AMERISERV FINANCIAL INC PA

Previous wording

**…..NET INTEREST INCOME AND MARGIN…..**The Company’s net interest income represents the amount by which interest income on earning assets exceeds interest paid on interest bearing liabilities. Net interest income is a primary source of the Company’s earnings, and it is affected by interest rate fluctuations as well as changes in the amount and mix of earning assets and interest bearing liabilities. The following table compares the Company’s net interest income performance for the second quarter of 2024 to the second quarter of 2023 (in thousands, except percentages):

Current wording

**…..NET INTEREST INCOME AND MARGIN…..**The Company’s net interest income represents the amount by which interest income on earning assets exceeds interest paid on interest bearing liabilities. Net interest income is a primary source of the Company’s earnings, and it is affected by interest rate fluctuations as well as changes in the amount and mix of earning assets and interest bearing liabilities. The following table compares the Company’s net interest income performance for the third quarter of 2024 to the third quarter of 2023 (in thousands, except percentages):

Previous wording

The Company's net interest income in the second quarter of 2024 decreased by $235,000, or 2.6%, from the prior year's second quarter while the net interest margin of 2.74% for the second quarter of 2024 represents a 15-basis point decrease from the second quarter of 2023. The decrease reflects net interest margin compression which has been prevalent in the banking industry since the Federal Reserve began tightening monetary policy in an effort to control inflation. Additionally, contributing to net interest margin compression was the inverted U.S. Treasury yield curve. While the Company’s net interest margin percentage in the second quarter of 2024 compares unfavorably to last year’s second quarter, it did improve for a second consecutive quarter and is 11-basis points higher than the fourth quarter of 2023. This improvement reflects the Federal Reserve keeping interest rates stable since July 2023 along with the impact of management’s pricing of loans and deposits.

Current wording

The Company's net interest income in the third quarter of 2024 increased by $88,000, or 1.0%, from the prior year's third quarter while the net interest margin of 2.71% for the third quarter of 2024 represents a five-basis point decrease from the third quarter of 2023. The decrease reflects net interest margin compression which has been prevalent in the banking industry since the Federal Reserve began tightening monetary policy in an effort to control inflation. Additionally, contributing to net interest margin compression was the inverted U.S. Treasury yield curve. While the Company’s net interest margin percentage in the third quarter of 2024 compares unfavorably to last year’s third quarter, it did demonstrate relative stability so far in 2024 and was eight-basis points higher than the fourth quarter of 2023.

Previous wording

Total average loans in the second quarter of 2024 were higher than the 2023 second quarter average by $43.6 million, or 4.4%. Strong loan pipelines during 2023 resulted in the loan portfolio demonstrating growth throughout the year. During the second quarter of 2024, new loan originations exceeded payoff activity and resulted in total loan volumes, on an end of period basis, increasing since March 31, 2024. Overall, total loans continue to be above the $1.0 billion threshold averaging $1.030 billion for the 2024 second quarter. The higher interest rate environment along with the higher average total loans outstanding resulted in total loan interest income improving by $1.4 million, or 11.1%, for the second quarter of 2024 when compared to the second quarter of 2023.

Current wording

Total average loans in the third quarter of 2024 were higher than the 2023 third quarter average by $38.9 million, or 3.9%. During the third quarter of 2024, new loan originations slightly exceeded payoff activity and resulted in total loan volumes, on an end of period basis, increasing since June 30, 2024. Overall, total loans continue to be above the $1.0 billion threshold averaging $1.033 billion for the 2024 third quarter. The higher interest rate environment along with the higher average total loans outstanding resulted in total loan interest and fee income improving by $1.1 million, or 8.7%, for the third quarter of 2024 when compared to the third quarter of 2023.

Previous wording

Total investment securities averaged $256.5 million for the second quarter of 2024, which is $5.2 million, or 2.0%, lower than the $261.8 million average for the second quarter of last year. The decrease reflects management’s strategy to allocate more cash flow from the securities portfolio to higher yielding loans while the Company controlled the amount of high cost overnight borrowed funds. Thus, new investment security purchases were primarily used to replace cash flow from maturing securities to maintain appropriate balances for pledging purposes related to public funds deposits. The improved yields for new securities purchases along with management’s execution of a late December 2023 investment portfolio repositioning strategy caused interest income from investments to increase by $249,000, or 11.3%. Overall, the 2024 second quarter balance of total average interest earning assets increased over last year’s second quarter by $38.0 million, or 3.0%, while total interest income increased by $1.6 million, or 11.0%, since the second quarter of 2023.

Current wording

flow from maturing securities to maintain appropriate balances for pledging purposes related to public funds deposits. The improved yields for new securities purchases along with management’s execution of an investment portfolio repositioning strategy in late December 2023 caused interest income from investments to increase by $123,000, or 5.5% in the third quarter of 2024 compared to the same period in 2023. Interest income from investments was unfavorably impacted by the transfer of one corporate security into non-accrual status during the third quarter of 2024, which resulted in a $73,000 reversal of previously recognized interest income. Overall, the 2024 third quarter balance of total average interest earning assets increased over last year’s third quarter by $34.0 million, or 2.7%, while total interest income increased by $1.3 million, or 8.2%, since the third quarter of 2023.

Previous wording

On the liability side of the balance sheet, total average deposits of $1.163 billion for the second quarter of 2024 were $5.3 million, or 0.5%, higher than the 2023 second quarter average. The increase reflects the Company’s successful business development efforts which more than offset a portion of the funds from the government stimulus programs leaving the balance sheet and greater pricing competition in the market to retain deposits because of the higher interest rates. The Company’s core deposit base continued to demonstrate the strength and stability that it has had for many years. In addition to its loyal core deposit base, the Company has several other sources of liquidity, including a significant unused borrowing capacity at the Federal Home Loan Bank (FHLB), overnight lines of credit at correspondent banks and access to the Federal Reserve Discount Window. The Company does not utilize brokered deposits as a funding source. The loan to deposit ratio averaged 88.5% in the second quarter of 2024, which indicates that the Company has ample capacity to continue to grow its loan portfolio and is well positioned to support our customers and our community during times of economic volatility.

Current wording

On the liability side of the balance sheet, total average deposits of $1.165 billion for the third quarter of 2024 were $15.9 million, or 1.4%, higher than the 2023 third quarter average. The increase reflects the Company’s successful business development efforts which more than offset a portion of the funds from the government stimulus programs leaving the balance sheet and greater pricing competition in the market to retain deposits because of the higher interest rates. The Company’s core deposit base continued to demonstrate the strength and stability that it has had for many years. In addition to its loyal core deposit base, the Company has several other sources of liquidity, including a significant unused borrowing capacity at the Federal Home Loan Bank (FHLB), overnight lines of credit at correspondent banks and access to the Federal Reserve Discount Window. The Company does not utilize brokered deposits as a funding source. The loan to deposit ratio averaged 88.7% in the third quarter of 2024, which indicates that the Company has ample capacity to continue to grow its loan portfolio, and we believe that it is well positioned to support our customers and our community during times of economic volatility.

