of June 30, 2025 and December 31, 2024 | (2,765 | ) | (2,765 | ) | |
| Total Stockholders' Equity | 55,598 | 50,853 | |||
| Less maximum cash obligation to ESOP shares | 1,553 | 1,453 | |||
| Total Stockholders’ Equity Less Maximum Cash Obligations Related to ESOP Shares | 54,045 | 49,400 | |||
| Total Liabilities and Stockholders' Equity | 691,423 | $ | 666,456 |
All values are in US Dollars.
See accompanying notes to consolidated financial statements
* Derived from consolidated audited financial statements
1
Northumberland Bancorp
Consolidated Statements of Income (Unaudited)
(in thousands, except per share data)
| Six Months Ended June 30, | |||||
|---|---|---|---|---|---|
| 2025 | 2024 | ||||
| Interest and Dividend Income | **** | **** | **** | **** | **** |
| Interest and fees on loans | $ | 11,990 | $ | 11,062 | |
| Interest-bearing deposits in banks | **** | 527 | 517 | ||
| Securities: | |||||
| Taxable | **** | 1,762 | 2,120 | ||
| Tax-exempt | **** | 276 | 275 | ||
| Dividends | **** | 266 | 274 | ||
| Total Interest and Dividend Income | **** | 14,821 | 14,248 | ||
| Interest Expense | **** | **** | **** | **** | **** |
| Deposits | **** | 5,551 | 5,883 | ||
| Federal Home Loan Bank advances | **** | 436 | 441 | ||
| Other borrowings | **** | 235 | 235 | ||
| Total Interest Expense | **** | 6,222 | 6,559 | ||
| Net Interest Income | **** | 8,599 | 7,689 | ||
| Provision for credit losses | **** | 7 | - | ||
| Net Interest Income after provision for credit losses | **** | 8,592 | 7,689 | ||
| Noninterest Income | **** | **** | **** | **** | **** |
| Service charges on deposit accounts | **** | 220 | 217 | ||
| ATM fees and debit card income | **** | 553 | 485 | ||
| Mortgage banking revenue | **** | 74 | 72 | ||
| Commissions from investment product sales | **** | 83 | 132 | ||
| Net marketable equity security gains (losses) | **** | 3 | (13 | ) | |
| Earnings on bank owned life insurance | **** | 187 | 186 | ||
| Trust income | **** | 638 | 680 | ||
| Other | **** | 309 | 389 | ||
| Total Noninterest Income | **** | 2,067 | 2,148 | ||
| Noninterest Expense | **** | **** | **** | **** | **** |
| Salaries and employee benefits | **** | 4,682 | 5,500 | ||
| Net occupancy and equipment expense | **** | 1,076 | 1,175 | ||
| Data processing fees | **** | 384 | 364 | ||
| Pennsylvania shares tax | **** | 200 | 200 | ||
| Professional fees | **** | 484 | 478 | ||
| Advertising expense | **** | 32 | 35 | ||
| FDIC deposit insurance | **** | 150 | 162 | ||
| Merger expenses | **** | 156 | - | ||
| Other | **** | 1,146 | 1,301 | ||
| Total Noninterest Expense | **** | 8,310 | 9,215 | ||
| Income Before Income Taxes | **** | 2,349 | 622 | ||
| Income Taxes | **** | 358 | 1 | ||
| Net Income | $ | 1,991 | $ | 621 | |
| Earnings Per Share - Basic and Diluted | $ | 1.52 | $ | 0.47 |
See accompanying notes to consolidated financial statements.
2
Northumberland Bancorp
Consolidated Statements of Comprehensive Income (Loss) (Unaudited)
(in thousands)
| Six Months Ended June 30, | |||||
|---|---|---|---|---|---|
| 2025 | 2024 | ||||
| Net Income | $ | 1,991 | $ | 621 | |
| Other Comprehensive Income (Loss) | **** | **** | **** | **** | **** |
| Unrealized holding gains (losses) on debt securities available-for-sale, net of income taxes | **** | 3,356 | (1,118 | ) | |
| Other comprehensive income (loss) | **** | 3,356 | (1,118 | ) | |
| Total Comprehensive Income (Loss) | $ | 5,347 | $ | (497 | ) |
See accompanying notes to consolidated financial statements.
3
Northumberland Bancorp
Consolidated Statements of Changes in Stockholders’ Equity
(Unaudited)
(in thousands)
| Maximum | |||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Accumulated | Cash | ||||||||||||||||||||
| Other | Obligation | ||||||||||||||||||||
| Capital | Retained | Comprehensive | Treasury | Unearned | Related to | ||||||||||||||||
| Surplus | Earnings | (Loss) | Stock | ESOP Shares | ESOP Shares | Total | |||||||||||||||
| Balance, December 31, 2023 | 150 | $ | 3,832 | $ | 62,944 | $ | (14,038 | ) | $ | (2,765 | ) | $ | (1,008 | ) | $ | (598 | ) | $ | 48,517 | ||
| Net income | - | 621 | - | - | - | - | 621 | ||||||||||||||
| Other comprehensive loss | - | - | - | (1,118 | ) | - | - | - | (1,118 | ) | |||||||||||
| Change related to ESOP shares | - | - | - | - | - | - | 126 | 126 | |||||||||||||
| Cash dividends declared (0.92 per share) | - | - | (603 | ) | - | - | - | - | (603 | ) | |||||||||||
| Balance, June 30, 2024 | 150 | $ | 3,832 | $ | 62,962 | $ | (15,156 | ) | $ | (2,765 | ) | $ | (1,008 | ) | $ | (472 | ) | $ | 47,543 |
All values are in US Dollars.
| Maximum | |||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Accumulated | Cash | ||||||||||||||||||||
| Other | Obligation | ||||||||||||||||||||
| Capital | Retained | Comprehensive | Treasury | Unearned | Related to | ||||||||||||||||
| Surplus | Earnings | (Loss) | Stock | ESOP Shares | ESOP Shares | Total | |||||||||||||||
| Balance, December 31, 2024 | 150 | $ | 3,832 | $ | 63,499 | $ | (13,466 | ) | $ | (2,765 | ) | $ | (397 | ) | $ | (1,453 | ) | $ | 49,400 | ||
| Net income | - | - | 1,991 | - | - | - | - | 1,991 | |||||||||||||
| Other comprehensive income | - | - | - | 3,356 | - | - | - | 3,356 | |||||||||||||
| Change related to ESOP shares | - | - | - | - | - | - | (100 | ) | (100 | ) | |||||||||||
| Cash dividends declared (0.92 per share) | - | - | (602 | ) | - | - | - | - | (602 | ) | |||||||||||
| Balance, June 30, 2025 | 150 | $ | 3,832 | $ | 64,888 | $ | (10,110 | ) | $ | (2,765 | ) | $ | (397 | ) | $ | (1,553 | ) | $ | 54,045 |
All values are in US Dollars.
See accompanying notes to consolidated financial statements.
4
Northumberland Bancorp
Consolidated Statements of Cash Flows (Unaudited)
(in thousands)
| Six Months Ended June 30, | ||||||
|---|---|---|---|---|---|---|
| Cash Flows from Operating Activities | 2025 | 2024 | ||||
| Net income | $ | 1,991 | $ | 621 | ||
| Adjustments to reconcile net income to net cash provided by operating activities: | ||||||
| Depreciation, amortization, and accretion, net | **** | 1,146 | 1,212 | |||
| Deferred income tax benefit | **** | (7 | ) | (14 | ) | |
| Provision for credit losses | **** | 7 | - | |||
| Decrease (increase) in accrued interest receivable | **** | 157 | (60 | ) | ||
| (Decrease) increase in accrued interest payable | **** | (25 | ) | 89 | ||
| Increase in cash surrender value of bank owned life insurance | **** | (187 | ) | (188 | ) | |
| Net marketable equity security (gains) losses | **** | (3 | ) | 13 | ||
| Origination of loans held for sale | **** | (2,805 | ) | (2,414 | ) | |
| Proceeds from loans sold | **** | 2,822 | 2,455 | |||
| Mortgage banking revenue | **** | (74 | ) | (72 | ) | |
| Amortization of debt issuance costs | **** | 10 | 10 | |||
| Change in other assets and liabilities, net | **** | 71 | 499 | |||
| Net Cash Provided by Operating Activities | **** | 3,103 | 2,151 | |||
| Cash Flows from Investing Activities | **** | **** | **** | **** | **** | **** |
| Debt securities available-for-sale: | ||||||
| Purchases | **** | - | (13,238 | ) | ||
| Proceeds from paydowns, maturities and calls | **** | 13,436 | 12,592 | |||
| Debt securities held-to-maturity: | ||||||
| Purchases | **** | - | (1,000 | ) | ||
| Proceeds from paydowns, maturities and calls | **** | - | 2,500 | |||
| Net increase in loans | **** | (13,224 | ) | (8,993 | ) | |
| Increase in restricted investments in bank stock | **** | 54 | 51 | |||
| Proceeds from sale of foreclosed real estate | **** | - | 180 | |||
| Purchases of premises and equipment | **** | (20 | ) | (44 | ) | |
| Net Cash Provided by (Used in) Investing Activities | **** | 246 | (7,952 | ) | ||
| Cash Flows from Financing Activities | **** | **** | **** | **** | **** | **** |
| Increase in deposits | **** | 20,177 | 18,317 | |||
| Dividends paid on common stock | **** | (602 | ) | (603 | ) | |
| Net Cash Provided by Financing Activities | **** | 19,575 | 17,714 | |||
| Net increase in cash and cash equivalents | **** | 22,924 | 11,913 | |||
| Cash and Cash Equivalents, Beginning of Year | **** | 24,067 | 19,014 | |||
| Cash and Cash Equivalents, End of Year | $ | 46,991 | $ | 30,927 | ||
| Supplementary Cash Flows Information | **** | **** | **** | **** | **** | **** |
| Interest paid | $ | 6,247 | $ | 7,600 | ||
| Supplementary Disclosure of Noncash Transactions | **** | **** | **** | **** | **** | **** |
| Increase (decrease) in maximum cash obligation related to ESOP shares | $ | 100 | $ | (126 | ) | |
| Other real estate acquired in settlement of loans | $ | - | $ | 148 |
See accompanying notes to consolidated financial statements.
5
Northumberland Bancorp
Notes to Consolidated Financial Statements
(Unaudited)
| 1. | Description of Business and Summary of Significant Accounting Policies |
|---|
A summary of significant accounting and reporting policies applied in the presentation of the accompanying consolidated financial statements follows:
Nature of Operations and Basis of Presentation
Northumberland Bancorp (the "Company") is a Pennsylvania corporation and is registered under the Bank Holding Company Act. The Company was organized as the holding company of its wholly owned subsidiary, The Northumberland National Bank (the "Bank"). The Bank is a nationally chartered commercial bank located in Northumberland, Pennsylvania. The Bank's service area includes portions of Northumberland, Snyder, and Union counties in Pennsylvania. The Company and the Bank derive substantially all their income from banking and bank-related services, which include interest earnings on commercial, commercial mortgage, residential real estate, and consumer loan financing as well as interest earnings on investment securities and deposit and trust services to their customers. The Company is supervised by the Federal Reserve Board, while the Bank is subject to regulation and supervision by the Office of the Comptroller of the Currency.
The consolidated financial statements include the accounts of the Company and its wholly owned subsidiary, the Bank. Intercompany activity has been eliminated in consolidation.
Use of Estimates
The consolidated financial statements have been prepared in conformity with U.S. generally accepted accounting principles (“U.S. GAAP”) and with general practice within the banking industry. In preparing the financial statements, management makes estimates and assumptions based upon available information. These estimates and assumptions affect the amounts reported in financial statements and the disclosures provided. Actual results could differ significantly from those estimates.
Investment Securities
Investment securities are classified at the time of purchase, based on management's intention and ability, as securities held-to-maturity or securities available-for-sale. Debt securities acquired with the intent and ability to hold to maturity are stated at cost adjusted for amortization of premium and accretion of discount that are computed using the level yield method and recognized as adjustments of interest income. Certain other debt securities have been classified as available-for- sale to serve principally as a source of liquidity. Equity securities are measured at fair value with changes in fair value recognized in the current period earnings. Unrealized holding gains and losses for available-for-sale securities are reported as a separate component of stockholders' equity, net of tax, until realized. Realized securities gains and losses are computed using the specific identification method. Interest and dividends on investment securities are recognized as income when earned.
Allowance for Credit Losses – Held-to-Maturity Securities: Management measures expected credit losses on held-to-maturity debt securities on a collective basis by major security type [and any other risk characteristics used to segment the portfolio]. The estimate of expected credit losses considers historical credit loss information that is adjusted for current conditions and reasonable and supportable forecasts.
Allowance for Credit Losses – Available-For-Sale Securities: For available-for-sale debt securities in an unrealized loss position, the Company first assesses whether it intends to sell, or it is more likely than not that it will be required to sell the security before recovery of its amortized cost basis. If either of the criteria regarding intent or requirement to sell is met, the security’s amortized cost basis is written down to fair value through income. For debt securities available-for-sale that do not meet the aforementioned criteria, the Company evaluates whether the decline in fair value has resulted from credit losses or other factors. In making this assessment, management considers the extent to which fair value is less than amortized cost, any changes to the rating of the security by a rating agency, and adverse conditions specifically related to the security, among other factors. If this assessment indicates that a credit loss exists, the present value of cash flows expected to be collected from the security are compared to the amortized cost basis of the security. If the present value of cash flows expected to be collected is less than the amortized cost basis, a credit loss exists and an allowance for credit losses is recorded for the credit loss, limited by the amount that the fair value is less than the amortized cost basis. Any impairment that has not been recorded through an allowance for credit losses is recognized in other comprehensive income (loss).
