UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Amendment No. 1)
(Mark one)
For the fiscal year-ended
OR
For the transition period from to
Commission file Number
Steele Bancorp, Inc.
(Exact name of registrant as specified in its charter)
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| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | |
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| (Address of principal executive offices) | (Zip Code) |
Registrant’s telephone number, including area code: (
Securities registered pursuant to Section 12(b) of the Act:
| Title of Each Class | Trading Symbol | Name of Each Exchange on Which Registered | ||
| None | None | None |
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. YES ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (Section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,“ “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer | ☐ | Accelerated filer | ☐ |
| | ☒ | Smaller reporting company | |
| Emerging growth company | |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report.
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements.
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to § 240.10D-1(b). ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
YES
The aggregate market value of the registrant’s common stock held by non-affiliates at June 30, 2025, the registrant’s most recently completed second fiscal quarter, was $
The number of shares of common stock outstanding at March 30, 2026 was
Documents Incorporated by Reference: Portions of the registrant’s proxy statement for the annual meeting of shareholders to be held on May 12, 2026 are incorporated by reference into Parts III and IV of this Annual Report on Form 10-K. Except as expressly incorporated by reference, the registrant’s definitive proxy statement shall not be deemed to be part of this report.
Explanatory Note
Steele Bancorp, Inc. (the “Company”) is filing this Amendment No. 1 on Form 10-K/A (this “Amendment”) to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2025, which the Company filed with the Securities and Exchange Commission (the “SEC”) on March 30, 2026 (the “Original Form 10-K”). This Amendment is being filed solely to remove the reference to “(Unaudited)” from the headings to the Company’s consolidated Statements of Income, Comprehensive Income, Changes in Stockholders’ Equity and Cash Flows included in the Original Form 10-K.
Pursuant to Rule 12b-15 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), this Amendment also contains the certifications required by Section 302 of the Sarbanes-Oxley Act of 2002, which are being filed as exhibits hereto.
Except as described above, this Amendment does not amend or update any other information contained in the Original Form 10-K, and the Original Form 10-K continues to speak as of the date of the original filing. Accordingly, this Amendment should be read in conjunction with the Original Form 10-K and the Company’s filings made with the SEC subsequent to the date of the Original Form 10-K.
STEELE BANCORP, INC.
FORM 10-K
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| PART II |
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| Item 8. |
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| PART IV |
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| Item 15. |
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PART II
Item 8. Financial Statements and Supplementary Data
Steele Bancorp, Inc. and Subsidiary
Consolidated Balance Sheets
(in thousands, except share and per share data)
| December 31, | December 31, | |||||||
| 2025 | 2024 | |||||||
| Assets | ||||||||
| Cash and due from banks | $ | $ | ||||||
| Interest-bearing demand deposits | ||||||||
| Federal funds sold | ||||||||
| Total cash and cash equivalents | ||||||||
| Interest-bearing time deposits | ||||||||
| Debt securities available-for-sale, at fair value | ||||||||
| Marketable equity securities, at fair value | ||||||||
| Restricted investments in bank stock, at cost | ||||||||
| Loans | ||||||||
| Allowance for credit losses | ( | ) | ( | ) | ||||
| Loans, net | ||||||||
| Premises and equipment, net | ||||||||
| Accrued interest receivable | ||||||||
| Core deposit intangible, net | ||||||||
| Bank owned life insurance | ||||||||
| Net deferred tax asset | ||||||||
| Other assets | ||||||||
| Total Assets | $ | $ | ||||||
| Liabilities and Stockholders' Equity | ||||||||
| Liabilities | ||||||||
| Deposits: | ||||||||
| Noninterest-bearing deposits | $ | $ | ||||||
| Interest-bearing deposits | ||||||||
| Total deposits | ||||||||
| Repurchase agreements | ||||||||
| Federal Home Loan Bank advances | ||||||||
| Subordinated debt, net | ||||||||
| Accrued interest payable | ||||||||
| Other liabilities | ||||||||
| Total Liabilities | ||||||||
| Commitments and Contingencies | ||||||||
| Redeemable Common Stock Held By Employee Stock Ownership Plan | ||||||||
| Stockholders' Equity | ||||||||
| Common stock, par value $ per share; authorized shares; issued (2025) and (2024) shares; outstanding and shares as of December 31, 2025 and December 31, 2024, respectively. | ||||||||
| Capital surplus | ||||||||
| Retained earnings | ||||||||
| Accumulated other comprehensive loss | ( | ) | ( | ) | ||||
| Treasury stock, at cost: 2025: shares; 2024: shares | ( | ) | ( | ) | ||||
| Total Stockholders' Equity | ||||||||
| Less maximum cash obligation to ESOP shares | ||||||||
| Total Stockholders’ Equity Less Maximum Cash Obligations Related to ESOP Shares | ||||||||
| Total Liabilities and Stockholders' Equity | $ | $ | ||||||
See accompanying notes to consolidated financial statements
Steele Bancorp, Inc. and Subsidiary
Consolidated Statements of Income
(in thousands, except per share data)
| Years Ended December 31, | ||||||||
| 2025 | 2024 | |||||||
| Interest and Dividend Income | ||||||||
| Interest and fees on loans | $ | $ | ||||||
| Interest-bearing deposits in banks and time deposits | ||||||||
| Federal funds sold | ||||||||
| Securities: | ||||||||
| Taxable | ||||||||
| Tax-exempt | ||||||||
| Dividends | ||||||||
| Total Interest and Dividend Income | ||||||||
| Interest Expense | ||||||||
| Deposits | ||||||||
| Federal Home Loan Bank advances | ||||||||
| Other borrowings | ||||||||
| Subordinated debt | ||||||||
| Total Interest Expense | ||||||||
| Net Interest Income | ||||||||
| Provision for credit losses - loans | ||||||||
| Provision for credit losses - off balance sheet credit exposures | ||||||||
| Provision for credit losses | ||||||||
| Net Interest Income after provision for credit losses | ||||||||
| Noninterest Income | ||||||||
| Service charges on deposit accounts | ||||||||
| ATM fees and debit card income | ||||||||
| Mortgage banking revenue | ||||||||
| Trust and investment fee income | ||||||||
| Gain on sale of premises | ||||||||
| Loss on sale of securities | ( | ) | ||||||
| Gain on sale of other real estate owned | ||||||||
| Net marketable equity security gains (losses) | ( | ) | ||||||
| Earnings on bank owned life insurance | ||||||||
| Bargain purchase gain | ||||||||
| Other | ||||||||
| Total Noninterest Income | ||||||||
| Noninterest Expense | ||||||||
| Salaries and employee benefits | ||||||||
| Net occupancy and equipment expense | ||||||||
| Amortization of core deposit intangible | ||||||||
| Data processing fees | ||||||||
| Pennsylvania shares tax | ||||||||
| Professional fees | ||||||||
| Advertising expense | ||||||||
| FDIC deposit insurance | ||||||||
| Merger-related expenses | ||||||||
| Other | ||||||||
| Total Noninterest Expense | ||||||||
| Income Before Income Taxes | ||||||||
| Income Taxes | ||||||||
| Net Income | $ | $ | ||||||
| Earnings Per Share - Basic and Diluted | $ | $ | ||||||
See accompanying notes to consolidated financial statements.
Steele Bancorp, Inc. and Subsidiary
Consolidated Statements of Comprehensive Income
(in thousands)
| Years Ended December 31, | ||||||||
| 2025 | 2024 | |||||||
| Net Income | $ | $ | ||||||
| Other Comprehensive Income | ||||||||
| Unrealized holding gains (losses) on debt securities available-for-sale, net of income taxes of $ and ($), respectively | ( | ) | ||||||
| Reclassification adjustment for losses on available-for- sale securities included in net income, net of income taxes of $ and $--, respectively | ||||||||
| Other comprehensive income (loss) | ( | ) | ||||||
| Total Comprehensive Income | $ | $ | ||||||
See accompanying notes to consolidated financial statements.
Steele Bancorp, Inc. and Subsidiary
Consolidated Statements of Changes in Stockholders’ Equity
(in thousands)
| Common Stock | Capital Surplus | Retained Earnings | Accumulated Other Comprehensive (Loss) | Treasury Stock | Maximum Cash Obligation Related to ESOP Shares | Total | ||||||||||||||||||||||
| Balance, December 31, 2023 | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | |||||||||||||||
| Net income | ||||||||||||||||||||||||||||
| Other comprehensive loss | ( | ) | ( | ) | ||||||||||||||||||||||||
| Change related to ESOP shares | ( | ) | ( | ) | ||||||||||||||||||||||||
| Cash dividends declared ($ per share) | ( | ) | ( | ) | ||||||||||||||||||||||||
| Balance, December 31, 2024 | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | |||||||||||||||
| Net income | ||||||||||||||||||||||||||||
| Other comprehensive income | ||||||||||||||||||||||||||||
| NUBC Acquisition | ||||||||||||||||||||||||||||
| Change related to ESOP shares | ( | ) | ( | ) | ||||||||||||||||||||||||
| Cash dividends declared ($ per share) | ( | ) | ( | ) | ||||||||||||||||||||||||
| Balance, December 31, 2025 | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | |||||||||||||||
See accompanying notes to consolidated financial statements.
Steele Bancorp, Inc. and Subsidiary
Consolidated Statements of Cash Flows
(in thousands)
| Years Ended December 31, | ||||||||
| Cash Flows from Operating Activities | 2025 | 2024 | ||||||
| Net income | $ | $ | ||||||
| Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
| Depreciation | ||||||||
| Net accretion of acquisition accounting adjustments | ( | ) | ||||||
| Net accretion of discounts and premiums on securities | ( | ) | ( | ) | ||||
| Bargain purchase gain | ( | ) | ||||||
| Deferred income tax expense (benefit) | ( | ) | ||||||
| Provision for credit losses | ||||||||
| Decrease (increase) in accrued interest receivable | ( | ) | ||||||
| (Decrease) increase in accrued interest payable | ( | ) | ||||||
| Increase in cash surrender value of bank owned life insurance | ( | ) | ( | ) | ||||
| Net marketable equity security (gains) losses | ( | ) | ||||||
| Origination of loans held for sale | ( | ) | ( | ) | ||||
| Proceeds from loans sold | ||||||||
| Gain on sale of loans | ( | ) | ( | ) | ||||
| (Gain) loss on disposition of premises and equipment | ( | ) | ||||||
| Realized loss on sale of securities | ||||||||
| (Gain) loss on sale of foreclosed real estate | ( | ) | ||||||
| Change in other assets and liabilities, net | ||||||||
| Net Cash Provided by Operating Activities | ||||||||
| Cash Flows from Investing Activities | ||||||||
| Debt securities available-for-sale: | ||||||||
| Purchases | ( | ) | ( | ) | ||||
| Proceeds from paydowns, maturities and calls | ||||||||
| Proceeds from sales | ||||||||
| Net increase in loans | ( | ) | ( | ) | ||||
| Decrease of interest-bearing time deposits | ||||||||
| Increase (decrease) in restricted investments in bank stock | ( | ) | ||||||
| Proceeds from sale of premises and equipment | ||||||||
| Proceeds from sale of foreclosed real estate | ||||||||
| Purchases of premises and equipment | ( | ) | ( | ) | ||||
| Cash acquired in the acquisition of NUBC, net of cash paid | ||||||||
| Net Cash Provided By (Used in) Investing Activities | ( | ) | ||||||
| Cash Flows from Financing Activities | ||||||||
| Increase in deposits | ||||||||
| Proceeds from Federal Home Loan Bank advances | ||||||||
| Repayment of Federal Home Loan Bank advances | ( | ) | ( | ) | ||||
| Repayment of Federal Reserve Bank Borrowings | ( | ) | ||||||
| Decrease in Federal Funds purchased | ( | ) | ||||||
| Increase (decrease) in repurchase agreements | ( | ) | ||||||
| Dividends paid on common stock | ( | ) | ( | ) | ||||
| Net Cash (Used In) Provided by Financing Activities | ( | ) | ||||||
| Net increase (decrease) in cash and cash equivalents | ( | ) | ||||||
| Cash and Cash Equivalents, Beginning of Year | ||||||||
| Cash and Cash Equivalents, End of Year | $ | $ | ||||||
| Supplementary Cash Flows Information | ||||||||
| Interest paid | $ | $ | ||||||
| Income taxes paid | $ | $ | ||||||
| Supplementary Disclosure of Noncash Transactions | ||||||||
| Other real estate acquired in settlement of loans | $ | $ | ||||||
| Increase in maximum cash obligation related to ESOP shares | $ | $ | ||||||
| ROU assets acquired in exchange for lease liabilities | $ | $ | ||||||
See accompanying notes to consolidated financial statements.
STEELE BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Steele Bancorp, Inc. (the Bancorp) is a Pennsylvania Corporation organized as the holding company of Central Penn Bank and Trust (the Bank) (collectively, the "Company"). The Bank is a state chartered commercial bank located in Mifflinburg, Pennsylvania, whose principal source of revenues are derived from its commercial, mortgage, residential real estate, and consumer loan financing as well as a variety of deposit services provided to customers services by its offices. Milestone Insurance Services, LLC (Milestone) was formed in 2003 and is a wholly owned subsidiary of the Bank. Milestone is licensed to sell title insurance. The Bancorp is supervised by the Board of Governors of the Federal Reserve System while the Bank is subject to regulation and supervision by the Federal Deposit Insurance Company and the Pennsylvania Department of Banking and Securities. A summary of significant accounting and reporting policies applied in the presentation of the accompanying consolidated financial statements follows.
On August 1, 2025, the Company completed the acquisition of NUBC. NUBC's results of operations are included in the Company's consolidated results since the date of acquisition.
Basis of Presentation
The accounting policies followed by the Bancorp and the Bank and the methods of applying these policies conform with accounting principles generally accepted in the United States of America (GAAP) and with general practices within the banking industry. Subsequent events have been considered through March 31, 2026.
Use of Estimates
In preparing the consolidated financial statements, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities and require disclosure of contingent assets and liabilities as of the date of the consolidated balance sheets and revenue s and expenses for the period. Actual results could differ significantly from those estimates. Material estimates that are particularly susceptible to significant change in the near term relate to the determination of the allowance for credit losses and the fair value of loans acquired in a business combination.
Principles of Consolidation
The accompanying consolidated financial statements include the accounts of the Bancorp and the Bank (including the accounts of Milestone), its wholly owned subsidiary (collectively, the Company). All significant intercompany balances and transactions have been eliminated. The entire business of the Company is managed as one operating segment. Certain reclassifications have been made to prior year amounts to conform to the current year presentation. The result of these reclassifications are not considered material and had no effect on prior years' net income or shareholders' equity.
Adoption of New Accounting Standards
In December 2023, the Financial Accounting Standards Board (FASB) issued ASU 2023-09, “Income Taxes (Topic 740): Improvements to Income Tax Disclosures.” The amendments in this ASU require an entity to disclose specific categories in the rate reconciliation and provide additional information for reconciling items that meet a quantitative threshold, which is greater than five percent of the amount computed by multiplying pretax income by the entity’s applicable statutory rate, on an annual basis. Additionally, the amendments in this ASU require an entity to disclose the amount of income taxes paid (net of refunds received) disaggregated by federal, state, and foreign taxes and the amount of income taxes paid (net of refunds received) disaggregated by individual jurisdictions that are equal to or greater than five percent of total income taxes paid (net of refunds received). Lastly, the amendments in this ASU require an entity to disclose income (or loss) from continuing operations before income tax expense (or benefit) disaggregated between domestic and foreign and income tax expense (or benefit) from continuing operations disaggregated by federal, state, and foreign. This ASU is effective for annual periods beginning after December 15, 2024. Early adoption is permitted. The amendments should be applied on a prospective basis; however, retrospective application is permitted. The adoption of ASU 2023-09 did not have a material impact on the Company's consolidated financial statements. See Note 12 within the Company’s Notes to the Consolidated Financial Statements as of December 31, 2025 and December 31, 2024 for more information regarding the Company’s income taxes.
