MUNCY COLUMBIA FINANCIAL Corp
For the period ended Jun 30, 2024. Filed Aug 12, 2024.
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A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Jun 30, 2024 · Filed Aug 12, 2024
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What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2024-03-31; filed 2024-05-13.
0001999371-24-005970
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2024-06-30; filed 2024-08-12.
0001999371-24-009916
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 110 previous paragraphs and 143 current paragraphs.
64 unchanged; 39 reworded; 39 added; 6 removed; 1 previous and 1 current paragraphs rearranged.
Tables are not compared: 39 previous and 37 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (39)
Current report
Total average assets increased 65.9% from $954.9 million for the six months ended June 30, 2023, to $1.585 billion for the six months ended June 30, 2024, primarily related to the MBF merger. Average earning assets were $1.488 billion for the six months ended June 30, 2024 and $891.2 million for the six months ended June 30, 2023. Average interest-bearing liabilities were $1.161 billion for the six months ended June 30, 2024 and $684.4 million for the six months ended June 30, 2023.
Current report
Asset Quality
Current report
Loans that management has the intent and ability to hold for the foreseeable future or until maturity or payoff are stated at the amount of unpaid principal, net of deferred loan fees and costs, and reduced by the allowance for credit losses. The allowance for credit losses is established through a provision for credit losses charged to earnings.
Current report
The Corporation has established and consistently applies loan policies and procedures designed to foster sound underwriting and credit monitoring practices. Credit risk is managed through the efforts of loan officers, the Chief Credit Officer, the loan review function, as well as oversight from the Board of Directors. Management continually evaluates its credit risk management practices to ensure problems in the loan portfolio are addressed in a timely manner, although, as is the case with any financial institution, a certain degree of credit risk is dependent in part on local and general economic conditions that are beyond management’s control. Under the Corporation’s risk rating system, loans are rated pass, special mention, substandard, doubtful, or loss, with all categories reviewed regularly as part of the risk management practices.
Current report
Non-performing loans are monitored on an ongoing basis as part of the Corporation’s loan review process. Additionally, work-outs for non-performing loans and foreclosed assets held for sale are actively monitored through the Bank’s Credit Department. A potential loss on a non-performing asset is generally determined by comparing the outstanding loan balance to the fair market value of the pledged collateral, less estimated cost to sell.
Current report
Management actively manages non-performing loans in an effort to mitigate loss to the Corporation by working with customers to develop strategies to resolve borrower difficulties, through sale or liquidation of collateral, foreclosure and other appropriate means. In addition, management monitors employment and economic conditions within its market area, as weakening of conditions could result in real estate devaluations and an increase in loan delinquencies, which could negatively impact asset quality and cause an increase in the provision for credit losses.
Current report
The following table presents information about non-performing assets, as of June 30, 2024 and December 31, 2023:
Current report
Non-performing Assets
Current report
Total non-performing assets amounted to $7,736,000, or 0.49% of total assets at June 30, 2024, as compared to $4,476,000, or 0.27% of total assets at December 31, 2023. For the six months ended June 30, 2024, the increase in non-performing assets was primarily attributable to one real estate loan relationship with an aggregate balance of $2,221,000 which was placed on nonaccrual status during the first quarter. This relationship is well secured, and the Bank is working closely with the borrower to bring the relationship to a current status. The Bank does not expect to incur a credit loss related to this relationship at this time.
Current report
Deposits are the primary source of funds for the Corporation’s lending and investing activities. The Corporation provides a range of deposit services to businesses and individuals, including noninterest-bearing checking accounts, interest-bearing checking accounts, savings accounts, money market accounts and time deposits. These accounts generally earn interest at rates the Corporation establishes based on market factors and the anticipated amount and timing of funding needs. The establishment or continuity of a core deposit relationship can be a factor in loan pricing decisions. While the Corporation’s primary focus is on establishing customer relationships to attract core deposits, at times, the Corporation may use brokered deposits and other wholesale deposits to supplement its funding sources. As of June 30, 2024, the Corporation held no brokered deposits.
Current report
The following tables summarize the average balances outstanding and average interest rates for each major category of deposits for the three and six month periods ending June 30, 2024 and 2023, respectively:
Current report
The Corporation believes its deposit product offerings are properly structured to attract and retain core low-cost deposit relationships. The average cost of interest-bearing deposits for the three months ended June 30, 2024, and 2023, was 1.84% and 0.47%, respectively. The increased cost was primarily attributable to the increases in rates and increased pricing competition. The average cost of interest-bearing deposits for the six months ended June 30, 2024, and 2023, was 1.72% and 0.42%, respectively. The increased cost was primarily attributable to the increases in rates and increased pricing competition.
Current report
Net interest income increased $14.2 million, or 140.2% to $24.3 million for the six months ended June 30, 2024, from $10.1 million for the six months ended June 30, 2023. Non-interest income was $5.0 million for the six months ended June 30, 2024, an increase of $1.6 million, or 48.6%, from $3.3 million for the six months ended June 30, 2023, which primarily related to increases in interchange fees and other non-interest income. Non-interest expense was $18.8 million for the six months ended June 30, 2024, an increase of $9.2 million, or 94.7%, from $9.7 million for the six months ended June 30, 2023, which was primarily related to increases in expenses related to the MBF merger.
Current report
For the three and six months ended June 30, 2024, the annualized return on average assets was 1.20% and 1.11%, respectively, compared to 0.71% and 0.72% for the respective periods of 2023. The annualized return on average equity was 12.28% and 11.40%, respectively, for the three and six months ended June 30, 2024, and 7.63% and 7.64%, respectively, for the comparable periods of 2023. The Corporation declared and paid dividends to holders of common stock of $0.44 per share for the second quarter of 2024 and $0.88 per share for the six months ended June 30, 2024, compared to $0.43 and $0.85 per share, respectively, for the quarter-to-date and year-to-date periods of 2023.
Current report
The increase in interest expense of $4.8 million was primarily due to an increase in funding costs, coupled with growth in average interest-bearing liabilities. The Corporation experienced a 95 basis point increase in the cost of funds to 2.74% for the three months ended June 30, 2024, from 1.79% for the same three months of 2023, which resulted in a corresponding increase in interest expense of $3.8 million. The Corporation increased deposit rates and offered promotional certificate of deposit rates in response to rising market rates and increased competition. Specifically, the average rate paid for interest-bearing deposits increased 169 basis points to 2.34% for the second quarter of 2024 from 0.65% for the same period of 2023, resulting in a corresponding increase to interest expense of $3.6 million. The average rates paid on interest bearing demand deposits increased 200 basis points, resulting in a corresponding increase to interest expense of $1.6 million. Comparing the second quarters of 2024 and 2023, the average rates paid for money market deposits and time deposits, increased 77 basis points and 218 basis points, respectively, resulting in corresponding increases to interest expense of $212,000 and $1.8 million, respectively. Additionally, the Corporation experienced an increase in wholesale borrowing costs. Comparing the three months ended June 30, 2024 and 2023, the average rate paid for borrowed fund increased 32 basis points to 4.85% from 4.53%, respectively, and resulted in a corresponding increase to interest expense of $179,000. Average interest-bearing liabilities increased $464.9 million, or 67.9%, to $1.150 billion for the three months ended June 30, 2024, from $685.2 million for the same three months of 2023. The increase in average interest-bearing liabilities resulted in a corresponding increase to interest expense of $997,000. Average interest-bearing deposits increased $481.4 million, or 99.4%, to $965.7 million from $484.3 million comparing the second quarters of 2024 and 2023, respectively. The increase in average interest-bearing deposits resulted in a corresponding increase to interest expense of $1.2 million. Average time deposits increased $210.0 million, or 164.1%, to $338.0 million for the three months ended June 30, 2024, from $128.0 million for the same three months of 2023, due to the MBF merger as well as changing customer deposit preferences due to the economic and rate environment continued to result in deposit migration from non-maturity deposits to higher-costing time deposits. The increase in average time deposit balances resulted in additional interest expense of $982,000. Partially offsetting the increase in interest expense due to higher deposit balances was a reduction in total borrowings. Average total borrowings decreased $16.5 million, or 8.2%, to $184.4 million for the second quarter of 2024 compared to $200.9 million for the same quarter of 2023, resulting in a decrease in interest expense of $2…
Excerpt shortened here; the source contains the full paragraph.