Changes in the allowance for credit losses are recorded as credit loss expense (or reversal). Losses are charged against the allowance when management believes the uncollectibility of an available-for-sale security is confirmed or when either of the criteria regarding intent or requirement to sell is met.
Federal Home Loan Bank Stock
The Bank is a member of the Federal Home Loan Bank ("FHLB") of Pittsburgh and, as such, is required to maintain a minimum investment in stock of the FHLB that varies with the level of advances outstanding with the FHLB, as well as a minimum level of mortgages in the Mortgage Partnership Finance (“MPF”) program. FHLB Stock is carried at cost, classified as restricted securities, and periodically evaluated for impairment based on the ultimate recovery of par value. Both cash and stock dividends are reported as income.
Loans Held for Sale and Loans Serviced
Loans held for sale are carried at a lower of cost or fair value, as determined on an aggregate basis. Gains and losses on sales of mortgage loans are determined by the difference between the sale proceeds and the carrying value of the loans. All sales are made with limited recourse. Loans held for sale were $345,000 and $288,000 at June 30, 2025 and December 31,2024, respectively. At June 30, 2025 and December 31, 2024, the amounts of loans serviced by the Company for the benefit of others were $106,307,000 and $111,696,000 respectively. These loans are not included on the Company’s consolidated balance sheets.
Mortgage Servicing Rights ("MSRs")
The Company has agreements for the express purpose of selling loans in the secondary market. The Company maintains servicing rights for certain loans. Originated MSRs are recorded by allocating total costs incurred between the loan and servicing rights based on their relative fair values. MSRs are amortized in proportion to the estimated servicing income over the estimated life of the servicing portfolio. Annually, the Company performs an impairment review of the MSRs and recognizes impairment through a valuation account. No impairment was recognized in 2025 or 2024. MSRs are a component of other assets on the consolidated balance sheets. The balance of loan servicing assets was $218,000 and $266,300 at June 30, 2025 and December 31, 2024, respectively.
6
Northumberland Bancorp
Notes to Consolidated Financial Statements
(Unaudited)
Loans
Loans originated with the intention to hold to maturity are reported at their principal amount, net of unearned income and the allowance for credit losses. Interest income on all loans is recognized on an accrual basis. Non-refundable loan fees and certain direct costs are deferred and amortized over the life of the loans using the interest method. The amortization is reflected as an interest yield adjustment, and the deferred portion of the net fees and costs is reflected as part of the loan balance.
Accrual of interest is discontinued when, in the opinion of management, reasonable doubt exists as to the collectability of additional interest. Loans are returned to accrual status when past due interest is collected and the collection of principal and interest is probable. Commercial and commercial real estate loans are considered for nonaccrual status when they are 90 days past due, unless the loan is well-secured and in the process of collection. Residential mortgages are considered for nonaccrual when they are 180 days past due, unless they are well secured and in the process of collection. Consumer loans continue to accrue interest until they are charged off after they have reached 120 days past due. Past due status is based upon the contractual terms of the loan. In all cases, loans are placed on non-accrual or charged off at an earlier date if collection of principal or interest is considered doubtful. Nonaccrual loans and loans past due 90 days and still accruing may include smaller balance homogeneous loans that are collectively evaluated for impairment and individually evaluated loans. The fair value of the underlying collateral at the reporting date is used to determine any possible loss.
Allowance for Credit Losses – Loans
The allowance for credit losses is a valuation account that is deducted from the loans’ amortized cost basis to present the net amount expected to be collected on the loans. Loans are charged off against the allowance when management believes the uncollectibility of a loan balance is confirmed.
Management estimates the allowance balance using relevant available information, from internal and external sources, relating to past events, current conditions, and reasonable and supportable forecasts. Historical credit loss experience provides the basis for the estimation of expected credit losses.
Adjustments to historical loss information are made for differences in current loan-specific risk characteristics such as differences in underwriting standards, delinquency level, or term as well as for changes in environmental conditions, such as changes in unemployment rates, property values, or other relevant factors. On a quarterly basis, the bank’s Loan Quality Committee meets to discuss current and suggested updated credit ratings, general reviews of credit relationships, updates on required relationship monitoring and other of the loan portfolio and its quality. This committee will also review and assess the current fair market value estimate for all loans to be individually analyzed. Within this meeting, current adjustments to the Qualitative Factors and general reasonable forecasting for the future periods will be discussed as well. These decisions will then be incorporated into the quarterly updated calculation for the Current Expected Credit Loss (CECL) model as required in ASU 2016-13 Financial Instruments – Credit Losses (Topic 326).
The allowance for credit losses is measured on a collective (pool) basis when similar risk characteristics exist. The Company has identified the following portfolio segments and measures the allowance for credit losses using the following methods: Loans that are not identified for individual analysis are evaluated based on a pooled approach, using “Call Report Classifications” as the segmentations. The bank uses the “Weighted Average Remaining Life/Maturity” Loss Rate Methodology (or WARM). Under this methodology, the remaining life of loans in the pool is determined based on the contractual terms as adjusted for expected annual prepayment rates. The Remaining Life calculator within the software aims to identify the remaining life of a given pool of loans given that pool’s historical experiences. In other terms, the methodology takes a calculated loss rate and applies that rate to a pool of loans on a periodic basis based on the remaining life expectation of said pool. The software contains an attrition calculator that performs quarterly, cohort-based attrition measurements. Estimated loss rates are determined using a custom “Peer Group” approach. The bank has selected a peer group of similar-sized community banks in its geography or the general central Pennsylvania region to capture this loss data.
Loans that do not share risk characteristics are evaluated on an individual basis. Loans evaluated individually are not included in the collective evaluation. When management determines that foreclosure is probable expected credit losses are based on the fair value of the collateral at the reporting date, adjusted for discounted selling costs as appropriate.
Expected credit losses are estimated over the contractual term of the loans, adjusted for expected prepayments when appropriate. 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 borrower is experiencing financial difficulties and the resulting extension or renewal options are either included in the original or modified contract at the reporting date or a new loan is executed.
Allowance for Credit Losses on Off-Balance Sheet Credit Exposures
The Company estimates expected credit losses over the contractual period in which the Company is exposed to credit risk via a contractual obligation to extend credit, unless that obligation is unconditionally cancellable by the Company. The allowance for credit losses on off-balance sheet credit exposures is adjusted through credit loss expense. The estimate includes consideration of the likelihood that funding will occur and an estimate of expected credit losses on commitments expected to be funded over its estimated life. The estimate of expected credit losses should take into consideration the likelihood that funding will occur as well as the amount expected to be funded over the estimated remaining contractual term of the off-balance-sheet credit exposures. The Bank should not record an estimate of expected credit losses for off-balance-sheet exposures that are unconditionally cancellable by the issuer. The bank evaluates expected credit losses for off-balance-sheet credit exposures as of each reporting date. This is addressed within the software and the resulting calculation performed by the bank utilizes benchmark funding rates within the Peer Group or as provided by the software through its analysis of corresponding call report segments. While the process for estimating expected credit losses for these exposures is similar to the one used for on-balance-sheet financial assets, these estimated credit losses are not recorded as part of the ACLs because cash has not yet been disbursed to fund the contractual obligation to extend credit. Instead, the expected credit loss estimate for off-balance sheet credit exposures is recorded as a liability on the balance sheet (separate from any allowance for credit losses associated with recognized financial assets, the ACL) with changes in the estimate reported as credit loss expense (or credit adjustment to the expense) in the statement of net income each reporting period.
7
Northumberland Bancorp
Notes to Consolidated Financial Statements
(Unaudited)
Premises and Equipment
Land is carried at cost. Premises and equipment are stated at cost less accumulated depreciation. Depreciation is computed on the straight-line method over the estimated useful lives of the assets, which range from 3 to 20 years for furniture, fixtures, and equipment and 15 to 50 years for buildings and building improvements. Expenditures for maintenance and repairs are charged against income as incurred. Costs of major additions, improvements are capitalized.
Other Real Estate Owned (“OREO”)
Other real estate owned acquired in settlement of foreclosed loans is carried as a component of other assets at fair value minus estimated cost to sell. Prior to foreclosure, the estimated collectible value of the collateral is evaluated to determine whether a partial charge-off of the loan balance is necessary. After transfer to real estate owned, any subsequent write-downs are charged against other operating expenses. Direct costs incurred in the foreclosure process and subsequent holding costs incurred on such properties are recorded as expenses of current operations.
Loan Commitments and Related Financial Instruments
Financial instruments include off-balance sheet credit instruments, such as commitments to make loans and commercial letters of credit, issued to meet financing needs of customers. The face amount for these items represents the exposure to loss, before considering customer ability to repay. Such financial instruments are recorded when they are funded.
Advertising Expenses
Advertising expenses are expensed as costs are incurred. Advertising expenses were $32,000 and $81,000 as of June 30, 2025 and December 31, 2024, respectively.
Income Taxes
The Company and the Bank file a consolidated federal income tax return. Deferred tax assets or liabilities are computed based on the difference between the financial statement and income tax basis of assets and liabilities using the enacted marginal tax rates. Deferred income tax expenses or benefits are based on the changes in the deferred tax asset or liability from period to period.
A tax position is recognized as a benefit only if it is “more likely than not” that the tax position would be sustained in a tax examination, with a tax examination being presumed to occur. The amount recognized is the largest amount of tax benefit that is greater than 50% likely of being realized on examination. For tax positions not meeting the “more likely than not” test, no tax benefit is recorded.
Trust Assets
Assets held by the Company in a fiduciary or agency capacity for its customers are not included in the accompanying consolidated financial statements, since such items are not assets of the Company. The fair value of trust assets under administration were $201,263,000 and $195,179,000 as of June 30, 2025 and December 31, 2024, respectively.
Comprehensive Income (Loss)
The Company is required to present comprehensive income (loss) and its components in a full set of general-purpose financial statements for all periods presented. Other comprehensive income (loss) is comprised of net unrealized holding gains or losses on its available-for-sale investment securities, net of tax.
Earnings Per Share
The Company currently maintains a simple capital structure; therefore, there are no dilutive effects on earnings per share. As such, earnings per share are calculated using the weighted-average number of shares outstanding for the periods. Shares purchased by the ESOP are excluded from weighted-average shares, but shares allocated to participants in the ESOP are included in weighted-average shares. Treasury stock shares are excluded from weighted-average shares.
Loss contingencies
Loss contingencies, including claims and legal actions arising in the ordinary course of business, are recorded as liabilities when the likelihood of loss is probable, and an amount or range of loss can be reasonably estimated. No loss contingency liabilities have been recorded at June 30, 2025 or December 31, 2024.
8
Northumberland Bancorp
Notes to Consolidated Financial Statements
(Unaudited)
| 2. | Securities |
|---|
The amortized cost and fair value of debt securities available-for-sale and held to maturity along with gross unrealized gains and losses as of the dates indicated are summarized as follows (in thousands):
| June 30. 2025 | Amortized Cost | Gross Unrealized<br><br> <br>Gains | Gross Unrealized<br><br> <br>Losses | Approximate<br><br> <br>Fair Value | |||||
|---|---|---|---|---|---|---|---|---|---|
| Available-for-sale: | |||||||||
| Obligations of states and political subdivisions | $ | 71,734 | $ | 9 | $ | (5,606 | ) | $ | 66,137 |
| Mortgage-backed securities in government sponsored entities | 105,847 | 163 | (7,360 | ) | 98,650 | ||||
| Total | $ | 177,581 | $ | 172 | $ | (12,966 | ) | $ | 164,787 |
| December 31, 2024 | ****** | ****** | ****** | ****** | ****** | ****** | ****** | ****** | ****** |
| Available-for-sale: | |||||||||
| Obligations of states and political subdivisions | $ | 74,425 | $ | 9 | $ | (7,251 | ) | $ | 67,183 |
| Mortgage-backed securities in government sponsored entities | 117,398 | 86 | (9,890 | ) | 107,594 | ||||
| Total | $ | 191,823 | $ | 95 | $ | (17,141 | ) | $ | 174,777 |
| June 30, 2025 | Amortized Cost | Gross Unrecognized<br><br> <br>Gains | Gross Unrecognized<br><br> <br>Losses | Approximate<br><br> <br>Fair Value | |||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| Held-to-maturity: | |||||||||
| Obligations of states and political subdivisions | $ | 1,573 | $ | - | $ | (34 | ) | $ | 1,539 |
| Corporates/other | 1,000 | 76 | - | 1,076 | |||||
| Total | $ | 2,573 | $ | 76 | $ | (34 | ) | $ | 2,615 |
| December 31, 2024 | ****** | ****** | ****** | ****** | ****** | ****** | ****** | ****** | ****** |
| Held-to-maturity: | |||||||||
| Obligations of states and political subdivisions | $ | 1,565 | $ | - | $ | (54 | ) | $ | 1,511 |
| Corporates/other | 1,000 | 80 | - | 1,080 | |||||
| Total | $ | 2,565 | $ | 80 | $ | (54 | ) | $ | 2,591 |
At June 30, 2025 and December 31, 2204, there were no holdings of securities of any one issuer, other than U.S Government and its agencies, in an amount great than 10% of shareholders’ equity.
