QNB Corp (OTCQX: QNBC) outlines all‑stock merger with The Victory Bancorp
Rhea-AI Filing Summary
QNB Corp. is registering shares on Form S-4 to complete an all‑stock merger with The Victory Bancorp, Inc., where Victory will merge into QNB and its bank subsidiary will combine into QNB Bank. Each Victory common share will be exchanged for 0.5500 shares of QNB common stock, with cash paid in lieu of fractional QNB shares based on an average market price before closing. Using QNB’s $35.60 share price on September 22, 2025, this implied about $19.58 in stock value per Victory share, compared with Victory’s $12.15 price that day. The deal is structured to qualify as a tax‑free reorganization for U.S. federal income tax purposes, subject to legal opinions, and requires approvals from both companies’ shareholders and banking regulators. Victory shareholders have dissenters’ rights under Pennsylvania law, capped at 10% of Victory shares as a closing condition.
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Insights
QNB plans a stock‑for‑stock acquisition of Victory, pending approvals.
QNB and The Victory Bancorp agreed to merge, exchanging each Victory share for 0.5500 QNB shares, with cash only for fractional shares. Based on QNB’s
The transaction is intended to qualify as a tax‑free reorganization under Section 368(a) of the Internal Revenue Code, so Victory holders exchanging shares solely for QNB stock generally are not expected to recognize gain or loss, apart from cash in lieu of fractional shares. Closing is conditioned on majority shareholder approvals at both companies, multiple regulatory approvals from the Federal Reserve, FDIC and Pennsylvania regulators, and limits on Victory dissenters’ rights at no more than
Both boards unanimously approved the merger and recommend voting in favor of the related proposals at their 2026 special meetings. The companies currently expect completion as early as the first quarter of
As filed with the Securities and Exchange Commission on December 18, 2025
Registration No. 333‑
UNITED STATES
Securities and exchange commission
Washington, D.C. 20549
_________________________
Form S‑4
Registration statement
under
The securities act of 1933
_________________________
QNB CORP.
(Exact name of Registrant as specified in its charter)
Pennsylvania (State or other jurisdiction |
6022 (Primary Standard Industrial |
23‑2318082 (I.R.S. Employer Identification No.) |
15 North Third Street
P.O. Box 9005
Quakertown, PA 18951‑9005
(215) 538‑5600
(Address, including zip code, and telephone number, including area code, of Registrant’s principal executive offices)
_________________________
David W. Freeman
Chief Executive Officer
QNB Corp.
15 North Third Street
P.O. Box 9005
Quakertown, PA 18951‑9005
(215) 538‑5600
(Name, address, including zip code, and telephone number, including area code, of agent for service)
_________________________
With copies of all communications to:
David W. Swartz Sunjeet S. Gill Stevens & Lee, P.C. 111 North Sixth Street Reading, Pennsylvania 19603 Telephone: (610) 478‑200 |
Christina M. Gattuso Stephen F. Donahoe Kilpatrick Townsend & Stockton LLP 701 Pennsylvania Avenue, NW, Suite 200 Washington, DC 20004 Telephone: (202) 508‑5800 |
_________________________
Approximate date of commencement of proposed sale of the securities to the public: As soon as practicable after this Registration Statement is declared effective and upon completion of the merger described herein.
If the securities being registered on this Form are being offered in connection with the formation of a holding company and there is compliance with General Instruction G, check the following box. ☐
If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐
If this Form is a post‑effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non‑accelerated filer, smaller reporting company, or an emerging growth company. See the 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 |
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Accelerated filer |
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Non‑accelerated filer |
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Smaller reporting company |
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Emerging growth company |
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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 7(a)(2)(B) of the Securities Act.
If applicable, place an X in the box to designate the appropriate rule provision relied upon in conducting this transaction:
Exchange Act Rule 13e-4(i) (Cross-Border Issuer Tender Offer) ☐
Exchange Act Rule 14d-1(d) (Cross-Border Third-Party Tender Offer) ☐
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION ACTING PURSUANT TO SAID SECTION 8(a) MAY DETERMINE.
Each of QNB and Victory expects that the merger will qualify as a “reorganization” within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended, which we refer to as the Code, with the result that no gain (or loss) on the exchange of the Victory common stock for QNB common stock will be recognized for U.S. federal income tax purposes and exchanging holders of Victory common stock will have a carryover basis in the QNB common stock received in the exchange. For additional information, please refer to “Material U.S. Federal Income Tax Consequences of the Merger” beginning on page 157of the enclosed joint proxy statement/prospectus.
YOUR VOTE IS VERY IMPORTANT, REGARDLESS OF THE NUMBER OF SHARES OF QNB COMMON STOCK OR VICTORY COMMON STOCK YOU OWN. To ensure your representation at the QNB special meeting or the Victory special meeting, as applicable, please follow the voting instructions in the enclosed joint proxy statement/prospectus and on your proxy card. Please vote promptly whether or not you expect to attend your special meeting. Submitting a proxy now will NOT prevent you from being able to vote in person at your special meeting. If you hold your shares in “street name,” you should instruct your broker, bank or other nominee how to vote in accordance with the voting instruction form you receive from your broker, bank or other nominee.
The QNB board of directors has unanimously (1) determined that the merger agreement and the transactions contemplated thereby, including the merger and the issuance of shares of QNB common stock as merger consideration, are in the best interests of QNB and its shareholders and declared that the merger agreement is advisable, and (2) approved the execution, delivery and performance of the merger agreement and the consummation of the transactions contemplated thereby. The QNB board of directors unanimously recommends that QNB shareholders vote “FOR” the QNB merger proposal and “FOR” the other matters to be considered at the QNB special meeting.
The Victory board of directors has unanimously (1) determined that the merger agreement and the transactions contemplated thereby, including the merger, are in the best interests of Victory and its shareholders and declared that the merger agreement is advisable, and (2) approved the execution, delivery and performance of the merger agreement and the consummation of the transactions contemplated thereby. The Victory board of directors unanimously recommends that Victory shareholders vote “FOR” the Victory merger proposal and “FOR” the other matters to be considered at the Victory special meeting.
This joint proxy statement/prospectus provides you with detailed information about the merger agreement and the merger. It also contains or references information about QNB and Victory and certain related matters. You are encouraged to read this joint proxy statement/prospectus carefully. In particular, you should read the “Risk Factors” section beginning on page 22 for a discussion of the risks you should consider in evaluating the proposed merger and how it will affect you. You can also obtain information about QNB from documents that have been filed with the Securities and Exchange Commission that are incorporated by reference in this joint proxy statement/prospectus.
We look forward to a successful completion of the merger and thank you for your prompt attention to this important matter.
Sincerely,
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David W. Freeman President and Chief Executive Officer QNB Corp. |
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Joseph W. Major Chairman and Chief Executive Officer The Victory Bancorp, Inc. |
Neither the Securities and Exchange Commission, the Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation, nor any state securities commission or any other federal or state bank regulatory agency has approved or disapproved the securities to be issued in the merger or determined if this joint proxy statement/prospectus is accurate or adequate. Any representation to the contrary is a criminal offense.
The securities to be issued in the merger are not savings or deposit accounts or other obligations of any bank or non‑bank subsidiary of either QNB or Victory, and they are not insured by the Federal Deposit Insurance Corporation or any other governmental agency.
The date of this joint proxy statement/prospectus is [_____], and it is first being mailed or otherwise delivered to QNB shareholders and Victory shareholders on or about [_____].
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THE VICTORY BANCORP, INC.
542 N. LEWIS ROAD
LIMERICK, PENNSYLVANIA 19468
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON [_______], 2026
To the shareholders of The Victory Bancorp, Inc.:
NOTICE IS HEREBY GIVEN that The Victory Bancorp, Inc. (which we refer to as “Victory”) will hold a special meeting of shareholders (which we refer to as the “Victory special meeting”) on [________], 2026, at [___] a.m. local time, at [________] located at [____________], to consider and vote upon the following matters:
The Victory merger proposal must be approved by a majority of the votes cast at the Victory special meeting, assuming a quorum is present. Whether or not a quorum is present, approval of the Victory adjournment proposal (if necessary or appropriate) requires that the holders of at least a majority of the shares of Victory common stock represented in person or by proxy at the special meeting vote “FOR” the Victory adjournment proposal. Victory will transact no other business at the special meeting.
Victory shareholders must approve the Victory merger proposal in order for the merger to occur. If Victory’s shareholders fail to approve the Victory merger proposal, the merger will not occur. The joint proxy statement/prospectus accompanying this notice explains the merger agreement and the transactions contemplated thereby, as well as the adjournment proposal. Please review the joint proxy statement/ prospectus carefully.
Victory shareholders are entitled to dissenters’ rights under the provisions of the Pennsylvania Business Corporation Law of 1988 (which we refer to as the “PBCL”) in connection with the proposed merger. If the merger is completed, shareholders perfecting their dissenters’ rights are entitled, if they have complied with the provisions of the PBCL regarding rights of dissenting shareholders, to be paid the “fair value” of their shares in cash, as provided in the relevant sections of the PBCL. A copy of the applicable statutory provisions of the PBCL is included with the accompanying joint proxy statement/prospectus as Annex D, and a summary of the provisions can be found under the section of the joint proxy statement/prospectus entitled “The Merger — Dissenters’ Rights.” It is a condition to the consummation of the merger that holders of no more than 10.0% of the outstanding shares of Victory common stock exercise dissenters’ rights.
The Victory board of directors has fixed the close of business on December 17, 2025 as the record date for the special meeting. Only Victory shareholders of record as of the record date are entitled to notice of the special meeting, or any adjournment or postponement of the special meeting. All holders of Victory common stock who held shares on the record date are entitled to vote at the Victory special meeting. Any shareholder entitled to attend and vote at the Victory special meeting is entitled to appoint a proxy to attend and vote on such shareholder’s behalf.
YOUR VOTE IS VERY IMPORTANT, REGARDLESS OF THE NUMBER OF SHARES OF VICTORY COMMON STOCK YOU OWN. Whether or not you plan to attend the Victory special meeting, please complete, sign, date and return the enclosed proxy card in the postage-paid envelope provided at your earliest convenience. You may also submit a proxy via the Internet by following the instructions in the enclosed joint proxy statement/prospectus and on your proxy card. If you hold your shares in “street name” through a broker, bank or other nominee, you should direct the vote of your shares in accordance with the voting instruction form received from your broker, bank or other nominee.
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The Victory board of directors has unanimously approved the merger agreement and the transactions contemplated thereby, including the merger, and unanimously recommends that Victory shareholders vote “FOR” the Victory merger proposal and “FOR” the Victory adjournment proposal (if necessary or appropriate).
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BY ORDER OF THE BOARD OF DIRECTORS, |
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Joseph W. Major |
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Chairman and Chief Executive Officer |
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QNB CORP.
15 NORTH THIRD STREET
P.O. BOX 9005
QUAKERTOWN, PA 18951‑9005
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON [______], 2026
To the shareholders of QNB Corp.:
NOTICE IS HEREBY GIVEN that QNB Corp. (which we refer to as “QNB”) will hold a special meeting of its shareholders (which we refer to as the “QNB special meeting”) on [______], 2026 at [_______________] located at [________], at [___] a.m., local time, to consider and vote upon the following matters:
The QNB merger proposal must be approved by a majority of the votes cast at the QNB special meeting, assuming a quorum is present. Whether or not a quorum is present, approval of the QNB adjournment proposal (if necessary or appropriate) requires the affirmative vote of holders representing a majority of the shares of QNB common stock represented at the meeting. QNB will transact no other business at the special meeting.
QNB shareholders must approve the QNB merger proposal in order for the merger to occur. If the QNB shareholders fail to approve the QNB merger proposal, the merger will not occur. The joint proxy statement/prospectus accompanying this notice explains the merger agreement and the transactions contemplated thereby, as well as the proposals to be considered at the QNB special meeting. Please review the joint proxy statement/prospectus carefully.
The QNB board of directors has fixed the close of business on December 17, 2025 as the record date for the special meeting. Only QNB shareholders of record as of the record date are entitled to notice of, and to vote at, the special meeting, or any adjournment or postponement of the special meeting. Any shareholder entitled to attend and vote at the QNB special meeting is entitled to appoint a proxy to attend and vote on such shareholder’s behalf.
YOUR VOTE IS VERY IMPORTANT, REGARDLESS OF THE NUMBER OF SHARES OF QNB COMMON STOCK YOU OWN. Whether or not you plan to attend the QNB special meeting, please complete, sign, date and return the enclosed proxy card in the postage-paid envelope provided at your earliest convenience. You may also submit a proxy by telephone or via the Internet by following the instructions in the enclosed joint proxy statement/prospectus and on your proxy card. If you hold your shares in “street name” through a broker, bank or other nominee, you should direct the vote of your shares in accordance with the voting instruction form received from your broker, bank or other nominee.
The QNB board of directors has unanimously approved the merger agreement and the transactions contemplated thereby, including the merger and the issuance of shares of QNB common stock as merger consideration, and unanimously recommends that QNB shareholders vote “FOR” the QNB merger proposal and “FOR” the QNB adjournment proposal (if necessary or appropriate).
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BY ORDER OF THE BOARD OF DIRECTORS, |
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David W. Freeman |
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President and Chief Executive Officer |
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ADDITIONAL INFORMATION
This joint proxy statement/prospectus incorporates important business and financial information about QNB from documents filed with the Securities and Exchange Commission, or SEC, that are not included in or delivered with this joint proxy statement/prospectus. You can obtain any of the documents filed with or furnished to the SEC by QNB at no cost from the SEC’s website at http://www.sec.gov. QNB has filed a registration statement on Form S‑4 of which this joint proxy statement/prospectus forms a part. As permitted by SEC rules, this joint proxy statement/prospectus does not contain all of the information included in the registration statement or in the exhibits or schedules to the registration statement. You may obtain a free copy of the registration statement, including any amendments, schedules and exhibits at the address set forth below. Statements contained in this joint proxy statement/prospectus as to the contents of any contract or other documents referred to in this joint proxy statement/prospectus are not necessarily complete. In each case, you should refer to the copy of the applicable contract or other document filed as an exhibit to the registration statement. You may also request copies of these documents, including documents incorporated by reference in this joint proxy statement/prospectus, at no cost by accessing QNB’s website at www.QNBbank.com or by contacting QNB at the contact information set forth below:
QNB Corp.
15 North Third Street
P.O. Box 9005
Quakertown, PA 18951‑9005
Attn: Corporate Secretary
Telephone: (215) 538‑5600
You will not be charged for any of these documents that you request. To obtain timely delivery of these documents, you must request them no later than five business days before the date of your respective company’s special meeting, or [_______], 2026 if you are a QNB shareholder and [__________], 2026 if you are a Victory shareholder.
If you are a QNB shareholder and have any questions about the merger agreement, the merger, the QNB special meeting or the joint proxy statement/prospectus, would like additional copies of the joint proxy statement/prospectus, need a proxy card or need help voting your shares of QNB common stock, please contact Georgeson LLC. Shareholders, Banks and Brokers can call Georgeson LLC toll-free (866) 486-2947.
If you are a Victory shareholder and have any questions about the merger agreement, the merger, the Victory special meeting or the joint proxy statement/prospectus, would like additional copies of the joint proxy statement/prospectus, need a proxy card or need help voting your shares of Victory common stock, please contact Georgeson LLC. Shareholders can call Georgeson LLC toll-free (866) 510-7878.
You should rely only on the information contained in or incorporated by reference into this joint proxy statement/prospectus. No one has been authorized to provide you with information that is different from that contained in, or incorporated by reference into, this joint proxy statement/prospectus. This joint proxy statement/prospectus is dated [_____], and you should assume that the information in this joint proxy statement/prospectus is accurate only as of such date. You should assume that the information incorporated by reference into this joint proxy statement/prospectus from another document is accurate as of the date of such other document or the date referenced in such other document with respect to particular information contained therein. Neither the mailing of this document to the shareholders of QNB or Victory nor the issuance by QNB of shares of QNB common stock in connection with the merger will create any implication to the contrary.
This document does not constitute an offer to sell, or a solicitation of an offer to buy any securities, or the solicitation of a proxy, in any jurisdiction to or from any person to whom it is unlawful to make any such offer or solicitation in such jurisdiction. Except where the context otherwise indicates, information contained in this document regarding Victory has been provided by Victory and information contained in this document regarding QNB has been provided by QNB. See “Where You Can Find More Information” beginning on page 162 for more details.
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TABLE OF CONTENTS
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Page |
QUESTIONS AND ANSWERS |
1 |
SUMMARY |
10 |
SPECIAL CAUTIONARY NOTE REGARDING FORWARD‑LOOKING STATEMENTS |
21 |
RISK FACTORS |
22 |
UNAUDITED PRO FORMA CONDENSED COMBINED CONSOLIDATED FINANCIAL STATEMENTS |
29 |
VICTORY SPECIAL MEETING OF SHAREHOLDERS |
38 |
Date, Time and Place of Victory Special Meeting |
38 |
Matters to be Considered |
38 |
Recommendation of the Victory Board of Directors |
38 |
Record Date and Quorum |
38 |
Required Vote; Treatment of Abstentions; Broker Non‑Votes and Failure to Vote |
38 |
Voting and Revocation of Proxies |
39 |
Shares Held in “Street Name”; Broker Non‑Votes |
39 |
Shares Subject to Support Agreement; Shares Held by Directors |
40 |
Solicitation of Proxies; Expenses |
40 |
Dissenters’ Rights |
40 |
Attending the Victory Special meeting |
40 |
Victory Merger Proposal |
40 |
Victory Adjournment Proposal |
41 |
Assistance |
41 |
QNB SPECIAL MEETING OF SHAREHOLDERS |
42 |
Date, Time and Place of QNB Special Meeting |
42 |
Matters to be Considered |
42 |
Recommendation of the QNB Board of Directors |
42 |
Record Date and Quorum |
42 |
Required Vote; Treatment of Abstentions; Broker Non‑Votes and Failure to Vote |
42 |
Voting and Revocation of Proxies |
43 |
Shares Held in “Street Name”; Broker Non‑Votes |
43 |
Shares Subject to Support Agreement; Shares Held by Directors |
44 |
Solicitation of Proxies; Expenses |
44 |
Attending the QNB Special Meeting |
44 |
QNB Merger Proposal |
44 |
QNB Adjournment Proposal |
45 |
Security Ownership of Certain QNB Beneficial Owners and Management |
45 |
THE MERGER |
48 |
Terms of the Merger |
48 |
Background of the Merger |
48 |
Victory’s Reasons for the Merger; Recommendation of the Victory Board of Directors |
51 |
Opinion of Victory’s Financial Advisor |
54 |
QNB’s Reasons for the Merger; Recommendation of the QNB Board of Directors |
64 |
Opinion of QNB’s Financial Advisor |
66 |
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Board Composition and Management of QNB after the Merger |
74 |
Interests of Victory’s Directors and Executive Officers in the Merger |
75 |
Trading Markets and Dividends |
77 |
Restrictions on Resale of QNB Common Stock |
78 |
Dissenters’ Rights |
78 |
Regulatory Approvals Required for the Merger |
81 |
THE MERGER AGREEMENT |
82 |
The Merger and Subsidiary Bank Merger |
82 |
Effective Time |
82 |
Merger Consideration |
83 |
Equity Awards |
83 |
Surrender of Certificates |
84 |
Indemnification and Directors’ and Officers’ and Company Liability Insurance |
84 |
Director Appointments |
85 |
OTC Stock Quotation |
86 |
Conditions to Complete the Merger |
86 |
Representations and Warranties |
87 |
Victory’s Conduct of Business Pending the Merger |
90 |
QNB’s Conduct of Business Pending the Merger |
93 |
Expenses of the Merger |
94 |
Termination of the Merger Agreement |
94 |
Acquisition Proposals and Termination Fee |
95 |
Amendment |
96 |
ANCILLARY AGREEMENTS TO THE MERGER AGREEMENT |
96 |
Victory Support Agreements |
96 |
QNB Support Agreements |
97 |
THE COMPANIES |
98 |
QNB Corp. |
98 |
The Victory Bancorp, Inc. |
98 |
SECURITY OWNERSHIP OF CERTAIN VICTORY BENEFICIAL OWNERS AND MANAGEMENT |
100 |
THE VICTORY BANCORP, INC. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
102 |
DESCRIPTION OF CAPITAL STOCK OF QNB |
138 |
Overview |
139 |
Common Stock |
139 |
Anti-Takeover Provisions |
140 |
Amendments to Articles of Incorporation |
142 |
Amendments to Bylaws |
142 |
COMPARISON OF SHAREHOLDERS’ RIGHTS |
144 |
MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER |
157 |
Tax Consequences of the Merger Generally |
157 |
U.S. Holders that Exchange Victory Common Stock Solely for QNB Common Stock |
158 |
Cash In Lieu of Fractional Shares |
158 |
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Net Investment Income Tax |
159 |
Potential Dividend Treatment |
159 |
Backup Withholding |
159 |
Certain Reporting Requirements |
159 |
LEGAL MATTERS |
159 |
EXPERTS |
159 |
SHAREHOLDER PROPOSALS |
160 |
HOUSEHOLDING |
160 |
WHERE YOU CAN FIND MORE INFORMATION |
162 |
THE VICTORY BANCORP INC. CONSOLIDATED FINANCIAL STATEMENTS |
F-1 |
ANNEX A |
A-1 |
ANNEX B |
B-1 |
ANNEX C |
C-1 |
ANNEX D |
D-1 |
EXHIBITS |
II-1 |
SIGNATURES AND POWER OF ATTORNEY |
II-3 |
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QUESTIONS AND ANSWERS
The following are answers to certain questions you may have regarding the merger, the QNB special meeting, and the Victory special meeting. We urge you to read carefully this joint proxy statement/prospectus, including the annexes and the documents incorporated by reference into this joint proxy statement/prospectus, because the information in this section may not provide all the information that might be important to you in determining how to vote.
Unless the context otherwise requires, references in this joint proxy statement/prospectus to “QNB” refer to QNB Corp., a Pennsylvania corporation, and its wholly‑owned subsidiary, QNB Bank, a Pennsylvania state chartered bank. Additionally, unless the context otherwise requires, references to “Victory” refer to The Victory Bancorp, Inc., a Pennsylvania corporation, and its wholly‑owned subsidiary, The Victory Bank, a Pennsylvania state chartered bank.
Victory will hold a special meeting of its shareholders (which we refer to as the “Victory special meeting”) and QNB will hold a special meeting of its shareholders (which we refer to as the “QNB special meeting”) to obtain, among other things, the required shareholder approvals in connection with the merger, and you are being provided with this joint proxy statement/prospectus in connection with those special meetings. A copy of the merger agreement is attached to this joint proxy statement/prospectus as Annex A. We urge you to read carefully this joint proxy statement/prospectus and the merger agreement in their entirety.
In order to approve and adopt the merger agreement and related matters, Victory and QNB have each called a meeting of their respective shareholders. This document serves as a joint proxy statement for both the Victory special meeting and the QNB special meeting and describes the proposals to be presented at the meetings.
This document is also a prospectus that is being delivered to Victory shareholders because QNB is offering shares of its common stock to Victory shareholders in connection with the merger.
This joint proxy statement/prospectus contains important information about the merger and the other proposals being voted on at the meetings. You should read it carefully and in its entirety. The enclosed materials allow you to have your shares voted by proxy without attending your meeting. Your vote is important. We encourage you to submit your proxy as soon as possible.
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If Victory provides notice of its intention to terminate the merger agreement as a result of certain changes in the trading price of QNB common stock relative to the price of NASDAQ Bank Index (which we refer to as, the “Index”), QNB has the option (but not the obligation) to increase the exchange ratio to equal a quotient, the numerator of which is equal to (i) the product of (a) the volume average weighted closing sale price of a share of QNB common stock on the OTCQX Best Market (which we refer to as the “OTC”) during the 20 consecutive trading days immediately preceding the date of the merger agreement (which we refer to as the “QNB Market Value”), (b) the exchange ratio (as then in effect), and (c)(I) the average of the daily closing value of the Index for the ten consecutive trading days immediately preceding the “determination date” (as determined per the merger agreement) divided by (II) $4,600.08, which is the volume average weighted closing value of the Index during the 20 consecutive trading days immediately preceding the date of the merger agreement, minus (ii) 0.20, and the denominator of which is equal to the QNB Market Value (each as calculated per the merger agreement).
QNB will not issue any fractional shares of QNB common stock in the merger. Instead, a Victory shareholder who otherwise would have received a fraction of a share of QNB common stock will receive an amount in cash (without interest and rounded to the nearest cent) determined by multiplying (1) the average of the daily closing prices on the OTC for shares of QNB common stock for the five consecutive full trading days ending two trading days immediately preceding the date of closing of the merger by (2) the fraction of a share (rounded to the nearest one‑thousandth of a share when expressed in decimal form) of QNB common stock to which such shareholder would otherwise be entitled to receive.
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QNB Special Meeting: The QNB special meeting will be held on [_____________], 2026, at [____] a.m., local time, at [____________________________________].
QNB Special Meeting: All holders of QNB common stock who held shares at the close of business on December 17, 2025 (which we refer to as the “QNB record date”) are entitled to receive notice of and to vote on the QNB merger proposal and the QNB adjournment proposal at the QNB special meeting, provided that such shares of QNB common stock remain outstanding on the date of the QNB special meeting.
Shareholder approval of the Victory merger proposal is required for completion of the merger. Victory will transact no other business at the Victory special meeting.
Each director of Victory has entered into a support agreement with QNB agreeing to, among other things, vote the shares of Victory common stock over which he or she has the sole power to vote or direct the voting of in favor of the merger agreement and the transactions contemplated thereby and against any acquisition proposals or any actions that would result in a breach of any covenant, representation or warranty of Victory in the merger agreement. As of the Victory record date, the members of the Victory board of directors owned and held the sole dispositive and voting power over shares of Victory common stock representing approximately 17.6% of the voting power represented by all issued and outstanding shares of Victory common stock.
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Shareholder approval of the QNB merger proposal is required for completion of the merger. QNB will transact no other business at the QNB special meeting.
Each director of QNB has entered into a support agreement with Victory agreeing to, among other things, vote the shares of QNB common stock over which he or she has the sole power to vote or direct the voting of in favor of the merger agreement and the transactions contemplated thereby. As of the QNB record date, the members of the QNB board of directors owned and held the sole dispositive and voting power over shares of QNB common stock representing approximately [ ]% of the voting power represented by all issued and outstanding shares of QNB common stock.
QNB Special Meeting: The presence, in person or represented by proxy, of at least a majority of the total number of outstanding shares of QNB common stock entitled to vote is necessary in order to constitute a quorum for purposes of the matters being voted on at the QNB special meeting.
If you fail to attend, or vote in person at, your company’s special meeting, fail to submit a proxy at your company’s special meeting, or fail to instruct your bank, broker, trustee or other nominee how to vote, your shares of common stock will not be counted towards a quorum. Abstentions and shares held of record by a broker or nominee that are voted on any matter are included in determining whether a quorum exists. Broker non‑votes, if any, will not be included in determining whether a quorum exists.
Victory adjournment proposal: Approval of the Victory adjournment proposal (if necessary or appropriate) requires the affirmative vote of holders representing a majority of the shares of Victory common stock represented at the meeting, whether or not a quorum is present. If you fail to vote in person or by proxy or fail to instruct your bank, broker or other nominee to vote, you will not be deemed represented at the meeting, and if you mark “ABSTAIN” on your proxy end, it will have no effect on the proposal. Victory’s shareholders are not required to approve the Victory adjournment proposal in order for the merger to occur. If Victory’s shareholders fail to approve the Victory adjournment proposal, but approve the Victory merger proposal, the merger may nonetheless occur.
QNB adjournment proposal: Approval of the QNB adjournment proposal (if necessary or appropriate) requires the affirmative vote of holders representing a majority of the shares of QNB common stock represented at the meeting, whether or not a quorum is present. If you fail to vote in person or by proxy or fail to instruct your bank, broker or other nominee to vote, or if you mark “ABSTAIN” on your proxy card, it will have no effect on the proposal. QNB’s shareholders are not
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required to approve the QNB adjournment proposal in order for the merger to occur. If QNB’s shareholders fail to approve the QNB adjournment proposal, but approve the QNB merger proposal, the merger may nonetheless occur.
The QNB board of directors has unanimously approved the merger agreement and the transactions contemplated thereby, including the merger, and unanimously recommends that QNB shareholders vote “FOR” the QNB merger proposal and “FOR” the QNB adjournment proposal (if necessary or appropriate).
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If you are a shareholder of record of QNB as of December 17, 2025, the QNB record date, you may submit your proxy before the QNB special meeting in any of the following ways:
If you intend to submit your proxy by mail, your completed proxy card must be received prior to your respective company’s special meeting. QNB shareholders who intend to submit a proxy by telephone or via the Internet must do so by 11:59 p.m. Eastern Time on the day before the QNB special meeting. Victory shareholders who intend to submit a proxy via the Internet must do so by 11:59 p.m. Eastern Time on the day before the Victory special meeting.
If you are a shareholder of record of Victory as of the Victory record date or a shareholder of record of QNB as of the QNB record date, you may also attend and cast your vote in person at your respective company’s special meeting. If you plan to attend your respective company’s special meeting, you must hold your shares in your own name or have a letter from the record holder of your shares confirming your ownership. In addition, you must bring a form of personal photo identification with you to be admitted to the meeting. Each of Victory and QNB reserves the right to refuse admittance to anyone without proper proof of stock ownership or without proper photo identification. The use of cameras, sound recording equipment, communications devices or any similar equipment during the Victory or QNB special meeting is expressly prohibited. [METHODS TO BE UPDATED] Whether or not you intend to be present at the special meeting, you are urged to complete, sign, date and return the enclosed proxy card to Victory or QNB, as applicable, in the enclosed postage-paid envelope or submit a proxy by telephone (solely for QNB shareholders) or via the Internet as described on the enclosed instructions as soon as possible. If you are present at your company’s special meeting and wish to vote your shares in person, your original proxy may be revoked by attending and voting at the relevant company’s special meeting.
If you hold your shares in “street name” through a broker, bank or other nominee, your broker, bank or other nominee will send you separate instructions describing the procedure for voting your shares. If your shares are held in “street name,” you must obtain a legal proxy, executed in your favor, from the record holder of your shares, such as a broker, bank or other nominee, to vote your shares in person at the relevant company’s special meeting.
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Abstentions and shares held of record by a broker or nominee that are voted on any matter are included in determining whether a quorum exists. Abstentions will no effect on the Victory merger proposal, the Victory adjournment proposal, the QNB merger proposal, and the QNB adjournment proposal.
QNB shareholders: Yes. If you are the record holder of your QNB shares, you may revoke your proxy in any one of four ways: (1) you may submit another properly completed proxy card bearing a later date which is received prior to the special meeting; (2) you may send a written notice which is received prior to the special meeting that you are revoking your proxy to: QNB Corp., 15 North Third Street, P.O. Box 9005, Quakertown, PA 18951‑9005, Attention: Corporate Secretary; (3) you may cast a new vote by telephone or via the Internet at any time before 11:59 p.m. Eastern Time on the day before the QNB special meeting; or (4) you may attend the special meeting and notify the election officials that you wish to revoke your proxy and vote in person. However, your attendance at the special meeting will not, by itself, revoke your proxy.
If your shares are held by your broker, bank or other agent as your nominee, you should follow the instructions provided by your broker, bank or other agent.
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Pursuant to the merger agreement, QNB will not be obligated to consummate the merger if dissenters’ rights are properly asserted with respect to 10.0% or more of the outstanding shares of Victory common stock.
The obligations of QNB and Victory to complete the merger are subject to, among other customary closing conditions described in this joint proxy statement/prospectus, the receipt of an opinion from Kilpatrick Townsend & Stockton LLP (with respect to Victory) and Stevens & Lee, P.C. (with respect to QNB), dated as of the closing date of the merger, to the effect that the merger will qualify as a reorganization within the meaning of Section 368(a) of the Code.
For further information, see the section of this joint proxy statement/prospectus entitled “Material U.S. Federal Income Tax Consequences of the Merger” beginning on page 157 for a general discussion of the material U.S. federal income tax consequences of the merger. The U.S. federal income tax consequences described above may not apply to all Victory shareholders. Tax matters can be complicated, and the tax consequences of the merger to you will depend on your particular tax situation. You should consult your tax advisor to determine the tax consequences of the merger to you.
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QNB shareholders: If you have any questions concerning the merger or this joint proxy statement/ prospectus, would like additional copies of this joint proxy statement/prospectus or need help voting your shares of QNB common stock, please contact Georgeson LLC at (866) 486-2947.
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SUMMARY
This summary highlights selected information included in this document and does not contain all of the information that may be important to you. You should read this entire document and its annexes and the other documents to which this document refers to before you decide how to vote with respect to the merger agreement. In addition, this document incorporates by reference important business and financial information about QNB. For a description of this information, please see “Where You Can Find More Information” beginning on page 162. You may obtain the information incorporated by reference into this document without charge by following the instructions in the section entitled “Additional Information” in the forepart of this document. Each item in this summary includes a page reference directing you to a more complete description of that item.
The Companies (page 98)
Information about QNB
QNB Corp. is a bank holding company headquartered in Quakertown, Pennsylvania, and the parent company of QNB Bank, a Pennsylvania state chartered bank. QNB Bank operates a full-service commercial and retail banking business through twelve branches in Bucks, Lehigh and Montgomery Counties, Pennsylvania. As of September 30, 2025, on a consolidated basis, QNB had total assets of $1.9 billion, total net loans of $1.2 billion, total deposits of $1.7 billion and shareholders’ equity of $121.5 million.
QNB’s common stock is quoted on the OTC under the symbol “QNBC.”
QNB’s principal office is located at 15 North Third Street, P.O. Box 9005, Quakertown, PA 18951‑9005. Its telephone number at that location is (215) 538‑5600 and its website is www.qnbbank.com. The information on QNB’s website is not part of this joint proxy statement/prospectus, and the reference to QNB’s website address does not constitute incorporation by reference of any information on that website into this joint proxy statement/prospectus.
Information about Victory
The Victory Bancorp, Inc. is a bank holding company headquartered in Limerick Township, Pennsylvania, and the parent company of The Victory Bank, a Pennsylvania state chartered bank that offers a full range of banking services from four offices across Montgomery and Berks Counties, Pennsylvania. As of September 30, 2025, Victory had $488.2 million in total consolidated assets, $392.1 million in total loans, net of the allowance for credit losses and deferred fees, $436.7 million in total deposits and $31.7 million in shareholders’ equity.
Victory’s common stock is quoted on the OTC under the symbol “VTYB.”
Victory’s principal office is located at 548 N. Lewis Road, Limerick, Pennsylvania 19468. Its telephone number at that location is (610) 948‑9000 and its website is www.victorybank.com. The information on Victory’s website is not part of this joint proxy statement/prospectus, and the reference to Victory’s website address does not constitute incorporation by reference of any information on that website into this joint proxy statement/prospectus.
The Merger (page 48)
QNB and Victory have entered into the merger agreement, pursuant to which Victory will merge with and into QNB, with QNB continuing as the surviving corporation. Immediately following the merger, The Victory Bank, Victory’s wholly-owned banking subsidiary, will merge with and into QNB Bank, QNB’s wholly-owned banking subsidiary, with QNB Bank continuing as the surviving bank.
The terms and conditions by which Victory will merge with and into QNB are contained in the merger agreement, a copy of which is attached to this document as Annex A. All descriptions in this summary and elsewhere in this joint proxy statement/prospectus of the terms and conditions of the merger are qualified by reference to the merger agreement. We encourage you to read the merger agreement carefully, as it is the legal document that governs the merger, for a more complete understanding of the merger.
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Merger Consideration (page 83)
If the merger agreement is approved by the shareholders of Victory and QNB, all other conditions to consummation of the merger are satisfied or waived and the merger is completed, each share of Victory common stock issued and outstanding immediately prior to the effective time of the merger will be converted into the right to receive 0.5500 shares (the “exchange ratio”) of QNB common stock (the consideration such holder receives, the “merger consideration”). Following the completion of the merger, former Victory shareholders will own approximately [23.6]% of the combined company based on the number of shares of QNB common stock outstanding as of [_______].