Current report
On a year-to-date basis, tax equivalent net interest income increased $14.6 million, or 141.3%, to $24.9 million for the six months ended June 30, 2024, from $10.3 million for the comparable period of 2023. The increase in tax-equivalent net interest income for the year-to-date period was largely due to a $24.9 million, or 157.8%, increase in tax equivalent interest income, to $40.6 million, from $15.8 million for 2023, partially offset by an increase in interest expense of $10.3 million, or 189.0%, to $15.8 million for the six months ended June 30, 2024, from $5.5 million for the six months ended June 30, 2023. Similar to the quarterly period, the $24.9 million or 157.8%, increase in year-to-date tax equivalent interest income was primarily due to higher earning-asset yields, coupled with an increase in average earning assets balances primarily related to the MBF merger. The tax-equivalent yield on average earning assets increased 193 basis points to 5.49% for the first half of 2024 from 3.56% in 2023, which resulted in a corresponding increase of $10.2 million to tax-equivalent interest income. The tax-equivalent yield on loans increased 178 basis points, while the tax-equivalent yield on investments increased 79 basis points comparing the year-to-date periods of 2024 and 2023, which resulted in corresponding increases in tax-equivalent interest income of $9.7 million and $557,000, respectively. Regarding earning-asset volumes, total average earning assets increased $596.7 million, or 67.0%, to $1.488 billion for the six months ended June 30 ,2024, from $891.2 million for the same period of 2023, which resulted in a corresponding increase in tax-equivalent interest income of $14.7 million. Similar to the quarterly period, this was primarily due to an increase in average total loans which increased $561.7 million, or 103.6%, to $1.104 billion for the six months ended June 30, 2024, from $542.3 million’ for the same comparable period of 2023, which was primarily as a result of the MBF merger and strong organic loan demand. This increase resulted in a corresponding increase in tax-equivalent interest income of $13.4 million.
Current report
The $10.3 million, or 189.0%, increase in year-to-date interest expense was largely due to higher funding costs, coupled with an increase in average interest-bearing liabilities related to the MBF merger. The Corporation experienced a 113 basis point increase in the cost of interest-bearing liabilities to 2.74% for the first half of 2024 compared to 1.61% for the same period of 2023, which resulted in a corresponding increase to interest expense of $7.4 million. For the six months ended June 30, 2024, the cost of interest-bearing deposits increased 162 basis points, to 2.20%, compared to 0.58% for the six months ended June 30, 2023. This resulted in a corresponding increase to interest expense of $6.7 million. Average interest-bearing liabilities increased $476.3 million, or 69.6%, to $1.161 billion for the six months ended June 30, 2024, from $684.4 million for the same six months of 2023, resulting in a corresponding increase to interest expense of $2.9 million. Comparing the year-to-date periods of 2024 and 2023, average interest-bearing deposits increased $439.1 million, or 89.0%, to $932.2 million from $493.1 million, respectively, increasing interest expense by $2.1 million. Average total borrowings increased $37.3 million, or 19.5%, to $228.5 million for the six months ended June 30, 2024 compared to $191.2 million for the same period of 2023, resulting in an increase in interest expense of $784,000.
Current report
(1) Average volume information was compared using daily averages for interest-earning and bearing accounts.
Current report
(2) Interest on loans includes loan fee income.
Current report
(3) Tax exempt interest revenue is shown on a tax-equivalent basis using a statutory federal income tax rate of 21 percent for 2024 and 2023.
Current report
(4) Nonaccrual loans have been included with loans for the purpose of analyzing net interest earnings.
Current report
(5) Net interest margin is computed by dividing annualized tax-equivalent net interest income by total interest earning assets.
Current report
(6) Interest rate spread represents the difference between the average rate earned on interest-earning assets and the average rate paid on interest-bearing liabilities.
Current report
SIX MONTHS ENDED JUNE 30,
Current report
(1) Average volume information was compared using daily averages for interest-earning and bearing accounts.
Current report
(2) Interest on loans includes loan fee income.
Current report
(3) Tax exempt interest revenue is shown on a tax-equivalent basis using a statutory federal income tax rate of 21 percent for 2024 and 2023.
Current report
(4) Nonaccrual loans have been included with loans for the purpose of analyzing net interest earnings.
Current report
(5) Net interest margin is computed by dividing annualized tax-equivalent net interest income by total interest earning assets.
Current report
(6) Interest rate spread represents the difference between the average rate earned on interest-earning assets and the average rate paid on interest-bearing liabilities.
Current report
For the six months ended June 30, 2024, total non-interest income increased $1.6 million or 48.6% to $5.0 million, compared to $3.3 million for the six months ended June 30, 2023. Similar to the quarterly period, increases in service charges and fees, earnings on bank-owned life insurance and interchange fees of $243,000, $234,000 and $440,000, respectively, were all related to the MBF merger. Other non-interest income increased $545,000 or 102.8% due primarily to incentives received in conjunction with the launch of a debit card reissuance project as well as a governmental grant recorded in the first quarter in conjunction with the completion of a solar energy project.
Current report
For the six months ended June 30, 2024, total non-interest expense increased $9.2 million or 94.7% to $18.8 million, compared to $9.7 million for the six months ended June 30, 2023. Similar to the quarterly period, increases in salaries and employee benefits, occupancy, data processing and telecommunications, automated teller machine and interchange and other non-interest expense of $4.4 million, $556,000, $1.2 million, $258,000 and $975,000, respectively, were all related to the closing of the MBF merger on November 11, 2023. Merger-related expenses totaled $297,000 and amortization of intangibles totaled $1.1 million for the six months ended June 30, 2024, compared to $449,000 and $0 for the six months ended June 30, 2023.
Current report
The statement of cash flows presents the change in cash and cash equivalents from operating, investing and financing activities. Cash and due from banks and interest-bearing deposits in other banks, which comprise cash and cash equivalents, are the Corporation’s most liquid assets. Cash and cash equivalents totaled $21.5 million at June 30, 2024, an increase of $3.1 million, or 16.9%, from $18.4 million at December 31, 2023, as net cash inflows from operating and investing activities were greater than net cash outflows from financing activities.
Current report
Net cash inflows from investing activities provided $52.0 million of cash and cash equivalents during the six months ended June 30, 2024. Accounting for the majority of the net cash inflows was $76.4 million related to proceeds from sales, paydowns, calls and maturities of available-for-sale debt securities. This was partially offset by a net increase in loans and leases of $26.9 million, which reflected strong demand. Financing activities used $57.1 million in net cash, which resulted primarily from a decrease in short-term borrowings, consisting of customer repurchase agreements and short-term FHLB borrowings, of $163.2 million. These outflows were offset by a $114.1 million increase in deposits. These changes were primarily related to a strategic initiative to reposition customer repurchase agreements into core deposit accounts. Operating activities include net income, adjusted for the effects of non-cash transactions including, among others, depreciation and amortization and the provision for credit losses, and is the primary source of cash flows from operations. For the six months ended June 30, 2024, operating activities provided the Corporation with $8.2 million in net cash, which primarily reflected net income of $8.7 million.