9
Northumberland Bancorp
Notes to Consolidated Financial Statements
(Unaudited)
The following table summarizes debt securities available-for-sale in an unrealized loss position for which an allowance for credit losses has not been recorded at June 30, 2025 and December 31, 2024, aggregated by major security type and length of time in a continuous unrealized loss position:
| Less than 12 Months | 12 Months or Longer | Total | |||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| June 30, 2025 | Fair Value | Unrealized Losses | Fair Value | Unrealized Losses | Fair Value | Unrealized Losses | |||||||||
| Available-for-sale: | |||||||||||||||
| Obligations of states and political subdivisions | $ | 5,298 | $ | (42 | ) | $ | 58,334 | $ | (5,564 | ) | $ | 63,632 | $ | (5,606 | ) |
| Mortgage-backed securities in government sponsored entities | - | - | 81,800 | (7,360 | ) | 81,800 | (7,360 | ) | |||||||
| Total | $ | 5,298 | $ | (42 | ) | $ | 140,134 | $ | (12,924 | ) | $ | 145,432 | $ | (12,966 | ) |
| Held-to-maturity: | Fair Value | Unrecognized Losses | Fair Value | Unrecognized Losses | Fair Value | Unrecognized Losses | |||||||||
| Obligations of states and political subdivisions | 808 | (8 | ) | 713 | (26 | ) | 1,521 | (34 | ) | ||||||
| Total | $ | 808 | $ | (8 | ) | $ | 713 | (26 | ) | $ | 1,521 | $ | (34 | ) | |
| Less than 12 Months | 12 Months or Longer | Total | |||||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| December 31, 2024 | Fair Value | Unrealized Losses | Fair Value | Unrealized Losses | Fair Value | Unrealized Losses | |||||||||
| Available-for-sale: | |||||||||||||||
| Obligations of states and political subdivisions | $ | 499 | $ | (1 | ) | $ | 63,682 | $ | (7,250 | ) | $ | 64,181 | $ | (7,251 | ) |
| Mortgage-backed securities in government sponsored entities | 14,514 | (80 | ) | 78,852 | (9,810 | ) | 93,366 | (9,890 | ) | ||||||
| Total | $ | 15,013 | $ | (81 | ) | $ | 142,534 | $ | (17,060 | ) | $ | 157,547 | $ | (17,141 | ) |
| Held-to-maturity: | Fair Value | Unrecognized Losses | Fair Value | Unrecognized Losses | Fair Value | Unrecognized Losses | |||||||||
| Obligations of states and political subdivisions | $ | - | $ | - | $ | 1,511 | $ | (54 | ) | $ | 1,511 | $ | (54 | ) | |
| Total | $ | - | $ | - | $ | 1,511 | $ | (54 | ) | $ | 1,511 | $ | (54 | ) |
There were 343 and 361 positions that were temporarily impaired at June 30, 2025 and December 31, 2024, respectively. The Company must evaluate if a decline in the fair value below amortized cost resulted from credit loss or other factors. The analysis should consider the guidance in ASC 326-30-35-6 and ASC 326-30-55-1 through 55-4 when determining whether a credit loss exists. Unrealized losses on corporate bonds have not been recognized into income because the issuer(s) bonds are of high credit quality, management does not intend to sell and it is likely that management will not be required to sell the securities prior to their anticipated recovery, and the decline in fair value is largely due to changes in interest rates and other market conditions. The issuer(s) continues to make timely principal and interest payments on the bonds. The fair value is expected to recover as the bond(s) approach maturity. As of June 30, 2025, the Company has not recognized any allowance for credit losses on debt securities either designated as available for sale or held to maturity.
10
Northumberland Bancorp
Notes to Consolidated Financial Statements
(Unaudited)
The amortized cost and fair value of debt securities at June 30, 2025, by contractual maturity, are shown below. Securities not due at a single maturity date are shown separately. Expected maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties (in thousands).
| June 30, 2025 | Available-for-Sale | Held-to-Maturity | ||||||
|---|---|---|---|---|---|---|---|---|
| Amortized<br><br> <br>Cost | Fair<br><br> <br>Value | Amortized<br><br> <br>Cost | Fair<br><br> <br>Value | |||||
| Due in one year or less | $ | 7,450 | $ | 7,417 | $ | 816 | $ | 808 |
| Due after one year through five years | **** | 39,865 | **** | 37,153 | **** | 757 | **** | 731 |
| Due after five years through ten years | **** | 24,419 | **** | 21,567 | **** | 1,000 | **** | 1,076 |
| Due after ten years | **** | - | **** | - | **** | - | **** | - |
| Mortgage-Backed Securities | **** | 105,847 | **** | 98,650 | **** | - | **** | - |
| Total | $ | 177,581 | $ | 164,787 | $ | 2,573 | $ | 2,615 |
The Company considers payment history, risk ratings from external parties, financial statements for municipal and corporate securities, public statements from issuers and other available credible published sources in evaluating credit risk. No credit risk was found and no Allowance for Credit Loss on securities available for sale was recorded as of June 30, 2025 and December 31, 2024. The unrealized losses are attributed to noncredit-related factors, including changes in interest rates and other market conditions.
The Company did not sell or recognize any gain or loss for any securities for the three and six months ended June 30, 2025 and 2024.
Securities with a carrying value of $76,850,000 and $83,236,000 at June 30, 2025 and December 31, 2024, respectively, were pledged to secure public deposits and for other purposes as required by law.
The Company monitors the credit quality of debt securities held-to-maturity through the use of credit rating. The Company monitors the credit rating on a monthly basis. The following table summarizes the amortized cost of debt securities held-to-maturity at June 30, 2025 aggregated by credit quality indicator.
| Held-to-Maturity | ||||
|---|---|---|---|---|
| As of June 30, 2025 | Obligations of<br><br> <br>states and political<br><br> <br>subdivisions | Corporates/other | ||
| AAA/AA/A | $ | 1,573 | - | |
| BBB/BB/B | $ | - | - | |
| Unrated | $ | - | 1,000 | |
| Total | $ | 1,573 | **** | 1,000 |
A security is considered to be past due once it is 90+ days contractually past due under the terms of the agreement. As of June 30, 2025, the Company did not have any past-due debt securities that are held-to-maturity.
11
Northumberland Bancorp
Notes to Consolidated Financial Statements
(Unaudited)
| 3. | Loans |
|---|
Major categories of loans are summarized as follows as of June 30, 2025 and December 31, 2024 (in thousands):
| 2025 | 2024 | |||||
|---|---|---|---|---|---|---|
| Commercial | $ | 84,274 | $ | 87,076 | ||
| Commercial real estate | **** | 113,405 | 99,653 | |||
| Residential mortgage | **** | 242,790 | 240,105 | |||
| Consumer | **** | 5,942 | 6,353 | |||
| Total loans | **** | 446,411 | 433,187 | |||
| Less: allowance for credit losses | **** | (3,866 | ) | (3,869 | ) | |
| Net Loans | $ | 442,545 | $ | 429,318 |
The Company grants residential, commercial, and consumer loans to customers throughout its trade area, which is concentrated in North Central Pennsylvania. Although the Company has a diversified loan portfolio at June 30, 2025 and December 31, 2024, a substantial portion of its debtors' ability to honor their loan agreements is dependent upon the economic stability of its immediate trade area.
12
Northumberland Bancorp
Notes to Consolidated Financial Statements
(Unaudited)
| 4. | Allowance for Credit Losses |
|---|
Changes in the allowance for credit losses by portfolio segment for the six months ended June 30,2025 and for the year ended December 31, 2024 are as follows (in thousands):
| June 30, 2025 | Commercial | Commercial<br><br> <br>Real Estate | Residential<br><br> <br>Real Estate | Consumer | Total | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Beginning Balance | $ | 1,597 | $ | 1,045 | $ | 1,137 | $ | 90 | $ | 3,869 | |||||
| Loans charged off | **** | - | **** | - | **** | - | **** | (17 | ) | **** | (17 | ) | |||
| Recoveries collected | **** | - | **** | - | **** | - | **** | 7 | **** | 7 | |||||
| Provision (credit) | **** | (83 | ) | **** | 149 | **** | (60 | ) | **** | 1 | **** | 7 | |||
| Ending Balance | $ | 1,514 | $ | 1,194 | $ | 1,077 | $ | 81 | $ | 3,866 | |||||
| December 31, 2024 | Commercial | Commercial<br><br> <br>Real Estate | Residential<br><br> <br>Real Estate | Consumer | Total | ||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| Beginning Balance | $ | 1,891 | $ | 1,015 | $ | 1,023 | $ | 94 | $ | 4,023 | |||||
| Loans charged off | - | (64 | ) | (7 | ) | (108 | ) | (179 | ) | ||||||
| Recoveries collected | - | - | 7 | 18 | 25 | ||||||||||
| Provision (credit) | (294 | ) | 94 | 114 | 86 | - | |||||||||
| Ending Balance | $ | 1,597 | $ | 1,045 | $ | 1,137 | $ | 90 | $ | 3,869 |
The total allowance reflects management's estimate of credit losses inherent in the loan portfolio at the consolidated balance sheet date.
Credit Quality Information
The Company's internally assigned loan grades are as follows:
Pass loans are protected by the current net worth and paying capacity of the obligor or by the value of the underlying collateral. There are five sub-grades within the pass category to further distinguish the loan.
Special Mention loans are loans for which a potential weakness or risk exists, which could cause a more serious problem if not corrected.
Substandard loans have a well-defined weakness based on objective evidence and are characterized by the distinct possibility that the bank will sustain some loss if the deficiencies are not corrected.
Doubtful loans have all the weaknesses inherent in a substandard asset. In addition, these weaknesses make collection or liquidation in full highly questionable and improbable, based on existing circumstances.
Loss loans are considered uncollectible, or of such value that continuance as an asset is not warranted.
13
Northumberland Bancorp
Notes to Consolidated Financial Statements
(Unaudited)
The following tables represent credit exposures for commercial real estate and commercial loans by internally assigned grades for the periods ended June 30, 2025 and December 31, 2024. The grading analysis estimates the capability of the borrower to repay the contractual obligations of the loan agreements as scheduled or at all. The Company's internal credit risk grading system is based on experiences with similarly graded loans (in thousands).