Although the exchange ratio is fixed, the market value of the merger consideration will fluctuate with the market price of QNB common stock and will not be known at the time Victory or QNB shareholders vote on the merger. QNB common stock is currently quoted on the OTC under the symbol “QNBC.” Based on the last reported sale price of QNB common stock of $35.60 per share on September 22, 2025, the last full trading day before the public announcement of the merger agreement, the exchange ratio represented approximately $19.58 in value for each share of Victory common stock to be converted into QNB common stock. Based on the closing sale price of QNB common stock of $[____] per share on [__________], the latest practicable trading date prior to the printing of this joint proxy statement/prospectus, the exchange ratio represented approximately $[____] in value for each share of Victory common stock to be converted into QNB common stock. Victory common stock is quoted on the OTC under the symbol “VYTB” and the last sale price on September 22, 2025, the last full trading day before the public announcement of the merger agreement, was $12.15 per share, and the most recent reported closing sale price of Victory common stock on [_________] was $[___] per share.
Additionally, QNB will not issue any fractional shares of QNB common stock in the merger. Instead, a Victory shareholder who otherwise would have received a fraction of a share of QNB common stock will receive an amount in cash (without interest and rounded to the nearest cent) determined by multiplying (1) the average of the daily closing prices on the OTC for shares of QNB common stock for the five consecutive full trading days ending two trading days immediately preceding the closing of the merger (which we refer to as the “average QNB closing price”) by (2) the fraction of a share (rounded to the nearest one‑thousandths of a share when expressed in decimal form) of QNB common stock to which such shareholder would otherwise be entitled to receive.
If Victory provides notice of its intention to terminate the merger agreement as a result of certain changes in the trading price of QNB common stock relative to the price of the Index, QNB has the option (but not the obligation) to adjust the exchange ratio to equal a quotient, the numerator of which is equal to (i) the product of (a) the QNB Market Value, (b) the exchange ratio (as then in effect), and (c)(I) the average of the daily closing value of the Index for the ten consecutive trading days immediately preceding the “determination date” (as determined per the merger agreement) divided by (II) $4,600.08, which is the volume average weighted closing value of the Index during the 20 consecutive trading days immediately preceding the date of the merger agreement, minus (ii) 0.20, and the denominator of which is equal to the QNB Market Value (each as calculated per the merger agreement).
Treatment of Victory Restricted Stock (page 84)
Immediately prior to the effective time of the merger, all outstanding shares of Victory common stock subject to vesting restrictions granted under Victory stock plans, if any (which we refer to as “Victory restricted stock”), will become fully vested and will be converted into the right to receive, less applicable taxes, the merger consideration.
Treatment of Options to Purchase Shares of Victory Common Stock (page 83)
At the effective time of the merger, each unvested option to purchase shares of Victory common stock will fully vest and all vested options be converted into and become an option to purchase QNB common stock, and QNB shall assume such option in accordance with the terms of Victory stock plans and the terms of the award agreement by which such option is evidenced. All rights with respect to shares of the Victory common stock under such options assumed by QNB shall thereupon be converted into rights with respect to QNB common stock with appropriate adjustments made to the number of shares and exercise price applicable to such options based on the exchange ratio.
Recommendation of the Victory Board of Directors (page 38)
The Victory board of directors has unanimously approved the merger agreement and the transactions contemplated thereby, including the merger, and unanimously recommends that Victory’s shareholders vote “FOR” the Victory merger proposal and “FOR” the Victory adjournment proposal (if necessary or appropriate). For the factors considered by the Victory board of directors in
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reaching its decision to approve the merger agreement, see “The Merger — Victory’s Reasons for the Merger; Recommendation of the Victory Board of Directors” on page 38.
Opinion of Victory’s Financial Advisor (page 54 and Annex B)
On September 23, 2025, The Kafafian Group, Inc. (which we refer to as “Kafafian”) rendered to Victory its written opinion letter with respect to the fairness, from a financial point of view, to the holders of Victory common stock, as of the date of the opinion, of the merger consideration to be received in connection with the merger by such holders pursuant to the terms of the merger agreement. Kafafian’s opinion was directed to the Victory board of directors and did not address any other aspect or implication of the merger. The references to Kafafian’s opinion in this joint proxy statement/prospectus are qualified in their entirety by reference to the full text of Kafafian’s written opinion, which is included as Annex B to this joint proxy statement/prospectus, and Kafafian’s opinion sets forth the procedures followed, assumptions made, qualifications and limitations on the review undertaken and other matters considered by Kafafian in preparing its opinion.
Neither Kafafian’s opinion, nor the summary of its opinion and the related analyses set forth in this joint proxy statement/prospectus is intended to be, and they do not constitute, advice or a recommendation to the Victory board of directors or any shareholder of Victory as to how to act or vote with respect to any matter relating to the merger agreement or otherwise. Kafafian’s opinion was furnished for the use and benefit of the Victory board of directors (in its capacity as such) in connection with its evaluation of the merger and should not be construed as creating, and Kafafian will not be deemed to have, any fiduciary duty to the Victory board of directors, Victory, any security holder or creditor of Victory or any other person, regardless of any prior or ongoing advice or relationships.
For further information, please see the section entitled “The Merger — Opinion of Victory’s Financial Advisor” on page 54
Recommendation of the QNB Board of Directors (page 42)
The QNB board of directors has unanimously approved the merger agreement and the transactions contemplated thereby, including the merger and the issuance of shares of QNB common stock as merger consideration, and unanimously recommends that QNB shareholders vote “FOR” the QNB merger proposal and “FOR” the QNB adjournment proposal (if necessary or appropriate). For the factors considered by the QNB board of directors in reaching its decision to approve the merger agreement, see “The Merger — QNB’s Reasons for the Merger; Recommendation of the QNB Board of Directors” on page 42.
Opinion of QNB’s Financial Advisor (page 66 and Annex C)
On September 23, 2025, at the request of the QNB board of directors, representatives of Performance Trust Capital Partners, LLC (which we refer to as “Performance Trust”) rendered Performance Trust’s opinion, dated September 23, 2025, to the QNB board of directors that, as of such date and based upon and subject to the qualifications, assumptions and other matters considered in connection with the preparation of its opinion, the total value of the merger is fair, from a financial point of view, to the shareholders of QNB common stock.
The full text of the written opinion of Performance Trust, dated September 23, 2025, which sets forth, among other things, the various qualifications, assumptions and limitations on the scope of the review undertaken by Performance Trust, is attached as Annex C to this document. Performance Trust provided its opinion for the information and assistance of the QNB board of directors (solely in its capacity as such) in connection with, and for purposes of, its consideration of the merger, and its opinion only addresses whether the total value of the merger pursuant to the merger agreement was fair, from a financial point of view, to the QNB shareholders as of September 23, 2025. The opinion of Performance Trust did not address any other term or aspect of the merger agreement or the merger contemplated thereby. The Performance Trust opinion does not constitute a recommendation to the QNB board of directors, the QNB shareholders, the Victory board of directors, the Victory shareholders or any shareholder or any other person as to how such person should act with respect to the merger or any other matter.
For further information, please see the section entitled “The Merger — Opinion of QNB’s Financial Advisor” on page 66.
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Victory Special Meeting of Shareholders (page 38)
Victory will hold a special meeting of shareholders on [______], 2026, at [___] a.m. local time, at the [__________________]. At the special meeting, Victory shareholders will be asked to vote on the Victory merger proposal and, if necessary, the Victory adjournment proposal.
The Victory board of directors has fixed the close of business on the Victory record date as the record date for determining the holders of Victory common stock entitled to receive notice of, and to vote at, the Victory special meeting. As of the Victory record date, there were 1,998,500 shares of Victory common stock outstanding and entitled to vote at the Victory special meeting held by 299 holders of record.
Shareholder approval of the Victory merger proposal is required to complete the merger. Victory will transact no business other than as listed above at the Victory special meeting. Each share of Victory common stock entitles the holder thereof to one vote at the Victory special meeting on each proposal to be considered at the Victory special meeting.
The presence, in person or represented by proxy, of at least a majority of the total number of outstanding shares of Victory common stock entitled to vote is necessary in order to constitute a quorum for purposes of the matters being voted on at the Victory special meeting.
The Victory merger proposal must be approved by a majority of the votes cast at the Victory special meeting, assuming a quorum is present. Whether or not a quorum is present, approval of the Victory adjournment proposal (if necessary or appropriate) requires that the holders of at least a majority of the shares of Victory common stock represented in person or by proxy at the special meeting vote “FOR” the Victory adjournment proposal. Victory shareholders must approve the Victory merger proposal in order for the merger to occur. Victory shareholders are not, however, required to approve the Victory adjournment proposal in order for the merger to occur. If Victory shareholders fail to approve the Victory adjournment proposal, but approve the Victory merger proposal, the merger may nonetheless occur.
Each director of Victory has entered into a support agreement with QNB agreeing to, among other things, vote the shares of Victory common stock over which he or she has the sole power to vote or direct the voting of in favor of the merger agreement and the transactions contemplated thereby and against any acquisition proposals or any actions that would result in a breach of any covenant, representation or warranty of Victory in the merger agreement. As of the Victory record date, the members of the Victory board of directors owned and held the sole dispositive and voting power over shares of Victory common stock representing approximately [ ]% of the voting power represented by all issued and outstanding shares of Victory common stock.
Even if you expect to attend the special meeting of shareholders, Victory recommends that you promptly complete and return your proxy card in the enclosed return envelope. Alternatively, you may vote through the Internet. Information and applicable deadlines for voting by Internet are set forth in the enclosed proxy card instructions.
QNB Special Meeting of Shareholders (page 42)
QNB will hold a special meeting of its shareholders on [_________], 2026, at [___] a.m., local time, at [________________________]. At the special meeting, QNB shareholders will be asked to vote on the QNB merger proposal and the QNB adjournment proposal.
The QNB board of directors has fixed the close of business on the QNB record date as the record date for determining the holders of QNB common stock entitled to receive notice of, and to vote at, the QNB special meeting. As of the QNB record date, there were [______] shares of QNB common stock outstanding and entitled to vote at the QNB special meeting held by approximately [___] holders of record.
Shareholder approval of the QNB merger proposal is required to complete the merger. QNB will transact no business other than as listed above at the QNB special meeting. Each share of QNB common stock entitles the holder thereof to one vote at the QNB special meeting on each proposal to be considered at the QNB special meeting.
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The presence, in person or represented by proxy, of at least a majority of the total number of outstanding shares of QNB common stock entitled to vote is necessary in order to constitute a quorum for purposes of the matters being voted on at the QNB special meeting.
The QNB merger proposal must be approved by a majority of the votes cast at the QNB special meeting, assuming a quorum is present. Whether or not a quorum is present, approval of the QNB adjournment proposal (if necessary or appropriate) requires the affirmative vote of holders representing a majority of the shares of QNB common stock represented at the meeting. QNB shareholders must approve the QNB merger proposal in order for the merger to occur. QNB shareholders are not, however, required to approve the QNB adjournment proposal in order for the merger to occur. If the QNB shareholders fail to approve the QNB adjournment proposal, but approve the QNB merger proposal, the merger may nonetheless occur.
Each director of QNB has entered into a support agreements with Victory agreeing to, among other things, vote the shares of QNB common stock over which he or she has the sole power to vote or direct the voting of in favor of the merger agreement and the transactions contemplated thereby. As of the QNB record date, the members of the QNB board of directors owned and held the sole dispositive and voting power over shares of QNB common stock representing approximately [ ]% of the voting power represented by all issued and outstanding shares of QNB common stock.
Even if you expect to attend the special meeting of shareholders, QNB recommends that you promptly complete and return your proxy card in the enclosed return envelope. Alternatively, you may vote through the Internet or by telephone. Information and applicable deadlines for voting by Internet or by telephone are set forth in the enclosed proxy card instructions.
Interests of Victory’s Directors and Executive Officers in the Merger (page 75)
In considering the recommendation of the Victory board of directors with respect to the merger agreement, Victory shareholders should be aware that certain of Victory’s directors and executive officers may have interests in the merger that are different from, or in addition to, the interests of Victory shareholders generally. Interests of directors and executive officers that may be different from or in addition to the interests of Victory shareholders include:
The Victory board of directors was aware of these interests and considered them, among other matters, in approving the merger agreement. For a more complete description of these interests, see “The Merger — Interests of Victory’s Directors and Executive Officers in the Merger” beginning on page 75.
Board Composition and Management of QNB after the Merger (page 74)
Each of the officers and directors of QNB immediately prior to the effective time of the merger will be the officers and directors of the surviving company from and after the effective time of the merger, provided, however, that QNB has agreed to:
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Regulatory Approvals Required for the Merger (page 81)
To complete the merger, the parties must receive the prior approval, or a waiver of the applicable approval requirements, of the Board of Governors of the Federal Reserve System (which we refer to as the “Federal Reserve”) as well as approvals by the Federal Deposit Insurance Corporation (which we refer to as the “FDIC”) and the Pennsylvania Department of Banking and Securities (which we refer to as the “PDBS”). The U.S. Department of Justice is also able to provide input into the approval process of federal banking agencies and will have between 15 and 30 days following any approval of a federal banking agency to challenge the approval on antitrust grounds. Although neither QNB nor Victory knows of any reason why the regulatory approvals cannot be obtained, QNB and Victory cannot be certain when or if they will be obtained, as the length of the review process may vary based on, among other things, requests by regulators for additional information or materials.
Conditions to Complete the Merger (page 86)
Currently, Victory and QNB expect to complete the merger as early as the first quarter of 2026. As more fully described in this joint proxy statement/prospectus and in the merger agreement, the completion of the merger depends on a number of conditions being satisfied or, where legally permissible, waived. Victory’s and QNB’s respective obligations to complete the merger are subject to the satisfaction or waiver of the following conditions, among others:
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Neither Victory nor QNB can provide assurance as to when or if all of the conditions to the merger can or will be satisfied or waived by the appropriate party, or that the merger will be completed. For more information see “The Merger Agreement — Conditions to Complete the Merger” beginning on page 86.
Agreement Not to Solicit Other Offers (page 95)
Under the merger agreement, Victory has agreed that it will not, and will instruct and use its reasonable best efforts to cause its representatives not to, directly or indirectly, (1) solicit, initiate, encourage, facilitate (including by way of providing information) or induce any inquiry, proposal or offer with respect to, or the making or completion of, any acquisition proposal, or any inquiry, proposal or offer that is reasonably likely to lead to any acquisition proposal , (2) enter into, continue or otherwise participate in any discussions or negotiations regarding, or furnish to any person or group any confidential or nonpublic information with respect to or in connection with, an acquisition proposal, (3) take any other action to facilitate any inquiries or the making of any proposal that constitutes or may reasonably be expected to lead to an acquisition proposal, (4) approve, endorse or recommend, or propose to approve, endorse or recommend any acquisition proposal or any agreement related thereto, (5) enter into any agreement contemplating or otherwise relating to any acquisition transaction or acquisition proposal, (5) enter into any agreement or agreement in principle requiring, directly or indirectly, Victory to abandon, terminate or fail to consummate the transactions contemplated the merger agreement or breach its obligations under the merger agreement, or (7) propose or agree to do any of the foregoing.
However, prior to obtaining Victory’s required shareholder approval, Victory may, under certain specified circumstances, participate in negotiations or discussions with any third party making an unsolicited acquisition proposal and provide confidential
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information to such third party (subject to the execution of a confidentiality agreement). Victory must notify QNB promptly (but in no event later than 24 hours) after the receipt of such unsolicited acquisition proposal.
Additionally, prior to obtaining Victory’s required shareholder approval, Victory may, under certain specified circumstances, withdraw its recommendation that Victory shareholders approve the merger and/or terminate the merger agreement in order to enter into an acquisition agreement with respect to an unsolicited acquisition proposal if it determines in good faith, after consultation with its outside legal counsel and financial advisors, that such acquisition proposal is a superior proposal (or is reasonably capable of becoming a superior proposal) and that the failure of the Victory’s board of directors to take such action would more likely than not cause Victory’s board of directors to violate its fiduciary duties to Victory under applicable law. However, Victory cannot take any of those actions in response to a superior proposal unless it provides QNB with a five business day period to negotiate in good faith to enable QNB to adjust the terms and conditions of the merger agreement such that it would cause the superior proposal to no longer constitute a superior proposal.
Termination of the Merger Agreement (page 94)
The merger agreement can be terminated at any time prior to the effective time of the merger in the following circumstances, whether before or after approval of the Victory merger proposal by the Victory shareholders or approval of the QNB merger proposal by the QNB shareholders:
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Victory also may terminate the merger agreement if both of the following conditions are met during any time period beginning on the first date on which all required regulatory approvals (and waivers, if applicable) have been received (disregarding any waiting period) and prior to closing (which we refer to as the “determination date”):
If Victory elects to exercise this termination right, prompt written notice must be provided to QNB. QNB then has the option (but not the obligation), within five business days following its receipt of such written notice, to increase the exchange ratio to equal a quotient, the numerator of which is equal to the product of the QNB Market Value, the exchange ratio (as then in effect) and the index ratio minus 0.20, and the denominator of which is equal to the QNB Market Value (each as calculated per the merger agreement). If QNB elects to make this adjustment, QNB must provide prompt written notice to Victory, which shall contain the revised exchange ratio. Once this notice is received by Victory, the merger agreement shall continue in full force and effect.
Termination Fee (page 95
If the merger agreement is terminated under certain circumstances, including circumstances involving an alternative acquisition proposal and changes in the recommendation of the Victory board of directors, Victory may be required to pay to QNB a termination fee equal to $1,575,000. This termination fee could discourage other companies from seeking to acquire or merge with Victory. For more information, see “The Merger Agreement — Termination of the Merger Agreement" beginning on page 94.
Expenses and Fees (page 94)
Each party will bear all expenses incurred in connection with the merger and the transactions contemplated by the merger agreement. If the merger agreement is terminated by Victory or QNB under circumstances other than those in which a termination fee is involved, as a result of the other party’s willful or intentional breach, or willful or intentional failure to perform, in any material respect, its covenants contained in the merger agreement, the breaching party shall pay the non-breaching party an amount equal to the out-of-pocket expenses incurred by the non-breaching party in connection with the transactions contemplated by the merger agreement (as itemized by the non-breaching party) up to $500,000, as agreed upon liquidated damages.
Amendment, Waiver and Extension of the Merger Agreement (page96)
Victory and QNB may jointly amend the merger agreement, and each of Victory and QNB may waive its right to require the other party to comply with particular provisions of the merger agreement. However, Victory and QNB may not amend the merger agreement or waive their respective rights after the Victory shareholders have approved the Victory merger proposal or QNB shareholders have approved the QNB merger proposal if the amendment or waiver would legally require further approval by the Victory shareholders or the QNB shareholders, as applicable, without first obtaining such further approval.
Comparison of Shareholders’ Rights (page 144)
The rights of Victory’s shareholders will change as a result of the merger due to differences in QNB’s and Victory’s governing documents. See “Comparison of Shareholders’ Rights” beginning on page 144 for a description of the material differences in shareholders’ rights under each of the QNB and Victory governing documents.
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Risk Factors (page 22)
You should consider all the information contained in this joint proxy statement/prospectus in deciding how to vote for the proposals presented in this joint proxy statement/prospectus. In particular, you should consider the factors described under the section of this joint proxy statement/prospectus entitled “Risk Factors” beginning on page 22].
Ancillary Agreements to the Merger Agreement (page 96)
Victory Support Agreements
As a condition to QNB entering into the merger agreement, each director of Victory has entered into a support agreement with QNB in the form included as Exhibit A-1 to the merger agreement, which is attached as Annex A to this joint proxy statement/prospectus. Under the support agreements, each such person agreed, among other things, to vote the shares of Victory common stock over which he or she has the sole power to vote or direct the voting thereof (1) to approve the merger agreement and the consummation of the transactions contemplated thereby (or any adjournment or postponement necessary to solicit additional proxies to approve the merger agreement and the merger) and (2) against any acquisition proposals or any actions that would be reasonably likely to result in a breach of any covenant, representation or warranty of Victory in the merger agreement.
QNB Support Agreements
As a condition to Victory entering into the merger agreement, each director of QNB has entered into a support agreement in the form included as Exhibit A-2 to the merger agreement, which is attached as Annex A to this joint proxy statement/prospectus. Under the support agreements, each such person agreed, among other things, to vote the shares of QNB common stock over which he or she has the sole power to vote or direct the voting thereof (1) to approve the merger agreement and the transactions contemplated thereby, including the merger and the issuance of shares of QNB common stock as merger consideration and (2) against any action or agreement that would be reasonably likely to result in a breach of any covenant, representation or warranty, or any other obligation or agreement of QNB or such director contained in the merger agreement.
Dissenters’ Rights (page 40)
Under Pennsylvania law, record holders of shares of Victory common stock are entitled to exercise statutory rights of dissent and appraisal and receive payment of the fair value of their shares in cash as determined by an appraisal process. To exercise those dissenters’ rights, a Victory shareholder must not vote in favor of the Victory merger proposal and must comply with the statutory requirements of Pennsylvania law concerning dissenters’ rights of appraisal.
To be eligible to demand payment for their shares, a Victory shareholder must file with Victory, prior to the vote on the Victory merger proposal, a written notice of such holder’s intention to demand payment for the fair value of their shares if the merger is completed. Voting against the Victory merger proposal alone will not entitle a Victory shareholder to cash payment for their shares. Please see “The Merger — Dissenters’ Rights,” beginning on page 40 for a discussion of the statutory requirements Victory shareholders are required to follow to perfect their dissenters’ rights of appraisal.
A copy of Subchapter D of Chapter 15 of the PBCL, which is the applicable statutory provisions of the PBCL, is attached as Annex D to this joint proxy statement/prospectus. Failure to strictly comply with these provisions may result in the loss of appraisal rights. The value determined in the appraisal process may be more or less than the value a Victory shareholder would receive in the merger under the terms of the merger agreement.
Pursuant to the merger agreement, QNB will not be obligated to consummate the merger if rights of dissenters are properly asserted with respect to more than 10.0% of the outstanding shares of Victory common stock.
Accounting Treatment (page 29)
QNB will account for the merger as a business combination using the acquisition method of accounting for financial reporting purposes.
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Material U.S. Federal Income Tax Consequences of the Merger (page 157)
The merger is expected to qualify as a “reorganization” within the meaning of Section 368(a) of the Code, and the merger agreement is intended to constitute a “plan of reorganization” as such term is used in Sections 354 and 361 of the Code. It is a condition to the respective obligations of QNB and Victory to complete the merger that each of QNB and Victory receives a tax opinion from its respective outside legal counsel, dated as of the closing date of the merger, that the merger will qualify as a “reorganization” within the meaning of Section 368(a) of the Code. These opinions, however, will not bind the Internal Revenue Service (“IRS”) or the courts, which could take a contrary view. Based upon a qualification of the merger as a reorganization under the Code, for U.S. federal income tax purposes, holders of Victory common stock who exchange their shares of Victory common stock solely for shares of QNB common stock generally will not recognize gain or loss with respect to the receipt of QNB common stock in the merger. Holders of Victory common stock generally will be subject to U.S. federal income tax with respect to any cash received in lieu of fractional shares of QNB common stock.
The U.S. federal income tax consequences described above may not apply to all holders of Victory common stock. Your tax consequences will depend on your individual situation. In addition, holders of Victory common stock may be subject to state, local or non-U.S. tax laws that are not discussed in this joint proxy statement/prospectus. Accordingly, QNB and Victory strongly urge you to consult your tax advisor for a full understanding of the particular tax consequences of the merger to you.
Trading Markets and Dividends (page 77)
QNB’s common stock is quoted on the OTC under the symbol “QNBC,” and Victory’s common stock is quoted on the OTC under the symbol “VTYB.” The OTCQX Best Market prices are quotations, which reflect interdealer prices, without retail mark-up, markdown, or commissions and may not represent actual transactions.
Under the merger agreement, Victory is prohibited from paying any dividend or distribution to its shareholders before the effective time of the merger, other than its regular semi-annual cash dividend of $0.065 per share, without the prior written consent of QNB. Victory’s ability to pay dividends is also subject to state and federal laws and regulations.
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SPECIAL CAUTIONARY NOTE REGARDING FORWARD‑LOOKING STATEMENTS
Some of the statements contained or incorporated by reference in this joint proxy statement/prospectus contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including, but not limited to, statements about the financial condition, results of operations, earnings outlook and business plans, goals, expectations and prospects of QNB, Victory, and the combined company following the proposed merger and statements for periods after the merger. Words such as “anticipate,” “believe,” “feel,” “expect,” “estimate,” “indicate,” “seek,” “strive,” “plan,” “intend,” “outlook,” “forecast,” “project,” “position,” “target,” “mission,” “contemplate,” “assume,” “achievable,” “potential,” “strategy,” “goal,” “aspiration,” “outcome,” “continue,” “remain,” “maintain,” “trend,” “objective,” “predict,” “aim” and variations of such words and similar expressions, or future or conditional verbs such as “will,” “would,” “should,” “could,” “might,” “can,” “may” or similar expressions, as they relate to QNB, Victory, the proposed merger, or the combined company following the merger often identify forward-looking statements, although not all forward-looking statements contain such words.
These forward-looking statements are predicated on the beliefs and assumptions of management based on information known to management as of the date of this joint proxy statement/prospectus and do not purport to speak as of any other date. Forward-looking statements may include descriptions of the expected benefits and costs of the transaction; forecasts of revenue, earnings or other measures of economic performance, including statements of profitability, business segments and subsidiaries; management plans relating to the merger; the expected timing of the completion of the merger; the ability to complete the merger; the ability to obtain any required regulatory, shareholder or other approvals; any statements of the plans and objectives of management for future or past operations, including the execution of integration plans; any statements of expectation or belief and any statements of assumptions underlying any of the foregoing.
The forward-looking statements contained or incorporated by reference in this joint proxy statement/ prospectus reflect the view of management as of this date with respect to future events and are subject to risks and uncertainties. Should one or more of these risks materialize or should underlying beliefs or assumptions prove incorrect, actual results could differ materially from those anticipated by the forward-looking statements or historical results. Such risks and uncertainties include, among others, the following possibilities:
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Any forward-looking statements made in this joint proxy statement/prospectus or in any documents incorporated by reference into this joint proxy statement/prospectus, are subject to the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995. You are cautioned not to place undue reliance on these statements, which speak only as of the date of this joint proxy statement/prospectus or the date of any document incorporated by reference in this joint proxy statement/prospectus. QNB and Victory do not undertake to update forward-looking statements to reflect facts, circumstances, assumptions or events that occur after the date the forward-looking statements are made, unless and only to the extent otherwise required by law. All subsequent written and oral forward-looking statements concerning the merger or other matters addressed in this joint proxy statement/prospectus and attributable to QNB, Victory or any person acting on their behalf are expressly qualified in their entirety by the cautionary statements contained or referred to in this joint proxy statement/prospectus.
RISK FACTORS
As investment in QNB common stock in connection with the merger involves risks. In addition to the other information contained or incorporated by reference into this joint proxy statement/prospectus, including the risk factors included in QNB’s Annual Report on Form 10‑K for the year ended December 31, 2024, you should carefully consider the following risk factors in deciding whether to vote to approve the merger agreement. You should keep these risk factors in mind when you read forward-looking statements in this document and in the documents incorporated by reference into this document. Please refer to the section of this joint proxy statement/prospectus titled “Special Cautionary Note Regarding Forward-Looking Statements.” You should also consider the other information in this document and other documents incorporated by reference into this document. Please see the sections entitled “Additional Information” in the forepart of this document and “Where You Can Find More Information” beginning on page 162.
Because of the fixed exchange ratio and the fluctuation of the market price of QNB common stock, Victory shareholders cannot be certain of the precise value of the per share stock consideration they will be entitled to receive.
Pursuant to the merger agreement, each share of Victory common stock issued and outstanding immediately prior to the effective time of the merger will be converted into the right to receive 0.5500 shares of QNB common stock. The market value of QNB common stock may vary from the market value on the date QNB and Victory announced the merger, on the date that this joint proxy statement/prospectus is mailed, on the date of the Victory special meeting and on the date the merger is completed and thereafter due to fluctuations in the market price of QNB common stock. Any fluctuation in the market price of QNB common stock
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after the date of this joint proxy statement/ prospectus will change the value of the shares of QNB common stock that Victory shareholders may receive. Stock price changes may result from a variety of factors that are beyond the control of QNB and Victory, including but not limited to general market and economic conditions, changes in their respective businesses, operations and prospects and regulatory considerations. Therefore, at the time of the Victory special meeting, Victory shareholders will not know the precise market value of the merger consideration they may receive at the effective time of the merger. Victory shareholders should obtain current sale prices for shares of QNB common stock before voting their shares at the Victory special meeting.
Victory shareholders who exercise dissenters’ rights may receive less than the value of the merger consideration.
Victory shareholders who properly exercise dissenters’ rights under applicable law may receive a cash payment for their shares based on a judicial determination of fair value. This amount may be less than the value of the merger consideration they would otherwise receive under the merger agreement. See “The Merger — Dissenters’ Rights” for more information.
The merger may not be consummated unless important conditions are satisfied.
QNB and Victory expect the merger to close as early as the first quarter of 2026, but the acquisition is subject to the satisfaction of a number of closing conditions. Satisfaction of many of these conditions is beyond QNB’s and Victory’s control. If these conditions are not satisfied or waived, the merger will not be completed or may be delayed and each of QNB and Victory may lose some or all of the intended benefits of the merger. Certain of the conditions that remain to be satisfied include, but are not limited to:
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As a result, the merger may not close as scheduled or at all. In addition, either QNB or Victory may terminate the merger agreement under certain circumstances. For additional information regarding the conditions to the merger, see “The Merger Agreement — Conditions to Complete the Merger” beginning on page 86.
Regulatory approvals may not be received, may take longer than expected or may impose conditions that QNB does not anticipate or cannot be met.
Before the transactions contemplated by the merger agreement may be completed, various approvals or consents must be obtained from various federal and state governmental entities. These governmental entities may impose conditions on the completion of the merger or require changes to the terms of the merger. Although QNB and Victory do not currently expect that any such conditions or changes would be imposed, there can be no assurance that they will not be, and such conditions or changes could have the effect of preventing or delaying the completion of the merger or imposing additional costs on or limiting the revenues of QNB following the merger, any of which might have a material adverse effect on QNB following the merger. In addition, neither party is obligated to complete the merger if the regulatory approvals received in connection with the completion of the merger impose certain burdensome conditions on QNB or Victory, as described more fully in “The Merger — Regulatory Approvals Required for the Merger” beginning on page 81.
QNB may be unsuccessful in integrating the operations of the businesses it has acquired or expects to acquire in the future, including Victory.
From time to time, QNB evaluates the potential acquisitions of businesses that it believes will complement its existing business. The impact of future acquisitions on QNB’s growth strategy depends on the successful integration of these acquisitions. QNB faces numerous risks and challenges to the successful integration of acquired businesses, including the following:
If QNB is unable to successfully integrate the businesses it acquires, QNB’s business, financial condition and results of operations may be materially adversely affected.
Victory’s executive officers and directors have interests in the merger in addition to or different from the interests of other Victory shareholders.
Victory’s executive officers and directors have interests in the merger that may be different from, or in addition to, the interests of Victory shareholders generally. The Victory board of directors was aware of these interests and considered them, among other matters, in adopting the merger agreement and approving the transactions contemplated by the merger agreement and in determining to recommend to Victory shareholders that they vote to approve the Victory merger proposal. These interests are described in more detail under the section entitled, “ “The Merger — Interests of Victory's Directors and Executive Officers in the Merger” beginning on page 75.
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The fairness opinions delivered by the respective financial advisors to QNB and Victory will not reflect changes in circumstances between the date of the merger agreement and the completion of the merger.
The QNB board of directors received a fairness opinion from Performance Trust on September 23, 2025 and the Victory board of directors received a fairness opinion from Kafafian on September 23, 2025. Such opinions have not been updated as of the date of this joint proxy statement/prospectus and will not be updated at, or prior to, the time of the completion of the merger. Changes in the operations and prospects of QNB and Victory, general market and economic conditions and other factors that may be beyond the control of QNB and Victory may alter the value of QNB or Victory or the prices of shares of QNB common stock or Victory common stock by the time the merger is completed. The opinions do not speak as of the time the merger is completed or as of any date other than the date of the opinions, nor do they contemplate any adjustments to the merger consideration. Management of QNB is not aware of any material changes in QNB’s operations or performance since the delivery of the Performance Trust opinion or that are anticipated to occur before the special meeting takes place or before the merger is completed. Management of Victory is not aware of any material changes in Victory’s operations or performance since the delivery of the Kafafian opinion or that are anticipated to occur before the Victory special meeting takes place or before the merger is completed. Copies of the Performance Trust and Kafafian fairness opinions are included as Annex C and Annex B, respectively, to this joint proxy statement/prospectus. For a description of the opinion that QNB received from its financial advisor, please refer to “The Merger — Opinion of QNB’s Financial Advisor” beginning on page 66. For a description of the opinion that Victory received from its financial advisor, please refer to “The Merger — Opinion of Victory’s Financial Advisor” beginning on page 54.
The merger agreement contains provisions granting both QNB and Victory the right to terminate the merger agreement in certain circumstances.
The merger agreement contains certain termination rights, including the right, subject to certain exceptions, of either party to terminate the merger agreement if the merger is not completed on or prior to September 30, 2026 and the right of Victory to terminate the merger agreement, subject to certain conditions, to accept an unsolicited third party acquisition proposal deemed to be superior to the merger by the Victory board of directors. In addition, Victory may provide QNB with notice of its intention to terminate the merger agreement as a result of certain changes in the trading price of QNB common stock relative to the price of the; however, QNB has the option (but not the obligation) to increase the exchange ratio to prevent such a termination of the merger agreement. See “The Merger Agreement — Termination of the Merger Agreement” beginning on page 94. If the merger is not completed, the ongoing business of Victory and/or QNB could be adversely affected and Victory and QNB will be subject to several risks, including the risks described elsewhere in this “Risk Factors” section.
Termination of the merger agreement could negatively impact Victory and QNB.
If the merger agreement is terminated before closing there may be various consequences. For example, Victory’s business may have been impacted adversely by the failure to pursue other beneficial opportunities due to the focus of management on the merger, without realizing any of the anticipated benefits of completing the merger. Also, Victory will have incurred substantial expenses in connection with the proposed merger without realizing the benefits of the merger. If the merger agreement is terminated and the Victory board of directors seeks another merger or business combination, Victory shareholders cannot be certain that Victory will be able to find a party willing to pay the equivalent or greater consideration than that which QNB has agreed to pay in the merger. In addition, if the merger agreement is terminated under certain circumstances, Victory may be required to pay QNB a termination fee. See “The Merger Agreement — Termination of the Merger Agreement” beginning on page 94.
Further, if the merger agreement is terminated and the merger is not consummated, QNB’s stock price may decline to the extent that its current market price reflects a market assumption that the merger will be completed. In addition, the reputation of QNB as an acquirer may be harmed and, as a result, it may make it more difficult for QNB to consummate future acquisitions.
QNB and Victory will incur significant, non‑recurring merger-related transaction and integration costs in connection with the merger, which could adversely affect either company’s financial condition and results of operations.
QNB and Victory each have incurred and expect to continue to incur substantial costs in connection with the negotiation and completion of the merger and combining the businesses and operations of the two companies, and additional unanticipated transaction- and merger-related costs may be incurred prior to or following the consummation of the merger. Whether or not the merger is consummated, QNB and Victory expect to continue to incur substantial expenses associated with planning for and completing the merger and combining the operations of the two companies, including such non‑recurring expenses as legal, accounting and financial advisory fees, printing fees, data processing and other fees related to formulating integration and conversion
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plans. Although QNB and Victory expect that the elimination of duplicative costs, as well as the realization of other efficiencies related to the integration of the businesses, may offset incremental transaction- and merger-related costs over time, this net benefit may not be achieved in the near term, or at all. The costs described above, as well as other unanticipated costs and expenses, could have a material adverse effect on the financial condition and operating results of QNB following completion of the merger.
The merger agreement contains provisions that may discourage other companies from pursuing, announcing or submitting a business combination proposal to Victory that might result in greater value to Victory shareholders.
The merger agreement prohibits Victory from initiating, soliciting, encouraging or facilitating certain third-party acquisition proposals. In addition, Victory has agreed to pay QNB a termination fee of $1,575,000 if the merger agreement is terminated because Victory decides to enter into an agreement with respect to, or complete, another acquisition transaction. These provisions could discourage a potential competing acquirer that might have an interest in acquiring all or a significant part of Victory from considering or proposing such an acquisition, even if it were prepared to pay consideration with a higher per share price than that proposed in the merger, or might result in a potential competing acquirer proposing to pay a lower per share price to acquire Victory than it might otherwise have proposed to pay because of the added expense of the termination fee that may become payable in certain circumstances under the merger agreement.