Previous wording

Total interest expense in the second quarter of 2024 increased by $1.9 million, or 32.3%, when compared to the second quarter of 2023, due to higher deposit and borrowings interest expense. Deposit interest expense was higher by $1.4 million, or 27.3%, while the second quarter 2024 average volume of total interest-bearing deposits grew from the 2023 second quarter average by $23.8 million, or 2.5%. The rising national interest rates in 2023 resulted in certain deposit products, particularly public funds, which are tied to a market index, repricing upward with the move in short-term interest rates causing interest expense to increase. Additionally, increased market competition resulted in the Company raising rates on certain shorter-term certificates of deposit to retain funds. Another factor contributing to net interest margin compression was an unfavorable deposit mix shift as the second quarter 2024 average of non-interest bearing demand deposits declined by $18.5 million, or 9.3%, while, as mentioned above, total interest-bearing deposits increased. For interest rate risk management purposes and to offset a portion of the unfavorable impact that rising funding costs are having on net interest income, management proactively executed $70 million of interest rate hedge transactions during 2023 to fix the cost of certain deposits that are indexed and move with short-term interest rates. Overall, total deposit cost averaged 2.21% for the second quarter of 2024, which is 47-basis points higher than total deposit cost of 1.74% for the second quarter of 2023.

Current wording

Total interest expense in the third quarter of 2024 increased by $1.2 million, or 17.8%, when compared to the third quarter of 2023, due to higher deposit and borrowings interest expense. Deposit interest expense was higher by $862,000, or 15.2%, while the third quarter 2024 average volume of total interest-bearing deposits grew from the 2023 third quarter average by $27.1 million, or 2.8%. The rising national interest rates in 2023 resulted in certain deposit products, particularly public funds, which are tied to a market index, repricing upward with the move in short-term interest rates causing interest expense to increase. Additionally, increased market competition resulted in the Company raising rates on certain shorter-term certificates of deposit to retain funds. Another factor contributing to net interest margin compression was an unfavorable deposit mix shift as the third quarter 2024 average of non-interest bearing demand deposits declined by $11.2 million, or 6.0%, while, as mentioned above, total interest-bearing deposits increased. For interest rate risk management purposes and to offset a portion of the unfavorable impact that rising funding costs are having on net interest income, management proactively executed $70 million of interest rate hedge transactions during 2023 to fix the cost of certain deposits that are indexed and move with short-term interest rates. Overall, total deposit cost averaged 2.22% for the third quarter of 2024, which is 27-basis points higher than total deposit cost of 1.95% for the third quarter of 2023.

Previous wording

Total borrowings interest expense increased by $496,000, or 66.1%, when comparing the second quarter of 2024 and the second quarter of 2023. The increase primarily results from the impact that the higher interest rates had on total borrowings cost. While the Company’s utilization of overnight borrowed funds in the second quarter of 2024 was relatively consistent with the same period of last year, the level of advances from the FHLB increased. Total short-term borrowings averaged $28.3 million for the second quarter of 2024 after averaging $25.0 million for the second quarter of 2023. Advances from the FHLB averaged $50.7 million in the second quarter of 2024 which is $32.5 million, or 178.3%, higher than the $18.2 million average in the second quarter of 2023. Management’s strategy to increase term advances to lock in lower rates than overnight borrowings due to the inversion in the yield curve has favorably impacted net interest income.

Current wording

Total borrowings interest expense increased by $319,000, or 32.3%, when comparing the third quarter of 2024 and the third quarter of 2023. The increase primarily results from the impact that the higher interest rates had on total borrowings cost. While the Company’s utilization of overnight borrowed funds in the third quarter of 2024 was lower than the same period of last year, the level of advances from the FHLB increased. Total short-term borrowings averaged $28.7 million for the third quarter of 2024 after averaging $36.0 million for the third quarter of 2023. Advances from the FHLB averaged $53.4 million in the third quarter of 2024 which is $33.0 million, or 161.1%, higher than the $20.5 million average in the third quarter of 2023. Management’s strategy to increase term advances to lock in lower rates than overnight borrowings due to the inversion in the yield curve has favorably impacted net interest income.

Previous wording

The table that follows provides an analysis of net interest income on a tax-equivalent basis (non-GAAP) for the three-month periods ended June 30, 2024 and 2023 setting forth (i) average assets, liabilities, and shareholders’ equity, (ii) interest income earned on interest earning assets and interest expense paid on interest bearing liabilities, (iii) average yields earned on interest earning assets and average rates paid on interest bearing liabilities, (iv) the Company’s interest rate spread (the difference between the average yield earned on interest earning assets and the average rate paid on interest bearing liabilities), and (v) the Company’s net interest margin (net interest income as a percentage of average total interest earning assets). For purposes of this table, loan balances include non-accrual loans, and interest income on loans includes loan fees or amortization of such fees which have been deferred. Regulatory stock is included within available for sale investment securities for this analysis. Additionally, a tax rate of 21% was used to compute tax-equivalent interest income and yields (non-GAAP). The tax equivalent adjustments to interest income on loans and municipal securities for the three months ended June 30, 2024 and 2023 was $6,000 and $4,000, respectively, which is reconciled to the corresponding GAAP measure at the bottom of the table. Differences between the net interest spread and margin from a GAAP basis to a tax-equivalent basis were not material.

Current wording

The table that follows provides an analysis of net interest income on a tax-equivalent basis (non-GAAP) for the three-month periods ended September 30, 2024 and 2023 setting forth (i) average assets, liabilities, and shareholders’ equity, (ii) interest income earned on interest earning assets and interest expense paid on interest bearing liabilities, (iii) average yields earned on interest earning assets and average rates paid on interest bearing liabilities, (iv) the Company’s interest rate spread (the difference between the average yield earned on interest earning assets and the average rate paid on interest bearing liabilities), and (v) the Company’s net interest margin (net interest income as a percentage of average total interest earning assets). For purposes of this table, loan balances include non-accrual loans, and interest income on loans includes loan fees or amortization of such fees which have been deferred. Regulatory stock is included within available for sale investment securities for this analysis. Additionally, a tax rate of 21% was used to compute tax-equivalent interest income and yields (non-GAAP). The tax equivalent adjustments to interest income on

Previous wording

**…..NON-INTEREST INCOME…..**Non-interest income for the second quarter of 2024 totaled $4.4 million and increased by $510,000, or 13.2%, from the second quarter of 2023 performance. Factors contributing to the higher level of non-interest income for the quarter included:

Current wording

**…..NON-INTEREST INCOME…..**Non-interest income for the third quarter of 2024 totaled $4.2 million and decreased by $53,000, or 1.2%, from the third quarter of 2023 performance. Factors contributing to the lower level of non-interest income for the quarter included:

Previous wording

**…..NON-INTEREST EXPENSE…..**Non-interest expense for the second quarter of 2024 totaled $13.3 million and increased by $120,000, or 0.9%, from the prior year’s second quarter. Factors contributing to the higher level of non-interest expense for the quarter included:

Current wording

**…..NON-INTEREST EXPENSE…..**Non-interest expense for the third quarter of 2024 totaled $11.7 million and decreased by $374,000, or 3.1%, from the prior year’s third quarter. Factors contributing to the lower level of non-interest expense for the quarter included:

Previous wording

For the six-month period ended June 30, 2024, the Company reported net income of $1,529,000, or $0.09 per diluted common share. This represented a 15.1% increase in earnings from the six-month period of 2023 when net income totaled $1,328,000, or $0.08 per diluted common share. Overall, the earnings improvement for the six-month period in 2024 was driven by a favorable comparison in the provision for credit losses which more than offset a lower level of net interest income.

Current wording

For the nine-month period ended September 30, 2024, the Company reported net income of $2,712,000, or $0.16 per diluted common share. This represented a 37.3% increase in earnings from the nine-month period of 2023 when net income totaled $1,975,000, or $0.12 per diluted common share. Overall, the earnings improvement for the nine-month period in 2024 was driven by the favorable comparison in the provision for credit losses and non-interest expense which more than offset a lower level of total revenue.

Previous wording

The Company’s community banking business continued to benefit from diversified revenue streams, with strong revenue and profit contribution from our wealth management business. Total non-interest income represented 35% of total revenue for the first half of 2024. Both total average loans and deposits have grown this year, demonstrating the strength and loyalty of our customer base and helping to drive two consecutive quarters of net interest margin improvement. The Company believes that its balance sheet is well positioned for further quarterly net interest income growth through the remainder of 2024 and into 2025.

Current wording

The Company’s community banking business continued to benefit from diversified revenue streams, with total non-interest income representing 34% of total revenue for the first nine months of 2024. Both total average loans and deposits have grown this year, demonstrating the strength and loyalty of our customer base and helping to drive three consecutive quarters of net interest income improvement. The Company believes that its balance sheet is well positioned for further quarterly net interest income growth through the remainder of 2024 and into 2025.

Previous wording

**…..NET INTEREST INCOME AND MARGIN…..**The following table compares the Company’s net interest income performance for the first six months of 2024 to the first six months of 2023 (in thousands, except percentages):

Current wording

**…..NET INTEREST INCOME AND MARGIN…..**The following table compares the Company’s net interest income performance for the first nine months of 2024 to the first nine months of 2023 (in thousands, except percentages):

Previous wording

The Company’s net interest income in the first six months of 2024 decreased by $1.0 million, or 5.4%, from the prior year’s first six months while the net interest margin of 2.72% for the first half of 2024 represents a 24-basis point decline from the first half of 2023. As previously mentioned, the decrease reflects net interest margin compression which has been prevalent in the banking industry since the Federal Reserve began tightening monetary policy to control inflation and as the U.S. Treasury yield curve continues to be inverted. While the Company’s net interest margin percentage compares unfavorably to last year, it did improve for a second consecutive quarter and is 11-basis points higher than the fourth quarter of 2023. This improvement reflects the Federal Reserve keeping interest rates stable since July 2023 along with the impact of management’s pricing of loans and deposits.

Current wording

The Company’s net interest income in the first nine months of 2024 decreased by $922,000, or 3.4%, from the prior year’s first nine months while the net interest margin of 2.72% for the first nine months of 2024 represents a 17-basis point decline from the first nine months of 2023. As previously mentioned, the decrease reflects net interest margin compression which has been prevalent in the banking industry since the Federal Reserve began tightening monetary policy to control inflation and as the U.S. Treasury yield curve continues to be inverted. While the Company’s net interest margin percentage compares unfavorably to last year, it did demonstrate relative stability so far in 2024 and has improved from its low point in the fourth quarter of 2023 which was 2.63%. With the Federal Reserve’s action to begin easing monetary policy in September 2024, the Company believes the net interest margin will continue to improve in the remaining months of 2024 and into 2025.

Previous wording

Total loans averaged $1.030 billion in the first six months of 2024, which is higher than the 2023 average by $43.5 million, or 4.4%. So far in 2024, new loan originations have slightly exceeded payoff activity through six months and resulted in total loan volumes, on an end of period basis, remaining relatively consistent since December 31, 2023. The higher interest rate environment along with the higher average total loans outstanding resulted in total loan interest income improving by $2.9 million, or 11.6%, for the first half of 2024 when compared to the same time-period of 2023.

Current wording

Total loans averaged $1.031 billion in the first nine months of 2024, which is higher than the 2023 average by $41.9 million, or 4.2%. So far in 2024, new loan originations have slightly exceeded payoff activity through nine months and resulted in total loan volumes, on an end of period basis, demonstrating modest growth since December 31, 2023. The higher interest rate environment along with the higher average total loans outstanding resulted in total loan interest and fee income improving by $4.0 million, or 10.6%, for the first nine months of 2024 when compared to the same period of 2023.

Previous wording

Total investment securities averaged $256.6 million for the first half of 2024, which is $7.2 million, or 2.7%, lower than the $263.9 million average for the first half of last year. As previously mentioned, the decrease reflects management’s strategy to allocate more cash flow from the securities portfolio to higher yielding loans while the

Current wording

Total investment securities averaged $255.9 million for the first nine months of 2024, which is $6.7 million, or 2.6%, lower than the $262.7 million average for the first nine months of last year. As previously mentioned, the decrease reflects management’s strategy to allocate more cash flow from the securities portfolio to higher yielding loans while the

Previous wording

Company controlled the amount of high cost overnight borrowed funds. Thus, new investment security purchases were primarily used to replace cash flow from maturing securities to maintain appropriate balances for pledging purposes related to public funds deposits. The improved yields for new securities purchases along with management’s execution of a late December 2023 investment portfolio repositioning strategy caused interest income from investments to increase by $389,000, or 8.8%. Overall, the 2024 first six-month average balance of total interest earning assets increased since last year’s six-month average by $35.9 million, or 2.9%, while total interest income increased by $3.3 million, or 11.1%, since the first six months of 2023.