Recent Accounting Pronouncements
In November 2024, the Financial Accounting Standards Board (FASB) issued ASU 2024-03, “Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses.” ASU 2024-03 requires public companies to disclose, in the notes to the financial statements, specified information about certain costs and expenses at each interim and annual reporting period. This includes disclosing amounts related to employee compensation, depreciation, and intangible asset amortization. In addition, public companies will need to provide qualitative description of the amounts remaining in relevant expense captions that are not separately disaggregated quantitatively. ASU 2024-03 is effective for public business entities for annual reporting periods beginning after December 15, 2026, and interim reporting periods beginning after December 15, 2027. Implementation of ASU 2024-03 may be applied prospectively or retrospectively. The Company does not expect the adoption of ASU 2024-03 to have a material impact on its consolidated financial statements.
In November 2025, the Financial Accounting Standards Board (FASB) issued ASU 2025-08, “Financial Instruments—Credit Losses (Topic 326): Purchased Loans.” The amendments in this ASU expand the population of acquired financial assets accounted for using the gross-up approach. Acquired loans (excluding credit cards) are deemed purchased seasoned loans and accounted for using the gross-up approach upon acquisition if criteria established by the new guidance are met. This change aims to enhance comparability, consistency, and better reflect the economics of acquiring financial assets. This ASU is effective for annual reporting periods beginning after December 15, 2026, and for interim reporting periods within those annual reporting periods. Early adoption is permitted in an interim or annual reporting period in which financial statements have not yet been issued or made available for issuance. If an entity adopts this ASU in an interim reporting period, it should apply it as of the beginning of that interim reporting period or the beginning of the annual reporting period that includes that interim reporting period. The Company does not expect the adoption of ASU 2025-08 to have a material impact on its consolidated financial statements.
Other accounting standards that have been issued by the FASB or other standard-setting bodies are not currently expected to have a material effect on the Company's financial position, results of operations or cash flows.
Segment Reporting
The Company adopted Accounting Standard Update 2023-07 "Segment Reporting (Topic 280) - Improvement to Reportable Segment Disclosures" on January 1, 2024. The Company has determined that all of its banking divisions meet the aggregation criteria of ASC 280, Segment Reporting, as its current operating model is structured whereby all product offerings are managed through similar processes and platforms that are collectively reviewed by the Company's Chief Financial Officer, who has been identified as the chief operating decision maker ("CODM"). The CODM regularly assesses performance of the aggregated single operating and reporting segment and decides how to allocate resources based on net income calculated on the same basis as in net income reported in the Company's statements of income and other comprehensive income. The CODM is also regularly provided with expense information at a level consistent with that disclosed in the Company's statements of income and other comprehensive income.
Cash and Cash Equivalents
For purposes of the consolidated statements of cash flows, the Company defines cash equivalents as cash and due from banks, interest-bearing demand deposits and federal funds sold. Federal funds are generally sold for
Interest-Bearing Time Deposits
Interest-bearing time deposits have original maturities in excess of one year and are carried at cost.
Debt Securities Available-for-Sale
Debt securities classified as available-for-sale are carried at fair value with unrealized gains and losses, net of the related tax effects, reflected as a separate component of stockholders’ equity. Securities classified as available-for-sale are those debt securities that the Company intends to hold for an indefinite period of time, but not necessarily to maturity. Premium amortization and discount accretion are recorded using the interest methods over each security's expected life.
Management evaluates all available-for-sale securities in an unrealized loss position on a quarterly basis, and more frequently when economic or market conditions warrant such evaluation. If the Company has the intent to sell the security or it is more likely than not that the Company will be required to sell the security, the security is written down to fair value and the entire loss is recorded in earnings.
If either of the above criteria is not met, the Company evaluates whether the decline in fair value is the result of credit losses or other factors. In making the assessment, the Company may consider various factors including the extent to which fair value is less than amortized cost, downgrades in the ratings of the security by a rating agency, the failure of the issuer to make scheduled interest or principal payments and adverse conditions specific to the security. If the assessment indicates that a credit loss exists, the present value of cash flows expected to be collected are compared to the amortized cost basis of the security and any deficiency is recorded as an allowance for credit loss, limited by the amount that the fair value is less than the amortized cost basis. Any amount of unrealized loss that has not been recorded through an allowance for credit loss is recognized in other comprehensive (loss) income.
Changes is the allowance for credit loss are recorded as a provision for (or recovery of) credit losses in the Consolidated Statements of Income. Losses are charged against the allowance for credit loss when management believes an available-for-sale security is confirmed to be uncollectible or when either of the criteria regarding intent or requirement to sell is met. At December 31, 2025, there was
Accrued interest receivable on available-for-sale securities totaled $
Realized gains and losses on sales of securities represent the differences between net proceeds and cost determined on the average cost method for equity securities and the specific identification method for all other securities.
Marketable Equity Securities
Marketable equity securities are carried at fair value with unrealized and realized gains and losses included in net income.
Restricted Investment in Bank Stocks
Restricted investment in bank stocks represent required investments in the common stock of correspondent banks and consists of common stock of the Federal Home Loan Bank of Pittsburgh (“FHLB”) of $
Mortgage Banking
Mortgage loans originated and intended for sale in the secondary market at the time of origination are carried at the lower of aggregate cost or estimated fair value, as determined by aggregate outstanding commitments from investors or current investor yield requirements. All sales are made without recourse. Loans are generally sold with the mortgage servicing rights retained by the Company; the mortgage service rights are recognized as assets upon the sale. See further information for accounting for these service rights under "Mortgage Servicing". Gains or losses on sales of mortgage loans are recognized based on the difference between the selling price and the carrying value of the related mortgage loans sold.
Loans Receivable
Loans receivable that management has the intent and ability to hold for the foreseeable future or until maturity or payoff are stated at their outstanding unpaid principal balances, net of an allowance for credit losses and any deferred fees or costs. Interest income is accrued on the unpaid principal balances. Loan origination fees, net of certain direct origination costs, are deferred and recognized as an adjustment of the yield (interest income) of the related loans. The Company is generally amortizing these amounts over the contractual life of the loan.
The loans receivable portfolio is segmented into commercial and consumer loans. Commercial loans consist of the following classes: commercial (including commercial, agricultural and state and municipal), and commercial real estate (including commercial, construction and land development and farmland). Consumer loans consist of the following classes: residential mortgage, home equity, consumer automobile and other consumer.
For all classes of loan receivable, the accrual of interest is generally discontinued when the contractual payment of principal or interest has become 90 days past due or management has serious doubts about further collectability of principal or interest, even though the loan is currently performing. A loan may remain on accrual status if it is in the process of collection and is either guaranteed or well secured. When a loan is placed on nonaccrual status, unpaid interest is reversed against interest income. Interest received on nonaccrual loans is either applied against principal or reported as interest income, according to management's judgment as to the collectability of principal. Generally, loans are restored to accrual status when the obligation is brought current, has performed in accordance with the contractual terms for a reasonable period of time (generally six months) and the ultimate collectability of the total contractual principal and interest is no longer in doubt. The past due status of all classes of loans receivable is determined based on contractual due dates for loan payments.
Purchased Credit Deteriorated (“PCD”) Loans
The Company purchased loans in connection with its acquisition of Northumberland Bancorp on August 1, 2025, some of which had, at the acquisition date, experienced more than insignificant credit deterioration since origination. The Company considers several factors as indicators that an acquired loan has evidence of deterioration in credit quality. These factors include loans classified as nonaccrual, loans with a risk rating of watch or worse, loans past due 30 days and over and still accruing, loans that are current but were more than 60 days past due at least once since origination and loans that are current but were delinquent 30 days, more than 3 times, since origination. PCD loans are recorded at the amount paid. An allowance for credit losses is determined on a collective basis and is allocated to individual loans. The sum of the loan’s purchase price and allowance for credit losses becomes its initial amortized cost basis. The difference between the initial amortized costs basis and the par value of the loan is noncredit discount or premium, which is amortized into interest income over the life of the loan. Subsequent changes to the allowance for credit losses are recorded through the provision for credit losses.
Allowance for Credit Losses - Loans
The allowance for credit losses on loans (ACLL) is a valuation account that is used to present the net amount expected to be collected on a loan. The ACLL is adjusted through provision for credit losses as a charge against, or credit to, earnings. Loans deemed to be uncollectible are charged against the ACLL, and any subsequent recoveries are credited to the allowance for credit losses (ACL). Management evaluates the ACL on a quarterly basis. When changes in the reserve are necessary, an adjustment is made.
Management utilizes a discounted cash flow (DCF) model to calculate the sum of expected losses via a gross loss rate and recovery rate assumption for pools of loans that share similar risk characteristics to determine its allowance for credit loss balance. The FDIC Call Report loan codes were utilized as the grouping mechanism. Management has elected to perform cash flow modeling without the present value component due to lack of loan loss history and simplification of the model.
Management uses relevant available information, from internal and external sources, relating to past events, current conditions, and reasonable and supportable forecasts in calculating its ACL. Historical credit loss experience provides the basis for the estimation of expected credit losses.
The key inputs to the DCF model are loss rate, probability of default, loss given default, prepayment and curtailment rates, reasonable and supportable economic forecasts, and forecast reversion period.
| • | Loss Rate - In order to incorporate economic factors into forecasting within the DCF model, management elected to use the Loss Driver method or benchmark data to generate the expected loss rate for the pools of loans. The Loss Driver method analyzes how one or more economic factors change the default rate using a statistical regression analysis. Management selected an economic factor (unemployment rate) that had a strong correlation to historical default rates. | |
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| • | Probability of Default (PD) and Loss Given Default (LGD) benchmark data was used to generate the expected loss rate for certain pools of loans. Management elected to use benchmark data to generate the PD/LGD rate inputs when the loss driver method proved to provide insufficient loss rates for certain loan call code segments. There were not strong correlations between losses and the economy for historical data or the peer group to provide sufficient enough loss observations to generate a reversion rate that accommodates an economic cycle. | |
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| • | Prepayment & Curtailment Rates: Due to historical data constraints, management has elected to use peer benchmark prepayment rates in the DCF model for certain call codes. The benchmark data used for each loan segment is based on the corresponding call report code. If observations were insufficient for that specific call code, management elected to apply the rate from the higher-level call code or from a call code with similar prepayment/curtailment behavior. For example, if a benchmark prepayment rate was not sufficient enough for call code 1d, the prepayment rate of a call code 1 would be utilized instead. | |
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| • | Reasonable and Supportable Forecasts - The forecast data used in the DCF model is obtained via a subscription to a widely recognized and relied upon company who publishes various forecast scenarios. Management evaluates the various scenarios to determine a reasonable and supportable scenario. | |
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| • | Forecast Reversion Period - Management uses forecasts to predict how economic factors will perform and has determined to use a four-quarter forecast period as well as a four-quarter straight-line reversion period to series mean (also commonly referred to as the mean reversion period). |
The allowance for credit losses calculation includes subjective adjustments for qualitative risk factors that are deemed likely to cause estimated credit losses to differ from historical experience. These qualitative adjustments generally increase allowance levels and include adjustments for factors deemed relevant, including: the nature and volume of portfolio changes, including loan portfolio growth; concentrations of credit based on loan type (such as agricultural lending) or industry; the volume and severity of past due, nonaccrual or adversely classified loans; trends in real estate or other collateral values; lending policies and procedures, including changes in underwriting and collections practices and loan review function; credit review function; lending, credit and other relevant management experience and risk tolerance; external factors and economic conditions not already captured. Each qualitative factor is assigned a value to reflect improvement, no change, minor risk, moderate risk, or major risk conditions based on management's best judgment using relevant information available at the time of the evaluation. Management uses a variety of future looking forecasts along with current economic statistics from reputable sources to assign the qualitative factor based on set parameters. Adjustments to the factors are supported through documentation of changes in conditions in a narrative accompanying the allowance calculation.
Loans that do not share risk characteristics are evaluated on an individual basis. The Company designates individually evaluated loans on nonaccrual status as collateral dependent loans, as well as other loans that management of the Company designates as having higher risk and loans for which the repayment is expected to be provided substantially through the operation or sale of the collateral. These loans do not share common risk characteristics and are not included within the collectively evaluated loans for determining the allowance for credit losses. Under CECL, for collateral dependent loans, the Company has adopted the practical expedient to measure the allowance for credit losses based on the fair value of collateral. The allowance for credit losses is calculated on an individual loan basis based on the shortfall between the fair value of the loan's collateral, which is adjusted for liquidation costs/discounts, and amortized cost. If the fair value of the collateral exceeds the amortized cost, no allowance is required.
An unallocated component is maintained to cover uncertainties that could affect management's estimate of expected losses. The unallocated component of the allowance reflects the margin of imprecision inherent in the underlying assumptions used in the methodologies for estimating specific and general losses in the portfolio.
The Company has elected to exclude accrued interest from the amortized cost basis in its determination of the allowance for credit losses for both loans, as well as elected the policy to write-off accrued interest receivable directly through the reversal of interest income. Accrued interest receivable totaled $
Commercial lending, including commercial real estate loans generally present a higher level of risk than residential mortgage loans. This greater risk is due to several factors, including the concentration of principal in a limited number of loans and borrowers, the effect of general economic conditions on income producing properties and the increased difficulty of evaluating and monitoring these types of loans. Furthermore, the repayment of loans secured by commercial and industrial real estate is typically dependent upon the successful operation of the related real estate project or business. If the cash flow from the project is reduced, the borrower's ability to repay the loan may be impaired. Consumer loans may entail greater credit risk than do residential mortgage loans, particularly in the case of consumer loans which are unsecured or are secured by rapidly depreciable assets, such as automobiles. Home equity loans also entail greater risk than residential mortgage loans due to being in a junior lien position. In such cases, any repossessed collateral for a defaulted consumer loan may not provide an adequate source of repayment of the outstanding loan balance as a result of the greater likelihood of damage, loss or depreciation. In addition, consumer loan collections are dependent on the borrower's continuing financial stability, and thus are more likely to be affected by adverse personal circumstances. Furthermore, the application of various federal and state laws, including bankruptcy and insolvency laws, may limit the amount which can be recovered on such loans.
For commercial and residential loans secured by real estate, estimated fair values are determined primarily through third-party appraisals. When a real estate secured loan becomes impaired, a decision is made regarding whether an updated certified appraisal of the real estate is necessary. This decision is based on various considerations, including the age of the most recent appraisal, the loan-to-value ratio based on the original appraisal and the condition of the property. Appraised values may be discounted to arrive at the estimated selling price of the collateral, which is considered to be the estimated fair value. The discounts also include estimated costs to sell the property.
In addition, Federal and State regulatory agencies, as an integral part of their examination process, periodically review the Company's allowance for credit losses and may require the Company to recognize additions to the allowance based on their judgments about information available to them at the time of their examination, which may not be currently available to management. Based on management's comprehensive analysis of the loan portfolio, management believes the current level of the allowance for credit losses is adequate at December 31, 2025.
Modifications
In situations where a borrower is experiencing financial difficulty, management grants a concession to the borrower that it would not otherwise consider, and the modification results in a more than insignificant change in contractual cash flows, the related loan is subject to specific disclosure requirements. Management strives to identify borrowers in financial difficulty early and work with them to modify their loans to more affordable terms before their loans reach nonaccrual status. These modified terms may include rate reductions, principal forgiveness, payment forbearance and other actions intended to minimize the economic loss and to avoid foreclosure or repossession of the collateral.
Allowance for Credit Losses - Off-Balance Sheet Credit Exposures
Financial instruments include off-balance sheet credit instruments, such as commitments to make loans and commercial letters of credit issued to meet customer financing needs. The Company’s exposure to credit loss in the event of nonperformance by the other party to the financial instrument for off-balance sheet loan commitments is represented by the contractual amount of those instruments. Such financial instruments are recorded when they are funded.