In connection with entering into the merger agreement, each member of the Victory board of directors, in their capacities as Victory shareholders, has entered into a support agreement with QNB. The support agreements require, among other things, that the Victory director vote all of his or her shares of Victory common stock over which he or she has the sole power to vote or direct the voting of in favor of the merger and the other transactions contemplated by the merger agreement and against alternative transactions and not to, directly or indirectly, assign, sell, transfer or otherwise dispose of his or her shares of Victory common stock, subject to certain exceptions. For further information, please see the section entitled “Ancillary Agreements to the Merger Agreement.”
QNB and Victory will be subject to business uncertainties and Victory will be subject to contractual restrictions while the merger is pending.
Uncertainty about the effect of the merger on employees and customers may have an adverse effect on QNB and Victory. These uncertainties may impair the ability of QNB or Victory to attract, retain and motivate strategic personnel until the merger is consummated, and could cause customers and others that deal with QNB or Victory to seek to change existing business relationships. Experienced employees in the financial services industry are in high demand, and competition for their talents can be intense. Employees of Victory may experience uncertainty about their future role with the surviving corporation until, or even after, strategies with regard to the combined company are announced or executed. If any key employees of QNB or Victory depart because of issues relating to the uncertainty and difficulty of integration or a desire not to remain with the surviving corporation, Victory’s business prior to the merger closing and QNB’s business after the merger closes could be harmed. In addition, subject to certain exceptions, Victory has agreed to operate its business in the ordinary course, and to comply with certain other operational restrictions, prior to closing the merger. See “The Merger Agreement — Victory's Conduct of Business Pending the Merger” beginning on page 93 for a description of the restrictive covenants applicable to Victory.
The merger with Victory may distract QNB’s management from its other responsibilities.
The acquisition of Victory could cause QNB’s management to focus its time and energies on matters related to the acquisition that otherwise would be directed to the business and operations of QNB. Any such distraction on the part of management, if significant, could affect its ability to service existing business and develop new business and adversely affect the business and earnings of QNB.
The combined company may be unable to retain QNB and/or Victory personnel successfully after the merger is completed.
The success of the merger will depend in part on the combined company’s ability to retain the talents and dedication of key employees currently employed by QNB and Victory. It is possible that these employees may decide not to remain with QNB and Victory, as applicable, while the merger is pending or with the combined company after the merger is consummated. If key employees terminate their employment or if an insufficient number of employees is retained to maintain effective operations, the combined company’s business activities may be adversely affected, and management’s attention may be diverted from successfully integrating Victory to hiring suitable replacements, all of which may cause the combined company’s business to suffer. In addition,
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QNB and Victory may not be able to locate suitable replacements for any key employees who leave either company or to offer employment to potential replacements on reasonable terms.
QNB and Victory may waive one or more of the conditions to the merger without re‑soliciting shareholder approval for the merger.
Each of the conditions to the obligations of QNB and Victory to complete the merger may be waived, in whole or in part, to the extent permitted by applicable law, by agreement of QNB and Victory if the condition is a condition to both parties’ obligation to complete the merger, or by the party for which such condition is a condition of its obligation to complete the merger. The boards of directors of QNB and Victory may evaluate the materiality of any such waiver to determine whether amendment of this joint proxy statement/prospectus and re‑solicitation of proxies are necessary. QNB and Victory, however, generally do not expect any such waiver to be significant enough to require re‑solicitation of shareholders. If any such waiver is not determined to be significant enough to require re‑solicitation of shareholders, the companies will have the discretion to complete the merger without seeking further shareholder approval.
Victory shareholders will experience a reduction in percentage ownership and voting power of their shares as a result of the merger and will have less influence on the management and policies of QNB than they had on Victory before the merger.
Victory shareholders will have a much smaller percentage ownership interest and effective voting power in QNB compared to their ownership interest and voting power in Victory prior to the merger. Consequently, Victory shareholders will have significantly less influence on the management and policies of QNB after the merger than they now have on the management and policies of Victory. If the merger is consummated, current Victory shareholders will own approximately [23.6]% of the combined company based upon the number of QNB shares outstanding as of [_______]. Accordingly, former Victory shareholders will own less than the outstanding voting stock of the combined company than current QNB shareholders and would, as a result, be outvoted by current QNB shareholders if such current QNB shareholders voted together as a group.
Future capital needs could result in dilution of shareholder investment.
QNB’s board of directors may determine from time to time there is a need to obtain additional capital through the issuance of additional shares of its common stock or other securities. These issuances would dilute the ownership interests of QNB shareholders and may dilute the per share book value of QNB common stock. New investors may also have rights, preferences and privileges senior to QNB’s shareholders which may adversely impact its shareholders.
Shares of QNB common stock to be received by holders of Victory common stock as a result of the merger will have rights different from the shares of Victory common stock.
Upon completion of the merger, the rights of former Victory shareholders will be governed by the Articles of Incorporation, as amended, and Amended and Restated Bylaws of QNB. Accordingly, certain rights associated with Victory common stock may differ from the rights associated with QNB common stock. See “Comparison of Shareholders’ Rights” beginning on page 144 for a discussion of the different rights associated with QNB common stock.
QNB may fail to realize some or all of the anticipated benefits of the merger.
The success of the merger will depend on, among other things, QNB’s ability to successfully combine the businesses of QNB and Victory. If QNB is not able to successfully achieve this objective, the anticipated benefits of the merger may not be realized fully, or at all, or may take longer to realize than expected.
QNB and Victory have operated and, until the consummation of the merger, will continue to operate independently. It is possible that the integration process or other factors could result in the loss or departure of key employees, the disruption of the ongoing business of QNB or inconsistencies in standards, controls, procedures and policies. It is also possible that clients, customers, depositors and counterparties of Victory could choose to discontinue their relationships with the combined company post‑merger because they prefer doing business with an independent company or for any other reason, which would adversely affect the future performance of the combined company. These transition matters could have an adverse effect on each of QNB and Victory during the pre‑merger period and for an undetermined time after the consummation of the merger.
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QNB’s and Victory's historical and pro forma condensed combined consolidated financial information may not be representative of QNB’s results as a combined company.
The unaudited pro forma condensed combined financial statements in this joint proxy statement/prospectus are presented for illustrative purposes only and are not necessarily indicative of what QNB’s actual financial condition or results of operations would have been had the merger been completed on the dates indicated. The unaudited pro forma condensed combined financial statements reflect adjustments to illustrate the effect of the merger had the transaction been completed on the dates indicated. Such unaudited pro forma condensed combined financial statements are based upon preliminary estimates to record the Victory identifiable assets acquired and liabilities assumed at fair value and the resulting goodwill recognized. The purchase price allocation for the merger reflected in this joint proxy statement/prospectus is preliminary, and final allocation of the purchase price will be based upon the actual purchase price and the fair value of the identifiable assets and identifiable liabilities of Victory as of the date of the completion of the merger. Accordingly, the final acquisition accounting adjustments may differ materially from the pro forma adjustments reflected in this joint proxy statement/prospectus. For more information, see the section of this joint proxy statement/prospectus entitled “Unaudited Pro Forma Condensed Combined Consolidated Financial Statements” beginning on page 29.
Sales of substantial amounts of QNB common stock by former Victory shareholders could adversely affect the market price of QNB stock.
Following the merger, Victory shareholders will receive QNB common stock, which will be freely tradable. If a significant number of shares of QNB common stock are sold in the public market, it could place downward pressure on the market price of QNB common stock and could affect investor perception of the combined company.
The market price of QNB common stock after the merger may be affected by factors different from those affecting Victory common stock or QNB common stock currently.
The results of operations of the combined company, as well as the market price of shares of the common stock of the combined company after the merger, may be affected by factors in addition to those currently affecting QNB’s or Victory’s results of operations and the market prices of shares of QNB common stock. Accordingly, the historical financial results of QNB and Victory and the historical market prices of shares of QNB common stock may not be indicative of these matters for the combined company after the merger. For a discussion of the businesses of QNB and of certain factors to consider in connection with that business, see the documents incorporated by reference by QNB into this joint proxy statement/prospectus referred to under “Where You Can Find More Information” beginning on page 162.
The market price of the combined company’s common stock may decline as a result of the merger.
The market price of the combined company’s common stock may decline as a result of the merger if the combined company does not achieve the perceived benefits of the merger or the effect of the merger on the combined company’s financial results is not consistent with the expectations of financial or industry analysts. In addition, upon completion of the merger, QNB and Victory shareholders will own interests in a combined company operating an expanded business with a different mix of assets, risks and liabilities. Current QNB and Victory shareholders may not wish to continue to invest in the combined company, or for other reasons may wish to dispose of some or all of their shares of the combined company.
The merger may fail to qualify as a “reorganization” within the meaning of Section 368(a) of the Code.
Each of QNB and Victory intends and expects the merger to qualify as a “reorganization” within the meaning of Section 368(a) of the Code, and the obligation of each of QNB and Victory to complete the merger is conditioned upon the receipt by each of QNB and Victory of a U.S. federal income tax opinion to that effect from their respective legal counsels. These tax opinions represent the legal judgment of counsel rendering the opinion and are not binding on the IRS or the courts, which could take a contrary view. If the merger were to fail to qualify as a reorganization within the meaning of Section 368(a) of the Code, then for U.S. federal income tax purposes the merger would be treated as a taxable sale of the assets of Victory to QNB followed by a taxable liquidation of Victory. Generally, for U.S. federal income tax purposes, (1) the deemed sale of the assets of Victory would result in taxable gain or loss to Victory equal to the difference between (i) the fair market value of the merger consideration and (ii) the adjusted tax basis in such assets held by Victory and (2) the deemed distribution of the merger consideration in the deemed liquidation of Victory common stock would result in taxable gain or loss to each Victory shareholder equal to the difference between (i) the fair market value of the merger consideration distributed in respect of such holder’s Victory common stock and (ii) the adjusted tax basis of such Victory
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common stock surrendered in the exchange. The tax consequences of the merger to any particular shareholder will depend on that shareholder’s individual situation. In addition, you may be subject to state, local or non-U.S. tax laws that are not discussed in this joint proxy statement/prospectus. Accordingly, we strongly urge you to consult your own tax advisor to determine the particular tax consequences of the merger to you.
Victory and/or QNB may be subject to claims and litigation pertaining to the merger that could prevent or delay the completion of the merger.
Any lawsuits filed in connection with the proposed merger could prevent or delay completion of the merger and result in substantial costs to Victory and QNB, including any costs associated with indemnification. The defense or settlement of any lawsuit or claim that may be filed seeking remedies against Victory, its board of directors or QNB or its board of directors in connection with the merger that remains unresolved at the effective time of the merger may adversely affect QNB’s business, financial condition, results of operations and cash flows.
Risks Relating QNB’s Business.
You should read and consider risk factors specific to QNB’s business that will also affect the combined company after the merger. These risks are described in the sections entitled “Risk Factors” in QNB’s Annual Report on Form 10‑K for the year ended December 31, 2024, and in other documents incorporated by reference into this joint proxy statement/prospectus. Please see the section entitled “Where You Can Find More Information” beginning on page 162 of this joint proxy statement/prospectus for the location of information incorporated by reference into this joint proxy statement/prospectus.
UNAUDITED PRO FORMA CONDENSED COMBINED CONSOLIDATED FINANCIAL STATEMENTS
The following unaudited pro forma combined financial information is presented to illustrate the estimated effects of the merger based on the historical financial statements and accounting records of QNB and Victory after giving effect to the merger, including the expected issuance of 1,151,123 shares of QNB common stock to Victory’s shareholders pursuant to the merger agreement, and the merger-related pro forma adjustments as described in the notes below. The unaudited pro forma combined condensed consolidated financial information has been prepared using the acquisition method of accounting. Under this method, Victory’s assets and liabilities as of the date of the acquisition will be recorded at their respective fair values and added to those of QNB. Any difference between the purchase price for Victory and the fair value of the identifiable net assets acquired (including core deposit intangibles) will be recorded as goodwill. The goodwill resulting from the acquisition will not be amortized to expense but instead will be reviewed for impairment at least annually. Any core deposit intangible and other intangible assets with estimated useful lives to be recorded by QNB in connection with the acquisition will be amortized to expense over their estimated useful lives. The financial statements of QNB issued after the acquisition will reflect the results attributable to the acquired operations of Victory beginning on the date of completion of the acquisition.
The unaudited pro forma combined condensed financial statements have been prepared in accordance with Article 11 of Regulation S‑X, Pro Forma Information, as amended by the final rule, Amendments to Financial Disclosures About Acquired and Disposed Businesses, as adopted by the SEC on May 21, 2020, which requires the depiction of the accounting for the transaction, which we refer to as “transaction accounting adjustments,” and allows, but does not require, presentation of the reasonably estimable cost savings and revenue enhancements and other transaction effects that have occurred or are reasonably expected to occur, which we refer to as “management’s adjustments.” QNB has elected not to present management’s adjustments and will only be presenting transaction accounting adjustments in the following unaudited pro forma condensed combined financial information. Pro forma adjustments are included only to the extent they are (1) directly attributable to the merger, (2) factually supportable and (3) with respect to the unaudited pro forma combined statement of income, expected to have a continuing impact on the combined results. The pro forma adjustments are based on estimates made for the purpose of preparing these pro forma statements and are described in the accompanying notes. QNB’s management believes that the estimates used in these pro forma financial statements are reasonable under the circumstances.
The unaudited pro forma combined consolidated balance sheet combines the historical consolidated balance sheets of QNB and Victory, giving effect to the merger as if it had been consummated on September 30, 2025. The unaudited pro forma combined consolidated statements of income for the nine months ended September 30, 2025 and for the year ended December 31, 2024 combine the historical consolidated statements of income of QNB and Victory, giving effect to the merger as if it had been consummated on January 1, 2024.
29
The pro forma adjustments included herein are subject to change as additional information becomes available and additional analyses are performed. The final allocation of the purchase price will be determined after further valuation analyses under GAAP are performed with respect to the fair values of certain tangible and intangible assets and liabilities as of the date of acquisition. The final adjustments may be materially different from the unaudited pro forma adjustments presented herein. In addition, the pro forma income statement information does not include anticipated cost savings or revenue enhancements, which management believes will result from combining certain operating procedures, nor does it include one-time merger-related expenses which will be expensed against income.
Increases or decreases in the estimated fair values of the net assets as compared with the information shown in the unaudited pro forma combined condensed consolidated financial information may change the amount of the purchase price allocated to goodwill and other assets and liabilities and may impact QNB’s consolidated statement of operations due to adjustments in yield and/or amortization of the adjusted assets or liabilities. Any changes to Victory’s shareholders’ equity, including results of operations from September 30, 2025 through the date the merger is completed will also change the purchase price allocation, which may include the recording of a lower or higher amount of goodwill. The final adjustments may be materially different from the unaudited transaction accounting adjustments presented herein. The pro forma calculations, shown herein, assume a closing price for QNB common stock of $34.75, which represents the closing price of QNB common stock on December 16, 2025.
The unaudited pro forma information, while helpful in illustrating the financial characteristics of the combined company under one set of assumptions, does not reflect the benefits of expected cost savings or opportunities to earn additional revenue and, accordingly, does not attempt to predict or suggest future results. It also does not necessarily reflect what the historical results of the combined company would have been had our companies been combined during this period.
The unaudited pro forma condensed combined consolidated financial information has been derived from, and should be read in conjunction with, the historical consolidated financial statements and related notes of QNB and Victory, which are included with this joint proxy statement/prospectus or incorporated by reference herein.
The unaudited pro forma data are qualified by the statements set forth under this caption and should not be considered indicative of the market value of QNB common stock or the actual or future results of operations of QNB for any period. Actual results may be materially different than the pro forma information presented.
30
QNB CORP. AND SUBSIDIARIES
UNAUDITED PRO FORMA COMBINED CONSOLIDATED BALANCE SHEET
AS OF SEPTEMBER 30, 2025
(all amounts are in thousands)
|
|
QNB |
|
|
Victory |
|
|
Combined |
|
|
Pro Forma Adjustments |
|
|
Notes |
|
Pro Forma Combined |
|
|||||
ASSETS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Cash and due from banks |
|
$ |
12,700 |
|
|
$ |
37,830 |
|
|
$ |
50,530 |
|
|
$ |
— |
|
|
A |
|
$ |
50,530 |
|
Fed Funds sold |
|
|
— |
|
|
|
3,000 |
|
|
|
3,000 |
|
|
|
— |
|
|
|
|
|
3,000 |
|
Interest-bearing deposits in banks |
|
|
53,631 |
|
|
|
— |
|
|
|
53,631 |
|
|
|
— |
|
|
|
|
|
53,631 |
|
Cash and equivalents |
|
|
66,331 |
|
|
|
40,830 |
|
|
|
107,161 |
|
|
|
— |
|
|
|
|
|
107,161 |
|
Investment securities available-for-sale, at fair value |
|
|
538,318 |
|
|
|
30,583 |
|
|
|
568,901 |
|
|
|
7,211 |
|
|
B, I |
|
|
576,112 |
|
Investment securities held-to-maturity, at amortized cost |
|
|
— |
|
|
|
10,267 |
|
|
|
10,267 |
|
|
|
(10,267 |
) |
|
B |
|
|
— |
|
Restricted investment in stocks |
|
|
4,868 |
|
|
|
1,700 |
|
|
|
6,568 |
|
|
|
— |
|
|
|
|
|
6,568 |
|
Loans held for sale |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
— |
|
Loans |
|
|
1,246,529 |
|
|
|
395,584 |
|
|
|
1,642,113 |
|
|
|
(6,150 |
) |
|
C |
|
|
1,635,963 |
|
Allowance for Credit Losses |
|
|
(9,255 |
) |
|
|
(3,473 |
) |
|
|
(12,728 |
) |
|
|
838 |
|
|
D |
|
|
(11,890 |
) |
Loans, net |
|
|
1,237,274 |
|
|
|
392,111 |
|
|
|
1,629,385 |
|
|
|
(5,312 |
) |
|
|
|
|
1,624,073 |
|
Premises and equipment |
|
|
16,719 |
|
|
|
3,444 |
|
|
|
20,163 |
|
|
|
— |
|
|
|
|
|
20,163 |
|
Other real estate owned |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
— |
|
Goodwill |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
8,050 |
|
|
E |
|
|
8,050 |
|
Other intangible assets |
|
|
360 |
|
|
|
— |
|
|
|
360 |
|
|
|
4,693 |
|
|
F |
|
|
5,053 |
|
Bank-owned life insurance |
|
|
12,192 |
|
|
|
6,033 |
|
|
|
18,225 |
|
|
|
— |
|
|
|
|
|
18,225 |
|
Net deferred tax assets |
|
|
15,351 |
|
|
|
— |
|
|
|
15,351 |
|
|
|
1,885 |
|
|
G |
|
|
17,236 |
|
Other assets |
|
|
11,831 |
|
|
|
3,251 |
|
|
|
15,082 |
|
|
|
— |
|
|
|
|
|
15,082 |
|
Total Assets |
|
$ |
1,903,244 |
|
|
$ |
488,219 |
|
|
$ |
2,391,463 |
|
|
$ |
6,260 |
|
|
|
|
$ |
2,397,723 |
|
LIABILITIES AND STOCKHOLDERS’ EQUITY |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Deposits |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Noninterest Bearing |
|
$ |
189,492 |
|
|
$ |
62,996 |
|
|
$ |
252,488 |
|
|
|
— |
|
|
|
|
$ |
252,488 |
|
Interest Bearing |
|
|
1,492,048 |
|
|
|
373,747 |
|
|
|
1,865,795 |
|
|
|
30 |
|
|
H |
|
|
1,865,825 |
|
Total Deposits |
|
|
1,681,540 |
|
|
|
436,743 |
|
|
|
2,118,283 |
|
|
|
30 |
|
|
|
|
|
2,118,313 |
|
Federal Home Loan Bank advances |
|
|
30,000 |
|
|
|
— |
|
|
|
30,000 |
|
|
|
— |
|
|
|
|
|
30,000 |
|
Other borrowings |
|
|
18,703 |
|
|
|
— |
|
|
|
18,703 |
|
|
|
— |
|
|
|
|
|
18,703 |
|
Subordinated debt |
|
|
39,218 |
|
|
|
17,359 |
|
|
|
56,577 |
|
|
|
(2,681 |
) |
|
I |
|
|
53,896 |
|
Other liabilities |
|
|
12,296 |
|
|
|
2,467 |
|
|
|
14,763 |
|
|
|
8,306 |
|
|
A |
|
|
23,069 |
|
Total Liabilities |
|
|
1,781,757 |
|
|
|
456,569 |
|
|
|
2,238,326 |
|
|
|
5,655 |
|
|
|
|
|
2,243,981 |
|
Stockholders’ equity: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Common stock |
|
|
2,460 |
|
|
|
1,997 |
|
|
|
4,457 |
|
|
|
(1,260 |
) |
|
J |
|
|
3,197 |
|
Paid in capital |
|
|
28,762 |
|
|
|
14,881 |
|
|
|
43,643 |
|
|
|
25,351 |
|
|
K |
|
|
68,994 |
|
Retained earnings (Accumulated deficit) |
|
|
145,835 |
|
|
|
15,729 |
|
|
|
161,564 |
|
|
|
(24,443 |
) |
|
L |
|
|
137,121 |
|
Accumulated other comprehensive income, net of taxes |
|
|
(51,533 |
) |
|
|
(957 |
) |
|
|
(52,490 |
) |
|
|
957 |
|
|
M |
|
|
(51,533 |
) |
Treasury stock, at cost |
|
|
(4,037 |
) |
|
|
— |
|
|
|
(4,037 |
) |
|
|
— |
|
|
|
|
|
(4,037 |
) |
Total Stockholders’ Equity |
|
|
121,487 |
|
|
|
31,650 |
|
|
|
153,137 |
|
|
|
605 |
|
|
|
|
|
153,742 |
|
Total Liabilities and Stockholders’ Equity |
|
$ |
1,903,244 |
|
|
$ |
488,219 |
|
|
$ |
2,391,463 |
|
|
$ |
6,260 |
|
|
|
|
$ |
2,397,723 |
|
Notes
31
Supporting Details on Calculation of Goodwill |
|
Victory Book Value |
|
|
Fair Value Adjustments |
|
|
Fair Value |
|
|||
Purchase price |
|
|
|
|
|
|
|
$ |
40,969 |
|
||
Recognized amounts of identifiable assets acquired and liabilities assumed: |
|
|
|
|
|
|
|
|
|
|||
Cash and equivalents |
|
$ |
40,830 |
|
|
$ |
— |
|
|
$ |
40,830 |
|
Investment securities |
|
|
40,850 |
|
|
|
(56 |
) |
|
|
40,794 |
|
Loans, net |
|
|
392,111 |
|
|
|
(2,677 |
) |
|
|
389,434 |
|
Premises and equipment |
|
|
3,444 |
|
|
|
— |
|
|
|
3,444 |
|
Core deposit intangible |
|
|
— |
|
|
|
4,693 |
|
|
|
4,693 |
|
Other assets |
|
|
10,984 |
|
|
|
(342 |
) |
|
|
10,642 |
|
Deposits |
|
|
(436,743 |
) |
|
|
(30 |
) |
|
|
(436,773 |
) |
Borrowings |
|
|
(17,359 |
) |
|
|
(319 |
) |
|
|
(17,678 |
) |
Other liabilities |
|
|
(2,467 |
) |
|
|
|
|
|
(2,467 |
) |
|
Total identifiable net assets |
|
|
31,650 |
|
|
|
1,269 |
|
|
|
32,919 |
|
Goodwill |
|
|
— |
|
|
|
8,050 |
|
|
|
8,050 |
|
Total Allocation |
|
$ |
31,650 |
|
|
$ |
9,319 |
|
|
$ |
40,969 |
|
Supporting Details on Valuation and Calculation of Purchase Price |
|
|
|
|
QNB Corp. Share price (Close of business on December 16, 2025) |
|
$ |
34.75 |
|
The Victory Bancorp, Inc. shares outstanding |
|
|
1,996,588 |
|
Exchange ratio |
|
|
0.550 |
|
Converted Company Common Shares |
|
|
1,098,123 |
|
Shares issued to Stock Option Holders |
|
|
80,850 |
|
QNB Corp shares issued to The Victory Bancorp, Inc. shareholders |
|
|
1,178,973 |
|
Transaction Value |
|
$ |
40,969 |
|
|
|
|
|
|
QNB Corp. par value per share and allocation (consolidated): |
|
|
|
|
J) Common stock ($0.625 par) |
|
$ |
737 |
|
J) Paid in Capital |
|
$ |
40,232 |
|
The purchase price will depend on the market price of QNB’s common stock when the acquisition is consummated. QNB's management believes that a 15% fluctuation in the market price of its common stock is reasonably possible based on historical volatility, and the potential effect on purchase price would be:
32
|
|
QNB Share Price |
|
|
Purchase Price |
|
||
As presented |
|
$ |
34.75 |
|
|
$ |
40,969 |
|
15% increase |
|
$ |
39.96 |
|
|
$ |
47,112 |
|
15% decrease |
|
$ |
29.54 |
|
|
$ |
34,827 |
|
33
QNB CORP. AND SUBSIDIARIES
UNAUDITED PRO FORMA COMBINED CONSOLIDATED CONDENSED STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 2024
(all amounts are in thousands, except per share data)
|
|
QNB |
|
|
Victory |
|
|
Pro Forma |
|
|
Notes |
|
Pro Forma |
|
||||
Interest income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Loans, including fees |
|
$ |
65,367 |
|
|
$ |
26,552 |
|
|
$ |
2,719 |
|
|
A |
|
$ |
94,638 |
|
Deposits with other banks & short-term investments |
|
|
3,187 |
|
|
|
214 |
|
|
|
— |
|
|
|
|
|
3,401 |
|
Investment securities |
|
|
15,514 |
|
|
|
2,101 |
|
|
|
184 |
|
|
B |
|
|
17,799 |
|
Total interest income |
|
|
84,068 |
|
|
|
28,867 |
|
|
|
2,903 |
|
|
|
|
|
115,838 |
|
Interest expense |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Deposits |
|
|
37,476 |
|
|
|
13,030 |
|
|
|
(23 |
) |
|
C |
|
|
50,483 |
|
Interest on borrowed funds |
|
|
2,470 |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
2,470 |
|
Interest on subordinated debt |
|
|
1,260 |
|
|
|
2,673 |
|
|
|
(16 |
) |
|
D |
|
|
3,917 |
|
Total interest expense |
|
|
41,206 |
|
|
|
15,703 |
|
|
|
(39 |
) |
|
|
|
|
56,870 |
|
Net interest income |
|
|
42,862 |
|
|
|
13,164 |
|
|
|
2,942 |
|
|
|
|
|
58,968 |
|
(Reversal of) provision for credit losses |
|
|
(68 |
) |
|
|
198 |
|
|
|
2,635 |
|
|
E |
|
|
2,765 |
|
Net interest income after (reversal of) provision for credit losses |
|
|
42,930 |
|
|
|
12,966 |
|
|
|
307 |
|
|
|
|
|
56,203 |
|
Noninterest income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Fees for services to customers |
|
|
1,770 |
|
|
|
503 |
|
|
|
— |
|
|
|
|
|
2,273 |
|
ATM and debit card |
|
|
2,740 |
|
|
|
— |
|
|
|
|
|
|
|
|
2,740 |
|
|
Retail brokerage and advisory |
|
|
476 |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
476 |
|
Loss on sale of securities |
|
|
704 |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
704 |
|
BOLI income |
|
|
332 |
|
|
|
178 |
|
|
|
— |
|
|
|
|
|
510 |
|
Other noninterest income |
|
|
891 |
|
|
|
265 |
|
|
|
— |
|
|
|
|
|
1,156 |
|
Total noninterest income |
|
|
6,913 |
|
|
|
946 |
|
|
|
— |
|
|
|
|
|
7,859 |
|
Noninterest expense |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Salaries and employee benefits |
|
|
19,741 |
|
|
|
7,180 |
|
|
|
— |
|
|
|
|
|
26,921 |
|
Occupancy and equipment |
|
|
6,180 |
|
|
|
749 |
|
|
|
— |
|
|
|
|
|
6,929 |
|
Third party services |
|
|
2,595 |
|
|
|
600 |
|
|
|
— |
|
|
|
|
|
|
|
Amortization of intangibles |
|
|
50 |
|
|
|
— |
|
|
|
587 |
|
|
F |
|
|
637 |
|
Acquisition related expenses |
|
|
— |
|
|
|
— |
|
|
|
8,306 |
|
|
G |
|
|
8,306 |
|
Other noninterest expense |
|
|
6,918 |
|
|
|
3,259 |
|
|
|
— |
|
|
|
|
|
10,177 |
|
Total Noninterest expense |
|
|
35,484 |
|
|
|
11,788 |
|
|
|
8,893 |
|
|
|
|
|
52,970 |
|
Income before income taxes |
|
|
14,359 |
|
|
|
2,124 |
|
|
|
(8,586 |
) |
|
|
|
|
11,092 |
|
Income taxes |
|
|
2,911 |
|
|
|
462 |
|
|
|
(1,721 |
) |
|
H |
|
|
1,652 |
|
Net Income |
|
$ |
11,448 |
|
|
$ |
1,662 |
|
|
$ |
(6,865 |
) |
|
|
|
$ |
9,440 |
|
Net income per share of common stock |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Basic |
|
$ |
3.12 |
|
|
$ |
0.84 |
|
|
|
|
|
|
|
$ |
2.72 |
|
|
Diluted |
|
$ |
3.12 |
|
|
$ |
0.82 |
|
|
|
|
|
|
|
$ |
2.72 |
|
|
Weighted average shares outstanding, basic |
|
|
3,672,251 |
|
|
|
1,972,940 |
|
|
|
(793,967 |
) |
|
|
|
|
4,851,224 |
|
The Victory Bancorp, Inc. shares outstanding |
|
|
3,673,697 |
|
|
|
2,021,715 |
|
|
|
(842,742 |
) |
|
|
|
|
4,852,670 |
|
Notes
34
35
QNB CORP. AND SUBSIDIARIES
UNAUDITED PRO FORMA COMBINED CONSOLIDATED CONDENSED STATEMENT OF INCOME
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2025
(all amounts are in thousands, except per share data)
|
|
QNB |
|
|
Victory |
|
|
Pro Forma |
|
|
Notes |
|
Pro Forma |
|
||||
Interest income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Loans, including fees |
|
$ |
53,768 |
|
|
$ |
19,583 |
|
|
$ |
2,049 |
|
|
A |
|
$ |
75,400 |
|
Deposits with other banks and short-term |
|
|
2,097 |
|
|
|
541 |
|
|
|
— |
|
|
|
|
|
2,638 |
|
Investment securities |
|
|
12,962 |
|
|
|
1,427 |
|
|
|
138 |
|
|
B |
|
|
14,527 |
|
Total interest income |
|
|
68,827 |
|
|
|
21,551 |
|
|
|
2,187 |
|
|
|
|
|
92,565 |
|
Interest expense |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Deposits |
|
|
26,745 |
|
|
|
9,805 |
|
|
|
(17 |
) |
|
C |
|
|
36,533 |
|
Interest on borrowed funds |
|
|
2,082 |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
2,082 |
|
Interest on subordinated debt |
|
|
2,812 |
|
|
|
1,186 |
|
|
|
(12 |
) |
|
D |
|
|
3,986 |
|
Total interest expense |
|
|
31,639 |
|
|
|
10,991 |
|
|
|
(29 |
) |
|
|
|
|
42,601 |
|
Net interest income |
|
|
37,188 |
|
|
|
10,560 |
|
|
|
2,216 |
|
|
|
|
|
49,964 |
|
Provision for (reversal of) credit losses |
|
|
497 |
|
|
|
(145 |
) |
|
|
— |
|
|
|
|
|
352 |
|
Net interest income after provision for (reversal of) credit losses |
|
|
36,691 |
|
|
|
10,705 |
|
|
|
2,216 |
|
|
|
|
|
49,612 |
|
Noninterest income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Fees for services to customers |
|
|
1,453 |
|
|
|
446 |
|
|
|
— |
|
|
|
|
|
1,899 |
|
ATM and debit card |
|
|
2,156 |
|
|
|
44 |
|
|
|
— |
|
|
|
|
|
2,200 |
|
Retail brokerage and advisory |
|
|
477 |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
477 |
|
Gain (loss) on sale of securities |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
— |
|
BOLI income |
|
|
254 |
|
|
|
157 |
|
|
|
— |
|
|
|
|
|
411 |
|
Other noninterest income |
|
|
743 |
|
|
|
23 |
|
|
|
— |
|
|
|
|
|
766 |
|
Total noninterest income |
|
|
5,083 |
|
|
|
670 |
|
|
|
— |
|
|
|
|
|
5,753 |
|
Noninterest expense |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Salaries and employee benefits |
|
|
15,531 |
|
|
|
5,527 |
|
|
|
— |
|
|
|
|
|
21,058 |
|
Occupancy and equipment |
|
|
5,105 |
|
|
|
547 |
|
|
|
— |
|
|
|
|
|
5,652 |
|
Third party services |
|
|
2,283 |
|
|
|
725 |
|
|
|
— |
|
|
|
|
|
3,008 |
|
Amortization of intangibles |
|
|
35 |
|
|
|
— |
|
|
|
440 |
|
|
E |
|
|
475 |
|
Acquisition related expenses |
|
|
519 |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
519 |
|
Other noninterest expense |
|
|
5,640 |
|
|
|
2,548 |
|
|
|
— |
|
|
|
|
|
8,188 |
|
Total noninterest expense |
|
|
29,113 |
|
|
|
9,347 |
|
|
|
440 |
|
|
|
|
|
38,900 |
|
Income before income taxes |
|
|
12,661 |
|
|
|
2,028 |
|
|
|
1,776 |
|
|
|
|
|
16,465 |
|
Income taxes |
|
|
2,551 |
|
|
|
434 |
|
|
|
382 |
|
|
F |
|
|
3,367 |
|
Net Income |
|
$ |
10,110 |
|
|
$ |
1,594 |
|
|
$ |
1,394 |
|
|
|
|
$ |
13,098 |
|
Net income per share of common stock |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Basic |
|
$ |
2.72 |
|
|
$ |
0.80 |
|
|
|
|
|
|
|
$ |
2.68 |
|
|
Diluted |
|
$ |
2.72 |
|
|
$ |
0.77 |
|
|
|
|
|
|
|
$ |
2.67 |
|
|
Weighted average shares outstanding, basic |
|
|
3,710,824 |
|
|
|
1,990,427 |
|
|
|
(811,454 |
) |
|
|
|
|
4,889,797 |
|
The Victory Bancorp, Inc. shares outstanding |
|
|
3,723,196 |
|
|
|
2,082,596 |
|
|
|
(903,623 |
) |
|
|
|
|
4,902,170 |
|
Notes
36
37
Date, Time and Place of Victory Special Meeting
The Victory special meeting of shareholders will be held on [________], 2026, at [___] a.m. local time, at [______________________________]. On or about [_____], Victory commenced mailing this document and the enclosed forms of proxy cards to its shareholders entitled to vote at the Victory special meeting.
Matters to be Considered
At the Victory special meeting, the holders of Victory common stock will be asked to consider and vote upon the Victory merger proposal. In addition, if necessary, holders of Victory common stock will be asked to vote on the Victory adjournment proposal. Completion of the merger is conditioned on, among other things, Victory shareholder approval of the Victory merger proposal. No other business may be conducted at the Victory special meeting.
Recommendation of the Victory Board of Directors
On September 23, 2025, the Victory board of directors unanimously approved the merger agreement and the transactions contemplated thereby. Based on Victory’s reasons for the merger described in the section of this joint proxy statement/prospectus entitled “The Merger — Victory’s Reasons for the Merger; Recommendation of the Victory Board of Directors” beginning on page 38, the Victory board of directors believes that the merger is in the best interests of Victory’s shareholders.
Accordingly, the Victory board of directors unanimously recommends that its shareholders vote “FOR” the Victory merger proposal and, if necessary, “FOR” the Victory adjournment proposal.
Record Date and Quorum
The Victory board of directors has fixed the close of business on the Victory record date as the record date, which is the date for determining the holders of Victory common stock entitled to receive notice of and to vote at the Victory special meeting. As of the Victory record date, there were an aggregate of 1,998,500 shares of Victory common stock entitled to vote at the Victory special meeting or any adjournment thereof. Such outstanding shares of Victory common stock were held by an aggregate of 299 holders of record. Each share of Victory common stock entitles the holder to one vote at the Victory special meeting on each proposal to be considered at the Victory special meeting.