Current wording

Company controlled the amount of high cost overnight borrowed funds. Thus, new investment security purchases were primarily used to replace cash flow from maturing securities to maintain appropriate balances for pledging purposes related to public funds deposits. The improved yields for new securities purchases along with management’s execution of an investment portfolio repositioning strategy in late December 2023 caused interest income from investments to increase by $512,000, or 7.7%. Interest income from investments was unfavorably impacted by the transfer of one corporate security into non-accrual status during the third quarter of 2024, which resulted in a $73,000 reversal of previously recognized interest income. Overall, the 2024 first nine-month average balance of total interest earning assets increased since last year’s nine-month average by $35.3 million, or 2.8%, while total interest income increased by $4.6 million, or 10.1%, since the first nine months of 2023.

Previous wording

On the liability side of the balance sheet, through six months, total average deposits were $7.8 million, or 0.7%, higher compared to total average deposits in the first six months of 2023. The increase since last year is reflective of the Company’s successful business development efforts despite greater pricing competition in the market to obtain/retain deposits because of higher interest rates which more than offset a portion of the funds from the government stimulus programs leaving the balance sheet. As previously mentioned, the Company’s core deposit base continued to demonstrate the strength and stability that it has had for many years. On June 30, 2024, total deposits grew by $12.0 million, or 1.0%, since December 31, 2023, demonstrating what we believe is customer loyalty and confidence in AmeriServ Financial Bank. In addition to its strong, loyal core deposit base, the Company has several other sources of liquidity, including a significant unused borrowing capacity at the Federal Home Loan Bank (FHLB), overnight lines of credit at correspondent banks and access to the Federal Reserve Discount Window. The Company does not utilize brokered deposits as a funding source.

Current wording

On the liability side of the balance sheet, through nine months, total average deposits were $10.5 million, or 0.9%, higher compared to total average deposits in the first nine months of 2023. The increase since last year is reflective of the Company’s successful business development efforts despite greater pricing competition in the market to obtain/retain deposits because of higher interest rates which more than offset a portion of the funds from the government stimulus programs leaving the balance sheet. As previously mentioned, the Company’s core deposit base continued to demonstrate the strength and stability that it has had for many years. On September 30, 2024, total deposits grew by $31.0 million, or 2.7%, since December 31, 2023, demonstrating what we believe is customer loyalty and confidence in AmeriServ Financial Bank.

Previous wording

Total interest expense in the first six months of 2024 increased by $4.3 million, or 39.7%, when compared to the first six months of 2023, due to higher deposit and borrowings interest expense. Deposit interest expense was higher by $3.4 million, or 36.7%, while the first six months of 2024 average volume of total interest-bearing deposits grew by $26.3 million, or 2.7%. The rising national interest rates in 2023 resulted in certain deposit products, particularly public funds, which are tied to a market index, repricing upward with the move in short-term interest rates causing interest expense to increase. Additionally, increased market competition resulted in the Company raising rates on certain shorter-term certificates of deposit to retain funds. Another factor contributing to net interest margin compression was an unfavorable deposit mix shift as the first six months of 2024 average of non-interest bearing demand deposits declined by $18.4 million, or 9.3%, while, as mentioned above, total interest-bearing deposits increased. As previously mentioned, for interest rate risk management purposes and to offset a portion of the unfavorable impact that rising funding costs are having on net interest income, management proactively executed $70 million of interest rate hedge transactions during 2023 to fix the cost of certain deposits that are indexed and move with short-term interest rates. Finally, the increasing trend in total deposit costs experienced since the Federal Reserve began to tighten monetary policy has slowed significantly in 2024 with the Federal Open Market Committee keeping the Fed Funds rate stable since July 2023. This slowdown in deposit costs has contributed to the recent improvement in the net interest margin. Overall, total deposit cost averaged 2.18% in the first half of 2024, which is 57-basis points higher than total deposit cost of 1.61% for the first half of 2023.

Current wording

Total interest expense in the first nine months of 2024 increased by $5.5 million, or 31.3%, when compared to the first nine months of 2023, due to higher deposit and borrowings interest expense. Deposit interest expense was higher by $4.2 million, or 28.5%, while the first nine months of 2024 average volume of total interest-bearing deposits grew by $26.5 million, or 2.8%. The rising national interest rates in 2023 resulted in certain deposit products, particularly public funds, which are tied to a market index, repricing upward with the move in short-term interest rates causing interest expense to increase. Additionally, increased market competition resulted in the Company raising rates on certain shorter-term certificates of deposit to retain funds. Another factor contributing to net interest margin compression was an unfavorable deposit mix shift as the first nine months of 2024 average of non-interest bearing demand deposits declined by $16.0 million, or 8.2%, while, as mentioned above, total interest-bearing deposits increased. Finally, the increasing trend in total deposit costs experienced since the Federal Reserve began to tighten monetary policy slowed in 2024 with the Federal Open Market Committee keeping the Fed Funds rate stable since July 2023 until their action to ease monetary policy in September 2024. This slowdown in deposit costs has contributed to the recent stabilization and improvement in the net interest margin. Management believes that deposit costs will improve as the Federal Reserve continues their expected tempered approach to reduce interest rates. Overall, total deposit cost averaged 2.19% in the first nine months of 2024, which is 47-basis points higher than total deposit cost of 1.72% for the first nine months of 2023.

Previous wording

Total borrowings interest expense increased by $911,000, or 56.5%, when comparing the first half of 2024 and the first half of 2023. The increase primarily results from the impact that the higher interest rates had on total borrowings cost. The Company’s utilization of overnight borrowed funds so far in 2024 has been relatively consistent with the 2023 level while the level of advances from the FHLB have increased. Total short-term borrowings averaged $31.0 million for the first six months of 2024 after averaging $32.8 million for the first six months of 2023. Advances from the FHLB averaged $49.3 million in the first half of 2024 which is $31.3 million, or 174.7%, higher than the $17.9 million average in the first half of 2023. Management’s strategy to increase term advances to lock in lower rates than overnight borrowings due to the inversion in the yield curve has favorably impacted net interest income.

Current wording

Total borrowings interest expense increased by $1.2 million, or 47.3%, when comparing the first nine months of 2024 and the first nine months of 2023. The increase primarily results from the impact that the higher interest rates had on total borrowings cost. The Company’s utilization of overnight borrowed funds so far in 2024 has been lower than the 2023 level while the level of advances from the FHLB have increased. Total short-term borrowings averaged $30.2 million for the first nine months of 2024 after averaging $33.9 million for the first nine months of 2023. Advances from the FHLB averaged $50.7 million in the first nine months of 2024 which is $31.9 million, or 169.8%, higher than the $18.8 million average in the first nine months of 2023. Management’s strategy to increase term advances to lock in lower rates than overnight borrowings due to the inversion in the yield curve has favorably impacted net interest income.

Previous wording

The table that follows provides an analysis of net interest income on a tax-equivalent basis (non-GAAP) for the six-month periods ended June 30, 2024 and 2023. For a detailed discussion of the components and assumptions included in the table, see the paragraph before the quarterly table on page 42. The tax equivalent adjustments to interest income on loans and municipal securities for the six months ended June 30, 2024 and 2023 was $12,000 and $6,000, respectively, which is reconciled to the corresponding GAAP measure at the bottom of the table. Differences between the net interest spread and margin from a GAAP basis to a tax-equivalent basis were not material.