The Company records an allowance for credit losses on off-balance sheet credit exposures, unless the commitments to extend credit are unconditionally cancelable, through a charge to provision for (or recovery of) credit losses in the Consolidated Statements of Income. The allowance for credit losses on off-balance sheet credit exposures is estimated by loan segment at each balance sheet date under the current expected credit loss model using the same methodology as the loan portfolio, taking into consideration the likelihood that funding will occur as well as any third-party guarantees. The allowance for off-balance sheet exposures is included in Other Liabilities on the Company’s Consolidated Balance Sheets and the related credit loss expense is recorded in the Consolidated Statements of Income.
Mortgage Servicing Rights
The Company retains the servicing rights on certain mortgage loans sold to the FHLB and Fannie Mae and receives mortgage banking fee income based upon the principal balance outstanding. The mortgage servicing rights recorded as an asset are not material. Total loans serviced for the FHLB and Fannie Mae amounted to $
Transfers of Financial Assets
Transfers of financial assets are accounted for as sales when control over the assets has been surrendered. Control over transferred assets is deemed to be surrendered when (1) the assets have been isolated from the Company, (2) the transferee obtains the right (free of conditions that constrain it from taking advantage of that right) to pledge or exchange the transferred assets, and (3) the Company does not maintain effective control over the transferred assets through an agreement to repurchase them before their maturity.
Other Real Estate Owned
Foreclosed assets held for sale consist of real estate acquired in settlement of foreclosed loans and is initially recorded at fair value less estimated costs to sell at the time of transfer from loans to foreclosed, establishing a new cost basis. Subsequent to the transfer, foreclosed assets are carried at the lower of the adjusted cost or fair value less costs to sell. Additional write-downs are charged against operating expenses. Costs related to the acquisition and holding of foreclosed assets are charged to operations when incurred. The fair value of real estate acquired through foreclosure is generally determined by reference to an outside appraisal. The Company did hold any foreclosed assets as of December 31, 2025 and 2024, respectively.
Premises and Equipment
Premises and equipment are stated at cost less accumulated depreciation. Repairs and maintenance expenditures are expensed as incurred. The costs of major additions and improvements are capitalized. When premises or equipment are retired or sold, the remaining cost and accumulated depreciation are removed from the accounts, and any gain or loss is credited or charged to income. Depreciation is computed using straight-line and accelerated methods over the estimated useful lives of the assets. Premises and equipment are reviewed by management at least annually for potential impairment and whenever events or circumstances indicate that carrying amounts may not be recoverable.
Business Combination
Business combinations are accounted for under Accounting Standards Codification (“ASC”) 805, Business Combinations, using the acquisition method of accounting. Under the acquisition method of accounting, the Company identifies the acquirer and the closing date and applies applicable recognition principles and conditions. The acquisition method of accounting requires an acquirer to record at fair value on the acquisition date the assets acquired and the liabilities assumed. To determine the fair values, the Company relies on internal or third-party valuations, such as appraisals, valuations based on discounted cash flow analyses, or other valuation techniques. As of acquisition date, the identifiable assets acquired and liabilities assumed are measured at fair value and recognized separately from goodwill or bargain purchase gain. Results of operations of the acquired entity are included in the consolidated statement of income from the date of acquisition. The calculation of intangible assets including core deposits and the fair value of loans are based on significant judgements. Core deposits intangibles are calculated using a discounted cash flow model based on various factors including discount rate, attrition rate, interest rate, cost of alternative funds and net maintenance costs. Loans acquired in connection with acquisitions are recorded at their acquisition-date fair value. Determining the fair value of the acquired loans involves estimating the principal and interest cash flows expected to be collected on the loans and discounting those cash flows at a market rate of interest. Management considers a number of factors in evaluating the acquisition-date fair value including the remaining life of the acquired loans, delinquency status, estimated prepayments, payment options and other loan features, internal risk grade, estimated value of the underlying collateral and interest rate environment. The Company's acquisition of NUBC closed on August 1, 2025. Results of operations and footnote disclosures reflect assets acquired and liabilities assumed.
Acquisition-related costs
Acquisition-related costs are costs the Company incurs to effect a business combination, including advisory, legal, accounting, valuation, and other professional or consulting fees. Some other examples of costs to the Company include systems conversions, integration planning consultants and advertising costs. The Company accounts for acquisition related costs as expenses in the periods in which the costs are incurred and the services are received, with one exception. The costs to issue debt or equity securities are recognized in accordance with other applicable GAAP. These acquisition-related costs are included within noninterest expenses in the consolidated statements of income.
Acquired loans
The most significant assessment of fair value in the Company’s accounting for business combinations relates to the valuation of an acquired loan portfolio. Loans acquired in a business combination are recorded at estimated fair value on the acquisition date without the carryover of the related allowance for credit losses on loans. The acquisition date fair value becomes the Company's original cost basis of the acquired loans. The fair value discount is accreted to interest income over the remaining life of the loans.
Fair values are determined primarily through a discounted cash flow approach which considers the acquired loans’ underlying characteristics, including account types, remaining terms, annual interest rates, interest types, timing of principal and interest payments, current market rates, and remaining balances. Estimates of fair value also include estimates of default, loss severity, and estimated prepayments.
At the acquisition date, loans are classified as either (i) purchase credit-deteriorated (“PCD”) loans or (ii) non-PCD loans. PCD loans are those for which there is more than insignificant evidence of credit deterioration since origination. The Company designated the following indicators as more than insignificant evidence of credit deterioration since origination:
As of acquisition date:
1. nonaccrual
2. risk-rated pass/watch or worse based on Mifflinburg's risk ratings
3. past due 60 days and over and still accruing
Over the life of the loan:
1. three or more instances of payments past due 30 days or more
2. one or more instances of payments past due 60 days or more
At acquisition, an ACLL for PCD loans is determined based upon the Company’s methodology for estimating the ACLL. This allowance is credited to the ACLL with a corresponding adjustment to the cost basis of the loans on the date of the acquisition. As the initial allowance for credit losses is added to the purchase price, there is no credit loss expense recognized upon acquisition of PCD loans. The difference between the new cost basis and the unpaid principal balance is either a noncredit discount or premium. Disposals of PCD loans, which may include sale of loans to third parties, receipt of payments in full or in part from the borrower or foreclosure of the collateral, result in removal of the loan from the loan portfolio at its carrying amount.
For non-PCD loans, an ACL is established in a manner that is consistent with the Company’s originated loans. The ACL is determined using the Company’s methodology and the related ACL for non-PCD loans is recorded through a charge to the provision for credit losses in the period in which the loans are purchased or acquired.
Intangible Assets - Core Deposit Intangible
Core deposit relationships provide a stable source of funds for lending and contribute to profitability. The core deposit intangible was valued using an income approach focused on cost savings, which recognized the cost savings represented by the expense of maintaining the core deposit base versus the cost of an alternative funding source. The valuation incorporates assumptions related to account retention, discount rates, deposit interest rates, deposit maintenance costs and alternative funding rates.
The Corporation recorded a core deposit intangible asset in 2025 related to the deposit premium paid for the acquisition of Northumberland Bancorp’s subsidiary, Northumberland National Bank. This intangible asset is being amortized on a sum of the years digits method over
The estimated amortization expense of the core deposit intangible over its remaining life is as follows:
| In Thousands | ||||
| 2026 | $ | |||
| 2027 | ||||
| 2028 | ||||
| 2029 | ||||
| 2030 | ||||
| Thereafter | ||||
| Total | $ |
Bargain Purchase Gain
A bargain purchase gain arises when the fair value of net assets acquired in a business combination exceeds the consideration transferred, resulting in a gain being recorded by the acquirer. Determining fair value is subjective, requiring the use of estimates, assumptions and management judgement. Bargain purchase gain is recorded within noninterest income in the period it was generated. An acquirer has a measurement period not to exceed 12 months from the acquisition date to finalize the accounting for a business combination which could adjust bargain purchase gain if material facts or circumstances arise. The Company recognized the gain as income on the date of acquisition in non-interest income.
Bank-Owned Life Insurance
The Company invests in bank owned life insurance (BOLI) as a source of funding for employee and director benefit expenses. BOLI involves the purchasing of life insurance by the Company on a chosen group of officers and directors. The Company is the owner and beneficiary of the policies. This life insurance investment is carried at the cash surrender value of the underlying policies. Income from the increase in the cash surrender value of the policies is included with noninterest income on the Consolidated Statements of Income. The policies can be liquidated, if necessary, with tax costs associated. However, the Company intends to hold these policies and accordingly, the Company has not provided for deferred income taxes on the earnings from the increase in cash surrender value.
The Company recognizes a liability for postretirement benefits provided through an endorsed split-dollar life insurance arrangement. The liability for post-retirement benefits under these arrangements was $
Income Taxes
Current income tax accounting guidance results in two components of income tax expense: current and deferred. Current income tax expense reflects taxes to be paid or refunded for the current period by applying the provisions of the enacted tax law to the taxable income or excess of deductions over revenues. The Company determines deferred income taxes using the liability (or balance sheet) method. Under this method, the net deferred tax asset or liability is based on the tax effects of the differences between the book and tax bases of assets and liabilities, and enacted changes in tax rates and laws are recognized in the period in which they occur.
Deferred income tax expense results from changes in certain deferred tax assets and liabilities between periods. Deferred tax assets are reduced by a valuation allowance if, based on the weight of evidence available, it is more likely than not that some portion or all of a deferred tax asset will not be realized.
The Company accounts for uncertain tax positions if it is more-likely-than-not, based on the technical merits, that the tax position will be realized or sustained upon examination. The term more-likely-than-not means a likelihood of more than 50 percent; the terms examined and upon examination also include resolution of the related appeals or litigation processes, if any. A tax position that meets the more-likely-than-not recognition threshold is initially and subsequently measured as the largest amount of tax benefit that has a greater than 50 percent likelihood of being realized upon settlement with a taxing authority that has full knowledge of all relevant information. The determination of whether or not a tax position has met the more-likely-than-not recognition threshold considers the facts, circumstances, and information available at the reporting date and is subject to management's judgment.
The Company recognizes interest and penalties on income taxes as a component of income tax expense. There were during the years ended December 31, 2025 and 2024.
Earnings Per Share
The Company does not have any common stock equivalents and, therefore, presents basic and diluted earnings per share, which represents net income divided by the weighted average shares outstanding during the period. The weighted average shares outstanding during 2025 and 2024 were
Treasury Stock
The acquisition of treasury stock is recorded under the cost method. The subsequent disposition or sale of the treasury stock is recorded using the average cost method.
Trust Assets and Income
Property held by the Company in a fiduciary or agency capacity for its customers is not included in the accompanying consolidated financial statements because such items are not assets of the Company and the Bank. As of December 31, 2025 the Trust Department had $
Advertising Costs
Advertising costs are expensed as incurred. Advertising expenses for the years ended December 31, 2025 and 2024 were approximately $
Comprehensive Income (Loss)
GAAP requires that recognized revenue, expenses, gains, and losses be included in net income. Although certain changes in assets and liabilities, such as unrealized gains and losses on debt securities available-for-sale, are reported as a separate component of the equity section of the balance sheet, such items, along with net income are components of comprehensive income (loss) and reflected in the consolidated statements of comprehensive income (loss).
The only other comprehensive income item that the Company presently has is unrealized gains or losses on debt securities available-for-sale.
Revenue Recognition
The Company earns income from various sources, including loans, investment securities, bank-owned life insurance, deposit accounts and sales of assets.
Interest income on loans is accrued on the unpaid principal balance and recorded daily. Loan origination fees, net of certain direct origination costs, are deferred and recognized as an adjustment of the related loan yield using the interest method. Other loan fees, including late charges, are recognized as they occur.
Interest income on debt securities is recognized on the accrual basis. Purchase premiums and discounts are recognized using the interest method over the term of the securities. Dividends on equity securities are recorded when declared.
Service charges on deposit accounts include maintenance and analysis fees and overdraft fees. Automated teller machine (ATM) fees and debit card income include fees for withdrawals by our deposit customers from other bank ATMs and interchange fees related to the acceptance and settlement of debit card transactions. Revenue is recognized when the Company's performance obligation is completed which is generally monthly for account services or when a transaction has occurred.
Commissions from investment product sales are received from third parties based on the sale of the third party's investment and insurance products to the Company's customers. The Company's performance obligation is complete when the sale occurs
Earnings on bank-owned life insurance policies represent the increase in the cash surrender value of these policies as well as any gains resulting from settlement of the policies.
Other income includes other fees and revenue, which are generally transactional in nature and are recorded as they occur.
Gains or losses on sales of assets are generally recognized when the asset has been legally transferred to the buyer and the Company has no continuing involvement with the asset. The Company does not generally finance the sale.
Under Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 606, management determined that the primary sources of revenue associated with financial instruments, including interest income on loans and investments, along with certain noninterest revenue sources including investment security gains, loan servicing charges, gains on the sale of loans, and earnings on bank owned life insurance are not within the scope of Topic 606. Noninterest income within the scope of Topic 606 is as follows:
| • | Service Charges on Deposit Accounts – The Bank earns fees from its deposit customers for various services, including transaction-based services and periodic account maintenance. Transaction based services include, but are not limited to stop payment fees, overdraft fees, check cashing fees, wire transfer fees, and early withdrawal penalties. Maintenance fees include account maintenance fees, minimum balance fees, and monthly service charge. Transaction based fees are only recognized when the transaction is complete, and maintenance fees are recognized when the period of the obligation is complete. |
| • | Trust and Investment Fee Income - The Trust department receives fees for providing trust related services including Investment Management, Security Custody, and Other Trust Services. These fees are based upon the value of assets under management and are assessed using a tiered rate schedule. Fees are recognized on a monthly basis when the service obligation is complete. These fees are recognized in trust services income on the Consolidated Statement of Income. The trust department provides estate settlement services. These fees are based on the estimated fair value of the estate according to a tiered rate schedule. Each estate is unique in the nature, size, and complexity, and may include many tasks or milestones to complete. Fees are recognized in proportion to the number of milestones completed which is a judgement made by the trust management team. These fees are included in trust services income on the Consolidated Statements of Income. |
| • | ATM Fees and Debit Card Income – The Bank provides electronic funds transfer processing services for the debit cards it offers to its customers. The Bank earns interchange fees from each cardholder transaction conducted through various networks. The fees are transaction based and are earned when the transaction is complete. ATM service charges are earned when non customers use Bank ATMs. These fees are recognized when the transaction is complete. These fees are recognized in other income on the Consolidated Statements of Income. |
| • | Mortgage Banking Revenue – The Bank recognizes revenue from the sale and servicing of loans to third parties. These gains/losses are included in other income on the Consolidated Statements of Income. |
2. BUSINESS COMBINATION
On August 1, 2025 (the “Acquisition Date”), the Company completed the acquisition of Northumberland Bancorp ("NUBC"), in accordance with the definitive agreement that was entered into on September 24, 2024, as amended on December 4, 2024, by and among the Company and NUBC. The primary reasons for the merger included: expansion of the branch network and increased market share positions in central Pennsylvania; attractive low-cost funding base; strong cultural alignment and a deep commitment to shareholders, customers, employees, and communities served by Steele and NUBC, meaningful value creation to shareholders; and increased trading liquidity for both companies and increased dividends for NUBC shareholders. In connection with the completion of the merger, former NUBC shareholders received
The acquisition of NUBC was accounted for as a business combination using the acquisition method of accounting and, accordingly, assets acquired, liabilities assumed, and consideration paid are recorded at estimated fair values on the Acquisition Date. The provisional amount of bargain purchase gain as of the Acquisition Date was approximately $
As a result of the integration of operations of NUBC, it is not practicable to determine revenue or net income included in the Company’s consolidated operating results relating to NUBC since the Acquisition Date, as NUBC’s results cannot be separately identified. Comparative pro-forma financial statements for the prior year period were not presented, as adjustments to those statements would not be indicative of what would have occurred had the acquisition taken place on January 1, 2025. In particular, adjustments that would have been necessary to be made to record the loans at fair value, the provision of credit losses or the core deposit intangible would not be practical to estimate.
