3 unchanged sentences
(Dollars in thousands, except share and per share data)
+Added: September 30,
Cash and due from banks
24 unchanged sentences
Preferred stock, par value $ 2.00 per share;
−Removed: authorized 1,000,000 shares as of June 30, 2023 and December 31, 2022;
−Removed: issued 0 as of June 30, 2023 and December 31, 2022
+Added: authorized 1,000,000 shares as of September 30, 2023 and December 31, 2022;
+Added: issued 0 as of September 30, 2023 and December 31, 2022
Common stock, par value $ 2.00 per share;
−Removed: authorized 20,000,000 shares as of June 30, 2023 and December 31, 2022;
−Removed: issued 6,296,383 as of June 30, 2023 and 6,250,763 as of December 31, 2022;
−Removed: outstanding 6,064,772 as of June 30, 2023 and 6,019,152 as of December 31, 2022
+Added: authorized 20,000,000 shares as of September 30, 2023 and December 31, 2022;
+Added: issued 6,322,772 as of September 30, 2023 and 6,250,763 as of December 31, 2022;
+Added: outstanding 6,091,161 as of September 30, 2023 and 6,019,152 as of December 31, 2022
Retained earnings
Accumulated other comprehensive loss
−Removed: Treasury stock, at cost, 231,611 shares as of June 30, 2023 and December 31, 2022
+Added: Treasury stock, at cost, 231,611 shares as of September 30, 2023 and December 31, 2022
TOTAL STOCKHOLDERS’ EQUITY
5 unchanged sentences
Three Months Ended
−Removed: Six Months Ended
+Added: Nine Months Ended
+Added: September 30,
+Added: September 30,
INTEREST INCOME
11 unchanged sentences
Net interest income
−Removed: Provision for credit losses
−Removed: Net interest income after provision for credit losses
+Added: (Credit) provision for credit losses
+Added: Net interest income after (credit) provision for credit losses
NON-INTEREST INCOME
24 unchanged sentences
FIRST KEYSTONE CORPORATION AND SUBSIDIARY
−Removed: CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME
+Added: CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(Dollars in thousands)
Three Months Ended
+Added: September 30,
Other comprehensive loss:
Unrealized net holding losses on debt securities available-for-sale arising during the period, net of income taxes of $( 1,711 ) and $( 3,243 ), respectively
−Removed: Less reclassification adjustment for net gains included in net income, net of income taxes of $( 0 ) and $( 6 ), respectively (a) (b)
+Added: Fair value adjustment on derivatives
Total other comprehensive loss
1 unchanged sentence
(Dollars in thousands)
−Removed: Six Months Ended
−Removed: Other comprehensive income (loss):
−Removed: Unrealized net holding gains (losses) on debt securities available-for-sale arising during the period, net of income taxes of $ 32 and $( 7,445 ), respectively
+Added: Nine Months Ended
+Added: September 30,
+Added: Other comprehensive loss:
+Added: Unrealized net holding losses on debt securities available-for-sale arising during the period, net of income taxes of $( 1,679 ) and $( 10,688 ), respectively
Less reclassification adjustment for net gains included in net income, net of income taxes of $( 21 ) and $( 6 ), respectively (a) (b)
−Removed: Total other comprehensive income (loss)
−Removed: Total Comprehensive Income (Loss)
+Added: Fair value adjustment on derivatives
+Added: Total other comprehensive loss
+Added: Total Comprehensive Loss
______________________________
4 unchanged sentences
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
−Removed: SIX MONTHS ENDED JUNE 30, 2023 AND 2022
+Added: NINE MONTHS ENDED SEPTEMBER 30, 2023 AND 2022
(Dollars in thousands, except
12 unchanged sentences
Balance at June 30, 2023
+Added: Other comprehensive loss, net of taxes
+Added: Issuance of common stock under dividend reinvestment plan
+Added: Dividends - $ 0.28 per share
+Added: Balance at September 30, 2023
(Dollars in thousands, except
11 unchanged sentences
Balance at June 30, 2022
+Added: Other comprehensive loss, net of taxes
+Added: Issuance of common stock under dividend reinvestment plan
+Added: Dividends - $ 0.28 per share
+Added: Balance at September 30, 2022
See accompanying notes to consolidated financial statements.
1 unchanged sentence
CONSOLIDATED STATEMENTS OF CASH FLOWS
−Removed: SIX MONTHS ENDED JUNE 30, 2023 AND 2022
+Added: NINE MONTHS ENDED SEPTEMBER 30, 2023 AND 2022
(Dollars in thousands)
1 unchanged sentence
Adjustments to reconcile net income to net cash (used in) provided by operating activities:
−Removed: Provision for credit losses
+Added: (Credit) provision for credit losses
Provision (credit) for credit losses on unfunded commitments
7 unchanged sentences
Net securities losses
−Removed: Decrease (increase) in accrued interest receivable
+Added: Increase in accrued interest receivable
Increase in cash surrender value of bank owned life insurance
3 unchanged sentences
Increase in accrued interest payable
−Removed: (Decrease) increase in other liabilities
+Added: Decrease in other liabilities
NET CASH PROVIDED BY OPERATING ACTIVITIES
23 unchanged sentences
SUPPLEMENTAL DISCLOSURE OF NON-CASH ACTIVITIES
+Added: Purchased securities settling after year-end
Loans transferred from held for sale to held for investment portfolio
12 unchanged sentences
In the opinion of management, all adjustments considered necessary for fair presentation have been included.
−Removed: Operating results for the three and six months ended June 30, 2023, are not necessarily indicative of the results for the year ending December 31, 2023.
+Added: Operating results for the three and nine months ended September 30, 2023, are not necessarily indicative of the results for the year ending December 31, 2023.
For further information, refer to the consolidated financial statements and notes thereto included in First Keystone Corporation’s Annual Report on Form 10-K for the year ended December 31, 2022.
Subsequent Events
−Removed: The Company has evaluated events and transactions occurring subsequent to the consolidated balance sheet date of June 30, 2023 for items that should potentially be recognized or disclosed in these consolidated financial statements.
+Added: The Company has evaluated events and transactions occurring subsequent to the consolidated balance sheet date of September 30, 2023 for items that should potentially be recognized or disclosed in these consolidated financial statements.
The evaluation was conducted through the date these consolidated financial statements were issued.
68 unchanged sentences
Corporate debt securities consist of senior debt and subordinated debt holdings.
−Removed: There was no allowance for credit losses for Available-For-Sale debt securities as of June 30, 2023;
+Added: There was no allowance for credit losses for Available-For-Sale debt securities as of September 30, 2023;
therefore, it is not present in the table below.
−Removed: The amortized cost, related estimated fair value, and unrealized gains and losses for debt securities classified as Available-For-Sale were as follows at June 30, 2023 and December 31, 2022:
+Added: The amortized cost, related estimated fair value, and unrealized gains and losses for debt securities classified as Available-For-Sale were as follows at September 30, 2023 and December 31, 2022:
Debt Securities Available-for-Sale
(Dollars in thousands)
−Removed: June 30, 2023:
+Added: September 30, 2023:
Treasury securities
17 unchanged sentences
Corporate debt securities
−Removed: Securities Available-for-Sale with an aggregate fair value of $ 247,027,000 at June 30, 2023 and $ 315,836,000 at December 31, 2022, were pledged to secure public funds, trust funds, securities sold under agreements to repurchase and the Federal Discount Window aggregating $ 195,838,000 at June 30, 2023 and $ 241,385,000 at December 31, 2022.
−Removed: The amortized cost and estimated fair value of debt securities, by contractual maturity, are shown below at June 30, 2023.
+Added: Securities Available-for-Sale with an aggregate fair value of $ 274,422,000 at September 30, 2023 and $ 315,836,000 at December 31, 2022, were pledged to secure public funds, trust funds, securities sold under agreements to repurchase and the Federal Discount Window aggregating $ 219,538,000 at September 30, 2023 and $ 241,385,000 at December 31, 2022.
+Added: The amortized cost and estimated fair value of debt securities, by contractual maturity, are shown below at September 30, 2023.
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.
−Removed: June 30, 2023
+Added: September 30, 2023
Debt Securities Available-For-Sale
11 unchanged sentences
Mortgage-backed securities are allocated for maturity reporting at their original maturity date.
−Removed: At June 30, 2023, the Corporation had holdings of securities from one issuer in excess of ten percent of consolidated stockholders’ equity, other than the U.S.
+Added: At September 30, 2023, the Corporation had holdings of securities from one issuer in excess of ten percent of consolidated stockholders’ equity, other than the U.S.
Government and U.S.
Government Agencies and Corporations.
−Removed: Holdings in Sallie Mae Bank securities had a fair value of $ 16,095,000 as of June 30, 2023.
−Removed: There were no aggregate holdings of securities with a single issuer (excluding the U.S.
+Added: Holdings in Sallie Mae Bank securities had a fair value of $ 15,912,000 as of September 30, 2023.
+Added: There were no
+Added: aggregate holdings of securities with a single issuer (excluding the U.S.
Government and U.S.
−Removed: Government Agencies and
−Removed: Corporations) which exceeded ten percent of consolidated stockholders’ equity at June 30, 2022.
+Added: Government Agencies and Corporations) which exceeded ten percent of consolidated stockholders’ equity at September 30, 2022.
The quality rating of the obligations of state and political subdivisions are generally investment grade, as rated by Moody’s, Standard and Poor’s or Fitch.
The typical exceptions are local issues which are not rated, but are secured by the full faith and credit obligations of the communities that issued these securities.
−Removed: There were no proceeds from sales of Debt Securities Available-For-Sale for the three months ended June 30, 2023 and 2022.
+Added: There were no proceeds from sales of Debt Securities Available-For-Sale for the three months ended September 30, 2023 and 2022.
Therefore, there were no gains or losses realized during these periods.
−Removed: Proceeds from sales of Debt Securities Available-For-Sale for the six months ended June 30, 2023 and 2022 were $ 23,230,000 and $ 0 , respectively.
+Added: Proceeds from sales of Debt Securities Available-For-Sale for the nine months ended September 30, 2023 and 2022 were $ 23,230,000 and $ 0 , respectively.
Gross gains realized on these sales were $ 447,000 and $ 0 , respectively.
1 unchanged sentence
The summary below shows the gross unrealized losses and fair value of the Company’s debt securities.
−Removed: Totals are aggregated by investment category where individual securities have been in a continuous loss position for less than 12 months or 12 months or more as of June 30, 2023 and December 31, 2022:
−Removed: June 30, 2023
+Added: Totals are aggregated by investment category where individual securities have been in a continuous loss position for less than 12 months or 12 months or more as of September 30, 2023 and December 31, 2022:
+Added: September 30, 2023
(Dollars in thousands)
23 unchanged sentences
Corporate debt securities
−Removed: There were 173 individual debt securities in an unrealized loss position as of June 30, 2023, with a combined decline in value representing 10.13 % of the debt securities portfolio.
−Removed: There were 183 individual debt securities in an
−Removed: unrealized loss position as of December 31, 2022, with their combined decline in value representing 9.11 % of the debt securities portfolio.
+Added: There were 178 individual debt securities in an unrealized loss position as of September 30, 2023, with a combined decline in value representing 12.02 % of the debt securities portfolio.
+Added: There were 183 individual debt securities in an unrealized loss position as of December 31, 2022, with their combined decline in value representing 9.11 % of the debt securities portfolio.
Available-for-sale debt securities are required to be individually evaluated for impairment in accordance with ASC 326, Financial Instruments – Credit Losses.
8 unchanged sentences
The Company made a policy election to exclude accrued interest receivable from the amortized cost basis of debt securities available for sale.
−Removed: Accrued interest receivable on debt securities available for sale is reported as a component of accrued interest receivable on the Company’s consolidated balance sheet and totaled $ 2,108,000 as of June 30, 2023.
+Added: Accrued interest receivable on debt securities available for sale is reported as a component of accrued interest receivable on the Company’s consolidated balance sheet and totaled $ 2,216,000 as of September 30, 2023.
Accrued interest receivable on debt securities available for sale is excluded from the estimate of credit losses.
−Removed: All debt securities available for sale in an unrealized loss position, as of June 30, 2023, continue to perform as scheduled and we do not believe that there is a credit loss or that a provision for credit losses is necessary.
+Added: All debt securities available for sale in an unrealized loss position, as of September 30, 2023, continue to perform as scheduled and we do not believe that there is a credit loss or that a provision for credit losses is necessary.
Also, as part of our evaluation of our intent and ability to hold debt securities for a period of time sufficient to allow for any anticipated recovery in the market, we consider our investment strategies, cash flow needs, liquidity position, capital adequacy and interest rate risk position.
5 unchanged sentences
Equity securities without readily determinable fair values are recorded at cost less impairment, if any.
−Removed: At June 30, 2023 and December 31, 2022, the Company had $ 1,476,000 and $ 1,699,000 , respectively, in equity securities recorded at fair value.
−Removed: The following is a summary of realized gains and losses recognized in net income on equity securities during the six months ended June 30, 2023 and 2022:
+Added: At September 30, 2023 and December 31, 2022, the Company had $ 1,389,000 and $ 1,699,000 , respectively, in equity securities recorded at fair value.
+Added: The following is a summary of realized gains and losses recognized in net income on equity securities during the nine months ended September 30, 2023 and 2022:
(Dollars in thousands)
−Removed: Six months ended
−Removed: Six months ended
−Removed: June 30, 2023
−Removed: June 30, 2022
+Added: Nine months ended
+Added: Nine months ended
+Added: September 30, 2023
+Added: September 30, 2022
Net losses from market value fluctuations recognized during the period on equity securities
8 unchanged sentences
The Company monitors the equity securities portfolio monthly with particular attention given to securities in a continuous loss position of at least ten percent for over twelve months.
−Removed: Based on the factors described above, management did not consider any equity securities to be other-than-temporarily impaired at June 30, 2023 or December 31, 2022.
+Added: Based on the factors described above, management did not consider any equity securities to be other-than-temporarily impaired at September 30, 2023 or December 31, 2022.
NOTE 4 — LOANS AND ALLOWANCE FOR CREDIT LOSSES
30 unchanged sentences
These loans are sold without recourse.
−Removed: Loans held for sale amounted to $ 0 and $ 71,000 at June 30, 2023 and December 31, 2022, respectively.
+Added: Loans held for sale amounted to $ 0 and $ 71,000 at September 30, 2023 and December 31, 2022, respectively.
Agricultural Lending
24 unchanged sentences
Government) on all principal and the balance of interest accruing through ninety days beyond the date that demand is made to the originating bank for repurchase of the loan.
−Removed: As of June 30, 2023, the Company's balance of GGLs was $ 4,542,000 , compared to $ 4,631,000 at December 31, 2022.
+Added: As of September 30, 2023, the Company's balance of GGLs was $ 4,501,000 , compared to $ 4,631,000 at December 31, 2022.
Consumer Lending
116 unchanged sentences
Any modifications of loans to borrowers experiencing financial difficulty that are classified as non-accrual or are otherwise designated as collateral dependent are individually evaluated for determination of expected credit losses.
−Removed: There were no loan modifications made to borrowers experiencing financial difficulties during the three or six months ended June 30, 2023.