| Term Loans | **** | **** | **** | **** | **** | **** | ||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| As of June 30, 2025 | Amortized Cost Basis by Origination Year and Risk Grades | **** | **** | **** | **** | **** | **** | |||||||
| Dollars in thousands | 2025 | 2024 | 2023 | Prior | Revolving Loans Amortized Cost Basis | Revolving loans converted to term Amortized Cost Basis | Total | |||||||
| Commercial | **** | **** | **** | **** | **** | **** | **** | **** | **** | **** | **** | **** | **** | **** |
| Pass | $ | 2,435 | $ | 7,474 | $ | 6,053 | $ | 64,774 | $ | - | $ | - | $ | 80,736 |
| Special Mention | **** | - | **** | - | **** | - | **** | 2,182 | **** | - | **** | - | **** | 2,182 |
| Substandard | **** | - | **** | - | **** | 77 | **** | 1,279 | **** | - | **** | - | **** | 1,356 |
| Total Commercial Loans | **** | 2,435 | **** | 7,474 | **** | 6,130 | **** | 68,235 | **** | - | **** | - | **** | 84,274 |
| Current Period Net write-offs | **** | - | **** | - | **** | - | **** | - | **** | - | **** | - | **** | - |
| Commercial Real Estate | **** | **** | **** | **** | **** | **** | **** | **** | **** | **** | **** | **** | **** | **** |
| Pass | **** | 14,264 | **** | 10,693 | **** | 11,976 | **** | 69,675 | **** | - | **** | - | **** | 106,608 |
| Special Mention | **** | - | **** | - | **** | - | **** | 4,588 | **** | - | **** | - | **** | 4,588 |
| Substandard | **** | - | **** | - | **** | 7 | **** | 2,202 | **** | - | **** | - | **** | 2,209 |
| Total Commercial Real Estate Loans | **** | 14,264 | **** | 10,693 | **** | 11,983 | **** | 76,465 | **** | - | **** | - | **** | 113,405 |
| Current Period Net write-offs | **** | - | **** | - | **** | - | **** | - | **** | - | **** | - | **** | - |
14
Northumberland Bancorp
Notes to Consolidated Financial Statements
(Unaudited)
| Term Loans | **** | **** | **** | **** | **** | **** | ||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| As of June 30, 2025 | Amortized Cost Basis by Origination Year and Risk Grades | **** | **** | **** | **** | **** | **** | |||||||
| Dollars in thousands | 2025 | 2024 | 2023 | Prior | Revolving Loans Amortized Cost Basis | Revolving loans converted to term Amortized Cost Basis | Total | |||||||
| Residential Real Estate | **** | **** | **** | **** | **** | **** | **** | **** | **** | **** | **** | **** | **** | **** |
| Performing | **** | 19,519 | **** | 33,708 | **** | 25,773 | **** | 161,206 | **** | - | **** | - | **** | 240,206 |
| Nonperforming | **** | - | **** | 26 | **** | 197 | **** | 2,361 | **** | - | **** | - | **** | 2,584 |
| Total Residential Loans | **** | 19,519 | **** | 33,734 | **** | 25,970 | **** | 163,567 | **** | - | **** | - | **** | 242,790 |
| Current Period Net write-offs | **** | - | **** | - | **** | - | **** | - | **** | - | **** | - | **** | - |
| Consumer | **** | **** | **** | **** | **** | **** | **** | **** | **** | **** | **** | **** | **** | **** |
| Performing | **** | 1,041 | **** | 1,734 | **** | 1,449 | **** | 1,685 | **** | - | **** | - | **** | 5,909 |
| Nonperforming | **** | - | **** | 2 | **** | 3 | **** | 28 | **** | - | **** | - | **** | 33 |
| Total Consumer Loans | **** | 1,041 | **** | 1,736 | **** | 1,452 | **** | 1,713 | **** | - | **** | - | **** | 5,942 |
| Current Period Net write-offs | **** | - | **** | 2 | **** | 7 | **** | 1 | **** | - | **** | - | **** | 10 |
| Portfolio Total | $ | 37,259 | $ | 53,637 | $ | 45,535 | $ | 309,980 | $ | - | $ | - | $ | 446,411 |
| Current Period Net write-offs | $ | - | $ | 2 | $ | 7 | $ | 1 | $ | - | $ | - | $ | 10 |
15
Northumberland Bancorp
Notes to Consolidated Financial Statements
(Unaudited)
| Term Loans | **** | **** | **** | **** | **** | **** | ||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| As of December 31, 2024 | Amortized Cost Basis by Origination Year and Risk Grades | **** | **** | **** | **** | **** | **** | |||||||
| Dollars in thousands | 2024 | 2023 | 2022 | Prior | Revolving Loans Amortized Cost Basis | Revolving loans converted to term Amortized Cost Basis | Total | |||||||
| Commercial | **** | **** | **** | **** | **** | **** | **** | **** | **** | **** | **** | **** | **** | **** |
| Pass | $ | 7,396 | $ | 6,558 | $ | 7,731 | $ | 61,271 | $ | - | $ | - | $ | 82,956 |
| Special Mention | - | - | 14 | 2,452 | - | - | 2,466 | |||||||
| Substandard | - | 83 | 1,119 | 452 | - | - | 1,654 | |||||||
| Total Commercial Loans | 7,396 | 6,641 | 8,864 | 64,175 | - | - | 87,076 | |||||||
| Current Period Net write-offs | - | - | - | - | - | - | - | |||||||
| Commercial Real Estate | **** | **** | **** | **** | **** | **** | **** | **** | **** | **** | **** | **** | **** | **** |
| Pass | 10,870 | 10,591 | 31,474 | 39,254 | - | - | 92,189 | |||||||
| Special Mention | - | - | - | 4,735 | - | - | 4,735 | |||||||
| Substandard | - | 12 | - | 2,717 | - | - | 2,729 | |||||||
| Total Commercial Real Estate Loans | 10,870 | 10,603 | 31,474 | 46,706 | - | - | 99,653 | |||||||
| Current Period Net write-offs | - | - | - | 64 | - | - | 64 |
16
Northumberland Bancorp
Notes to Consolidated Financial Statements
(Unaudited)
| Term Loans | **** | **** | **** | **** | **** | **** | ||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| As of December 31, 2024 | Amortized Cost Basis by Origination Year and Risk Grades | **** | **** | **** | **** | **** | **** | |||||||
| Dollars in thousands | 2024 | 2023 | 2022 | Prior | Revolving Loans Amortized Cost Basis | Revolving loans converted to term Amortized Cost Basis | Total | |||||||
| Residential Real Estate | **** | **** | **** | **** | **** | **** | **** | **** | **** | **** | **** | **** | **** | **** |
| Performing | 37,205 | 28,179 | 48,867 | 123,385 | - | - | 237,636 | |||||||
| Nonperforming | 26 | 199 | 66 | 2,178 | - | - | 2,469 | |||||||
| Total Residential Loans | 37,231 | 28,378 | 48,933 | 125,563 | - | - | 240,105 | |||||||
| Current Period Net write-offs | - | - | - | - | - | - | - | |||||||
| Consumer | **** | **** | **** | **** | **** | **** | **** | **** | **** | **** | **** | **** | **** | **** |
| Performing | 2,303 | 1,905 | 1,173 | 898 | - | - | 6,279 | |||||||
| Nonperforming | 2 | 11 | 36 | 25 | - | - | 74 | |||||||
| Total Consumer Loans | 2,305 | 1,916 | 1,209 | 923 | - | - | 6,353 | |||||||
| Current Period Net write-offs | - | 52 | 35 | 3 | - | - | 90 | |||||||
| Portfolio Total | $ | 57,802 | $ | 47,538 | $ | 90,480 | $ | 237,367 | $ | - | $ | - | $ | 433,187 |
| Current Period Net write-offs | $ | - | $ | 52 | $ | 35 | $ | 67 | $ | - | $ | - | $ | 154 |
17
Northumberland Bancorp
Notes to Consolidated Financial Statements
(Unaudited)
The Company evaluates credit quality for residential real estate and consumer loans based upon the aging status of the loan, which is presented below, and by payment activity. The following tables present performing and nonperforming residential real estate and consumer loans based on payment activity for the periods ended June 30, 2025 and December 31, 2024 (in thousands):
| June 30, 2025 | First Mortgages | Home Equity Loans | Consumer | Total | ||||
|---|---|---|---|---|---|---|---|---|
| Performing | $ | 224,102 | $ | 18,196 | $ | 5,934 | $ | 248,232 |
| Nonperforming (Nonaccrual loans) | **** | 461 | **** | 31 | **** | 8 | **** | 500 |
| Total | $ | 224,563 | $ | 18,227 | $ | 5,942 | $ | 248,732 |
| December 31, 2024 | First Mortgages | Home Equity Loans | Consumer | Total | ||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- |
| Performing | $ | 210,307 | $ | 27,329 | $ | 6,278 | $ | 243,914 |
| Nonperforming (Nonaccrual loans) | 2,311 | 158 | 75 | 2,544 | ||||
| Total | $ | 212,618 | $ | 27,487 | $ | 6,353 | $ | 246,458 |
Following are tables which include an aging analysis of the recorded investment of past-due loans as of June 30, 2025 and December 31, 2024 (in thousands):
| June 30, 2025 | Loans Past Due (Days) | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 30 - 59 | 60 - 89 | 90 + | Total | Current | Total Loans | |||||||
| Commercial: | ||||||||||||
| Obligations of state and political subdivisions | $ | - | $ | - | $ | - | $ | - | $ | 12,223 | $ | 12,223 |
| Other commercial loans | **** | 1,186 | **** | 52 | **** | 150 | **** | 1,388 | **** | 70,663 | **** | 72,051 |
| **** | 1,186 | **** | 52 | **** | 150 | **** | 1,388 | **** | 82,886 | **** | 84,274 | |
| Commercial Real Estate: | ||||||||||||
| Loans for investment property | **** | - | **** | - | **** | - | **** | - | **** | 7,583 | **** | 7,583 |
| Other commercial real estate loans | **** | - | **** | - | **** | 7 | **** | 7 | **** | 105,815 | **** | 105,822 |
| **** | - | **** | - | **** | 7 | **** | 7 | **** | 113,398 | **** | 113,405 | |
| Residential Mortgage Loans: | ||||||||||||
| First Mortgage | **** | 1,934 | **** | 661 | **** | 1,359 | **** | 3,954 | **** | 210,129 | **** | 214,083 |
| Home equity loans | **** | 221 | **** | 61 | **** | 31 | **** | 313 | **** | 28,394 | **** | 28,707 |
| **** | 2,155 | **** | 722 | **** | 1,390 | **** | 4,267 | **** | 238,523 | **** | 242,790 | |
| Consumer: | **** | 42 | **** | 17 | **** | 8 | **** | 67 | **** | 5,875 | **** | 5,942 |
| Ending Balance | $ | 3,383 | $ | 791 | $ | 1,555 | $ | 5,729 | $ | 440,682 | $ | 446,411 |
| December 31, 2024 | Loans Past Due (Days) | |||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| 30 - 59 | 60 - 89 | 90 + | Total | Current | Total Loans | |||||||
| Commercial: | ||||||||||||
| Obligations of state and political subdivisions | $ | - | $ | - | $ | - | $ | - | $ | 12,044 | $ | 12,044 |
| Other commercial loans | 220 | - | 1,382 | 1,602 | 73,430 | 75,032 | ||||||
| 220 | - | 1,382 | 1,602 | 85,474 | 87,076 | |||||||
| Commercial Real Estate: | ||||||||||||
| Loans for investment property | - | - | - | - | 7,036 | 7,036 | ||||||
| Other commercial real estate loans | - | 10 | 12 | 22 | 92,595 | 92,617 | ||||||
| - | 10 | 12 | 22 | 99,631 | 99,653 | |||||||
| Residential Mortgage Loans: | ||||||||||||
| First Mortgage | 1,500 | 704 | 1,494 | 3,698 | 208,920 | 212,618 | ||||||
| Home equity loans | 317 | - | 72 | 389 | 27,098 | 27,487 | ||||||
| 1,817 | 704 | 1,566 | 4,087 | 236,018 | 240,105 | |||||||
| Consumer: | 92 | 10 | 36 | 138 | 6,215 | 6,353 | ||||||
| Ending Balance | $ | 2,129 | $ | 724 | $ | 2,996 | $ | 5,849 | $ | 427,338 | $ | 433,187 |
18
Northumberland Bancorp
Notes to Consolidated Financial Statements
(Unaudited)
Nonaccrual Loans
Loans are considered for nonaccrual status when they are 90 days past due. When a loan is placed on nonaccrual status, previously accrued but unpaid interest is deducted from interest income.
The following tables present loans that are on nonaccrual status and that are 90 days past due and still accruing interest by portfolio segment as of June 30, 2025 and December 31, 2024 (in thousands):
| June 30, 2025 | Nonaccrual With<br><br> <br>No Allowance for<br><br> <br>Credit Loss | Nonaccrual With an<br><br> <br>Allowance | Past Due 90 Days or<br><br> <br>More and Still<br><br> <br>Accruing | |||
|---|---|---|---|---|---|---|
| Commercial Loans: | ||||||
| Obligations of states and political subdivisions | $ | - | $ | - | $ | - |
| Other commercial loans | **** | 150 | **** | - | **** | - |
| Commercial Real Estate: | ||||||
| Loans for investment properties | **** | - | **** | - | **** | - |
| Other commercial real estate loans | **** | 7 | **** | - | **** | - |
| Residential Mortgage Loans: | ||||||
| First Mortgages | **** | 461 | **** | - | **** | 192 |
| Home equity loans | **** | 31 | **** | - | **** | - |
| Consumer Loans | **** | 8 | **** | - | **** | - |
| Net Loans | $ | 657 | $ | - | $ | 192 |
| December 31, 2024 | Nonaccrual With<br><br> <br>No Allowance or<br><br> <br>Credit Loss | Nonaccrual With an<br><br> <br>Allowance | Past Due 90 Days or<br><br> <br>More and Still<br><br> <br>Accruing | |||
| --- | --- | --- | --- | --- | --- | --- |
| Commercial Loans: | ||||||
| Obligations of states and political subdivisions | $ | - | $ | - | $ | - |
| Other commercial loans | 1,091 | 30 | 262 | |||
| Commercial Real Estate: | ||||||
| Loans for investment properties | - | - | - | |||
| Other commercial real estate loans | - | 12 | - | |||
| Residential Mortgage Loans: | ||||||
| First Mortgages | 214 | 148 | 1,132 | |||
| Home equity loans | - | - | 72 | |||
| Consumer Loans | - | 36 | - | |||
| Net Loans | $ | 1,305 | $ | 226 | $ | 1,466 |
19
Northumberland Bancorp
Notes to Consolidated Financial Statements
(Unaudited)
The following table presents the amortized cost basis of collateral-dependent loans by class as of June 30, 2025 and December 31, 2024:
(Amounts in thousands)
| June 30, 2025 | Real Estate<br><br> <br>Collateral | Other<br><br> <br>Collateral | ||
|---|---|---|---|---|
| Commercial Loans: | ||||
| Obligations of states and political subdivisions | $ | - | $ | - |
| Other commercial loans | **** | - | **** | - |
| Commercial Real Estate: | ||||
| Loans for investment properties | **** | - | **** | - |
| Other commercial real estate loans | **** | 1,702 | **** | - |
| Residential Mortgage Loans: | ||||
| First Mortgages | **** | 825 | **** | - |
| Home equity loans | **** | - | **** | - |
| Consumer Loans | **** | - | **** | - |
| Net Loans | $ | 2,527 | $ | - |
| December 31, 2024 | Real Estate<br><br> <br>Collateral | Other<br><br> <br>Collateral | ||
| --- | --- | --- | --- | --- |
| Commercial Loans: | ||||
| Obligations of states and political subdivisions | $ | - | $ | - |
| Other commercial loans | 1,091 | - | ||
| Commercial Real Estate: | ||||
| Loans for investment properties | - | - | ||
| Other commercial real estate loans | - | - | ||
| Residential Mortgage Loans: | ||||
| First Mortgages | 1,624 | - | ||
| Home equity loans | - | - | ||
| Consumer Loans | - | - | ||
| Net Loans | $ | 2,715 | $ | - |
Interest income on nonaccrual loans not recognized during 2025 and 2024 was $70,000 and $76,500, respectively.
Occasionally, the Company modifies loans to borrowers in financial distress by providing; principal forgiveness, term extension, an other-than-insignificant payment delay or interest rate reduction. When principal forgiveness is provided, the amount of forgiveness is charged-off against the allowance for credit losses.
In some cases, the Company provides multiple types of concessions on one loan. Typically, one type of concession, such as a term extension, is granted initially. If the borrower continues to experience financial difficulty, another concession, such as principal forgiveness, may be granted.
There were no modifications in 2025 and 2024 for borrowers experiencing financial difficulty.
20
Northumberland Bancorp
Notes to Consolidated Financial Statements
(Unaudited)
| 5. | Borrowings |
|---|
The Company maintains a borrowing agreement with the FHLB of Pittsburgh with an available funding capacity of approximately $260 million as of June 30, 2025. This agreement is subject to annual renewal, incurs no service charges, and is secured by FHLB stock and a blanket security agreement on outstanding residential mortgage loans.