The following table summarizes the consideration paid for NUBC and the amounts of the assets acquired and liabilities assumed recognized:
| (in thousands, Except Share and Per Share Data) | As Initially Reported | Measurement Period Adjustments | As Adjusted | |||||||||||||||||||||
| Purchase Price Consideration | ||||||||||||||||||||||||
| Mifflinburg Bancorp, Inc. shares to be issued | ||||||||||||||||||||||||
| Per share value assigned to shares issued | $ | $ | ||||||||||||||||||||||
| Total purchase price assigned to shares issued | $ | $ | ||||||||||||||||||||||
| Cash in lieu of fractional shares | ||||||||||||||||||||||||
| Dissenter's shares (1) | ||||||||||||||||||||||||
| Fair value of Dissenter's shares | $ | $ | $ | |||||||||||||||||||||
| Total fair value of Dissenter's shares | ||||||||||||||||||||||||
| Fair value of total consideration transferred | $ | $ | $ | |||||||||||||||||||||
| Recognized amounts of identifiable assets acquired and liabilities assumed, at fair value | ||||||||||||||||||||||||
| Cash and cash equivalents | $ | $ | - | $ | ||||||||||||||||||||
| Securities, available for sale | - | |||||||||||||||||||||||
| Loans held for sale | - | |||||||||||||||||||||||
| Loans gross | ||||||||||||||||||||||||
| Allowance for credit losses | ( | ) | - | ( | ) | |||||||||||||||||||
| Loans, net of allowance | ||||||||||||||||||||||||
| Bank owned life insurance | - | |||||||||||||||||||||||
| Premises | - | |||||||||||||||||||||||
| Furniture, fixtures and equipment | - | |||||||||||||||||||||||
| Accrued interest receivable | - | |||||||||||||||||||||||
| Restricted investment in bank stock | - | |||||||||||||||||||||||
| Deferred tax asset | ||||||||||||||||||||||||
| Core deposit intangible | - | |||||||||||||||||||||||
| Customer list intangibles | - | |||||||||||||||||||||||
| Operating lease right of use asset | - | |||||||||||||||||||||||
| Other assets | (398 | ) | ||||||||||||||||||||||
| Total identifiable assets acquired at fair value | $ | $ | ( | ) | $ | |||||||||||||||||||
| Deposits | $ | $ | - | $ | ||||||||||||||||||||
| Borrowings | - | |||||||||||||||||||||||
| Subordinated debt | - | |||||||||||||||||||||||
| Accrued interest payable | - | |||||||||||||||||||||||
| Operating lease liability | - | |||||||||||||||||||||||
| Reserve for unfunded commitments | ( | ) | - | |||||||||||||||||||||
| Other liabilities | ( | ) | ||||||||||||||||||||||
| Total liabilities assumed | $ | $ | ( | ) | $ | |||||||||||||||||||
| Total identifiable net assets, at fair value | $ | $ | $ | |||||||||||||||||||||
| Preliminary bargain purchase gain | $ | $ | $ | |||||||||||||||||||||
(1) NUBC stockholder with
During the Measurement Period, the Company recorded adjustments to the fair value of dissenter's shares, estimated fair value of loans, reserve for unfunded commitments, and to adjust other assets and other liabilities. The Company also recognized a net change in the deferred tax asset due to the measurement period adjustments.
The Company recorded all loans acquired at the estimated fair value on the acquisition date with no carryover of the related allowance for loan losses. The Company determined the net discounted value of cash flows on gross loans totaling $
Management made significant estimates and exercised significant judgement in accounting for the acquisition of NUBC. The Company utilized a valuation specialist to assist with the determination of fair values for certain acquired assets and assumed liabilities. The following is a brief description of the valuation methodologies used to estimate the fair values of major categories of assets acquired and liabilities assumed.
Cash and equivalents
Included in cash and equivalents are an investment in time deposits of other financial institutions, valued at the present value of the expected contractual payments discounted at market rates for instruments with similar terms.
Securities
The estimated fair value of the acquired portfolio of debt securities was based on quoted market prices. The Company sold available-for-sale securities with a total par value of $
Loans
The fair valuation process identified loans with credit risk indicators that qualified for “purchase credit deteriorated” (“PCD”) status. PCD and non-PCD loans were then evaluated for credit risk and other fair value indicators. Consistent with GAAP, FCB’s related allowance for credit losses on loans and deferred fees and costs were not recorded.
Credit risk was quantified using a probability of default (“PD”)/loss given default(“LGD”) methodology from a market participant perspective and applied to each loan’s outstanding principal balance. PD/LGD rates were tailored to PCD or non-PCD status. Other fair value indicators were quantified using a discounted cash flow methodology, with discounts applied for current market rates, credit risk and liquidity. Cash flows were generated based upon the loans’ underlying characteristics and estimated prepayment speeds.
The following table provides information on PCD and non-PCD loans inclusive of measurement period adjustments previously discussed as of August 1, 2025:
| August 1, 2025 | ||||||||
| (Dollars in Thousands) | PCD Loans | Non-PCD Loans | ||||||
| Number of loans | ||||||||
| NUBC recorded value | $ | $ | ||||||
| Discount for credit risk | ( | ) | ( | ) | ||||
| Discount for non-credit factors | ( | ) | ( | ) | ||||
| Fair value - initially reported | $ | $ | ||||||
| Measurement period adjustments | $ | $ | ||||||
| Fair value - adjusted | $ | $ | ||||||
Premises and equipment
The fair value of premises acquired was based on a recent third-party appraisal. Acquired equipment was based on the remaining net book value of NUBC, which approximated fair value.
Core Deposit Intangible
Core deposit relationships provide a stable source of funds for lending and contribute to profitability. The core deposit intangible was valued using an income approach focused on cost savings, which recognizes the cost savings represented by the expense of maintaining the core deposit base versus the cost of an alternative funding source. The valuation incorporates assumptions related to account retention, discount rates, deposit interest rates, deposit maintenance costs and alternative funding rates.
Leases: right of use asset, lease liability and fair value
Right of use assets (included in other assets) and lease liabilities (included in other liabilities) for branch locations were measured at the acquisition date. The fair value of leases was determined by applying a discounted cash flow methodology discounted by current lease rates within the appropriate market.
Customer List Intangible Asset ("CLI")
The customer list intangible asset fair value is derived from the revenues generated by NUBC's Trust and Financial Services Divisions.
Mortgage Servicing Rights
The estimated fair value of mortgage servicing rights was determined through a discounted cash flow analysis and calculated using a computer pricing model.
Deposits
Deposits were valued using methods appropriate to their characteristics. The fair value of noninterest bearing demand deposits, interest bearing demand deposits, money market and savings deposit accounts were assumed to approximate the carrying value as these accounts have no stated maturity and are payable on demand. Time deposits were valued at the present value of the expected contractual payments discounted at market rates for instruments with similar terms.
Borrowings
The estimated fair value of borrowings was determined by obtaining payoff quotes from the lender. Borrowings were paid off upon completion of the acquisition.
Subordinated Debt
The estimated fair value of subordinated debt was determined by the present value of the expected contractual payments discounted by market rates for similar subordinated debt market rates estimate.
The net effect of the amortization and accretion of premiums and discounts associated with the Company's acquisition accounting adjustments, had the following impact on the Consolidated Statements of Income during the year ended December 31, 2025 (dollars in thousands):
| Loans (1) | $ | |||
| Buildings (2) | ( | ) | ||
| Core deposit intangible (3) | ( | ) | ||
| Subordinated debt (4) | ( | ) | ||
| Time Deposits (5) | ( | ) | ||
| Wealth management customer list intangible (6) | ( | ) | ||
| Mortgage servicing rights (7) | ( | ) | ||
| Leased building (8) | ||||
| Net impact to income before taxes | $ |
| (1) | Loan acquisition-related fair value adjustments accretion is included in "Interest and fees on loans" in the "Interest and Dividend Income" section of the Company's Consolidated Statements of Income. |
| (2) | Building and lease acquisition-related fair value adjustments amortization is included in "Net occupancy and equipment expense" in the "Noninterest Expense" section of the Company's Consolidated Statements of Income. |
| (3) | Core deposit intangible amortization is included in "Amortization of core deposit intangible" in the "Noninterest Expense" section of the Company's Consolidated Statements of Income. |
| (4) | Borrowings acquisition-related fair value adjustments amortization is included in "Subordinated debt" in the "Interest Expense" section of the Company's Consolidated Statements of Income. |
| (5) | Certificate of deposit acquisition-related fair value adjustments amortization is included in "Deposits" in the "Interest Expense" section of the Company's Consolidated Statements of Income. |
| (6) | Wealth management customer list intangible ("CLI") acquisition-related fair value adjustments amortization is included in "Other" in the "Noninterest Expense" section of the Company's Consolidated Statements of Income. |
| (7) | Mortgage servicing rights acquisition-related fair value adjustments amortization is included in "Other" in the "Noninterest Expense" section of the Company's Consolidated Statements of Income. |
| (8) | Leased building acquisition-related fair value adjustments accretion is included in "Net occupancy and equipment expense" in the "Noninterest Expense" section of the Company's Consolidated Statements of Income. |
3. ACCUMULATED OTHER COMPREHENSIVE LOSS
The following tables provide information about components of accumulated other comprehensive income (loss) as of the dates indicated:
| Unrealized Gain (Loss) on Available-For- Sale Debt Securities (a) | ||||
| (In Thousands) | ||||
| Balance at December 31, 2023 | $ | ( | ) | |
| Unrealized holding loss on available for sale securities, net of tax $ | ( | ) | ||
| Balance at December 31, 2024 | $ | ( | ) | |
| Balance at December 31, 2024 | $ | ( | ) | |
| Unrealized holding gain on available for sale securities, net of tax $ | ||||
| Balance at December 31, 2025 | $ | ( | ) | |
The following table presents the amounts reclassified out of accumulated other comprehensive loss by component, net of tax, for the years ended December 31, 2025 and 2024:
| (In Thousands) | Amount Reclassified from Accumulated Other Comprehensive Loss | ||||||||
| Details about accumulated other comprehensive loss | 2025 | 2024 | Affected Line Item in the Consolidated Statement of Income | ||||||
| Net realized losses on available-for-sale debt securities | $ | ( | ) | $ | Loss on sale of securities | ||||
| Income tax effect | Income taxes | ||||||||
| $ | (6 | ) | $ | - | |||||
4. SECURITIES
The amortized cost and fair value of debt securities available-for-sale along with gross unrealized gains and losses as of the dates indicated are summarized as follows (in thousands):
| December 31, 2025 | December 31, 2024 | |||||||||||||||||||||||||||||||
| Gross | Gross | Gross | Gross | |||||||||||||||||||||||||||||
| Amortized | Unrealized | Unrealized | Fair | Amortized | Unrealized | Unrealized | Fair | |||||||||||||||||||||||||
| Cost | Gains | Losses | Value | Cost | Gains | Losses | Value | |||||||||||||||||||||||||
| U.S. Treasury | $ | $ | $ | ( | ) | $ | $ | $ | $ | ( | ) | $ | ||||||||||||||||||||
| U.S. government agencies | ( | ) | ( | ) | ||||||||||||||||||||||||||||
| Taxable state and municipal | ( | ) | ( | ) | ||||||||||||||||||||||||||||
| Tax exempt state and municipal | ( | ) | ( | ) | ||||||||||||||||||||||||||||
| U.S. government sponsored enterprise mortgage-backed | ( | ) | ( | ) | ||||||||||||||||||||||||||||
| Corporate | ( | ) | ( | ) | ||||||||||||||||||||||||||||
| Total debt securities available-for-sale | $ | $ | $ | ( | ) | $ | $ | $ | $ | ( | ) | $ | ||||||||||||||||||||
Accrued interest receivable on available-for-sale securities totaled $
The deferred tax asset for the net unrealized loss on securities available for sale was $
The amortized cost and estimated fair value of debt securities available-for-sale at December 31, 2025, by expected maturity for mortgage-backed securities and debt securities with call features and by contractual maturity for all other securities, are shown below. Expected maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties (in thousands).
| Amortized | Fair | |||||||
| Cost | Value | |||||||
| Due in one year or less | $ | $ | ||||||
| Due after one year through five years | ||||||||
| Due after five years through ten years | ||||||||
| Due after ten years | ||||||||
| Total | $ | $ | ||||||
The following tables show the Company's debt securities available-for-sale gross unrealized losses and fair value, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position, as of December 31, 2025 and December 31, 2024 (in thousands):
| December 31, 2025 | Less than 12 Months | 12 Months or Longer | Total | |||||||||||||||||||||
| Unrealized | Unrealized | Unrealized | ||||||||||||||||||||||
| Fair Value | Losses | Fair Value | Losses | Fair Value | Losses | |||||||||||||||||||
| U.S. Treasury | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
| U.S. government agencies | ||||||||||||||||||||||||
| Taxable state and municipal | ||||||||||||||||||||||||
| Tax-exempt state and municipal | ||||||||||||||||||||||||
| U.S. government sponsored enterprise mortgage-backed | ||||||||||||||||||||||||
| Corporate | ||||||||||||||||||||||||
| Total debt securities available-for-sale | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
| December 31, 2024 | Less than 12 Months | 12 Months or Longer | Total | |||||||||||||||||||||
| Unrealized | Unrealized | Unrealized | ||||||||||||||||||||||
| Fair Value | Losses | Fair Value | Losses | Fair Value | Losses | |||||||||||||||||||
| U.S. Treasury | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
| U.S. government agencies | ||||||||||||||||||||||||
| Taxable state and municipal | ||||||||||||||||||||||||
| Tax-exempt state and municipal | ||||||||||||||||||||||||
| U.S. government sponsored enterprise mortgage-backed | ||||||||||||||||||||||||
| Corporate | ||||||||||||||||||||||||
| Total debt securities available-for-sale | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
At December 31, 2025, the $
The Company considers payment history, risk ratings from external parties, financial statements for municipal and corporate securities, public statements from issuers and other available credible published sources in evaluating credit risk. No credit risk was found and
During the year ended December 31, 2025, the Company sold available-for-sale securities with a total book value of $
Securities with a carrying value of $
As of December 31, 2025 and December 31, 2024, the Company had $
| Year Ended | Year Ended | |||||||
| December 31, 2025 | December 31, 2024 | |||||||
| Net change in the unrealized gain (loss) recognized during the period on marketable equity securities | $ | $ | ( | ) | ||||
| Add: Net realized gain (loss) recognized on marketable equity securities sold during the period | ||||||||
| Net gain (loss) recognized in net income during the period on marketable equity securities still held at the reporting date | $ | $ | ( | ) | ||||
Restricted Investments in Bank and Other Stock
Restricted investments in bank stock represent required investments in the common stock of correspondent banks and consist of common stock of the Federal Home Loan Bank of Pittsburgh (FHLB) of $
5. LOANS AND OTHER REAL ESTATE OWNED (“OREO”)
Major categories of loans are summarized as follows as of December 31, 2025 and December 31, 2024 (in thousands):
| 2025 | 2024 | |||||||
| Commercial | $ | $ | ||||||
| Commercial real estate | ||||||||
| Residential mortgage | ||||||||
| Home equity | ||||||||
| Consumer, other | ||||||||
| Consumer, automobile | ||||||||
| 919,237 | 437,158 | |||||||
| Less: net deferred loan fees | ( | ) | ( | ) | ||||
| Total loans net of deferred loan fees | ||||||||
| Less: allowance for credit losses | ( | ) | ( | ) | ||||
| Net Loans | $ | $ | ||||||
In the normal course of business, loans are extended to directors, executive officers, and their affiliates.