The presence, in person or represented by proxy, of at least a majority of the total number of outstanding shares of Victory common stock entitled to vote is necessary in order to constitute a quorum for purposes of the matters being voted on at the Victory special meeting. Abstentions and shares held of record by a broker or nominee that are voted on any matter are included in determining whether a quorum exists. Broker non‑votes, if any, will not be included in determining whether a quorum exists. The Victory merger proposal cannot be approved at the Victory special meeting unless a quorum is present. If a quorum is not present at the Victory special meeting, Victory will seek approval of the Victory adjournment proposal to solicit additional proxies to approve the Victory merger approval.
Required Vote; Treatment of Abstentions; Broker Non‑Votes and Failure to Vote
The Victory Merger Proposal. The Victory merger proposal must be approved by a majority of the votes cast at the Victory special meeting, assuming a quorum is present.. If you fail to vote in person or by proxy or fail to instruct your bank, broker or other nominee to vote, or if you mark “ABSTAIN” on your proxy card, with respect to the Victory merger proposal, it will have no effect on the proposal.
The Victory Adjournment Proposal. Approval of the Victory adjournment proposal (if necessary or appropriate) requires the affirmative vote of holders representing a majority of the shares of Victory common stock represented at the meeting, whether or not a quorum is present. If you fail to vote in person or by proxy or fail to instruct your bank, broker or other nominee to vote, you will not be deemed represented at the meeting, and if you mark “ABSTAIN” on your proxy card, with respect to the Victory adjournment proposal, it will have no effect on the proposal. If Victory’s shareholders fail to approve the Victory adjournment proposal, but approve the Victory merger proposal, the merger may nonetheless occur.
38
The Victory board of directors encourages you to complete, date and sign the enclosed proxy card that is applicable to your shares of Victory common stock and return it promptly in the enclosed postage-paid envelope so that your voice is heard on these matters. You may also vote via the Internet by following the instructions on the enclosed proxy card.
Voting and Revocation of Proxies
Proxies, in the form enclosed, which are properly executed and returned and not subsequently revoked, will be voted in accordance with the instructions indicated on the proxies. Any properly executed proxy on which voting instructions are not specified will be voted “FOR” the Victory merger proposal and “FOR” the Victory adjournment proposal, if applicable.
If you are a shareholder of record of Victory as of the Victory record date, you may submit your proxy before the Victory special meeting in any of the following ways:
If you intend to submit your proxy via the Internet, you must do so by 11:59 p.m. Eastern Time on the day before the Victory special meeting. If you intend to submit your proxy by mail, your completed proxy card must be received prior to the Victory special meeting.
If you are the record holder of your Victory shares, you may revoke your proxy at any time before it is voted at the special meeting by:
Attendance at the Victory special meeting will not, by itself, revoke your proxy. If you hold your shares in street name with a bank or broker, you must contact such bank or broker for instructions as to how to revoke your proxy.
Banks, brokers and other nominees who hold shares of Victory common stock in “street name” for a beneficial owner of those shares typically have the authority to vote in their discretion on “routine” proposals when they have not received instructions from beneficial owners. However, banks, brokers and other nominees are not allowed to exercise their voting discretion with respect to the approval of matters determined to be “non‑routine,” without specific instructions from the beneficial owner. Broker non‑votes are shares held by a broker, bank or other nominee that are represented at the Victory special meeting, but with respect to which the broker or nominee is not instructed by the beneficial owner of such shares to vote on the particular proposal and the broker does not have discretionary voting power on such proposal. As a result, we do not expect any broker non‑votes at the Victory special meeting.
If your broker, bank or other nominee holds your shares of Victory common stock in “street name,” your broker, bank or other nominee will vote your shares of Victory common stock only if you provide instructions on how to vote by filling out the voter instruction form sent to you by your broker, bank or other nominee with this joint proxy statement/prospectus.
39
Each director of Victory, solely in his or her capacity as a shareholder of Victory, has entered into a support agreement with QNB pursuant to which each Victory director has agreed to vote the shares of Victory common stock over which he or she has the sole power to vote or direct the voting of in favor of the approval of the merger agreement and the merger and against the approval or adoption of any proposal made in opposition to the merger. As of the Victory record date, 354,927 shares of Victory common stock, or approximately 17.76% of the outstanding shares of Victory common stock entitled to vote at the Victory special meeting, are bound by the support agreements.
Solicitation of Proxies; Expenses
This proxy solicitation is made by the Victory board of directors. Victory is responsible for its expenses incurred in preparing, assembling, printing, and mailing this joint proxy statement/prospectus to Victory shareholders. Proxies will be solicited through the mail. Additionally, directors and officers of Victory intend to solicit proxies personally or by telephone or other means of communication. The directors and officers will not be additionally compensated for any such solicitation. Victory will reimburse banks, brokers, and other custodians, nominees and fiduciaries for their reasonable expenses in forwarding the proxy materials to beneficial owners. In addition, Victory has engaged Georgeson LLC, a third-party proxy solicitor, to assist Victory in soliciting proxies from the Victory shareholders, for a fee of $15,000, plus additional fees for each holder of Victory common stock contacted and other matters and reimbursement of reasonable and customary documented out-of-pocket expenses for their services.
Dissenters’ Rights
Victory shareholders are entitled to assert dissenters’ rights with respect to the merger proposal. These dissenters’ rights are conditioned on strict compliance with the requirements of Subchapter D of Chapter 15 of the PBCL. Please see “The Merger — Dissenters’ Rights,” beginning on page 40, and the full text of Subchapter D of Chapter 15 of the PBCL, which is reproduced in full in Annex D to this joint proxy statement/prospectus, for additional information.
Attending the Victory Special Meeting
All shareholders of Victory as of the Victory record date, including shareholders of record and shareholders who hold their shares in “street name” through banks, brokers, nominees or any other holder of record as of the Victory record date, are invited to attend the Victory special meeting. Shareholders of record of Victory common stock can vote in person at the Victory special meeting. If you are not a shareholder of record as of the Victory record date, you must obtain a proxy card, executed in your favor, from the record holder of your shares, such as a broker, bank or other nominee, to be able to vote in person at the Victory special meeting. If you plan to attend the Victory special meeting, you must hold your shares in your own name or have a letter from the record holder of your shares confirming your ownership. In addition, all Victory shareholders must bring a form of personal photo identification with you to be admitted. Victory reserves the right to refuse admittance to anyone without proper proof of share ownership or without proper photo identification. The use of cameras, sound recording equipment, communications devices or any similar equipment during the Victory special meeting is expressly prohibited.
A Victory shareholder who holds shares in “street name” through a broker, bank, trustee or other nominee (which we refer to as a “beneficial owner”) who desires to attend the Victory special meeting in person must bring proof of beneficial ownership as of the Victory record date, such as a letter from the broker, bank, trustee or other nominee that is the record owner of such beneficial owner’s shares, a brokerage account statement or the voting instruction form provided by the broker.
Victory Merger Proposal
Victory is asking its shareholders to approve the Victory merger proposal. Holders of Victory common stock should read this joint proxy statement/prospectus carefully and in its entirety, including the annexes, for more detailed information concerning the merger agreement and the merger. A copy of the merger agreement is attached to this joint proxy statement/prospectus as Annex A. In addition, holders of Victory common stock should read the documents incorporated by reference herein for further information about QNB.
After careful consideration, the Victory board of directors, by a unanimous vote of all directors, approved the merger agreement and declared the merger agreement and the transactions contemplated thereby, including the merger, to be advisable and in
40
the best interest of Victory and its shareholders. See “The Merger — Victory’s Reasons for the Merger; Recommendation of the Victory Board of Directors” beginning on page 38 of this joint proxy statement/prospectus for a more detailed discussion of the Victory board of directors’ recommendation.
The Victory board of directors unanimously recommends a vote “FOR” the Victory merger proposal.
Victory Adjournment Proposal
The Victory special meeting may be adjourned to another time or place, if necessary or appropriate, to solicit additional proxies if there are insufficient votes at the time of the Victory special meeting to approve the Victory merger proposal.
If, at the Victory special meeting, the number of shares of Victory common stock present or represented and voting in favor of the Victory merger proposal is insufficient to approve the Victory merger proposal, Victory intends to move to adjourn the Victory special meeting to enable the Victory board of directors to solicit additional proxies for approval of the Victory merger proposal. In that event, Victory will ask the holders of Victory common stock to vote upon the Victory adjournment proposal, but not the Victory merger proposal.
In this proposal, Victory is asking the holders of Victory common stock to authorize the holder of any proxy solicited by the Victory board of directors on a discretionary basis to vote in favor of adjourning the Victory special meeting to another time and place for the purpose of soliciting additional proxies, including the solicitation of proxies from Victory shareholders who have previously voted.
The Victory board of directors unanimously recommends a vote “FOR” the Victory adjournment proposal.
Assistance
If you need assistance in completing your proxy card, have questions regarding Victory’s special meeting or would like additional copies of this joint proxy statement/prospectus, please contact Georgeson LLC toll-free at (866) 510-7878.
41
Date, Time and Place of QNB Special Meeting
The QNB special meeting of shareholders will be held on [____________], 2026 at the [____________________________], at [_____] a.m. local time. On or about [_____], QNB commenced mailing this document and the enclosed forms of proxy cards to its shareholders entitled to vote at the QNB special meeting.
Matters to be Considered
At the QNB special meeting, the holders of QNB common stock will be asked to consider and vote upon the QNB merger proposal and, if necessary, the QNB adjournment proposal. Completion of the merger is conditioned on, among other things, QNB shareholder approval of the QNB merger proposal. No other business may be conducted at the QNB special meeting.
Recommendation of the QNB Board of Directors
On September 23, 2025, the QNB board of directors unanimously approved the merger agreement and the transactions contemplated thereby. Based on QNB’s reasons for the merger described in the section of this joint proxy statement/prospectus entitled “The Merger — QNBs’ Reasons for the Merger; Recommendation of the QNB Board of Directors” beginning on page 67, the QNB board of directors believes that the merger and the issuance of shares of QNB common stock as merger consideration is in the best interests of QNB shareholders.
Accordingly, the QNB board of directors unanimously recommends that its shareholders vote “FOR” the QNB merger proposal and, if necessary, vote “FOR” the QNB adjournment proposal.
Record Date and Quorum
The QNB board of directors has fixed the close of business on the QNB record date as the record date, which is the date for determining the holders of QNB common stock entitled to receive notice of and to vote at the QNB special meeting. As of the QNB record date, there were an aggregate of [____________] shares of QNB common stock outstanding and entitled to notice of, and to vote at, the QNB special meeting or any adjournment thereof, and such outstanding shares of QNB common stock were held by an aggregate of approximately [___] holders of record. Each share of QNB common stock entitles the holder to one vote at the QNB special meeting on each proposal to be considered at the QNB special meeting.
The presence, in person or represented by proxy, of at least a majority of the total number of outstanding shares of QNB common stock entitled to vote is necessary in order to constitute a quorum for purposes of the matters being voted on at the QNB special meeting. Abstentions and shares held of record by a broker or nominee that are voted on any matter are included in determining whether a quorum exists. Broker non‑votes, if any, will not be included in determining whether a quorum exists. The QNB merger proposal cannot be approved at the QNB special meeting unless a quorum is present. If the quorum is not present at the QNB special meeting, QNB will seek approval of the QNB adjournment proposal to solicit additional proxies to approve the QNB merger proposal.
Required Vote; Treatment of Abstentions; Broker Non‑Votes and Failure to Vote
The QNB Merger Proposal. The QNB merger proposal must be approved by a majority of the votes cast at the QNB special meeting, assuming a quorum is present. If you fail to vote in person or by proxy or fail to instruct your bank, broker or other nominee to vote, of if you mark “ABSTAIN” on your proxy card, with respect to the QNB merger proposal, it will have no effect on the proposal.
The QNB Adjournment Proposal. Approval of the QNB adjournment proposal (if necessary or appropriate) requires the affirmative vote of holders representing a majority of the shares of QNB common stock represented at the meeting, whether or not a quorum is present. If you fail to vote in person or by proxy or fail to instruct your bank, broker or other nominee to vote, of if you mark “ABSTAIN” on your proxy card, with respect to the QNB adjournment proposal, it will have no effect on the proposal. If QNB’s shareholders fail to approve the QNB adjournment proposal, but approve the QNB merger proposal, the merger may nonetheless occur.
42
The QNB board of directors encourages you to complete, date and sign the enclosed proxy card that is applicable to your shares of QNB common stock and return it promptly in the enclosed postage-paid envelope so that your voice is heard on these matters. You may also vote by telephone or Internet by following the instructions on the enclosed proxy card.
Voting and Revocation of Proxies
Proxies, in the forms enclosed, which are properly executed and returned and not subsequently revoked, will be voted in accordance with the instructions indicated on the proxies. Any properly executed proxy on which voting instructions are not specified will be voted “FOR” the QNB merger proposal and “FOR” the QNB adjournment proposal, if applicable.
If you are a shareholder of record of QNB as of the QNB record date, you may submit your proxy before the QNB special meeting in any of the following ways:
If you intend to submit your proxy by telephone or via the Internet, you must do so by 11:59 p.m. Eastern Time on the day before the QNB special meeting. If you intend to submit your proxy by mail, your completed proxy card must be received prior to the QNB special meeting.
If you are the record holder of your QNB shares, you may revoke your proxy at any time before it is voted at the special meeting by:
All written notices of revocation and other communications with respect to revocation or proxies should be sent to: QNB Corp., 15 North Third Street, P.O. Box 9005, Quakertown, Pennsylvania 18951-9005, Attn: Corporate Secretary. Attendance at the QNB special meeting will not, by itself, revoke your proxy. If you hold your shares in street name with a bank or broker, you must contact such bank or broker for instructions as to how to revoke your proxy.
Banks, brokers and other nominees who hold shares of QNB common stock in “street name” for a beneficial owner of those shares typically have the authority to vote in their discretion on “routine” proposals when they have not received instructions from beneficial owners. However, banks, brokers and other nominees are not allowed to exercise their voting discretion with respect to the approval of matters determined to be “non‑routine,” without specific instructions from the beneficial owner. Broker non‑votes are shares held by a broker, bank or other nominee that are represented at the QNB special meeting, but with respect to which the broker or nominee is not instructed by the beneficial owner of such shares to vote on the particular proposal and the broker does not have discretionary voting power on such proposal. As a result, we do not expect any broker non‑votes at the QNB special meeting.
43
If your broker, bank or other nominee holds your shares of QNB common stock in “street name,” your broker, bank or other nominee will vote your shares of QNB common stock only if you provide instructions on how to vote by filling out the voter instruction form sent to you by your broker, bank or other nominee with this joint proxy statement/prospectus.
Each director of QNB, solely in his or her capacity as a shareholder of QNB, has entered into a support agreement with Victory pursuant to which each QNB director has agreed to vote the shares of QNB common stock over which he or she has the sole power to vote or direct the voting of in favor of the QNB merger proposal. As of the QNB record date, 503,517 shares of QNB common stock, or approximately 13.4% of the outstanding shares of QNB common stock entitled to vote at the QNB special meeting, are bound by the support agreements.
Solicitation of Proxies; Expenses
This proxy solicitation is made by the QNB board of directors. QNB is responsible for its expenses incurred in preparing, assembling, printing, and mailing this joint proxy statement/prospectus to QNB shareholders. Proxies will be solicited through the mail. Additionally, directors and officers of QNB intend to solicit proxies personally or by telephone or other means of communication. The directors and officers will not be additionally compensated for any such solicitation. QNB will reimburse banks, brokers, and other custodians, nominees and fiduciaries for their reasonable expenses in forwarding the proxy materials to beneficial owners. In addition, QNB has engaged Georgeson, a third-party proxy solicitor, to assist QNB in soliciting proxies from the QNB shareholders, for a fee of $15,000, plus additional fees for each holder of Victory common stock contacted and other matters and reimbursement of reasonable and customary documented out-of-pocket expenses for their services.
Attending the QNB Special Meeting
All shareholders of QNB as of the QNB record date, including shareholders of record and shareholders who hold their shares in “street name” through banks, brokers, nominees or any other holder of record as of the QNB record date, are invited to attend the QNB special meeting. Shareholders of record of QNB common stock can vote in person at the QNB special meeting. If you are not a shareholder of record as of the QNB record date, you must obtain a proxy card, executed in your favor, from the record holder of your shares, such as a broker, bank or other nominee, to be able to vote in person at the QNB special meeting. If you plan to attend the QNB special meeting, you must hold your shares in your own name or have a letter from the record holder of your shares confirming your ownership. In addition, all QNB shareholders must bring a form of personal photo identification with you to be admitted. QNB reserves the right to refuse admittance to anyone without proper proof of share ownership or without proper photo identification. The use of cameras, sound recording equipment, communications devices or any similar equipment during the QNB special meeting is expressly prohibited.
A QNB shareholder who holds shares in “street name” through a broker, bank, trustee or other nominee (which we refer to as a “beneficial owner”) who desires to attend the QNB special meeting in person must bring proof of beneficial ownership as of the QNB record date, such as a letter from the broker, bank, trustee or other nominee that is the record owner of such beneficial owner’s shares, a brokerage account statement or the voting instruction form provided by the broker.
QNB Merger Proposal
QNB is asking its shareholders to approve the QNB merger proposal. Holders of QNB common stock should read this joint proxy statement/prospectus carefully and in its entirety, including the annexes, for more detailed information concerning the merger agreement and the merger. A copy of the merger agreement is attached to this joint proxy statement/prospectus as Annex A.
After careful consideration, the QNB board of directors, by a unanimous vote of all directors, approved the merger agreement and declared the merger agreement and the transactions contemplated thereby, including the merger and the issuance of shares of QNB common stock as merger consideration, to be advisable and in the best interest of QNB and its shareholders. See “The Merger — QNB’s Reasons for the Merger; Recommendation of the QNB Board of Directors” beginning on page 42 of this joint proxy statement/prospectus for a more detailed discussion of the QNB board of directors’ recommendation.
The QNB board of directors unanimously recommends a vote “FOR” the QNB merger proposal.
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QNB Adjournment Proposal
The QNB special meeting may be adjourned to another time or place, if necessary or appropriate, to solicit additional proxies if there are insufficient votes at the time of the QNB special meeting to approve the QNB merger proposal.
If, at the QNB special meeting, the number of shares of QNB common stock present or represented and voting in favor of the QNB merger proposal is insufficient to approve the QNB merger proposal, QNB intends to move to adjourn the QNB special meeting to enable the QNB board of directors to solicit additional proxies for approval of the QNB merger proposal. In that event, QNB will ask the holders of QNB common stock to vote upon the adjournment proposal, but not the QNB merger proposal.
In this proposal, QNB is asking the holders of QNB common stock to authorize the holder of any proxy solicited by the QNB board of directors on a discretionary basis to vote in favor of adjourning the QNB special meeting to another time and place for the purpose of soliciting additional proxies, including the solicitation of proxies from QNB shareholders who have previously voted.
The QNB board of directors unanimously recommends a vote “FOR” the QNB adjournment proposal.
Assistance
If you need assistance in completing your proxy card, have questions regarding QNB’s special meeting or would like additional copies of this joint proxy statement/prospectus, please contact Georgeson LLC at (866) 486-2947.
Security Ownership of Certain QNB Beneficial Owners and Management
The following table sets forth, as of the record date for the QNB special meeting, the beneficial ownership of QNB common stock by each of QNB’s directors and executive officers, by QNB’s directors and executive officers as a group, and by each person known to QNB to beneficially own more than 5% ownership of the issued and outstanding shares of Victory common stock. Unless otherwise noted below, the address of each beneficial owner listed in the table is c/o QNB Corp., 320 West Broad Street, P.O. Box 9005, Quakertown, Pennsylvania 18951.
The percentages of beneficial ownership in the following table are calculated in relation to the 3,733,073 shares of QNB common stock that were issued and outstanding as of the QNB record date. Beneficial ownership is determined in accordance with the rules of the SEC, which generally attribute beneficial ownership of securities to persons who possess sole or shared voting or investment power with respect to those securities. Unless otherwise indicated, and subject to the support agreements entered into with QNB in connection with entering into the merger agreement, to QNB’s knowledge, the persons or entities identified on the table
45
below have sole voting and investment power with respect to all shares shown as beneficially owned by them and have not pledged such shares as security.
Name of Beneficial Owner |
|
Amount and Nature of |
|
Percentage of |
|||
Directors and executive officers: |
|
|
|
|
|
|
|
Autumn R. Bayles |
|
|
2,703 |
|
|
|
* |
Laurie Bergman |
|
|
1,699 |
|
|
|
* |
Randy S. Bimes |
|
|
263,469 |
|
(3) |
|
6.99% |
Kenneth F. Brown, Jr. |
|
|
150,999 |
|
(4) |
|
4.01% |
Christopher T. Cattie |
|
|
8,995 |
|
(5) |
|
* |
Courtney L. Covelens |
|
|
5,949 |
|
(6) |
|
* |
David W. Freeman |
|
|
32,895 |
|
(7) |
|
* |
Gerald E. Gorski |
|
|
572 |
|
|
|
* |
Jeffrey Lehocky |
|
|
5,312 |
|
(8) |
|
* |
Jennifer L. Mann |
|
|
9,927 |
|
|
|
* |
Christina S. McDonald |
|
|
1,185 |
|
(9) |
|
* |
Scott G. Orzehoski |
|
|
21,042 |
|
(10) |
|
* |
Ranajoy Ray-Chaudhuri |
|
|
1,699 |
|
|
|
* |
W. Randall Stauffer |
|
|
54,583 |
|
(11) |
|
1.45% |
Scott R. Stevenson |
|
|
2,045 |
|
|
|
* |
Current Directors & Executive |
|
|
563,074 |
|
(12) |
|
14.94% |
Beneficial owners of 5% or more voting power: |
|
|
|
|
|
|
|
Fourthstone LLC(13) |
|
|
346,290 |
|
|
|
9.19% |
March T. Lynch(14) |
|
|
334,159 |
|
|
|
8.87% |
46
47
THE MERGER
The following discussion contains certain information about the merger. The discussion is subject, and qualified in its entirety by reference, to the merger agreement attached as Annex A to this joint proxy statement/prospectus and incorporated herein by reference. QNB and Victory urge you to read carefully this entire joint proxy statement/prospectus, including the merger agreement attached as Annex A, for a more complete understanding of the merger.
Terms of the Merger
Each of the boards of directors of QNB and Victory has unanimously approved the merger agreement and the transactions contemplated thereby including, in the case of the QNB board of directors, the issuance of shares of QNB common stock as merger consideration. The merger agreement provides that, subject to the terms and conditions set forth in the merger agreement, Victory will merge with and into QNB, with QNB continuing as the surviving entity. Immediately following the merger, The Victory Bank, Victory’s wholly-owned banking subsidiary, will merge with and into QNB Bank, QNB’s wholly-owned banking subsidiary, with QNB Bank continuing as the surviving bank.
If the merger agreement is approved by the shareholders of Victory and by the shareholders of QNB, all other conditions to consummation of the merger are satisfied or waived and the merger is completed, each share of Victory common stock issued and outstanding immediately prior to the effective time of the merger will be converted into the right to receive 0.5500 shares (the “exchange ratio”) of QNB common stock (the consideration such holder receives, the “merger consideration”). Following the completion of the merger, former Victory shareholders will own approximately 23.6% of the combined company based on the number of shares of QNB common stock outstanding as of [_______________].
If Victory provides notice of its intention to terminate the merger agreement as a result of certain changes in the trading price of QNB common stock relative to the price of the Index, QNB has the option (but not the obligation) to adjust the exchange ratio to equal a quotient, the numerator of which is equal to the product of the QNB Market Value, the exchange ratio (as then in effect) and the index ratio minus 0.20, and the denominator of which is equal to the QNB Market Value (each as calculated per the merger agreement).
Immediately prior to the effective time of the merger, all outstanding shares of Victory common stock subject to vesting restrictions granted under Victory stock plans, if any (which we refer to as “Victory restricted stock”), will become fully vested and will be converted into the right to receive, less applicable taxes, the merger consideration. At the effective time of the merger, each unvested option to purchase shares of Victory common stock will fully vest and all unexercised vested options will be converted into and become an option to purchase QNB common stock, and QNB shall assume such option in accordance with the terms of Victory stock plans and the terms of the award agreement by which such option is evidenced. All rights with respect to shares of the Victory common stock under such options assumed by QNB shall thereupon be converted into rights with respect to QNB common stock with appropriate adjustments made to the number of shares and exercise price applicable to such options based on the exchange ratio.
QNB will not issue any fractional shares of QNB common stock in the merger. Instead, a Victory shareholder who otherwise would have received a fraction of a share of QNB common stock will receive an amount in cash (without interest and rounded to the nearest cent) determined by multiplying (1) the average of the daily closing prices on the OTC for shares of QNB common stock for the five consecutive full trading days ending two trading days immediately preceding the date of closing of the merger by (2) the fraction of a share (rounded to the nearest one-thousandth of a share when expressed in decimal form) of QNB common stock to which such shareholder would otherwise be entitled to receive.
QNB’s shareholders and Victory’s shareholders are being asked to approve the QNB merger proposal and the Victory merger proposal, respectively. See the section of this joint proxy statement/prospectus entitled “The Merger Agreement” beginning on page 82 for additional and more detailed information regarding the legal documents that govern the merger, including information about the conditions to the completion of the merger and the provisions for terminating or amending the merger agreement.
Background of the Merger
The Victory board of directors has regularly reviewed and discussed Victory’s business strategy, performance and prospects in the context of the national and local economic environment, developments in the regulation of financial institutions and the competitive landscape. Among other things, these reviews and discussions have included possible strategic initiatives available to Victory, such as capital management strategies, potential acquisitions, and business combinations involving other financial
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institutions. These reviews and discussions included analyses of the mergers and acquisitions environment, including trading and acquisition multiples and premiums being paid, and an assessment of potential partners for Victory. As part of these reviews, the Victory board of directors and executive management team has also met with representatives of The Kafafian Group, Inc. (“Kafafian”), financial advisor to Victory, who have provided the Victory board of directors with periodic general market observations and valuation perspectives regarding community bank merger and acquisition transactions.
In connection with the evaluation of Victory’s strategic alternatives, Joseph W. Major, the Chairman, President and Chief Executive Officer of Victory, has also had, from time to time, informal discussions with representatives of other financial institutions, including QNB, and has regularly updated the Victory board of directors regarding such discussions. During the fall of 2024, Mr. Major began to have informal exploratory discussions with representatives of several companies regarding a possible business combination, and representatives of Victory, with the assistance of Kafafian, evaluated the financial aspects of a possible business combination with each of these potential transaction partners. However, no formal indication of interest was sought by Victory as a result of these informal exploratory discussions.
In December 2024, Mr. Major met with David W. Freeman, the President and Chief Executive Officer of QNB, to learn more about QNB’s business operations, growth strategy and interest in a potential transaction or partnership with Victory. The conversation was generally positive and Mr. Major and Mr. Freeman expressed a desire to continue discussions following their first meeting. Mr. Freeman and Mr. Major subsequently held informal discussions with representatives of Performance Trust Capital Partners, LLC (“Performance Trust”) to discuss the strategic and financial benefits of a combination between QNB and Victory.
On January 3, 2025, QNB, in consultation with Performance Trust, QNB’s financial advisor, sent Victory an informal term sheet regarding a potential business combination, which contemplated an all-stock merger in which Victory would merge with QNB and Victory shareholders would receive shares of QNB common stock at a fixed exchange ratio of 0.5000 shares of QNB common stock per share of Victory common stock. Following the receipt of the informal term sheet, during January 2025 and early February 2025, Victory assessed the financial impact of the proposed 0.5000 exchange ratio, in consultation with representatives of Kafafian, on Victory shareholders, as well as the other anticipated benefits of the proposed transaction. Concurrently, the Victory board of directors also evaluated alternative potential merger partners in addition to QNB. As part of this process, representatives of Kafafian reviewed with Victory’s board of directors a group of alternative potential counterparties, along with an analysis of each institution’s capacity to pay for shares of Victory common stock in a merger transaction.
At a meeting held on April 15, 2025, the Victory board of directors discussed Victory’s strategic alternatives, including pursuing a potential merger with QNB or one of the other alternative potential counterparties previously identified by Victory. Following this discussion, the Victory board of directors instructed Mr. Major to continue discussions with QNB about the terms of a potential merger transaction. The Victory board of directors elected to move forward with discussions with QNB, and not to solicit an indication of interest from any of the other alternative potential counterparties, because QNB stood alone among the possible business partners for a business combination as a result of, among other things, the similar culture and values of QNB and Victory, the geographic footprint and physical proximity of QNB, the substantial opportunities for employment of Victory employees following the completion of the merger, the greater anticipated franchise value of QNB following the completion of the merger, the market value of QNB common stock and the future trading upside for Victory shareholders following the completion of the merger, the potential for greater liquidity and trading volume of the combined company’s common stock, and the inability of the other potential counterparties to pay the same merger consideration offered by QNB, as calculated and estimated by Kafafian.
On May 2, 2025, representatives of Victory, Kafafian, QNB and Performance Trust, met to discuss the preliminary terms of a proposed business combination between Victory and QNB. At this meeting, representatives of Victory informed QNB that the previously proposed exchange ratio of 0.5000 was insufficient. The parties then informally discussed but did not agree upon a potential increase in the exchange ratio to 0.5279 shares of QNB common stock for each share of Victory common stock, subject to the completion of additional due diligence.
On May 13, 2025, Victory and QNB entered into a mutual nondisclosure agreement, which included a 45-day exclusivity period, in order to move forward with mutual preliminary due diligence. Following the execution of the mutual nondisclosure agreement, Victory and QNB commenced their respective formal preliminary due diligence reviews, including through documents provided in electronic data rooms established by each party. Over the following weeks, QNB conducted preliminary due diligence on Victory and Victory conducted preliminary reverse due diligence on QNB. The boards of directors and management teams of QNB and Victory received periodic updates from the companies’ respective management teams and advisors on matters related to the proposed merger transaction and the parties’ mutual due diligence process throughout the period.
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On June 27, 2025, the 45-day exclusivity period included in the May 13, 2025 mutual nondisclosure agreement expired. Following the expiration of the exclusivity period, QNB and Victory continued to conduct formal due diligence on each other with the goal of working towards a business combination transaction and a formal non-binding indication of interest letter for Victory from QNB. The boards of directors of QNB and Victory continued to receive periodic updates from the companies’ respective management teams and advisors on matters related to the proposed merger transaction and the parties’ mutual due diligence.
On July 15, 2025, following further due diligence and continued negotiations between QNB, Victory and their respective financial advisors, QNB delivered to Victory a non-binding indication of interest letter that increased the proposed exchange ratio from 0.5279 to 0.5450 shares of QNB common stock for each share of Victory common stock, subject to QNB’s continued due diligence review of Victory. On July 21, 2025, following continued discussions between the parties regarding the exchange ratio, and further due diligence by QNB, including a review of preliminary fair value accounting estimates in connection with the proposed transaction, QNB delivered to Victory an updated non-binding indication of interest letter that further increased the proposed exchange ratio from 0.5450 to 0.5500 shares of QNB common stock for each share of Victory common stock. On July 22, 2025, QNB and Victory entered into the updated non-binding indication of interest letter, which included a new 45-day exclusivity period and reflected the increased exchange ratio of 0.5500 shares of QNB common stock for each share of Victory common stock, subject to QNB’s continued due diligence review of Victory.
Following the execution of the updated non-binding indication of interest letter, QNB continued to conduct due diligence on Victory and Victory continued to conduct reverse due diligence on QNB. Representatives of Performance Trust and Stevens & Lee, P.C. (“Stevens & Lee”), QNB’s legal counsel, assisted QNB with its evaluation of Victory and the proposed merger transaction, and representatives of Kafafian and Kilpatrick Townsend & Stockton LLP (“Kilpatrick”), Victory’s legal counsel, assisted Victory with its evaluation of QNB and the proposed merger transaction.
On August 7, 2025, Stevens & Lee distributed an initial draft of the merger agreement to Kilpatrick. Over the following weeks, multiple drafts of the merger agreement, and the exhibits and schedules thereto, were exchanged and representatives of Stevens & Lee and Kilpatrick participated in calls to discuss open issues, which included deal protections, termination fees, the conduct of Victory’s business prior to closing, certain representations and warranties and employee matters. Among the employee matters discussed were proposed settlement agreements between Victory and each of Joseph W. Major and Robert H. Schultz, pursuant to which (i) each executive’s existing employment agreement with Victory would be terminated as of the effective time of the merger and (ii) in consideration for the termination of his employment agreement, each executive would each receive a severance payment at the effective time of the merger, subject to his capped limit under Section 280G of the Internal Revenue Code of 1986, as amended.
On September 5, 2025, the 45-day exclusivity period provided for in the July 22, 2025 non-binding indication of interest letter expired and the parties continued to negotiate, in good faith, the terms of the proposed merger agreement. On September 10, 2025, as part of the parties’ respective due diligence evaluation of each other, the executive management teams of both QNB and Victory met in person to become better acquainted with one another and to share information about their respective companies. The boards of directors of QNB and Victory continued to receive periodic updates from the companies’ respective management teams and advisors on matters related to the proposed merger transaction and the parties’ mutual due diligence.
On September 23, 2025, Victory’s board of directors held a special meeting, with representatives of Kafafian and Kilpatrick in attendance, to consider the approval of the merger agreement and the transactions contemplated by the merger agreement. In advance of the meeting, management distributed to each director the proposed merger agreement and a financial presentation prepared by Kafafian. Representatives of Kafafian reviewed in detail the pricing and other financial terms of the proposed merger agreement. Kilpatrick reviewed in detail the terms and conditions of the proposed merger agreement, including, but not limited to, the transaction structure, the representations, warranties and covenants made by Victory and QNB, the closing conditions, and the termination rights of Victory and QNB, and also discussed with directors their fiduciary duties under Pennsylvania law. Victory’s board of directors reviewed all aspects of the merger process, including Victory’s then current financial position, performance and prospects, including its decision to pursue a strategic transaction with QNB, then current economic and stock market conditions, Victory’s reverse due diligence investigation of QNB, the terms and conditions of the proposed merger agreement, the implied value of the proposed merger consideration (including the final exchange ratio of 0.5500 shares of QNB common stock for each share of Victory common stock, which reflected several increases from the initial exchange ratio proposed by QNB), and the potential impact of the proposed merger on Victory’s shareholders and other constituencies. All questions posed by the directors were answered by management and/or representatives of Kafafian or Kilpatrick, as appropriate. Representatives of Kafafian then rendered Kafafian’s oral opinion to the board of directors, which was subsequently confirmed in writing, to the effect that, as of September 23, 2025, and subject to the procedures followed, assumptions made, matters considered, and qualifications and limitations on the review undertaken by Kafafian
50
as set forth in such opinion, the exchange ratio pursuant to the proposed merger agreement was fair to Victory’s shareholders from a financial point of view. After considering the proposed merger agreement, and ancillary documents, and taking into consideration the matters discussed at the meeting and at prior meetings of the board of directors, the board of directors voted unanimously to adopt and approve the proposed merger agreement, to recommend that Victory’s shareholders vote to approve the proposed merger agreement, and to authorize Mr. Major to execute and deliver the merger agreement, and all ancillary documents, on behalf of Victory.
Also on September 23, 2025, QNB’s board of directors met to consider the approval of the merger agreement and the transactions contemplated by the merger agreement. Representatives of Performance Trust and Stevens & Lee participated in the QNB board meeting, during which they reviewed the provisions of the merger agreement in detail with the board of directors. Representatives of Performance Trust discussed the financial terms of the proposed transaction and Stevens & Lee reviewed in detail the terms of the merger agreement and discussed with the QNB board their fiduciary duties under Pennsylvania law. Also at this meeting, Performance Trust reviewed financial aspects of the proposed merger, and rendered an opinion (which was initially rendered verbally and confirmed in a written opinion, dated September 23, 2025) to QNB’s board of directors to the effect that, as of such date and subject to the procedures followed, assumptions made, matters considered, and qualifications and limitations on the review undertaken by Performance Trust as set forth in such opinion, the exchange ratio in the proposed merger was fair, from a financial point of view, to QNB. After careful consideration of the presentations from Performance Trust and Stevens & Lee, and following further discussion, QNB’s board of directors unanimously approved the proposed merger agreement and agreed to recommend that QNB’s shareholders vote to approve the proposed merger agreement.