Current report
The Corporation regularly analyzes its ability to generate adequate amounts of cash to meet its short and long-term cash requirements and plans. As part of its quarterly asset liability management procedures, the Corporation performs liquidity cash flow forecasts in various base level and stress scenarios to monitor future cash needs. As of June 30, 2024, the Corporation is expected to maintain a level cash balance over the next 12 months. The Corporation has not identified any known demands, commitments, events or uncertainties that would result or that are reasonably likely to result in its liquidity position materially increasing or decreasing over the next 12 months. The Corporation’s long-term cash needs are regularly analyzed through its strategic planning process, which includes a detailed review of liquidity and funding needs.
Current report
In addition to gap analysis, the Bank uses net interest income simulations and economic value of equity (“EVE”) simulations as the primary tools in measuring and managing the Bank’s position and considers balance sheet forecasts, the Bank’s liquidity position, the economic environment, anticipated direction of interest rates and the Bank’s earnings sensitivity to changes in these rates in its modeling. In addition, ALCO has established policy tolerance limits for acceptable negative changes in net interest income. Furthermore, as part of its ongoing monitoring, ALCO requires annual back testing of modeling results, which involves after-the-fact comparisons of projections with the Bank’s actual performance to measure the validity of assumptions used in the modeling techniques.
Current report
The following table illustrates the simulated impact of parallel and instantaneous interest rate shocks of +100, +200, +300, -100, -200, and -300 basis points on net interest income and the change in economic value over a one-year time horizon from the June 30, 2024 levels:
Current report
Model results from the simulation at June 30, 2024 indicated that the Bank was projected to see an increase in net interest income over a one-year horizon in any of the rate shock scenarios, with the exception of the +300 scenario, which showed a 2.47% decrease. The percent change in EVE is expected to decrease in all rates up scenarios and increase in all rates down scenarios. All modeled exposures to net interest income and EVE for the next twelve-month horizon are within internal ALCO policy guidelines.
Current report
This analysis does not represent a forecast for the Bank and should not be relied upon as being indicative of expected operating results. These simulations are based on numerous assumptions, including but not limited to, the nature and timing of interest rate levels, prepayments on loans and securities, deposit decay rates, pricing decisions on loans and deposits, reinvestment/replacements of asset and liability cash flows, and other factors. While assumptions reflect current economic and local market conditions, the Bank cannot make any assurances as to the predictive nature of these assumptions, including changes in interest rates, customer preferences, competition and liquidity needs, or what actions ALCO might take in responding to these changes.
Removed paragraphs (6)
Previous report
Total deposits averaged $1.153 billion in the first quarter 2024, an increase of $474.4 million, or 69.9%, compared to $678.5 million in the first quarter 2023. All segments of the Corporation’s deposit portfolio increased from the first quarter 2023 to the first quarter 2024 due to the MBF merger. The Corporation’s deposit funding costs** increased 124 basis points to 1.61% in the first quarter 2024 from 0.37% in the first quarter 2023. Rates on interest-bearing demand deposits, money market deposits and time deposits **increased by 121 basis points, 62 basis points, and 258 basis points, respectively, comparing the first quarters of 2024 and 2023.
Previous report
The average balance and average rate paid on deposits are summarized as follows:
Previous report
Interest expense increased $5.5 million, or 229.6%, to $8.0 million for the three months ended March 31, 2024, from $2.4 million for the three months ended March 31, 2023, which was primarily related to increases in average interest-bearing liabilities resulting from the MBF merger as well as an increase in funding costs. The Corporation was more reliant on wholesale funding for the three months ended March 31, 2024. As a result, average borrowed funds, which is largely comprised of customer repurchase agreements and FHLB of Pittsburgh advances, averaged $272.5 million for the three months ended March 31, 2024, an increase of $91.1 million from $181.4 million for the three months ended March 31, 2023. Higher volumes of average borrowed funds resulted in a corresponding increase in interest expense of $1.1 million. Total average interest-bearing deposits increased $396.7 million, or 79.0%, to $898.8 million for the three months ended March 31, 2024, compared to $502.1 million for the three months ended March 31, 2023, which resulted in a corresponding increase in interest expense of $907,000. In the latter half of 2022 and into 2023 and 2024, following the rapid rise in market interest rates, competition for deposits intensified and depositors became increasingly rate sensitive. The Corporation responded with increases in deposit rates. As a result, the Corporation experienced an increase in interest expense due to an increase in funding costs. For the three months ended March 31, 2024, the Corporation’s cost of funds increased 130 basis points to 2.73% from 1.43% for the three months ended March 31, 2023, which resulted in a corresponding increase in interest expense of $3.6 million.
Previous report
Reconcilement of Taxable Equivalent Net Interest Income
Previous report
At March 31, 2024, our cumulative gap positions and the potential earnings change resulting from various change in rates were both within the internal risk management guidelines.
Previous report
In addition to gap analysis, the Bank uses earnings simulation to assist in measuring and controlling interest rate risk. The Bank also simulates the impact on net interest income of plus and minus 100, 200, 300 and 400 basis point rate shocks. The results of these theoretical rate shocks provide an additional tool to help manage the Bank’s interest rate risk.
Reworded paragraphs (39)
Previous wording
Management’s Discussion and Analysis of Financial Condition and Results of Operations, or MD&A, represents an overview of the financial condition and results of operations of the Corporation and should be read in conjunction with the more detailed and comprehensive disclosures included in the Annual Report on Form 10-K for the year ended December 31, 2023. In addition, please read this section in conjunction with the unaudited consolidated financial statements and notes to the unaudited consolidated financial statements contained in Item 1, “Financial Statements” of Part I to this Quarterly Report on Form 10-Q.
Current wording
Management’s Discussion and Analysis of Financial Condition and Results of Operations, or MD&A, represents an overview of the financial condition and results of operations of the Corporation and should be read in conjunction withthe more detailed and comprehensive disclosures included in the Annual Report on Form 10-K for the year ended December 31, 2023. In addition, please read this section in conjunction with the unaudited consolidated financial statements and notes to the unaudited consolidated financial statements contained in Item 1, “Financial Statements” of Part I to this Quarterly Report on Form 10-Q.
Previous wording
Management evaluates the credit quality of the Corporation’s loan portfolio on an ongoing basis and performs a formal review of the adequacy of the ACL on a quarterly basis. The ACL is established through a provision for credit losses charged to earnings and is maintained at a level that management considers to be an estimate of the lifetime expected credit losses of the portfolio as of theevaluation date. Loans, or portions of loans, determined by management to be uncollectible are charged off against the ACL, while recoveries of amounts previously charged off are credited to the ACL.
Current wording
Management evaluates the credit quality of the Corporation’s loan portfolio on an ongoing basis and performs a formal review of the adequacy of the ACL on a quarterly basis. The ACL is established through a provision for credit losses charged to earnings and is maintained at a level that management considers to be an estimate of the lifetime expected credit losses of the portfolio as of the evaluation date. Loans, or portions of loans, determined by management to be uncollectible are charged off against the ACL, while recoveries of amounts previously charged off are credited to the ACL.
Previous wording
Although the Corporation’s management uses the best information available, the level of the ACL remains an estimate which is subject to significant judgment and short-term change which could have a significant impact on the Corporation’s financial condition or results of operations. From January 1, 2024 to March 31, 2024, the level of the ACL increased from $9.3 million to $9.4 million and the ACL to total loans remained consistent at 0.87%. The Corporation’s ACL is highly sensitive to the methods, assumptions and estimates underlying its calculation. See Note 4 “Loans and Allowance for Credit Losses” within the Corporation’s Notes to the Unaudited Consolidated Financial Statements which are included in Part I of this Quarterly Report on Form 10-Q for additional qualitative and quantitative information about the Corporation’s ACL.