A summary of loan activity for those directors, executive officers, and their affiliates is as follows (in thousands):
| December 31, 2024 | New Loans (a) | Repayments | December 31, 2025 | |||||||||||
| $ | $ | $ | ( | ) | $ | |||||||||
(a) Loans to new directors and executive officers of $
| December 31, 2023 | New Loans | Repayments | December 31, 2024 | |||||||||||
| $ | $ | $ | ( | ) | $ | |||||||||
The Company grants commercial, residential, and personal loans to customers primarily in Union, Centre, Northumberland and Snyder Counties, Pennsylvania. Although the Company has a diversified loan portfolio, a significant portion of its debtors' ability to honor their contracts is dependent on the economic conditions within this region. Additionally, approximately
The Company has elected to exclude accrued interest from the amortized cost basis in its determination of the allowance for credit losses for loans, as well as elected the policy to write-off accrued interest receivable directly through the reversal of interest income. Accrued interest receivable totaled $
An initial allowance for credit losses on non-PCD loans of $
The following table provides details related to the fair value of acquired PCD loans as of August 1, 2025:
| (Dollars in Thousands) | Par Value | Purchase (Premium) Discount | Allowance | Initial Purchase Price | Measurement Period Adjustments | Adjusted Purchase Price | ||||||||||||||||||
| Commercial | $ | $ | ( | ) | $ | $ | $ | $ | ||||||||||||||||
| Commercial Real Estate | ( | ) | ||||||||||||||||||||||
| Residential Mortgage | ( | ) | ||||||||||||||||||||||
| Home Equity | ||||||||||||||||||||||||
| Consumer - Other | ( | ) | ||||||||||||||||||||||
| Total | $ | $ | ( | ) | $ | $ | $ | $ | ||||||||||||||||
The following table provides details related to the fair value of acquired Non-PCD loans as of August 1, 2025:
| (Dollars in Thousands) | Par Value | Purchase (Premium) Discount | Initial Purchase Price | Measurement Period Adjustments | Adjusted Purchase Price | |||||||||||||||
| Commercial | $ | $ | ( | ) | $ | $ | $ | |||||||||||||
| Commercial Real Estate | ( | ) | ||||||||||||||||||
| Residential Mortgage | ( | ) | ||||||||||||||||||
| Home Equity | ( | ) | ||||||||||||||||||
| Consumer - Other | ( | ) | ||||||||||||||||||
| Total | $ | $ | ( | ) | $ | $ | $ | |||||||||||||
Loans acquired in business combinations are recorded in the Consolidated Balance Sheets at fair value at the acquisition date under the acquisition methos of accounting. The principal balance of purchased loans is included in the allowance for credit losses calculation. The remaining net discount on purchased loans at December 31, 2025 was $
| December 31, 2025 | ||||||||||||
| (Dollars in Thousands) | Acquired Loans - PCD | Acquired Loans - Non-PCD | Acquired Loans - Total | |||||||||
| Outstanding Principal Balance | $ | $ | $ | |||||||||
| Carrying amount: | ||||||||||||
| Commercial | ||||||||||||
| Commercial Real Estate | ||||||||||||
| Residential Mortgage | ||||||||||||
| Home Equity | ||||||||||||
| Consumer - Other | ||||||||||||
| Total Acquired Loans | $ | $ | $ | |||||||||
Other Real Estate Owned
Foreclosed assets held for sale consist of real estate acquired in settlement of foreclosed loans and is initially recorded at fair value less estimated costs to sell at the time of transfer from loans to foreclosed, establishing a new cost basis. Subsequent to the transfer, foreclosed assets are carried at the lower of the adjusted cost or fair value less costs to sell. Additional write-downs are charged against operating expenses. Costs related to the acquisition and holding of foreclosed assets are charged to operations when incurred. The fair value of real estate acquired through foreclosure is generally determined by reference to an outside appraisal. The Company did hold any foreclosed assets as of December 31, 2025 and December 31, 2024. At December 31, 2025 there were commercial loans, commercial real estate loans, and residential loans totaling $
Mortgage Servicing
The Company retains the servicing rights on certain mortgage loans sold to the FHLB and Fannie Mae and receives mortgage banking fee income based upon the principal balance outstanding. The mortgage servicing rights recorded as an asset are not material. Total loans serviced for the FHLB and Fannie Mae amounted to $
6. ALLOWANCE FOR CREDIT LOSSES
Credit Quality Indicators
A Loan Risk Rating Grading System has been developed and is being utilized to categorize loans with similar characteristics. There are six (6) “Pass” Ratings and the standard “Classified” Watchlist Ratings. The loans are assessed based upon the information in the Loan Committee Package and a lender identified score. Further, any reassessment would be performed when the annual loan review is performed or when the loan account exhibits signs of financial difficulty or improvement. The definition of each Loan Risk Rating is outlined below:
Pass (Grades 1-6) – These loans are to customers with credit quality ranging from an acceptable to very high quality and are protected by the current net worth and paying capacity of the obligor or by the value of the underlying collateral.
Special Mention (Grade 7) – This loan grade is in accordance with regulatory guidance and includes loans where a potential weakness or risk exists, which could cause a more serious problem if not corrected.
Substandard (Grade 8) – This loan grade is in accordance with regulatory guidance and includes loans that have a well-defined weakness based on objective evidence and are characterized by the distinct possibility that the Company will sustain some loss if the deficiencies are not corrected.
Doubtful (Grade 9) – This loan grade is in accordance with regulatory guidance and includes loans that have all the weaknesses inherent in a substandard asset. In addition, these weaknesses make collection or liquidation in full highly questionable and improbable, based on existing circumstances.
Loss (Grade 10) – This loan grade is in accordance with regulatory guidance and includes loans that are considered uncollectible, or of such value that continuance as an asset is not warranted.
To help ensure that risk ratings are accurate and reflect the present and future capacity of borrowers to repay the loan as agreed, the Company’s loan rating process includes several layers of internal and external oversight. The Company’s loan officers are responsible for the timely and accurate risk rating of the loans in each of their portfolios at origination and on an ongoing basis under the supervision of management. All commercial, agricultural and state and political relationships over $
The following tables present the classes of the loan portfolio summarized by the aggregate pass rating and the classified ratings of special mention, substandard and doubtful within the Company's internal risk rating system as of December 31, 2025 and December 31, 2024 and gross year-to-date charge-offs for the respective periods (in thousands):
| Term Loans by Year of Origination | ||||||||||||||||||||||||||||||||
| December 31, 2025 | 2025 | 2024 | 2023 | 2022 | 2021 | Prior | Revolving | Total | ||||||||||||||||||||||||
| Commercial | ||||||||||||||||||||||||||||||||
| Pass | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
| Special Mention | ||||||||||||||||||||||||||||||||
| Substandard | ||||||||||||||||||||||||||||||||
| Doubtful | ||||||||||||||||||||||||||||||||
| Loss | ||||||||||||||||||||||||||||||||
| Commercial – Total | ||||||||||||||||||||||||||||||||
| Current Year Gross Charge-Offs | ||||||||||||||||||||||||||||||||
| Commercial Real Estate | ||||||||||||||||||||||||||||||||
| Pass | ||||||||||||||||||||||||||||||||
| Special Mention | ||||||||||||||||||||||||||||||||
| Substandard | ||||||||||||||||||||||||||||||||
| Doubtful | ||||||||||||||||||||||||||||||||
| Loss | ||||||||||||||||||||||||||||||||
| Commercial Real Estate – Total | ||||||||||||||||||||||||||||||||
| Current Year Gross Charge-Offs | ||||||||||||||||||||||||||||||||
| Residential Mortgage | ||||||||||||||||||||||||||||||||
| Pass | ||||||||||||||||||||||||||||||||
| Special Mention | ||||||||||||||||||||||||||||||||
| Substandard | ||||||||||||||||||||||||||||||||
| Doubtful | ||||||||||||||||||||||||||||||||
| Loss | ||||||||||||||||||||||||||||||||
| Residential Mortgage – Total | ||||||||||||||||||||||||||||||||
| Current Year Gross Charge-Offs | ||||||||||||||||||||||||||||||||
| Home Equity | ||||||||||||||||||||||||||||||||
| Pass | ||||||||||||||||||||||||||||||||
| Special Mention | ||||||||||||||||||||||||||||||||
| Substandard | ||||||||||||||||||||||||||||||||
| Doubtful | ||||||||||||||||||||||||||||||||
| Loss | ||||||||||||||||||||||||||||||||
| Home Equity – Total | ||||||||||||||||||||||||||||||||
| Current Year Gross Charge-Offs | ||||||||||||||||||||||||||||||||
| Consumer - Other | ||||||||||||||||||||||||||||||||
| Pass | ||||||||||||||||||||||||||||||||
| Special Mention | ||||||||||||||||||||||||||||||||
| Substandard | ||||||||||||||||||||||||||||||||
| Doubtful | ||||||||||||||||||||||||||||||||
| Loss | ||||||||||||||||||||||||||||||||
| Consumer - Other – Total | ||||||||||||||||||||||||||||||||
| Current Year Gross Charge-Offs | ||||||||||||||||||||||||||||||||
| Consumer – Auto | ||||||||||||||||||||||||||||||||
| Pass | ||||||||||||||||||||||||||||||||
| Special Mention | ||||||||||||||||||||||||||||||||
| Substandard | ||||||||||||||||||||||||||||||||
| Doubtful | ||||||||||||||||||||||||||||||||
| Loss | ||||||||||||||||||||||||||||||||
| Consumer - Auto – Total | ||||||||||||||||||||||||||||||||
| Current Year Gross Charge-Offs | ||||||||||||||||||||||||||||||||
| Overall – Total | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
| Current Year Gross Charge-Offs - Total | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
| Term Loans by Year of Origination | ||||||||||||||||||||||||||||||||
| December 31, 2024 | 2024 | 2023 | 2022 | 2021 | 2020 | Prior | Revolving | Total | ||||||||||||||||||||||||
| Commercial | ||||||||||||||||||||||||||||||||
| Pass | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
| Special Mention | ||||||||||||||||||||||||||||||||
| Substandard | ||||||||||||||||||||||||||||||||
| Doubtful | ||||||||||||||||||||||||||||||||
| Loss | ||||||||||||||||||||||||||||||||
| Commercial – Total | ||||||||||||||||||||||||||||||||
| Current Year Gross Charge-Offs | ||||||||||||||||||||||||||||||||
| Commercial Real Estate | ||||||||||||||||||||||||||||||||
| Pass | ||||||||||||||||||||||||||||||||
| Special Mention | ||||||||||||||||||||||||||||||||
| Substandard | ||||||||||||||||||||||||||||||||
| Doubtful | ||||||||||||||||||||||||||||||||
| Loss | ||||||||||||||||||||||||||||||||
| Commercial Real Estate – Total | ||||||||||||||||||||||||||||||||
| Current Year Gross Charge-Offs | ||||||||||||||||||||||||||||||||
| Residential Mortgage | ||||||||||||||||||||||||||||||||
| Pass | ||||||||||||||||||||||||||||||||
| Special Mention | ||||||||||||||||||||||||||||||||
| Substandard | ||||||||||||||||||||||||||||||||
| Doubtful | ||||||||||||||||||||||||||||||||
| Loss | ||||||||||||||||||||||||||||||||
| Residential Mortgage – Total | ||||||||||||||||||||||||||||||||
| Current Year Gross Charge-Offs | ||||||||||||||||||||||||||||||||
| Home Equity | ||||||||||||||||||||||||||||||||
| Pass | ||||||||||||||||||||||||||||||||
| Special Mention | ||||||||||||||||||||||||||||||||
| Substandard | ||||||||||||||||||||||||||||||||
| Doubtful | ||||||||||||||||||||||||||||||||
| Loss | ||||||||||||||||||||||||||||||||
| Home Equity – Total | ||||||||||||||||||||||||||||||||
| Current Year Gross Charge-Offs | ||||||||||||||||||||||||||||||||
| Consumer - Other | ||||||||||||||||||||||||||||||||
| Pass | ||||||||||||||||||||||||||||||||
| Special Mention | ||||||||||||||||||||||||||||||||
| Substandard | ||||||||||||||||||||||||||||||||
| Doubtful | ||||||||||||||||||||||||||||||||
| Loss | ||||||||||||||||||||||||||||||||
| Consumer - Other – Total | ||||||||||||||||||||||||||||||||
| Current Year Gross Charge-Offs | ||||||||||||||||||||||||||||||||
| Consumer – Auto | ||||||||||||||||||||||||||||||||
| Pass | ||||||||||||||||||||||||||||||||
| Special Mention | ||||||||||||||||||||||||||||||||
| Substandard | ||||||||||||||||||||||||||||||||
| Doubtful | ||||||||||||||||||||||||||||||||
| Loss | ||||||||||||||||||||||||||||||||
| Consumer - Auto – Total | ||||||||||||||||||||||||||||||||
| Current Year Gross Charge-Offs | ||||||||||||||||||||||||||||||||
| Overall – Total | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
| Current Year Gross Charge-Offs - Total | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
There were
The performance and credit quality of the loan portfolio is also monitored by analyzing the age of the loans receivable as determined by the length of time a recorded payment is past due. The following tables present the classes of the loan portfolio summarized by past due and nonaccrual status as of December 31, 2025 and December 31, 2024 (in thousands):
| Greater | Total Past | |||||||||||||||||||||||
| than 90 | Due and | Total | ||||||||||||||||||||||
| 30-89 Days | Days and | Non- | Non- | Loans | ||||||||||||||||||||
| December 31, 2025 | Past Due (1) | Accruing | accrual | accrual | Current | Receivable | ||||||||||||||||||
| Commercial | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
| Commercial real estate | ||||||||||||||||||||||||
| Residential mortgage | ||||||||||||||||||||||||
| Home equity | ||||||||||||||||||||||||
| Consumer, other | ||||||||||||||||||||||||
| Consumer, automobile | ||||||||||||||||||||||||
| Total | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
(1) Excludes any non-accrual loans 30-89 days past due.
| Greater | Total Past | |||||||||||||||||||||||
| than 90 | Due and | Total | ||||||||||||||||||||||
| 30-89 Days | Days and | Non- | Non- | Loans | ||||||||||||||||||||
| December 31, 2024 | Past Due (1) | Accruing | accrual | accrual | Current | Receivable | ||||||||||||||||||
| Commercial | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
| Commercial real estate | ||||||||||||||||||||||||
| Residential mortgage | ||||||||||||||||||||||||
| Home equity | ||||||||||||||||||||||||
| Consumer, other | ||||||||||||||||||||||||
| Consumer, automobile | ||||||||||||||||||||||||
| Total | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
(1) Excludes any non-accrual loans 30-89 days past due.
The following tables present nonaccrual loans, by loan class, as of December 31, 2025 and December 31, 2024 (in thousands):
| Nonaccruals | Nonaccruals | |||||||
| with No | with an | |||||||
| Allowance | Allowance | |||||||
| for Credit | for Credit | |||||||
| December 31, 2025 | Losses | Losses | ||||||
| Commercial | $ | $ | ||||||
| Commercial real estate | ||||||||
| Residential mortgage | ||||||||
| Home equity | ||||||||
| Consumer, other | ||||||||
| Consumer, automobile | ||||||||
| Total | $ | $ | ||||||
| Nonaccruals | Nonaccruals | |||||||
| with No | with an | |||||||
| Allowance | Allowance | |||||||
| for Credit | for Credit | |||||||
| December 31, 2024 | Losses | Losses | ||||||
| Commercial | $ | $ | ||||||
| Commercial real estate | ||||||||
| Residential mortgage | ||||||||
| Home equity | ||||||||
| Consumer, other | ||||||||
| Consumer, automobile | ||||||||
| Total | $ | $ | ||||||
During the years ended December 31, 2025 and December 31, 2024, no accrued interest receivable was reversed against interest income.