On September 23, 2025, Victory and QNB executed the merger agreement and, later on September 23, 2025, following the closing of the stock markets, Victory and QNB issued a joint press release to publicly announce the execution of the merger agreement.
Victory’s Reasons for the Merger; Recommendation of the Victory Board of Directors
After careful consideration, at a meeting held on September 23, 2025, the Victory board of directors unanimously determined that the merger agreement, including the merger and the other transactions contemplated thereby, was in the best interests of Victory and its shareholders and approved the merger agreement.
In reaching its decision to adopt and approve the merger agreement and the transactions contemplated thereby (including the merger), and to recommend that the holders of Victory common stock approve and adopt the merger agreement, the Victory board of directors evaluated the merger agreement and the transactions contemplated thereby (including the merger) in consultation with Victory’s management, as well as Victory’s financial and legal advisors, and considered a number of factors, including the following (which are presented below in no particular order):
51
• the expanded possibilities for growth and access to capital that would be available to the surviving corporation, given its larger size, asset base, capital and footprint; |
52
The Victory board of directors also considered potential risks related to the merger but concluded that the anticipated benefits of the merger were likely to substantially outweigh these risks. These potential risks include:
53
The foregoing discussion of the information and factors considered by the Victory board of directors is not intended to be exhaustive but includes the material factors considered by the Victory board of directors. In reaching its decision to approve the merger agreement and the transactions contemplated thereby (including the merger), the Victory board of directors did not quantify or assign any relative weights to the factors considered, and individual directors may have given different weights to different factors. The Victory board of directors considered all these factors as a whole, including through its discussions with Victory’s management and financial and legal advisors, in evaluating the merger agreement and the transactions contemplated thereby (including the merger).
For the reasons set forth above, the Victory board of directors unanimously (i) determined that the merger agreement and the other matters and transactions contemplated thereby are advisable and in the best interests of Victory and its shareholders, (ii) adopted and approved the merger agreement and the other matters and transactions contemplated thereby, (iii) authorized the execution and delivery of the merger agreement and the other matters and transactions contemplated thereby, (iv) directed that the merger agreement be submitted to the holders of Victory common stock for adoption and (v) recommended approval and adoption of the merger agreement by the holders of Victory common stock.
In considering the recommendation of the Victory board of directors, you should be aware that certain directors and executive officers of Victory may have interests in the merger that are different from, or in addition to, interests of shareholders of Victory generally and may create potential conflicts of interest. The Victory board of directors was aware of these interests and considered them when evaluating and negotiating the merger agreement and the transactions contemplated thereby (including the merger), and in recommending to the holders of Victory common stock that they vote in favor of the Victory merger proposal and the Victory adjournment proposal. See the section entitled “—Interests of Victory’s Directors and Executive Officers in the Merger.”
This summary of the reasoning of the Victory board of directors and other information presented in this section is forward-looking in nature and, therefore, should be read in light of the factors discussed under the heading “Special Cautionary Note Regarding Forward-Looking Statements.”
THE VICTORY BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT THE VICTORY SHAREHOLDERS VOTE “FOR” THE VICTORY MERGER PROPOSAL AT THE VICTORY SPECIAL MEETING.
Opinion of Victory’s Financial Advisor
54
By letter dated June 12, 2025, The Victory Bank engaged Kafafian as its exclusive financial advisor and to render an opinion as to the fairness, from a financial point of view, to the holders of Victory common stock, of the exchange ratio in the proposed merger.
The Victory board of directors engaged Kafafian based on Kafafian’s qualifications, industry experience, reputation and past assistance with providing financial advisory services to financial institutions. Kafafian, as part of its financial advisory business, is regularly engaged in the valuation of businesses operating in the financial services industry and their securities in connection with mergers and acquisitions, and valuations for other purposes. In the ordinary course of business Kafafian provides consulting services to financial institutions, including performance measurement; profitability outsourcing; strategic, capital, and business planning; regulatory assistance; profit and process improvement; and various other financial advisory services. Outside of our engagement by Victory as exclusive financial advisor on the merger, Kafafian has also provided investment banking services and consulting services to Victory in the two years preceding the date hereof. In the two years preceding the date hereof Kafafian has not provided any services to QNB.
At the request of the Victory board of directors, representatives of Kafafian participated in a board meeting held on September 23, 2025, at which the Victory board of directors considered the proposed merger with QNB. At that meeting, representatives of Kafafian made a presentation to the Victory board of directors of Kafafian’s analyses relating to the proposed merger and, in particular, of Kafafian’s determination regarding the fairness, from a financial point of view, of the exchange ratio to be paid by QNB to the holders of Victory common stock. At that meeting, Kafafian issued its written opinion that the exchange ratio in the proposed merger was fair, from a financial point of view, to the holders of Victory common stock. Except as discussed herein, no limitations were imposed by the Victory board of directors upon Kafafian with respect to investigations made or procedures followed in rendering Kafafian’s fairness opinion.
The description of Kafafian’s opinion set forth herein is qualified in its entirety by reference to the full text of the opinion, which is attached as Annex B to this joint proxy statement/prospectus and is incorporated herein by reference and describes the procedures followed, assumptions made, materials reviewed, matters considered and qualifications and limitations of the review undertaken by Kafafian in preparing the opinion.
Kafafian’s opinion speaks only as of the date of the opinion. The opinion was for the information of, and was directed to, the Victory board of directors (in its capacity as such) in connection with its consideration of the financial terms of the merger. The opinion addressed only the fairness, from a financial point of view, of the exchange ratio. Kafafian’s opinion did not address the underlying business decision of Victory to enter into the merger or enter into the merger agreement nor does Kafafian’s opinion constitute a recommendation to the Victory board of directors in connection with the merger, and Kafafian’s opinion does not constitute a recommendation to any holder of Victory common stock or any shareholder of any other entity as to how to vote in connection with the merger or any other matter, nor does it constitute a recommendation as to whether or not any such holder of Victory common stock should enter into a voting, shareholders’, affiliates’ or other agreement with respect to the merger.
Kafafian’s fairness opinion has been approved by Kafafian’s fairness opinion committee. This fairness opinion shall not be reproduced or summarized without Kafafian’s prior written consent; provided, however, Kafafian will provide its consent for the fairness opinion to be included in regulatory or securities filings to be completed in connection with the merger.
In connection with the fairness opinion, Kafafian reviewed, analyzed and relied upon material bearing upon the financial and operating condition of Victory and QNB and bearing upon the merger, including among other things, the following:
55
Kafafian’s consideration of financial information and other factors that we deemed appropriate under the circumstances or relevant to our analyses included, among others, the following:
As part of its analyses, Kafafian took into account its assessment of general economic, market and financial conditions as of the date hereof and the information made available to Kafafian through the respective dates thereof, its experience in similar transactions, as well as its experience in and knowledge of the banking industry and reviewed and considered, among other things deemed relevant by Kafafian. In addition, Kafafian notes that there is currently significant volatility in the stock and other financial markets arising from global tensions and political unrest, economic uncertainty, inflation, and the current interest rate environment. These factors introduce extraordinary uncertainty and unusual volatility, and actual results may vary significantly from those set forth in any projections or analyses considered. Kafafian’s opinion is necessarily based upon conditions as they exist and can be evaluated on the date hereof and the information made available through the date hereof, and Kafafian does not have any obligation to update, revise, or reaffirm this opinion for events or circumstances arising after the date hereof.
Kafafian does not express an opinion as to such information, or the assumptions on which such information is based. Kafafian has also assumed that there has been no material change in the composition of loans or deposits, financial condition, results of operations, business or prospects for either Victory or QNB since the date of the most recent financial statements made available to Kafafian and that Victory and QNB would remain as going concerns for all periods relevant to Kafafian’s analyses. Any estimates contained in the analyses performed by Kafafian are not necessarily indicative of actual values or future results, which may be significantly more or less favorable than suggested by these analyses.
Kafafian also discussed with certain members of the management of Victory the business, financial condition, results of operations and prospects of Victory and held similar discussions with certain members of the management of QNB regarding the business, financial condition, results of operations and prospects of QNB. In addition, we have considered the results of the efforts undertaken by Victory from discussions with third parties regarding a potential transaction with Victory.
In performing its review and arriving at our opinion, Kafafian relied upon the accuracy and completeness of all of the financial and other information that was available to and reviewed by Kafafian from public sources, that was provided to Kafafian by Victory, QNB or their respective representatives or that was otherwise reviewed by Kafafian and as such, Kafafian has assumed such accuracy and completeness for purposes of rendering this fairness opinion without any independent verification or investigation. Kafafian has further relied on the assurances of the respective managements of Victory and QNB that they are not aware of any facts or circumstances that would make any of such information inaccurate or misleading. Kafafian has not been asked to and has not undertaken an independent verification of any of such information and Kafafian does not assume any responsibility or liability for the accuracy or completeness thereof. Additionally, Kafafian assumes that the merger is, in all respects, lawful under applicable law as of the date hereof.
Kafafian assumed in all aspects material to its analyses:
56
Kafafian did not make an independent evaluation or perform an appraisal of the specific assets, the collateral securing assets or the liabilities (contingent or otherwise) of Victory or QNB, nor has Kafafian been furnished with any such evaluations or appraisals. Kafafian does not render an opinion or evaluation on the collectability of any assets or the future performance of any loans of Victory or QNB nor did Kafafian make an independent evaluation of the adequacy of the allowance for credit losses of Victory or QNB, or the combined entity after the merger and Kafafian has not reviewed individual credit files relating to Victory or QNB. Kafafian has assumed, with Victory’s consent, that the respective allowances for credit losses for both Victory and QNB are currently adequate to cover such losses and will be adequate on a combined basis for QNB with Victory and after application of certain acquisition accounting adjustments.
This opinion addresses only the fairness, from a financial point of view, as of the date hereof, of the exchange ratio in the merger to the holders of Victory common stock. Kafafian expresses no view or opinion as to any other terms or aspects of the merger or any term or aspect of any related transaction, no opinion as to the trading values of Victory common stock or QNB common stock at any time or what the value of or trading volume of QNB common stock may be once it is received by the holders of Victory common stock. Nothing in Kafafian’s fairness opinion is to be construed as constituting tax advice or a recommendation to take any tax position, nor does Kafafian’s fairness opinion address any legal, tax, regulatory or accounting matters, as to which we understand that Victory has obtained such advice as it deemed necessary from qualified professionals including whether or not each of the merger and the bank merger would qualify as a tax-free reorganization for United States federal income tax purposes. Kafafian does not express any opinion as to the fairness of the amount or nature of the compensation to be received in the merger by any of the officers, directors, or employees of any party to the merger agreement, or any class of such persons, relative to the compensation to be received by the holders of Victory common stock in the merger.
Kafafian’s fairness opinion is for the benefit of the Victory board of directors in connection with its evaluation of the merger and does not constitute a recommendation to the board of directors of Victory of how it should vote on the merger. Kafafian’s fairness opinion is directed to the Victory board of directors in connection with its consideration of the merger agreement and the merger. Kafafian’s fairness opinion is directed only to the fairness, from a financial point of view, of the exchange ratio to the holders of Victory common stock and does not address the underlying business decision of Victory to engage in the merger, the form or structure of the merger or any other transactions contemplated in the merger agreement, the relative merits of the merger as compared to any other alternative transactions or business strategies that might exist for Victory, or the effect of any other transaction in which Victory might engage. This fairness opinion should not be construed as creating any fiduciary duty on the part of Kafafian to any party or person, or any duties whatsoever to the holders of Victory common stock.
Proposal Summary – Pursuant to the terms of the merger agreement, holders of Victory common stock shall, by virtue of the merger and without any further action by the holder thereof, be converted into and represent the right to receive 0.5500 shares of QNB common stock for each share of Victory common stock they own and cash for fractional shares. For the purposes of the financial analyses described below and pursuant to the terms of the merger agreement, Kafafian utilized an implied transaction value of $19.58 per outstanding share for 1,996,588 shares of Victory common stock and when including the value of 153,000 Victory stock options with a weighted average strike price of $7.30 that would be rolled over to QNB stock options for a transaction value of approximately $40.9 million in the aggregate.
Contribution Analysis – Kafafian reviewed the contribution made by each of Victory and QNB to various balance sheet and income statement categories of the combined company based on balance sheet data as of June 30, 2025, and income statement information estimated for the twelve months ended June 30, 2025. Given the merger consideration was comprised of 100% of QNB common stock
57
to the holders of Victory common stock (except for cash in lieu of fractional shares), at an exchange ratio of 0.5500 and a stock price for QNB common stock of $35.60 as of September 22, 2025, the implied value for a share of Victory common stock was $19.58, the analysis showed that Victory and QNB would each contribute, prior to any acquisition accounting adjustments or other transaction expenses, the following percentages to the combined QNB:
Relative Contribution Analysis (prior to fair value adjustments)
|
QNB |
Victory |
Balance Sheet (as of 06/30/2025) |
|
|
Loans, Net of Allowance |
75.5% |
24.5% |
Total Assets |
79.8% |
20.2% |
Total Deposits |
79.5% |
20.5% |
Total Common Equity |
78.5% |
21.5% |
Proforma Ownership |
77.3% |
22.7% |
Income Statement (for the twelve months ended 6/30/2025) |
|
|
Net Income |
84.4% |
15.6% |
Peer Group Analysis – An integral part of the evaluation of the merger is to compare the financial condition and financial performance of QNB and Victory to banking organizations that possess characteristics that are believed to be similar to that of QNB and Victory.
In the following Peer Group analysis, The Victory Bank and QNB Bank data may be used if appropriate or if holding company data is unavailable.
Kafafian compared certain of Victory’s and QNB’s financial condition and financial performance measures to several peer groups of financial institutions, with each institution being compared to one specific peer group that is believed to possess characteristics similar to that of Victory and QNB, and one peer group applicable to both institutions. The financial condition and financial performance data for Victory, QNB and all companies in the peer groups was as of or for the last twelve months ended June 30, 2025. For those peer group members that were publicly traded companies, market data was as of September 22, 2025.
The first peer group, “Victory De Novo Peers”, consists of companies based on six (6) screening criteria: (i) publicly traded commercial banks, (ii) established in the year 2000 or later, (iii) headquartered in metropolitan areas within the Mid-Atlantic, Northeast, or Southeast regions, (iv) total assets between $400 million and $1 billion, (v) NPAs as a percentage of total assets less than three (3) percent, and (vi) excludes Minority Depository Institutions (“MDIs”) There are eleven (11) companies that meet this criteria.
The second peer group, “QNB Relational Peer” consists of companies based on four (4) screening criteria: (i) publicly traded commercial banks, (ii) headquartered in Pennsylvania, (iii) total assets between $1.5 billion and $3 billion, and (iv) excludes Western Pennsylvania and select Central Pennsylvania institutions. There are eight (8) companies that meet this criteria.
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The third peer group, “QNB + Victory Competitors of Interest Peer” consists of companies based on three (3) screening criteria: (i) publicly traded, (ii) operating a branch within a five-mile radius of any QNB or Victory branch, and (iii) total assets less than $10 billion. There are fifteen (15) companies that meet this criteria.
Victory and QNB Peer Group Members |
||||||
|
|
|
||||
Victory De Novo Peer |
|
QNB Relational Peer |
|
QNB + Victory Competitors of Interest Peer |
|
|
• 1st Colonial Bancorp, Inc. • BankFLORIDA Bancorp, Inc. • blueharbor bank • ES Bancshares, Inc. • First Greenwich Financial, Inc. • First Resource Bancorp, Inc. • InsCorp, Inc. • Oak Ridge Financial Services, Inc. • Oak View Bankshares, Inc. • Paragon Financial Solutions, Inc. • Primary Bank |
|
• Citizens & Northern Corporation • Citizens Financial Services, Inc. • Embassy Bancorp, Inc. • ENB Financial Corp • Fidelity D & D Bancorp, Inc. • LINKBANCORP, Inc. • Meridian Corporation • Norwood Financial Corp. |
|
• 1st Colonial Bancorp, Inc. • American Bank Incorporated • Citizens Financial Services, Inc. • CNB Financial Corporation • Embassy Bancorp, Inc. • First Bank • FNB Bancorp, Inc. • Harleysville Financial Corporation • Meridian Corporation • Mid Penn Bancorp, Inc. • New Tripoli Bancorp, Inc. • Peoples Financial Services Corp. • Princeton Bancorp, Inc. • Quaint Oak Bancorp, Inc. • Univest Financial Corporation |
|
|
The following table provides a summary comparison of Victory’s and QNB’s financial condition and financial performance to that of the median for each peer group:
Victory and QNB Peer Group Comparison
|
Victory |
QNB |
De Novo Peer (median) |
Relational Peer (median) |
Competitors of Interest Peer (median) |
Total Assets ($000s) |
477,089 |
1,884,828 |
724,753 |
2,560,907 |
2,241,668 |
Equity / Assets (%) |
6.50 |
6.01 |
8.13 |
8.80 |
9.87 |
Tang. Equity / Tang. Assets (%) |
6.50 |
6.01 |
8.74 |
7.61 |
9.34 |
Loans / Deposits (%) |
92.9 |
73.8 |
98.7 |
90.3 |
95.2 |
NPAs / Assets (%) |
0.00 |
0.47 |
0.28 |
0.62 |
0.48 |
Reserves / NPAs (%) |
- |
102 |
163 |
131 |
161 |
Net Interest Margin (%) |
3.28 |
2.51 |
3.53 |
3.23 |
3.23 |
Non-Int. Income/ Avg. Assets (%) |
0.21 |
0.34 |
0.26 |
0.63 |
0.44 |
Non-Int. Expense/ Avg. Assets (%) |
2.52 |
1.96 |
2.19 |
2.41 |
2.27 |
Efficiency Ratio (FTE basis) (%) |
80 |
69 |
64 |
65 |
64 |
Non-Int. Inc./ Oper. Revenue (%) |
6.69 |
12.16 |
8.65 |
17.63 |
12.47 |
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Return on Average Assets (%) |
0.51 |
0.69 |
0.90 |
0.86 |
0.89 |
Return on Average Equity (%) |
8.03 |
10.68 |
10.90 |
10.63 |
9.34 |
Market Value ($M) |
24.2 |
132.5 |
54.6 |
247.4 |
175.5 |
Price / Book (%) |
78 |
117 |
103 |
104 |
98 |
Price/Tangible Common Equity (%) |
78 |
117 |
104 |
124 |
105 |
Price/LTM EPS |
10.3 |
10.3 |
10.7 |
10.3 |
11.0 |
Current dividend yield (%) |
2.1 |
4.3 |
1.8 |
3.6 |
3.2 |
Financial data as of or for the last twelve months ended June 30, 2025, market data as of close of business ended September 22, 2025.
Source: S&P Capital IQ.
Kafafian reviewed the financial and market valuation metrics of Victory and QNB relative to selected peer groups as of the most recent available data. Victory was compared to the Victory De Novo Peer group, while QNB was evaluated against both the QNB Relational Peer group and the QNB + Victory Competitors of Interest Peer group.
In comparison to the Victory De Novo Peer group, Victory exhibited a lower Price/Book multiple of 78%, compared to the peer median of 117%, suggesting that Victory common stock was trading at a discount relative to its peers on a book value basis. Victory’s Price/LTM EPS multiple of 10.3x was generally consistent with the peer median of 10.7x, indicating alignment with earnings-based valuation norms. Victory’s current dividend yield of 2.1% exceeded the De Novo Peer median of 1.8%, reflecting a relatively higher return of capital to shareholders.
With respect to QNB, its Price/Book multiple of 117% was above the medians of both the QNB Relational Peer group (103%) and the QNB + Victory Competitors of Interest Peer group (104%). QNB’s Price/LTM EPS multiple of 10.3x was in line with the Relational Peer group and slightly below the Competitors of Interest median of 11.0x. Notably, QNB’s current dividend yield of 4.3% was significantly higher than both peer group medians (3.6% and 3.2%, respectively), indicating a differentiated capital return strategy.
No individual company included in the peer group analysis is identical to QNB or Victory. These peer comparisons were considered in the context of broader market positioning, capital structure, and valuation dynamics, and were used to inform Kafafian’s overall assessment of Victory and QNB’s relative market performance and financial characteristics.
Valuation metrics for banking sector – Kafafian reviewed valuation metrics for publicly traded commercial banks segmented by asset size as of September 22, 2025. As of June 30, 2025, Victory had total assets of approximately $477.1 million, placing it within the “SNL U.S. Bank$250M–$500M” peer group, which reflected a price-to-book multiple of approximately 73% as of September 22, 2025. Following the transaction, the pro forma institution is expected to fall within the “SNL U.S. Bank $1B–$5B” peer group, which had a price-to-book multiple of approximately 107% on the same date. Kafafian noted that the transaction results in a shift to a peer group with higher observed valuation metrics, though no assurance can be given that the pro forma institution will trade in line with such metrics.
|
|
Valuation Metrics (medians) 9/22/2025 |
||
Commercial Banks |
Aggregate Market Capitalization ($ Millions) |
Price / LTM Earnings (X) |
Price / Book |
Price / Tangible Book |
|
|
|
|
|
|
|
|
|
|
SNL U.S. Bank > $10B |
2,728,361 |
13.5 |
119% |
159% |
SNL U.S. Bank $5B-$10B |
62,722 |
11.6 |
113% |
133% |
SNL U.S. Bank $1B-$5B |
44,357 |
11.4 |
107% |
119% |
SNL U.S. Bank $500M-$1B |
3,457 |
10.3 |
103% |
101% |
SNL U.S. Bank $250M-$500M |
369 |
12.3 |
73% |
73% |
SNL U.S. Bank < $250M |
87 |
24.9 |
76% |
76% |
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Source: S&P Capital IQ. Market and valuation metrics data as of September 22, 2025; financial data generally as of or for the latest twelve months ended June 30, 2025.
Price change and total return vs. Indices – Kafafian discussed the Total Price Return and Total Return through two different time periods, January 16, 2008 through September 18, 2025 and February 8, 2017 through September 18, 2025. Kafafian noted that both Victory and QNB have underperformed relative to the NASDAQ Bank Index and the S&P 500 throughout both time periods.
Victory and QNB Comparison to Indexes
Description |
Stock Price As of 1/16/2008 |
Stock Price As of 9/18/2025 |
Total Price Return Through 9/18/2025 |
Total Cash Dividends Through 9/18/2025 |
Total Return Through 9/18/2025 |
Total Return Annualized Through 9/18/2025 |
|
|
|||||||
|
|
|
|
|
|
|
|
Victory (VTYB) |
$10.00 |
$12.15 |
21.5% |
$1.70 |
38.5% |
1.9% |
|
QNB (QNBC) |
$21.15 |
$35.60 |
68.3% |
$21.20 |
168.6% |
5.7% |
|
NASDAQ Bank Index (BANK) |
$2,476.97 |
$4,651.66 |
87.8% |
- |
- |
- |
|
S&P 500 (SPX) |
$1,373.20 |
$6,631.96 |
383.0% |
- |
- |
- |
|
|
|
|
|
|
|
|
|
Description |
Stock Price As of 2/8/2017 |
Stock Price As of 9/18/2025 |
Total Price Return Through 9/18/2025 |
Total Cash Dividends Through 9/18/2025 |
Total Return Through 9/18/2025 |
Total Return Annualized Through 9/18/2025 |
|
|
|||||||
|
|
|
|
|
|
|
|
Victory (VTYB) |
$7.50 |
$12.15 |
62.0% |
$1.70 |
84.6% |
7.4% |
|
QNB (QNBC) |
$29.25 |
$35.60 |
21.7% |
$14.12 |
70.0% |
6.4% |
|
NASDAQ Bank Index (BANK) |
$2,708.49 |
$4,651.66 |
71.7% |
- |
- |
- |
|
S&P 500 (SPX) |
$2,112.93 |
$6,631.96 |
213.9% |
- |
- |
- |
|
Source: S&P Capital IQ.
Comparable Transaction Analysis – Kafafian reviewed various financial conditions, financial performance and acquisition multiples for two (2) groups of institutions that Kafafian believed to have characteristics similar to those of Victory. Kafafian then compared the median acquisition multiples for the Victory and QNB merger relative to the median acquisition multiples derived from the transactions that comprised Victory’s Comparable Transactions.
The first set of transactions, “Regional Transactions”, included commercial bank transactions announced on or after January 1, 2021 through September 22, 2025 where the target institution (i) had assets between $300 million and $1 billion at announcement, (ii) announced deal value less than $100 million, (iii) target and buyer are stock corporations, (iv) target return on average assets (“ROAA”) was greater than or equal to thirty (30) basis points, (v) target non-performing assets as a percentage of total assets was less than two (2) percent, (vi) target institution was located in the Mid-Atlantic region, and (vii) excludes merger of equals, private equity
61
involvement, government assisted transactions and credit union buyers. The criteria resulted in a list of six (6) merger and acquisition transactions.
The second set of transactions, “National Transactions”, included commercial bank transactions announced on or after January 1, 2021 through September 22, 2025 where the target institution (i) had assets between $300 million and $1 billion at announcement, (ii) announced deal value less than $100 million, (iii) target and buyer are stock corporations, (iv) target ROAA was greater than or equal to thirty (30) basis points, (v) target non-performing assets as a percentage of total assets was less than two (2) percent, (vi) target institution was located in any state within the U.S., (vii) tangible equity as a percentage of tangible assets was less than or equal to ten (10) percent, and (viii) excludes merger of equals, private equity involvement, government assisted transactions and credit union buyers. The criteria resulted in a list of twelve (12) merger and acquisition transactions.
The following tables compares certain financial and valuation metrics of Victory relative to the median for Comparable Transactions. Victory data is as of or for the last twelve months ended June 30, 2025:
Transaction Financial Highlights |
||||||
|
|
|
|
|
|
|
|
|
|
Regional Transactions |
|
National Transactions |
Victory |
|
Total Assets ($000s) |
|
554,262 |
|
554,262 |
477,089 |
|
Total Deposits ($000) |
|
473,548 |
|
441,612 |
426,433 |
|
Tangible Equity / Assets (%) |
|
7.06 |
|
8.01 |
6.50 |
|
NPAs / Total Assets (%) |
|
0.45 |
|
0.27 |
0.00 |
|
Non-Int. Inc./Avg. Assets (%) |
|
0.43 |
|
0.50 |
0.20 |
|
Non-Int. Exp./ Avg. Assets (%) |
|
2.05 |
|
2.07 |
2.50 |
|
ROAA (%) |
|
0.50 |
|
0.60 |
0.51 |
|
ROAE (%) |
|
7.56 |
|
7.45 |
8.03 |
|
Number of Transactions |
|
6 |
|
12 |
|
Transaction Valuation Highlights |
|||||||
|
|
|
|
|
|
|
|
|
|
|
Regional Transactions |
|
National Transactions |
Victory & QNB* |
|
|
Deal Value ($M) |
|
48.6 |
|
51.5 |
40.9 |
|
|
Deal Value/Common Equity (%) |
|
129 |
|
131 |
132 |
|
|
Deal Value/TCE (%) |
|
129 |
|
131 |
132 |
|
|
Deal Value/LTM EPS (x) |
|
17.7 |
|
18.3 |
17.2 |
|
|
Price/Net Income (x) |
|
17.8 |
|
18.3 |
17.2 |
|
|
Deal Value/Deposits (%) |
|
10.9 |
|
11.5 |
9.6 |
|
|
Fran. Prem/Core Deps (%) |
|
3.1 |
|
3.0 |
2.9 |
|
|
Deal Premium 1 Day Before (%) |
|
35.7 |
|
34.8 |
61.2 |
|
|
|
|
|
|
|
|
|
|
*Assumes merger consideration is valued at $19.58 for Victory based on an exchange ratio of 0.5500 and QNB closing price of $36.50 as of September 22, 2025. |
||||||
Kafafian reviewed the aggregate implied value of the merger consideration, which totaled approximately $40.9 million, and compared it to values derived from selected median transaction metrics. Based on median price-to-book and price-to-tangible-book multiples of approximately 129% and 131%, respectively, for the Regional and National Transaction peer groups, the implied values were approximately $40.1 million for each group. Using median price-to-last-twelve-months earnings multiples of 17.8x and 18.3x for the same peer groups, the implied values were approximately $42.1 million and $43.6 million, respectively. Kafafian noted that the
62
pricing in this transaction appeared to be more closely aligned with book value multiples than earnings-based metrics. Nonetheless, the results of both approaches were relatively close, with the implied median price-to-book values being slightly lower and the implied median price-to-earnings values being slightly higher than the merger consideration.
In evaluating the various financial condition, financial performance, trading multiples and acquisition multiples for the merger and the merger consideration, it is important to note that no company or transaction in the preceding analyses is identical to Victory, QNB, or the merger. Accordingly, an analysis of the results of the foregoing is not mathematically precise; rather, it involves complex considerations and judgments concerning differences in financial and operating characteristics of the companies and other factors that could affect the public trading value of the companies to which they are being compared. The range of value resulting from the foregoing analyses should not be taken to represent Kafafian’s view of the actual value of Victory, QNB or the combined company.
Discounted dividend method – Kafafian applied a capitalized tangible book approach to estimate the value range of Victory common stock under various change-of-control scenarios. This method was considered appropriate given that Victory has historically traded on a book value basis rather than an earnings basis. The model projects net income, applies a terminal tangible book multiple to the final period’s equity, and discounts both the projected income stream and terminal value to determine the present value of one share of Victory common stock.
In preparing a range of value for Victory, Kafafian made the following assumptions:
|
Discount Rate |
||
Scenarios |
10% |
12% |
14% |
|
|
|
|
Terminal Price-to-Tangible Book Value of 75% |
|||
Value (in millions) |
$30.9 |
$28.2 |
$25.8 |
Value per share |
$14.94 |
$13.68 |
$12.56 |
Price-to-Earnings |
11.2X |
10.2X |
9.4X |
Price-to-Tangible Book |
96% |
88% |
80% |
|
|
|
|
|
|
|
|
Terminal Price-to-Tangible Book Value of 125% |
|||
Value (in millions) |
$45.3 |
$41.1 |
$37.4 |
Value per share |
$21.66 |
$19.70 |
$17.97 |
Price-to-Earnings |
16.4X |
14.9X |
13.6X |
Price-to-Tangible Book |
141% |
128% |
116% |
Kafafian observed that the merger consideration of $19.58 per share as of September 22, 2025 exceeded the high end of the valuation range based on 75% of tangible book terminal value, which was $14.94 per share. On a sale basis, using 125% of tangible book value, the consideration fell within the estimated range of $17.97 to $21.66 per share.
Although the capitalized tangible book method is a recognized valuation approach, it relies on numerous assumptions—including balance sheet and earnings growth rates, discount rates, and market trading multiples—that may ultimately differ materially
63
from actual results or market conditions. Accordingly, the range of value developed by Kafafian does not purport to represent the actual or expected trading value of Victory common stock.
Miscellaneous - Pursuant to the terms of the Kafafian engagement letter, Kafafian has received a fee of $40,000 for work completed prior to the execution of the merger agreement, has received a fee of $60,000 upon rendering this fairness opinion to the Victory board of directors and Victory has agreed to pay Kafafian a success fee equal to 1.00% of the aggregate closing transaction value that is contingent upon the successful completion of the merger. Victory has also agreed to indemnify Kafafian against certain claims and liabilities arising out of Kafafian’s engagement and to reimburse Kafafian for out-of-pocket expenses incurred in connection with Kafafian’s engagement. Kafafian’s fee for rendering this fairness opinion was not contingent upon any conclusion that Kafafian may reach or upon completion of the merger.
QNB’s Reasons for the Merger; Recommendation of the QNB Board of Directors
After careful consideration, the QNB board of directors determined that the merger agreement and the transactions contemplated thereby, including the merger and the issuance of shares of QNB common stock as merger consideration, are in the best interests of QNB and its shareholders. Accordingly, the QNB board of directors unanimously approved the merger agreement and the transactions contemplated thereby.
In evaluating the merger agreement and the transactions contemplated thereby, including the merger and the issuance of shares of QNB common stock as merger consideration, the QNB board of directors consulted with QNB’s management and legal and financial advisors and, in reaching its decision to approve the merger agreement and the transactions contemplated thereby, the QNB board of directors considered a number of factors, including the following material factors:
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The QNB board of directors also considered the potential risks related to the merger but concluded that the anticipated benefits of the merger were likely to outweigh these risks. These potential risks include:
The foregoing discussion of the factors considered by the QNB board of directors is not intended to be exhaustive, but, rather, includes the material factors primarily considered by the QNB board of directors. In reaching its decision to approve the
65
merger agreement and the transactions contemplated thereby, including the merger and the issuance of shares of QNB common stock as merger consideration, the QNB board of directors did not quantify or assign any relative weights to the factors considered, and individual directors may have given different weights to different factors. The QNB board of directors considered all of these factors as a whole and overall considered the factors to be favorable to, and to support, its determination. It should be noted that this explanation of the QNB board of directors’ reasoning and all other information presented in this section is forward-looking in nature and, therefore, should be read in light of the factors discussed under the heading “Special Cautionary Note Regarding Forward-Looking Statements” beginning on page 21.
THE QNB BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT QNB SHAREHOLDERS VOTE “FOR” THE QNB MERGER PROPOSAL AT THE QNB SPECIAL MEETING.
Opinion of QNB’s Financial Advisor
QNB retained Performance Trust to act as financial advisor to the QNB board of directors in connection with QNB’s consideration of a possible business combination with Victory under which QNB would acquire Victory with Victory merged with and into QNB (the “Transaction” or the “Merger”). QNB selected Performance Trust to act as its financial advisor because Performance Trust is a nationally recognized investment banking firm which specializes in community financial institutions. In the ordinary course of its investment banking business, Performance Trust is regularly engaged in the valuation of financial institutions and their securities in connection with mergers and acquisitions and other corporate transactions.
Performance Trust acted as financial advisor to the QNB board of directors in connection with the proposed merger and participated in certain of the negotiations leading to the execution of the merger agreement. At the September 23, 2025 meeting at which the QNB board of directors considered the Transaction and the merger agreement, Performance Trust delivered to the board of directors its oral opinion, which was subsequently confirmed in writing on September 23, 2025, to the effect that, as of such date, the consideration to be paid by QNB in the Transaction pursuant to the merger agreement was fair, from a financial point of view, to QNB. The full text of Performance Trust’s opinion is attached as Annex C to this proxy statement/prospectus. The opinion outlines the procedures followed, assumptions made, matters considered and qualifications and limitations on the review undertaken by Performance Trust in rendering its opinion. The description of the opinion set forth below is qualified in its entirety by reference to the full text of the opinion. Holders of QNB common stock are urged to read the entire opinion carefully in connection with their consideration of the proposed merger.
Performance Trust’s opinion was directed to the QNB board of directors in connection with its consideration of the Transaction and does not constitute a recommendation to any QNB shareholder as to how any such shareholder should vote at any meeting of shareholders called to consider and vote upon the approval of the Transaction and the merger agreement. Performance Trust’s opinion was directed only to the fairness, from a financial point of view, of the consideration to be paid by QNB pursuant to the merger agreement, to QNB and did not address the underlying business decision of QNB to engage in the Merger, the form or structure of the Merger or any other transactions contemplated in the merger agreement, the relative merits of the Merger as compared to any other alternative transactions or business strategies that might exist for QNB or the effect of any other transaction in which QNB might engage. Performance Trust also did not express any opinion as to the fairness of the amount or nature of the compensation to be received in the Merger by any officer, director or employee of QNB or Victory, or any class of such persons, if applicable. Performance Trust’s opinion was approved by Performance Trust’s fairness opinion committee.
This analysis includes:
In undertaking this analysis, Performance Trust has:
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In performing its review, Performance Trust relied upon the accuracy and completeness of all financial and other information that was available to and reviewed by Performance Trust from public sources, that was provided to Performance Trust by QNB, Victory or their representatives, or that was otherwise reviewed by Performance Trust, and Performance Trust assumed such accuracy and completeness for purposes of rendering its opinion without any independent verification or investigation. Performance Trust relied on the assurances of the management of QNB that they were not aware of any facts or circumstances that would have made any of such information inaccurate or misleading. Performance Trust was not asked to and did not undertake an independent verification of any of such information and Performance Trust did not assume any responsibility or liability for the accuracy or completeness thereof. Performance Trust did not make an independent evaluation or perform an appraisal of the specific assets, the collateral securing assets or the liabilities (contingent or otherwise) of QNB or Victory, nor was Performance Trust furnished with any such evaluations or appraisals with the exception of a third-party fair value analysis of the loan portfolio of Victory prepared by consultants retained by Victory. Performance Trust rendered no opinion or evaluation on the collectability of any assets or the future performance of any loans of QNB or Victory. Performance Trust did not make an independent evaluation of the adequacy of the allowance for credit losses of QNB or Victory, or of the combined entity after the Merger, and Performance Trust did not review any individual credit files relating to QNB or Victory. Performance Trust assumed, with QNB’s consent, that the respective allowances for credit losses for both QNB and Victory were adequate to cover such losses and would be adequate on a pro forma basis for the combined entity after taking into account estimated purchase accounting adjustments.