Current wording
Although the Corporation’s management uses the best information available, the level of the ACL remains an estimate which is subject to significant judgment and short-term change which could have a significant impact on the Corporation’s financial condition or results of operations. From January 1, 2024 to June 30, 2024, the level of the ACL increased from $9.3 million to $9.4 million and the ACL to total loans decreased from at 0.87% to 0.85%. The Corporation’s ACL is highly sensitive to the methods, assumptions and estimates underlying its calculation. See Note 4 “Loans and Allowance for Credit Losses” within the Corporation’s Notes to the Unaudited Consolidated Financial Statements which are included in Part I of this Quarterly Report on Form 10-Q for additional qualitative and quantitative information about the Corporation’s ACL.
Previous wording
In connection with the acquisition, effective November 11, 2023, the Corporation recorded goodwill of $ 17.7 million and a core deposit intangible asset of $12.1 million. Assets acquired totaled $671.4 million, including gross loans valued at $504.1 million, available-for-sale debt securities valued at $93.0 million, bank-owned life insurance valued at $17.8 million and premises and equipment, net, valued at $14.9 million. Liabilities assumed totaled $634.0 million, including deposits valued at $521.3 million andborrowings valued at $105.5 million. The assets purchased and liabilities assumed in the acquisition were recorded at their preliminary estimated fair values at the time of closing and may be adjusted for up to one year subsequent to the acquisition.
Current wording
In connection with the acquisition, effective November 11, 2023, the Corporation recorded goodwill of $17.7 million and a core deposit intangible asset of $12.1 million. Assets acquired totaled $671.4 million, including gross loans valued at $504.1 million, available-for-sale debt securities valued at $93.0 million, bank-owned life insurance valued at $17.8 million and premises and equipment, net, valued at $14.9 million. Liabilities assumed totaled $634.0 million, including deposits valued at $521.3 million and borrowings valued at $105.5 million. The assets purchased and liabilities assumed in the acquisition were recorded at their preliminary estimated fair values at the time of closing and may be adjusted for up to one year subsequent to the acquisition.
Previous wording
For the three months ended March 31, 2024, the Corporation incurred pre-tax merger-related expenses related to the MBF transaction of $96,000, compared to $0 for the three months ended March 31, 2023 and $3.0 million for the year ended December 31, 2023. Merger-related expenses include voluntary severance and similar expenses as well as expenses related to conversion of MBF’s core banking system into the Corporation’s core system and legal and other professional expenses.
Current wording
For the three and six months ended June 30, 2024, the Corporation incurred pre-tax merger-related expenses related to the MBF transaction of $201,000 and $297,000, respectively, compared to $449,000 for the three and six months ended June 30, 2023. Merger-related expenses include voluntary severance and similar expenses as well as expenses related to conversion of MBF’s core banking system into the Corporation’s core system and legal and other professional expenses.
Previous wording
Total assets at March 31, 2024, were $1.573 billion, a decrease of $66.5 million, or 4.1% from $1.640 billion at December 31, 2023. The change in total assets primarily reflected decreases in cash and cash equivalents, available-for-sale debt securities, and restricted investment in bank stocks, partially offset by an increase in loans receivable. Cash and cash equivalents decreased $2.1 million, available-for-sale debt securities decreased $73.7 million, and restricted investment in bank stocks decreased $2.4 million. Gross loans receivable increased $12.3 million. Total liabilities at March 31, 2024, were $1.418 billion, a decrease of $67.5 million, or 4.5% from $1.486 billion at December 31, 2023. Deposit balances increased by $62.8 million, short-term borrowings decreased $126.7 million and long-term borrowings decreased $4.9 million since December 31, 2023.
Current wording
Total assets at June 30, 2024, were $1.592 billion, a decrease of $47.5 million, or 2.9% from $1.640 billion at December 31, 2023. The change in total assets primarily reflected decreases in available-for-sale debt securities and restricted investment in bank stocks, partially offset by increases in cash and cash equivalents and loans receivable. Available-for-sale debt securities decreased $78.5 million and restricted investment in bank stocks decreased $2.3 million. Cash and cash equivalents increased $3.1 million and gross loans receivable increased $32.2 million. Total liabilities at June 30, 2024, were $1.434 billion, a decrease of $51.3 million, or 3.5% from $1.486 billion at December 31, 2023. Deposit balances increased by $115.0 million, short-term borrowings decreased $163.2 million and long-term borrowings decreased $4.9 million since December 31, 2023.
Previous wording
Total average assets increased 67.0% from $952.2 million for the three months ended March 31, 2023, to $1.590 billion for the three months ended March 31, 2024, primarily related to the MBF merger. Average earning assets were $1.493 billion for the three months ended March 31, 2024 and $889.0 million for the three months ended March 31, 2023. Average interest- bearing liabilities were $1.171 billion for the three months ended March 31, 2024 and $683.5 million for the three months ended March 31, 2023.
Current wording
Total average assets increased 64.9% from $957.6 million for the three months ended June 30, 2023, to $1.579 billion for the three months ended June 30, 2024, primarily related to the MBF merger. Average earning assets were $1.483 billion for the three months ended June 30, 2024 and $893.3 million for the three months ended June 30, 2023. Average interest-bearing liabilities were $1.150 billion for the three months ended June 30, 2024 and $685.2 million for the three months ended June 30, 2023.
Previous wording
Available-for-sale debt securities decreased $73.7 million to $339.6 million at March 31, 2024 from $413.3 million at December 31, 2023. On January 17, 2024, the Corporation sold available- for-sale debt securities with a total market value of $50.3 million, the proceeds of which were utilized to paydown short-term FHLB borrowings. Securities sold included $34.2 million of US government agency securities, $15.5 million of mortgaged-backed securities and $563,000 of collateralized mortgage obligations. In addition to the securities sold during the quarter, the Corporation received proceeds from paydowns, calls and maturities of available-for-sale debt securities of $21.7 million during the quarter.
Current wording
Available-for-sale debt securities decreased $78.5 million to $334.8 million at June 30, 2024 from $413.3 million at December 31, 2023. On January 17, 2024, the Corporation sold available-for-sale debt securities with a total market value of $50.3 million, the proceeds of which were utilized to paydown short-term FHLB borrowings. Securities sold included $34.2 million of US government agency securities, $15.5 million of mortgaged-backed securities and $563,000 of collateralized mortgage obligations. In addition to the securities sold, the Corporation received proceeds from paydowns, calls and maturities of available-for-sale debt securities of $26.1 million during the six months ended June 30, 2024.
Previous wording
Restricted investment in bank stocks decreased $2.4 million to $8.0 million at March 31, 2024 from $10.4 million at December 31, 2023. This decrease is directly attributable to the decrease in required FHLB stock holdings due to the paydown in short and long-term FHLB borrowings.
Current wording
Restricted investment in bank stocks decreased $2.3 million to $8.1 million at June 30, 2024 from $10.4 million at December 31, 2023. This decrease is directly attributable to the decrease in required FHLB stock holdings due to the paydown in short and long-term FHLB borrowings.
Previous wording
Cash and cash equivalents decreased $2.1 million or 11.7% from $18.4 million at December 31, 2023 to $16.2 million at March 31, 2024. This decrease is primarily related to reduced branch cash levels as well as the timing of items clearing through correspondent bank balances.
Current wording
Cash and cash equivalents increased $3.1 million or 16.9% from $18.4 million at December 31, 2023 to $21.5 million at June 30, 2024. This increase is primarily related to increased branch cash levels as well as the timing of items clearing through correspondent bank balances.
Previous wording
Gross loans not held for sale increased 1.2% to $1.081 billion at March 31, 2024 from $1.068 billion at December 31, 2023.