Current wording

The table that follows provides an analysis of net interest income on a tax-equivalent basis (non-GAAP) for the nine-month periods ended September 30, 2024 and 2023. For a detailed discussion of the components and assumptions included in the table, see the paragraph before the quarterly table on page 42. The tax equivalent adjustments to interest income on loans for the nine months ended September 30, 2024 and 2023 was $19,000 and $10,000, respectively, which is reconciled to the corresponding GAAP measure at the bottom of the table. Differences between the net interest spread and margin from a GAAP basis to a tax-equivalent basis were not material.

Previous wording

**…..PROVISION FOR CREDIT LOSSES…..**For the first six months of 2024, the Company recognized a $123,000 provision for credit losses recovery after recognizing $1.2 million of provision expense in the first six months of 2023, resulting in a net favorable change of $1.3 million. The provision for credit losses recovery for the six-month timeframe of 2024 reflects recoveries recognized for both the loan and securities portfolios. Specifically, a $110,000 recovery from the loan portfolio occurred primarily due to a favorable adjustment to the loss and qualitative factors used to calculate the allowance for credit losses in accordance with ASC 326,Financial Instruments – Credit Losses (CECL). Within the investment portfolio, a $435,000 recovery was recognized on a $926,000 reserve that was established in the first quarter of 2023 for a Signature Bank subordinated debt investment after the bond was successfully sold in the first

Current wording

**…..PROVISION FOR CREDIT LOSSES…..**For the first nine months of 2024, the Company recognized a $174,000 provision for credit losses recovery after recognizing $1.4 million of provision expense in the first nine months of 2023, resulting in a net favorable change of $1.6 million. The provision for credit losses recovery for the nine-month timeframe of 2024 reflects recoveries recognized for both the loan and securities portfolios. Specifically, a $145,000 recovery from the loan portfolio occurred primarily due to a favorable adjustment to the loss and qualitative factors used to calculate the allowance for credit losses in accordance with ASC 326,Financial Instruments – Credit Losses (CECL). Within the investment portfolio, a $435,000 recovery was recognized on a $926,000 reserve that was established in the first quarter of 2023 for a Signature Bank subordinated debt investment after the bond was successfully sold in the first

Previous wording

quarter of 2024. These recoveries more than offset a $360,000 reserve established for an available for sale corporate security and an additional $63,000 that was contributed to the reserve for HTM securities in accordance with CECL.

Current wording

quarter of 2024. These recoveries more than offset a $360,000 reserve established for an available for sale corporate security and an additional $50,000 that was contributed to the reserve for HTM securities in accordance with CECL.

Previous wording

**…..NON-INTEREST INCOME…..**Non-interest income for the first six months of 2024 totaled $9.3 million and declined by $50,000, or 0.5%, from the first six months of 2023 performance. Factors contributing to the lower level of non-interest income for the six-month period included:

Current wording

**…..NON-INTEREST INCOME…..**Non-interest income for the first nine months of 2024 totaled $13.5 million and declined by $103,000, or 0.8%, from the first nine months of 2023 performance. Factors contributing to the lower level of non-interest income for the nine-month period included:

Previous wording

**…..NON-INTEREST EXPENSE…..**Non-interest expense for the first six months of 2024 totaled $25.2 million and increased slightly by $21,000, or 0.1%, from the prior year’s first six months. Factors contributing to the higher level of non-interest expense for the six-month period included:

Current wording

**…..NON-INTEREST EXPENSE…..**Non-interest expense for the first nine months of 2024 totaled $36.9 million and decreased by $353,000, or 0.9%, from the prior year’s first nine months. Factors contributing to the lower level of non-interest expense for the nine-month period included:

Previous wording

**…..INCOME TAX EXPENSE…..**The Company recorded an income tax expense of $374,000, or an effective tax rate of 19.7%, in the first six months of 2024. This compares to an income tax expense of $311,000, or an effective tax rate of 19.0%, for the first six months of 2023. The higher level of income tax expense this year is due to the increased level of pre-tax income.

Current wording

**…..INCOME TAX EXPENSE…..**The Company recorded an income tax expense of $611,000, or an effective tax rate of 18.4%, in the first nine months of 2024. This compares to an income tax expense of $435,000, or an effective tax rate of 18.0%, for the first nine months of 2023. The higher level of income tax expense this year is due to the increased level of pre-tax income.

Previous wording

**…..SEGMENT RESULTS.…..**The community banking segment reported a net income contribution of $8,985,000 in the six months of 2024 which was $1,160,000 higher than the net income contribution in the first six months of 2023. The increase between time periods results from the strength that this segment provides to the Company which was determined by a thorough funds transfer pricing analysis. In short, a funds transfer pricing analysis determines how funding (deposits) and use of this funding (loans) by each segment contributes to the overall profitability of the Company by providing an estimated positive or negative dollar value of the segment’s contribution to the Company. Overall, the funds transfer pricing analysis indicated that the community banking segment provided an additional $1.5 million benefit to the Company in the six months of 2024 when compared to the six months of 2023. Despite this benefit that community banking provides, this segment was unfavorably impacted from net interest margin compression as total deposit interest expense increased to a higher level than the increase to total loan interest income by $493,000. Contributing to the net interest margin compression experienced by the Company was an unfavorable deposit mix shift as exhibited by the six-month average of non-interest-bearing demand deposits declining by $18.4 million, or 9.3%, while total interest-bearing deposits increased by $26.3 million, or 2.7%. This segment benefitted from a higher level of total average loans in the first six months of 2024 by $43.5 million, or 4.4%. Growth occurred primarily in the commercial real estate category with modest growth occurring in residential mortgage and home equity loans. Overall, total loan interest income improved by $2.9 million, or 11.6%, for the first six months of 2024 when compared to the first six months of last year. Deposit interest expense was higher by $3.4 million, or 36.6%, while, as mentioned above, the 2024 six-month average volume of total interest-bearing deposits increased by $26.3 million, or 2.7%. The higher national interest rates along with increased market competition to retain and attract deposits contributed to deposit costs increasing. This segment was favorably impacted by the Company recording a $111,000 recovery for the allowance for credit losses on our loan portfolio and unfunded commitments in the first six months of 2024 compared to $301,000 of provision expense for credit losses on loans and unfunded commitments in last year’s first six months. This was discussed previously in the Provision for Credit Losses section within this document. Non-interest income increased due to the Company recognizing a $250,000 signing bonus that resulted from successful negotiations related to the renewal of an expiring contract with Visa. Also, this segment was favorably impacted by a positive adjustment to the fair market value of an interest rate swap related risk participation agreement as well as the re…

Excerpt shortened here; the source contains the full paragraph.