+Added: There were no loan modifications made to borrowers experiencing financial difficulties during the three or nine months ended September 30, 2023.
The most common types of concessions granted upon modification of a loan to a borrower experiencing financial difficulties include:
19 unchanged sentences
The reserve for unfunded lending commitments represents management’s estimate of losses inherent in its unfunded loan commitments and, if necessary, is recorded in other liabilities on the consolidated balance sheets.
−Removed: As of June 30, 2023 and December 31, 2022, the amount of the reserve for unfunded lending commitments was $ 260,000 and $ 68,000 , respectively.
+Added: As of September 30, 2023 and December 31, 2022, the amount of the reserve for unfunded lending commitments was $ 233,000 and $ 68,000 , respectively.
The Company made a policy election to exclude accrued interest receivable from the amortized cost basis of loans.
Accrued interest receivable on loans is reported as a component of accrued interest receivable on the Company’s
−Removed: consolidated balance sheet and totaled $ 1,906,000 as of June 30, 2023.
+Added: consolidated balance sheet and totaled $ 2,239,000 as of September 30, 2023.
Accrued interest receivable on loans is excluded from the estimate of credit losses.
38 unchanged sentences
Loans are graded doubtful if they contain weaknesses so serious that collection or liquidation in full is questionable.
−Removed: The following table presents the classes of the loan portfolio summarized by risk rating and year of origination and gross charge offs by loan portfolio summarized by year of origination as of June 30, 2023.
+Added: The following table presents the classes of the loan portfolio summarized by risk rating and year of origination and gross charge offs by loan portfolio summarized by year of origination as of September 30, 2023.
(Dollars in thousands)
36 unchanged sentences
Total Gross Charge Offs
−Removed: Commercial and Industrial Loans include loans categorized as tax-free in the amount of $ 10,000 and State and Political Subdivision Loans include loans categorized as tax-free in the amount of $ 28,140,000 as of June 30, 2023.
−Removed: Commercial and Industrial Loans also include $ 4,542,000 of GGLs as of June 30, 2023.
+Added: State and Political Subdivision Loans include loans categorized as tax-free in the amount of $ 27,012,000 as of September 30, 2023.
+Added: Commercial and Industrial Loans include $ 4,501,000 of GGLs as of September 30, 2023.
Loans held for sale are included in the Real Estate Loans category.
−Removed: There were no loans held for sale at June 30, 2023.
+Added: There were no loans held for sale at September 30, 2023.
The activity in the allowance for credit losses by loan class (post adoption of ASU No.
−Removed: 2016-13), is summarized below for the three and six months ended June 30, 2023.
+Added: 2016-13), is summarized below for the three and nine months ended September 30, 2023.
(Dollars in thousands)
and Industrial
−Removed: As of and for the three months ended June 30, 2023:
+Added: As of and for the three months ended September 30, 2023:
Allowance for Credit Losses:
Beginning balance
−Removed: Provision (credit)
Ending Balance
1 unchanged sentence
and Industrial
−Removed: As of and for the six months ended June 30, 2023:
+Added: As of and for the nine months ended September 30, 2023:
Allowance for Credit Losses:
15 unchanged sentences
evaluated for impairment
−Removed: The Company's activity in the allowance for credit losses on unfunded commitments for the six months ended June 30, 2023 was as follows:
+Added: The Company's activity in the allowance for credit losses on unfunded commitments for the nine months ended September 30, 2023 was as follows:
(Dollars in thousands)
2 unchanged sentences
Provision for credit losses on unfunded commitments
−Removed: Balance at June 30, 2023
−Removed: The recorded investment, unpaid principal balance, and the related allowance of the Company’s individually evaluated loans are summarized below at June 30, 2023:
+Added: Balance at September 30, 2023
+Added: The recorded investment, unpaid principal balance, and the related allowance of the Company’s individually evaluated loans are summarized below at September 30, 2023:
(Dollars in thousands)
−Removed: June 30, 2023
−Removed: With no related allowance recorded:
−Removed: Commercial and Industrial
−Removed: With an allowance recorded:
−Removed: Commercial and Industrial
−Removed: Total consists of:
+Added: September 30, 2023
Commercial and Industrial
1 unchanged sentence
The unpaid balance is equal to the gross amount due on the loan.
−Removed: The average recorded investment and interest income recognized for the Company’s individually evaluated loans are summarized below for the three and six months ended June 30, 2023:
+Added: The average recorded investment and interest income recognized for the Company’s individually evaluated loans are summarized below for the three and nine months ended September 30, 2023:
(Dollars in thousands)
−Removed: For the Three Months Ended
−Removed: June 30, 2023
−Removed: With no related allowance recorded:
−Removed: Commercial and Industrial
−Removed: With an allowance recorded:
−Removed: Commercial and Industrial
−Removed: Total consists of:
+Added: For the Three Months Ended September 30, 2023
Commercial and Industrial
−Removed: Of the $ 6,000 in interest income recognized on individually evaluated loans for the three months ended June 30, 2023, $ 0 in interest income was recognized with respect to non-accrual loans.
+Added: Of the $ 6,000 in interest income recognized on individually evaluated loans for the three months ended September 30, 2023, $ 0 in interest income was recognized with respect to non-accrual loans.
(Dollars in thousands)
−Removed: For the Six Months Ended
−Removed: June 30, 2023
−Removed: With no related allowance recorded:
−Removed: Commercial and Industrial
−Removed: With an allowance recorded:
−Removed: Commercial and Industrial
−Removed: Total consists of:
+Added: For the Nine Months Ended September 30, 2023
Commercial and Industrial
−Removed: Of the $ 12,000 in interest income recognized on individually evaluated loans for the six months ended June 30, 2023, $ 0 in interest income was recognized with respect to non-accrual loans.
−Removed: The following table presents collateral-dependent loans by segment for the period ended June 30, 2023.
+Added: Of the $ 18,000 in interest income recognized on individually evaluated loans for the nine months ended September 30, 2023, $ 0 in interest income was recognized with respect to non-accrual loans.
+Added: The following table presents collateral-dependent loans by segment for the period ended September 30, 2023.
(Dollars in thousands)
−Removed: June 30, 2023
+Added: September 30, 2023
Commercial and Industrial
−Removed: At June 30, 2023, there were no commitments to lend additional funds with respect to individually evaluated loans.
−Removed: Total non-performing assets (which includes loans receivable on non-accrual status, foreclosed assets held for resale and loans past-due 90 days or more and still accruing interest) as of June 30, 2023 and December 31, 2022 were as follows:
+Added: At September 30, 2023, there were no commitments to lend additional funds with respect to individually evaluated loans.
+Added: Total non-performing assets (which includes loans receivable on non-accrual status, foreclosed assets held for resale and loans past-due 90 days or more and still accruing interest) as of September 30, 2023 and December 31, 2022 were as follows:
(Dollars in thousands)
+Added: September 30,
Commercial and Industrial
4 unchanged sentences
Total non-performing assets
−Removed: There were no foreclosed assets held for resale at June 30, 2023 or December 31, 2022.
−Removed: Consumer mortgage loans secured by residential real estate for which the Company has entered into formal foreclosure proceedings but for which physical possession has yet to be obtained amounted to $ 138,000 at June 30, 2023 and $ 41,000 at December 31, 2022.
−Removed: These balances were not included in foreclosed assets held for resale at June 30, 2023 or December 31, 2022.
−Removed: The following tables present the classes of the loan portfolio, including individually evaluated loans, summarized by past-due status at June 30, 2023 and December 31, 2022:
+Added: There were no foreclosed assets held for resale at September 30, 2023 or December 31, 2022.
+Added: Consumer mortgage loans secured by residential real estate for which the Company has entered into formal foreclosure proceedings but for which physical possession has yet to be obtained amounted to $ 138,000 at September 30, 2023 and $ 41,000 at December 31, 2022.
+Added: These balances were not included in foreclosed assets held for resale at September 30, 2023 or December 31, 2022.
+Added: The following tables present the classes of the loan portfolio, including individually evaluated loans, summarized by past-due status at September 30, 2023 and December 31, 2022:
(Dollars in thousands)
−Removed: June 30, 2023:
+Added: September 30, 2023:
Commercial and Industrial
34 unchanged sentences
The activity in the allowance for credit losses by loan class (prior to adoption of ASU No.
−Removed: 2016-13), is summarized below for the three and six months ended June 30, 2022 and the year ended December 31, 2022.
+Added: 2016-13), is summarized below for the three and nine months ended September 30, 2022 and the year ended December 31, 2022.
(Dollars in thousands)
and Industrial
−Removed: As of and for the three months ended June 30, 2022:
+Added: As of and for the three months ended September 30, 2022:
Allowance for Loan Losses:
4 unchanged sentences
and Industrial
−Removed: As of and for the six months ended June 30, 2022:
+Added: As of and for the nine months ended September 30, 2022:
Allowance for Credit Losses:
17 unchanged sentences
Beginning balance
−Removed: Proviion (credit)
+Added: Provision (credit)
Ending Balance
9 unchanged sentences
evaluated for impairment
−Removed: During the three months ended June 30, 2022, one loan with a post modification balance of $ 372,000 was modified as a TDR.
−Removed: No loans were modififed as TDRs during the first three months of 2022.
−Removed: The loan modifications for the six months ended June 30, 2022 consisted of one payment modification.
−Removed: The outstanding recorded investment of TDRs as of December 31, 2022 was $ 7,480,000 .
−Removed: There were no unfunded commitments on TDRs at December 31, 2022.
+Added: During the three months ended September 30, 2022, one loan with a post modification balance of $ 143,000 was modified as a TDR.
+Added: During the nine months ended September 30, 2022, two loans with a combined post modification recorded investment of $ 515,000 were modified as TDRs.
+Added: The loan modifications for the nine months ended September 30, 2022 consisted of two payment modifications.
+Added: The outstanding recorded investment of TDRs as of September 30, 2022 was $ 7,589,000 .
+Added: There were no unfunded commitments on TDRs at September 30, 2022.
The following table presents the outstanding recorded investment of TDRs at the dates indicated:
2 unchanged sentences
Accruing TDRs
−Removed: At June 30, 2022, three Commercial and Industrial loans classified as TDRs with a combined recorded investment of $ 682,000 , six Commercial Real Estate loans classified as TDRs with a combined recorded investment of $ 318,000 and one Residential Real Estate loan classified as a TDR with a recorded investment of $ 12,000 were not in compliance with the terms of their restructure.
−Removed: Of the loans that were modified as TDRs within the twelve months preceding June 30, 2022, no loans experienced payment defaults during the three months ended June 30, 2022.
−Removed: One Commercial Real Estate loan that was modified as a TDR within the twelve months preceding June 30, 2022 experienced a payment default during the six months ended June 30, 2022, but the loan was subsequently paid off during the first quarter of 2022.
−Removed: The following table presents information regarding the loan modifications categorized as TDRs during the three and six months ended June 30, 2022.
+Added: At September 30, 2022, three Commercial and Industrial loans classified as TDRs with a combined recorded investment of $ 670,000 and four Commercial Real Estate loans classified as TDRs with a combined recorded investment of $ 107,000 were not in compliance with the terms of their restructure.
+Added: Of the loans that were modified as TDRs within the twelve months preceding September 30, 2022, no loans experienced payment defaults during the three or nine months ended September 30, 2022.
+Added: The following table presents information regarding the loan modifications categorized as TDRs during the three and nine months ended September 30, 2022.
(Dollars in thousands)
−Removed: For the Three Months Ended June 30, 2022
+Added: For the Three Months Ended September 30, 2022
Pre-Modification
2 unchanged sentences
(Dollars in thousands)
−Removed: For the Six Months Ended June 30, 2022
+Added: For the Nine Months Ended September 30, 2022
Pre-Modification
1 unchanged sentence
Commercial Real Estate
−Removed: The following table provides detail regarding they types of loan modifications made for loans categorized as TDRs during the three and six months ended June 30, 2022.
−Removed: For the Three Months Ended June 30, 2022
+Added: The following table provides detail regarding they types of loan modifications made for loans categorized as TDRs during the three and nine months ended September 30, 2022.
+Added: For the Three Months Ended September 30, 2022
Commercial Real Estate
−Removed: For the Six Months Ended June 30, 2022
+Added: For the Nine Months Ended September 30, 2022
Commercial Real Estate
2 unchanged sentences
December 31, 2022
−Removed: With no related allowance recorded:
Commercial and Industrial
1 unchanged sentence
Residential Real Estate
−Removed: With an allowance recorded:
−Removed: Commercial and Industrial
−Removed: Commercial Real Estate
−Removed: Residential Real Estate
−Removed: Total consists of:
−Removed: Commercial and Industrial
−Removed: Commercial Real Estate
−Removed: Residential Real Estate
At December 31, 2022, $ 7,480,000 of loans classified as TDRs were included in impaired loans with a total allocated allowance of $ 0 at December 31, 2022.
1 unchanged sentence
The unpaid balance is equal to the gross amount due on the loan.
−Removed: The average recorded investment and interest income recognized for the Company’s impaired loans are summarized below for the three and six months ended June 30, 2022.
+Added: The average recorded investment and interest income recognized for the Company’s impaired loans are summarized below for the three and nine months ended September 30, 2022.
(Dollars in thousands)
−Removed: For the Three Months Ended
−Removed: June 30, 2022
−Removed: With no related allowance recorded:
−Removed: Commercial and Industrial
−Removed: Commercial Real Estate
−Removed: Residential Real Estate
−Removed: With an allowance recorded:
−Removed: Commercial and Industrial
−Removed: Commercial Real Estate
−Removed: Residential Real Estate
−Removed: Total consists of:
+Added: For the Three Months Ended September 30, 2022
Commercial and Industrial
1 unchanged sentence
Residential Real Estate
−Removed: Of the $ 73,000 in interest income recognized on impaired loans for the three months ended June 30, 2022, $ 0 in interest income was recognized with respect to non-accrual loans.
+Added: Of the $ 75,000 in interest income recognized on impaired loans for the three months ended September 30, 2022, $ 0 in interest income was recognized with respect to non-accrual loans.
(Dollars in thousands)
−Removed: For the Six Months Ended
−Removed: June 30, 2022
−Removed: With no related allowance recorded:
−Removed: Commercial and Industrial
−Removed: Commercial Real Estate
−Removed: Residential Real Estate
−Removed: With an allowance recorded:
−Removed: Commercial and Industrial
−Removed: Commercial Real Estate
−Removed: Residential Real Estate
−Removed: Total consists of:
+Added: For the Nine Months Ended September 30, 2022
Commercial and Industrial
1 unchanged sentence
Residential Real Estate
−Removed: Of the $ 147,000 in interest income recognized on impaired loans for the six months ended June 30, 2022, $ 0 in interest income was recognized with respect to non-accrual loans.
+Added: Of the $ 222,000 in interest income recognized on impaired loans for the nine months ended September 30, 2022, $ 0 in interest income was recognized with respect to non-accrual loans.
NOTE 5 — DEPOSITS
−Removed: Major classifications of deposits at June 30, 2023 and December 31, 2022 consisted of:
+Added: Major classifications of deposits at September 30, 2023 and December 31, 2022 consisted of:
(Dollars in thousands)
+Added: September 30,
Non-interest bearing demand
3 unchanged sentences
Total deposits
−Removed: Total deposits decreased $ 57,658,000 to $ 935,841,000 as of June 30, 2023 due to decreases in non-interest bearing demand, interest bearing demand and savings deposits.