Federal Home Loan Bank advances consist of separate loans with the FHLB of Pittsburgh as of June 30, 2025 and December 31, 2024 as follows (dollars in thousands):
| 2025 | 2024 | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| Amount | Weighted<br><br> <br>Average Rate | Amount | Weighted<br><br> <br>Average Rate | |||||||
| FHLB fixed-rate advances maturing: | ||||||||||
| March 15, 2027 | $ | 20,000 | **** | 4.33 | % | $ | 20,000 | 4.33 | % | |
| Total | $ | 20,000 | $ | 20,000 |
Subordinated Debt
In June 2022, the Company issued $10 million of subordinated debt. The subordinated debt has a term of 10 years, maturing in June 2031, and a contractual fixed interest rate of 4.50% through June 30, 2026. The effective rate is 4.70%, which includes the amortization of issuance costs. Subsequent to June 30, 2026, the interest rate will be floating, based on the 90-day average Secured Overnight Financing Rate (“SOFR”) plus 382 basis points. Interest is paid semi-annually in June and December.
The Company may redeem or prepay any or all of the subordinated debt, in whole or in part, without premium or penalty, at any time on or after June 30, 2026, and prior to the maturity date at a price of 100% of the principal amount, plus interest accrued and unpaid to the date of redemption or prepayment.
21
Northumberland Bancorp
Notes to Consolidated Financial Statements
(Unaudited)
| 6. | Employee Stock Ownership Plan (“ESOP”) |
|---|
The Company established an Employee Stock Ownership Plan in 2021 to provide additional benefits to employees. In 2021 the ESOP borrowed money from the Company to purchase 24,307 shares of stock at $38.00 per share. In 2022 the ESOP borrowed money from the Company to purchase 24,307 shares of stock at $37.00 per share. In 2023 the ESOP borrowed money from the Company to purchase 24,307 shares of stock at $23.00 per share. The Company did not purchase shares of stock in 2024. The Company makes discretionary contributions to the ESOP, as well as paying dividends on unallocated shares to the ESOP, and the ESOP uses funds it receives to repay the loan. When loan payments are made, ESOP shares are allocated to participants based on relative compensation and expense is recorded. Dividends on allocated shares increase participant accounts.
Participants receive their allocated shares at the end of employment. A participant may require stock received to be repurchased unless the stock is traded on an established market.
| Shares held by the ESOP were as follows: | June 30, 2025 | December 31, 2024 | ||
|---|---|---|---|---|
| Allocated to participants | $ | 59,126 | 59,126 | |
| Unallocated | $ | 13,795 | 13,795 | |
| Total ESOP shares | $ | 72,921 | **** | 72,921 |
Fair value of unearned shares at June 30. 2025 $369,016
Since the Company’s common stock is not traded on an established securities market, the ESOP includes a put option for shares of the Company’s common stock. Under the company’s administration of the ESOP’s put option, in the event a terminated plan participant desires to sell his or her shares of the Company stock, or for certain employees who elect to diversify their account balances, the Company may be required to purchase the shares from the participant at fair value. To the extent that shares of common stock held by the ESOP are not readily traded, a sponsor must reflect the maximum cash obligation related to those securities outside of stockholder’s equity.
| Maximum cash obligation related to ESOP shares, net of unearned ESOP shares | June 30, 2025 | December 31, 2024 | ||||
|---|---|---|---|---|---|---|
| Shares held by ESOP | 72,921 | 72,921 | ||||
| Fair Value per share | $ | 26.75 | 25.38 | |||
| Maximum cash obligation | $ | 1,950,637 | 1,850,735 | |||
| Less: Unearned ESOP shares | (397,715 | ) | (397,715 | ) | ||
| Maximum cash obligation, net of unearned ESOP Shares | $ | 1,552,922 | **** | 1,453,020 |
22
Northumberland Bancorp
Notes to Consolidated Financial Statements
(Unaudited)
| 7. | Regulatory Matters |
|---|
Cash and Due from Banks
Deposits with correspondent financial institutions are insured up to $250,000 per institution. The Company maintains cash and cash equivalents with certain correspondent financial institutions in excess of the insured amount.
Regulatory Capital Requirements
The Bank is subject to various regulatory capital requirements administered by the federal banking agencies. Failure to meet the minimum capital requirements can initiate certain mandatory and possibly additional discretionary-actions by regulators that, if undertaken, could have a direct material effect on the Bank’s financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Bank must meet specific capital guidelines that involve quantitative measures of the Bank’s assets, liabilities, and certain off-balance sheet items as calculated under regulatory accounting practices. The Bank’s capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk‑weightings and other factors.
Information presented for June 30, 2025 and December 31, 2024, reflects the Basel III capital requirements. Under these capital requirements and the regulatory framework for prompt corrective action, the Bank must meet specific capital guidelines that involve quantitative measures of the Bank’s assets, liabilities and certain off-balance-sheet items as calculated under regulatory accounting practices. The Bank’s capital amounts and classifications are also subject to qualitative judgments by regulators about components, risk-weightings and other factors.
The risk-based capital rules adopted effective January 1, 2015 require that banks and holding companies maintain a “capital conservation buffer” of 250 basis points in excess of the “minimum capital ratio.” The minimum capital ratio is equal to the prompt corrective action adequately capitalized threshold ratio. The capital conservation buffer is 2.5% for 2019 and thereafter. Failure to maintain the required capital conservation buffer will result in limitations on capital distributions and on discretionary bonuses to executive officers.
Effective January 1, 2024, the capital levels required for the Bank to avoid these limitations were as follows:
| ● | Common Equity Tier 1 capital ratio of 7.00% |
|---|---|
| ● | Tier 1 risk based capital ratio of 8.50% |
| --- | --- |
| ● | Total risk based capital ratio of 10.50% |
| --- | --- |
As of June 30, 2025 and December 31, 2024, the Bank had a conservation buffer greater than 2.5%.
In addition to the capital requirements, the Federal Deposit Insurance Corporation Improvement Act ("FDICIA") established five capital categories ranging from "well capitalized" to "critically undercapitalized." Should any institution fail to meet the requirements to be considered "adequately capitalized," it would become subject to a series of increasingly restrictive regulatory actions.
As of June 30, 2025 and December 31, 2024, the OCC categorized the Bank as well-capitalized under the regulatory framework for prompt corrective action. To be classified as a well-capitalized financial institution, Common equity Tier 1, Total risk-based, Tier I risk-based, and Tier I leverage capital ratios must be at least 6.5 percent, 10.0 percent, 8.0 percent, and 5.0 percent, respectively.
The following table presents the Bank’s Capital Ratios as of the dates indicated (dollars in thousands).
| Actual | To be Adequately Capitalized<br><br> <br>under Prompt Corrective Action<br><br> <br>Provisions | To be Well Capitalized under<br><br> <br>Prompt Corrective Action<br><br> <br>Provisions | |||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| June 30, 2025 | Amount | Ratio | Amount | Ratio | Amount | Ratio | |||||||||||
| Common equity Tier 1 (total risk-weighted assets) | $ | 68,497 | 15.92 | % | $ | > | 19,360 | > | 4.50 | % | $ | > | 27,964 | > | 6.50 | % | |
| Total capital (to risk-weighted assets) | $ | 72,613 | 16.88 | % | $ | > | 34,417 | > | 8.00 | % | $ | > | 43,022 | > | 10.00 | % | |
| Tier 1 capital (to risk-weighted assets) | $ | 68,497 | 15.92 | % | $ | > | 25,813 | > | 6.00 | % | $ | > | 34,417 | > | 8.00 | % | |
| Tier 1 capital (to average assets) | $ | 68,497 | 9.86 | % | $ | > | 27,789 | > | 4.00 | % | $ | > | 34,736 | > | 5.00 | % | |
| December 31, 2024 | Amount | Ratio | Amount | Ratio | Amount | Ratio | |||||||||||
| Common equity Tier 1 (total risk-weighted assets) | $ | 66,791 | 15.90 | % | $ | > | 18,900 | > | 4.50 | % | $ | > | 27,300 | > | 6.50 | % | |
| Total capital (to risk-weighted assets) | $ | 70,910 | 16.88 | % | $ | > | 33,600 | > | 8.00 | % | $ | > | 42,000 | > | 10.00 | % | |
| Tier 1 capital (to risk-weighted assets) | $ | 66,791 | 15.90 | % | $ | > | 25,200 | > | 6.00 | % | $ | > | 33,600 | > | 8.00 | % | |
| Tier 1 capital (to average assets) | $ | 66,791 | 9.69 | % | $ | > | 27,569 | > | 4.00 | % | $ | > | 34,462 | > | 5.00 | % |
Dividends
Banking regulations limit the amount of dividends that may be paid by the Bank to the Company without prior regulatory approval and are subject to the minimum capital ratio requirements noted above.
23
Northumberland Bancorp
Notes to Consolidated Financial Statements
(Unaudited)
| 8. | Fair Value Measurements |
|---|
The following disclosures show the hierarchal disclosure framework associated with the level of pricing observations utilized in measuring assets and liabilities at fair value. The three broad levels of pricing observations are as follows:
Level 1: Quoted prices are available in active markets for identical assets or liabilities as of the reported date.
Level 2: Pricing inputs are other than the quoted prices in active markets, which are either directly or indirectly observable as of the reported date. The nature of these assets and liabilities includes items for which quoted prices are available but traded less frequently and items that are fair-valued using other financial instruments, the parameters of which can be directly observed.
Level 3: Valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable. This hierarchy requires the use of observable market data when available.
24
Northumberland Bancorp
Notes to Consolidated Financial Statements
(Unaudited)
The following table presents the balances of financial assets measured at fair value on a recurring basis (in thousands):
| Quoted Prices in<br><br> <br>Active Markets<br><br> <br>for<br><br> <br>Identical Assets | Significant<br><br> <br>Other<br><br> <br>Observable<br><br> <br>Inputs | Significant<br><br> <br>Unobservable<br><br> <br>Inputs | ||||||
|---|---|---|---|---|---|---|---|---|
| June 30, 2025 | Total | (Level 1) | (Level 2) | (Level 3) | ||||
| Debt securities available-for-sale: | ||||||||
| U.S. Treasury | $ | 1,502 | $ | - | $ | 1,502 | $ | - |
| U.S. government agencies | **** | 28,983 | **** | - | **** | 28,983 | **** | - |
| Taxable state and municipal | **** | 29,475 | **** | - | **** | 29,475 | **** | - |
| Tax-exempt state and municipal | **** | 35,160 | **** | - | **** | 35,160 | **** | - |
| U.S. government sponsored enterprise mortgage-backed | **** | 69,667 | **** | - | **** | 69,667 | **** | - |
| Total Debt Securities Available-for-Sale | $ | 164,787 | $ | - | $ | 164,787 | $ | - |
| Marketable equity securities | $ | 208 | $ | 208 | $ | - | $ | - |
| December 31, 2024 | Total | Quoted Prices in<br><br> <br>Active Markets<br><br> <br>for<br><br> <br>Identical Assets<br><br> <br>(Level 1) | Significant<br><br> <br>Other<br><br> <br>Observable<br><br> <br>Inputs<br><br> <br>(Level 2) | Significant<br><br> <br>Unobservable<br><br> <br>Inputs<br><br> <br>(Level 3) | ||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- |
| Debt securities available-for-sale: | ||||||||
| U.S. Treasury | $ | 2,502 | $ | - | $ | 2,502 | $ | - |
| U.S. government agencies | 33,982 | - | 33,982 | - | ||||
| Taxable state and municipal | 29,858 | - | 29,858 | - | ||||
| Tax-exempt state and municipal | 34,824 | - | 34,824 | - | ||||
| U.S. government sponsored enterprise mortgage-backed | 73,611 | - | 73,611 | - | ||||
| Total Debt Securities Available-for-Sale | $ | 174,777 | $ | - | $ | 174,777 | $ | - |
| Marketable equity securities | $ | 205 | $ | 205 | $ | - | $ | - |
25
Northumberland Bancorp
Notes to Consolidated Financial Statements
(Unaudited)
Assets Measured at Fair Value on a Non-recurring Basis
Certain assets are measured at fair value on a nonrecurring basis in accordance with generally accepted accounting principles. Adjustments to the fair value of these assets usually result from the application of lower-of-cost-or-market accounting or write-downs of individual assets.
Loans Held for Sale
Loans held for sale are carried at the lower of cost of fair value. These loans currently consist of one-to-four family residential loans originated for sale in the secondary market. Fair value is based on the price secondary markets are currently offering for similar loans using observable market data which is not materially different than cost due to the short duration between origination and sale (Level 2). As such, the Company records any fair value adjustments on a recurring basis. No nonrecurring fair value adjustments were recorded on loans held for sale at June 30, 2025 or December 31, 2024.
Collateral Dependent Loans with an ACL
In accordance with ASC 326, we may determine that an individual loan exhibits unique risk characteristics which differentiate it from other loans within our loan pools. In such cases, the loans are evaluated for expected credit losses on an individual basis and excluded from the collective evaluation. Specific allocations of the ACL are determined by analyzing the borrower's ability to repay amounts owed, collateral deficiencies, the relative risk grade of the loan and economic conditions affecting the borrower's industry, among other things. A loan is considered to be collateral dependent when, based upon management's assessment, the borrower is experiencing financial difficulty and repayment is expected to be provided substantially through the operation or sale of the collateral. In such cases, expected credit losses are based on the fair value of the collateral at the measurement date, adjusted for estimated selling costs if satisfaction of the loan depends on the sale of the collateral. We reevaluate the fair value of collateral supporting collateral dependent loans on a quarterly basis. The fair value of real estate collateral supporting collateral dependent loans is evaluated by appraisal services using a methodology that is consistent with the Uniform Standards of Professional Appraisal Practice. The bank held no collateral dependent loans with an allowance at June 30, 2025 and December 31, 2024.