Current wording
Gross loans not held for sale increased 3.0% to $1.101 billion at June 30, 2024 from $1.068 billion at December 31, 2023. This increase is related to strong loan demand in the first six months of 2024.
Previous wording
Interest-bearing deposits increased $ 64.9 million to $949.5 million at March 31, 2024 from $884.7 million at December 31, 2023. Noninterest-bearing deposits decreased 0.8% from $266.0 million at December 31, 2023 to $ 264.0 million at March 31, 2024. The increase in interest-bearing deposits during the quarter-ended March 31, 2024 was as a result of a strategic initiative to reposition customer repurchase agreements, which are classified as short-term borrowings, into core deposit accounts. The Bank anticipates a continued migration of customer repurchase accounts from short-term borrowings to interest bearing deposits throughout 2024. The decrease in noninterest-bearing deposits is as a result of the migration of deposits from noninterest-bearing to interest bearing due to the rate environment.
Current wording
Interest-bearing deposits increased $117.6 million to $1.002 billion at June 30, 2024 from $884.7 million at December 31, 2023. Noninterest-bearing deposits decreased 1.0% from $266.0 million at December 31, 2023 to $263.4 million at June 30, 2024. The increase in interest-bearing deposits during the six months ended June 30, 2024 was as a result of a strategic initiative to reposition customer repurchase agreements, which are classified as short-term borrowings, into core deposit accounts. The Bank anticipates a continued migration of customer repurchase accounts from short-term borrowings to interest bearing deposits throughout the remainder of 2024. The decrease in noninterest-bearing deposits was as a result of the migration of deposits from noninterest-bearing to interest bearing due to the interest rate environment.
Previous wording
Short-term borrowings decreased $126.7 million to $125.9 million at March 31, 2024 from $252.5 million at December 31, 2023. This change was primarily related to the migration of customer repurchase agreements as well as a paydown in short-term FHLB borrowings during the quarter discussed above.
Current wording
Short-term borrowings decreased $163.2 million to $89.3 million at June 30, 2024 from $252.5 million at December 31, 2023. This change was primarily related to the migration of customer repurchase agreements as well as a paydown in short-term FHLB borrowings during the quarter as discussed above.
Previous wording
Long-term borrowings were $65.5 million at March 31, 2024 compared to $70.4 million at December 31, 2023. This decrease is primarily related to a $5.0 million long-term borrowing maturity during the first quarter.
Current wording
Long-term borrowings were $65.6 million at June 30, 2024 compared to $70.4 million at December 31, 2023. This decrease is primarily related to a $5.0 million long-term borrowing maturity during the first quarter 2024.
Previous wording
Total stockholder’s equity increased by $1.0 million, or 0.7%, from $153.8 million at December 31, 2023, to $154.9 million at March 31, 2024. The increase is primarily attributable to earnings, net of cash dividends for the quarter, partially offset by an increase in accumulated other comprehensive loss due to changes in the fair values of available-for-sale investment securities. Accumulated other comprehensive loss amounted to $16.5 million as of March 31, 2024 and $15.0 million as of December 31, 2023.
Current wording
Total stockholder’s equity increased by $3.8 million, or 2.5%, from $153.8 million at December 31, 2023, to $157.6 million at June 30, 2024. The increase is primarily attributable to earnings, net of cash dividends, partially offset by an increase in accumulated other comprehensive loss due to changes in the fair values of available-for-sale investment securities. Accumulated other comprehensive loss amounted to $16.9 million as of June 30, 2024 and $15.0 million as of December 31, 2023.
Previous wording
The loan-to-deposit ratio is a key measurement of liquidity. Our loan-to-deposit ratio decreased from 92.0% as of December 31, 2023 to 88.3% as of March 31, 2024 due to the asset/liability mix changes noted above, and remains within internal policy limits.
Current wording
The loan-to-deposit ratio is a key measurement of liquidity. Our loan-to-deposit ratio decreased from 92.0% as of December 31, 2023 to 86.2% as of June 30, 2024 due to the asset/liability mix changes noted above, and remains within internal policy limits.
Previous wording
The majority of the Corporation's debt securities are fixed-rate instruments and inherently subject to interest rate risk, as the value of fixed-rate securities fluctuates with changes in interest rates. Generally, a security's value reacts inversely with changes in interest rates. Available-for-sale securities are carried at fair value, with unrealized gains or losses reported in the accumulated other comprehensive income or loss component of stockholder's equity, net of deferred income taxes. At March 31, 2024, the Corporation reported a net unrealized loss, included in accumulated other comprehensive loss, of $16.5 million, net of deferred income taxes of $4.4 million, an increase of $1.5 million compared to the net unrealized holding loss of $15.0 million, net of deferred income taxes of $4.0 million, at December 31, 2023. Any future changes in interest rates could result in changes in the fair value of the Corporation’s securities portfolio and capital position. However, accumulated other comprehensive income and loss related to available-for-sale debt securities is excluded from regulatory capital and does not have an impact on the Corporation's regulatory capital ratios.
Current wording
The majority of the Corporation’s debt securities are fixed-rate instruments and inherently subject to interest rate risk, as the value of fixed-rate securities fluctuates with changes in interest rates. Generally, a security’s value reacts inversely with changes in interest rates. Available-for-sale securities are carried at fair value, with unrealized gains or losses reported in the accumulated other comprehensive income or loss component of stockholder’s equity, net of deferred income taxes. At June 30, 2024, the Corporation reported a net unrealized loss, included in accumulated other comprehensive loss, of $16.9 million, net of deferred income taxes of $4.5 million, an increase of $1.9 million compared to the net unrealized holding loss of $15.0 million, net of deferred income taxes of $4.0 million, at December 31, 2023. Any future changes in interest rates could result in changes in the fair value of the Corporation’s securities portfolio and capital position. However, accumulated other comprehensive income and loss related to available-for-sale debt securities is excluded from regulatory capital and does not have an impact on the Corporation’s regulatory capital ratios.
Previous wording
At March 31, 2024 and December 31, 2023, the Corporation had $1.2 million and $1.3 million in equity securities recorded at fair value, respectively. The following is a summary of unrealized and realized gains and losses recognized in net income on equity securities during the three months ended March 31, 2024 and 2023:
Current wording
At June 30, 2024 and December 31, 2023, the Corporation had $1.1 million and $1.3 million in equity securities recorded at fair value, respectively. The following is a summary of unrealized and realized gains and losses recognized in net income on equity securities during the three and six months ended June 30, 2024 and 2023:
Previous wording
Gross loans receivable increased 1.2% from $1.068 billion at December 31, 2023 to $1.081 billion at March 31, 2024. The percentage distribution in the loan portfolio is shown in the tables below:
Current wording
Gross loans receivable increased 3.0% from $1.068 billion at December 31, 2023 to $1.101 billion at June 30, 2024. The percentage distribution in the loan portfolio is shown in the tables below:
Previous wording
As of March 31, 2024, commercial real estate loans totaled $363.5 million or 33.6% of total gross loans. Of this amount commercial mortgage loans represented $328.0 million or 30.3% of total gross loans and student housing loans represented $35.5 million or 3.3% of total gross loans. The following table presents the distribution of commercial mortgage loans and related percentage of the total loan portfolio as of March 31, 2024:
Current wording
As of June 30, 2024, commercial real estate loans totaled $367.9 million or 33.4% of total gross loans. Of this amount commercial mortgage loans represented $327.8 million or 29.8% of total gross loans and student housing loans represented $40.1 million or 3.6% of total gross loans. The following table presents the distribution of commercial mortgage loans and related percentage of the total loan portfolio as of June 30, 2024 and December 31, 2023:
Previous wording
The allowance for credit losses was $9.4 million at March 31, 2024, compared to $9.3 million at December 31, 2023. This allowance equaled 0.87% of total loans, net of unearned fees and costs and unamortized fair value adjustments, at both March 31, 2024 and December 31, 2023. The allowance for credit losses was analyzed quarterly and reviewed by the Corporation’s Board of Directors. No concentration or apparent deterioration in classes of loans or pledged collateral was evident. Regular loan meetings with the Corporation’s Board of Directors reviewed new loans. Delinquent loans, loan exceptions and certain large loans are addressed by the full Board no less than monthly to determine compliance with policies.