−Removed: The decrease in deposits was mainly the result of a $ 39,273,000 decrease in municipal deposits and other normal fluctuations in deposits during the six months ended June 30, 2023.
+Added: Total deposits decreased $ 1,196,000 to $ 992,303,000 as of September 30, 2023 due to decreases in non-interest bearing demand, interest bearing demand and savings deposits.
+Added: The decrease in deposits was mainly the result of a $ 13,876,000 decrease in municipal deposits offset by increased time deposits as the result of higher rate CD promotions during the nine months ended September 30, 2023.
+Added: Time deposits increased during the nine months ended September 30, 2023 as the result of higher rate CD offerings along with an increase in brokered CDs of $ 20,250,000 .
NOTE 6 — BORROWINGS
1 unchanged sentence
Short-term borrowings include federal funds purchased, securities sold under agreements to repurchase, the Federal Discount Window, and Federal Home Loan Bank of Pittsburgh (“FHLB”) advances, which generally represent overnight or less than 30-day borrowings.
−Removed: Short-term borrowings and weighted–average interest rates at June 30, 2023 and December 31, 2022 are as follows:
+Added: Short-term borrowings and weighted–average interest rates at September 30, 2023 and December 31, 2022 are as follows:
(Dollars in thousands)
−Removed: June 30, 2023
+Added: September 30, 2023
December 31, 2022
10 unchanged sentences
In addition, as the Company does not enter into reverse repurchase agreements, there is no such offsetting to be done with the repurchase agreements.
−Removed: The right of setoff for a repurchase agreement resembles a secured borrowing, whereby the collateral would be used to settle the fair value of the repurchase agreement should the Company be in default (e.g., fails to make an interest
−Removed: payment to the counterparty).
+Added: The right of setoff for a repurchase agreement resembles a secured borrowing, whereby the collateral would be used to settle the fair value of the repurchase agreement should the Company be in default (e.g., fails to make an interest payment to the counterparty).
The collateral is held by a correspondent bank in the counterparty’s custodial account.
The counterparty has the right to sell or repledge the investment securities.
−Removed: The following table presents the short-term borrowings subject to an enforceable master netting arrangement or repurchase agreements as of June 30, 2023 and December 31, 2022.
+Added: The following table presents the short-term borrowings subject to an enforceable master netting arrangement or repurchase agreements as of September 30, 2023 and December 31, 2022.
(Dollars in thousands)
of Liabilities
−Removed: June 30, 2023
+Added: September 30, 2023
Repurchase agreements (a)
1 unchanged sentence
Repurchase agreements (a)
−Removed: (a) As of June 30, 2023 and December 31, 2022, the fair value of securities pledged in connection with repurchase agreements was $ 24,285,000 and $ 34,160,000 , respectively.
−Removed: The following table presents the remaining contractual maturity of the master netting arrangement or repurchase agreements as of June 30, 2023:
+Added: (a) As of September 30, 2023 and December 31, 2022, the fair value of securities pledged in connection with repurchase agreements was $ 22,799,000 and $ 34,160,000 , respectively.
+Added: The following table presents the remaining contractual maturity of the master netting arrangement or repurchase agreements as of September 30, 2023:
(Dollars in thousands)
Remaining Contractual Maturity of the Agreements
−Removed: June 30, 2023:
+Added: September 30, 2023:
Repurchase agreements and repurchase-to-maturity transactions:
5 unchanged sentences
In addition, FHLB shall not be required to fund advances under any outstanding commitments.
−Removed: As of June 30, 2023 and December 31, 2022, the Company had $ 25,000,000 in long-term borrowings outstanding with the FHLB.
+Added: As of Septmeber 30, 2023 and December 31, 2022, the Company had $ 22,000,000 and $ 25,000,000 , respectively, in long-term borrowings outstanding with the FHLB.
Irrevocable standby letters of credit may be issued to a customer/beneficiary by the FHLB on the Company’s behalf in order to secure public/municipal unit deposits, provide credit enhancement to certain transaction types, or to support payment obligations to third parties.
1 unchanged sentence
The Company began utilizing this service offered by the FHLB during the second quarter of 2021.
−Removed: There were no irrevocable standby letters of credit which could be drawn on through FHLB’s close of business on June 30, 2023.
+Added: There were no irrevocable standby letters of credit which could be drawn on through FHLB’s close of business on September 30, 2023.
Any irrevocable standby letters of credit are issued as necessary in an amount appropriate to secure specific public/municipal unit deposits.
1 unchanged sentence
Principal qualifying assets are certain real estate mortgages and investment securities.
−Removed: As of June 30, 2023, loans of $ 716,188,000 were pledged to FHLB which resulted in a FHLB
−Removed: maximum borrowing capacity of $ 505,628,000 .
−Removed: As of June 30, 2023, no securities were pledged as collateral to FHLB to secure FHLB loans and letters of credit.
+Added: As of September 30, 2023, loans of $ 728,242,000 were pledged to FHLB which resulted in a FHLB maximum borrowing capacity of $ 509,624,000 .
+Added: As of September 30, 2023, no securities were pledged as collateral to FHLB to secure FHLB loans and letters of credit.
NOTE 7 — SUBORDINATED DEBT
11 unchanged sentences
The Company currently leases two branch banking facilities and one parcel of land under operating leases.
−Removed: At June 30, 2023, right-of-use assets and lease liabilities were recorded related to these operating leases totaling $ 1,523,000 and $ 2,019,000 , respectively.
+Added: At September 30, 2023, right-of-use assets and lease liabilities were recorded related to these operating leases totaling $ 1,498,000 and $ 1,998,000 , respectively.
At December 31, 2022, right-of-use assets and lease liabilities stood at $ 1,541,000 and $ 2,029,000 , respectively, in the consolidated balance sheets.
4 unchanged sentences
therefore, our incremental borrowing rate was used for each of the leases.
−Removed: The Company recognized total operating lease costs for the six months ended June 30, 2023 and 2022 of $ 113,000 and $ 90,000 , respectively.
+Added: The Company recognized total operating lease costs for the nine months ended September 30, 2023 and 2022 of $ 167,000 and $ 135,000 , respectively.
Operating lease costs are included in occupancy, net in the accompanying statements of income.
−Removed: Cash payments totaled $ 106,000 and $ 83,000 , respectively, for the six months ended June 30, 2023 and 2022.
−Removed: The Company currently has one finance lease for equipment.
−Removed: At June 30, 2023, right-of-use assets and lease liabilities were recorded related to the finance lease totaling $ 34,000 and $ 1,000 , respectively.
+Added: Cash payments totaled $ 155,000 and $ 125,000 , respectively, for the nine months ended September 30, 2023 and 2022.
+Added: The Company’s one finance lease for equipment expired as of August 31, 2023 The equipment will continue to depreciate for an additional two years .
+Added: At September 30, 2023, right-of-use assets and lease liabilities were recorded related to the finance lease totaling $ 34,000 and $ 0 , respectively.
At December 31, 2022, right-of-use assets and lease liabilities stood at $ 34,000 and $ 6,000 , respectively.
4 unchanged sentences
therefore, our incremental borrowing rate was used.
−Removed: Total finance lease costs that were recognized by the Company for the six months ended June 30, 2023 and 2022 were immaterial.
−Removed: Cash payments totaled $ 5,000 for the six months ended June 30, 2023 and 2022.
−Removed: The following table displays the weighted-average term and discount rates for operating and finance leases outstanding as of June 30, 2023 and December 31, 2022.
+Added: Total finance lease costs that were recognized by the Company for the nine months ended September 30, 2023 and 2022 were immaterial.
+Added: Cash payments totaled $ 7,000 for the nine months ended September 30, 2023 and 2022.
+Added: The following table displays the weighted-average term and discount rates for operating and finance leases outstanding as of September 30, 2023 and December 31, 2022.
+Added: September 30,
+Added: September 30,
Weighted-average term (years)
2 unchanged sentences
(Dollars in thousands)
+Added: September 30,
+Added: September 30,
Minimum Lease Payments due:
8 unchanged sentences
Total lease liability
+Added: NOTE 9 — DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES
+Added: Risk Management Objective of Using Derivatives
+Added: The Company uses various financial instruments, including derivatives, to manage its exposure to interest rate risk.
+Added: The Company’s derivative financial instruments are used to manage differences in the amount, timing, and duration of the Company’s known or expected cash receipts and cash payments principally related to specific assets and short-term wholesale funding positions.
+Added: The Company entered into four swap contracts effective September 20, 2023.
+Added: Fair Values of Derivative Instruments on the Statement of Financial Condition
+Added: The tables below present the fair value of the Company’s derivative financial instruments as well as their classification on the Consolidated Balance Sheets as of September 30, 2023 and December 31, 2022:
+Added: (Dollars in thousands)
+Added: September 30, 2023
+Added: Derivative Assets
+Added: Derivative Liabilities
+Added: Derivatives designated as hedging instruments:
+Added: Interest rate swaps
+Added: Other Liabilities
+Added: (Dollars in thousands)
+Added: December 31, 2022
+Added: Derivative Assets
+Added: Derivative Liabilities
+Added: Derivatives designated as hedging instruments:
+Added: Interest rate swaps
+Added: Other Liabilities
+Added: Fair Value Hedges of Interest Rate Risk
+Added: The Company is exposed to changes in the fair value of certain of its fixed-rate assets due to changes in benchmark interest rates.
+Added: The Company uses interest rate swaps to manage its exposure to changes in fair value on these instruments attributable to changes in the designated benchmark interest rates.
+Added: Interest rate swaps designated as fair value hedges involve the payment of fixed-rate amounts to a counterparty in exchange for the Company receiving variable-rate payments over the life of the agreements without the exchange of the underlying notional amount.
+Added: Such derivatives are used to hedge the changes in fair value of certain of its pools of fixed rate assets.
+Added: As of September 30, 2023, the Company had a total of two interest rate swaps with a combined notional amount of $ 50,000,000 hedging fixed-rate available-for-sale debt securities.
+Added: As of September 30, 2023 and December 31, 2022, the following amounts were recorded on the balance sheet related to the cumulative basis adjustment for fair value hedges:
+Added: (Dollars in thousands)
+Added: September 30,
+Added: Carrying amount of hedged assets:
+Added: Closed Portfolio Amount
+Added: Closed Portfolio Amount
+Added: Available-for-sale - Municipals
+Added: Available-for-sale - MBS
+Added: Interst rate swaps notional amount
+Added: (Dollars in thousands)
+Added: September 30,
+Added: Cumulative amount of fair value hedging adjustment included in the carrying amount of assets:
+Added: Available-for-sale - Municipals
+Added: Available-for-sale - MBS
+Added: The table below presents the pre-tax effects of the Company’s derivative instruments designated as fair value hedges on the Consolidated Statements of Income for the years ended September 30, 2023 and 2022:
+Added: (Dollars in thousands)
+Added: September 30,
+Added: Amount of gain recognized in other comprehensive loss
+Added: Amount of gain (loss) , net of fair value re-measurements, included in interest income
+Added: Cash Flow Hedges of Interest Rate Risk
+Added: The Company uses derivatives to add stability to interest expense and to manage its exposure to interest rate movements.
+Added: To accomplish this objective, the Company has entered into interest rate swaps as part of its interest rate risk management strategy.
+Added: These interest rate products are designated as cash flow hedges.
+Added: As of September 30, 2023,
+Added: the Company had a total of two interest rate swaps with a combined notional amount of $ 100,000,000 hedging specific short-term wholesale funding positions.
+Added: For derivatives designated as cash flow hedges, the gain or loss on the derivatives is recorded in other comprehensive loss and subsequently reclassified into interest expense in the same period during which the hedged transaction affects earnings.
+Added: During the next twelve months, it is estimated that an additional $ 959,000 will be reclassified as a decrease to interest expense.
+Added: Interest rate swaps designated as cash flow hedges involve the payment of fixed-rate amounts to a counterparty in exchange for the Company receiving variable-rate payments over the life of the agreements without the exchange of the underlying notional amount.
+Added: For cash flow hedges on the Company's short-term wholesale funding positions, amounts reported in accumulated other comprehensive loss related to derivatives will be reclassified to interest expense as interest payments are made on the Company’s hedged variable rate short-term wholesale funding positions.
+Added: During the year ended September 30, 2023, the Company reclassified $ 24,000 as a reduction in interest expense.
+Added: The table below presents the pre-tax effects of the Company’s derivative instruments designated as cash flow hedges on the Consolidated Statements of Income for the years ended September 30, 2023 and 2022:
+Added: (Dollars in thousands)
+Added: September 30,
+Added: Amount of gain recognized in other comprehensive loss
+Added: Amount of gain (loss) reclassified from accumulated other comprehensive income to interest expense
+Added: Interest rate swaps notional amount
+Added: Credit Risk-Related Contingent Features
+Added: The Company has agreements with each of its derivative counterparties that contain a provision where if the Company defaults on any of its indebtedness, then the Company could also be declared in default on its derivative obligations and could be required to terminate its derivative positions with the counterparty.
+Added: The Company also has agreements with its derivative counterparties that contain a provision where if the Company fails to maintain its status as a well-capitalized institution, then the Company could be required to terminate its derivative positions with the counterparty.
+Added: As of September 30, 2023 and December 31, 2022, the Company had no derivatives in a net liability position and accordingly did not have to post any collateral.
NOTE 10 — FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK AND CONCENTRATIONS OF CREDIT RISK
8 unchanged sentences
The Company may require collateral or other security to support financial instruments with off-balance sheet credit risk.
−Removed: The contract or notional amounts at June 30, 2023 and December 31, 2022 were as follows:
+Added: The contract or notional amounts at September 30, 2023 and December 31, 2022 were as follows:
(Dollars in thousands)
−Removed: June 30, 2023
+Added: September 30, 2023
December 31, 2022
15 unchanged sentences
The ability of the majority of the Company’s customers to honor their contractual loan obligations is dependent on the economy and real estate market in this area.
−Removed: At June 30, 2023, the Company had $ 774,688,000 in loans secured by real estate, which represented 88.9 % of total loans.
+Added: At September 30, 2023, the Company had $ 784,126,000 in loans secured by real estate, which represented 89.0 % of total loans.
The real estate loan portfolio is largely secured by lessors of residential buildings and dwellings, lessors of non-residential buildings, and lessors of hotels/motels.
−Removed: As of June 30, 2023 and December 31, 2022, management is of the opinion that there were no concentrations exceeding 10% of total loans with regard to loans to borrowers who were engaged in similar activities that were similarly impacted by economic or other conditions.
+Added: As of September 30, 2023 and December 31, 2022, management is of the opinion that there were no concentrations exceeding 10% of total loans with regard to loans to borrowers who were engaged in similar activities that were similarly impacted by economic or other conditions.
As all financial instruments are subject to some level of credit risk, the Company requires collateral and/or guarantees for all loans.
7 unchanged sentences
Fair value measurement and disclosure guidance provides a list of factors that a reporting entity should evaluate to determine whether there has been a significant decrease in the volume and level of activity for the asset or liability in relation to normal market activity for the asset or liability.