Current wording

**…..SEGMENT RESULTS.…..**The community banking segment reported a net income contribution of $13,484,000 in the nine months of 2024 which was $1,319,000 higher than the net income contribution in the nine months of 2023. The increase between time periods results from the strength that this segment provides to the Company which was determined by a thorough funds transfer pricing analysis. In short, a funds transfer pricing analysis determines how funding (deposits) and use of this funding (loans) by each segment contributes to the overall profitability of the Company by providing an estimated positive or negative dollar value of the segment’s contribution to the Company. Overall, the funds transfer pricing analysis indicated that the community banking segment provided an additional $1.5 million benefit to the Company in the nine months of 2024 when compared to the nine months of 2023. Despite this benefit that community banking provides, this segment was unfavorably impacted from net interest margin compression as total deposit interest expense increased to a higher level than the increase to total loan interest income by $209,000. Contributing to the net interest margin compression experienced by the Company was an unfavorable deposit mix shift as exhibited by the nine-month average of non-interest-bearing demand deposits declining by $16.0 million, or 8.2%, while total interest-bearing deposits increased by $26.5 million, or 2.8%. This segment benefitted from a higher level of total average loans in the nine months of 2024 by $41.9 million, or 4.2%. Growth occurred primarily in the commercial real estate category with modest growth occurring in residential mortgage and home equity loans. Overall, total loan interest income improved by $4.0 million, or 10.6%, for the nine months of 2024 when compared to the nine months of last year. Deposit interest expense was higher by $4.2 million, or 28.5%, while, as mentioned above, the 2024 nine-month average volume of total interest-bearing deposits increased by $26.5 million, or 2.8%. The higher national interest rates along with increased market competition to retain and attract deposits contributed to deposit costs increasing. This segment was favorably impacted by the Company recording a $149,000 recovery for the allowance for credit losses on our loan portfolio and unfunded commitments in the nine months of 2024 compared to $567,000 of provision expense for credit losses on loans and unfunded commitments in last year’s nine months. Non-interest income increased due to the Company recognizing a $250,000 signing bonus that resulted from successful negotiations related to the renewal of an expiring contract with Visa. Also, this segment was favorably impacted by the necessary adjustment to the fair market value of an interest rate swap related risk participation agreement as well as the credit valuation adjustment to the market value of the interest rate swap contracts that the Company executed to accom…

Excerpt shortened here; the source contains the full paragraph.

Previous wording

The wealth management segment’s net income contribution increased by $1.0 million in the first six months of 2024 from the first six months of 2023. The increase reflects the strong performance from the Financial Services division that resulted from new business growth. Also, wealth management fees increased due to the improving market conditions particularly for equity securities as the major market indexes continue their ascent to record highs in 2024. Overall, the fair market value of wealth management assets totaled $2.6 billion at June 30, 2024 and increased by $133.8 million, or 5.5%, since June 30, 2023. Also contributing to the higher level of net income for this segment were lower levels of salaries expense and health care costs. Overall, wealth management revenues reached a historically high level. Partially offsetting the improvement in wealth management revenue for the six-month period was a higher level of incentive compensation.

Current wording

The wealth management segment’s net income contribution increased by $1.2 million in the nine months of 2024 from the nine months of 2023. The increase reflects the strong performance from the Financial Services division that resulted from new business growth. In addition, wealth management fees increased due to the improving market conditions particularly for equity securities as the major market indexes continue their ascent to record highs in 2024. Overall, wealth management revenues reached a historically high level. Also contributing to the higher level of net income for this segment were lower levels of salaries expense and health care costs. Partially offsetting the improvement in wealth management revenue cost for the nine-month period were higher levels of professional fees and incentive compensation.

Previous wording

The investment/parent segment reported a net loss of $8,915,000 in the six months of 2024 which is greater than the net loss of $6,917,000 in the first six months of 2023 by $1,998,000. The funds transfer pricing analysis caused the loss reported within this segment to be higher due to the inverted yield curve and the higher funding costs on our balance sheet. Also contributing to the higher net loss for this segment was the $1.7 million gain recognized during the first quarter of 2023 from the sale of the Class B common stock of Visa Inc. while there was no such gain in 2024. This segment did experience a $1.4 million favorable shift from the Bank recognizing a $435,000 provision recovery in 2024 from the subordinated debt investment with Signature Bank after a $926,000 provision expense was recognized on this same investment in the first quarter of 2023. This segment was unfavorably impacted by the recognition of $360,000 of provision expense in 2024 to establish a reserve for an available for sale (AFS) corporate security. This segment was

Current wording

The investment/parent segment reported a net loss of $12,904,000 in the nine months of 2024 which is greater than the net loss of $11,097,000 in the nine months of 2023 by $1,807,000. The funds transfer pricing analysis caused the loss reported within this segment to be higher due to the inverted yield curve and the higher funding costs on our balance sheet. Also contributing to the higher net loss for this segment was the $1.7 million gain recognized during the first quarter of 2023 from the sale of the Class B common stock of Visa Inc. while there was no such gain in 2024. This segment did experience an $869,000 favorable shift from the Bank recognizing a $435,000 provision recovery in 2024 from the subordinated debt investment with Signature Bank after a $926,000 provision expense was recognized on this same investment in the first quarter of 2023. This segment was unfavorably impacted by the recognition of $360,000 of provision expense in 2024 to establish a reserve for an available for sale (AFS) corporate security. This segment was also unfavorably impacted by $1,230,000 of additional total borrowings interest expense due to the higher average balance of FHLB term borrowings. Professional fees in both 2024 and 2023 were impacted by litigation and responses to

Previous wording

also unfavorably impacted by $911,000 of additional total borrowings interest expense due to the higher average balance of FHLB term borrowings. Professional fees in both 2024 and 2023 were impacted by litigation and responses to the actions of an activist shareholder. These activist related costs amounted to $1.5 million for the first six months of 2024 compared to activist costs of $1.7 million for the first six months of 2023. Favorably impacting net income for this segment was an increased level of interest income from investment securities by $389,000 as the higher interest rates and a portfolio restructuring in late 2023 resulted in an improved overall total securities yield.

Current wording

the actions of an activist shareholder. These activist related costs amounted to $1.5 million for the nine months of 2024 compared to activist costs of $2.0 million for the nine months of 2023. Favorably impacting net income for this segment was an increased level of interest income from investment securities by $512,000 as the higher interest rates and a portfolio restructuring in late 2023 resulted in an improved overall total securities yield.