26
Northumberland Bancorp
Notes to Consolidated Financial Statements
(Unaudited)
The Company had no financial liabilities measured at fair value on a nonrecurring basis as of June 30, 2025 or December 31, 2024.
The following information should not be interpreted as an estimate of the fair value of the entire Company since the fair value calculation is only provided for a limited portion of the Company's assets and liabilities. Due to a wide range of valuation techniques and the degree of subjectivity used in making the estimates, comparisons between the Company's disclosures and those of other companies may not be meaningful.
The estimated fair values (in thousands) of the Company's financial instruments were as follows at June 30, 2025 and December 31, 2024.
| Balance June 30, 2025 | Carrying Value | Fair Value | Level 1 | Level 2 | Level 3 | |||||
|---|---|---|---|---|---|---|---|---|---|---|
| Financial Assets: | **** | **** | **** | **** | **** | **** | **** | **** | **** | **** |
| Cash and cash equivalents | $ | 46,991 | $ | 46,991 | $ | 46,991 | $ | - | $ | - |
| Investment securities: | ||||||||||
| Available-for-sale | 164,787 | 164,787 | - | 164,787 | - | |||||
| Held-to-maturity | 2,573 | 2,615 | - | 2,615 | - | |||||
| Equity securities | 208 | 208 | 208 | - | - | |||||
| Loans held for sale | 345 | 345 | 345 | - | - | |||||
| Net loans | 442,545 | 425,008 | - | - | 425,008 | |||||
| Restricted stock | 2,728 | N/A | N/A | N/A | N/A | |||||
| Mortgage servicing rights | 218 | 1,100 | - | 1,100 | - | |||||
| Accrued interest receivable | 2,163 | 2,163 | - | 2,163 | - | |||||
| Financial Liabilities: | **** | **** | **** | **** | **** | **** | **** | **** | **** | **** |
| Deposits | 603,520 | 556,457 | - | 556,457 | - | |||||
| Borrowings | 20,000 | 20,000 | - | 20,000 | - | |||||
| Accrued interest payable | 431 | 431 | - | 431 | - | |||||
| Balance December 31, 2024 | Carrying Value | Fair Value | Level 1 | Level 2 | Level 3 | |||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| Financial Assets: | **** | **** | **** | **** | **** | **** | **** | **** | **** | **** |
| Cash and cash equivalents | $ | 24,067 | $ | 24,067 | $ | 24,067 | $ | - | $ | - |
| Investment securities: | - | - | ||||||||
| Available-for-sale | 174,777 | 174,777 | - | 174,777 | - | |||||
| Held-to-maturity | 2,565 | 2,591 | - | 2,591 | - | |||||
| Equity securities | 205 | 205 | 205 | - | - | |||||
| Loans held for sale | 288 | 288 | 288 | - | - | |||||
| Net loans | 429,318 | 415,998 | - | - | 415,998 | |||||
| Restricted stock | 2,782 | N/A | N/A | N/A | N/A | |||||
| Mortgage servicing rights | 266 | 1,138 | - | 1,138 | - | |||||
| Accrued interest receivable | 2,320 | 2,320 | - | 2,320 | - | |||||
| Financial Liabilities: | **** | **** | **** | **** | **** | **** | **** | **** | **** | **** |
| Deposits | 583,343 | 581,919 | - | 581,919 | - | |||||
| Borrowings | 20,000 | 20,000 | - | 20,000 | - | |||||
| Accrued interest payable | 456 | 456 | - | 456 | - |
27
Northumberland Bancorp
Notes to Consolidated Financial Statements
(Unaudited)
9. Merger with Mifflinburg Bancorp, Inc.
Mifflinburg Bancorp, Inc. (“MIFF”), the bank holding company for Mifflinburg Bank and Trust Company, and Northumberland Bancorp (“NUBC”), the bank holding company for The Northumberland National Bank, jointly announced on July 2, 2025 that, in connection with their proposed strategic merger of equals, they have received the requisite regulatory approvals and waivers from the Pennsylvania Department of Banking and Securities, the Federal Deposit Insurance Corporation and the Federal Reserve Bank of Philadelphia to complete their transaction on the terms and subject to the conditions of the Agreement and Plan of Merger, dated as of September 24, 2024, as amended on December 4, 2024, by and between MIFF and NUBC.
On August 1, 2025, Steele Bancorp, Inc., announced the completion of the merger of Northumberland Bancorp (“Northumberland”) with and into Mifflinburg Bancorp, Inc. (“Mifflinburg”), and the merger of The Northumberland National Bank (“Norry Bank”) with and into Mifflinburg Bank and Trust Company (“Mifflinburg Bank”). In connection with the mergers, effective August 1, 2025, Mifflinburg changed its name to Steele Bancorp, Inc. (“Steele”), and Mifflinburg Bank changed its name to Central Penn Bank & Trust (“Central Penn”).
Upon the terms and subject to the conditions set forth in the Merger Agreement, Northumberland Bancorp shareholders will receive a fixed exchange ratio of 1.1850 shares of Mifflinburg for each Northumberland share they own. The transaction is expected to qualify as a tax-free reorganization (except to the extent of cash received for fractional shares). Additional information about the proposed merger is available in the registration statement on form S-4 filed by Mifflinburg with the SEC and other documents filed by Mifflinburg and Northumberland with the SEC.
28
ex_867456.htm
Exhibit 99.3
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED COMBINED FINANCIAL INFORMATION
The unaudited pro forma condensed consolidated combined financial information has been prepared using the acquisition method of accounting under the provisions of the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification, ASC 805, “Business Combinations”, giving effect to Mifflinburg Bancorp, Inc.’s (“MIFF”) acquisition of Northumberland Bancorp (“NUBC”). In connection with the transaction, MIFF changed its name to Steele Bancorp, Inc. (“STLE”) concurrently with the completion of the merger on August 1, 2025. Under the acquisition method of accounting, NUBCs assets and liabilities as of the date of the acquisition will be recorded at their respective fair values and added to those of STLE. The difference between the purchase price for NUBC and the fair value of the identifiable net assets acquired (including core deposit intangibles) will be recorded as a gain on bargain purchase. The core deposit intangible and other intangible assets with estimated useful lives to be recorded by STLE in connection with the acquisition will be amortized as an expense over their respective estimated useful lives. The financial statements of STLE issued after the acquisition will reflect the results attributable to the acquired operations of NUBC beginning on the date of completion of the acquisition. The merger was consummated on August 1, 2025.
The unaudited pro forma condensed consolidated combined financial information and accompanying notes are based on and should be read in conjunction with (i) the historical audited consolidated financial statements of MIFF and the related notes for the year ended December 31, 2024 included in STLE’s Annual Report on Form SP 15D2 filed with the U.S. Securities and Exchange Commission (“Commission”) on April 25, 2025, (ii) the historical unaudited consolidated financial statements of STLE and the related notes for the six months ended June 30, 2025 included in STLE’s Quarterly Report on Form 10-Q filed with the Commission on August 14, 2025, (iii) the historical audited consolidated financial statements of NUBC and the related notes for the year ended December 31, 2024, which are included in this Current Report on Form 8-K as Exhibit 99.1, and (iv) the historical unaudited consolidated financial statements of NUBC for the six months ended June 30, 2025, which are included in this Current Report on Form 8-K as Exhibit 99.2.
The unaudited pro forma condensed consolidated combined financial information is provided for illustrative information purposes only. The unaudited pro forma condensed consolidated combined financial information is not necessarily, and should not be assumed to be, an indication of the actual results that would have been achieved had the merger been completed as of the dates indicated or that may be achieved in the future. The unaudited pro forma condensed consolidated combined financial statements have been prepared in accordance with Article 11 of Regulation S-X, Pro Forma Information, which requires the depiction of the accounting for the transaction. The unaudited pro forma condensed consolidated combined financial information also does not consider any potential effects of changes in market conditions, revenue enhancements, or expense efficiencies, among other factors.
The unaudited pro forma condensed consolidated combined balance sheet as of June 30, 2025 gives effect to the merger as if the transaction occurred June 30, 2025. The unaudited pro forma condensed consolidated combined statements of income for the six months ended June 30, 2025 and the year ended December 31, 2024 give effect to the merger as if the transaction occurred on the first day of periods presented.
The unaudited pro forma condensed consolidated combined financial statements were prepared with STLE as the accounting acquirer and NUBC as the accounting acquiree under the acquisition method of accounting. Accordingly, the consideration paid by STLE to complete the acquisition of NUBC will be allocated to NUBC’s assets and liabilities based upon their estimated fair values as of the date of completion of the acquisition. The fair value adjustments made to the acquired assets and liabilities of NUBC are considered preliminary at this time and are subject to change as STLE finalizes its fair value determinations. There can be no assurance that the final determination will not result in material changes from the amounts presented in these unaudited pro forma condensed consolidated combined financial statements. The pro forma calculations, shown below, include a closing share price of $26.10, which represents the closing price of STLE’s common stock on June 30, 2025. The total estimated purchase price of $40.56 million was used in the goodwill (gain on bargain purchase) calculation.
Shown below is a summary of the fair value of assets acquired and liabilities assumed resulting in gain on bargain purchase. Gain on bargain purchase is created when the purchase price consideration is lower than the fair value of the net assets acquired. Gain on bargain purchase of $17.3 million resulted from the transaction; however, it is noted the fair value adjustments made to the acquired assets and liabilities are considered preliminary at this time and are subject to change as STLE finalizes its fair value determinations. The final adjustments may be materially different from the transaction accounting adjustments presented herein.
1
The unaudited pro forma condensed consolidated combined income statement and earnings per share data do not include anticipated cost savings or revenue enhancements, but do they include one-time merger-related expenses which will be expensed against income, and a one-time provision expense of $4.4 million related to ASC 326 Current Expected Credit Losses (“CECL”) allowance for credit losses for non-PCD loans. STLE is currently in the process of assessing the two companies’ personnel, benefits plans, premises, equipment, computer systems and service contracts to determine where the companies may take advantage of redundancies or where it will be beneficial or necessary to convert to one system. Certain decisions arising from these assessments may involve canceling contracts between either STLE or NUBC and certain service providers. There is no assurance that the anticipated cost savings will be realized on the anticipated time schedule or at all.
The pro forma combined basic and diluted earnings per share of STLE common stock are based on the pro forma combined net income per common share for STLE and NUBC divided by the pro forma basic or diluted common shares of the combined entities. The pro forma information includes adjustments related to the fair value of assets and liabilities of NUBC and is subject to adjustment as additional information becomes available and as final merger data analyses are performed.
The unaudited pro forma data are qualified by the statements set forth under this caption and should not be considered indicative of the market value of STLE common stock or the actual or future results of operations of STLE for any period. Actual results may be materially different than the pro forma information presented.