In preparing its analyses, Performance Trust used certain financial projections and transaction expense estimates for QNB and Victory, as provided by the management of QNB and Victory. With respect to the foregoing information, the management of QNB confirmed to Performance Trust that such information reflected the best currently available estimates and judgments of management, and Performance Trust assumed that the future financial performance reflected in such information would be achieved. Performance Trust expressed no opinion as to such information, or the assumptions on which such information was based. Performance Trust also assumed that there had been no material change in the respective assets, financial condition, results of operations, business or prospects of QNB or Victory since the date of the most recent financial statements made available to Performance Trust. Performance Trust assumed in all respects material to its analyses that QNB and Victory would remain as going concerns for all periods relevant to its analyses.
Performance Trust also assumed, with QNB’s consent, that (i) each of the parties to the merger agreement would comply in all material respects with all material terms and conditions of the merger agreement and all related agreements, that all of the representations and warranties contained in such agreements were true and correct in all material respects, that each of the parties to such agreements would perform in all material respects all of the covenants and other obligations required to be performed by such party under such agreements and that the conditions precedent in such agreements were not and would not be waived, (ii) in the course of obtaining the necessary regulatory or third party approvals, consents and releases with respect to the merger, no delay, limitation, restriction or condition would be imposed that would have an adverse effect on QNB, Victory, the merger or any related transactions,
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and (iii) the merger and any related transactions would be consummated in accordance with the terms of the merger agreement without any waiver, modification or amendment of any material term, condition or agreement thereof and in compliance with all applicable laws and other requirements. Finally, with QNB’s consent, Performance Trust relied upon the advice that QNB received from its legal, accounting and tax advisors as to all legal, accounting and tax matters relating to the merger and the other transactions contemplated by the merger agreement. Performance Trust expressed no opinion as to any such matters.
Performance Trust’s opinion was necessarily based on financial, economic, regulatory, market and other conditions as in effect on, and the information made available to Performance Trust as of, the date thereof. Events occurring after the date thereof could materially affect Performance Trust’s opinion. Performance Trust has not undertaken to update, revise, reaffirm or withdraw its opinion or otherwise comment upon events occurring after the date thereof.
In rendering its opinion, Performance Trust performed a variety of financial analyses. The summary below is not a complete description of all the analyses underlying Performance Trust’s opinion or the presentation made by Performance Trust to the QNB board of directors, but is a summary of the material analyses performed and presented by Performance Trust. The summary includes information presented in tabular format. In order to fully understand the financial analyses, these tables must be read together with the accompanying text. The tables alone do not constitute a complete description of the financial analyses. The preparation of a fairness opinion is a complex process involving subjective judgments as to the most appropriate and relevant methods of financial analysis and the application of those methods to the particular circumstances. The process, therefore, is not necessarily susceptible to a partial analysis or summary description. Performance Trust believes that its analyses must be considered as a whole and that selecting portions of the factors and analyses to be considered without considering all factors and analyses, or attempting to ascribe relative weights to some or all such factors and analyses, could create an incomplete view of the evaluation process underlying its opinion. Also, no company included in Performance Trust’s comparative analyses described below is identical to QNB or Victory and no transaction is identical to the merger. Accordingly, an analysis of comparable companies or transactions involves complex considerations and judgments concerning differences in financial and operating characteristics of the companies and other factors that could affect the public trading values or transaction values, as the case may be, of QNB or Victory and the companies to which they were compared. In arriving at its opinion, Performance Trust did not attribute any particular weight to any analysis or factor that it considered. Rather, Performance Trust made qualitative judgments as to the significance and relevance of each analysis and factor. Performance Trust did not form an opinion as to whether any individual analysis or factor (positive or negative) considered in isolation supported or failed to support its opinion, rather, Performance Trust made its determination as to the fairness of the consideration to be paid pursuant to the merger agreement, from a financial point of view, to QNB on the basis of its experience and professional judgment after considering the results of all its analyses taken as a whole.
In performing its analyses, Performance Trust also made numerous assumptions with respect to industry performance, business and economic conditions and various other matters, many of which cannot be predicted and are beyond the control of QNB, Victory, and Performance Trust. The analyses performed by Performance Trust are not necessarily indicative of actual values or future results, both of which may be significantly more or less favorable than suggested by such analyses. Performance Trust prepared its analyses solely for purposes of rendering its opinion and provided such analyses to the QNB board of directors at its September 23, 2025 meeting. Estimates on the values of companies do not purport to be appraisals or necessarily reflect the prices at which companies or their securities may actually be sold. Such estimates are inherently subject to uncertainty and actual values may be materially different. Accordingly, Performance Trust’s analyses do not necessarily reflect the value of QNB or Victory common stock or the price at which QNB or Victory common stock may be sold at any time. The analyses of Performance Trust and its opinion were among a number of factors taken into consideration by the QNB board of directors in making its determination to approve the merger agreement and the analyses described below should not be viewed as determinative of the decision of the QNB board of directors with respect to the fairness of the consideration to be paid pursuant to the merger agreement.
Summary of Proposed Merger Consideration and Implied Transaction Metrics
Performance Trust reviewed the financial terms of the proposed transaction. As set forth in the merger agreement, at the effective time of the acquisition, Victory will merge with and into QNB, with QNB continuing as the surviving corporation. As a result of the merger, each share of Victory will be converted into the right to receive 0.5500 shares of QNB stock per share of Victory. Performance Trust’s fairness opinion was rendered to the QNB board on September 23, 2025 and was based on financial information using closing stock prices as of September 19, 2025. Based on QNB’s closing stock price of $35.60 as of September 19, 2025, the merger consideration would equate to $19.58 per Victory share. Based on 1,996,588 Victory shares outstanding and 153,000 Victory options outstanding with a weighted average strike price of $7.30, the aggregate merger consideration would equate to approximately $41.0 million.
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Based upon financial information for Victory as of or for the last-twelve-months (“LTM”) ended June 30, 2025 Performance Trust calculated the following implied transaction metrics:
Premium to Market, 1-Day |
61.2% |
Merger Consideration / Tangible Book Value Per Share |
126.2% |
Merger Consideration / LTM Earnings Per Share |
16.4x |
Tangible Book Premium / Core Deposits1 |
2.3% |
1 Core deposits defined as total deposits excluding time deposits with balances greater than $100,000
Victory Three-Year Stock Performance
Performance Trust reviewed the historical performance of Victory common stock from September 19, 2022 to September 19, 2025. Performance Trust then compared the relationship between the stock price performance of Victory common stock to movements in the Victory Comparable Companies peer group (defined in the following section), as well as certain stock indices.
Stock Price Performance from 09/19/2022 to 09/19/2025 |
|
Victory |
(19.0)% |
Victory Comparable Company Median |
(3.6)% |
S&P 500 Index |
70.9% |
NASDAQ Bank Index |
6.7% |
Victory Comparable Company Analyses
Performance Trust used publicly available information to compare selected financial information for Victory with a regional group of financial institutions selected by Performance Trust. This Victory regional peer group included: Publicly traded banks and thrifts headquartered in the Mid-Atlantic (DE, DC, MD, NJ, NY, PA) and Northeast (CT, ME, MA, NH, RI, VT) with total assets between $250 million and $1.0 billion, LTM return on average assets (“ROAA”) for the period ended June 30, 2025, between 0.00% and 1.25%, and tangible common equity / tangible assets (“TCE / TA”) between 0.00% and 12.00%; excludes companies subject to an announced merger and mutual holding companies (“MHCs”). The Victory Regional Peer Group consisted of the following companies – Company Name (State):
Ledyard Financial Group, Inc. (NH) |
Magyar Bancorp, Inc. (NJ) |
JBT Bancorp, Inc. (PA) |
Ballston Spa Bancorp, Inc. (NY) |
Harleysville Financial Corporation (PA) |
1st Colonial Bancorp, Inc. (NJ) |
Juniata Valley Financial Corp. (PA) |
Farmers and Merchants Bancshares, Inc. (MD) |
Harford Bank (MD) |
National Capital Bancorp, Inc. (DC) |
First Resource Bancorp, Inc. (PA) |
First Community Financial Corporation (PA) |
Quaint Oak Bancorp, Inc. (PA) |
ES Bancshares, Inc. (NY) |
Steele Bancorp Inc. (PA) |
Woodlands Financial Services Company (PA) |
NBC Bancorp, Inc. (NY) |
Elmer Bancorp, Inc. (NJ) |
Fleetwood Bank Corporation (PA) |
Delhi Bank Corp. (NY) |
Commercial National Financial Corporation (PA) |
Glen Burnie Bancorp (MD) |
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The analysis compared financial information for Victory with corresponding publicly available financial information for the Victory Regional Peer Group as of or for the LTM ended June 30, 2025, with pricing data as of September 19, 2025. The tables below set forth the data for Victory and the 25th percentile, median, and 75th percentile data for the Victory Regional Peer Group.
Victory Regional Selected Public Companies Analysis
|
|
Victory Peer Group |
||
|
|
25th |
|
75th |
|
Victory |
Percentile |
Median |
Percentile |
Total assets (in millions) |
$ 477 |
$ 493 |
$ 686 |
$ 883 |
Tangible common equity / Tangible assets |
6.50% |
6.35% |
7.73% |
9.26% |
LTM Return on average assets |
0.51% |
0.45% |
0.65% |
0.97% |
LTM Return on average equity |
8.03% |
5.51% |
8.47% |
10.96% |
LTM Net interest margin |
3.09% |
2.62% |
2.98% |
3.42% |
LTM Efficiency ratio |
80.0% |
85.8% |
74.9% |
62.8% |
Nonperforming assets / Total assets1 |
0.00% |
0.66% |
0.31% |
0.08% |
Market Capitalization (in millions) |
$ 24.2 |
$ 29.5 |
$ 51.7 |
$ 72.0 |
90-day Average Daily Volume |
877 |
235 |
888 |
1,358 |
Price / Tangible book value |
77.6% |
74.5% |
87.6% |
99.5% |
Price / LTM EPS2 |
10.3x |
8.6x |
10.1x |
12.5x |
1 Nonperforming assets defined as nonperforming loans, other real estate owned, and other nonaccrual assets
2 Price / LTM EPS greater than 35.0x considered not meaningful (“NM”)
Victory Analysis of Precedent Transactions
Performance Trust reviewed a regional group of recent bank and thrift merger and acquisition transactions. The regional group consisted of transactions with disclosed financial terms which were announced between July 1, 2022 and September 19, 2025 involving Mid-Atlantic (DE, DC, MD, NJ, NY, PA) and Northeast (CT, ME, MA, NH, RI, VT) headquartered bank and thrift targets with total assets between $250 million and $1.0 billion, LTM ROAA between 0.00% and 1.25%, and TCE / TA between 0.00% and 12.00%; excludes credit union buyers, mergers of equals, and less than 100% equity ownership acquired (the “Regional Selected Transactions”). The Regional Selected Transactions group was composed of the following transactions:
Acquirer |
Target |
Norwood Financial Corp. (PA) |
PB Bankshares, Inc. (PA) |
Citizens & Northern Corporation (PA) |
Susquehanna Community Financial, Inc. (PA) |
ACNB Corporation (PA) |
Traditions Bancorp, Inc. (PA) |
Princeton Bancorp, Inc. (NJ) |
Cornerstone Financial Corporation (NJ) |
NexTier Incorporated (PA) |
Mars Bancorp, Inc. (PA) |
Mid Penn Bancorp, Inc. (PA) |
Brunswick Bancorp (NJ) |
Summit Financial Group, Inc. (WV) |
PSB Holding Corp. (MD) |
Citizens Financial Services, Inc. (PA) |
HV Bancorp, Inc. (PA) |
SR Bancorp, Inc. (NJ) |
Regal Bancorp, Inc. (NJ) |
Using the latest publicly available information prior to the announcement of the relevant transaction and as of or for the LTM ended June 30, 2025 for Victory, Performance Trust reviewed the following transaction metrics: transaction price to tangible book value per share, transaction price to last-twelve-months earnings per share, tangible book value premium to core deposits, and 1-Day Market Premium. Performance Trust compared the indicated transaction metrics for the merger to the 25th percentile, median and 75th percentile metrics of both transaction groups.
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Regional Selected Transactions Analysis
|
|
Regional Precedent Transactions Group |
||
|
Victory / |
25th |
|
75th |
|
QNB |
Percentile |
Median |
Percentile |
Total assets (in millions) |
$ 477 |
$ 424 |
$ 521 |
$ 591 |
Tangible common equity / Tangible assets |
6.50% |
6.02% |
7.75% |
10.95% |
LTM Return on average assets |
0.51% |
0.34% |
0.49% |
0.71% |
LTM Return on average equity |
8.03% |
5.16% |
6.55% |
8.79% |
Nonperforming assets / Total assets1 |
0.00% |
0.50% |
0.26% |
0.12% |
Price / Tangible book value |
126.2% |
113.5% |
128.5% |
139.8% |
Price / LTM EPS2 |
16.4x |
13.9x |
19.6x |
22.3x |
Tangible Book Value Premium to Core Deposits |
2.3% |
2.2% |
3.1% |
5.5% |
1-Day Market Premium |
61.2% |
13.0% |
34.6% |
50.6% |
1 Nonperforming assets defined as nonperforming loans, other real estate owned, and other nonaccrual assets
2 Price / LTM EPS greater than 35.0x considered not meaningful (“NM”)
Victory Dividend Discount Analyses
Performance Trust performed a standalone analysis that estimated the net present value of Victory’s excess tangible common equity over a threshold of 7.50% TCE / TA assuming Victory performed in accordance with net income estimates of $2.7 million in 2025, $2.9 million in 2026, $3.3 million in 2027, $3.6 million in 2028, $3.9 million in 2029, and total assets to increase to $595 million by December 31, 2029, projections as provided by Victory management and approved by QNB management. To approximate the terminal value of a share of Victory common stock at December 31, 2029, Performance Trust applied multiples of 2029 tangible book value ranging from 80% to 100% and price to 2029 earnings multiples ranging from 9.0x to 11.0x. The terminal values were then discounted to present values using different discount rates ranging from 13.81% to 15.81%, which were chosen to reflect different assumptions regarding required rates of return of holders or prospective buyers of Victory common stock. As illustrated in the following tables, the analysis indicated a range of per share value of Victory common stock of $9.06 to $12.41 when applying multiples of tangible book value and $8.80 to $11.79 when applying multiples of earnings.
Victory Standalone Dividend Discount Analysis - Terminal TBV Multiple ($/share)
|
|
||
|
Discount Rate |
||
Tangible Book Value Multiple |
13.81% |
14.81% |
15.81% |
80.0% |
9.91 |
9.47 |
9.06 |
90.0% |
11.16 |
10.67 |
10.21 |
100.0% |
12.41 |
11.87 |
11.36 |
Victory Standalone Dividend Discount Analysis - Terminal P/E Value ($/share)
|
Discount Rate |
||
Earnings Per Share Multiple |
13.81% |
14.81% |
15.81% |
9.0x |
9.64 |
9.21 |
8.80 |
10.0x |
10.72 |
10.25 |
9.80 |
11.0x |
11.79 |
11.28 |
10.80 |
Performance Trust performed a pro forma analysis that estimated the net present value of Victory’s excess tangible common equity over a threshold of 7.50% TCE / TA assuming the same earnings and assets projections shown on the standalone analysis. Assumptions for the transaction include cost savings equal to 30% of Victory’s standalone non-interest expense (80% phased-in 2026; 100% phased-in starting in 2027) and transaction costs of $4.9 million after-tax with fair value marks and PCD credit mark impact to equity of $4.7 million after-tax. To approximate the terminal value of a share of Victory common stock at December 31, 2029, Performance Trust applied multiples of 2029 tangible book value ranging from 105% to 125% and price to 2029 earnings multiples ranging from 10.0x to 12.0x. The pro forma terminal multiples were selected to approximate the medians for the QNB comparable
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companies identified below. The terminal values were then discounted to present values using different discount rates ranging from 13.81% to 15.81%, which were chosen to reflect different assumptions regarding required rates of return of holders or prospective buyers of Victory common stock. As illustrated in the following tables, the analysis indicated a range of per share value of Victory common stock of $12.32 to $16.17 when applying multiples of tangible book value and $20.41 to $26.80 when applying multiples of earnings.
Victory Pro Forma Dividend Discount Analysis (with synergies) - Terminal TBV Value ($/share)
|
Discount Rate |
||
Tangible Book Value Multiple |
13.81% |
14.81% |
15.81% |
105.0% |
13.68 |
12.98 |
12.32 |
115.0% |
14.93 |
14.18 |
13.48 |
125.0% |
16.17 |
15.38 |
14.63 |
Victory Pro Forma Dividend Discount Analysis (with synergies) - Terminal P/E Value ($/share)
|
Discount Rate |
||
Earnings Per Share Multiple |
13.81% |
14.81% |
15.81% |
10.0x |
22.43 |
21.40 |
20.41 |
11.0x |
24.62 |
23.50 |
22.44 |
12.0x |
26.80 |
25.60 |
24.46 |
QNB Three-Year Stock Performance
Performance Trust reviewed the historical performance of QNB common stock from September 19, 2022 to September 19, 2025. Performance Trust then compared the relationship between the stock price performance of QNB common stock to movements in the QNB Comparable Companies peer group (defined in the following section), as well as certain stock indices.
Stock Price Performance from 09/19/2022 to 09/19/2025 |
|
QNB |
26.2% |
QNB Comparable Company Median |
6.3% |
S&P 500 Index |
70.9% |
NASDAQ Bank Index |
6.7% |
QNB Comparable Company Analyses
Performance Trust used publicly available information to compare selected financial information for QNB with a regional group of financial institutions selected by Performance Trust. This QNB regional peer group included: Publicly traded bank and thrifts headquartered in the Mid-Atlantic (DE, DC, MD, NJ, NY, PA) and Northeast (CT, ME, MA, NH, RI, VT) with total assets between $1.25 billion and $3.0 billion, LTM ROAA for the period ended June 30, 2025, between 0.00% and 1.50%, and TCE / TA between 0.00% and 10.00%; excludes companies subject to an announced merger and mutual holding companies (“MHCs”). The QNB Regional Peer Group consisted of the following companies – Company Name (State):
Citizens Financial Services, Inc. (PA) |
LINKBANCORP, Inc. (PA) |
Chemung Financial Corporation (NY) |
Western New England Bancorp, Inc. (MA) |
Fidelity D & D Bancorp, Inc. (PA) |
Citizens & Northern Corporation (PA) |
Orange County Bancorp, Inc. (NY) |
Meridian Corporation (PA) |
Somerset Trust Holding Company (PA) |
Norwood Financial Corp. (PA) |
Hanover Bancorp, Inc. (NY) |
Franklin Financial Services Corporation (PA) |
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ENB Financial Corp (PA) |
Lyons Bancorp Inc. (NY) |
First United Corporation (MD) |
Kish Bancorp, Inc. (PA) |
Embassy Bancorp, Inc. (PA) |
Muncy Columbia Financial Corporation (PA) |
CB Financial Services, Inc. (PA) |
Pathfinder Bancorp, Inc. (NY) |
Union Bankshares, Inc. (VT) |
AmeriServ Financial, Inc. (PA) |
1ST SUMMIT BANCORP of Johnstown, Inc. (PA) |
First Keystone Corporation (PA) |
The analysis compared financial information for QNB (as of or for the LTM ended June 30, 2025) with corresponding publicly available financial information for the QNB Peer Group, with pricing data as of September 19, 2025. The tables below set forth the data for QNB and the 25th percentile, median, and 75th percentile data for the QNB National Selected Public Companies.
QNB National Selected Public Companies Analysis
|
|
QNB Peer Group |
||
|
|
25th |
|
75th |
|
QNB |
Percentile |
Median |
Percentile |
Total assets (in millions) |
$ 1,885 |
$ 1,543 |
$ 2,256 |
$ 2,610 |
Tangible common equity / Tangible assets |
6.01% |
6.50% |
7.51% |
8.39% |
LTM Return on average assets |
0.69% |
0.47% |
0.76% |
1.04% |
LTM Return on average equity |
10.68% |
5.66% |
10.25% |
13.22% |
LTM Net interest margin |
2.51% |
2.67% |
3.11% |
3.37% |
LTM Efficiency ratio |
68.8% |
70.3% |
66.7% |
62.8% |
Nonperforming assets / Total assets1 |
0.47% |
0.90% |
0.48% |
0.25% |
Market Capitalization (in millions) |
$ 132.5 |
$ 114.5 |
$ 172.8 |
$ 254.3 |
90-day Average Daily Volume |
766 |
1,567 |
14,788 |
36,208 |
Price / Tangible book value |
116.9% |
97.2% |
118.2% |
132.9% |
Price / LTM EPS2 |
10.3x |
8.7x |
10.7x |
13.8x |
Price / 2026E EPS2 |
11.7x |
7.6x |
8.6x |
9.8x |
1 Nonperforming assets defined as nonperforming loans, other real estate owned, and other nonaccrual assets
2 Price / LTM EPS greater than 35.0x considered not meaningful (“NM”)
QNB Dividend Discount Analyses
Performance Trust performed a standalone analysis that estimated the net present value of QNB’s excess tangible common equity over a threshold of 7.50% TCE / TA assuming QNB performed in accordance with net income estimates of $11.0 million in 2025, $11.3 million in 2026, $12.5 million in 2027, $13.9 million in 2028, $15.4 million in 2029, and total assets to increase to $2.1 billion by December 31, 2029, projections as provided and approved by the management of QNB. To approximate the terminal value of a share of QNB common stock at December 31, 2029, Performance Trust applied multiples of 2029 tangible book value ranging from 110% to 130% and price to 2029 earnings multiples ranging from 10.0x to 12.0x. The terminal values were then discounted to present values using different discount rates ranging from 13.81% to 15.81%, which were chosen to reflect different assumptions regarding required rates of return of holders or prospective buyers of QNB common stock. As illustrated in the following tables, the analysis indicated a range of per share value of QNB common stock of $24.36 to $31.35 when applying multiples of tangible book value and $21.69 to $28.36 when applying multiples of earnings.
QNB Standalone Dividend Discount Analysis - Terminal TBV Multiple ($/share)
|
Discount Rate |
73
Tangible Book Value Multiple |
13.81% |
14.81% |
15.81% |
110.0% |
26.67 |
25.49 |
24.36 |
120.0% |
29.01 |
27.74 |
26.52 |
130.0% |
31.35 |
29.99 |
28.69 |
QNB Standalone Dividend Discount Analysis - Terminal P/E Value ($/share)
|
Discount Rate |
||
Earnings Per Share Multiple |
13.81% |
14.81% |
15.81% |
10.0x |
23.79 |
22.72 |
21.69 |
11.0x |
26.07 |
24.91 |
23.81 |
12.0x |
28.36 |
27.11 |
25.92 |
Performance Trust’s Relationship
Performance Trust is acting as QNB’s financial advisor in connection with the acquisition and will receive a fee for such services in an amount equal to $800,000, a significant portion of which is contingent upon the closing of the Transaction. Performance Trust received a $150,000 fee from QNB upon rendering its opinion which will be credited in full towards the advisory fee that will become payable to Performance Trust upon closing of the merger. QNB has also agreed to indemnify Performance Trust against certain claims and liabilities arising out of Performance Trust’s engagement and to reimburse Performance Trust for certain of its out-of-pocket expenses incurred in connection with Performance Trust’s engagement.
Performance Trust had been engaged on financial advisory and investment banking assignments for both QNB and Victory and their respective affiliates including having served as placement agent for the QNB and the Victory in connection with their respective issuances of subordinated debt in 2024. In the ordinary course of Performance Trust’s business as a broker-dealer, Performance Trust may purchase securities from and sell securities to QNB and Victory.
Each QNB shareholder is encouraged to read Performance Trust’s fairness opinion in its entirety. The full text of this fairness opinion is included as Annex C to this joint proxy statement/prospectus.
Board Composition and Management of QNB after the Merger
Following the effective time, the executive officers of QNB will remain the same. Additionally, following the effective time, the current members of the board of directors of QNB shall be the members of the board of directors of QNB immediately prior to the effective time, provided, however, that QNB has agreed to:
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Information regarding the executive officers and directors of QNB is contained in documents filed by QNB with the SEC and incorporated by reference into this joint proxy statement/prospectus, including QNB’s Annual Report on Form 10‑K for the year ended December 31, 2024 and its definitive proxy statement on Schedule 14A for its 2025 annual meeting, filed with the SEC on April 8, 2025. See “Where You Can Find More Information” and “Additional Information.”
Interests of Victory’s Directors and Executive Officers in the Merger
In the merger, the directors and executive officers of Victory will receive the same merger consideration for their shares of Victory common stock as other Victory shareholders. In considering the recommendation of the Victory board of directors with respect to the merger agreement, Victory shareholders should be aware that certain of Victory’s directors and executive officers may have interests in the merger that are different from, or in addition to, the interests of Victory shareholders generally. Interests of directors and executive officers that may be different from or in addition to the interests of Victory shareholders include the following. The Victory board of directors was aware of these interests and considered them, among other matters, in approving the merger agreement.
Vesting of restricted stock awarded to executive officers and directors of Victory, if any, will accelerate as a result of the merger. Pursuant to the terms of the merger agreement, immediately prior to the effective time of the merger, all outstanding shares of unvested Victory restricted stock, if any, will become fully vested and will be converted into the right to receive, less applicable taxes, the merger consideration. Additionally, pursuant to the terms of the merger agreement, each unvested option to purchase shares of Victory common stock, held by certain officers and directors of Victory will fully vest and all vested options will be converted into and become an option to purchase QNB common stock, and QNB shall assume such option in accordance with the terms of Victory stock plans and the terms of the award agreement by which such option is evidenced. All rights with respect to shares of the Victory common stock under such options assumed by QNB shall thereupon be converted into rights with respect to QNB common stock with appropriate adjustments made to the number of shares and exercise price applicable to such options based on the exchange ratio.
As of September 30, 2025, there were 2,937 shares of unvested Victory restricted stock held by Mr. Major that will become vested as a result of the Merger. No other director or executive officer holds shares of unvested restricted stock.
The following table sets forth, as of September 30, 2025, the aggregate number of options to purchase shares of Victory common stock held by each of Victory’s executive officers and directors plus an approximation of the value that each of them may become entitled to receive in connection with their outstanding equity awards, assuming continued service through the completion of the merger and that the per share cash equivalent at the effective time of the merger is $19.58 (which represents the implied value of one share of Victory common stock to be converted into merger consideration as of September 22, 2025, which is the date immediately prior to the announcement of the merger):
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|
|
|
|
|
|
|
|
|
|
|
|
Name |
Exercise |
|
|
Stock |
|
|
Approximate |
|
|||
Joseph Major |
$ |
7.25 |
|
|
|
39,000 |
|
|
$480,870 |
|
|
Matthew Bates |
$ |
7.25 |
|
|
|
6,000 |
|
|
$73,980 |
|
|
Michael Eddinger |
$ |
7.25 |
|
|
|
6,000 |
|
|
$73,980 |
|
|
Steve Gilmore |
$ |
7.25 |
|
|
|
5,000 |
|
|
$61,650 |
|
|
Kevin Johnson |
$ |
7.25 |
|
|
|
6,000 |
|
|
$73,980 |
|
|
Mary Beth Touey |
$ |
7.25 |
|
|
|
5,000 |
|
|
$61,650 |
|
|
Robert Schultz |
$ |
7.25 |
|
|
|
21,000 |
|
|
$258,930 |
|
|
Alexander Kroll |
$ |
7.25 |
|
|
|
6,000 |
|
|
$73,980 |
|
|
Jon Swearer |
$ |
7.25 |
|
|
|
6,000 |
|
|
$73,980 |
|
|
Jon Swearer |
$ |
9.00 |
|
|
|
4,000 |
|
|
$42,320 |
|
|
Shelly Stockmal |
$ |
7.25 |
|
|
|
6,000 |
|
|
$73,980 |
|
|
Benjamin Major |
$ |
7.25 |
|
|
|
5,000 |
|
|
$61,650 |
|
|
The Victory Bank maintains employment agreements with Joseph Major and Robert Schultz. The employment agreements provide that if within two years after a change in control (as defined therein), the executive is involuntarily terminated or voluntarily leaves for good reason (as defined therein), the executive will be entitled to a payment equal to three times the sum of the executive’s base annual salary plus the highest cash bonus paid to the executive during the three year period prior to the change in control. For purposes of the employment agreements with Messrs. Major and Schultz, the Merger constitutes a change in control under the respective employment agreements.
Simultaneously with the signing of the Merger Agreement, each of Mr. Major and Mr. Schultz entered into settlement agreements with The Victory Bank, which provide for cash payments to be made to the executives immediately prior to the closing of the Merger, provided the executives do not voluntarily terminate their employment with The Victory Bank through the closing of the Merger or are terminated by The Victory Bank for “cause” (as defined in the respective employment agreement) in exchange for the termination of their respective employment agreements with The Victory Bank. The cash payments to be paid under the settlement agreements are $1,467,972 for Mr. Major and $931,290 for Mr. Schultz and are conditioned on the merger becoming effective.
The Victory Bank is a party to a supplemental executive retirement plan with Mr. Major (“SERP”), In accordance with the terms of the SERP, The Victory Bank may terminate the SERP at any time. Subject to the closing of the Merger, the SERP shall terminate prior to the closing of the Merger and Mr. Major will receive a lump sum payment equal $710,339. Mr. Major’s supplemental executive retirement plan will be terminated without any further accruals or increased obligations or further contributions by QNB.
Compensation Arrangements with QNB and QNB Bank
QNB Bank intends to enter into a consulting agreement with Robert H. Schultz, which will become effective upon completion of the Merger. Under the terms of the consulting agreement Mr. Schultz shall receive a monthly retainer of $ for a period of months following the closing of the Merger.
In addition, QNB Bank intends to enter into a twenty-four month non-competition agreement with Joseph Major immediately following the closing of the Merger in exchange for a lump sum payment equal to $ .
It is possible that other employees will enter into new compensation agreements, arrangements or understandings with QNB Bank. As of the date of this joint proxy statement/prospectus, Victory is not aware of any compensation agreements, arrangements or understandings between its executive officers other than Messrs. Major and Schultz and QNB Bank.
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Change in Control Agreements
The Victory Bank is a party to change in control agreements with certain executives, including Alexander Kroll (Chief Lending Officer), Jon Swearer (Chief Credit Officer), Shelly Stockmal (Chief Human Resources Officer) and Benjamin Major (Chief Information Officer), which provide that if, within 24 months after the effective date of a change in control (as defined in the change in control agreements) of Victory or The Victory Bank, the executive’s employment is involuntarily terminated for reasons other than cause (as defined in the change in control agreements) or is voluntarily terminated for good reason (as defined in the change in control agreements), the terminated executive will be entitled to a payment equal to one or two times the executive’s base salary, as applicable. In addition, the executive will continue to receive life and health insurance coverage for 12 months substantially identical to the coverage maintained for the executive prior to termination. If The Victory Bank or its successor cannot provide those benefits, it will make a cash equivalent payment to the executive.
Assuming the Merger is completed and the respective employments of Mr. Kroll, Mr. Swearer, Ms. Stockmal and Mr. Benjamin Major are terminated, the amounts of cash severance and benefits payable under their change in control agreements are estimated to be approximately $491,568, $479,290, $141,075 and $195,896, respectively, less applicable tax withholding and any reductions necessary to avoid penalties under Sections 280G and 4999 of the Code.
Board Seats with QNB
Under the terms and subject to the conditions of the Merger Agreement, QNB agrees to appoint Mr. Major and one other current member of the Victory board of directors to the QNB board of directors. Subject to its standard corporate governance practices and the standard director evaluation, selection and nomination process of QNB’s nominating committee, QNB will also consider, in good faith, adding an additional current member of the Victory board of directors to the QNB board of directors. The remaining directors of QNB will be persons who served as directors of QNB and QNB Bank prior to the completion of the Merger.
Indemnification of Victory Directors and Officers
QNB has agreed to indemnify the directors and officers of Victory and its subsidiaries for a period of six years following the effective time of the merger. QNB has also agreed to maintain in effect a directors’ and officers’ liability insurance policy for a period of six years after the effective time of the merger with respect to claims arising from facts, events or actions which occurred prior to the effective time of the merger and covering persons who are currently covered by such insurance. The insurance policy must contain at least the same coverage and amounts and contain terms and conditions no less advantageous to the directors and officers as currently provided, subject to a cap on the cost of such policy equal to 250% of the last annual premium paid by Victory.
Interests of Victory Directors Combined
In conjunction with the execution of the merger agreement, members of Victory’s board of directors each executed a support agreement pursuant to which they agreed to vote their respective beneficially owned shares in favor of the merger and also executed non‑competition and non‑disclosure agreements as described more fully in this joint proxy statement/prospectus. As of the closing date of the merger, members of Victory’s board of directors and the board of directors of Victory Bank will resign from those boards.
Trading Markets and Dividends
QNB
As of the QNB record date, there were [ ] shares of QNB common stock (including shares subject to vesting restrictions), outstanding, which were held by approximately [____] holders of record.
QNB’s common stock is quoted for trading on the OTC under the symbol “QNBC” and will continue to be quoted under that symbol following the merger. The OTC prices are quotations, which reflect interdealer prices, without retail mark-up, markdown, or commissions and may not represent actual transactions. Under the terms of the merger agreement, QNB will cause the shares of common stock to be issued to Victory’s shareholders in the merger to be approved for quotation on the OTC.
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The following table sets forth the closing sale prices of QNB common stock as reported on the OTC on September 22, 2025, the last full trading day before the public announcement of the merger agreement, and on [___________________], the latest practicable trading date before the date of this joint proxy statement/prospectus.
|
|
QNB Common Stock |
|
|
Implied Value of |
|
||
September 22, 2025 |
|
$ |
35.60 |
|
|
$ |
19.58 |
|
[_________________], |
|
$[____] |
|
|
$[____] |
|
||
Victory
As of the Victory record date, there were 1,998,500 shares of Victory common stock (including shares subject to vesting restrictions), outstanding, which were held by approximately 299 holders of record.
Victory’s common stock is quoted on the OTC under the symbol “VTYB.” The OTC prices are quotations, which reflect interdealer prices, without retail mark-up, markdown, or commissions and may not represent actual transactions.
The following table sets forth the last sale price of Victory common stock as quoted on the OTC on September 22, 2025, the last full trading day before the public announcement of the merger agreement, and on [_____], the latest practicable trading date before the date of this joint proxy statement/prospectus.
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|
Victory Common |
|
|
September 22, 2025 |
|
$ |
12.15 |
|
[_________________], |
|
$[____] |
|
|
Under the merger agreement, Victory is prohibited from paying any dividend or distribution to its stockholders before the effective time of the merger, other than its regular quarterly cash dividend of $0.0650 per share, without the prior written consent of QNB. Victory’s ability to pay dividends is also subject to state and federal laws and regulations.
Restrictions on Resale of QNB Common Stock
The shares of QNB common stock to be issued in connection with the merger will be registered under the Securities Act, and will be freely transferable, except for shares issued to any shareholder who may be deemed to be an “affiliate” of QNB for purposes of Rule 144 under the Securities Act. Persons who may be deemed to be affiliates of QNB include individuals or entities that control, are controlled by, or are under common control with QNB and may include the executive officers, directors and significant shareholders of QNB.
Dissenters’ Rights
The following discussion is not a complete description of the law relating to dissenters’ rights available under Pennsylvania law. This description is qualified in its entirety by the full text of Subchapter D of Chapter 15 of the PBCL which is reprinted in its entirety as Annex D to this joint proxy statement/prospectus. If you desire to exercise your appraisal rights, you should review carefully the PBCL and are urged to consult a legal advisor before electing or attempting to exercise these rights.