−Removed: When the reporting entity concludes there has been a significant decrease in the volume and level of activity for the asset or liability, further analysis of the information from
−Removed: that market is needed and significant adjustments to the related prices may be necessary to estimate fair value in accordance with the fair value measurement and disclosure guidance.
+Added: When the reporting entity concludes there has been a significant decrease in the volume and level of activity for the asset or liability, further analysis of the information from that market is needed and significant adjustments to the related prices may be necessary to estimate fair value in accordance with the fair value measurement and disclosure guidance.
This guidance clarifies that when there has been a significant decrease in the volume and level of activity for the asset or liability, some transactions may not be orderly.
15 unchanged sentences
Financial Assets Measured at Fair Value on a Recurring Basis
−Removed: At June 30, 2023 and December 31, 2022, securities measured at fair value on a recurring basis and the valuation methods used are as follows:
+Added: At September 30, 2023 and December 31, 2022, securities measured at fair value on a recurring basis and the valuation methods used are as follows:
(Dollars in thousands)
−Removed: June 30, 2023
+Added: September 30, 2023
Debt Securities Available-for-Sale:
34 unchanged sentences
Non-recurring adjustments can also include certain specific allocation amounts for individually evaluated collateral-dependent loans as calculated when establishing the allowance for credit losses.
−Removed: The Company’s valuation procedure for any individually evaluated loans greater than $250,000 requires an appraisal to be obtained and reviewed annually at year end unless the Board of Directors waives such requirement for a specific loan, in favor of obtaining a Certificate of Inspection instead, defined as an internal evaluation completed by the Company.
+Added: The Company’s valuation procedure for any individually evaluated loans
+Added: greater than $250,000 requires an appraisal to be obtained and reviewed annually at year end unless the Board of Directors waives such requirement for a specific loan, in favor of obtaining a Certificate of Inspection instead, defined as an internal evaluation completed by the Company.
A quarterly collateral evaluation is performed which may include a site visit, property pictures and discussions with realtors and other similar business professionals to ascertain current values.
3 unchanged sentences
Following the adoption of ASU No.
−Removed: 2016-13, at June 30, 2023 measured at fair value on a nonrecurring basis are as follows:
+Added: 2016-13, at September 30, 2023 measured at fair value on a nonrecurring basis are as follows:
(Dollars in thousands)
−Removed: Assets at June 30, 2023
+Added: Assets at September 30, 2023
Individually evaluated loans:
9 unchanged sentences
Nonfinancial Assets Measured at Fair Value on a Nonrecurring Basis
−Removed: There were no foreclosed assets held for resale measured at fair value on a nonrecurring basis at June 30, 2023 and December 31, 2022.
+Added: There were no foreclosed assets held for resale measured at fair value on a nonrecurring basis at September 30, 2023 and December 31, 2022.
The Company’s foreclosed asset valuation procedure requires an appraisal or a Certificate of Inspection, which considers the sales prices of similar properties in the proximate vicinity, to be completed periodically with the exception of those cases in which the Bank has obtained a sales agreement.
5 unchanged sentences
2016-13 Adoption:
−Removed: June 30, 2023
+Added: September 30, 2023
Valuation Technique
25 unchanged sentences
(Dollars in thousands)
−Removed: Fair Value Measurements at June 30, 2023
+Added: Fair Value Measurements at September 30, 2023
FINANCIAL ASSETS:
4 unchanged sentences
Accrued interest receivable
+Added: Derivative Assets
FINANCIAL LIABILITIES:
5 unchanged sentences
Accrued interest payable
−Removed: OFF-BALANCE SHEET FINANCIAL INSTRUMENTS
(Dollars in thousands)
6 unchanged sentences
Accrued interest receivable
+Added: Derivative Assets
FINANCIAL LIABILITIES:
5 unchanged sentences
Accrued interest payable
−Removed: OFF-BALANCE SHEET FINANCIAL INSTRUMENTS
NOTE 12 — REVENUE RECOGNITION
13 unchanged sentences
Wealth management fees are included within non-interest income in the consolidated statements of income.
−Removed: As of June 30, 2023 and December 31, 2022, the fair value of trust assets under management was $ 114,166,000 and $ 111,172,000 , respectively.
−Removed: The costs of acquiring asset management customers are incremental and recognized within non-interest expense in the consolidated statements of income.
+Added: As of September 30, 2023 and December 31, 2022, the fair value of trust assets under management was $ 116,688,000 and $ 111,172,000 , respectively.
+Added: The costs of acquiring asset
+Added: management customers are incremental and recognized within non-interest expense in the consolidated statements of income.
Interchange Fees and Surcharges
8 unchanged sentences
Diluted EPS reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock that then shared in the earnings of the Corporation.
−Removed: At June 30, 2023 and 2022, there were no potential common shares outstanding.
+Added: At September 30, 2023 and 2022, there were no potential common shares outstanding.
The following table sets forth the computation of basic and diluted earnings per share.
1 unchanged sentence
Three Months Ended
+Added: September 30,
Weighted-average common shares outstanding
1 unchanged sentence
(In thousands, except earnings per share)
−Removed: Six Months Ended
+Added: Nine Months Ended
+Added: September 30,
Weighted-average common shares outstanding
4 unchanged sentences
In accordance with current accounting standards, goodwill is not amortized.
−Removed: Goodwill totaled $ 19,133,000 at June 30, 2023 and December 31, 2022.
+Added: Goodwill totaled $ 19,133,000 at September 30, 2023 and December 31, 2022.
Impairment testing is performed on an annual basis, using either a qualitative or quantitative approach.
2 unchanged sentences
Goodwill was evaluated for impairment at December 31, 2022, and it was determined that goodwill was not impaired.
−Removed: Management evaluated the need for an interim goodwill impairment analysis and determined that there were no triggering events or negative factors affecting goodwill since the previous test that would indicate goodwill was impaired as of June 30, 2023.
+Added: Management evaluated the need for an interim goodwill impairment analysis and determined that there were no triggering events or negative factors affecting goodwill since the previous test that would indicate goodwill was impaired as of September 30, 2023.
First Keystone Corporation Management’s Discussion and Analysis of Financial Condition and Results of Operation
11 unchanged sentences
RESULTS OF OPERATIONS
−Removed: Quarter ended June 30, 2023 compared to quarter ended June 30, 2022
−Removed: First Keystone Corporation realized earnings for the three months ended June 30, 2023 of $1,139,000, a decrease of $2,683,000, or 70.2% from the second quarter of 2022.
−Removed: The decrease in net income for the three months ended June 30, 2023 was primarily due to increases in interest paid on deposits, interest paid on short-term borrowings through the Federal Home Loan Bank, and salaries and employee benefits expenses, as well as a reduction in PPP fees.
−Removed: On a per share basis, for the three months ended June 30, 2023, net income was $0.19 versus $0.64 for the same three month period of 2022.
−Removed: Cash dividends amounted to $0.28 per share for the three months ended June 30, 2023 and 2022.
+Added: Quarter ended September 30, 2023 compared to quarter ended September 30, 2022
+Added: First Keystone Corporation realized earnings for the three months ended September 30, 2023 of $1,283,000, a decrease of $2,221,000, or 63.4% from the third quarter of 2022.
+Added: The decrease in net income for the three months ended September 30, 2023 was primarily due to increases in interest paid on deposits, interest paid on short-term borrowings through the Federal Home Loan Bank, and salaries and employee benefits expenses, as well as a reduction in PPP fees.
+Added: On a per share basis, for the three months ended September 30, 2023, net income was $0.21 versus $0.58 for the same three month period of 2022.
+Added: Cash dividends amounted to $0.28 per share for the three months ended September 30, 2023 and 2022.
NET INTEREST INCOME
The major source of operating income for the Company is net interest income, defined as interest and loan fee income less interest expense.
−Removed: In the three months ended June 30, 2023, interest income amounted to $13,651,000, an increase of $2,540,000 or 22.9% from the three months ended June 30, 2022.
−Removed: The increase in interest income during the three months ended June 30, 2023 was mainly the result of an increase in interest earned on commercial real estate loans and an increase in interest earned on taxable securities.
−Removed: Interest expense amounted to $6,543,000 in the three months ended June 30, 2023, an increase of $5,213,000 or 392.0% from the three months ended June 30, 2022.
+Added: In the three months ended September 30, 2023, interest income amounted to $14,237,000, an increase of $2,340,000 or 19.7% from the three months ended September 30, 2022, while interest expense amounted to $7,353,000 in the three months ended September 30, 2023, an increase of $4,975,000 or 209.2% from the three months ended September 30, 2022.
As a result, net interest income decreased $2,635,000 or 27.7% to $6,884,000 from $9,519,000 for the same period in 2022.
−Removed: The Company’s net interest margin for the three months ended June 30, 2023 was 2.38% compared to 3.36% for same period in 2022.
+Added: The Company’s net interest margin for the three months ended September 30, 2023 was 2.23% compared to 3.24% for same period in 2022.
The decrease in net interest margin was primarily a result of increased rates paid on deposit products and short-term borrowings.
PROVISION FOR CREDIT LOSSES
−Removed: The provision for credit losses for the three months ended June 30, 2023 and 2022 was $34,000 and $218,000, respectively.
+Added: The provision for credit losses for the three months ended September 30, 2023 carried a credit balance of $370,000, compared to a provision balance of $219,000 for the three months ended September 30, 2022.
The decrease in the provision for credit losses resulted from the Company’s analysis of the current loan portfolio, including historic losses, past-due trends, current economic conditions, loan portfolio growth, and other relevant factors.
−Removed: The provision for credit losses for the three months ended June 30, 2023 is also reflective of management’s assessment of the continued credit risk associated with the uncertainty surrounding geopolitical and economic concerns.
−Removed: Charge-off and recovery activity in the allowance for credit losses resulted in net charge-offs of $19,000 and net recoveries of $5,000 for the three months ended June 30, 2023 and 2022, respectively.
+Added: The provision for credit losses for the three months ended September 30, 2023 is also reflective of management’s assessment of the continued credit risk associated with the uncertainty surrounding geopolitical and economic concerns.
+Added: Charge-off and recovery activity in the allowance for credit losses resulted in net recoveries of $30,000 and net charge-offs of $168,000 for the three months ended September 30, 2023 and 2022, respectively.
See Allowance for Credit Losses on page 52 for further discussion.
NON-INTEREST INCOME
−Removed: Total non-interest income was $1,539,000 for the three months ended June 30, 2023, as compared to $1,514,000 for the same period in 2022, an increase of $25,000, or 1.7%.
−Removed: Net securities losses decreased $1,000 to ($69,000) for the three months ended June 30, 2023 as compared to the three months ended June 30, 2022.
−Removed: Net securities losses were the result of recognizing $69,000 in net losses on held equity securities in the second quarter of 2023 compared to $68,000 in net losses on held equity securities for the same period in 2022.
−Removed: Trust department income decreased $20,000 or 7.5% to $248,000 for the three months ended June 30, 2023 as compared to the same period in 2022.
−Removed: Service charges and fee income increased $22,000 or 4.0%.
−Removed: The increase was mainly due to increases in overdraft fees as compared to the same period in 2022.
−Removed: ATM fees and debit card income increased $8,000 or 1.4% to $566,000 for the three months ended June 30, 2023.
−Removed: Net gains (losses) on sales of mortgage loans increased $17,000 during the second quarter of 2023 as there were no sales of mortgage loans in the second quarter of 2022.
−Removed: Other non-interest income decreased $6,000 or 10.2% to $53,000 for the three months ended June 30, 2023.
−Removed: The decrease was due to lower building rental income and lower retail investment income as income from annuities was lower in the second quarter of 2023 as compared to the same period in 2022.
+Added: Total non-interest income was $1,476,000 for the three months ended September 30, 2023, as compared to $1,493,000 for the same period in 2022, a decrease of $17,000, or 1.1%.
+Added: Net securities losses increased $37,000 to ($87,000) for the three months ended September 30, 2023 as compared to the three months ended September 30, 2022.
+Added: Net securities losses were the result of recognizing $87,000 in net losses on held equity securities in the third quarter of 2023 compared to $50,000 in net losses on held equity securities for the same period in 2022.
+Added: Trust department income decreased $5,000 or 2.1% to $231,000 for the three months ended September 30, 2023 as compared to the same period in 2022.
+Added: Service charges and fee income decreased $17,000 or 3.0% while, ATM fees and debit card income increased $25,000 or 4.7% to $556,000 for the three months ended September 30, 2023.
+Added: Net gains (losses) on sales of mortgage loans increased $14,000 during the third quarter of 2023 as there were two mortgage loans repurchased from Fannie Mae for a net loss of $3,000 in the third quarter of 2022.
+Added: Other non-interest income decreased $3,000 or 5.4% to $53,000 for the three months ended September 30, 2023.
NON-INTEREST EXPENSE
−Removed: Total non-interest expense was $7,157,000 for the three months ended June 30, 2023, as compared to $6,595,000 for the three months ended June 30, 2022.
+Added: Total non-interest expense was $7,420,000 for the three months ended September 30, 2023, as compared to $6,711,000 for the three months ended September 30, 2022.
Expenses associated with employees (salaries and employee benefits) continue to be the largest category of non-interest expense.
−Removed: Salaries and benefits amounted to $3,733,000 or 52.2% of total non-interest expense for the three months ended June 30, 2023, as compared to $3,462,000 or 52.5% for the three months ended June 30, 2022.
+Added: Salaries and benefits amounted to $4,020,000 or 54.2% of total non-interest expense for the three months ended September 30, 2023, as compared to $3,677,000 or 54.8% for the three months ended September 30, 2022.
The increase was due to normal merit increases for employees, filling existing open positions, plus new hires as compared to the same period in 2022.
−Removed: Net occupancy, furniture and equipment, and computer expense amounted to $1,121,000 for the three months ended June 30, 2023, an increase of $138,000 or 14.0% which was mainly due to increased bank building costs as the result of purchasing and renovating a new branch and higher software costs as the bank implemented a new accounting system during the second quarter of 2023.
−Removed: Professional services decreased $24,000 or 6.5% to $346,000 as of June 30, 2023, versus the second quarter of 2022.
−Removed: Pennsylvania shares tax expense amounted to $241,000 for the three months ended June 30, 2023, a decrease of $83,000 or 25.6% as compared to the three months ended June 30, 2022.
+Added: Net occupancy, furniture and equipment, and computer expense amounted to $1,102,000 for the three months ended September 30, 2023, an increase of $125,000 or 12.8% which was mainly due to increased bank building costs as the result of purchasing and renovating a new branch and higher software costs as the bank implemented a new accounting system during the second quarter of 2023.
+Added: Professional services increased $41,000 or 13.9% to $336,000 as of September 30, 2023 versus the third quarter of 2022.
+Added: This was due to increases in audit fees in 2023 and higher consulting fees associated with implementing new internal systems contracts.
+Added: Pennsylvania shares tax expense amounted to $189,000 for the three months ended September 30, 2023, a decrease of $123,000 or 39.4% as compared to the three months ended September 30, 2022.
This decrease was due to lower equity due to the unrealized loss position in the securities portfolio at December 31, 2022.