2
Unaudited Pro Forma Combined Condensed Consolidated Balance Sheet
As of June 30, 2025
| (in thousands) | Steele Bancorp * | Northumberland | Pro Forma | Pro Forma | Pro Forma | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Historical | Historical | Adjustments | Notes | Combined | ||||||||||
| ASSETS: | **** | **** | **** | **** | **** | **** | **** | **** | **** | **** | **** | **** | **** | **** |
| Cash and due from banks | $ | 7,224 | $ | 12,261 | $ | (5,892 | ) | (A) | $ | 13,593 | ||||
| Interest-bearing demand deposits | 4,681 | 34,730 | - | 39,411 | ||||||||||
| Fed funds sold | 9,111 | - | - | 9,111 | ||||||||||
| Total cash and cash equivalents | 21,016 | 46,991 | (5,892 | ) | 62,115 | |||||||||
| Interest-bearing time deposits | 8,646 | - | - | 8,646 | ||||||||||
| Available-for-sale securities, at fair value | 107,137 | 164,787 | - | 271,924 | ||||||||||
| Marketable equity securities, at fair value | 265 | 208 | - | 473 | ||||||||||
| Restricted investments in bank stock, at cost | 2,533 | 2,728 | - | 5,261 | ||||||||||
| Held-to-maturity securities , at amortized cost | - | 2,573 | 30 | (B) | 2,603 | |||||||||
| Loans held for sale | - | 345 | - | 345 | ||||||||||
| Loans | 467,613 | 446,411 | (19,342 | ) | (C) | 894,682 | ||||||||
| Allowance for credit losses | (4,636 | ) | (3,866 | ) | (1,501 | ) | (D) | (10,003 | ) | |||||
| Loans, net | 462,977 | 442,545 | (20,843 | ) | 884,679 | |||||||||
| Premises and equipment | 7,989 | 7,510 | 2,967 | (E) | 18,466 | |||||||||
| Accrued interest receivable | 1,903 | 2,163 | - | 4,066 | ||||||||||
| Other real estate owned | 78 | - | - | 78 | ||||||||||
| Goodwill | - | - | - | (F) | 0 | |||||||||
| Core deposit intangible | - | - | 14,662 | (G) | 14,662 | |||||||||
| Other intangible assets | 270 | 218 | 2,292 | (H) | 2,780 | |||||||||
| Bank owned life insurance | 13,092 | 14,817 | - | 27,909 | ||||||||||
| Other assets | 3,333 | 6,538 | 59 | (I) | 9,930 | |||||||||
| TOTAL ASSETS | $ | 629,239 | $ | 691,423 | $ | (6,725 | ) | $ | 1,313,937 | |||||
| LIABILITIES AND STOCKHOLDERS' EQUITY | **** | **** | **** | **** | **** | **** | **** | **** | **** | **** | **** | **** | **** | **** |
| LIABILITIES: | **** | **** | **** | **** | **** | **** | **** | **** | **** | **** | **** | **** | **** | **** |
| Deposits: | ||||||||||||||
| Noninterest-bearing | $ | 81,741 | $ | 143,695 | - | $ | 225,436 | |||||||
| Interest-bearing | 432,867 | 459,825 | (1,013 | ) | (J) | 891,679 | ||||||||
| Total deposits | 514,608 | 603,520 | (1,013 | ) | 1,117,115 | |||||||||
| Borrowed funds | 48,327 | 29,880 | (12 | ) | (K), (L) | 78,195 | ||||||||
| Accrued interest payable | 1,951 | 431 | - | 2,382 | ||||||||||
| Other liabilities | 5,287 | 1,994 | 1,494 | **** | (M) | 8,775 | ||||||||
| TOTAL LIABILITIES | 570,173 | 635,825 | 469 | 1,206,467 | ||||||||||
| Commitments and Contingencies | **** | **** | **** | **** | **** | **** | **** | **** | **** | **** | **** | **** | **** | **** |
| Redeemable common stock held by Employee Stock Ownership Plan (ESOP), net of unearned ESOP shares | 1,950 | 1,553 | - | 3,503 | ||||||||||
| STOCKHOLDERS' EQUITY: | **** | **** | **** | **** | **** | **** | **** | **** | **** | **** | **** | **** | **** | **** |
| Common stock | 2,160 | 150 | 1,397 | (N) | 3,707 | |||||||||
| Capital surplus | 1,899 | 3,832 | 35,418 | (O) | 41,149 | |||||||||
| Retained earnings | 66,264 | 64,888 | (56,854 | ) | (P) | 74,298 | ||||||||
| Accumulated other comprehensive (loss) | (3,526 | ) | (10,110 | ) | 10,110 | (Q) | (3,526 | ) | ||||||
| Unearned ESOP shares | - | (397 | ) | (30 | ) | (R) | (427 | ) | ||||||
| Treasury stock, at cost | (7,731 | ) | (2,765 | ) | 2,765 | (S) | (7,731 | ) | ||||||
| STOCKHOLDERS' EQUITY | 59,066 | 55,598 | (7,194 | ) | 107,470 | |||||||||
| Less maximum cash obligation related to ESOP shares, net of unearned ESOP shares | 1,950 | 1,553 | - | 3,503 | ||||||||||
| STOCKHOLDERS' EQUITY LESS MAXIMUM CASH OBLIGATION TO ESOP SHARES, NET OF UNEARNED ESOP SHARES | 57,116 | 54,045 | (7,194 | ) | 103,967 | |||||||||
| TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | $ | 629,239 | $ | 691,423 | $ | (6,725 | ) | $ | 1,313,937 | |||||
| Issued and outstanding common shares | 1,858,536 | 1,311,858 | 234,867 | (T) | 3,405,261 |
* Effective 8/1/2025 Mifflinburg Bancorp, Inc. changed its name to Steele Bancorp, Inc.
3
Unaudited Pro Forma Condensed Combined Consolidated Income Statement
For the Six Months Ended June 30, 2025
| (in thousands, except share and per share data) | Steele Bancorp * | Northumberland | Pro Forma | Pro Forma | Pro Forma | ||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| Historical | Historical | Adjustments | Notes | Combined | |||||||
| INTEREST AND DIVIDEND INCOME: | **** | **** | **** | **** | **** | **** | **** | **** | **** | **** | |
| Interest and fees on loans | $ | 13,142 | $ | 11,990 | $ | 2,124 | (U) | $ | 27,256 | ||
| Interest-bearing deposits with banks | 237 | 527 | - | 764 | |||||||
| Interest on fed funds sold | 10 | - | - | 10 | |||||||
| Investment securities: | |||||||||||
| Taxable | 1,017 | 1,762 | 411 | (V) | 3,190 | ||||||
| Tax-exempt | 587 | 276 | (1 | ) | (W) | 862 | |||||
| Dividends | 117 | 266 | - | 383 | |||||||
| TOTAL INTEREST AND DIVIDEND INCOME | 15,110 | 14,821 | 2,534 | 32,465 | |||||||
| INTEREST EXPENSE: | **** | **** | **** | **** | **** | **** | **** | **** | **** | **** | |
| Deposits | 4,559 | 5,551 | 111 | (X) | 10,221 | ||||||
| Federal Home Loan Bank advances | 820 | 436 | - | 1,256 | |||||||
| Other borrowings | 1 | 235 | (37 | ) | (Y), (Z) | 199 | |||||
| TOTAL INTEREST EXPENSE | 5,380 | 6,222 | 74 | 11,676 | |||||||
| NET INTEREST INCOME | 9,730 | 8,599 | 2,460 | 20,789 | |||||||
| Provision for credit losses | 162 | 7 | - | 169 | |||||||
| NET INTEREST INCOME AFTER PROVISION FOR CREDIT LOSSES | 9,568 | 8,592 | 2,460 | 20,620 | |||||||
| NON-INTEREST INCOME: | **** | **** | **** | **** | **** | **** | **** | **** | **** | **** | |
| Service charges and fees | 261 | 220 | - | 481 | |||||||
| ATM fees and debit card income | 370 | 533 | - | 903 | |||||||
| Mortgage banking revenue | 108 | 74 | - | 182 | |||||||
| Commission from investment product sales | 78 | 83 | - | 161 | |||||||
| Gain on sale of premises | 52 | - | - | 52 | |||||||
| Net marketable equity security gain (loss) | (3 | ) | 3 | - | 0 | ||||||
| Earnings on bank owned life insurance | 126 | 187 | - | 313 | |||||||
| Trust | - | 638 | - | 638 | |||||||
| Other | 120 | 329 | - | 449 | |||||||
| TOTAL NON-INTEREST INCOME | 1,112 | 2,067 | - | 3,179 | |||||||
| NON-INTEREST EXPENSES: | **** | **** | **** | **** | **** | **** | **** | **** | **** | **** | |
| Salaries and employee benefits | 3,687 | 4,682 | - | 8,369 | |||||||
| Net occupancy and equipment expense | 598 | 1,076 | 25 | (AA) | 1,699 | ||||||
| Data processing fees | 346 | 384 | - | 730 | |||||||
| Pennsylvania shares tax | 223 | 200 | - | 423 | |||||||
| Professional fees | 79 | 484 | - | 563 | |||||||
| Advertising expense | 75 | 32 | - | 107 | |||||||
| Federal deposit insurance | 136 | 150 | - | 286 | |||||||
| Merger expenses | 248 | 156 | - | 404 | |||||||
| Other | 835 | 1,146 | 1,410 | (AB) | 3,391 | ||||||
| TOTAL NON-INTEREST EXPENSES | 6,227 | 8,310 | 1,435 | 15,972 | |||||||
| Income before provision for income taxes | 4,453 | 2,349 | 1,025 | 7,827 | |||||||
| Provision for income taxes | 827 | 358 | 215 | (AC) | 1,400 | ||||||
| NET INCOME | $ | 3,626 | $ | 1,991 | $ | 810 | $ | 6,427 | |||
| PER COMMON SHARE DATA: | **** | **** | **** | **** | **** | **** | **** | **** | **** | **** | |
| Basic | $ | 1.95 | $ | 1.52 | $ | 1.89 | |||||
| Diluted | $ | 1.95 | $ | 1.52 | $ | 1.89 | |||||
| WEIGHTED AVERAGE COMMON SHARES OUTSTANDING: | **** | **** | **** | **** | **** | **** | **** | ||||
| Basic | 1,858,536 | 1,311,858 | 234,867 | (AD) | 3,405,261 | ||||||
| Diluted | 1,858,536 | 1,311,858 | 234,867 | (AD) | 3,405,261 |
* Effective 8/1/2025 Mifflinburg Bancorp, Inc. changed its name to Steele Bancorp, Inc.
4
Unaudited Pro Forma Condensed Combined Consolidated Income Statement
For the Year Ended December 31, 2024
| (in thousands, except share and per share data) | Mifflinburg | Northumberland | Pro Forma | Pro Forma | Pro Forma | |||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Historical | Historical | Adjustments | Notes | Combined | ||||||||
| INTEREST AND DIVIDEND INCOME: | **** | **** | **** | **** | **** | **** | **** | **** | **** | **** | **** | |
| Interest and fees on loans | $ | 22,357 | $ | 22,736 | $ | 5,291 | (AE) | $ | 50,384 | |||
| Interest-bearing deposits with banks | 546 | 1,165 | - | 1,711 | ||||||||
| Interest on fed funds sold | 240 | - | - | 240 | ||||||||
| Investment securities: | ||||||||||||
| Taxable | 1,963 | 4,532 | 822 | (AF) | 7,317 | |||||||
| Tax-exempt | 1,209 | 549 | (3 | ) | (AG) | 1,755 | ||||||
| Dividends | 196 | 260 | - | 456 | ||||||||
| TOTAL INTEREST AND DIVIDEND INCOME | 26,511 | 29,242 | 6,110 | 61,863 | ||||||||
| INTEREST EXPENSE: | **** | **** | **** | **** | **** | **** | **** | **** | **** | **** | **** | |
| Deposits | 8,677 | 12,004 | 592 | (AH) | 21,273 | |||||||
| Federal Home Loan Bank advances | 708 | 896 | - | 1,604 | ||||||||
| Other borrowings | 452 | 470 | 248 | (AI), (AJ) | 1,170 | |||||||
| TOTAL INTEREST EXPENSE | 9,837 | 13,370 | 840 | 24,047 | ||||||||
| NET INTEREST INCOME | 16,674 | 15,872 | 5,270 | 37,816 | ||||||||
| Provision for credit losses | 680 | - | 4,448 | (AK) | 5,128 | |||||||
| NET INTEREST INCOME AFTER PROVISION FOR CREDIT LOSSES | 15,994 | 15,872 | 822 | 32,688 | ||||||||
| NON-INTEREST INCOME: | **** | **** | **** | **** | **** | **** | **** | **** | **** | **** | **** | |
| Service charges and fees | 451 | 489 | - | 940 | ||||||||
| ATM fees and debit card income | 762 | 1,032 | - | 1,794 | ||||||||
| Mortgage banking revenue | 250 | 194 | - | 444 | ||||||||
| Commission from investment product sales | 83 | 238 | - | 321 | ||||||||
| Net marketable equity security gain (loss) | (55 | ) | 38 | - | (17 | ) | ||||||
| Earnings on bank owned life insurance | 257 | 805 | - | 1,062 | ||||||||
| Trust | - | 1,360 | - | 1,360 | ||||||||
| Other | 222 | 629 | 17,325 | (AL) | 18,176 | |||||||
| TOTAL NON-INTEREST INCOME | 1,970 | 4,785 | 17,325 | 24,080 | ||||||||
| NON-INTEREST EXPENSES: | **** | **** | **** | **** | **** | **** | **** | **** | **** | **** | **** | |
| Salaries and employee benefits | 7,462 | 11,150 | - | 18,612 | ||||||||
| Net occupancy and equipment expense | 1,160 | 2,233 | 50 | (AM) | 3,443 | |||||||
| Data processing fees | 698 | 717 | - | 1,415 | ||||||||
| Pennsylvania shares tax | 450 | 395 | - | 845 | ||||||||
| Professional fees | 202 | 471 | - | 673 | ||||||||
| Advertising expense | 122 | 81 | - | 203 | ||||||||
| Federal deposit insurance | 259 | 336 | - | 595 | ||||||||
| Merger expenses | 537 | 944 | - | 1,481 | ||||||||
| Other | 1,699 | 2,453 | 10,338 | (AN) | 14,490 | |||||||
| TOTAL NON-INTEREST EXPENSES | 12,589 | 18,780 | 10,388 | 41,757 | ||||||||
| Income before provision for income taxes | 5,375 | 1,877 | 7,759 | 15,011 | ||||||||
| Provision for income taxes | 894 | 115 | (1,457 | ) | (AO) | (448 | ) | |||||
| NET INCOME | $ | 4,481 | $ | 1,762 | $ | 9,216 | $ | 15,549 | ||||
| PER COMMON SHARE DATA: | **** | **** | **** | **** | **** | **** | **** | **** | **** | **** | **** | |
| Basic | $ | 2.41 | $ | 1.37 | $ | 4.54 | ||||||
| Diluted | $ | 2.41 | $ | 1.37 | $ | 4.54 | ||||||
| WEIGHTED AVERAGE COMMON SHARES OUTSTANDING: | **** | **** | **** | **** | **** | **** | **** | **** | ||||
| Basic | 1,858,536 | 1,284,827 | 261,898 | (AP) | 3,405,261 | |||||||
| Diluted | 1,858,536 | 1,284,827 | 261,898 | (AP) | 3,405,261 |
5
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION RELATING TO THE MERGER
(in thousands, except share data)
| As of June 30, 2025 Balance Sheet Notes: | ||||
|---|---|---|---|---|
| (A) | Adjustments to cash and due from banks | |||
| Cash used to settle fractional shares and for dissenters' shares | $ | (190 | ) | |
| To reflect reduction in cash to pay pre-tax amount of Steele Bancorp, Inc. * estimated merger-related expenses | (5,702 | ) | ||
| Total proforma adjustments | (5,892 | ) | ||
| (B) | Adjustments to held-to-maturity securities | |||
| To reflect fair value discount for Northumberland’s held-to-maturity securities | 30 | |||
| (C) | Adjustments to loans | |||
| To reflect the purchased credit deteriorated ("PCD") credit marks on Northumberland's loans | (919 | ) | ||
| To reflect the non-PCD credit marks on Northumberland's loans | (4,448 | ) | ||
| To reflect PCD loans CECL gross-up on Northumberland's loans | 919 | |||
| To reflect reversal of deferred loan fees, net on Northumberland's loans | (337 | ) | ||
| To reflect fair value interest rate discount for Northumberland’s PCD and Non-PCD loans | (14,557 | ) | ||