The following tables summarize the activity in the allowance for credit losses by loan class for the years ended December 31, 2025 and 2024, and information in regard to the allowance for credit losses and the recorded investment in loans receivable by loan class as of December 31, 2025 and December 31, 2024 (in thousands):
| Initial | Initial | |||||||||||||||||||||||||||
| Beginning | Provision for | Provision for | Provisions | Ending | ||||||||||||||||||||||||
| December 31, 2025 | Balance | PCD Loans | Charge-offs | Recoveries | Non-PCD Loans | (Credits) | Balance | |||||||||||||||||||||
| Commercial | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||
| Commercial real estate | ||||||||||||||||||||||||||||
| Residential mortgage | ( | ) | ||||||||||||||||||||||||||
| Home equity | ( | ) | ||||||||||||||||||||||||||
| Consumer, other | ( | ) | ( | ) | ||||||||||||||||||||||||
| Consumer, automobile | ( | ) | ||||||||||||||||||||||||||
| Total | $ | $ | $ | ( | ) | $ | $ | $ | $ | |||||||||||||||||||
| Beginning | Provisions | Ending | ||||||||||||||||||
| December 31, 2024 | Balance | Charge-offs | Recoveries | (Credits) | Balance | |||||||||||||||
| Commercial | $ | $ | $ | $ | $ | |||||||||||||||
| Commercial real estate | ||||||||||||||||||||
| Residential mortgage | ||||||||||||||||||||
| Home equity | ||||||||||||||||||||
| Consumer, other | ( | ) | ( | ) | ||||||||||||||||
| Consumer, automobile | ( | ) | ||||||||||||||||||
| Unallocated | ( | ) | ||||||||||||||||||
| Total | $ | $ | ( | ) | $ | $ | $ | |||||||||||||
| Allowance for Credit Losses | Loans Receivable | |||||||||||||||||||||||
| Ending Balance December 31, 2025 | Ending Balance December 31, 2025 | |||||||||||||||||||||||
| Individually | Collectively | Individually | Collectively | |||||||||||||||||||||
| Evaluated | Evaluated | Total | Evaluated | Evaluated | Total | |||||||||||||||||||
| Commercial | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
| Commercial real estate | ||||||||||||||||||||||||
| Residential mortgage | ||||||||||||||||||||||||
| Home equity | ||||||||||||||||||||||||
| Consumer, other | ||||||||||||||||||||||||
| Consumer, automobile | ||||||||||||||||||||||||
| Total | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
| Allowance for Credit Losses | Loans Receivable | |||||||||||||||||||||||
| Ending Balance December 31, 2024 | Ending Balance December 31, 2024 | |||||||||||||||||||||||
| Individually | Collectively | Individually | Collectively | |||||||||||||||||||||
| Evaluated | Evaluated | Total | Evaluated | Evaluated | Total | |||||||||||||||||||
| Commercial | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
| Commercial real estate | ||||||||||||||||||||||||
| Residential mortgage | ||||||||||||||||||||||||
| Home equity | ||||||||||||||||||||||||
| Consumer, other | ||||||||||||||||||||||||
| Consumer, automobile | ||||||||||||||||||||||||
| Total | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
The Company individually evaluates loans for impairment when a loan meets the following criteria: credit risk rated substandard or doubtful and on non-accrual status, or a previously modified loan that is now past due 30 days or more.
The Company has certain loans for which repayment is dependent upon the operation or sale of collateral when the borrower is experiencing financial difficulty. Under ASC 326, for collateral dependent loans, the Company has adopted the practical expedient to measure the allowance for credit losses based on the fair value of the collateral. The allowance for credit losses is calculated on an individual loan basis on the shortfall between the fair value of the loan's collateral, which is adjusted for liquidation costs, and amortized cost. If the fair value of the collateral exceeds the amortized cost, no allowance is required. The following table details the amortized costs of the collateral dependent loans as of December 31, 2025 and December 31, 2024 (in thousands):
| Real Estate | Other | |||||||||||
| December 31, 2025 | Collateral | Collateral | Total | |||||||||
| Commercial | $ | $ | $ | |||||||||
| Commercial real estate | ||||||||||||
| Residential mortgage | ||||||||||||
| Home equity | ||||||||||||
| Consumer, other | ||||||||||||
| Consumer, automobile | ||||||||||||
| Total | $ | $ | $ | |||||||||
| Real Estate | Other | |||||||||||
| December 31, 2024 | Collateral | Collateral | Total | |||||||||
| Commercial | $ | $ | $ | |||||||||
| Commercial real estate | ||||||||||||
| Residential mortgage | ||||||||||||
| Home equity | ||||||||||||
| Consumer, other | ||||||||||||
| Consumer, automobile | ||||||||||||
| Total | $ | $ | $ | |||||||||
Modifications
In situations where a borrower is experiencing financial difficulty, management grants a concession to the borrower that it would not otherwise consider, and the modification results in a more than insignificant change in contractual cash flows, the related loan is subject to specific disclosure requirements. Management strives to identify borrowers in financial difficulty early and work with them to modify their loans to more affordable terms before their loans reach nonaccrual status. These modified terms may include rate reductions, principal forgiveness, payment forbearance and other actions intended to minimize the economic loss and to avoid foreclosure or repossession of the collateral. Occasionally, we may modify a loan by providing principal forgiveness. In some cases, we will modify a loan by providing multiple types, or combinations, of concessions.
The following table presents the amortized cost basis of loans at December 31, 2025 and December 31, 2024 that were both experiencing financial difficulty and modified during the years ended December 31, 2025 and December 31, 2024. The percentage of amortized cost basis of loans that were modified to borrowers in financial distress as compared to the amortized cost basis of each financing receivable is also presented below. All loan categories with modifications are included in the table below (in thousands):
| December 31, 2025 | Principal Forgiveness | Payment Delay | Term Extension | Interest Rate Reduction | Combination Term Extension and Payment Delay | Total | % of Total Class of Financing Receivable | |||||||||||||||||||||
| Commercial | $ | $ | $ | $ | $ | $ | % | |||||||||||||||||||||
| Total | $ | $ | $ | $ | $ | $ | % | |||||||||||||||||||||
| December 31, 2024 | Principal Forgiveness | Payment Delay | Term Extension | Interest Rate Reduction | Combination Term Extension and Payment Delay | Total | % of Total Class of Financing Receivable | |||||||||||||||||||||
| Commercial | $ | $ | $ | $ | $ | $ | % | |||||||||||||||||||||
| Commercial real estate | $ | $ | $ | $ | $ | $ | % | |||||||||||||||||||||
| Residential mortgage | $ | $ | $ | $ | $ | $ | % | |||||||||||||||||||||
| Total | $ | $ | $ | $ | $ | $ | % | |||||||||||||||||||||
There were
There were
Unfunded Commitments
The Company maintains an allowance for off-balance sheet credit exposures such as unfunded balances for existing lines of credit, commitments to extend future credit, as well as both standby and commercial letters of credit when there is a contractual obligation to extend credit and when this extension of credit is not unconditionally cancellable by the Company. The allowance for off-balance sheet credit exposures is adjusted as a provision for (or recovery of) credit losses and is included in provision for (recovery of) credit losses in the Consolidated Statements of Income. The estimate includes consideration of the likelihood that funding will occur, which is based on a historical funding study derived from internal information, and an estimate of expected credit losses on commitments expected to be funded over its estimated life, which are the same loss rates that are used in computing the allowance for loan credit losses. The allowance for credit losses for unfunded loan commitments of $
| Allowance for | ||||
| Credit Losses | ||||
| Unfunded | ||||
| Commitments | ||||
| Beginning balance, December 31, 2024 | $ | |||
| Provision for credit losses | ||||
| Beginning balance, December 31, 2025 | $ | |||
| Allowance for | ||||
| Credit Losses | ||||
| Unfunded | ||||
| Commitments | ||||
| Beginning balance, December 31, 2023 | $ | |||
| Provision for credit losses | ||||
| Beginning balance, December 31, 2024 | $ | |||
7. PREMISES AND EQUIPMENT
Major classifications of premises and equipment are summarized as follows at December 31 (in thousands):
| December 31, | 2025 | 2024 | ||||||
| Land | $ | $ | ||||||
| Construction in progress | ||||||||
| Buildings | ||||||||
| Furniture and fixtures | ||||||||
| Automobiles | ||||||||
| Total | ||||||||
| Less accumulated depreciation | ( | ) | ( | ) | ||||
| Net | $ | $ | ||||||
Depreciation expense for the years ended December 31, 2025 and 2024 amounted to $
8. DEPOSITS
Aggregate time deposits in denominations of $250,000 or more were $
A summary of the maturity of time deposits as of December 31, 2025 is as follows (in thousands):
| Year Ending December 31, | ||||
| 2026 | $ | |||
| 2027 | ||||
| 2028 | ||||
| 2029 | ||||
| 2030 | ||||
| Total | $ |
At December 31, 2025 and 2024, deposits from related parties totaled $
The Company had no customers with aggregate deposit accounts totaling percent or greater of total deposits as of December 31, 2025 December 31, 2024.
The Company obtains certain deposits through the efforts of third-part broker. Brokered deposits totaled $
9. BORROWINGS AND SUBORDINATED DEBT
FHLB Borrowings
The Company maintains a borrowing agreement with the FHLB of Pittsburgh with an available funding capacity of approximately $
Federal Home Loan Bank advances consist of separate loans with the FHLB of Pittsburgh as of December 31, 2025 and December 31, 2024 as follows (dollars in thousands):
| 2025 | 2024 | |||||||||||||||
| Weighted | Weighted | |||||||||||||||
| Amount | Average Rate | Amount | Average Rate | |||||||||||||
| FHLB fixed-rate advances maturing: | ||||||||||||||||
| 2025 | $ | % | $ | % | ||||||||||||
| 2026 | ||||||||||||||||
| 2027 | ||||||||||||||||
| 2028 | ||||||||||||||||
| Total | $ | $ | ||||||||||||||
Subordinated Debt
As part of the acquisition of NUBC, the Company acquired previously issued $
The Company may redeem or prepay any or all of the subordinated debt, in whole or in part, without premium or penalty, at any time on or after June 30, 2026, and prior to the maturity date at a price of of the principal amount, plus interest accrued and unpaid to the date of redemption or prepayment.
10. SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE
The Company enters into agreements under which it sells securities subject to an obligation to repurchase the same or similar securities. Under these arrangements, the Company may transfer legal control over the assets but still retain effective control through an agreement that entitles and obligates the Company to repurchase the assets.
As a result, these repurchase agreements are accounted for as collateralized financing agreements (i.e., secured borrowings) and not as a sale and subsequent repurchase of securities. The obligation to repurchase the securities is reflected as a liability in the Company’s Consolidated Balance Sheets, while the securities underlying the repurchase agreements remain in the respective investment securities asset accounts. In other words, there is no offsetting or netting of the investment securities assets with the repurchase agreement liabilities.
The following table presents the liabilities subject to an enforceable master netting arrangement or repurchase agreements as of December 31, 2025 and 2024 (dollars in thousands):
| Gross Amounts Not Offset | ||||||||||||||||||||||||
| in the Balance Sheets | ||||||||||||||||||||||||
| December 31, 2025 | Gross Amounts of Recognized Liabilities | Gross Amounts Offset in the Balance Sheets | Net Amounts of Liabilities Presented in the Balance Sheets | Financial Instruments | Cash Collateral Pledged | Net Amount | ||||||||||||||||||
| Repurchase agreements: | ||||||||||||||||||||||||
| Commercial customers (a) | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
| Gross Amounts Not Offset | ||||||||||||||||||||||||
| in the Balance Sheets | ||||||||||||||||||||||||
| December 31, 2024 | Gross Amounts of Recognized Liabilities | Gross Amounts Offset in the Balance Sheets | Net Amounts of Liabilities Presented in the Balance Sheets | Financial Instruments | Cash Collateral Pledged | Net Amount | ||||||||||||||||||
| Repurchase agreements: | ||||||||||||||||||||||||
| Commercial customers (a) | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
| (a) | As of December 31, 2025 and 2024, the fair value of securities pledged in connection with repurchase agreements was $ |
11. BENEFIT PLANS
Section 401(k) Plan
The Company sponsors a contributory defined contribution Section 401(k) plan covering substantially all employees who have completed year of service, have worked
The Company has a profit-sharing employer contribution component to the 401(k) Plan. The profit-sharing employer contribution is made at the discretion of management and the Board of Directors based upon current year earnings. The Company's contributions were $
Employee Stock Ownership Plan
The Company sponsors an Employee Stock Ownership Plan (ESOP) covering substantially all employees who have completed year of service, have worked
In the event a terminated plan participant desires to sell his or her shares of the Company stock, or for certain employees who elect to diversify their account balances, the Company may be required to purchase the shares from the participant at their fair value. To the extent that shares of common stock held by the ESOP are not readily traded, a sponsor must reflect the maximum cash obligation related to those securities outside of stockholders’ equity.
As of December 31, 2025 and December 31, 2024, the shares held by the ESOP, fair value and maximum cash obligation were as follows:
| As of | December 31, 2025 | December 31, 2024 | ||||||
| Shares held by the ESOP | ||||||||
| Fair value per share | $ | $ | ||||||
| Maximum cash obligation | $ | $ | ||||||
Deferred Directors' Compensation
The Company maintains deferred compensation plans with directors through which the payments of the directors' fees are deferred. The future liability of these agreements, which is payable in annual installments, was financed through the purchase of life insurance contracts.
The present value of the future liability of the plans at December 31, 2025 and December 31, 2024 was $
Supplemental Retirement Plans
The Company has an unfunded, non-qualified supplemental executive retirement plan (SERP) for certain key executives. The SERP is designed to provide certain executives, upon attaining age
Bank Owned Life Insurance
The Company invests in bank owned life insurance (BOLI) as a source of funding for employee and director benefit expenses. BOLI involves the purchasing of life insurance by the Company on a chosen group of officers and directors. The Company is the owner and beneficiary of the policies. This life insurance investment is carried at the cash surrender value of the underlying policies. Income from the increase in the cash surrender value of the policies is included with noninterest income on the Consolidated Statements of Income. The policies can be liquidated, if necessary, with tax costs associated. However, the Company intends to hold these policies and accordingly, the Company has not provided for deferred income taxes on the earnings from the increase in cash surrender value.
The Company recognizes a liability for postretirement benefits provided through an endorsed split-dollar life insurance arrangement. The liability for post-retirement benefits under these arrangements was $
The Company holds bank-owned life insurance (BOLI) with a cash value of $
12. INCOME TAXES
The Company files tax returns in the U.S. federal jurisdiction and required states. With few exceptions, the Bank is no longer subject to tax examination by tax authorities for years prior to 2022. Cash paid for federal income taxes, net of any refunds, during the years ended December 31, 2025 and 2024 were $
The Commonwealth of Pennsylvania assesses a Bank Franchise Tax on banks instead of a state income tax. The Bank Franchise Tax expense is reported in non-interest expense and the tax's calculation is unrelated to taxable income. The Bank does not file any income-based taxes in any other states.
The provision for income taxes for the years ended December 31, 2025 and 2024 consists of the following components before the adoption of ASU 2023-09 (in thousands):
| Year Ended December 31, | 2025 | 2024 | ||||||
| Current tax expense | $ | $ | ||||||
| Deferred tax expense (benefit) | ( | ) | ||||||
| Total Provision | $ | $ | ||||||
The tax effects of deductible and taxable temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities at December 31 are as follows (in thousands):
| December 31, | 2025 | 2024 | ||||||
| Deferred tax assets: | ||||||||
| Allowance for credit losses | $ | $ | ||||||
| Deferred compensation | ||||||||
| Purchase accounting adjustments on loans | ||||||||
| Purchase accounting adjustments on securities | ||||||||
| Core contract termination | ||||||||
| Net Unrealized losses on securities | ||||||||
| Other | ||||||||
| Total | ||||||||
| Deferred tax liabilities: | ||||||||
| Premises and equipment | ||||||||
| Purchase accounting adjustments on premises | ||||||||
| Purchase accounting adjustments on deposits and borrowings | ||||||||
| Core deposit intangible | ||||||||
| Purchase accounting adjustments on intangible assets | ||||||||
| Deferred loan origination costs | ||||||||
| Other | ||||||||
| Total | ||||||||
| Net Deferred Tax Asset | $ | $ | ||||||
Income tax expense for the years ended December 31, 2025 and 2024 differed from the federal statutory rate applied to income before income taxes for the following reasons in accordance with ASU 2023-09 (dollars in thousands):
| 2025 | 2024 | |||||||||||||||
| Amount | Percentage | Amount | Percentage | |||||||||||||
| Provision at statutory rate | $ | % | $ | % | ||||||||||||
| Tax-exempt interest | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Nondeductible interest expense | ||||||||||||||||
| Bank owned life insurance | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Bargain purchase gain | ( | ) | ( | ) | ||||||||||||
| Nondeductible merger expenses | ||||||||||||||||
| Other, net | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Applicable Income Taxes and Effective Rates | $ | % | $ | % | ||||||||||||
It is anticipated that all tax assets shown above will be realized and accordingly no valuation allowance was provided. The Company and the Bank file a consolidated federal income tax return.