−Removed: Federal Deposit Insurance Corporation (“FDIC”) insurance expense amounted to $178,000 for the three months ended June 30, 2023, an increase of $58,000 or 48.3% as compared to the same period in 2022.
+Added: Federal Deposit Insurance Corporation (“FDIC”) insurance expense amounted to $175,000 for the three months ended September 30, 2023, an increase of $59,000 or 50.9% as compared to the same period in 2022.
FDIC insurance expense varies with changes in net asset size, risk ratings, and FDIC derived assessment rates.
−Removed: ATM and debit card fees expense amounted to $278,000 for the three months ended June 30, 2023, an increase of $36,000 or 14.9% as compared to the three months ended June 30, 2022.
−Removed: This increase was a result of third party pricing increases, increased debit card transaction volume and increased ATM fraud.
+Added: ATM and debit card fees expense amounted to $283,000 for the three months ended September 30, 2023, an increase of $9,000 or 3.3% as compared to the three months ended September 30, 2022.
+Added: This increase was a result of third party pricing increases and increased debit card transaction volume.
Data processing expenses amounted to $544,000 for the three months ended June 30, 2023 as compared to $205,000 for the same period of 2022, an increase of $339,000 or 165.4%.
−Removed: This increase was mainly the result of third party pricing increases, credits used to lower third party costs in the second quarter of 2022 and increased costs associated with preparation for the upgrade of the Bank’s online and mobile banking platforms.
−Removed: Advertising expense amounted to $154,000 in the second quarter of 2023, an increase of $36,000 or 30.5% as compared to the three months ended June 30, 2023.
−Removed: The increase was due to the Bank marketing the new full-service Bethlehem branch, along with utilizing more television and newspaper advertising in the second quarter of 2023 as compared to the same period in 2022.
−Removed: Other non-interest expense amounted to $749,000 for the three months ended June 30, 2023, an increase of $24,000 or 3.3% as compared to 2022.
−Removed: Income tax expense amounted to $317,000 for the three months ended June 30, 2023, as compared to $660,000 for the three months ended June 30, 2022, a decrease of $343,000.
−Removed: The effective total income tax rate was 21.8% for the three months ended June 30, 2023 as compared to 14.7% for the three months ended June 30, 2022.
−Removed: The increase in the effective tax rate was mainly due to lower tax-exempt income earned on securities.
−Removed: The Company recognized $58,000 of tax credits from low-income housing partnerships in the three months ended June 30, 2023 and 2022.
−Removed: Six months ended June 30, 2023 compared to six months ended June 30, 2022
−Removed: First Keystone Corporation realized earnings for the six months ended June 30, 2023 of $2,496,000, a decrease of $4,869,000, or 66.1% from the same period in 2022.
−Removed: The decrease in net income for the six months ended June 30, 2023 was primarily due to less PPP loan fees and an increase in interest expense, mainly due to increases in interest paid on deposits and interest paid on short-term borrowings through the Federal Home Loan Bank.
−Removed: On a per share basis, net income was $0.41 for the six months ended June 30, 2023 versus $1.24 for the same period in 2022.
−Removed: Cash dividends amounted to $0.56 per share for the six months ended June 30, 2023 and 2022
+Added: This increase was mainly the result of third party pricing increases, credits used to lower third party costs in the third quarter of 2022 and increased costs associated with preparation for and implementation of the upgrade of the Bank’s online and mobile banking platforms.
+Added: Advertising expense amounted to $152,000 in the third quarter of 2023, an increase of $56,000 or 58.3% as compared to the three months ended September 30, 2023.
+Added: The increase was due to the Bank marketing the new full-service Bethlehem branch, along with utilizing more television and billboard advertising in the third quarter of 2023 as compared to the same period in 2022.
+Added: Other non-interest expense amounted to $619,000 for the three months ended September 30, 2023, a decrease of $140,000 or 18.4% as compared to 2022.
+Added: The decrease was mainly the result of a fraud settlement related to a customer’s deposit relationship in the third quarter of 2022.
+Added: Income tax expense amounted to $27,000 for the three months ended September 30, 2023, as compared to $578,000 for the three months ended September 30, 2022, a decrease of $551,000.
+Added: The effective total income tax rate was 2.1% for the three months ended September 30, 2023 as compared to 14.2% for the three months ended September 30, 2022.
+Added: The decrease in the effective tax rate was mainly due to lower pre-tax earnings in relation to the amount of tax-exempt income earned on securities and low-income housing tax credits.
+Added: The Company recognized $58,000 of tax credits from low-income housing partnerships in the three months ended September 30, 2023 and 2022.
+Added: Nine months ended September 30, 2023 compared to nine months ended September 30, 2022
+Added: First Keystone Corporation realized earnings for the nine months ended September 30, 2023 of $3,779,000, a decrease of $7,090,000, or 65.2% from the same period in 2022.
+Added: The decrease in net income for the nine months ended September 30, 2023 was primarily due to less PPP loan fees, increases in salaries and benefits and data processing expenses, and an increase in interest expense, mainly due to increases in interest paid on deposits and interest paid on short-term borrowings through the Federal Home Loan Bank.
+Added: On a per share basis, net income was $0.62 for the nine months ended September 30, 2023 versus $1.82 for the same period in 2022.
+Added: Cash dividends amounted to $0.84 per share for the nine months ended September 30, 2023 and 2022.
NET INTEREST INCOME
The major source of operating income for the Company is net interest income, defined as interest and loan fee income less interest expense.
−Removed: For the six months ended June 30, 2023, interest income amounted to $26,958,000, an increase of $5,218,000 or 24.0% from the six months ended June 30, 2022.
−Removed: The increase in interest income during the six months ended June 30, 2023 was mainly the result of an increase in interest earned on commercial real estate loans and an increase in interest earned on taxable securities.
−Removed: Interest expense amounted to $12,046,000 in the six months ended June 30, 2023 an increase of $9,543,000 or 381.3% from the six months ended June 30, 2022.
+Added: For the nine months ended September 30, 2023, interest income amounted to $41,195,000, an increase of $7,558,000 or 22.5% from the nine months ended September 30, 2022, while interest expense amounted to $19,399,000 in the nine months ended September 30, 2023 an increase of $14,518,000 or 297.4% from the nine months ended September 30, 2022.
As a result, net interest income decreased $6,960,000 or 24.2% to $21,796,000 from $28,756,000 for the same period in 2022.
−Removed: The Company’s net interest margin for the six months ended June 30, 2023 was 2.50% compared to 3.28% for same period in 2022.
+Added: The Company’s net interest margin for the nine months ended September 30, 2023 was 2.41% compared to 3.26% for same period in 2022.
The decrease in net interest margin was primarily a result of increased rates paid on deposit products and short-term borrowings.
PROVISION FOR CREDIT LOSSES
−Removed: The provision for credit losses for the six months ended June 30, 2023 and 2022 was $34,000 and $437,000, respectively.
+Added: The provision for credit losses for the nine months ended September 30, 2023 carried a credit balance of $336,000, compared to a provision balance of $656,000 for the nine months ended September 30, 2023.
The decrease in the provision for credit losses resulted from the Company’s analysis of the current loan portfolio, including historic losses, past-due trends, current economic conditions, loan portfolio growth, and other relevant factors.
−Removed: The provision for credit losses for the six months ended June 30, 2023 is also reflective of management’s assessment of the continued credit risk associated with the uncertainty surrounding geopolitical and economic concerns.
−Removed: Charge-off and recovery activity in the allowance for credit losses resulted in net charge-offs of
−Removed: $32,000 and net recoveries of $43,000 for the six months ended June 30, 2023 and 2022, respectively.
+Added: The provision for credit losses for the nine months ended September 30, 2023 is also reflective of management’s assessment of the continued credit risk associated with the uncertainty surrounding geopolitical and economic concerns.
+Added: Charge-off and recovery activity in the allowance for credit losses resulted in net charge-offs of $2,000 and $125,000 for the nine months ended September 30, 2023 and 2022, respectively.
See Allowance for Credit Losses on page 52 for further discussion.
NON-INTEREST INCOME
−Removed: Total non-interest income was $2,991,000 for the six months ended June 30, 2023, as compared to $2,903,000 for the same period in 2022, an increase of $88,000, or 3.0%.
−Removed: ATM fees and debit card income increased $31,000 or 2.9% to $1,098,000 for the six months ended June 30, 2023 due to increased ATM interchange fees as the result of increased transaction volume.
−Removed: Service charges and fee income increased $38,000 for the six months ended June 30, 2023.
+Added: Total non-interest income was $4,467,000 for the nine months ended September 30, 2023, as compared to $4,396,000 for the same period in 2022, an increase of $71,000, or 1.6%.
+Added: ATM fees and debit card income increased $56,000 or 3.5% to $1,654,000 for the nine months ended September 30, 2023 due to increased ATM interchange fees as the result of increased transaction volume.
+Added: Service charges and fee income increased $21,000 for the nine months ended September 30, 2023.
The increase was mainly due to increased overdraft fees on DDA accounts.
−Removed: Gains on sales of mortgage loans increased $68,000 or 200.0% due to a low number of individual loans sold in the first half of 2022 and many of the loans sold in 2022 being sold at a loss.
−Removed: These factors were due to the current rate environment and fewer loans being originated with the intent to sell in 2022.
−Removed: Trust department income was $478,000 for the six months ended June 30, 2023 a decrease of $40,000 or 7.7% as compared to the same period in 2022.
−Removed: Net securities losses increased $6,000 or 4.6% to ($125,000) for the six months ended June 30, 2023 as compared to the six months ended June 30, 2022.
−Removed: The increase was due to the Company recognizing $224,000 in net losses on held equity securities and $99,000 in net gains on the sales of debt securities in the first half of 2023 as compared to recognizing $131,000 in net losses on held equity securities in the same period in 2022.
+Added: Gains(losses) on sales of mortgage loans increased $82,000 or 215.8% due to a low number of individual loans sold in the first nine months of 2022 and many of the loans sold in 2022 being sold at a loss.
+Added: These factors were due to the rate environment and fewer loans being originated with the intent to sell in 2022.
+Added: Trust department income was $709,000 for the nine months ended September 30, 2023 a decrease of $45,000 or 6.0% as compared to the same period in 2022.
+Added: Net securities losses increased $31,000 or 17.1% to ($212,000) for the nine months ended September 30, 2023 as compared to the nine months ended September 30, 2022.
+Added: The decrease was due to the Company recognizing $311,000 in net losses on held equity securities and $99,000 in net gains on the sales of debt securities in the first nine months of 2023 as compared to recognizing $181,000 in net losses on held equity securities in the same period in 2022.
NON-INTEREST EXPENSE
−Removed: Total non-interest expense was $14,910,000 for the six months ended June 30, 2023, as compared to $13,111,000 for the six months ended June 30, 2022.
+Added: Total non-interest expense was $22,330,000 for the nine months ended September 30, 2023, as compared to $19,822,000 for the nine months ended September 30, 2022.
Non-interest expense increased $2,508,000 or 12.7%.
Expenses associated with employees (salaries and employee benefits) continue to be the largest category of non-interest expense.
−Removed: Salaries and benefits amounted to $8,119,000 or 54.5% of total non-interest expense for the six months ended June 30, 2023, as compared to $7,016,000 or 53.5% for the six months ended June 30, 2022.
−Removed: The increase was mainly due to normal merit increases and new hires along with an increase in medical insurance costs and a bonus paid to all employees in January of 2023.
−Removed: Net occupancy, furniture and equipment, and computer expense amounted to $2,164,000 for the six months ended June 30, 2023, an increase of $164,000 or 8.2%.
−Removed: The increase was due to increased bank building costs as the result of purchasing and renovating a new branch and higher software costs as the Bank implemented a new accounting system in the first half of 2023.
−Removed: Professional services increased $113,000 or 16.9% to $781,000 for the six months ended June 30, 2023.
+Added: Salaries and benefits amounted to $12,139,000 or 54.4% of total non-interest expense for the nine months ended September 30, 2023, as compared to $10,693,000 or 53.9% for the nine months ended September 30, 2022.
+Added: The increase was mainly due to normal merit increases and new hires along with an increase in medical insurance costs and a one-time bonus paid to all employees in January of 2023.
+Added: Net occupancy, furniture and equipment, and computer expense amounted to $3,266,000 for the nine months ended September 30, 2023, an increase of $289,000 or 9.7%.
+Added: The increase was due to increased bank building and leasehold improvement costs as the result of purchasing and renovating new branch locations and higher software costs as the Bank implemented a new accounting system in the first nine months of 2023.
+Added: Professional services increased $154,000 or 16.0% to $1,117,000 for the nine months ended September 30, 2023.
The increase was mainly the result of increases in annual audit expenses for 2023 along with additional audit expenses relating to year end 2022.
−Removed: Pennsylvania shares tax expense amounted to $482,000 for the six months ended June 30, 2023, a decrease of $166,000 or 25.6% as compared to the six months ended June 30, 2022.
+Added: Pennsylvania shares tax expense amounted to $671,000 for the nine months ended September 30, 2023, a decrease of $289,000 or 30.1% as compared to the nine months ended September 30, 2022.
This decrease was due to lower equity due to the unrealized loss position in the securities portfolio at December 31, 2022.
−Removed: FDIC insurance expense increased $97,000 or 37.7% for the six months ended June 30, 2023.
+Added: FDIC insurance expense increased $156,000 or 41.8% for the nine months ended September 30, 2023.
FDIC insurance expense varies with changes in net asset size, risk ratings, and FDIC derived assessment rates.
−Removed: ATM and debit card fees expense amounted to $585,000 for the six months ended June 30, 2023, an increase of $215,000 or 58.1% as compared to the six months ended June 30, 2022.
+Added: ATM and debit card fees expense amounted to $868,000 for the nine months ended September 30, 2023, an increase of $224,000 or 34.8% as compared to the nine months ended September 30, 2022.
The increase was the result of third party pricing increases, increased debit card transaction volume and increased ATM fraud.
−Removed: Data processing expenses amounted to $669,000 for the six months ended June 30, 2023, an increase of $160,000 or 31.4% as compared to the six months ended June 30, 2022.
−Removed: This increase was the result of third party pricing increases, credits used to lower third party costs in the first half of 2022 and increased costs associated with preparation for the upgrade of the Bank’s online and mobile banking platforms.
−Removed: Advertising expense increased $38,000 or 20.0% during the six months ended June 30, 2023.
−Removed: This increase was mainly due to the Bank marketing the new full-service Bethelehem branch, along with utilizing more television and
−Removed: radio advertising in the first half of 2023 as compared to the same period of 2022.
−Removed: Other non-interest expense amounted to $1,528,000 for the six months ended June 30, 2023, an increase of $75,000 or 5.2% as compared to the six months ended June 30, 2022.
−Removed: This increase was mainly the result of an increase in the provision for unfunded commitments as the result of increased funding rates and loss rates utilized in the methodology upon the adoption of ASU 2016-13 in 2023, as well as an increase in unfunded lending commitments.
−Removed: Income tax expense amounted to $463,000 for the six months ended June 30, 2023, as compared to $1,227,000 for the six months ended June 30, 2022, a decrease of $764,000.
−Removed: The effective total income tax rate was 15.6% for the six months ended June 30, 2023 as compared to 14.3% for the six months ended June 30, 2022.