General
Victory shareholders have the right under Pennsylvania law to dissent from the merger agreement and obtain the “fair value” of their shares in cash as determined by an appraisal process in accordance with the procedures under Subchapter D of Chapter 15 of the PBCL. QNB shareholders do not have dissenters’ or appraisal rights. Following is a summary of the rights of dissenting
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shareholders. The summary is qualified in its entirety by reference to Annex D, which sets forth the applicable dissenters’ rights provisions of Pennsylvania law. Victory shareholders who are considering exercising dissenters’ rights should read carefully the summary below and the full text of the law set forth in Annex D.
In the discussion of dissenters’ rights, the term “fair value” means the value of a share of Victory common stock immediately before the day of the effective date of the merger, taking into account all relevant factors, but excluding any appreciation or depreciation in anticipation of the merger.
Before the effective date of the merger, Victory shareholders should send any written notice or demand required in order to exercise dissenters’ rights to The Victory Bancorp, Inc., 542 N. Lewis Road, Limerick, Pennsylvania 19468, Attention: Corporate Secretary. After the effective date of the merger, all dissenters should send any correspondence to QNB Corp., 15 North Third Street, P.O. Box 9005, Quakertown, PA 18951‑9005, Attention: Corporate Secretary.
Notice of Intention to Dissent
If you wish to dissent from the merger, you must do the following:
Simply providing a proxy against or voting against the proposed merger will not constitute notice of your intention to dissent. Further, if you submit a proxy, but do not indicate how you wish to vote, your right to dissent will be lost.
Notice to Demand Payment
If the merger is adopted by the required vote of Victory shareholders, Victory will mail a notice to all those dissenting shareholders who gave due notice of their intention to demand payment of the fair value of their shares and who did not vote to adopt the merger agreement. The notice will state where and when dissenting shareholders must deliver a written demand for payment and where such dissenting shareholder must deposit certificates for the shares of Victory common stock for which they dissented in order to obtain payment. The notice will include a form for demanding payment and a copy of the relevant provisions of Pennsylvania law. The time set for receipt of the demand for payment and deposit of stock certificates will be not less than 30 days from the date of mailing of the notice.
Failure to Comply with Required Steps to Dissent
You must take each step in the indicated order and in strict compliance with Pennsylvania law in order to maintain your dissenters’ rights. If you fail to follow these steps, you will lose the right to dissent, and you will receive the same merger consideration as shareholders who do not dissent.
Payment of Fair Value of Shares
Promptly after the effective date of the merger, or upon timely receipt of demand for payment if the closing of the merger has already taken place, QNB will send each dissenting shareholder who has deposited his, her or its stock certificates, the amount that QNB estimates to be the fair value of the Victory common stock held by such dissenting shareholder. The remittance or notice will be accompanied by:
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Estimate by Dissenting Shareholder of Fair Value of Shares
If a dissenting shareholder believes that the amount stated or remitted by QNB is less than the fair value of their Victory common stock, the dissenting shareholder must send its estimate of the fair value (deemed a demand for the deficiency) of such common stock to QNB within 30 days after QNB mails its remittance. If the dissenting shareholder does not file its estimated fair value within 30 days after the mailing by QNB of its remittance, the dissenting shareholder will be entitled to no more than the amount remitted by QNB.
Valuation Proceedings
If any demands for payment remain unsettled within 60 days after the latest to occur of:
then, QNB may file an application in the Court of Common Pleas requesting that the court determine the fair value of the Victory common stock. If this happens, all dissenting shareholders whose demands have not been settled, no matter where they reside, will become parties to the proceeding. In addition, a copy of the application will be delivered to each dissenting shareholder.
If QNB were to fail to file the application, then any dissenting shareholder, on behalf of all dissenting shareholders who have made a demand and who have not settled their claim against QNB, may file an application in the name of QNB at any time within the 30-day period after the expiration of the 60-day period and request that the Court of Common Pleas determine the fair value of the Victory common stock. The fair value determined by the Court of Common Pleas may, but need not, equal the dissenting shareholders’ estimates of fair value. If no dissenter files an application, then each dissenting shareholder entitled to do so shall be paid no more than QNB’s estimate of the fair value of their Victory common stock, and may bring an action to recover any amount not previously remitted, plus interest at a rate the Court of Common Pleas finds fair and equitable.
QNB intends to negotiate in good faith with any dissenting shareholder. If, after negotiation, a claim cannot be settled, then QNB will file an application requesting that the fair value of the Victory common stock be determined by the Court of Common Pleas.
Cost and Expenses
The costs and expenses of any valuation proceedings performed by the Court of Common Pleas, including the reasonable compensation and expenses of any appraiser appointed by such court to recommend a decision on the issue of fair value, will be determined by such court and assessed against QNB, except that any part of the costs and expenses may be apportioned and assessed by such court against any or all of the dissenting shareholders who are parties and whose action in demanding supplemental payment is dilatory, obdurate, arbitrary, vexatious or in bad faith, in the opinion of such court.
Victory shareholders wishing to exercise their dissenters’ rights should consult their own counsel to ensure that they fully and properly comply with applicable requirements.
Income Tax Consequences
The exercise of dissenters’ rights may result in taxable income to you. Neither QNB nor Victory has obtained a tax opinion regarding the tax consequences of a shareholder’s exercise of dissenters’ rights. Accordingly, those who wish to exercise their dissenters’ rights should consult their own tax advisors regarding the tax consequences of such an election.
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Failure by a Victory shareholder to follow the steps required by the PBCL for perfecting dissenters’ rights may result in the loss of such rights. In view of the complexity of these provisions and the requirement that they be strictly complied with, if you hold shares of Victory common stock and are considering dissenting from the approval of the Victory merger proposal and exercising your dissenters’ rights under the PBCL, you should consult your legal advisors.
Regulatory Approvals Required for the Merger
Federal Reserve Board
The merger of Victory with and into QNB is subject to approval by, or a waiver of the applicable approval requirements from the Federal Reserve Board under Section 3 of the Bank Holding Company Act of 1956, or the BHC Act, and its implementing regulations. In considering the approval of a transaction such as the merger, the BHC Act and related laws require the Federal Reserve Board to review, with respect to the parent holding companies and the bank concerned: (1) the competitive impact of the transaction; (2) financial, managerial and other supervisory considerations, including capital positions and managerial resources of the subject entities; (3) the record of the insured depository institution subsidiaries of the bank holding companies under the Community Reinvestment Act and fair lending laws; (4) the extent to which the proposal would result in greater or more concentrated risks to the stability of the U.S. banking or financial system; and (5) additional public benefits of the proposal, such as the benefits to the customers of the subject entities. In connection with its review, the Federal Reserve Board will provide an opportunity for public comment on the application and is authorized to hold a public meeting or other proceeding if it determines that would be appropriate.
Merger transactions between bank holding companies are generally eligible for a waiver from the general requirement of prior approval of the Federal Reserve Board if the transaction is part of the merger or consolidation of the bank with a subsidiary bank of the acquiring bank holding company, and if: (i) the bank merger occurs simultaneously with the merger of the holding companies, and the bank is not operated by the acquiring bank holding company as a separate entity; (ii) the transaction requires the prior approval of a federal supervisory agency under the Bank Merger Act; (iii) the transaction does not involve the acquisition of any nonbank company that would require approval under Section 4 of the BHC Act; (iv) both before and after the transaction, the acquiring bank holding company satisfies the Federal Reserve Board’s capital adequacy guidelines; and (v) at least ten days prior to the transaction, the acquiring bank holding company has provided notice to the Federal Reserve Board regarding the transaction and the proposed application for the waiver. QNB has determined that the merger transaction meets the eligibility requirements for a waiver of the applicable approval requirements from the Federal Reserve Board under Section 3 of the BHC Act. QNB not yet filed a request for waiver from the application requirements of Section 3 of the BHC Act. The companies are not aware of any reason why the Federal Reserve Board would fail to grant the waiver of application requirements, if and when requested.
Federal Deposit Insurance Corporation
The merger of Victory Bank with and into QNB Bank must be approved by the FDIC under the Federal Deposit Insurance Act (12 U.S.C. 1828(c)), commonly known as the Bank Merger Act. An application for approval of the bank merger was filed with the FDIC on December 5, 2025. In evaluating an application filed under the Bank Merger Act, the FDIC generally considers: (1) the competitive impact of the transaction; (2) the financial and managerial resources of the banks party to the bank merger or mergers; (3) the convenience and needs of the community to be served and the record of the banks under the Community Reinvestment Act; (4) the banks’ effectiveness in combating money-laundering activities; and (5) the extent to which the bank merger or mergers would result in greater or more concentrated risks to the stability of the U.S. banking or financial system. In connection with its review, the FDIC will provide an opportunity for public comment on the application for the bank merger and is authorized to hold a public meeting or other proceeding if they determine that would be appropriate. The companies are not aware of any reason why the FDIC would fail to approve the bank merger as contemplated under this joint proxy statement/prospectus.
The U.S. Department of Justice has between 15 and 30 days following approvals by the Federal Reserve and FDIC to challenge the approval on antitrust grounds. While QNB and Victory do not know of any reason that the Department of Justice would challenge regulatory approval or waiver, as applicable, by the Federal Reserve and FDIC and believe that the likelihood of such action is remote, there can be no assurance that the Department of Justice will not initiate such a proceeding, or if such a proceeding is initiated, as to the result of any such challenge.
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Pennsylvania Department of Banking and Securities
The merger of Victory with and into QNB requires the approval of commissioner of the PDBS pursuant to Section 115 of the Pennsylvania Banking Code of 1965. Under Pennsylvania law, the PDBS shall consider the financial and managerial resources and future prospects of Victory and QNB and the combined company and whether the convenience and needs of the community will be served by the merger. The application to the PDBS with respect to the merger is also subject to public comment. An application for approval of the merger was filed with the PDBS on December 5, 2025. The companies are not aware of any reason why the PDBS would fail to approve the merger as contemplated under this joint proxy statement/prospectus.
The merger of Victory Bank with and into QNB Bank requires the approval of the commissioner of the PDBS pursuant to Title 7 P.S. § 1601 et seq of the Pennsylvania Banking Code of 1965. Under Pennsylvania law, the PDBS shall consider the financial history and condition of the parties, the future prospects of the existing and proposed institutions, the character of their management, and whether the convenience and needs of the community will be served. An application for approval of the bank merger was filed with the PDBS on November 24, 2025. The companies are not aware of any reason why the PDBS would fail to approve the bank merger contemplated under this joint proxy statement/prospectus.
Notifications and/or applications requesting approval of the merger, or other transactions contemplated by the merger agreement, may be submitted to various other federal and state regulatory authorities and self-regulatory organizations.
The approval of any notice or application merely implies satisfaction of regulatory criteria for approval and does not include review of the merger from the standpoint of the adequacy of the consideration to be received by, or fairness to, shareholders. Regulatory approval does not constitute an endorsement or recommendation of the proposed merger.
QNB and Victory are not aware of any material governmental approvals or actions that are required prior to the parties’ completion of the merger other than those described in this joint proxy statement/ prospectus. If any additional governmental approvals or actions are required, the parties presently intend to seek those approvals or actions. However, the parties cannot assure you that any of these additional approvals or actions will be obtained.
THE MERGER AGREEMENT
The following is a description of the material terms of the merger agreement. A complete copy of the merger agreement is attached as Annex A to this joint proxy statement/prospectus and is incorporated into this joint proxy statement/prospectus by reference. We encourage you to read the merger agreement carefully, as it is the legal document that governs the merger.
The merger agreement contains representations and warranties of Victory and QNB. The assertions embodied in those representations and warranties are qualified by information contained in confidential disclosure schedules that the parties delivered in connection with the execution of the merger agreement. In addition, certain representations and warranties were made as of a specific date, may be subject to a contractual standard of materiality different from the standard of materiality generally applicable to statements made by a corporation to shareholders or may have been used for purposes of allocating risk between the respective parties rather than establishing matters as facts. Accordingly, you should not rely on the representations and warranties as characterizations of the actual state of facts, or for any other purpose, at the time they were made or otherwise.
The Merger and Subsidiary Bank Merger
Pursuant to the terms and subject to the conditions of the merger agreement, upon filing the statement of merger, Victory will merge with and into QNB, with QNB surviving the merger and continuing as a Pennsylvania corporation and a registered bank holding company. Immediately after the merger or at such later time specified by QNB, QNB will cause Victory Bank to be merged with and into QNB Bank, with QNB Bank surviving the merger and continuing as a Pennsylvania state chartered bank.
Effective Time
QNB and Victory will cause the effective date of the merger to occur as soon as practicable after the last of the conditions set forth in the merger agreement have been satisfied or waived. Unless QNB and Victory otherwise unanimously consent, the effective date of the merger will not be later than September 30, 2026 or after the date or dates on which any regulatory authority approval or extension thereof expires. The merger will become effective at the time at the later of the filing of the statement of merger with the
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Pennsylvania Department of State Bureau of Corporations and Charitable Organizations or such later date and time as set forth in such statement of merger (the “effective time”).
QNB and Victory currently anticipate completing the merger and filing the statement of merger with the Pennsylvania Department of State Bureau of Corporations and Charitable Organizations in the first quarter of 2026.
Merger Consideration
Under the terms of the merger agreement, holders of shares of Victory common stock (other than treasury shares and dissenters’ shares) will receive 0.5500 shares of QNB common stock for each share of Victory common stock they hold immediately prior to the effective time.
QNB will not issue any fractional shares of common stock in connection with the merger. Instead, each holder of Victory common stock who would otherwise be entitled to receive a fraction of a share QNB common stock (after taking into account all shares of Victory common stock owned by such holder at the effective time) will receive cash (rounded to the nearest cent), without interest, in an amount equal to the fractional share of QNB common stock to which such holder would otherwise be entitled to multiplied by the average of the daily closing-sale prices of QNB common stock on the OTC (as reported on Bloomberg or, if not reported by Bloomberg, in another source mutually selected by QNB and Victory) for the five (5) consecutive full trading days ending two trading days preceding the closing date.
At the effective time, shares of Victory’s common stock will no longer be outstanding and will automatically be cancelled and cease to exist, and holders of Victory common stock will cease to be, and will have no rights as, shareholders of Victory, other than (i) to receive the merger consideration pursuant to the terms and conditions of the merger agreement, (ii) to receive cash, without interest, in lieu of a fractional share of QNB common stock to which such holder would otherwise be entitled, or (iii) to receive any dividend or other distribution which the holder thereof has the right to receive pursuant to the merger agreement.
Equity Awards
Victory Options. Under the terms of the merger agreement, at the effective time, each option (each, a “Victory option”) to purchase shares of Victory common stock under a Victory stock plan that is unvested immediately prior to the effective time shall, automatically and without any required action on the part of the holder of such option, fully vest. All vested and unexercised options will be converted into and become an option to purchase shares of QNB common stock, and QNB shall assume such Victory option in accordance with the terms of the applicable Victory stock plan and the terms of the stock option award agreement by which such Victory option is evidenced. All rights with respect to shares of Victory common stock under the Victory options assumed by QNB shall thereupon be converted into rights with respect to QNB common stock. Accordingly, from and after the effective time:
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At the effective time, QNB shall assume the Victory equity incentive plans. QNB shall be entitled to grant equity awards, to the extent permissible under applicable law and regulations, using the share reserves of such Victory equity incentive plan as of the effective time (including any shares returned to such share reserves as a result of the termination of the Victory options that are assumed by QNB pursuant to merger agreement), except that: (i) stock covered by such awards shall be shares of QNB common stock; (ii) all references in the Victory equity incentive plan to a number of shares of Victory common stock shall be deemed amended to refer instead to a number of shares of QNB common stock determined by multiplying the number of referenced shares of Victory common stock by the exchange ratio, and rounding the resulting number down to the nearest whole number of shares of QNB common stock; and (iii) the QNB board of directors or a committee thereof shall succeed to the authority and responsibility of the Victory board of directors or any committee thereof with respect to the administration of the Victory equity incentive plans. Prior to the effective time, Victory and QNB shall take all action that may be necessary (under the Victory equity incentive plans and otherwise) to effectuate the provisions described in this paragraph and to ensure that, from and after the effective time, holders of Victory options have no rights with respect thereto other than those specifically provided in this paragraph. At or prior to the effective time, QNB shall reserve for issuance the number of shares of QNB common stock that will become subject to Victory options assumed by QNB pursuant to the merger agreement.
Victory Restricted Stock Awards. Under the terms of the merger agreement, at the effective time, (i) each unvested restricted stock award (a “Victory restricted stock award”) under the Victory equity incentive plans, if any; and the terms of the contract or agreement by which such Victory restricted stock award is evidenced shall, automatically and without any required action on the part of the holder of the Victory restricted stock award, fully vest and be converted into the right to receive (without interest), less applicable tax withholdings, a number of shares of QNB common stock equal to the number of shares of Victory common stock that were subject to such Victory restricted stock award immediately prior to the effective time multiplied by the exchange ratio, and rounding the resulting number down to the nearest whole number of shares of QNB common stock, which shall be delivered as soon as reasonably practicable following the closing date and in no event later than ten (10) calendar days following the closing date. At or prior to the effective time, the QNB board of directors or a committee thereof shall adopt any resolutions that are necessary to effectuate the treatment of the Victory restricted stock awards as contemplated by this paragraph.
Surrender of Certificates
QNB will engage an exchange agent to handle the exchange of Victory common stock for the merger consideration. As promptly as practicable after the effective time, but no later than five (5) calendar days after the effective time, the exchange agent will mail to each holder of Victory common stock a letter of transmittal for use in the exchange along with instructions explaining how to surrender Victory common stock certificates to the exchange agent. Victory shareholders that surrender their certificates to the exchange agent, together with a properly completed letter of transmittal, duly executed, will receive (i) the new book entry statements representing that number of whole shares of QNB common stock to which such former holder of Victory common stock shall have become entitled, and (ii) a check representing the amount of any cash in lieu of a fractional share and any dividends or distributions which such holder has the right to receive pursuant to the merger agreement. The old certificates of Victory common stock will have been cancelled. No interest will be paid or accrued on the QNB common stock or cash in lieu of fractional shares, dividends, or distributions payable to holders of the former Victory certificates. Victory shareholders that do not exchange their Victory common stock will not be entitled to receive the merger consideration or any dividends or other distributions by QNB until their certificates are surrendered. After surrender of the certificates representing Victory common stock, any unpaid dividends or distributions with respect to QNB common stock represented by the certificates will be paid without interest.
If any Victory stock certificate has been lost, stolen, or destroyed, the transmittal materials received from the exchange agent will explain the steps that the Victory shareholder must take including the posting by such shareholder of a bond in such amount as QNB or the exchange agent may determine is reasonably necessary as indemnity against any claim that may be made against it with respect to such certificate.
Indemnification and Directors’ and Officers’ and Company Liability Insurance
For a period of six (6) years after the effective date of the merger, to the fullest extent permitted under applicable law, QNB will indemnify each person who served as a director or officer of Victory or its subsidiaries on or after September 23, 2025 (the date of the merger agreement), or who has served in such a role at any time prior to the date of the merger agreement, or at any time after the date of the merger agreement but before the effective time, against any costs or expenses (including reasonable attorney’s fees), judgments, fines, losses, damages or liabilities incurred in connection with any threatened or actual claim, action, suit, proceeding or investigation, whether civil, criminal, administrative or investigative, whether arising before or after the effective time of the merger, arising out of the fact that such person is or was a director or officer of the Victory or any of its subsidiaries and pertaining to matters,
84
acts or omissions existing or occurring at or prior to the effective time, including matters, acts or omissions occurring in connection with the approval of the merger agreement and the transactions contemplated by the merger agreement.; In addition, the merger agreement provides that, prior to the effective date of the merger, Victory will procure a policy of directors’ and officers’ and company liability insurance with respect to actions, omissions, events, matters or circumstances occurring prior to the effective time as currently maintained by Victory (“Tail Policy”) to be effective for a period of up to six (6) years following the effective time, on terms no less advantageous than those contained in Victory’s existing policy. However, the combined company is not obligated to expend, on an aggregate basis, an amount in excess of 250% of the current annual premium paid by Victory for such insurance as of the date of the merger agreement.
Director Appointments
Effective at the effective time, and contingent upon the closing of the merger, the current members of the board of directors of QNB shall be the members of the board of directors of QNB immediately prior to the effective time, provided, however, that QNB has agreed to:
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OTC Stock Quotation
QNB common stock is currently quoted on the OTC under the symbol “QNBC.” The shares to be issued to Victory shareholders as merger consideration also will be eligible for quotation on the OTC. QNB shall cause the shares of QNB common stock to be issued in the merger to be approved for quotation as of the effective time.
Conditions to Complete the Merger
Conditions to Each Party’s Obligation to Effect the Merger. The respective obligations of QNB and Victory to complete the merger are subject to the fulfillment or written waiver of each of the following conditions:
Conditions to Victory’s Obligation to Effect the Merger. Victory will not be required to complete the merger unless the following conditions are fulfilled or waived in writing:
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Conditions to QNB’s Obligations to Effect the Merger. QNB will not be required to consummate the merger unless the following conditions are also fulfilled or waived in writing:
QNB or Victory can waive in writing any of the conditions listed above, unless the waiver is prohibited by law.
Representations and Warranties
Victory has made customary representations and warranties in the merger agreement relating to:
87
88
QNB has made customary representations and warranties in the merger agreement relating to:
89
Victory’s Conduct of Business Pending the Merger
From the date of the merger agreement until the effective time of the merger, except as expressly contemplated or permitted by the merger agreement or as disclosed in the Victory disclosure schedules to the merger agreement, as required by law, or required by an applicable regulatory order, without the prior written consent of QNB, Victory shall not, and shall cause its subsidiaries not to:
90
91
92
QNB’s Conduct of Business Pending the Merger
From the date of the merger agreement until the effective time, except as expressly contemplated or permitted by the merger agreement or required by law or required by an applicable regulatory order, without the prior written consent of Victory, QNB shall not, and shall cause its subsidiaries not to:
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Expenses of the Merger
QNB and Victory are each required to bear their own expenses incurred by it in connection with the merger agreement and the transactions contemplated by the merger agreement. If the merger agreement is terminated by Victory or QNB under circumstances other than those in which a termination fee is involved, as a result of the other party’s willful or intentional breach, or willful or intentional failure to perform, in any material respect, its covenants contained in the merger agreement, the breaching party shall pay the non-breaching party an amount equal to the out-of-pocket expenses incurred by the non-breaching party in connection with the transactions contemplated by the merger agreement (as itemized by the non-breaching party) up to $500,000, as agreed upon liquidated damages.
Termination of the Merger Agreement
Termination by mutual consent. QNB and Victory may mutually consent to terminate the merger agreement and abandon the merger at any time before the merger is effective, if the boards of directors of QNB and Victory both approve the termination by vote of a majority of the members of their entire boards of directors.
Termination by either QNB or Victory. The merger agreement may be terminated at any time prior to the effective time by QNB or Victory upon written notice to the other party, if either board of directors so determines by vote of a majority of the members of the entire board of directors, in the event of the following circumstances:
Termination by Victory or QNB with regards to either the Victory shareholder vote or the QNB shareholder vote. Either Victory or QNB may terminate the merger agreement if the requisite vote of the Victory shareholders or the QNB shareholders shall not have been obtained at the meeting of the applicable shareholders duly convened therefor or at any adjournment or postponement thereof; provided that no party may terminate the merger agreement if the party has breached in any material respect certain of its specified obligations under the merger agreement, in each case in a manner that primarily caused the failure to obtain the requisite vote of the Victory shareholders or the QNB shareholders, as applicable, at the meeting of such shareholders and shareholders duly convened or at any adjournment or postponement thereof.
Termination by QNB. QNB may terminate the merger agreement and abandon the merger at any time before the requisite vote of the Victory shareholders is obtained if:
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Termination by Victory. Victory may terminate the merger agreement and abandon the merger:
Acquisition Proposals and Termination Fee
Pursuant to the merger agreement, Victory shall not, and shall instruct and use its reasonable best efforts to cause its subsidiaries and the officers, directors, employees, advisors and other agents of Victory and its subsidiaries not to, directly or indirectly (i) solicit, initiate, encourage, facilitate (including by way of providing information) or induce any inquiry, proposal or offer with respect to, or the making or completion of, any acquisition proposal, or any inquiry, proposal or offer that is reasonably likely to lead to any acquisition proposal, (ii) enter into, continue or otherwise participate in any discussions or negotiations regarding, or furnish to any person or group any confidential or nonpublic information with respect to or in connection with, an acquisition proposal, (iii) take any other action to facilitate any inquiries or the making of any proposal that constitutes or may reasonably be expected to lead to an acquisition proposal, (iv) approve, endorse or recommend, or propose to approve, endorse or recommend any acquisition proposal or any agreement related thereto, (v) enter into any agreement contemplating or otherwise relating to any acquisition transaction or acquisition proposal, (vi) enter into any agreement or agreement in principle requiring, directly or indirectly, Victory to abandon, terminate or fail to consummate the transactions contemplated hereby or breach its obligations hereunder, or (vii) propose or agree to do any of the foregoing; unless the Victory board of directors determines in good faith, after consultation with Victory’ outside legal and financial advisors, that (a) such acquisition proposal constitutes or is reasonably capable of becoming a superior proposal, and (b) the failure of the Victory board to take such action would more likely than not cause the Victory board to violate its fiduciary duties to the shareholders of Victory under applicable law.
As promptly as practicable (but in no event more than 24 hours) following receipt of any acquisition proposal or any request for nonpublic information or inquiry that would reasonably be expected to lead to any acquisition proposal, Victory must (i) advise QNB in writing of the receipt of such acquisition proposal, request or inquiry and the terms and conditions of such acquisition proposal, request or inquiry, (ii) promptly provide to QNB a written summary of the material terms of such acquisition proposal,
95
request or inquiry including the identity of the person or group making the acquisition proposal, and (iii) keep QNB promptly apprised of the status of any related developments, discussions and negotiations on a current basis.
If Victory terminates the merger agreement with the intention of entering into or accepting an alternate proposal or commits a willful breach of the merger agreement, and within twelve (12) months after the date of termination of the merger agreement enters a definitive agreement for a separate acquisition (whether or not it is the superior proposal), then, Victory must pay to QNB a termination fee of $1,575,000 (the “termination fee”). Additionally, the termination fee will be payable from Victory to QNB if Victory accepts a superior proposal or if QNB is permitted to terminate the merger agreement pursuant to certain terms specified in the merger agreement.
Notwithstanding the foregoing, at any time prior to the Victory shareholder meeting, Victory may accept or approve a superior acquisition proposal, thereby withdrawing its recommendation of the merger to its shareholders, if, and only if: (i) Victory has complied with the relevant terms of the merger agreement; (ii) Victory has determined, in good faith, and after consultation with financial advisors and outside legal counsel, that the acquisition proposal was a superior proposal, after taking into account any proposed modification to the merger agreement by QNB; (iii) the acquisition was unsolicited and constitutes a superior proposal after taking into account any amendment or modification proposed to the merger agreement by QNB; (iv) Victory provided at least five (5) business days written notice to QNB and specified the terms and conditions of the proposal to QNB; (v) during the notice period, Victory and its advisors negotiated with QNB in good faith; and (vi) the Victory board of directors concluded, in good faith, after such negotiations, that the acquisition proposal continues to constitute a superior proposal. If any revisions are made to the superior proposal during the notice period, Victory shall deliver a new written notice to QNB giving rise to a new five (5) business day notice period.
Amendment
The merger agreement may be amended or modified by QNB and Victory at any time before or after the receipt of the requisite vote of the Victory shareholders, provided, however, that after the receipt of the requisite vote of the Victory shareholders, there may not be, without further approval of such shareholders of Victory, any amendment of the merger agreement that requires such further approval under applicable law. The merger agreement may not be amended, modified or supplemented in any manner, whether by course of conduct or otherwise, except by an instrument in writing signed on behalf of QNB and Victory.
ANCILLARY AGREEMENTS TO THE MERGER AGREEMENT
Victory Support Agreements
In connection with, and as a condition to, QNB entering into the merger agreement, each director of Victory entered into a support agreement with QNB. The following summary of the support agreements is subject to, and qualified in its entirety by reference to, the form of support agreement attached as Exhibit A-1 to the merger agreement, which is attached as Annex A to this joint proxy statement/ prospectus.
Under the support agreements, each such director has agreed to appear at the Victory special meeting (in person or by proxy) and to vote the shares of Victory common stock over which he or she has the sole power to vote or direct the voting of:
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In addition, the support agreements provide that each such director will not directly or indirectly, without the prior written consent of QNB sell, transfer, pledge, assign or otherwise dispose of or encumber prior to the record date for the Victory special meeting, any or all of his or her shares of Victory common stock, subject to limited exceptions.
Each director also agreed in the support agreements, subject to certain exceptions, not to:
The support agreements will automatically terminate upon the earlier of (1) the effective time of the merger, (2) the amendment of the merger agreement in a manner that materially and adversely affects the shareholder’s rights set forth in the merger agreement, (3) termination of the merger agreement, or (4) three (3) years from the date of the support agreement.
As of the Victory record date, approximately 354,927 shares of Victory common stock, which represented approximately 17.76% of the shares of Victory common stock outstanding on that date, are bound by the support agreements.
QNB Support Agreements
In addition, in connection with, and as a condition to, Victory entering into the merger agreement, each director of QNB entered into a support agreement with Victory. The following summary of the QNB support agreements is subject to, and qualified in its entirety by reference to, the form of support agreement attached as Exhibit A-2 to the merger agreement, which is attached as Annex A to this joint proxy statement/prospectus.
Under the QNB support agreements, each such director has agreed to appear at the QNB special meeting (in person or by proxy) and to vote the shares of QNB common stock over which he or she has the sole power to vote or direct the voting of: (1) to approve the merger agreement and the transactions contemplated thereby, including the merger and the issuance of shares of QNB common stock as merger consideration; (2) to approve any adjournment or postponement necessary to solicit additional proxies to approve the merger agreement; and (3) against any action or agreement that would reasonably be expected to result in a breach of any covenant, representation or warranty, or any other obligation or agreement of QNB or such director contained in the merger agreement. In addition, the support agreements provide that each such director will not directly or indirectly, without the prior written consent of Victory, sell, transfer, pledge, assign or otherwise dispose of or encumber prior to the record date for the QNB special meeting, any or all such shares of QNB common stock, subject to limited exceptions.
As of the QNB record date, approximately 459,268 shares of QNB common stock, which represented approximately 12% of the shares of QNB common stock outstanding on that date, are bound by the support agreements.
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THE COMPANIES
QNB Corp.
QNB Corp. is a bank holding company headquartered in Quakertown, Pennsylvania, and the parent company of QNB Bank, a Pennsylvania state chartered bank. QNB operates a full-service commercial and retail banking business through twelve branches in Bucks, Lehigh and Montgomery Counties, Pennsylvania. As of September 30, 2025, on a consolidated basis, QNB had total assets of $1.9 billion, total net loans of 1.2 billion, total deposits of $1.7 billion and shareholders’ equity of $121.5 million.
QNB’s common stock is quoted on the OTC under the symbol “QNBC.”
QNB’s principal office is located at 15 North Third Street, P.O. Box 9005, Quakertown, PA 18951‑9005, and its telephone number at that location is (215) 538‑5600. Information relating to executive compensation, various benefit plans, the principal holders of voting securities, relationships and related transactions and other related matters as to QNB is included in documents incorporated by reference in this joint proxy statement/prospectus. See “Where You Can Find More Information” on page 162.
The Victory Bancorp, Inc.
The Victory Bancorp, Inc. was founded in 2009 and is a bank holding company headquartered in Limerick, Pennsylvania, and the sole shareholder of Victory Bank. Victory was formed to expand the means by which capital can be raised, permit great diversification of Victory Bank’s activities, and provide Victory Bank with greater flexibility in structuring possible acquisitions, and was approved by the Pennsylvania Department of State on March 29, 2009. Victory has no material business operations at the holding company level other than owning and managing Victory Bank.
Victory Bank is a commercial bank that was organized in 2008 and which offers a full range of banking products and services from two full-service branch locations located in Montgomery County, Pennsylvania. As of September 30, 2025, Victory had $488.2 million in total consolidated assets, $392.1 million in total loans, net of the allowance for credit losses and deferred fees, $436.7 million in total deposits and $31.7 million in shareholders’ equity.
As a bank holding company, Victory is subject to supervision and regulation by the Federal Reserve. Victory Bank is subject to supervision and regulation by the Federal Reserve, its primary Federal regulator, and also by the Pennsylvania Department of Banking and Securities.
Victory’s common stock is quoted on the OTCQX Best Market under the symbol “VTYB.”
Victory’s principal office is located at 548 N. Lewis Rd, Limerick, Pennsylvania, 19468, and its telephone number at that location is (610) 948-9000. Victory’s website is www.victorybank.com. The information on Victory’s website is not part of this joint proxy statement/prospectus, and the reference to the Victory website address does not constitute incorporation by reference of any information on that website into this joint proxy statement/prospectus.
Products and Services
Victory’s business consists primarily of taking deposits from the general public and investing those deposits, together with funds generated from operations in one-to-four family residential real estate loans, commercial real estate loans, acquisition, development and land loans, commercial and industrial loans, home equity lines and lines of credit and consumer loans.
Victory Bank offers a diversified portfolio of lending products. Victory Bank grants loans and extensions of credit to individuals and a variety of small businesses and professionals in its market areas. The loan portfolio generally consists of one-to-four family residential real estate loans, commercial real estate loans, construction and land development loans, commercial and industrial loans and consumer loans.
Victory Bank’s deposits are generated primarily from its branch banking network. Its primary deposit products are personal checking accounts, business checking accounts, savings accounts, money market accounts and certificates of deposit. Deposit account terms vary, with the principal differences being the minimum balance required, the amount of time the funds must remain on deposit
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and the interest rate. In addition, Victory Bank utilizes brokered deposits as an additional source of funding and as a balance sheet management tool.
Market Area and Competition
Victory faces competition within its market areas both in making loans and attracting deposits. Victory’s market area has a concentration of financial institutions that include large money center and regional banks, as well as community banks and credit unions. Victory also faces competition from savings institutions, mortgage banking firms, consumer finance companies and, with respect to deposits from money market funds, brokerage firms, mutual funds and insurance companies.
The following table lists Victory Bank’s deposit market share as of September 30, 2025 (the most recent date for which date is available) for each county in which Victory Bank has a branch, as reported in the FDIC’s Summary of Deposits.
Market Area (County) |
Market Rank |
No. of Institutions |
Deposits in Markets |
Market Share |
|
Montgomery County, Pennsylvania |
16 |
31 |
38,974,038 |
1.09 |
% |
Legal Proceedings
From time to time, Victory and Victory Bank may become a party to various litigation matters incidental to the conduct of its business. However, neither Victory nor Victory Bank is presently party to any legal proceeding the resolution of which, in the opinion of Victory’s management, would be expected to have a material adverse effect on Victory’s business, operating results, financial condition or prospects.
Employees
As of September 30, 2025, Victory had a total of 56 employees, 52 of which are full time employees. No employee of Victory is covered by a collective bargaining agreement. Victory considers its relationship with its employees to be good.
Description of Property
The principal properties of Victory consist of the properties of Victory Bank. Victory’s headquarters is located at 548 N. Lewis Road. Limerick, Pennsylvania, 19468 . Victory Bank currently operates out of its main office in Limerick, Pennsylvania, as well as an additional branch banking location in Horsham, Pennsylvania. Victory Bank also operates two Loan Production Offices (LPOs), one in Horsham, Pennsylvania and a second in Wyomissing, Pennsylvania. Victory Bank owns its main office and leases its remaining locations. Victory Bank believes that its banking offices are in good condition and are suitable and adequate to its needs.
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SECURITY OWNERSHIP OF CERTAIN VICTORY BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of the record date for the Victory special meeting, the beneficial ownership of Victory common stock by each of Victory’s directors and executive officers, by Victory’s directors and executive officers as a group, and by each person known to Victory to beneficially own more than 5% ownership of the issued and outstanding shares of Victory common stock. Unless otherwise noted below, the address of each beneficial owner listed in the table is c/o The Victory Bancorp, Inc., 542 N. Lewis Road, Limerick, Pennsylvania 19468, Attention: Corporate Secretary.
The percentages of beneficial ownership in the following table are calculated in relation to the 1,998,500 shares of Victory common stock that were issued and outstanding as of December 17, 2025. Beneficial ownership is determined in accordance with the rules of the SEC, which generally attribute beneficial ownership of securities to persons who possess sole or shared voting or investment power with respect to those securities. Unless otherwise indicated, and subject to the support agreements entered into with QNB in connection with entering into the merger agreement, to Victory’s knowledge, the persons or entities identified on the table below have sole voting and investment power with respect to all shares shown as beneficially owned by them.