The Company prescribes a recognition threshold and a measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. Benefits from tax positions should be recognized in the financial statements only when it is more likely than not that the tax position will be sustained upon examination by the appropriate taxing authority that would have full knowledge of all relevant information. A tax position that meets the more-likely-than-not recognition threshold is measured at the largest amount of benefit that is greater than 50% likely of being realized upon ultimate settlement. Tax positions that previously failed to meet the more-likely-than-not recognition threshold should be recognized in the first subsequent financial reporting period in which that threshold is met. Previously recognized tax positions that no longer meet the more-likely-than- not recognition threshold should be derecognized in the first subsequent financial reporting period in which that threshold is no longer met. There is currently no liability for uncertain tax positions and no known unrecognized tax benefits. With limited exceptions, the Company’s federal and state income tax returns for taxable years through 2022 have been closed for purposes of examination by the federal and state taxing jurisdictions.
13. OPERATING LEASE COMMITMENTS AND CONTINGENCIES
The Company leases one office location under operating leases. This operating lease was assumed with the acquisition of NUBC. The Company has elected to account for the variable nonlease components, such as common area maintenance charges, utilities, real estate taxes, and insurance, separately from the lease component. Such variable nonlease components are reported in net occupancy expense on the Consolidated Statements of Income when paid. These variable nonlease components were excluded from the calculation of the present value of the remaining lease payments, therefore, they are not included in the right-of-use assets and lease liabilities reported on the Consolidated Balance Sheets.
As of December 31, 2025 the Company had recorded right-of-use assets in for operating leases of $
The Company’s lease contains an option to renew the lease after the initial term. Management considers the Company’s historical pattern of exercising renewal options on leases and the positive performance of the leased locations, when determining whether it is reasonably certain that the leases will be renewed. If management concludes that there is reasonable certainty about the renewal option, it is included in the calculation of the remaining term of each applicable lease. The discount rate utilized in calculating the present value of the remaining lease payments for each lease was the Federal Home Loan Bank of Pittsburgh advance rate corresponding to the remaining maturity of the lease as of August 1, 2025. The following table presents the weighted-average remaining lease term and discount rate for the leases outstanding at December 31, 2025.
| 2025 | ||||
| Weighted-average remaining term (years) | ||||
| Weighted-average discount rate | % | |||
The following table presents the undiscounted cash flows due related to operating leases as of December 31, 2025, along with a reconciliation to the discounted amount recorded on the Consolidated Balance Sheets:
Undiscounted cash flows due (In thousands):
| 2026 | $ | |||
| 2027 | ||||
| 2028 | ||||
| 2029 | ||||
| 2030 | ||||
| Thereafter | ||||
| Total undiscounted cash flows | ||||
| Discount on cash flows | ( | ) | ||
| Total lease liabilities | $ |
Under Topic 842, the lessee can elect to not record on the Consolidated Balance Sheets a lease whose term is twelve months or less and does not include a purchase option that the lessee is reasonably certain to exercise. As of December 31, 2025, the Company had no leases that had a term of twelve months or less.
Rental expense under operating leases totaled approximately $
In the normal course of business, the Company is subject to pending and threatened litigation in which claims for monetary damages are asserted. In management’s opinion, the Company’s financial position and results of operations would not be materially affected by the outcome of these legal proceedings.
14. REGULATORY MATTERS
Cash and Due from Banks
Deposits with correspondent financial institutions are insured up to $250,000 per institution. The Company maintains cash and cash equivalents with certain correspondent financial institutions in excess of the insured amount.
Regulatory Capital Requirements
The Bank is subject to various regulatory capital requirements administered by federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory and possible additional discretionary actions by regulators that, if undertaken, could have a direct material effect on the Company’s consolidated financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Bank must meet specific capital guidelines that involve quantitative measures of the Bank’s assets, liabilities, and certain off-balance-sheet items as calculated under regulatory accounting practices. The Bank’s capital amounts and classifications are also subject to qualitative judgments by the regulators about components, risk-weightings, and other factors. The Company is exempt from consolidated capital requirements as those requirements do not apply to bank holding companies with consolidated assets under $3 billion.
Prompt corrective action regulations provide five classifications: well capitalized, adequately capitalized, undercapitalized, significantly undercapitalized, and critically undercapitalized, although these terms are not used to represent overall financial condition. If a bank becomes undercapitalized, its regulator must take certain supervisory actions under prompt corrective action regulations, and such actions could have a direct material effect on the institution's financial statements. Generally, an institution is considered well capitalized if it has a leverage (Tier 1) ratio of
The federal banking agencies have developed a minimum Community Bank Leverage Ratio ("CBLR") (which represents a bank's tier 1 capital to average total consolidated assets) for financial institutions with assets of less than $10 billion and limited amounts of off-balance-sheet exposures and trading assets and liabilities. A “qualifying community bank” may elect to utilize the CBLR in lieu of the general applicable risk-based capital requirements under Basel III. If the community bank exceeds this ratio, it will be deemed to be in compliance with all other capital and leverage requirements, including the capital requirements to be considered “well capitalized” under Basel III. The federal banking agencies may consider a financial institution’s risk profile when evaluating whether it qualifies as a community bank for purposes of the capital ratio requirement. The federal banking agencies set the minimum CBLR at
Volatile earnings, along with other qualitative factors and changes to regulatory mandates, could significantly impact the Bank’s capital adequacy. The most recent notification from the FDIC categorized the Bank as “well capitalized” and there have been no conditions or events since that notification that management believes have changed the Bank’s categorization.
As of December 31, 2025 and 2024, the Bank's Community Bank Leverage Ratio was
CBLR Grace Period
If an electing banking organization fails to satisfy one or more of the qualifying criteria but maintains a leverage ratio of greater than
A banking organization is required to comply with and report under the generally applicable capital rule and file the relevant regulatory reports if the banking organization (i) is unable to restore compliance with all qualifying criteria during the two-quarter grace period (including reporting a leverage ratio greater than
The Bank's actual capital amounts and ratios are as follows as of December 31, 2025 and December 31, 2024 (dollar in thousands):
| To be Well Capitalized | ||||||||||||||||
| under Prompt Corrective | ||||||||||||||||
| December 31, 2025 | Actual | Action Provisions (CBLR) | ||||||||||||||
| Amount | Ratio | Amount | Ratio | |||||||||||||
| Tier 1 (Core) Capital to average total assets Bank | $ | % | $ | % | ||||||||||||
| To be Well Capitalized | ||||||||||||||||
| under Prompt Corrective | ||||||||||||||||
| December 31, 2024 | Actual | Action Provisions (CBLR) | ||||||||||||||
| Amount | Ratio | Amount | Ratio | |||||||||||||
| Tier 1 (Core) Capital to average total assets Bank | $ | % | $ | % | ||||||||||||
The Federal Reserve Bank has established capital guidelines for bank holding companies. These guidelines allow small bank holding companies, as defined, an exemption from regulatory capital requirements. The Bancorp meets the eligibility criteria and is exempt from regulatory capital requirements.
Dividends
Banking regulations limit the amount of dividends that may be paid by the Bank to the Company without prior regulatory approval and are subject to the minimum capital ratio requirements noted above.
15. COMMITMENTS AND STANDBY LETTERS OF CREDIT
In the normal course of business, the Company makes various commitments which are not reflected in the accompanying consolidated financial statements. The Company offers such products to meet the financing needs of its customers. These financial instruments include commitments to extend credit and standby letters of credit. These instruments involve to varying degrees elements of credit, interest rate, or liquidity risk in excess of the amount recognized in the consolidated balance sheet.
The Company's maximum exposure to credit loss from nonperformance by the other party to the financial instruments for commitments to extend credit and standby letters of credit is represented by the contractual amount of these instruments. The Company uses the same credit policies in making commitments and conditional obligations as it does for on-balance-sheet instruments. The Company evaluates each customer's creditworthiness on a case-by-case basis. The amount of collateral obtained if deemed necessary by the Company on extension of credit is based on management's credit assessment of the counterparty.
Financial instruments whose contract amounts represent credit risk at December 31 are as follows (in thousands):
| December 31, | 2025 | 2024 | ||||||
| Commitments to extend credit | $ | $ | ||||||
| Standby letters of credit | ||||||||
Commitments to extend credit are legally binding agreements to lend to customers as long as there are no violations of the agreements. Commitments generally have fixed expiration dates or other termination clauses and may require payment of fees. Since many of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future liquidity requirements.
Outstanding letters of credit written are conditional commitments issued by the Company to guarantee the performance of a customer to a third party. The majority of these standby letters of credit expire within the next twelve months. The credit risk involved in issuing letters of credit is essentially the same as that involved in extending other loan commitments. The Company requires collateral supporting these letters of credit as deemed necessary. The current amount of the liability as of December 31, 2025 and 2024 for guarantees under standby letters of credit is not material.
16. PARENT COMPANY STATEMENTS
The following is condensed financial information for the Bancorp on a parent company only basis (in thousands):
Condensed Balance Sheets
| December 31, | 2025 | 2024 | ||||||
| Assets: | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Investment in subsidiary | ||||||||
| Debt securities available-for-sale | ||||||||
| Marketable equity securities | ||||||||
| Other assets | ||||||||
| Total Assets | $ | $ | ||||||
| Liabilities: | ||||||||
| Subordinated Debt, at fair value | $ | $ | ||||||
| Deferred tax liability | ||||||||
| Total Liabilities | ||||||||
| Redeemable Common Stock Held by ESOP | ||||||||
| Total Stockholders’ Equity | ||||||||
| Less maximum cash obligation to ESOP shares | ||||||||
| Total Stockholders’ equity Less Maximum Cash Obligation Related to ESOP Shares | $ | $ | ||||||
| Total Liabilities and Stockholders’ Equity | $ | $ | ||||||
Condensed Income Statements
| December 31, | 2025 | 2024 | ||||||
| Income: | ||||||||
| Equity in undistributed earnings of subsidiary | $ | $ | ||||||
| Dividends from subsidiaries | ||||||||
| Interest and dividend income | ||||||||
| Net marketable equity security (gains) losses | ( | ) | ||||||
| Other Income | ||||||||
| Bargain Purchase Gain | ||||||||
| Total Income | ||||||||
| Expense: | ||||||||
| Interest expense | ||||||||
| Amortization of subordinated debt | ||||||||
| Operating expenses | ||||||||
| Total Expense | ||||||||
| Income before income taxes | ||||||||
| Income tax (benefit) | ( | ) | ( | ) | ||||
| Net Income | $ | $ | ||||||
Condensed Statements of Cash Flows
| December 31, | 2025 | 2024 | ||||||
| Cash Flows From Operating Activities: | ||||||||
| Net income | $ | $ | ||||||
| Equity in undistributed earnings of subsidiaries | ( | ) | ( | ) | ||||
| Net marketable equity security (gains) losses | ( | ) | ||||||
| Bargain purchase gain | ( | ) | ||||||
| Net amortization of accounting estimates | ||||||||
| Other, net | ( | ) | ||||||
| Net Cash Provided By Operating Activities | ||||||||
| Cash Flows From Investing Activities: | ||||||||
| Proceeds from maturities of securities | ||||||||
| Net cash and cash equivalents acquired in business combination | ||||||||
| Net Cash Provided By Investing Activities | ||||||||
| Cash Flows From Financing Activities: | ||||||||
| Dividends paid | ( | ) | ( | ) | ||||
| Net Cash Used In Financing Activities | ( | ) | ( | ) | ||||
| Net Increase in Cash and Cash Equivalents | ||||||||
| Cash and Cash Equivalents, Beginning of Year | ||||||||
| Cash and Cash Equivalents, End of Year | $ | $ | ||||||
17. FAIR VALUE MEASUREMENTS AND FAIR VALUES OF FINANCIAL INSTRUMENTS
Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. The fair value measurements and disclosure topic specifies a hierarchy of valuation techniques based on whether the inputs to these valuation techniques are observable or unobservable. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect the Company’s market assumptions. U.S. GAAP requires that valuation techniques maximize the use of observable inputs and minimize the use of unobservable inputs.
Fair Value Hierarchy
U.S. GAAP establishes a fair value hierarchy which prioritizes the valuation inputs into three broad levels. Based on the underlying inputs, each fair value measurement in its entirety is reported in one of the three levels. These levels are:
Level 1 - Valuation is based on quoted prices in active markets for identical assets and liabilities that the reporting entity has the ability to access at the measurement date. Level 1 assets and liabilities generally include debt and equity securities that are traded in an active exchange market. Valuations are obtained from readily available pricing sources for market transactions involving identical assets or liabilities The Company establishes a hierarchal disclosure framework associated with the level of pricing observability utilized in measuring assets and liabilities at fair value. The standard describes three levels of inputs that may be used to measure fair values:
Level 2 - Valuation is based on inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. The valuation may be based on quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the asset or liability.
Level 3 - Valuation is based on unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. Level 3 assets and liabilities include financial instruments whose value is determined using pricing models, discounted cash flow methodologies, or similar techniques, as well as instruments for which determination of fair value requires significant management judgment or estimation.
An asset or liability's categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement.
Assets and Liabilities Measured at Fair Value on a Recurring Basis
The following describes the valuation techniques used by the Company to measure certain financial assets and liabilities recorded at fair value on a recurring basis in the financial statements:
Securities Available for Sale & Equity Securities
Debt securities available for sale and equity securities are recorded at fair value on a recurring basis. Fair value measurement is based upon quoted market prices, when available (Level 1). If quoted market prices are not available, fair values are measured utilizing independent valuation techniques of identical or similar securities for which significant assumptions are derived primarily from or corroborated by observable market data (Level 2). If the inputs used to provide the evaluation for certain securities are unobservable and/or there is little, if any, market activity then the security would fall to the lowest level of the hierarchy (Level 3).
The Company's investment portfolio is valued using fair value measurements that are considered to be Level 1 or Level 2. The Bank has contracted with a securities portfolio accounting service provider for valuation of its securities portfolio. Most security types are priced using the vendor’s internally developed pricing software, however, subscription pricing services may be used to supplement the internal pricing system. The software uses the discounted cash flow analysis based on the net present value of a security’s projected cash flow to arrive at fair market value. Generally, the methodology involves market quotes, current yields, proprietary models, as well as extensive quality control programs. Valuations for direct obligations of the U.S. Treasury, exchange listed stock and preferred stock are obtained from on-line real-time databases.
The vendor utilizes proprietary valuation matrices for valuing all municipal securities. The initial curves for determining the price, movement, and yield relationships within the municipal matrices are derived from industry benchmark curves or sourced from a municipal trading desk. The securities are further broken down according to issuer, credit support, state of issuance and rating to incorporate additional spreads to the industry benchmark curves.