−Removed: The increase in the effective tax rate was mainly due to fewer tax credits from low-income housing partnerships in the current year and lower tax-exempt income earned on securities.
−Removed: The Company recognized $116,000 and $132,000 of tax credits from low-income housing partnerships in the six months ended June 30, 2023 and 2022, respectively.
+Added: Data processing expenses amounted to $1,213,000 for the nine months ended September 30, 2023, an increase of $499,000 or 69.9% as compared to the nine months ended September 30, 2022.
+Added: This increase was the result of third party pricing increases, credits used to lower third party costs in the first nine months of 2022 and increased costs associated with preparation for the upgrade of the Bank’s online and mobile banking platforms.
+Added: Advertising expense increased $94,000 or 32.9% during the nine months ended September 30, 2023.
+Added: This increase was mainly due to the Bank marketing the new full-service Bethelehem branch, along with utilizing more television, billboard and radio advertising in the first nine months of 2023 as compared to the same period of 2022.
+Added: Other non-interest expense amounted to $2,147,000 for the nine months ended September 30, 2023, a decrease of $65,000 or 2.9% as compared to the nine months ended September 30, 2022.
+Added: The decrease was mainly the result of a fraud reimbursement to one customer and a fraud settlement related to another customer’s deposit relationship both in 2022.
+Added: Income tax expense amounted to $490,000 for the nine months ended September 30, 2023, as compared to $1,805,000 for the nine months ended September 30, 2022, a decrease of $1,315,000.
+Added: The effective total income tax rate was 11.5% for the nine months ended September 30, 2023 as compared to 14.2% for the nine months ended September 30, 2022.
+Added: The decrease in the effective tax rate was mainly due to lower pre-tax earnings in relation to the amount of tax-exempt income earned on securities and low-income housing tax credits.
+Added: The Company recognized $174,000 and $191,000 of tax credits from low-income housing partnerships in the nine months ended September 30, 2023 and 2022, respectively.
FINANCIAL CONDITION
−Removed: Total assets decreased to $1,307,899,000 as of June 30, 2023, a decrease of $21,295,000 from year-end 2022.
+Added: Total assets decreased to $1,319,714,000 as of September 30, 2023, a decrease of $9,480,000 from year-end 2022.
Total assets as of December 31, 2022 amounted to $1,329,194,000.
−Removed: Total debt securities available-for-sale decreased $41,864,000 or 11.2% to $331,580,000 as of June 30, 2023 from December 31, 2022.
+Added: Total debt securities available-for-sale decreased $40,267,000 or 10.8% to $333,177,000 as of September 30, 2023 from December 31, 2022.
The decrease was mainly due to the sales of tax-exempt municipals and principal paydowns.
−Removed: Total loans increased $12,770,000 or 1.5% to $871,239,000 as of June 30, 2023 from December 31, 2022.
−Removed: Loan demand grew in the six months ended June 30, 2023 as the Bank has realized an increase in loan originations, primarily commercial real estate loans.
−Removed: Total deposits decreased $57,658,000 or 5.8% to $935,841,000 as of June 30, 2023 from December 31, 2022.
−Removed: The decrease was mainly due to a decrease in both non-interest and interest bearing deposits, primarily municipal deposits and savings and money market accounts, stemming from decreased stimulus funded deposits, etc.
+Added: Total loans increased $22,640,000 or 2.6% to $881,038,000 as of September 30, 2023 from December 31, 2022.
+Added: Loan demand grew in the nine months ended September 30, 2023 as the Bank has realized an increase in loan originations, primarily commercial real estate loans.
+Added: Total deposits decreased $1,196,000 or 0.1% to $992,303,000 as of September 30, 2023 from December 31, 2022.
+Added: The decrease was mainly due to a decrease in non-interest bearing deposits, offset by an increase in interest bearing deposits due to the purchase of $20,250,000 in Brokered CD’s in the third quarter of 2023.
The Company continues to maintain and manage its asset growth.
The Company’s strong equity capital position provides an opportunity to further leverage its asset growth.
−Removed: Total borrowings increased in the six months ended June 30, 2023 by $39,941,000 to $218,359,000 from $178,418,000 as of December 31, 2022.
−Removed: Borrowings increased mainly due to decreased deposit balances and growth in the loan portfolio.
−Removed: Total stockholders’ equity amounted to $121,185,000 at June 30, 2023, an increase of $799,000 or 0.7% from December 31, 2022.
+Added: Total borrowings decreased in the nine months ended September 30, 2023 by $1,642,000 to $176,776,000 from $178,418,000 as of December 31, 2022.
+Added: Borrowings decreased mainly due to decreased repurchase balances and the maturity of a long-term note.
+Added: Total stockholders’ equity amounted to $115,021,000 at September 30, 2023, a decrease of $5,365,000 or 4.5% from December 31, 2022 due to a decrease in the market value of the securities portfolio.
SEGMENT REPORTING
3 unchanged sentences
By maintaining a healthy asset utilization rate, i.e., the volume of earning assets as a percentage of total assets, the Company maximizes income.
−Removed: The earning asset ratio (average interest earning assets divided by average total assets) equaled 93.2% at June 30, 2023 and 94.1% at June 30, 2022.
−Removed: This indicates that the management of earning assets is a priority and non-earning assets,
−Removed: primarily cash and due from banks, fixed assets and other assets, are maintained at minimal levels.
+Added: The earning asset ratio (average interest earning assets divided by average total assets) equaled 93.1% at September 30, 2023 and 94.0% at September 30, 2022.
+Added: This indicates that the management of earning assets is a priority and non-earning assets, primarily cash and due from banks, fixed assets and other assets, are maintained at minimal levels.
The primary earning assets are loans and securities.
−Removed: Our primary earning asset, total loans, increased to $871,239,000 as of June 30, 2023, up $12,770,000 or 1.5% since year-end 2022.
+Added: Our primary earning asset, total loans, increased to $881,038,000 as of September 30, 2023, up $22,569,000 or 2.6% since year-end 2022.
The loan portfolio continues to be well diversified.
Non-performing assets increased since year-end 2022, and overall asset quality has remained consistent.
−Removed: Total non-performing assets were $5,673,000 as of June 30, 2023, an increase of $314,000, or 5.9% from $5,359,000 reported in non-performing assets as of December 31, 2022.
−Removed: Total allowance for credit losses to total non-performing assets was 138.14% as of June 30, 2023 and 154.39% at December 31, 2022.
+Added: Total non-performing assets were $6,293,000 as of September 30, 2023, an increase of $934,000, or 17.4% from $5,359,000 reported in non-performing assets as of December 31, 2022.
+Added: Total allowance for credit losses to total non-performing assets was 108.33% as of September 30, 2023 and 154.39% at December 31, 2022.
See the Non-Performing Assets section on page 55 for more information.
−Removed: In addition to loans, another primary earning asset is our overall securities portfolio, which decreased in size from December 31, 2022 to June 30, 2023.
−Removed: Debt securities available-for-sale amounted to $331,580,000 as of June 30, 2023, a decrease of $41,864,000 from year-end 2022.
+Added: In addition to loans, another primary earning asset is our overall securities portfolio, which decreased in size from December 31, 2022 to September 30, 2023.
+Added: Debt securities available-for-sale amounted to $333,177,000 as of September 30, 2023, a decrease of $40,267,000 from year-end 2022.
The decrease in debt securities available-for-sale is mainly due to the sales of $23,131,000 of tax-exempt municipals during the first quarter of 2023.
There were also principal paydowns on debt securities of $22,344,000.
−Removed: Interest-bearing deposits in other banks decreased as of June 30, 2023, to $1,178,000 from $1,297,000 at year-end 2022 due to decreased cash held at the Federal Home Loan Bank.
−Removed: Total loans increased to $871,239,000 as of June 30, 2023 as compared to $858,469,000 as of December 31, 2022.
+Added: Interest-bearing deposits in other banks increased as of September 30, 2023, to $2,100,000 from $1,297,000 at year-end 2022 due to increased balances due from the Federal Reserve Bank.
+Added: Total loans increased to $881,038,000 as of September 30, 2023 as compared to $858,469,000 as of December 31, 2022.
The table on page 22 provides data relating to the composition of the Company’s loan portfolio on the dates indicated.
Total loans increased by $22,569,000 or 2.6%.
−Removed: Steady demand for borrowing by businesses accounted for the 1.5% increase in the loan portfolio from December 31, 2022 to June 30, 2023.
−Removed: The Real Estate portfolio increased $9,808,000 or 1.3% from $764,880,000 at December 31, 2022 to $774,688,000 at June 30, 2023.
−Removed: The increase in the Real Estate portfolio for the six months ended June 30, 2023 was mainly the result of $41,847,000 in new loan originations, which were offset by loan payoffs of $18,002,000 and a decrease of $6,286,000 in utilization of existing real estate lines of credit, along with regular principal payments and other typical fluctuations in the Real Estate portfolio.
−Removed: The Agricultural portfolio increased $2,000 or 0.2% from $860,000 at December 31, 2022 to $862,000 at June 30, 2023.
−Removed: The increase in the Agricultural portfolio for the six months ended June 30, 2023 was mainly the result of an increase of $16,000 in utilization of existing agricultural lines of credit, offset with regular principal payments and other typical fluctuations in the Agricultural portfolio.
−Removed: There were no new agricultural loans originated during the six months ended June 30, 2023 and payoffs of agricultural loans for the six months ended June 30, 2023 did not have a material impact on the change in the portfolio balance.
−Removed: Overall, the Commercial and Industrial portfolio increased $5,236,000 or 9.3% from $56,077,000 at December 31, 2022 to $61,313,000 at June 30, 2023.
−Removed: The increase in the Commercial and Industrial portfolio during the six months ended June 30, 2023 was mainly attributable to the portion of the Commercial and Industrial portfolio excluding PPP loans which increased $5,260,000 during the six months ended June 30, 2023.
−Removed: The increase was attributable to $6,191,000 in new loan originations and an increase of $1,126,000 in utilization of existing commercial and industrial lines of credit, offset by loan payoffs of $671,000, as well as regular principal payments and other typical amortization in the Commercial and Industrial portfolio.
−Removed: The portion of the Commercial and Industrial portfolio attributable to PPP loans decreased $24,000 from December 31, 2022 to June 30, 2023.
−Removed: Consumer loans increased $422,000 or 7.4% from $5,707,000 at December 31, 2022 to $6,129,000 at June 30, 2023.
+Added: Steady demand for borrowing by businesses accounted for the 2.6% increase in the loan portfolio from December 31, 2022 to September 30, 2023.
+Added: The Real Estate portfolio increased $19,246,000 or 2.5% from $764,880,000 at December 31, 2022 to $784,126,000 at September 30, 2023.
+Added: The increase in the Real Estate portfolio for the nine months ended September 30, 2023 was mainly the result of $66,345,000 in new loan originations, which were offset by loan payoffs of $31,182,000 and a decrease of $3,664,000 in utilization of existing real estate lines of credit, along with regular principal payments and other typical fluctuations in the Real Estate portfolio.
+Added: The Agricultural portfolio decreased $152,000 or 17.7% from $860,000 at December 31, 2022 to $708,000 at September 30, 2023.
+Added: The decrease in the Agricultural portfolio for the nine months ended September 30, 2023 was mainly the result of an increase of $38,000 in utilization of existing agricultural lines of credit, offset with regular principal payments and other typical fluctuations in the Agricultural portfolio.
+Added: There were no new agricultural loans originated during the nine months ended September 30, 2023 and payoffs of agricultural loans for the nine months ended September 30, 2023 did not have a material impact on the change in the portfolio balance.
+Added: Overall, the Commercial and Industrial portfolio increased $6,789,000 or 12.1% from $56,077,000 at December 31, 2022 to $62,866,000 at September 30, 2023.
+Added: The increase in the Commercial and Industrial portfolio during the nine months ended September 30, 2023 was mainly attributable to the portion of the Commercial and Industrial portfolio (excluding PPP loans) which increased $6,825,000 during the nine months ended September 30, 2023.
+Added: The increase was attributable to $9,154,000 in new loan originations offset by a decrease of $420,000 in utilization of existing commercial and industrial lines of credit and loan payoffs of $1,010,000, as well as
+Added: regular principal payments and other typical amortization in the Commercial and Industrial portfolio.
+Added: The portion of the Commercial and Industrial portfolio attributable to PPP loans decreased $36,000 from December 31, 2022 to September 30, 2023.
+Added: Consumer loans increased $511,000 or 9.0% from $5,707,000 at December 31, 2022 to $6,218,000 at September 30, 2023.
The increase is mainly attributable to new loan originations of $2,094,000, offset by loan payoffs of $779,000 and a decrease of $25,000 in utilization of existing consumer lines of credit, along with regular principal payments.
−Removed: The State and Political Subdivisions portfolio decreased $2,698,000 or 8.7% from $30,945,000 at December 31, 2022 to $28,247,000 at June 30, 2023.
−Removed: The decrease is mainly the result of $2,419,000 in loan payoffs for the six months ended June 30, 2023 along with regular principal payments, offset by $50,000 in new loan originations and a $50,000 increase in utilization of existing state and political subdivision lines of credit.
+Added: The State and Political Subdivisions portfolio decreased $3,825,000 or 12.4% from $30,945,000 at December 31, 2022 to $27,120,000 at September 30, 2023.
+Added: The decrease is mainly the result of $2,419,000 in loan payoffs for the nine months ended September 30, 2023 along with regular principal payments, offset by $734,000 in new loan originations.
The Company continues to originate and sell certain long-term fixed rate residential mortgage loans, which conform to secondary market requirements, when the market pricing is favorable.
−Removed: The Company derives ongoing income
−Removed: from the servicing of mortgages sold in the secondary market.
+Added: The Company derives ongoing income from the servicing of mortgages sold in the secondary market.
The Company continues its efforts to lend to creditworthy borrowers.
6 unchanged sentences
See Note 4 — Loans and Allowance for Credit Losses for risk grading tables.
−Removed: Overall, non-pass grades increased $83,000 to $21,018,000 at June 30, 2023, as compared to $20,935,000 at December 31, 2022.
−Removed: Real Estate non-pass grades increased $106,000 to $20,316,000 as of June 30, 2023 as compared to $20,210,000 as of December 31, 2022.
−Removed: Commercial and Industrial non-pass grades decreased $33,000 to $692,000 as of June 30, 2023 as compared to $725,000 as of December 31, 2022.
−Removed: Consumer non-pass grades increased to $10,000 as of June 30, 2023 as compared to $0 as of December 31, 2022.
−Removed: There were no Agricultural or State and Political Subdivision non-pass grades at June 30, 2023 or December 31, 2022.
+Added: Overall, non-pass grades decreased $318,000 to $20,617,000 at September 30, 2023, as compared to $20,935,000 at December 31, 2022.
+Added: Real Estate non-pass grades decreased $310,000 to $19,900,000 as of September 30, 2023 as compared to $20,210,000 as of December 31, 2022.
+Added: Commercial and Industrial non-pass grades decreased $57,000 to $668,000 as of September 30, 2023 as compared to $725,000 as of December 31, 2022.
+Added: Consumer non-pass grades increased to $49,000 as of September 30, 2023 as compared to $0 as of December 31, 2022.