Previous wording

**…..BALANCE SHEET…..**The Company’s total consolidated assets were $1.4 billion at June 30, 2024, which increased by $13.8 million, or 1.0%, from the December 31, 2023 asset level. This change was related, primarily, to increased levels of cash and cash equivalents, investment securities, total loans, leases, and other assets. Specifically, total loans increased by $857,000, or 0.1%, as so far in 2024, new loan originations have only slightly exceeded payoff activity. Investment securities increased by $735,000, or 0.3%, as new investment security purchases have been primarily limited to the replacement of cash flow from maturing securities in order to maintain appropriate balances for pledging purposes related to public funds deposits. The marginal growth in loans and investment securities along with an increase in total deposits led to a $4.4 million, or 31.1%, increase in cash and cash equivalents. The $1.1 million, or 34.8%, increase in the right-of-use asset for operating and financing leases resulted from the execution of two new leases for office locations and one new lease for equipment during 2024. Finally, other assets increased $6.6 million, or 18.0%, due to an increase in the positive balance of the accrued pension liability, an increase in the market values for the interest rate swaps and hedges, as well as amounts prepaid for state shares tax.

Current wording

**…..BALANCE SHEET…..**The Company’s total consolidated assets were $1.4 billion at September 30, 2024, which increased by $15.5 million, or 1.1%, from the December 31, 2023 asset level. This change was related, primarily, to increased levels of cash and cash equivalents, total loans, leases, other real estate owned (OREO) and repossessed assets and other assets. Specifically, total loans increased by $2.0 million, or 0.2%, as so far in 2024, new loan originations have only slightly exceeded payoff activity. The marginal growth in loans along with an increase in total deposits led to an $8.1 million, or 57.7%, increase in cash and cash equivalents. The $953,000, or 31.5%, increase in the right-of-use asset for operating and financing leases resulted from the execution of two new leases for office locations and one new lease for equipment during 2024. OREO and repossessed assets increased $1.8 million due primarily to the foreclosure of a non-owner occupied commercial real estate loan secured by an office property during the second quarter of 2024. Finally, other assets increased $2.7 million, or 7.3%, due to an increase in the positive balance of the accrued pension liability which was partially offset by a decrease in the market values for the interest rate swaps.

Previous wording

Total deposits increased by $12.0 million, or 1.0%, in the first six months of 2024. We believe this demonstrates customer confidence and the strength and loyalty of our core deposit base. As of June 30, 2024, the 25 largest depositors represented 24.1% of total deposits, which is an increase from December 31, 2023, when it was 22.4%. As of June 30, 2024 and December 31, 2023, the estimated amount of uninsured deposits was $397.4 million and $384.5 million, respectively. The estimate of uninsured deposits was done at the single account level and does not take into account total customer balances in the Bank. It should be noted that approximately 50% of these uninsured deposits relate to public funds from municipalities, government entities, and school districts which by law are required to be collateralized by investment securities or FHLB letters of credit to protect these depositor funds. Total borrowings remained relatively consistent since year-end 2023 as a decrease in short-term borrowings was offset by an increase in FHLB term advances. Specifically, short-term borrowings decreased by $6.4 million, or 15.6%. Given the high cost of overnight borrowed funds, management has been effectively controlling the usage of this funding source. In addition, the inversion in the yield curve has caused FHLB term advances to have rates that are lower than the cost of overnight borrowed funds. Therefore, management increased usage of FHLB term advances in the first six months of 2024 leading to an increase of $6.4 million, or 14.2%.

Current wording

Total deposits increased by $31.0 million, or 2.7%, in the first nine months of 2024. We believe this demonstrates customer confidence and the strength and loyalty of our core deposit base. As of September 30, 2024, the 25 largest depositors represented 25.3% of total deposits, which is an increase from December 31, 2023, when it was 22.4%. As of September 30, 2024 and December 31, 2023, the estimated amount of uninsured deposits was $420.9 million and $384.5 million, respectively. The estimate of uninsured deposits was done at the single account level and does not take into account total customer balances in the Bank. It should be noted that approximately 50% of these uninsured deposits relate to public funds from municipalities, government entities, and school districts which by law are required to be collateralized by investment securities or FHLB letters of credit to protect these depositor funds. Total short-term and FHLB borrowings were reduced by $19.2 million, or 22.5%, since year-end 2023 as a decrease in short-term borrowings more than offset an increase in FHLB term advances. Specifically, short-term borrowings decreased by $29.2 million, or 71.3%. Given the high cost of overnight borrowed funds, management has been effectively controlling the usage of this funding source. In addition, the inversion in the yield curve has caused FHLB term advances to have rates that are lower than the cost of overnight borrowed funds. Therefore, management increased usage of FHLB term advances in the first nine months of 2024 leading to an increase of $10.0 million, or 22.4%.

Previous wording

The Company’s total shareholders’ equity increased by $1.4 million, or 1.4%, during the first six months of 2024. The increase in capital is the result of the Company’s earnings performance during the first half of 2024 more than offsetting our common stock dividend payments to shareholders. In addition, the pension adjustment and improved market value adjustment on the interest rate hedges had a positive impact on accumulated other comprehensive loss which more than offset the reduced market value of the available for sale investment securities portfolio. Partially offsetting these positive items was the execution of a Stock Repurchase Agreement pursuant to which the Company repurchased, at current market price, 628,003 shares of common stock from Driver Opportunity Partners, in connection with a settlement agreement, reducing capital by $1.5 million.

Current wording

The Company’s total shareholders’ equity increased by $5.9 million, or 5.8%, during the first nine months of 2024. The increase in capital is the result of the Company’s earnings performance during the first nine months of 2024 more than offsetting our common stock dividend payments to shareholders. In addition, the pension adjustment and improved market value of the available for sale investment securities portfolio had a positive impact on accumulated other comprehensive loss. Partially offsetting these positive items was the execution of a Stock Repurchase Agreement pursuant to which the Company repurchased, at current market price, 628,003 shares of common stock from Driver Opportunity Partners, in connection with a settlement agreement, reducing capital by $1.5 million.

Previous wording

The Company continues to be considered well capitalized for regulatory purposes with a total capital ratio of 12.77%, and a common equity tier 1 capital ratio of 9.23% at June 30, 2024. See the discussion of the Basel III capital requirements under the Capital Resources section below. As of June 30, 2024, the Company’s book value per common share was $6.28 and its tangible book value per common share was $5.45(1). When compared to March 31, 2024, book value per common share increased by $0.22, or 3.6%, and tangible book value per common share increased by $0.19 per common share, or 3.6%. The improvement in the Company’s book value and tangible book value per share during the second quarter of 2024 is largely due to the accretive repurchase of our common stock from the activist investor. The tangible common equity to tangible assets ratio was 6.47%(1) at June 30, 2024 and increased by three-basis points when compared to December 31, 2023.