The following table presents the balances of financial assets measured at fair value on a recurring basis(in thousands):
| December 31, 2025 | Total | Quoted Prices in Active Markets for Identical Assets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | ||||||||||||
| Debt securities available-for-sale: | ||||||||||||||||
| U.S. Treasury | $ | $ | $ | $ | ||||||||||||
| U.S. government agencies | ||||||||||||||||
| Taxable state and municipal | ||||||||||||||||
| Tax-exempt state and municipal | ||||||||||||||||
| U.S. government sponsored enterprise mortgage-backed | ||||||||||||||||
| Corporate | ||||||||||||||||
| Total Debt Securities Available-for-Sale | $ | $ | $ | $ | ||||||||||||
| Marketable equity securities | $ | $ | $ | $ | ||||||||||||
| December 31, 2024 | Total | Quoted Prices in Active Markets for Identical Assets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | ||||||||||||
| Debt securities available-for-sale: | ||||||||||||||||
| U.S. Treasury | $ | $ | $ | $ | ||||||||||||
| U.S. government agencies | ||||||||||||||||
| Taxable state and municipal | ||||||||||||||||
| Tax-exempt state and municipal | ||||||||||||||||
| U.S. government sponsored enterprise mortgage-backed | ||||||||||||||||
| Corporate | ||||||||||||||||
| Total Debt Securities Available-for-Sale | $ | $ | $ | $ | ||||||||||||
| Marketable equity | $ | $ | $ | $ | ||||||||||||
Assets Measured at Fair Value on a Non-recurring Basis
Certain assets are measured at fair value on a nonrecurring basis in accordance with generally accepted accounting principles. Adjustments to the fair value of these assets usually result from the application of lower-of-cost-or-market accounting or write-downs of individual assets.
Collateral Dependent Loans with an ACL
In accordance with ASC 326, we may determine that an individual loan exhibits unique risk characteristics which differentiate it from other loans within our loan pools. In such cases, the loans are evaluated for expected credit losses on an individual basis and excluded from the collective evaluation. Specific allocations of the ACL are determined by analyzing the borrower's ability to repay amounts owed, collateral deficiencies, the relative risk grade of the loan and economic conditions affecting the borrower's industry, among other things. A loan is considered to be collateral dependent when, based upon management's assessment, the borrower is experiencing financial difficulty and repayment is expected to be provided substantially through the operation or sale of the collateral. In such cases, expected credit losses are based on the fair value of the collateral at the measurement date, adjusted for estimated selling costs if satisfaction of the loan depends on the sale of the collateral. We reevaluate the fair value of collateral supporting collateral dependent loans on a quarterly basis. The fair value of real estate collateral supporting collateral dependent loans is evaluated by appraisal services using a methodology that is consistent with the Uniform Standards of Professional Appraisal Practice. The bank held
Other Real Estate Owned
Other real estate owned (OREO) is measured at fair value less costs to sell. Valuation of OREO is determined using current appraisals from independent parties, a Level 2 input. If current appraisals cannot be obtained, or if declines in value are identified after a recent appraisal is received, appraisal values may be discounted, resulting in a Level 3 estimate. If the Company markets the property with a realtor, estimated selling costs reduce the fair value, resulting in a valuation based on Level 3 inputs. Fair value adjustments are recorded in the period incurred and expensed against current earnings. The Bank held
The following table presents the Company's assets that were measured at fair value on a nonrecurring basis as of December 31, 2025 (dollars in thousands).
| December 31, 2025 | Total | Quoted Prices in Active Markets for Identical Assets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | ||||||||||||
| Collateral Dependent, net | $ | $ | $ | $ | ||||||||||||
The following table presents additional quantitative information about assets measured at fair value on a nonrecurring basis and for which Level 3 inputs were utilized to determine fair value at December 31, 2025 (in thousands):
| December 31, 2025 | Fair Value | Valuation Technique | Unobservable Input | Range (Weighted Average) | |||||||||||
| Collateral Dependent, net | $ | Appraisal of collateral | Appraisal adjustments | - | ( | )% | |||||||||
| Liquidation expenses | 0 | - | 10% | (9 | )% | ||||||||||
The Company had
The following information should not be interpreted as an estimate of the fair value of the entire Company since the fair value calculation is only provided for a limited portion of the Company's assets and liabilities. Due to a wide range of valuation techniques and the degree of subjectivity used in making the estimates, comparisons between the Company's disclosures and those of other companies may not be meaningful.
The estimated fair values (in thousands) of the Company's financial instruments were as follows at December 31, 2025 and 2024.
| Carrying | Fair | |||||||||||||||||||
| December 31, 2025 | Value | Value | Level 1 | Level 2 | Level 3 | |||||||||||||||
| Financial assets: | ||||||||||||||||||||
| Cash and cash equivalents | $ | $ | $ | $ | $ | |||||||||||||||
| Interest-bearing time deposits | ||||||||||||||||||||
| Debt securities available-for-sale | ||||||||||||||||||||
| Marketable equity securities | ||||||||||||||||||||
| Restricted investments in bank stock | ||||||||||||||||||||
| Net loans | ||||||||||||||||||||
| Accrued interest receivable | ||||||||||||||||||||
| Bank owned life insurance | ||||||||||||||||||||
| Financial liabilities: | ||||||||||||||||||||
| Deposits | ||||||||||||||||||||
| Repurchase agreements | ||||||||||||||||||||
| FHLB advances | ||||||||||||||||||||
| Subordinated debt | ||||||||||||||||||||
| Accrued interest payable | ||||||||||||||||||||
| Carrying | Fair | |||||||||||||||||||
| December 31, 2024 | Value | Value | Level 1 | Level 2 | Level 3 | |||||||||||||||
| Financial assets: | ||||||||||||||||||||
| Cash and cash equivalents | $ | $ | $ | $ | $ | |||||||||||||||
| Interest-bearing time deposits | ||||||||||||||||||||
| Debt securities available-for-sale | ||||||||||||||||||||
| Marketable equity securities | ||||||||||||||||||||
| Restricted investments in bank stock | ||||||||||||||||||||
| Net loans | ||||||||||||||||||||
| Accrued interest receivable | ||||||||||||||||||||
| Bank owned life insurance | ||||||||||||||||||||
| Financial liabilities: | ||||||||||||||||||||
| Deposits | ||||||||||||||||||||
| Repurchase agreements | ||||||||||||||||||||
| FHLB advances | ||||||||||||||||||||
| Accrued interest payable | ||||||||||||||||||||
Report of Independent Registered Public Accounting Firm
To the Stockholders and the Board of Directors of Steele Bancorp, Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Steele Bancorp, Inc. and its subsidiary (the Company) as of December 31, 2025 and 2024, the related consolidated statements of income, comprehensive income, stockholders’ equity, and cash flows for the years then ended, and the related notes to the consolidated financial statements (collectively, the financial statements). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2025 and 2024, and the results of its operations and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matter
The critical audit matters communicated below are matters arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.
Allowance for Credit Losses – Collectively Evaluated Loans
Description of the Matter
As further described in Note 1 (Summary of Significant Accounting Policies) and Note 6 (Allowance for Credit Losses) to the financial statements, the allowance for credit losses on loans (ACL) is a valuation allowance that represents management’s best estimate of expected credit losses on loans measured at amortized cost considering available information relevant to assessing collectability over the loans’ contractual terms. Loans which share common risk characteristics are pooled and collectively evaluated by the Company using historical data, as well as assessments of current conditions and reasonable and supportable forecasts of future conditions. The Company’s ACL related to collectively evaluated loans represented $9.3 million of the total recorded ACL of $9.9 million as of December 31, 2025. The collectively evaluated ACL consists of quantitative and qualitative components.
Management utilized a discounted cash flow (DCF) model. The quantitative component consists of loss estimates derived from a combination of Loss Rate and Lifetime Probability of Default (PD)/Loss Given Default (LGD) Models. The Loss Rate model uses benchmark data to generate the expected loss rate for the loan pools. The PD/LGD model is a model that uses PD and LGD rates recognized over the life of loans in a pool historically. The PD and LGD benchmark data was used to generate the expected loss rate for certain pools of loans. This method was used when the loss driver method proved to provide insufficient loss rates. Benchmark prepayment and curtailment rates were also utilized in the model. Reasonable and supportable forecast data used in the DCF model is based on various forecast scenarios. This information is evaluated to determine the reasonable and supportable scenario. The model estimates consider large amounts of data in tabulating significant inputs to the calculations and require complex calculations as well as management judgment in the selection of appropriate inputs. In addition to the quantitative component, the collectively evaluated ACL also includes a qualitative component which aggregates management’s assessment of available information relevant to assessing collectability that is not captured in the quantitative loss estimation process. This evaluation is inherently subjective as it requires estimates that are susceptible to significant revision as more information becomes available.
Management exercised significant judgment when estimating the ACL on collectively evaluated loans. We identified the estimation of the collectively evaluated ACL as a critical audit matter as auditing the collectively evaluated ACL involved especially complex and subjective auditor judgment in evaluating management’s assessment of the inherently subjective estimates.
How We Addressed the Matter in Our Audit
The primary audit procedures we performed to address this critical audit matter included:
| ● | Obtaining an understanding of the Company’s process for determining its ACL, including the underlying methodology and significant inputs to the calculation. |
| ● | Substantively testing management’s process for measuring the collectively evaluated ACL, including: |
| ● | Evaluating the conceptual soundness, assumptions, and key data inputs of the Company’s discounted cash flow methodology, including the identification of loan pools, loss driver assumptions, the probability of default and loss given default rate inputs, and the prepayment/curtailment rate inputs for each pool. | |
| ● | Evaluating the relevance and reliability of the underlying external data utilized to prepare the calculation. | |
| ● | Testing the completeness and accuracy of data utilized to prepare the calculation. | |
| ● | Evaluating the reasonableness of the significant judgements and assumptions utilized within the calculation, including qualitative allocations. | |
| ● | Testing the mathematical accuracy of the ACL for collectively evaluated loans including both the quantitative and qualitative factor components of the calculations. | |
| ● | Developing an independent expectation of relevant qualitative factors, which included consideration of certain alternative assumptions as well as metrics for comparison to the Company's qualitative allowance to determine whether this information supported or contradicted the Company's conclusions. | |
| ● | Performed an analysis of the overall allowance for credit loss ratio compared to a relevant peer group. |
Business Combinations - Fair Value of Acquired Loans
Description of the Matter
As described in Note 1 (Summary of Significant Accounting Policies) and Note 2 (Business Combinations) to the financial statements, the Company completed its acquisition of Northumberland Bancorp on August 1, 2025, for total consideration of $40.4 million. The transaction was accounted for as a business combination using the acquisition method of accounting. Accordingly, assets acquired and liabilities assumed were recorded at fair value on the acquisition date, including acquired loans with an aggregate fair value of $426.4 million. Determining the acquired fair values, particularly in relation to the loan portfolio, is inherently subjective and involves significant judgment regarding the methods and assumptions used to estimate fair value. In determining the fair value of loans acquired, management must determine whether or not acquired loans have evidence of more-than-insignificant credit deterioration at acquisition, the amount and timing of cash flows expected to be collected, and market discount rates, among other assumptions. Changes in these assumptions could have a significant impact on the fair value of the loans acquired and the amount of bargain purchase gain recorded.
We identified the acquisition date fair value of acquired loans as a critical audit matter as auditing this estimate is especially complex and requires subjective auditor judgment. Auditing this estimate required a high level of judgment in evaluating management’s identification of loans with evidence of credit deterioration, the need for specialized skill in development and application of subjective assumptions in estimated cash flows, and the size of the acquired loan portfolio.
How We Addressed the Matter in Our Audit
The primary audit procedures we performed to address this critical audit matter included:
| ● | Obtaining an understanding of the Company’s business combination accounting practices and internal controls, including the process of: |
| ● | The appropriateness of the valuation approach and methodology. | |
| ● | Review of valuation specialist valuation, including financial information, data, assumptions utilized and key inputs specifically as it relates to the valuation for acquired loans. |
| ● | Substantively testing management's process, including the use of our own valuation specialist to assess the Company's methods and significant assumptions utilized in determining the fair value of the acquired loan portfolio and evaluating whether the assumptions used were reasonable with respect to market participant views and other factors. |
| ● | Testing the completeness and accuracy of loans determined to have credit deterioration at acquisition and evaluating the reasonableness of the criteria utilized by management in making the determination. |
| ● | Testing the accuracy of the data utilized in the development of acquisition date fair values by confirming, on a sample basis, select data. |
/s/
We have served as the Company’s auditor since 2023.
March 30, 2026
PART IV
Item 15. Exhibits and Financial Statement Schedules
| (a) | The following documents are filed as part of this report: |
| 1. | The following financial statements are filed herewith in Item 8: |
Report of Independent Registered Public Accounting Firm (PCAOB ID
Consolidated Balance Sheets as of December 31, 2025 and 2024
Consolidated Statements of Income for the Years Ended December 31, 2025 and 2024
Consolidated Statements of Comprehensive Income for the Years Ended December 31, 2025 and 2024
Consolidated Statements of Changes in Stockholders’ Equity for the Years Ended December 31, 2025 and 2024
Consolidated Statements of Cash Flows for the Years Ended December 31, 2025 and 2024
Notes to Consolidated Financial Statements
| 2. | All financial statement schedules are omitted because the required information is either not applicable, not required or is shown in the respective financial statement or in the notes thereto, which are incorporated by reference at subsection (a) (1) of this item. |
| 3. | Refer to the Exhibit Index following the signature page of this report, which is incorporated herein by reference. |
| (b) | See item 15(a) (3) |
| (c) | None. |
The following exhibits are filed herewith, or, as indicated, incorporated by reference as a part of this report.
| 3.1 |
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| 3.2 |
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| 4.1 |
Instruments Defining Rights of Securities Holders (filed herewith) |
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| 4.2 |
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| 10.1 |
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| 14.1 |
Code of Ethics – The Code of Ethics is available through the Registrant’s website at https://www.centralpennbank.com/Resources/Investor-Relations. |
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| 19.1 |
| 21.1 |
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| 23.1 |
Consent of Independent Registered Public Accounting (Filed herewith) |
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| 31.1 |
Rule 13a-14(a)/15d-14(a) Certification of Principal Executive Officer (Filed herewith) |
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| 31.2 |
Rule 13a-14(a)/15d-14(a) Certification of Principal Financial Officer (Filed herewith) |
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| 32.1 |
Section 1350 Certification of Chief Executive Officer and Chief Financial Officer (Filed herewith) |
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| 101 |
Interactive Data File |
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| 104 |
Cover Page Interactive Data File (embedded with the Inline XBRL Document) |
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Management contract or compensatory plan or agreement |
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Steele Bancorp, Inc.
(Registrant)
| By: |
/s/ Jeffery J. Kapsar |
Date: May 11, 2026 |
| Jeffery J. Kapsar |
||
| President and Chief Executive Officer (Principal Executive Officer) |
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| By: |
/s/ Thomas C. Graver, Jr. |
Date: May 11, 2026 |
| Thomas C. Graver, Jr. |
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| Senior Executive Vice President and Chief Financial Officer (Principal Financial and Principal Accounting Officer) |
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.
BOARD OF DIRECTORS
| By: |
/s/ Jeffrey J. Kapsar |
Date: May 11, 2026 |
| By: |
Jeffrey J. Kapsar
/s/ Thomas C. Graver, Jr. |
Date: May 11, 2026 |
| By: |
Thomas C. Graver, Jr.
/s/ J. Donald Steele, Jr. |
Date: May 11, 2026 |
| By: |
J. Donald Steele, Jr.
/s/ Richard J. Drzewiecki |
Date: May 11, 2026 |
| By: |
Richard J. Drzewiecki
/s/ Robert C. Musser |
Date: May 11, 2026 |
| By: |
Robert C. Musser
/s/ Robert S. Pierce |
Date: May 11, 2026 |
| By: |
Robert S. Pierce
/s/ Betsy K. Robertson |
Date: May 11, 2026 |
| By: |
Betsy K. Robertson
/s/ Bradley E. Moyer |
Date: May 11, 2026 |
| By: |
Bradley E. Moyer
/s/ J. Todd Troxell |
Date: May 11, 2026 |
| By: |
J. Todd Troxell
/s/ Timothy J. Apple |
Date: May 11, 2026 |
| By: |
Timothy J. Apple
/s/ Chad M. Geise |
Date: May 11, 2026 |
| By: |
Chad M. Geise
/s/ Amanda G. Kessler |
Date: May 11, 2026 |
| By: |
Amanda G. Kessler
/s/ Adam C. Purdy |
Date: May 11, 2026 |
| Adam C. Purdy |