+Added: There were no Agricultural or State and Political Subdivision non-pass grades at September 30, 2023 or December 31, 2022.
The Company continues to internally underwrite each of its loans to comply with prescribed policies and approval levels established by its Board of Directors.
(Dollars in thousands)
+Added: September 30,
Commercial and Industrial
2 unchanged sentences
The allowance for credit losses constitutes the amount available to absorb losses within the loan portfolio.
−Removed: As of June 30, 2023, the allowance for credit losses was $7,157,000 as compared to $8,274,000 as of December 31, 2022.
+Added: As of September 30, 2023, the allowance for credit losses was $6,817,000 as compared to $8,274,000 as of December 31, 2022.
The allowance for credit losses is established through a provision for credit losses charged to expenses.
1 unchanged sentence
The risk characteristics of the loan portfolio are managed through various control processes, including credit evaluations of individual borrowers, periodic reviews, and diversification by industry.
−Removed: Risk is further mitigated through the application of lending procedures such as the holding of adequate collateral and the establishment of contractual guarantees.
+Added: Risk is further mitigated through
+Added: the application of lending procedures such as the holding of adequate collateral and the establishment of contractual guarantees.
Management performs a quarterly analysis to determine the adequacy of the allowance for credit losses.
6 unchanged sentences
Upon adoption of ASU No.
−Removed: 2016-13 in the first
−Removed: quarter of 2023, the qualitative factors used in the allowance calculation were adjusted from five loan pools utilized under previous methodology to fifteen loan segmentation pools aligning with the segmentation of the quarterly call report.
+Added: 2016-13 in the first quarter of 2023, the qualitative factors used in the allowance calculation were adjusted from five loan pools utilized under previous methodology to fifteen loan segmentation pools aligning with the segmentation of the quarterly call report.
There were no material increases or decreases in the qualitative factors arising from the realigning of the qualitative factor pools/segments and no additional qualitative factor adjustments were deemed necessary for the first quarter of 2023.
2 unchanged sentences
Both of these loan segmentation pools are included in the Real Estate component of the loan portfolio.
−Removed: The Analysis of Allowance for Credit Losses table contains an analysis of the allowance for credit losses indicating charge-offs and recoveries for the six months ended June 30, 2023 and 2022.
−Removed: Net charge-offs as a percentage of average loans was 0.004% for the six months ended June 30, 2023 and net recoveries as a percentage of average loans was 0.006% as of June 30, 2022.
−Removed: Net charge-offs amounted to $32,000 the six months ended June 30, 2023 as compared to net recoveries of $43,000 for the six months ended June 30, 2022.
−Removed: For the six months ended June 30, 2023, the provision for credit losses was $34,000 as compared to $437,000 for the six months ended June 30, 2022.
+Added: During the third quarter of 2023, various qualitative factor decreases were implemented across multiple loan segmentation pools.
+Added: Delinquency trends were decreased by twelve basis points for each of the following loan segmentation pools:
+Added: (a) construction, land development, and other land loans, (b) residential construction (loans to build homes, both speculative and owner-occupied, and 1-4 family lot loans), (c) agribusiness, farmland, or secured by farmland, (d) loans secured by junior liens, and (e) loans secured by other non-farm, non-residential properties.
+Added: All of these loan segmentation pools are included in the Real Estate Component of the loan portfolio.
+Added: Additionally, delinquency trends were decreased by eight basis points and volume trends were decreased by twelve basis points across all three loan segmentation pools in the Consumer portfolio, volume trends for Commercial and Industrial loans were decreased by eight basis points, and delinquency trends for Agricultural loans were decreased by eight basis points during the third quarter of 2023.
+Added: The Analysis of Allowance for Credit Losses table contains an analysis of the allowance for credit losses indicating charge-offs and recoveries for the nine months ended September 30, 2023 and 2022.
+Added: Net charge-offs as a percentage of average loans was 0.00% and 0.02% for the nine months ended September 30, 2023 and 2022, respectively.
+Added: Net charge-offs amounted to $2,000 the nine months ended September 30, 2023 as compared to $125,000 for the nine months ended September 30, 2022.
+Added: For the nine months ended September 30, 2023, the provision for credit losses carried a credit balance of $336,000 as compared to the provision for credit losses of $656,000 for the nine months ended September 30, 2022.
The provision, net of charge-offs and recoveries, resulted in the quarter end allowance for credit losses of $6,817,000, of which 95.0% was attributed to the Real Estate component, 0.0% attributed to the Agricultural component, 3.3% attributed to the Commercial and Industrial component, 1.1% attributed to the Consumer component, and 0.6% attributed to the State and Political Subdivisions component (refer to the activity in Note 4 – Loans and Allowance for Credit Losses on page 14).
1 unchanged sentence
(Dollars in thousands)
−Removed: As of and for the six months ended:
+Added: September 30,
+Added: As of and for the nine months ended:
Balance at prior year-end
6 unchanged sentences
Net charge-offs
−Removed: Additions charged to operations
+Added: (Credits) additions charged to operations
Balance at end of period
3 unchanged sentences
(Dollars in thousands)
−Removed: As of and for the six months ended:
+Added: September 30,
+Added: As of and for the nine months ended:
Beginning balance
15 unchanged sentences
A detailed quarterly analysis to determine the adequacy of the Company’s allowance for credit losses is reviewed by the Board of Directors.
−Removed: With the Bank’s manageable level of net charge-offs and recoveries along with the additions to the reserve from the provision out of operations, the allowance for credit losses as a percentage of year-to-date average loans amounted to 0.828% and 1.177% at June 30, 2023 and 2022, respectively.
+Added: With the Bank’s manageable level of net charge-offs and recoveries along with the additions to the reserve from the provision out of operations, the allowance for credit losses as a percentage of year-to-date average loans amounted to 0.79% and 1.16% at September 30, 2023 and 2022, respectively.
NON-PERFORMING ASSETS
4 unchanged sentences
Foreclosed assets held for resale represent property acquired through foreclosure, or considered to be an in-substance foreclosure.
−Removed: Total non-performing assets amounted to $5,673,000 as of June 30, 2023, as compared to $5,359,000 as of December 31, 2022.
+Added: Total non-performing assets amounted to $6,293,000 as of September 30, 2023, as compared to $5,359,000 as of December 31, 2022.
The economy remains unstable.
2 unchanged sentences
Many economists and influential thinkers believe at least a mild recession will hit the United States economy by the final quarter of 2023.
−Removed: Inflation has receded in recent months, but as of June 2023 was at 3%, above the Federal Reserve’s target rate of 2%.
+Added: Inflation has been receding in recent months, as low as 3% as of June 2023;
+Added: however, it has risen to 3.7% as of September 2023.
+Added: The Federal Reserve’s target rate of inflation is 2%.
The war between Ukraine and Russia continues to produce worldwide consternation.
4 unchanged sentences
The Company is closely monitoring all segments of its loan portfolio because of the current uncertain economic environment.
−Removed: Non-accrual loans totaled $5,089,000 as of June 30, 2023, as compared to $5,051,000 as of December 31, 2022.
−Removed: There were no foreclosed assets held for resale as of June 30, 2023 and December 31, 2022.
−Removed: There were five loans past-due 90 days or more and still accruing interest at June 30, 2023 that carried a balance of $584,000 which were well-secured by commercial and residential real estate and in the process of collection, compared to December 31, 2022 when there were three loans carrying an aggregate balance of $308,000 that were past-due 90 days or more and still accruing interest.
−Removed: The loan past-due 90 days or more and still accruing interest as of December 31, 2022 consisted of three loans secured by commercial and residential real estate, all of which were well secured and in the process of collection.
−Removed: Non-performing assets to total loans was 0.65% at June 30, 2023 and 0.62% at December 31, 2022.
−Removed: Non-performing assets to total assets was 0.43% at June 30, 2023 and 0.40% at December 31, 2022.
−Removed: The allowance for credit losses to total non-performing assets was 126.16% as of June 30, 2023 as compared to 154.39% as of December 31, 2022.
+Added: Non-accrual loans totaled $5,009,000 as of September 30, 2023, as compared to $5,051,000 as of December 31, 2022.
+Added: There were no foreclosed assets held for resale as of September 30, 2023 and December 31, 2022.
+Added: There were five loans past-due 90 days or more and still accruing interest at September 30, 2023 that carried a balance of $1,284,000 which were well-secured by commercial and residential real estate and in the process of collection, compared to December 31, 2022 when loans past-due 90 days or more and still accruing interest amounted to $308,000.
+Added: The loans past-due 90 days or more and still accruing interest as of December 31, 2022 consisted of three loans secured by commercial and residential real estate, all of which were well secured and in the process of collection.
+Added: Non-performing assets to total loans was 0.71% at September 30, 2023 and 0.62% at December 31, 2022.
+Added: Non-performing assets to total assets was 0.48% at September 30, 2023 and 0.40% at December 31, 2022.
+Added: The allowance for credit losses to total non-performing assets was 108.33% as of September 30, 2023 as compared to 154.39% as of December 31, 2022.
Additional detail can be found on page 58 and 59 in the Non-Performing Assets and Individually Evaluated Loans (Post-Adoption of ASU No.
2 unchanged sentences
Asset quality is a priority and the Company retains a full-time loan review officer to closely track and monitor overall loan quality, along with a full-time loan workout department to manage collection and liquidation effortsand engages an annual external loan review.
−Removed: Performing substandard loans which have not been designated for individual impairment have characteristics that cause management to have doubts regarding the ability of the borrower to perform under present loan repayment terms and which may result in reporting these loans as non-performing loans in the future.
−Removed: Performing substandard loans not designated for individual impairment amounted to $15,289,000 at June 30, 2023.
−Removed: Individually evaluated loans were $5,398,000 at June 30, 2023 and $11,207,000 at December 31, 2022.
−Removed: The largest individually evaluated loan relationship at June 30, 2023 consisted of a non-performing loan to a student housing holding company which is secured by commercial real estate.
−Removed: At June 30, 2023, the loan carried a balance of $2,340,000, net of $1,989,000 that had been charged off to date.
−Removed: The second largest individually evaluated loan relationship at June 30, 2023 consisted of five non-performing loans to a plastic processing company focused on non-post-consumer recycling.
+Added: Performing substandard loans, which have not been designated for individual evaluation to determine expected credit losses, have characteristics that cause management to have doubts regarding the ability of the borrower to perform under present loan repayment terms and which may result in reporting these loans as non-performing loans in the future.
+Added: Performing substandard loans not designated for individual impairment amounted to $14,929,000 at September 30, 2023.
+Added: Individually evaluated loans were $5,318,000 at September 30, 2023, compared to impaired loans of $11,207,000 at December 31, 2022.
+Added: The largest individually evaluated loan relationship at September 30, 2023 consisted of a non-performing loan to a student housing holding company which is secured by commercial real estate.
+Added: At September 30, 2023, the loan carried a balance of $2,340,000, net of $1,989,000 that had been charged off to date.
+Added: The second largest individually evaluated loan relationship at September 30, 2023 consisted of five non-performing loans to a plastic processing company focused on non-post-consumer recycling.
Three loans are classified in the Commercial and Industrial portfolio and two loans are secured by commercial real estate.
−Removed: The loans carried an aggregate balance of $1,042,000 at June 30, 2023.
−Removed: The third largest individually evaluated loan relationship at June 30, 2023 consisted of a non-performing loan to the owner of a golf course and catering venue which is secured by commercial real estate.
−Removed: At June 30, 2023, the loan carried a balance of $582,000.
+Added: The loans carried an aggregate balance of $1,005,000 at September 30, 2023.
+Added: The third largest individually evaluated loan relationship at September 30, 2023 consisted of a non-performing loan to the owner of a golf course and catering venue which is secured by commercial real estate.
+Added: At September 30, 2023, the loan carried a balance of $582,000.
The Company determines the need for individual evaluation of loans based on its analysis of the cash flows or collateral estimated at fair value less cost to sell.
−Removed: For collateral dependent loans, the estimated appraisal or other qualitative adjustments and cost to sell percentages are determined based on the market area in which the real estate securing the loan is located, among other factors, and therefore, can differ from one loan to another.
−Removed: Of the $5,398,000 in individually evaluated loans at June 30, 2023, none were located outside of the Company’s primary market area.
+Added: For collateral dependent loans, the estimated appraisal or other qualitative adjustments and cost to sell percentages are determined based on the market area in which the real estate
+Added: securing the loan is located, among other factors, and therefore, can differ from one loan to another.
+Added: Of the $5,318,000 in individually evaluated loans at September 30, 2023, none were located outside of the Company’s primary market area.
The Company’s non-accrual loan valuation procedure for any loans greater than $250,000 requires an appraisal to be obtained and reviewed annually at year end, unless the Board of Directors waives such requirement for a specific loan, in favor of obtaining a Certificate of Inspection instead, defined as an internal evaluation completed by the Company.
17 unchanged sentences
A concentration of credit exists when the total amount of loans to borrowers, who are engaged in similar activities that are similarly impacted by economic or other conditions, exceed 10% of total loans.
−Removed: As of June 30, 2023 and December 31, 2022, management is of the opinion that there were no loan concentrations exceeding 10% of total loans.
+Added: As of September 30, 2023 and December 31, 2022, management is of the opinion that there were no loan concentrations exceeding 10% of total loans.
Non-Performing Assets and Individually Evaluated Loans (Post-Adoption of ASU No.
(Dollars in thousands)
+Added: September 30,
Non-performing assets
40 unchanged sentences
Allowance for credit losses to total non-performing assets
−Removed: Real estate mortgages comprise 88.9% of the loan portfolio as of June 30, 2023, as compared to 89.1% as of December 31, 2022.
+Added: Real estate mortgages comprise 89.0% of the loan portfolio as of September 30, 2023, as compared to 89.1% as of December 31, 2022.
Real estate mortgages consist of both loans secured by residential and commercial real estate.
10 unchanged sentences
The Bank regularly reviews competing financial institutions’ interest rates, especially when establishing interest rates on certificates of deposit and municipal deposits.
−Removed: Total deposits decreased $57,658,000 to $935,841,000 as of June 30, 2023 as non-interest bearing deposits decreased by $11,235,000 and interest bearing deposits decreased by $46,423,000 from year-end 2022.
−Removed: The decrease in deposits was the result of a $39,273,000 decrease in municipal deposits and other fluctuations.
−Removed: Total short-term and long-term borrowings increased to $218,359,000 as of June 30, 2023, from $178,418,000 at year-end 2022, an increase of $39,941,000 or 22.4%.
−Removed: The increase in total borrowings was mainly the result of increased short-term borrowings due to decreased deposits and growth in the loan portfolio.
+Added: Total deposits decreased $1,196,000 to $992,303,000 as of September 30, 2023 as non-interest bearing deposits decreased by $6,451,000 and interest bearing deposits increased by $5,255,000 from year-end 2022.
+Added: The decrease in deposits was the result of a $13,876,000 decrease in municipal deposits offset by an increase in time deposits as the result of higher rate CD offerings along with an increase in brokered CDs of $20,250,000.
+Added: Total short-term and long-term borrowings decreased to $176,776,000 as of September 30, 2023, from $178,418,000 at year-end 2022, a decrease of $1,642,000 or 0.9%.
+Added: Total borrowings decreased mainly due to a decrease in the balance of repurchase agreements and the maturity of a long-term note.