Current wording
The allowance for credit losses was $9.4 million at June 30, 2024, compared to $9.3 million at December 31, 2023. The allowance equaled 0.85% of total loans, net of unearned fees and costs and unamortized fair value adjustments, at June 30, 2024 as compared to 0.87% of total loans at December 31, 2023. The allowance for credit losses was analyzed quarterly and reviewed by the Corporation’s Board of Directors. No concentration or apparent deterioration in classes of loans or pledged collateral was evident. Regular loan meetings with the Corporation’s Board of Directors reviewed new loans. Delinquent loans, loan exceptions and certain large loans are addressed by the full Board no less than monthly to determine compliance with policies.
Previous wording
At March 31, 2024, estimated uninsured deposits, or the portion of deposit accounts which exceeded the Federal Deposit Corporation insurance limit, totaled $311.9 million. Of this amount, $136.2 million was collateralized by securities pledged by the Corporation or letters of credit issued through the Federal Home Loan Bank of Pittsburgh. Time deposits of $250,000 or more totaled approximately $100.2 million at March 31, 2024.
Current wording
At June 30, 2024, estimated uninsured deposits, or the portion of deposit accounts which exceeded the Federal Deposit Corporation insurance limit, totaled $337.5 million. Of this amount, $137.0 million was collateralized by securities pledged by the Corporation or letters of credit issued through the Federal Home Loan Bank of Pittsburgh. Time deposits of $250,000 or more totaled approximately $100.1 million at June 30, 2024.
Previous wording
The average balance of short-term borrowings, including securities sold under agreements to repurchase and day-to-day FHLB - Pittsburgh borrowings increased $21.2 million or 11.7% from $181.4 million in the first quarter 2023 to $202.7 million in the first quarter 2024. Average short-term borrowings amounted to 17.3% of total interest-bearing liabilities for the three months ended March 31, 2024 as compared to 26.5% for the three months ended March 31, 2023. Short-term borrowings consist primarily of securities sold under agreements to repurchase and periodic overnight or short-term Federal Home Loan Bank advances.
Current wording
Short-term borrowings consist primarily of securities sold under agreements to repurchase and periodic overnight or short-term Federal Home Loan Bank advances. Average short-term borrowings amounted to 10.3% and 13.8% of total interest-bearing liabilities for the three and six months ended June 30, 2024, respectively, as compared to 27.3% and 26.9% for the three and six months ended June 30, 2023, respectively. This change was primarily related to the migration of customer repurchase agreements as well as a paydown in short-term FHLB borrowings during 2024 as discussed above.
Previous wording
Long-term borrowings consist of advances due to the FHLB - Pittsburgh. Under terms of a blanket agreement, the loans are secured by certain qualifying assets of the Bank which consist principally of first mortgage loans. The carrying value of these collateralized items was $788.4 million at March 31, 2024. The Bank has lines of credit with the Federal Reserve Bank Discount Window, FHLB – Pittsburgh, and Atlantic Community Bankers Bank in the aggregate amount of $563.9 million at March 31, 2024. The unused portion of these lines of credit was $386.3 million at March 31, 2024.
Current wording
Long-term borrowings consist of advances due to the FHLB - Pittsburgh. Under terms of a blanket agreement, the loans are secured by certain qualifying assets of the Bank which consist principally of first mortgage loans. The carrying value of these collateralized items was $800.7 million at June 30, 2024. The Bank has lines of credit with the Federal Reserve Bank Discount Window, FHLB – Pittsburgh, and Atlantic Community Bankers Bank in the aggregate amount of $572.7 million at June 30, 2024. The unused portion of these lines of credit was $399.2 million at June 30, 2024.
Previous wording
Net income for the three months ended March 31, 2024 amounted to $4.0 million, or $1.13 per share, an increase of $2.1 million, or 108.0%, compared to $1.9 million, or $0.93 per share, for the three months ended March 31, 2023. The increase in net income for the three months ended March 31, 2024, compared to the same period in 2023, was primarily attributable to the MBF merger.
Current wording
Net income for the quarter ended June 30, 2024 was $4,707,000, or $1.32 per share compared to net income of $1,462,000, or $0.71 per share for the same period in 2023. Net income for the six months ended June 30, 2024 was $8,743,000, or $2.45 per share compared to $3,402,000, or $1.64 per share for the same period in 2023. The increase in net income for the three and six months ended June 30, 2024, compared to the same periods in 2023, was primarily attributable to the MBF merger.
Previous wording
Net interest income increased $6.7 million, or 129.5% to $11.9 million for the three months ended March 31, 2024, from $5.2 million for the three months ended March 31, 2023. Non-interest income was $2.5 million for the three months ended March 31, 2024, an increase of $0.9 million, or 55.7%, from $1.6 million for the three months ended March 31, 2023, which primarily related to increases in interchange fees and other non-interest income. Non-interest expense was $9.6 million for the three months ended March 31, 2024, an increase of $4.8 million, or 100.2%, from $4.8 million for the three months ended March 31, 2023, which was primarily related to increases in expenses related to the MBF merger.
Current wording
Net interest income increased $7.5 million, or 151.6% to $12.4 million for the three months ended June 30, 2024, from $4.9 million for the three months ended June 30, 2023. Non-interest income was $2.4 million for the three months ended June 30, 2024, an increase of $0.7 million, or 41.8%, from $1.7 million for the three months ended June 30, 2023, which primarily related to increases in service charges and fees, interchange fees and other non-interest income. Non-interest expense was $9.2 million for the three months ended June 30, 2024, an increase of $4.3 million, or 89.3%, from $4.9 million for the three months ended June 30, 2023, which was primarily related to increases in expenses related to the MBF merger.
Previous wording
Tax-equivalent net interest income increased $6.9 million, or 130.8%, to $12.2 million for the three months ended March 31, 2024, compared to $5.3 million for the three months ended March 31, 2023. The increase in tax-equivalent net interest income was due to an increase in tax-equivalent interest income reflecting higher earning asset volumes and yields, partially offset by an increase in interest expense which resulted primarily from an increase in interest-bearing deposits and increased utilization of borrowed funds. Tax-equivalent net interest margin, a key measurement used in the banking industry to measure income from earning assets relative to the cost to fund those assets, is calculated by dividing tax-equivalent net interest income by average interest-earning assets. The Corporation’s tax-equivalent net interest margin increased 91 basis points to 3.32% for the three months ended March 31, 2024, compared to 2.41% for the three months ended March 31, 2023, which was largely caused by higher yields on earning assets outpacing the increase funding costs. The Corporation’s interest rate spread, the difference between the average yield on interest-earning assets, shown on a fully tax-equivalent basis, and the average cost of interest-bearing liabilities, also increased comparing the three months ended March 31, 2024 and 2023. The Corporation’s rate spread was 2.70% for the three months ended March 31, 2024, an increase of 63 basis points as compared to 2.07% for the three months ended March 31, 2023.
