Executive Summary

The Company generated $20.8 million in net income in 2024, or $3.60 diluted earnings per share, an increase of $2.6 million, or 14%, from $18.2 million, or $3.19 diluted earnings per share, in 2023. However, the Company’s net interest income performance has been reduced by asset yields being outpaced by the increases of rates paid on deposits.

Nationally, the unemployment rate rose from 3.7% at December 31, 2023 to 4.1% at December 31, 2024. The unemployment rates in the Scranton - Wilkes-Barre - Hazleton (market area north) and the Allentown – Bethlehem - Easton (market area south) Metropolitan Statistical Areas (local) increased but were lower than the national rate. Median home values in these metro areas also increased.

In 2024, the Company experienced an increase in net income partially due to the effects from deleveraging from the sale of securities in the fourth quarter of 2023. This sale removed a negative spread and contributed to improving net interest income, earnings per share and net interest margin.

For the years ended December 31, 2024 and 2023, tangible common book value per share (non-GAAP) was $31.98 and $29.57, respectively, an increase of 8.2%. The increase was due primarily to an increase in retained earnings from net income.

During 2024, the Company’s assets grew by 3% primarily as a result of growth in the loan portfolio. Non-performing assets represented 0.30% of total assets as of December 31, 2024, up from 0.13% at the prior year end.

The Company continues to focus on the trusted financial advisor model by utilizing the team approach of experienced bankers that are fully engaged and dedicated towards maintaining and growing profitable relationships. Management expects to operate in a moderately declining interest rate environment throughout 2025 and plans to improve net interest margin compared to 2024.

Financial Condition

Consolidated assets increased $81.5 million, or 3%, to $2.6 billion as of December 31, 2024 from $2.5 billion as of December 31, 2023. The increase in assets was primarily due to loan portfolio growth.

Total deposits increased $182.4 million, or 8%, to $2.3 billion as of December 31, 2024 from $2.2 billion as of December 31, 2023. CDs increased $125.9 million, or 59%, as of December 31, 2024 primarily due to promotional rates and one relationship transferring funds to CDARS. Money market accounts increased $110.4 million primarily driven by maintaining a highly competitive rate offer.

The investment securities portfolio decreased $11.1 million, or 2%, during 2024. The decline was primarily due to principal reductions and a decrease in the unrealized loss position in the AFS portfolio, partially offset by purchases of MBS - GSE residential or mortgage-backed securities.

Gross loans and leases totaled $1.8 billion as of December 31, 2024, an increase of $113.6 million, or 7%, compared to $1.7 billion at December 31, 2023. The growth was primarily attributed to a $121.4 million, or 13%, increase in the commercial portfolio.

The allowance for credit losses increased $0.9 million, or 5%, to $19.7 million as of December 31, 2024 from $18.8 million at December 31, 2023. Non-performing assets represented 0.30% of total assets at December 31, 2024, up from 0.13% at the prior year end.

Results of Operation

Net income recorded for the year ended December 31, 2024 was $20.8 million, or $3.60 diluted earnings per share, compared to $18.2 million, or $3.19 diluted earnings per share, for the year ended December 31, 2023. The $2.6 million, or 14% increase in net income resulted primarily from a $7.6 million increase in non-interest income for 2024 compared to 2023.

Net interest income was $61.9 million for the year ended December 31, 2024 compared to $62.1 million for the year ended December 31, 2023. The $0.2 million decline was the result of interest expense growing faster than interest income. The FTE (non-GAAP measurement) net interest spread was 2.02% for the twelve months ended December 31, 2024, a decrease of 23 basis points from the 2.25% recorded for the same period of 2023.

For the year ended December 31, 2024, the provision for credit losses on loans was $1.3 million and the provision for credit losses on unfunded commitments was $0.1 million, compared to a $1.5 million provision for credit losses on loans and a $0.2 million net benefit for the provision for unfunded commitments for the year ended December 31, 2023.

Non-interest income amounted to $19.0 million for the year ended December 31, 2024, a $7.6 million, or 67%, increase compared to $11.4 million recorded for the year ended December 31, 2023. The primary driver of the large increase was the $6.5 million loss recognized on the sale of securities during 2023.

Total other operating expenses totaled $55.5 million for the year ended December 31, 2024, an increase of $3.6 million, or 7%, compared to $51.9 million for the year ended December 31, 2023. The increase was primarily due to higher salaries and benefits expense.

The provision for income taxes increased $1.0 million for the year ended December 31, 2024 compared to the same 2023 period due to $3.6 million higher income before taxes. The Company’s effective income tax rate approximated 12.9% in 2024 and 10.1% in 2023.