Current wording

The Company continues to be considered well capitalized for regulatory purposes with a total capital ratio of 12.87%, and a common equity tier 1 capital ratio of 9.33% at September 30, 2024. See the discussion of the Basel III capital requirements under the Capital Resources section below. As of September 30, 2024, the Company’s book value per common share was $6.55 and its tangible book value per common share was $5.72(1). When compared to December 31, 2023, book value per common share increased by $0.59, or 9.9%, and tangible book value per common share increased by $0.56 per common share, or 10.9%. The improvement in the Company’s book value and tangible book value per share during 2024 was largely due to the favorable adjustment for both the unrealized loss on available for sale securities and the Company’s defined benefit pension plan as well as the accretive repurchase of 628,003 shares of our common stock from the activist shareholder. The tangible common equity to tangible assets ratio was 6.79%(1) at September 30, 2024 and increased by 35-basis points when compared to December 31, 2023.

Previous wording

**…..LOAN QUALITY…..**The following table sets forth information concerning the Company’s loan delinquency, non-performing assets, and classified assets (in thousands, except percentages):

Current wording

**…..LOAN QUALITY…..**The following table sets forth information concerning the Company’s loan delinquency, non-performing loans, and classified loans (in thousands, except percentages):

Previous wording

The increase in accruing loan delinquency since year-end 2023 is attributable to an increase in commercial real estate loan delinquency due in part to slow payments on a $3.6 million urban office loan. Non-performing assets increased from $12.4 million at December 31, 2023 to $12.8 million at June 30, 2024 primarily due to one commercial real estate loan that was over 90 days past due which was partially offset by a reduction in non-accrual residential mortgage and consumer loans. Non-performing assets were at 1.23% of total loans as of June 30, 2024. The Company recognized net loan charge-offs of $332,000, or 0.06% of total average loans, in the first six months of 2024 compared to net loan charge-offs of $61,000, or 0.01% of total average loans, in the first six months of 2023. Classified loans decreased $2.5 million, or 10.0%, from December 31, 2023 and totaled $22.5 million at June 30, 2024 as a result of the foreclosure and transfer to OREO of a commercial office building which secured a classified commercial real estate loan as well as normal paydown activity.

Current wording

The increase in accruing loan delinquency since year-end 2023 is attributable to an increase in commercial real estate loan delinquency due to slow payments on a $3.6 million urban office loan for which the Company has already established a specific reserve for credit losses allocation of $1.6 million. Non-performing loans decreased from $12.4 million at December 31, 2023 to $9.8 million at September 30, 2024 due to a reduction in non-accrual loans as well as loans past due 90 days or more still accruing. Primarily, the foreclosure and transfer to other real estate owned (OREO), during the second quarter of 2024, of a commercial office building which secured a $1.5 million non-accrual commercial real estate loan contributed to this decrease. The aforementioned transfer to OREO along with the risk rating upgrade of a $3.6 million non-owner occupied commercial real estate loan and normal paydown activity contributed to a decrease in classified loans. Specifically, classified loans decreased $5.8 million, or 23.0%, from December 31, 2023 and totaled $19.2 million at September 30, 2024.

Previous wording

We also continue to closely monitor the loan portfolio given the number of relatively large-sized commercial and commercial real estate loans within the portfolio. As of June 30, 2024, the 25 largest credits represented 23.0% of total loans outstanding, which is a slight increase from December 31, 2023 when it was 22.7%.

Current wording

We also continue to closely monitor the loan portfolio given the number of relatively large-sized commercial and commercial real estate loans within the portfolio. As of September 30, 2024, the 25 largest credits represented 22.5% of total loans outstanding, which is relatively consistent with December 31, 2023 when it was 22.7%.

Previous wording

There is a particular emphasis on ensuring that the subsidiary bank has appropriate levels of capital to support its non-owner occupied commercial real estate loan concentration, which stood at 380% as of June 30, 2024. It should be noted that this ratio increased from 375% at December 31, 2023 due to the growth in non-owner occupied commercial real estate loan balances out pacing the increase in total regulatory capital. Further, non-owner occupied commercial real estate loans represented 49.9% and 49.3% of total loans as of June 30, 2024 and December 31, 2023, respectively.

Current wording

There is a particular emphasis on ensuring that the subsidiary bank has appropriate levels of capital to support its non-owner occupied commercial real estate loan concentration, which stood at 388% as of September 30, 2024. It should be noted that this ratio increased from 375% at December 31, 2023 due to the growth in non-owner occupied commercial real estate loan balances out pacing the increase in total regulatory capital. Further, non-owner occupied commercial real estate loans represented 51.3% and 49.3% of total loans as of September 30, 2024 and December 31, 2023, respectively.

Previous wording

The allowance for loan credit losses declined since December 31, 2023 by $442,000, or 2.9%, to $14.6 million at June 30, 2024. Even with this modest decrease, the allowance for loan credit losses is $2.4 million, or 19.6%, higher than the allowance for loan credit losses at June 30, 2023. The increase since last year’s second quarter end is due to the Company strengthening its allowance for loan credit losses during the fourth quarter of 2023. Overall, the Company continues to maintain solid coverage of both total loans and non-performing assets as the allowance for loan credit losses provided 114% coverage of non-performing assets and 1.41% of total loans at June 30, 2024.

Current wording

The allowance for loan credit losses declined since December 31, 2023 by $633,000, or 4.2%, to $14.4 million at September 30, 2024. Even with this modest decrease, the allowance for loan credit losses is $2.1 million, or 17.1%, higher than the allowance for loan credit losses at September 30, 2023. The increase since last year’s third quarter end was due to the Company strengthening its allowance for loan credit losses during the fourth quarter of 2023. Overall, the Company continues to maintain solid coverage of both total loans and non-performing loans as the allowance for loan credit losses provided 147% coverage of non-performing loans and 1.39% of total loans at September 30, 2024.

Previous wording

The allowance for credit losses on the investment securities portfolio was comprised of $360,000 on available for sale securities and $100,000 on held to maturity securities as of June 30, 2024. This compares to $926,000 on available for sale securities and $37,000 on held to maturity securities as of December 31, 2023. The allowance for credit losses on available for sale securities decreased $566,000, or 61.1%, since year-end 2023 due to the successful sale of the Signature Bank subordinated debt investment which was partially offset by the establishment of an allowance for credit losses on another corporate available for sale security that was deemed to be credit impaired in 2024.

Current wording

The allowance for credit losses on the investment securities portfolio was comprised of $360,000 on available for sale securities and $88,000 on held to maturity securities as of September 30, 2024. This compares to $926,000 on available for sale securities and $37,000 on held to maturity securities as of December 31, 2023. The allowance for credit losses on available for sale securities decreased $566,000, or 61.1%, since year-end 2023 due to the successful sale of the Signature Bank subordinated debt investment which was partially offset by the establishment of an allowance for credit losses on another corporate available for sale security that was deemed to be credit impaired in 2024.