On December 10, 2020, the Corporation issued $25,000,000 aggregate principal amount of Subordinated Notes due December 31, 2030 (the “2020 Notes”).
3 unchanged sentences
Normal increases in capital are generated by net income, less dividends paid out.
−Removed: During the six months ended June 30, 2023, net income less dividends paid decreased capital by $880,000.
+Added: During the nine months ended September 30, 2023, net income less dividends paid decreased capital by $1,296,000.
The decrease was offset by a one-time cumulative effect adjustment that increased retained earnings by $768,000 upon the adoption of ASU 2016-13.
−Removed: Accumulated other comprehensive (loss) income derived from net unrealized gains on debt securities available-for-sale also impacts capital.
+Added: Accumulated other comprehensive (loss) income derived from net unrealized gains on debt securities available-for-sale and interest rate derivatives also impacts capital.
At December 31, 2022 accumulated other comprehensive loss was ($29,558,000).
−Removed: Accumulated other comprehensive loss stood at ($29,516,000) at June 30, 2023, an increase of $42,000.
+Added: Accumulated other comprehensive loss stood at ($35,719,000) at September 30, 2023, a decrease of $6,161,000.
Fluctuations in interest rates have regularly impacted the gain/loss position in the Bank’s securities portfolio, as well as its decision to sell securities at a gain or loss.
−Removed: The fluctuations from net unrealized gains on debt securities available-for-sale do not affect regulatory capital, as the Bank elected to opt-out of the inclusion of this item with the filing of the March 31, 2015 Call Report.
−Removed: The Company held 231,611 shares of common stock as treasury stock at June 30, 2023 and December 31, 2022, respectively.
−Removed: This had an effect of reducing our total stockholders’ equity by $5,709,000 as of June 30, 2023 and December 31, 2022.
−Removed: Total stockholders’ equity was $121,185,000 as of June 30, 2023, and $120,386,000 as of December 31, 2022.
−Removed: At June 30, 2023 the Bank met the definition of a “well-capitalized” institution under the regulatory framework for prompt corrective action and the minimum capital requirements under Basel III.
−Removed: The following table presents the Bank’s capital ratios as of June 30, 2023 and December 31, 2022:
+Added: The fluctuations from net unrealized gains on debt securities available-for-sale and derivatives do not affect regulatory capital, as the Bank elected to opt-out of the inclusion of this item with the filing of the March 31, 2015 Call Report.
+Added: The Company held 231,611 shares of common stock as treasury stock at September 30, 2023 and December 31, 2022, respectively.
+Added: This had an effect of reducing our total stockholders’ equity by $5,709,000 as of September 30, 2023 and December 31, 2022.
+Added: Total stockholders’ equity was $115,021,000 as of September 30, 2023, and $120,386,000 as of December 31, 2022.
+Added: At September 30, 2023 the Bank met the definition of a “well-capitalized” institution under the regulatory framework for prompt corrective action and the minimum capital requirements under Basel III.
+Added: The following table presents the Bank’s capital ratios as of September 30, 2023 and December 31, 2022:
+Added: September 30,
Corrective Action
6 unchanged sentences
The capital buffer requirement was phased in over three years beginning in 2016.
−Removed: The capital buffer requirement effectively raises the minimum required common equity Tier 1 capital ratio to 7.0%, the Tier 1 capital ratio to 8.5%, and the total capital ratio to 10.5% on a fully phased-in basis as of January 1, 2019.
−Removed: As of June 30, 2023, the Bank meets all capital adequacy requirements under the Basel III Capital Rules on a fully phased-in basis.
+Added: The capital buffer requirement effectively raises the minimum required common equity Tier 1 capital ratio to 7.0%, the Tier 1 capital ratio to 8.5%, and the total capital ratio
+Added: to 10.5% on a fully phased-in basis as of January 1, 2019.
+Added: As of September 30, 2023, the Bank meets all capital adequacy requirements under the Basel III Capital Rules on a fully phased-in basis.
The Corporation’s capital ratios are not materially different than those of the Bank.
8 unchanged sentences
● Brokered CDs.
−Removed: At June 30, 2023 the Company had $505,628,000 in maximum borrowing capacity at FHLB (inclusive of the outstanding balances of FHLB long-term notes, FHLB short-term borrowings, and irrevocable standby letters of credit issued by FHLB);
+Added: At September 30, 2023 the Company had $509,624,000 in maximum borrowing capacity at FHLB (inclusive of the outstanding balances of FHLB long-term notes, FHLB short-term borrowings, and irrevocable standby letters of credit issued by FHLB);
the maximum borrowing capacity at ACBB was $15,000,000 and the maximum borrowing capacity of the Federal Discount Window was $8,539,000.
2 unchanged sentences
As a result, the repurchase agreements are accounted for as collateralized financing agreements (secured borrowings) and act as an additional source of liquidity.
−Removed: Securities sold under agreements to repurchase were $19,308,000 at June 30, 2023.
+Added: Securities sold under agreements to repurchase were $17,715,000 at September 30, 2023.
Asset liquidity is provided by securities maturing in one year or less, other short-term investments, federal funds sold, and cash and due from banks.
2 unchanged sentences
Also, short-term borrowings provide funds to meet liquidity needs.
−Removed: Net cash flows provided by operating activities were $357,000 for the six months ended June 30, 2023, compared to net cash flows provided by operating activities of $8,411,000 for the six months ended June 30, 2022.
−Removed: Net income amounted to $2,496,000 for the six months ended June 30, 2023 and $7,365,000 for the six months ended June 30, 2022.
−Removed: During the six months ended June 30, 2023 and 2022, net premium amortization on securities amounted to $799,000 and $1,633,000, respectively.
−Removed: Net gains on sales of mortgage loans amounted to $34,000 for the six months ended June 30, 2023, compared to net losses on sales of mortgage loans of $34,000 for the six months ended June 30, 2022.
−Removed: Proceeds (net of gains/losses) from sales of mortgage loans originated for resale exceeded originations of mortgage loans originated for resale by $105,000 for the six months ended June 30, 2023, compared to the six months ended June 30, 2022 when originations of mortgage loans originated for resale exceeded proceeds (net of gains/losses) from sales of mortgage loans originated for resale by $1,639,000.
−Removed: Net securities losses amounted to $125,000 and $131,000 for the six months ended June 30, 2023 and 2022, respectively.
−Removed: Accrued interest receivable decreased by $218,000 and increased by $112,000 during the six months ended June 30, 2023 and 2022, respectively.
−Removed: Other assets increased by $87,000 and $639,000 during the six months ended June 30, 2023 and 2022, respectively.
−Removed: Accrued interest payable increased by $608,000 during the six months ended June 30, 2023, compared to an increase of $22,000 during the six months ended June 30, 2022.
−Removed: Other liabilities decreased by $5,188,000 during the six months ended June 30, 2023 and increased by $97,000 during the six months ended June 30, 2022.
−Removed: Investing activities provided cash of $23,778,000 during the six months ended June 30, 2023, compared to the six months ended June 30, 2022 when investing activities used cash of $64,171,000.
−Removed: Net activity in the available-for-sale
−Removed: securities portfolio (including proceeds from sale, maturities, and redemptions, net against purchases) provided cash of $41,217,000 during the six months ended June 30, 2023 and used cash of $9,283,000 during the six months ended June 30, 2022.
−Removed: Changes in restricted investment in bank stocks used cash of $1,481,000 and $3,834,000 during the six months ended June 30, 2023 and 2022, respectively.
−Removed: Net cash used to originate loans amounted to $12,873,000 for the six months ended June 30, 2023, compared to $50,331,000 for the six months ended June 30, 2022.
−Removed: Purchases of premises and equipment used cash of $1,251,000 and $325,000 during the six months ended June 30, 2023 and 2022, respectively.
−Removed: Purchase of investment in real estate venture used cash of $1,834,000 during the six months ended June 30, 2023, compared to $645,000 for the six months ended June 30, 2022.
−Removed: Financing activities used cash of $21,098,000 and provided cash of $4,646,000 during the six months ended June 30, 2023 and 2022, respectively.
−Removed: Deposits decreased by $57,658,000 during the six months ended June 30, 2023, and decreased by $84,361,000 during the six months ended June 30, 2022.
−Removed: Short-term borrowings increased by $39,941,000 and $102,346,000 during the six months ended June 30, 2023 and 2022, respectively.
−Removed: Dividends paid amounted to $3,376,000 for the six months ended June 30, 2023, compared to $3,334,000 for the six months ended June 30, 2022.
+Added: Net cash flows provided by operating activities were $2,812,000 for the nine months ended September 30, 2023, compared to net cash flows provided by operating activities of $12,614,000 for the nine months ended September 30, 2022.
+Added: Net income amounted to $3,779,000 for the nine months ended September 30, 2023 and $10,869,000 for the nine months ended September 30, 2022.
+Added: During the nine months ended September 30, 2023 and 2022, net premium amortization on securities amounted to $1,196,000 and $2,346,000, respectively.
+Added: Net gains on sales of mortgage loans amounted to $44,000 for the nine months ended September 30, 2023, compared to net losses on sales of mortgage loans of $38,000 for the nine months ended September 30, 2022.
+Added: Proceeds (net of gains/losses) from sales of mortgage loans originated for resale exceeded originations of mortgage loans originated for resale by $114,000 for the nine months ended September 30, 2023, compared to the nine months ended September 30, 2022 when originations of mortgage loans originated for resale exceeded proceeds (net of gains/losses) from sales of mortgage loans originated for resale by $2,819,000.
+Added: Net securities losses amounted to $212,000 and $181,000 for the nine months ended September 30, 2023 and 2022, respectively.
+Added: Accrued interest receivable increased by $224,000 and $118,000 during the nine months ended September 30, 2023 and 2022, respectively.
+Added: Accrued interest payable increased by $1,097,000 during the nine months ended September 30, 2023, compared to an increase of $322,000 during the nine months ended September 30, 2022.
+Added: Other liabilities decreased by $4,848,000 during the nine months ended September 30, 2023 and decreased by $262,000 during the nine months ended September 30, 2022.
+Added: Investing activities provided cash of $7,007,000 during the nine months ended September 30, 2023, compared to the nine months ended September 30, 2022 when investing activities used cash of $96,167,000.
+Added: Net activity in the available-for-sale securities portfolio (including proceeds from sale, maturities, and redemptions, net against purchases) provided cash of $33,337,000 during the nine months ended September 30, 2023 and used cash of $1,754,000 during the nine months ended September 30, 2022.
+Added: Changes in restricted investment in bank stocks provided cash of $119,000 and used cash of $2,489,000 during the nine months ended September 30, 2023 and 2022, respectively.
+Added: Net cash used to originate loans amounted to $22,641,000 for the nine months ended September 30, 2023, compared to $90,178,000 for the nine months ended September 30, 2022.
+Added: Purchases of premises and equipment used cash of $1,442,000 and $445,000 during the nine months ended September 30, 2023 and 2022, respectively.
+Added: Purchase of investment in real estate venture used cash of $2,366,000 during the nine months ended September 30, 2023, compared to $1,548,000 for the nine months ended September 30, 2022.
+Added: Financing activities used cash of $7,920,000 and provided cash of $32,695,000 during the nine months ended September 30, 2023 and 2022, respectively.
+Added: Deposits decreased by $1,196,000 during the nine months ended September 30, 2023, and decreased by $19,660,000 during the nine months ended September 30, 2022.
+Added: Short-term borrowings increased by $1,358,000 and $67,371,000 during the nine months ended September 30, 2023 and 2022, respectively.
+Added: Repayment of long-term borrowings amounted to $3,000,000 and $10,000,000 during the nine months ended September 30, 2023 and 2022, respectively.
+Added: Dividends paid amounted to $5,075,000 for the nine months ended September 30, 2023, compared to $5,009,000 for the nine months ended September 30, 2022.
Managing liquidity remains an important segment of asset/liability management.
17 unchanged sentences
Several techniques are used for measuring interest rate sensitivity.
−Removed: Interest rate risk arises from the mismatches in the repricing of rates on assets and liabilities within a given time period, referred to as a rate sensitivity gap.
+Added: Interest rate risk arises from the mismatches in the repricing of rates on assets and
+Added: liabilities within a given time period, referred to as a rate sensitivity gap.
If more assets than liabilities mature or reprice within the time frame, the Company is asset sensitive.
2 unchanged sentences
This position would contribute positively to net interest income in a falling rate environment.
−Removed: The Company’s cumulative gap at one year indicates the Company is liability sensitive at June 30, 2023.
+Added: The Company’s cumulative gap at one year indicates the Company is liability sensitive at September 30, 2023.
Earnings at Risk
18 unchanged sentences
In addition, the earnings simulation model projects net interest income would increase 1.61%, 5.34%, and 8.24% in the 100, 200 and 300 basis point decreasing rate scenarios presented.
−Removed: All of the forecasts in the increasing rate scenarios presented are outside of the Company’s policy guidelines with the 100 basis point immediate increase scenario at (16.34)%, the 200 basis point immediate increase scenario at (31.71)% and the 300 basis point immediate increase scenario at (45.79)% vs.
−Removed: the policy limits of (15.00)%, (20.00)%, and (25.00)%, respectively.
+Added: All of the forecasts in the increasing and decreasing rate scenarios presented are within the Company’s policy guidelines.
The analysis and model used to quantify the sensitivity of net interest income becomes less reliable in a decreasing rate scenario given the current interest rate environment with federal funds trading in the 525-550 basis point range and many deposit accounts still lagging at markedly lower rates.
1 unchanged sentence
However, the Company’s interest-sensitive assets are able to decline by these amounts.
−Removed: For the three months ended June 30, 2023, the cost of interest-bearing liabilities averaged 2.52%, and the yield on interest-earning assets, on a fully taxable equivalent basis, averaged 4.46%.
+Added: For the nine months ended September 30, 2023, the cost of interest-bearing liabilities averaged 2.70%, and the yield on interest-earning assets, on a fully taxable equivalent basis, averaged 4.53%.
Net Present Value Estimation
The net present value measures economic value at risk and is used for helping to determine levels of risk at a point in time present in the balance sheet that might not be taken into account in the earnings simulation model.
−Removed: The net present value of the balance sheet is defined as the discounted present value of asset cash flows minus the discounted present value of liability cash flows.
−Removed: At June 30, 2023, net present value is projected to decrease 4.07%, 10.93%, and 19.31% in the 100, 200, and 300 basis point immediate increase scenarios, respectively.
−Removed: Additionally, the 100, 200 and
−Removed: 300 basis point immediate decreases in rates are estimated to affect net present value with a decrease of 1.12%, 9.50%, and 26.89%, respectively.
+Added: present value of the balance sheet is defined as the discounted present value of asset cash flows minus the discounted present value of liability cash flows.
+Added: At September 30, 2023, net present value is projected to decrease 2.29%, 6.25%, and 11.20% in the 100, 200, and 300 basis point immediate increase scenarios, respectively.
+Added: Additionally, the 100, 200 and 300 basis point immediate decreases in rates are estimated to affect net present value with a decrease of 1.14%, 7.85%, and 23.40%, respectively.
All scenarios presented are within the Company’s policy limits.
22 unchanged sentences
Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.