Current wording
Net interest income on a tax-equivalent basis increased $7.6 million, or 152.4%, to $12.6 million for the three months ended June 30, 2024 from $5.0 million for the comparable period of 2023. The increase in tax-equivalent net interest income primarily reflected an increase in tax equivalent interest income of $12.4 million, or 154.1%, to $20.5 million from $8.1 million, comparing the second quarters of 2024 and 2023, respectively, partially offset by an increase in interest expense of $4.8 million, to $7.8 million for the second quarter of 2024 from $3.1 million for the same quarter of 2023. The tax-equivalent net interest margin, a key measurement used in the banking industry to measure income from earning assets relative to the cost to fund those assets, is calculated by dividing tax-equivalent net interest income by average interest-earning assets. The Corporation’s tax-equivalent net interest margin increased 118 basis points to 3.43% for the second quarter of 2024 from 2.25% for the same quarter of 2023. Additionally, rate spread, the difference between the average yield on interest-earning assets and the average cost of interest-bearing liabilities shown on a fully tax-equivalent basis, increased 98 basis points to 2.81% for the three months ended June 30, 2024 from 1.83% for the same three months of 2023.
Previous wording
Tax-equivalent interest income increased $12.5 million, or 161.7%, to $20.2 million for the three months ended March 31, 2024, from $7.7 million for the three months ended March 31, 2023, which was largely caused by significant increases in average earning assets due to the MBF merger, coupled with an increase in the tax-equivalent yield on average earning assets. Average earning assets increased $604.0 million, or 67.9%, to $1.493 billion for the three months ended March 31, 2024, from $889.0 million for the three months ended March 31, 2023, resulting in a corresponding increase to tax-equivalent interest income of $7.2 million. Specifically, average loans increased $559.8 million, or 104.0%, to $1.098 billion for the three months ended March 31, 2024, from $538.4 million for the three months ended March 31, 2023, which reflected strong organic loan demand, as well as the MBF merger. Investment securities averaged $389.7 million for the three months ended March 31, 2024, an increase of $44.4 million, or 12.9%, compared to $345.3 million for the three months ended March 31, 2023, which contributed $655,000 to tax-equivalent interest income. The tax-equivalent yield on earning assets increased 192 basis points to 5.43% for the three months ended March 31, 2024, from 3.51% for the same period in 2023, which resulted in a corresponding increase in tax-equivalent interest income of $5.2 million. The Corporation’s tax-equivalent yield on loans increased 180 basis points to 6.48% for the three months ended March 31, 2024, compared to 4.68% in 2023, resulting in a corresponding increase in tax-equivalent interest income of $4.8 million, due primarily to net accretion of loan fair value adjustments recorded in conjunction with the MBF merger as well as the continued repricing of existing loans in the Corporation’s portfolio. The tax-equivalent yield on investment securities increased 81 basis points to 2.48% for the three months ended March 31, 2024, from 1.67% for the three months ended March 31, 2023, and caused a corresponding increase to tax-equivalent interest income of $186,000.
Current wording
The $12.4 million, or 154.1%, increase in tax-equivalent interest income comparing the three months ended June 30, 2024 and 2023 largely reflected an increase in the tax-equivalent yield on average earning assets, coupled with significant growth in average earning assets related to the MBF merger. The tax-equivalent yield on average earning assets increased 193 basis points to 5.55% for the second quarter of 2024 from 3.62% for the same quarter of 2023, which resulted in a corresponding $5.0 million increase to tax-equivalent interest income. Specifically, the tax-equivalent yield on the loan portfolio increased 175 basis points to 6.58% from 4.83% comparing the second quarters of 2024 and 2023, which was due primarily to net accretion of loan fair value adjustments recorded in conjunction with the MBF merger as well as the continued repricing of existing loans in the Corporation’s portfolio. Additionally, the tax-equivalent yield on the investment portfolio increased 77 basis points to 2.46% for the second quarter of 2024 from 1.69% for the same quarter of 2023. These yield increases resulted in corresponding increases in tax-equivalent interest income of $4.7 million, and $232,000, respectively. Additionally, total average earning assets increased $621.1 million, or 64.9%, to $1.483 billion for the three months ended June 30, 2024, from $957.6 million for the same three months of 2023, which resulted in a corresponding increase in tax-equivalent interest income of $7.5 million. Specifically, average total loans increased $563.8 million, or 103.2%, to $1.110 billion for the second quarter of 2024 from $546.1 million for the same quarter of 2023, which largely reflected the impact of the MBF merger along with strong organic loan demand. The increase in the average loan balances resulted in a corresponding increase to tax-equivalent interest income of $6.8 million comparing the three months ended June 30, 2024, and 2023. Meanwhile, total securities averaged $368.2 million for the second quarter of 2024, an increase of $22.6 million, or 6.5%, from $345.6 million for the same quarter of 2023, which caused a corresponding increase to tax-equivalent interest income of $561,000.
Previous wording
The following Average Balance Sheet and Rate Analysis tables presents the average assets, actual income or expense and the average yield on assets, liabilities and stockholders’ equity for the three months ended March 31, 2024 and 2023.
Current wording
The following Average Balance Sheet and Rate Analysis tables presents the average assets, actual income or expense and the average yield on assets, liabilities and stockholders’ equity for the three and six months ended June 30, 2024 and 2023.
Previous wording
To enhance the understanding of the effects of volumes (the average balance of earning assets and costing liabilities) and average interest rate fluctuations on the Consolidated Balance Sheets as it pertains to net interest income, the table below reflects these changes for the three months ended March 31, 2024 versus the three months ended March 31, 2023:
Current wording
To enhance the understanding of the effects of volumes (the average balance of earning assets and costing liabilities) and average interest rate fluctuations on the Consolidated Balance Sheets as it pertains to net interest income, the table below reflects these changes for the three and six months ended June 30, 2024 versus the three and six months ended June 30, 2023:
Previous wording
For the three months ended March 31, 2024, the Corporation recorded a $101,000 provision for credit losses on loans, compared to a $418,000 credit for the three months ended March 31, 2023. For the three months ended March 31, 2024, the provision for credit losses primarily reflects an increase in volume in the loan portfolio during the quarter. For the three months ended March 31, 2023, the credit was primarily related to the clarity that existed related to the COVID-19 pandemic and the related financial condition of municipalities and local businesses.
Current wording
For the three and six months ended June 30, 2024, the Corporation recorded a $36,000 and $137,000 provision for credit losses on loans, respectively, compared to a $4,000 and $422,000 credit, respectively, for the three and six months ended June 30, 2023. For the three and six months ended June 30, 2024, the provision for credit losses primarily reflects an increase in volume in the loan portfolio during the quarters. For the three and six months ended June 30, 2023, the credit was primarily related to improved economic forecasts and ongoing low charge-off experience.
Previous wording
Total non-interest income increased $906,000 or 55.7% to $2.5 million for the three months ended March 31, 2024, compared to the three months ended March 31, 2023. Earnings on bank-owned life insurance increased $118,000 or 108.3% from $109,000 to $227,000 due to an increase in cash surrender values related to the MBF merger. Interchange fees increased $195,000 or 46.0% due to an increase in the volume of transactions due to the MBF merger and continued increase in electronic payments. Other non-interest income increased $389,000 or 129.2% due to incentives received in conjunction with the launch of a debit card reissuance project during the first quarter 2024 as well as a governmental grant recorded in the first quarter in conjunction with the completion of a solar energy project.
Current wording
Total non-interest income increased $713,000 or 41.8% to $2.4 million for the three months ended June 30, 2024, compared to the three months ended June 30, 2023. Service charges and fees increased $153,000 due to an increased number of accounts and increased transaction volumes due to the MBF merger. Earnings on bank-owned life insurance increased $116,000 or 102.7% from $113,000 to $229,000 due to an increase in cash surrender values related to the MBF merger. Interchange fees increased $245,000 or 55.4% due to an increase in the volume of transactions due to the MBF merger and continued increase in electronic payments. Other non-interest income increased $156,000 or 68.1% due to incentives received in conjunction with the launch of a debit card reissuance project and an increase in other miscellaneous income.