| Total proforma adjustments | (19,342 | ) | ||
| (D) | Adjustments to allowance for credit losses | |||
| To reflect the elimination of Northumberland’s existing allowance for credit losses | 3,866 | |||
| To reflect the allowance for credit losses for PCD loans | (919 | ) | ||
| To reflect the allowance for credit losses for non-PCD loans | (4,448 | ) | ||
| Total proforma adjustments | (1,501 | ) | ||
| (E) | Adjustments on fixed assets | |||
| To reflect write up of fair value of Northumberland's premises | 2,967 | |||
| (F) | Adjustments to goodwill | |||
| To reflect goodwill created as a result of the merger (zero if there is a gain on bargain purchase) | - | |||
| (G) | Adjustments to core deposit intangible | |||
| To reflect estimated fair value of core deposit intangible asset | 14,662 | |||
| (H) | Adjustments to other intangible assets | |||
| Adjustments to mortgage servicing assets | 886 | |||
| To reflect fair value of wealth management and trust department customer lists | 1,406 | |||
| Total proforma adjustments | 2,292 |
6
| (I) | Adjustments to other assets | ||
|---|---|---|---|
| Adjustment on Northumberland's other assets | (1,152 | ) | |
| To reflect write down on Northumberland's right of use asset | (533 | ) | |
| Deferred taxes on acquisition adjustments, net | 2,767 | ||
| Deferred taxes on core deposit intangible | (3,079 | ) | |
| Deferred taxes on Wealth/Trust customer list intangible | (295 | ) | |
| Deferred taxes as a result of the merger-related expenses | 1,417 | ||
| Deferred taxes on Northumberland non-PCD loans | 934 | ||
| Total proforma adjustments | 59 | ||
| (J) | Adjustments to interest-bearing deposits | ||
| To reflect estimated fair value adjustment for certificates of deposits | (1,013 | ) | |
| (K) | Adjustments on other short-term borrowings | ||
| To reflect estimated fair value adjustment for other short-term borrowings | 117 | ||
| (L) | Adjustments to Northumberland's subordinated debt | ||
| To reflect estimated fair value adjustment for subordinated debt | (247 | ) | |
| To reflect reversal of debt issuance costs | 118 | ||
| Total proforma adjustments | (129 | ) | |
| (M) | Adjustments to other liabilities | ||
| To reflect accrual for merger-related liabilities | 1,494 | ||
| (N) | Adjustments to common stock | ||
| To reflect the elimination of historical Northumberland common stock par value | (150 | ) | |
| To reflect increase par value related to new Steele Bancorp, Inc. * common stock issued for Northumberland shares | 1,547 | ||
| Total proforma adjustments | 1,397 | ||
| (O) | Adjustments to additional paid-in-capital | ||
| To reflect the elimination of Northumberland’s historical additional paid-capital | (3,832 | ) | |
| Market value adjustment for unearned ESOP shares | 427 | ||
| To reflect increase in additional paid-in capital related to merger ~~~~ | 38,823 | ||
| Total proforma adjustments | 35,418 | ||
| (P) | Adjustments to retained earnings | ||
| To reflect the elimination of Northumberland's historical retained earnings | (64,888 | ) | |
| To reflect Steele Bancorp, Inc.'s *after-tax tax, tax deductible, merger expenses shown as a direct reduction of retained earnings | (5,777 | ) | |
| Gain on bargain purchase | 17,325 | ||
| To reflect the after- tax provision for credit losses associated with Northumberland’s non-PCD loans shown as a direct reduction of retained earnings | (3,514 | ) | |
| Total proforma adjustments | (56,854 | ) |
7
| (Q) | Adjustments to accumulated other comprehensive loss | |||
|---|---|---|---|---|
| To reflect elimination of Northumberland's historical accumulated other comprehensive loss | 10,110 | |||
| (R) | Adjustments for Northumberland's ESOP | |||
| Unallocated shares in Northumberland ESOP | (13,795 | ) | ||
| Multiplied by Conversion Ratio | 1.1850 | |||
| Unallocated shares in Legacy Northumberland ESOP | (16,347 | ) | ||
| Multiplied by Steele Bancorp, Inc. * stock price as of June 30, 2025 | $ | 26.10 | ||
| ESOP value for Legacy Northumberland ESOP as of June 30, 2025 Steele Bancorp, Inc. * stock price | (427 | ) | ||
| Reversal of Legacy Northumberland ESOP | 397 | |||
| Net change in fair value of Legacy Northumberland ESOP | (30 | ) | ||
| (S) | Adjustments to treasury stock | |||
| To reflect elimination of Northumberland's historical treasury stock | 2,765 | |||
| (T) | Adjustment to issued and outstanding shares for proforma company | |||
| Reflects the issuance of shares of Steele Bancorp, Inc. * common stock in consideration for the outstanding shares of Northumberland | 1,546,725 | |||
| Reflects the elimination of Northumberland's issued and outstanding shares as of June 30, 2025 | (1,311,858 | ) | ||
| Net increase in Steele Bancorp, Inc. * shares outstanding | 234,867 | |||
| Year to date ended June 30, 2025 Income Statement Notes: | ||||
| (U) | Adjustments to interest and fees on loans income | |||
| To reflect net accretion of loan credit marks using the level yield method | 342 | |||
| To reflect net accretion of loan rate marks using the level yield method | 1,782 | |||
| Total proforma adjustments | 2,124 | |||
| (V) | Adjustments to taxable securities income | |||
| To reflect the fair value of AFS securities which will be accreted into income using the straight line method | 411 | |||
| (W) | Adjustments to tax-exempt securities income | |||
| To reflect the fair value of HTM securities which will be amortized into income using the straight line method | (1 | ) | ||
| (X) | Adjustment to interest expense on certificates of deposit | |||
| To reflect amortization of time deposit rate mark over an estimated average life using the level yield method | 111 | |||
| (Y) | Adjustment to interest expense on other short-term borrowings | |||
| To reflect accretion of short-term borrowings mark over an estimated year life using the straight line method | (32 | ) |
8
| (Z) | Adjustment to interest expense on Northumberland subordinated debt | ||
|---|---|---|---|
| To reflect amortization of sub debt mark over an estimated average life using the level yield method | (5 | ) | |
| (AA) | Adjustments on fixed assets | ||
| To reflect accretion on the write-down of Northumberland's right of use asset over the estimated remaining life | (15 | ) | |
| To record depreciation of write-up of Northumberland's fixed assets over an estimated 20 year average life using the straight line method | 40 | ||
| Total proforma adjustments | 25 | ||
| (AB) | Adjustment to other non-interest expenses | ||
| To reflect the amortization of the write up of the fair value of mortgage servicing assets over an estimated life | 95 | ||
| To reflect the amortization of the acquired core deposit intangible asset over 10 year life by the sum of the years digit method | 1,200 | ||
| To reflect the amortization of the acquired wealth management and trust dept. customer lists over a 10 year life by the sum of the years digit method | 115 | ||
| Total proforma adjustments | 1,410 | ||
| (AC) | Adjustment to income tax expense | ||
| To reflect the income tax effect of pro forma adjustments at estimated marginal tax rate of 21.00% | 215 | ||
| (AD) | Adjustment to weighted average shares | ||
| Reflects the issuance of shares of Steele Bancorp, Inc. * common stock in consideration for the outstanding shares of Northumberland | 1,546,725 | ||
| Reflects the elimination of Northumberland's average shares outstanding | (1,311,858 | ) | |
| Net increase in Steele Bancorp, Inc. * average shares outstanding | 234,867 | ||
| Year ended December 31, 2024 Income Statement Notes: | |||
| (AE) | Adjustments to interest and fees on loans income | ||
| To reflect net accretion of loan credit marks using the level yield method | 819 | ||
| To reflect net accretion of loan rate marks using the level yield method | 4,472 | ||
| Total proforma adjustments | 5,291 | ||
| (AF) | Adjustments to taxable securities income | ||
| To reflect the fair value of AFS securities which will be accreted into income using the straight line method | 822 | ||
| (AG) | Adjustments to tax-exempt securities income | ||
| To reflect the fair value of HTM securities which will be amortized into income using the straight line method | (3 | ) | |
| (AH) | Adjustment to interest expense on certificates of deposit | ||
| To reflect amortization of time deposit rate mark using the level yield method | 592 |
9
| (AI) | Adjustment to interest expense on other short-term borrowings | ||
|---|---|---|---|
| To reflect accretion of short-term borrowings mark using the straight line method | (64 | ) | |
| (AJ) | Adjustment to interest expense on Northumberland subordinated debt | ||
| To reflect amortization of sub debt mark using the level yield method | 312 | ||
| (AK) | Adjustment to provision for credit losses | ||
| To record the one-time provision for credit losses associated with Northumberland's non-PCD loans | 4,448 | ||
| (AL) | Adjustment to other non-interest income | ||
| To reflect gain on bargain purchase of $17.33 million, which is non taxable and is non-recurring | 17,325 | ||
| (AM) | Adjustments on fixed assets | ||
| To reflect accretion on the write-down of Northumberland's right of use asset over the estimated remaining life | (30 | ) | |
| To record depreciation of write-up of Northumberland's fixed assets over an estimated 20 year average life using the straight line method | 80 | ||
| Total proforma adjustments | 50 | ||
| (AN) | Adjustment to other non-interest expenses | ||
| To reflect the amortization of the write up of the fair value of mortgage servicing assets over an estimated life | 222 | ||
| To reflect the amortization of the acquired core deposit intangible asset over 10 year life by the sum of the years digit method | 2,666 | ||
| To reflect the amortization of the acquired wealth management and trust dept. customer lists over a 10 year life by the sum of the years digit method | 256 | ||
| To reflect the recognition of the estimated non-recurring expenses related to the merger | 7,194 | ||
| Total proforma adjustments | 10,338 | ||
| (AO) | Adjustment to income tax expense | ||
| To reflect the income tax effect of the taxable pro forma adjustments at estimated marginal tax rate of 21% | (1,457 | ) | |
| (AP) | Adjustment to weighted average shares | ||
| Reflects the issuance of shares of Steele Bancorp, Inc. * common stock in consideration for the outstanding shares of Northumberland | 1,546,725 | ||
| Reflects the elimination of Northumberland's average shares outstanding | (1,284,827 | ) | |
| Net increase in Steele Bancorp, Inc. * average shares outstanding | 261,898 |
* Effective 8/1/2025 Mifflinburg Bancorp, Inc. changed its name to Steele Bancorp, Inc.
10
Summary of Purchase Price Calculation and Goodwill (Gain on Bargain Purchase) Resulting from the Merger
As of June 30, 2025
(in thousands, except share data)
| Purchase Price Consideration in Common Stock Outstanding at June 30, 2025 | **** | **** | **** | **** | **** |
|---|---|---|---|---|---|
| Number of Northumberland Bancorp shares outstanding at June 30, 2025 | 1,311,858 | ||||
| less: dissenter's shares | 6,493 | ||||
| Number of Northumberland Bancorp shares outstanding at June 30, 2025 to receive stock consideration | 1,305,365 | ||||
| multiplied by the Conversion Ratio | 1.1850 | ||||
| Number of Steele Bancorp, Inc. * shares to be issued to Northumberland Bancorp shareholders and excludes fractional shares | 1,546,725 | ||||
| multiplied by Steele Bancorp, Inc. 's * share price as of June 30, 2025 | $ | 26.10 | |||
| Stock consideration for Northumberland Bancorp | $ | 40,370 | |||
| plus: Cash Consideration for fractional shares | 3 | ||||
| plus: Cash Consideration for dissenter's shares | 187 | ||||
| Preliminary estimate of consideration for Northumberland Bancorp | **** | **** | $ | 40,560 | |
| Fair Value of Assets Acquired: | **** | **** | **** | **** | **** |
| Cash and cash equivalents | $ | 46,801 | |||
| Total investments (available for sale, equity securities and restricted) | 167,723 | ||||
| Held-to-maturity securities, net | 2,603 | ||||
| Loans, net | 426,495 | ||||
| Premises and equipment | 10,477 | ||||
| Core deposit intangible | 14,662 | ||||
| Other intangible assets | 2,510 | ||||
| Other assets | 22,908 | ||||
| Total assets | **** | 694,179 | **** | **** | **** |
| Fair Value of Liabilities Acquired: | **** | **** | **** | **** | **** |
| Total deposits | 602,507 | ||||
| Borrowed funds | 29,868 | ||||
| Other liabilities | 3,919 | ||||
| Total liabilities | **** | 636,294 | **** | **** | **** |
| Net assets acquired | **** | **** | $ | 57,885 | |
| Preliminary goodwill (gain on bargain purchase) - Northumberland Bancorp | **** | **** | $ | (17,325 | ) |
* Effective 8/1/2025 Mifflinburg Bancorp, Inc. changed its name to Steele Bancorp, Inc.
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