Previous wording
Total non-interest expense increased $4.8 million or 100.2% from $4.8 million for the three months ended March 31, 2023, to $9.6 million for the three months ended March 31, 2024. The MBF merger has contributed significantly to increases in all components of non-interest expense. Salaries and employee benefits increased $2.2 million, occupancy increased $295,000, furniture and equipment increased $377,000, professional fees increased $488,000, federal deposit insurance increased $112,000, automated teller machine and interchange increased $143,000 and other non-interest expense increased $454,000. All of these increases relate to the closing of the MBF merger on November 11, 2023. Merger-related expenses totaled $96,000 and amortization of core deposit intangible totaled $549,000 for the three months ended March 31, 2024.
Current wording
Total non-interest expense increased $4.3 million or 89.3% from $4.9 million for the three months ended June 30, 2023, to $9.2 million for the three months ended June 30, 2024. The MBF merger has contributed significantly to increases in all components of non-interest expense. Salaries and employee benefits increased $2.2 million, occupancy increased $261,000, data processing and telecommunications increased $572,000, automated teller machine and interchange increased $115,000 and other non-interest expense increased $521,000. All of these increases relate to the closing of the MBF merger on November 11, 2023. Merger-related expenses totaled $201,000 and amortization of intangibles totaled $549,000 for the three months ended June 30, 2024, compared to $449,000 and $0 for the three months ended June 30, 2023.
Previous wording
One standard to measure non-interest expense is to express annualized non-interest expense as a percentage of average total assets. For the three months ended March 31, 2024 this percentage was 2.44% compared to 2.03% for the three months ended March 31, 2023.
Current wording
One standard to measure non-interest expense is to express annualized non-interest expense as a percentage of average total assets. For the three and six months ended June 30, 2024 this percentage was 2.49% and 2.55%, respectively, compared to 2.19% and 2.18%, respectively, for the three and six months ended June 30, 2023.
Previous wording
The Bank’s liquidity, represented by cash and due from banks, is a product of its operating, investing and financing activities. The Bank’s primary sources of funds are deposits, securities sold under agreements to repurchase, principal repayments of securities and outstanding loans, funds provided from operations, and day-to-day FHLB – Pittsburgh borrowings. In addition, the Corporation invests excess funds in short-term interest-earning assets such as overnight deposits or U.S. agency securities, which provide liquidity to meet lending requirements. While scheduled payments from the amortization of loans and securities and short-term investments are relatively predictable sources of funds, general interest rates, economic conditions and competition greatly influence deposit flows and repayments on loans and mortgage-backed securities.
Current wording
The Bank’s liquidity, represented by cash and due from banks, is a product of its operating, investing and financing activities. The Bank’s primary sources of funds are deposits, securities sold under agreements to repurchase, principal repayments of securities and outstanding loans, funds provided from operations, and day-to-day FHLB – Pittsburgh borrowings. In addition, the Bank invests excess funds in short-term interest-earning assets such as overnight deposits or U.S. agency securities, which provide liquidity to meet lending requirements. While scheduled payments from the amortization of loans and securities and short-term investments are relatively predictable sources of funds, general interest rates, economic conditions and competition greatly influence deposit flows and repayments on loans and mortgage-backed securities.
Previous wording
The Bank strives to maintain sufficient liquidity to fund operations, loan demand and to satisfy fluctuations in deposit levels. The Bank is required to have enough investments that qualify as liquid assets in order to maintain sufficient liquidity to ensure safe and sound banking operations. Liquidity may increase or decrease depending upon the availability of funds and comparative yields on investments in relation to the return on loans. The Bank attempts to maintain adequate but not excessive liquidity, and liquidity management is both a daily and long-term function of its business management. The Bank manages its liquidity in accordance with a board of directors-approved asset liability policy, which is administered by its asset-liability committee (“ALCO”). ALCO reports interest rate sensitivity, liquidity, capital and investment-related matters on a quarterly basis to the Corporation’s board of directors.
Current wording
The Bank strives to maintain sufficient liquidity to fund operations, loan demand and to satisfy fluctuations in deposit levels. The Bank is required to have enough investments that qualify as liquid assets in order to maintain sufficient liquidity to ensure safe and sound banking operations. Liquidity may increase or decrease depending upon the availability of funds and comparative yields on investments in relation to the return on loans. The Bank attempts to maintain adequate but not excessive liquidity, and liquidity management is both a daily and long-term function of its business management. The Bank manages its liquidity in accordance with a board of directors-approved asset liability policy, which is administered by its asset-liability committee (“ALCO”). ALCO reports interest rate sensitivity, liquidity, capital and investment-related matters on a quarterly basis to the Bank’s board of directors.
Previous wording
The Bank reviews cash flow projections regularly and updates them in order to maintain liquid assets at levels believed to meet the requirements of normal operations, including loan commitments and potential deposit outflows from maturing certificates of deposit and savings withdrawals. While deposits and securities sold under agreements to repurchase are its primary source of funds, when needed it is also able to generate cash through borrowings from the FHLB. At March 31, 2024, the Bank had remaining available capacity with FHLB, subject to certain collateral restrictions, of $368.2 million.
Current wording
The Bank reviews cash flow projections regularly and updates them in order to maintain liquid assets at levels believed to meet the requirements of normal operations, including loan commitments and potential deposit outflows from maturing certificates of deposit and savings withdrawals. While deposits and securities sold under agreements to repurchase are its primary source of funds, when needed it is also able to generate cash through borrowings from the FHLB. At June 30, 2024, the Bank had remaining available capacity with FHLB, subject to certain collateral restrictions, of $381.0 million.
Previous wording
To manage the interest sensitivity position, an asset/liability model called “gap analysis” is used to monitor the difference in the volume of the Bank’s interest sensitive assets and liabilities that mature or reprice within given periods. A positive gap (asset sensitive) indicates that more assets reprice during a given period compared to liabilities, while a negative gap (liability sensitive) has the opposite effect. The Bank employs computerized net interest income simulation modeling to assist in quantifying interest rate risk exposure. This process measures and quantifies the impact on net interest income through varying interest rate changes and balance sheet compositions. The use of this model assists the ALCO to gauge the effects of the interest rate changes on interest sensitive assets and liabilities in order to determine what impact these rate changes will have upon our net interest spread.
Current wording
To manage the interest sensitivity position, an asset/liability model called “gap analysis” is used to monitor the difference in the volume of the Bank’s interest sensitive assets and liabilities that mature or reprice within given periods. A positive gap (asset sensitive) indicates that more assets reprice during a given period compared to liabilities, while a negative gap (liability sensitive) has the opposite effect. The Bank employs computerized net interest income simulation modeling to assist in quantifying interest rate risk exposure. This process measures and quantifies the impact on net interest income through varying interest rate changes and balance sheet compositions. The use of this model assists the ALCO to gauge the effects of the interest rate changes on interest sensitive assets and liabilities in order to determine what impact these rate changes will have upon our net interest spread. At June 30, 2024, our cumulative gap positions were within the internal risk management guidelines.
Previous wording
It is our opinion that the asset/liability mix and the interest rate risk associated with the balance sheet is within manageable parameters. Additionally, the Bank’s Asset/Liability Committee meets quarterly with an investment consultant.
Current wording
It is our opinion that the asset/liability mix and the interest rate risk associated with the balance sheet is within manageable parameters. Additionally, the Bank’s ALCO meets quarterly with an asset liability management consultant.
Rearranged current paragraphs (1)
Current report — wording carried from elsewhere
AVERAGE BALANCE SHEET AND RATE ANALYSIS
Rearranged previous paragraphs (1)
Previous report — wording carried elsewhere
This increase is related to strong loan demand in the first three months of 2024.