Name |
|
Shares Beneficially |
|
|
Percent of |
|
||
Directors and executive officers: |
|
|
|
|
|
|
||
Matthew Bates |
|
|
69,200 |
|
(2) |
|
3.45 |
% |
Michael A. Eddinger |
|
|
51,850 |
|
(3) |
|
2.59 |
% |
Steven D. Gilmore, P.E. |
|
|
60,352 |
|
(4) |
|
3.01 |
% |
Kevin L. Johnson |
|
|
35,267 |
|
(5) |
|
1.76 |
% |
Kenneth Lawrence |
|
|
4,633 |
|
|
|
0.23 |
% |
Joseph W. Major |
|
|
132,159 |
|
(6) |
|
6.48 |
% |
Laurie E. Tolle, CPA |
|
|
4,866 |
|
|
* |
|
|
Mary Beth Touey |
|
|
36,214 |
|
(7) |
|
1.81 |
% |
Dennis R. Urffer, CPA |
|
|
34,854 |
|
(8) |
|
1.74 |
% |
Alexander S. Kroll |
|
|
6,000 |
|
(9) |
* |
|
|
Benjamin M. Major |
|
|
6,500 |
|
(10) |
* |
|
|
Robert H. Schultz |
|
|
31,334 |
|
(11) |
|
1.55 |
% |
Shelly Stockmal |
|
|
8,200 |
|
(12) |
* |
|
|
Jon G. Swearer |
|
|
8,857 |
|
(13) |
* |
|
|
All directors and executive officers, as a group |
|
|
490,286 |
|
|
|
24.34 |
% |
* Less than 1%.
100
Beneficial Owners of 5% or more voting power |
|
Shares Beneficially |
|
|
Percent of |
|
||
Alliance Berstein, 501 Commerce Street, Nashville, TN 37203 |
|
|
195,000 |
|
|
|
9.76 |
% |
Joseph Major, 125 Laurel Ln, Boyertown PA 19512 |
|
|
132,159 |
|
|
|
6.48 |
% |
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THE VICTORY BANCORP, INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis is presented by management of The Victory Bancorp, Inc. to focus on the financial condition of The Victory Bancorp, Inc. as of and for the nine-month period ended September 30, 2025 and as of and for the years ended December 31, 2024 and December 31, 2023, and its results of operations for the nine-month periods ended September 30, 2025 and September 30, 2024, and as of and for the years ended December 31, 2024 and December 31, 2023. This discussion and analysis is intended to highlight and supplement information presented elsewhere in this proxy statement and prospectus, particularly the audited and unaudited financial statements and related notes appearing herein. This presentation may contain forward-looking statements (within the meaning of Private Securities Litigation Reform Act of 1995). Actual results may differ materially from the results discussed in these forward-looking statements. Factors that might cause such a difference include, but are not limited to, general economic conditions, changes in interest rates, deposit flows, loan demand, real estate values, and competition; changes in accounting principles, policies, or guidelines; changes in legislation or regulation; and other economic; competitive, governmental, regulatory, and technological factors affecting Victory’s operations, pricing, products, and services. As used in this section, unless the context otherwise requires, references to “Victory,” “we,” “us” and “our” refer to The Victory Bancorp, Inc. and its consolidated subsidiaries, unless the context indicates otherwise.
Overview of The Victory Bancorp, Inc.
The Victory Bancorp, Inc. (the Bank), is a registered bank holding company, which owns 100% of the outstanding capital stock of The Victory Bank. The Victory Bancorp, Inc. was incorporated under the laws of the State of Pennsylvania in 2009 for the purpose of serving as The Victory Bank’s holding company. The Victory Bank, founded in 2008, is a Pennsylvania state-chartered commercial bank headquartered in Limerick Township, Montgomery County. It offers a full range of banking services, including checking and savings accounts, home equity lines of credit, and personal loans. In addition to traditional banking, the Bank specializes in high-quality business lending, serving small and mid-sized businesses and professionals. With four offices across Montgomery and Berks Counties, it is dedicated to meeting the financial needs of the local community.
As of September 30, 2025, we had total consolidated assets of $488.2 million, net loans of $392.1 million, total deposits of $436.7 million, and total stockholders’ equity of $31.7 million.
The majority of our revenue is derived from interest income on loans, along with customer service charges and loan-related fees. Our expenses include interest paid on deposits and other borrowed funds, as well as noninterest costs such as salaries, employee benefits, data processing costs, and occupancy-related expenses. We evaluate our effectiveness in optimizing income from interest-earning assets and managing the cost of our liabilities through our net interest margin. This margin is calculated by dividing net interest income by the average balance of interest-earning assets. Net interest income represents the difference between the interest earned on assets like loans and securities, and the interest paid on liabilities such as deposits and borrowings that finance those assets.
Variations in net interest spread, net interest margin, and net interest income over time are primarily influenced by changes in market interest rates and the rates we receive on interest-earning assets or pay on interest-bearing liabilities, as well as the volume and composition of interest-earning assets, interest-bearing and noninterest-bearing liabilities, and stockholders’ equity. Market interest rate fluctuations are influenced by a range of factors, including government monetary policy, local competitive dynamics, inflation, deflation, macroeconomic trends, shifts in unemployment, changes in the money supply, geopolitical and international events, and both domestic and global financial market conditions. Shifts in the volume and composition of loans in our portfolio are impacted by factors such as economic and competitive trends in our markets and region, as well as developments in key sectors like real estate, agriculture, financial services, insurance, transportation, manufacturing, and energy.
Financial Highlights
The financial highlights as of and for the nine months ended September 30, 2025, include:
|
• |
|
Total Assets: $488.2 million, a $27.2 million, or 5.9%, increase from December 31, 2024. |
|
• |
|
Total Net Loans: $392.1 million, a $1.2 million, or 0.3%, increase from December 31, 2024. |
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|
• |
|
Total Deposits: $436.7 million, a $39.7 million, or 10.0%, increase from December 31, 2024. |
|
• |
|
Net Income: $1.6 million, a $489,000, or 44.3%, increase from the nine months ended September 30, 2024. |
|
• |
|
Net Interest Income: $10.6 million, a $791,000, or 8.1%, increase from the nine months ended September 30, 2024. |
|
• |
|
Allowance for Credit Losses on Loans: 0.88% of total loans as of September 30, 2025. |
|
• |
|
Return on Average Assets: 0.45% (annualized). |
|
• |
|
Regulatory Capital Ratios for The Victory Bank: |
|
• |
|
Tier 1 Leverage: 9.83% |
|
• |
|
Common Equity Tier 1 Risk-Based: 11.82% |
|
• |
|
Tier 1 Risk-Based: 11.82% |
|
• |
|
Total Risk-Based Capital: 12.69% |
Results of Operations for the Nine Months ended September 30, 2025, and 2024
Performance Summary
For the nine months ended September 30, 2025, net income was $1.6 million compared to $1.1 million as of September 30, 2024. Return on annualized average assets for the nine months ended September 30, 2025, was 0.45% compared to 0.32% for the nine months ended September 30, 2024. The Bank has been able to maintain a strong ratio of net interest income to average earning assets for each period ending September 30, 2025 and September 30, 2024. This ratio as of September 30, 2025 was 3.12% compared to 2.97% as of September 30, 2024. See Income Statement below:
103
|
|
For the nine months ended September 30, |
|
|
Change |
|
||||||||||
|
|
2025 |
|
|
2024 |
|
|
Amount |
|
|
Percent |
|
||||
|
|
(Dollars in thousands) |
|
|||||||||||||
Interest Income |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Interest and fees on loans |
|
$ |
19,583 |
|
|
$ |
19,824 |
|
|
$ |
(241 |
) |
|
|
(1.2 |
)% |
Interest on investment securities |
|
|
1,427 |
|
|
|
1,591 |
|
|
|
(164 |
) |
|
|
(10.3 |
) |
Other interest income |
|
|
541 |
|
|
|
171 |
|
|
|
370 |
|
|
|
216.4 |
|
Total interest income |
|
|
21,551 |
|
|
|
21,586 |
|
|
|
(35 |
) |
|
|
(0.2 |
) |
Interest Expense |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Deposits |
|
|
9,805 |
|
|
|
9,664 |
|
|
|
141 |
|
|
|
1.5 |
|
Borrowings |
|
|
1,186 |
|
|
|
2,153 |
|
|
|
(967 |
) |
|
|
(44.9 |
) |
Total interest expense |
|
|
10,991 |
|
|
|
11,817 |
|
|
|
(826 |
) |
|
|
(7.0 |
) |
Net Interest Income |
|
|
10,560 |
|
|
|
9,769 |
|
|
|
791 |
|
|
|
8.1 |
|
(Reversal of) provision for credit losses |
|
|
(145 |
) |
|
|
230 |
|
|
|
(375 |
) |
|
|
(163.0 |
) |
Net interest income after provision for credit losses |
|
|
10,705 |
|
|
|
9,539 |
|
|
|
1,166 |
|
|
|
12.2 |
|
Non-interest Income |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Service charges and activity fees |
|
|
446 |
|
|
|
376 |
|
|
|
70 |
|
|
|
18.6 |
|
Net gains on sales of loans |
|
|
— |
|
|
|
59 |
|
|
|
(59 |
) |
|
|
(100.0 |
) |
Other income |
|
|
224 |
|
|
|
212 |
|
|
|
12 |
|
|
|
5.7 |
|
Total noninterest income |
|
|
670 |
|
|
|
647 |
|
|
|
23 |
|
|
|
3.6 |
|
Noninterest Expense |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Salaries and employee expense |
|
|
5,527 |
|
|
|
5,403 |
|
|
|
124 |
|
|
|
2.3 |
|
Occupancy and equipment |
|
|
547 |
|
|
|
557 |
|
|
|
(10 |
) |
|
|
(1.8 |
) |
Data processing |
|
|
1,066 |
|
|
|
1,086 |
|
|
|
(20 |
) |
|
|
(1.8 |
) |
Legal and professional |
|
|
725 |
|
|
|
440 |
|
|
|
285 |
|
|
|
64.8 |
|
Other expenses |
|
|
1,482 |
|
|
|
1,301 |
|
|
|
181 |
|
|
|
13.9 |
|
Total noninterest expense |
|
|
9,347 |
|
|
|
8,787 |
|
|
|
560 |
|
|
|
6.4 |
|
Income tax expense |
|
|
434 |
|
|
|
294 |
|
|
|
140 |
|
|
|
47.6 |
|
Net Income |
|
$ |
1,594 |
|
|
$ |
1,105 |
|
|
$ |
489 |
|
|
|
44.3 |
% |
Net Interest Income
To evaluate net interest income, we measure and monitor (1) yields on our loans and other interest-earning assets, (2) the costs of our deposits and other funding sources, (3) our net interest spread and (4) our net interest margin. Net interest spread is the difference between rates earned on interest-earning assets and rates paid on interest-bearing liabilities. Net interest margin is calculated as net interest income divided by average interest-earning assets. Because noninterest-bearing sources of funds, such as noninterest-bearing deposits and stockholders’ equity, also fund interest-earning assets, net interest margin includes the benefit of these noninterest-bearing sources. We calculate average assets, liabilities and capital by taking an average over monthly actuals.
The following table presents, for the periods indicated, an analysis of net interest income by each major category of interest-earning assets and interest-bearing liabilities, the average amounts outstanding and the interest earned or paid on such amounts. The table also sets forth the average rate earned on interest-earning assets, the average rate paid on interest-bearing liabilities, and the net interest margin on average total interest-earning assets for the same periods. The balance of loans that are classified as nonaccrual are reflected in average outstanding balances for the period. For the nine months ended September 30, 2025, and 2024, interest income not recognized on nonaccrual loans was immaterial. The average total loans reflected below are net of deferred loan fees and discounts.
104
|
|
For the nine months ended September 30, |
|
|||||||||||||||||||||
|
|
2025 |
|
|
2024 |
|
||||||||||||||||||
|
|
Average |
|
|
Interest |
|
|
Average |
|
|
Average |
|
|
Interest |
|
|
Average |
|
||||||
|
|
(Dollars in thousands) |
|
|||||||||||||||||||||
Interest-earning assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Loans |
|
$ |
390,385 |
|
|
$ |
19,583 |
|
|
|
6.71 |
% |
|
$ |
388,624 |
|
|
$ |
19,824 |
|
|
|
6.81 |
% |
Investment securities |
|
|
45,398 |
|
|
|
1,427 |
|
|
|
4.20 |
% |
|
|
49,895 |
|
|
|
1,591 |
|
|
|
4.26 |
% |
Other interest-earning assets |
|
|
16,853 |
|
|
|
541 |
|
|
|
4.29 |
% |
|
|
1,362 |
|
|
|
171 |
|
|
|
16.77 |
% |
Total interest-earning assets |
|
|
452,636 |
|
|
|
21,551 |
|
|
|
6.37 |
% |
|
|
439,881 |
|
|
|
21,586 |
|
|
|
6.55 |
% |
Allowance for credit losses |
|
|
(3,557 |
) |
|
|
|
|
|
|
|
|
(3,508 |
) |
|
|
|
|
|
|
||||
Non-interest-earning assets |
|
|
25,363 |
|
|
|
|
|
|
|
|
|
22,281 |
|
|
|
|
|
|
|
||||
Total assets |
|
$ |
474,442 |
|
|
|
|
|
|
|
|
$ |
458,654 |
|
|
|
|
|
|
|
||||
Interest-bearing liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Interest-bearing deposits |
|
$ |
360,686 |
|
|
|
9,805 |
|
|
|
3.63 |
% |
|
$ |
318,061 |
|
|
|
9,664 |
|
|
|
4.06 |
% |
Borrowings |
|
|
1,791 |
|
|
|
120 |
|
|
|
8.96 |
% |
|
|
36,477 |
|
|
|
1,485 |
|
|
|
5.44 |
% |
Subordinated debt |
|
|
17,334 |
|
|
|
1,066 |
|
|
|
8.22 |
% |
|
|
12,841 |
|
|
|
668 |
|
|
|
6.95 |
% |
Total interest-bearing liabilities |
|
|
379,811 |
|
|
|
10,991 |
|
|
|
3.87 |
% |
|
|
367,379 |
|
|
|
11,817 |
|
|
|
4.30 |
% |
Non-interest-bearing deposits |
|
|
61,524 |
|
|
|
|
|
|
|
|
|
60,878 |
|
|
|
|
|
|
|
||||
Other non-interest-bearing liabilities |
|
|
2,705 |
|
|
|
|
|
|
|
|
|
2,082 |
|
|
|
|
|
|
|
||||
Total liabilities |
|
|
444,040 |
|
|
|
|
|
|
|
|
|
430,339 |
|
|
|
|
|
|
|
||||
Total equity |
|
|
30,402 |
|
|
|
|
|
|
|
|
|
28,315 |
|
|
|
|
|
|
|
||||
Total liabilities and equity |
|
$ |
474,442 |
|
|
|
|
|
|
|
|
$ |
458,654 |
|
|
|
|
|
|
|
||||
Net interest income |
|
|
|
|
$ |
10,560 |
|
|
|
|
|
|
|
|
$ |
9,769 |
|
|
|
|
||||
Net earning assets |
|
$ |
72,825 |
|
|
|
|
|
|
|
|
$ |
72,502 |
|
|
|
|
|
|
|
||||
Net interest rate spread(1) |
|
|
|
|
|
|
|
|
2.50 |
% |
|
|
|
|
|
|
|
|
2.26 |
% |
||||
Net interest margin(2) |
|
|
|
|
|
|
|
|
3.12 |
% |
|
|
|
|
|
|
|
|
2.97 |
% |
||||
Average Interest-Earning Assets to Interest-bearing Liabilities |
|
|
|
|
|
|
|
|
119.17 |
% |
|
|
|
|
|
|
|
|
119.73 |
% |
||||
For the nine months ended September 30, 2025, net interest income totaled $10.6 million and net interest margin and net interest spread were 3.12% and 2.50%, respectively. For the nine months ended September 30, 2024, net interest income totaled $9.8 million and net interest margin and net interest spread were 2.97% and 2.26%, respectively.
The interest rate spread increased from 2.26% for the nine months ended September 30, 2024 to 2.50% for the nine months ended September 30, 2025. Net interest income increased from $9.77 million to $10.56 million for the same period. During the period, September 30, 2024 to September 30, 2025, average total assets increased from $458.65 million to $474.44 million. This is an increase of $15.79 million or 3.44%. Average total asset increase is primarily from increase in other interest earning assets funding by an increase in deposits.
105
The following table presents the effect on net income for changes in the average outstanding volumes of interest-earning assets and interest-bearing liabilities and the rates earned and paid on these assets and liabilities from September 30, 2024 to September 30, 2025:
|
|
For the nine months ended September 30, |
|
|||||||||
|
|
2025 vs. 2024 |
|
|||||||||
|
|
Increase/(decrease) due to |
|
|
Total |
|
||||||
|
|
Volume |
|
|
Rate |
|
|
increase/ |
|
|||
|
|
(Dollars in thousands) |
|
|||||||||
Interest-earning assets: |
|
|
|
|
|
|
|
|
|
|||
Loans |
|
$ |
90 |
|
|
$ |
(331 |
) |
|
$ |
(241 |
) |
Investment securities |
|
|
(143 |
) |
|
$ |
(21 |
) |
|
|
(164 |
) |
Other interest-earning assets |
|
|
1,945 |
|
|
$ |
(1,575 |
) |
|
|
370 |
|
Total interest-earning assets |
|
|
1,892 |
|
|
|
(1,927 |
) |
|
|
(35 |
) |
Interest-bearing liabilities: |
|
|
|
|
|
|
|
|
|
|||
Interest-bearing deposits |
|
|
1,295 |
|
|
|
(1,154 |
) |
|
|
141 |
|
Borrowings |
|
|
(1,412 |
) |
|
|
47 |
|
|
|
(1,365 |
) |
Subordinated debt |
|
|
234 |
|
|
|
164 |
|
|
|
398 |
|
Total interest-bearing liabilities |
|
|
117 |
|
|
|
(943 |
) |
|
|
(826 |
) |
Change in net interest income |
|
$ |
1,775 |
|
|
$ |
(984 |
) |
|
$ |
791 |
|
.
Provision for Credit Losses
Our provision for credit losses is a charge to income in order to bring our allowance for credit losses on loans to a level deemed appropriate by management. There was a negative provision for credit losses on loans of $145,000 for the nine months ended September 30, 2025 and provision of $230,000 for the nine months ended September 30, 2024. The negative provision for the nine months ended September 30, 2025 resulted from improved loss history over the lookback period while the provision for the same period in 2024 resulted from the increase in net loans of $30.8 million or 8.5%. Total loans increased $1.2 million from September 30, 2024 to September 30, 2025.
The allowance for credit losses was $3.5 million, or 0.88% of total loans, at September 30, 2025, compared to 0.91% at December 31, 2024.
Non‑interest Income
The primary sources of Victory’s non‑interest income are service charges on deposit accounts and other services charges and fees. Income from the investment in bank-owned life insurance (“BOLI”) is the other major contributor to Victory’s non‑interest income. Service charges on accounts includes maintenance charges as well as fees for non‑sufficient funds/overdrafts. Other service charges and fees includes ATM and debit card income. The following table presents, for the periods indicated, the major categories of non‑interest income:
|
|
For the nine months ended September 30, |
|
|
Change |
|
||||||||||
|
|
2025 |
|
|
2024 |
|
|
Amount |
|
|
Percent |
|
||||
|
|
(Dollars in thousands) |
|
|||||||||||||
Service charges and activity fees |
|
$ |
446 |
|
|
$ |
376 |
|
|
$ |
70 |
|
|
|
19 |
% |
Net gains on sales of loans |
|
|
— |
|
|
|
59 |
|
|
|
(59 |
) |
|
|
(100.0 |
) |
Other |
|
|
224 |
|
|
|
212 |
|
|
|
12 |
|
|
|
5.7 |
|
Total non-interest income |
|
$ |
670 |
|
|
$ |
647 |
|
|
$ |
23 |
|
|
|
3.6 |
% |
Non‑interest income for the nine months ended September 30, 2025, increased $23,000, or 3.6%, to $670,000, compared to $647,000 for the same period in 2024. The increase during this period is primarily due to additional Money Service Business
106
customers. Fee income is earned based on a percentage of the deposits related to money services business customers. The increase in customers and related deposits resulted in increased fee income.
Non‑interest Expense
Generally, noninterest expense is composed of all employee expenses and costs associated with operating our facilities, obtaining and retaining customer relationships and providing bank services. The largest component of noninterest expense is salaries and employee benefits. Noninterest expense also includes operational expenses such as occupancy expenses, depreciation and amortization, professional and regulatory fees, including FDIC assessments, data processing expenses, and advertising and promotion expenses.
The following table presents, for the periods indicated, the major categories of non‑interest expenses:
|
|
For the nine months ended September 30, |
|
|
Change |
|
||||||||||
|
|
2025 |
|
|
2024 |
|
|
Amount |
|
|
Percent |
|
||||
|
|
(Dollars in thousands) |
|
|||||||||||||
Salaries and employee benefits |
|
$ |
5,527 |
|
|
$ |
5,403 |
|
|
$ |
124 |
|
|
|
2.3 |
% |
Occupancy and equipment |
|
|
547 |
|
|
|
557 |
|
|
|
(10 |
) |
|
|
(1.8 |
) |
Advertising |
|
|
182 |
|
|
|
51 |
|
|
|
131 |
|
|
|
256.9 |
|
Legal and professional fees |
|
|
725 |
|
|
|
440 |
|
|
|
285 |
|
|
|
64.8 |
|
Data processing costs |
|
|
1,066 |
|
|
|
1,086 |
|
|
|
(20 |
) |
|
|
(1.8 |
) |
Other |
|
|
1,300 |
|
|
|
1,250 |
|
|
|
50 |
|
|
|
4.0 |
|
Total non-interest expense |
|
$ |
9,347 |
|
|
$ |
8,787 |
|
|
$ |
560 |
|
|
|
6.4 |
% |
Non‑interest expenses for the nine months ended September 30, 2025, increased $560,000, or 6.4%, to $9.4 million compared to $8.8 million for the same nine month period in 2024. The components of noninterest expense with significant fluctuations compared to the prior year periods were as follows:
Salaries and employee benefits—September 30, 2025 & 2024. Salaries and employee benefits increased $124,000 thousand, or 2.3%, for the period ending September 30, 2025, compared to the prior period. This was caused by increased salary expense for the employees hired for the new branch facility in Horsham, Pennsylvania, which opened in April 2025.
Legal and Professional—September 30, 2025 & 2024. Legal and Professional expenses increased $285,000, or 64.8%, for the period ending September 30, 2025, compared to the prior period. The $725,000 spent on Legal and Professional for the period ended September 30, 2025, includes $374,000 spent on merger expenses.
Advertising and Marketing—September 30, 2025 & 2024. Advertising and Marketing expenses increased $131,000 or 256.9% for the period ended September 30, 2025, compared to the prior period. The largest component of this increase was the opening of the Horsham branch in April 2025.
Income Tax Expense
Victory had income tax expense of $434,000 for the nine months ended September 30, 2025, compared to $294,000 of income tax expense for the nine months ended September 30, 2024. This increase was the result of the $629,000 increase in income before taxes for the comparable nine month periods. Victory’s effective tax rates were 21.4% and 21.0% for the nine months ended September 30, 2025, and 2024, respectively.
Results of Operations for the Years Ended December 31, 2024, and 2023
Performance Summary
For the twelve months ended December 31, 2024, net income was $1.6 million compared to $2.1 million as of December 31, 2023. Return on average assets for the twelve months ended December 31, 2024 was 0.36% compared to 0.52% for the twelve months
107
ended December 31, 2023. The Bank has been able to maintain a strong ratio of net interest income to average earning assets for each period ending December 31, 2024 and December 31, 2023. This ratio as of December 31, 2024 was 3.01% compared to 3.39% as of December 31, 2023. See Income Statement below:
|
|
For the Year ended December 31, |
|
|
Change |
|
||||||||||
|
|
2024 |
|
|
2023 |
|
|
Amount |
|
|
Percent |
|
||||
|
|
(Dollars in thousands) |
|
|||||||||||||
Interest Income |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Loans, including fees |
|
$ |
26,552 |
|
|
$ |
22,297 |
|
|
$ |
4,255 |
|
|
|
19.1 |
% |
Interest on investment securities |
|
|
2,101 |
|
|
|
2,109 |
|
|
|
(8 |
) |
|
|
(0.4 |
) |
Other interest income |
|
|
214 |
|
|
|
260 |
|
|
|
(46 |
) |
|
|
(17.7 |
) |
Total interest income |
|
|
28,867 |
|
|
|
24,666 |
|
|
|
4,201 |
|
|
|
17.0 |
|
Interest Expense |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Deposits |
|
|
13,030 |
|
|
|
9,685 |
|
|
|
3,345 |
|
|
|
34.5 |
|
Borrowings |
|
|
2,673 |
|
|
|
1,478 |
|
|
|
1,195 |
|
|
|
80.9 |
|
Total interest expense |
|
|
15,703 |
|
|
|
11,163 |
|
|
|
4,540 |
|
|
|
40.7 |
|
Net Interest Income |
|
|
13,164 |
|
|
|
13,503 |
|
|
|
(339 |
) |
|
|
(2.5 |
) |
Provision for credit losses |
|
|
198 |
|
|
|
245 |
|
|
|
(47 |
) |
|
|
(19.2 |
) |
Net interest income after provision for credit losses |
|
|
12,966 |
|
|
|
13,258 |
|
|
|
(292 |
) |
|
|
(2.2 |
) |
Noninterest Income |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Service charges and activity fees |
|
|
503 |
|
|
|
223 |
|
|
|
280 |
|
|
|
125.6 |
|
Net gains on sales of loans |
|
|
160 |
|
|
|
108 |
|
|
|
52 |
|
|
|
48.1 |
|
Other income |
|
|
283 |
|
|
|
279 |
|
|
|
4 |
|
|
|
1.4 |
|
Total noninterest income |
|
|
946 |
|
|
|
610 |
|
|
|
336 |
|
|
|
55.1 |
|
Noninterest Expense |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Salaries and employee expense |
|
|
7,180 |
|
|
|
6,859 |
|
|
|
321 |
|
|
|
4.7 |
|
Occupancy and equipment |
|
|
749 |
|
|
|
654 |
|
|
|
95 |
|
|
|
14.5 |
|
Data processing costs |
|
|
1,435 |
|
|
|
1,305 |
|
|
|
130 |
|
|
|
10.0 |
|
Legal and professional fees |
|
|
600 |
|
|
|
479 |
|
|
|
121 |
|
|
|
25.3 |
|
Other expenses |
|
|
1,824 |
|
|
|
1,843 |
|
|
|
(19 |
) |
|
|
(1.0 |
) |
Total noninterest expense |
|
|
11,788 |
|
|
|
11,140 |
|
|
|
648 |
|
|
|
5.8 |
|
Income tax expense |
|
|
462 |
|
|
|
587 |
|
|
|
(125 |
) |
|
|
(21.3 |
) |
Net Income |
|
$ |
1,662 |
|
|
$ |
2,141 |
|
|
$ |
(479 |
) |
|
|
(22.4 |
)% |
Net Interest Income
The following table presents, for the periods indicated, an analysis of net interest income by each major category of interest-earning assets and interest-bearing liabilities, the average amounts outstanding and the interest earned or paid on such amounts. The table also sets forth the average rate earned on interest-earning assets, the average rate paid on interest-bearing liabilities, and the net interest margin on average total interest-earning assets for the same periods. The balance of loans that are classified as nonaccrual are reflected in average outstanding balances for the period. For the twelve months ended December 31, 2024, and 2023, interest income not recognized on nonaccrual loans was immaterial. The average total loans reflected below are net of deferred loan fees and discounts.
108
|
|
For the years ended December 31, |
|
|||||||||||||||||||||
|
|
|
|
|
2024 |
|
|
|
|
|
|
|
|
2023 |
|
|
|
|
||||||
|
|
Average |
|
|
Interest |
|
|
Average |
|
|
Average |
|
|
Interest |
|
|
Average |
|
||||||
|
|
|
|
|
|
|
|
(Dollars in thousands) |
|
|
|
|
|
|
|
|||||||||
Interest-earning assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Loans |
|
$ |
390,987 |
|
|
$ |
26,552 |
|
|
|
6.79 |
% |
|
$ |
345,068 |
|
|
$ |
22,297 |
|
|
|
6.46 |
% |
Investment securities |
|
|
49,514 |
|
|
|
2,101 |
|
|
|
4.24 |
% |
|
|
51,650 |
|
|
|
2,109 |
|
|
|
4.08 |
% |
Other interest-earning assets |
|
|
1,519 |
|
|
|
214 |
|
|
|
14.09 |
% |
|
|
4,414 |
|
|
|
260 |
|
|
|
5.89 |
% |
Total interest-earning assets |
|
|
442,020 |
|
|
|
28,867 |
|
|
|
6.53 |
% |
|
|
401,132 |
|
|
|
24,666 |
|
|
|
6.15 |
% |
Allowance for credit losses |
|
|
(3,546 |
) |
|
|
|
|
|
|
|
|
(3,311 |
) |
|
|
|
|
|
|
||||
Non-interest-earning assets |
|
|
22,008 |
|
|
|
|
|
|
|
|
|
17,419 |
|
|
|
|
|
|
|
||||
Total assets |
|
$ |
460,482 |
|
|
|
|
|
|
|
|
$ |
415,240 |
|
|
|
|
|
|
|
||||
Interest-bearing liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Interest-bearing deposits |
|
$ |
322,429 |
|
|
|
13,030 |
|
|
|
4.04 |
% |
|
$ |
296,219 |
|
|
|
9,685 |
|
|
|
3.27 |
% |
Borrowings |
|
|
32,611 |
|
|
|
1,763 |
|
|
|
5.41 |
% |
|
|
13,248 |
|
|
|
658 |
|
|
|
4.97 |
% |
Subordinated debt |
|
|
12,841 |
|
|
|
910 |
|
|
|
7.09 |
% |
|
|
13,734 |
|
|
|
820 |
|
|
|
5.97 |
% |
Total interest-bearing liabilities |
|
|
367,881 |
|
|
|
15,703 |
|
|
|
4.27 |
% |
|
|
323,201 |
|
|
|
11,163 |
|
|
|
3.45 |
% |
Non-interest-bearing deposits |
|
|
61,532 |
|
|
|
|
|
|
|
|
|
64,318 |
|
|
|
|
|
|
|
||||
Other non-interest-bearing liabilities |
|
|
2,257 |
|
|
|
|
|
|
|
|
|
1,608 |
|
|
|
|
|
|
|
||||
Total liabilities |
|
|
431,670 |
|
|
|
|
|
|
|
|
|
389,127 |
|
|
|
|
|
|
|
||||
Total equity |
|
|
28,812 |
|
|
|
|
|
|
|
|
|
26,113 |
|
|
|
|
|
|
|
||||
Total liabilities and equity |
|
$ |
460,482 |
|
|
|
|
|
|
|
|
$ |
415,240 |
|
|
|
|
|
|
|
||||
Net interest income |
|
|
|
|
$ |
13,164 |
|
|
|
|
|
|
|
|
$ |
13,503 |
|
|
|
|
||||
Net earning assets |
|
$ |
74,139 |
|
|
|
|
|
|
|
|
$ |
77,931 |
|
|
|
|
|
|
|
||||
Net interest rate spread(1) |
|
|
|
|
|
|
|
|
2.26 |
% |
|
|
|
|
|
|
|
|
2.70 |
% |
||||
Net interest margin(2) |
|
|
|
|
|
|
|
|
2.98 |
% |
|
|
|
|
|
|
|
|
3.37 |
% |
||||
Average Interest-Earning Assets to Interest-bearing Liabilities |
|
|
|
|
|
|
|
|
120.15 |
% |
|
|
|
|
|
|
|
|
124.11 |
% |
||||
For the twelve months ended December 31, 2024, net interest income totaled $13.2 million and net interest margin and net interest spread were 2.98% and 2.26%, respectively. For the twelve months ended December 31, 2023, net interest income totaled $13.5 million and net interest margin and net interest spread were 3.37% and 2.70%, respectively.
The interest rate spread decreased from 2.70% for the twelve months ended December 31, 2023 to 2.26% for the twelve months ended December 31, 2024. Net interest income decreased from $13.50 million to $13.16 million for the same period. During this period, December 31, 2023 to December 31, 2024, average total assets increased from $415.24 million to $460.48 million. This is an increase of $45.24 million or 10.90%. Average total asset growth is primarily from increased loans for this period.
109
The following table presents the effect of net income for changes in the average outstanding volumes of interest-earning assets and interest-bearing liabilities and the rates earned and paid on these assets and liabilities from December 31, 2023 to December 31, 2024:
|
|
For the years ended December 31, |
|
|||||||||
|
|
2024 vs. 2023 |
|
|||||||||
|
|
Increase/(decrease) due to |
|
|
|
|
||||||
|
|
Volume |
|
|
Rate |
|
|
Total |
|
|||
|
|
(Dollars in thousands) |
|
|||||||||
Interest-earning assets: |
|
|
|
|
|
|
|
|
|
|||
Loans receivable |
|
$ |
2,967 |
|
|
$ |
1,288 |
|
|
$ |
4,255 |
|
Investment securities |
|
|
(87 |
) |
|
|
79 |
|
|
|
(8 |
) |
Other interest-earning assets |
|
|
(171 |
) |
|
|
125 |
|
|
|
(46 |
) |
Total interest-earning assets |
|
|
2,709 |
|
|
|
1,492 |
|
|
|
4,201 |
|
Interest-bearing liabilities: |
|
|
|
|
|
|
|
|
|
|||
Savings and money market accounts |
|
|
857 |
|
|
|
2,488 |
|
|
|
3,345 |
|
Borrowings |
|
|
962 |
|
|
|
143 |
|
|
|
1,105 |
|
Subordinated debt |
|
|
(53 |
) |
|
|
143 |
|
|
|
90 |
|
Total interest-bearing liabilities |
|
|
1,766 |
|
|
|
2,774 |
|
|
|
4,540 |
|
Change in net interest income |
|
$ |
943 |
|
|
$ |
(1,282 |
) |
|
$ |
(339 |
) |
Provision for Credit Losses
The provision for credit losses was $198,000 for the twelve months ended December 31, 2024 and $245,000 for the twelve months ended December 31, 2023.
The allowance for credit losses was $3.6 million, or 0.91% of total loans, at December 31, 2024, and $3.4 million, or 0.93% of total loans, at December 31, 2023.
Non‑interest Income
The following table presents, for the periods indicated, the major categories of Victory’s non‑interest income:
|
|
For the years ended |
|
|
Change |
|
||||||||||
|
|
2024 |
|
|
2023 |
|
|
Amount |
|
|
Percent |
|
||||
|
|
(Dollars in thousands) |
|
|||||||||||||
Service charges and activity fees |
|
$ |
503 |
|
|
$ |
223 |
|
|
$ |
280 |
|
|
|
125.6 |
% |
Net gains on sales of loans |
|
|
160 |
|
|
|
108 |
|
|
|
52 |
|
|
|
48.1 |
|
Other |
|
|
283 |
|
|
|
279 |
|
|
|
4 |
|
|
|
1.4 |
|
Total non-interest income |
|
$ |
946 |
|
|
$ |
610 |
|
|
$ |
336 |
|
|
|
55.1 |
% |
Non‑interest income for the twelve months ended December 31, 2024, increased $336,000, or 55.1%, to $946,000, when compared to $610,000 realized for the same twelve month period of 2023. The increase during this period is due to the addition of various Money Service Business customers.
110
Non‑interest Expense
The following table presents, for the periods indicated, the major categories of non‑interest expense:
|
|
For the years ended |
|
|
Change |
|
||||||||||
|
|
2024 |
|
|
2023 |
|
|
Amount |
|
|
Percent |
|
||||
|
|
|
|
|
(Dollars in thousands) |
|
|
|
|
|||||||
Salaries and employee benefits |
|
$ |
7,180 |
|
|
$ |
6,859 |
|
|
$ |
321 |
|
|
|
4.7 |
% |
Occupancy and equipment |
|
|
749 |
|
|
|
654 |
|
|
|
95 |
|
|
|
14.5 |
|
Advertising |
|
|
67 |
|
|
|
98 |
|
|
|
(31 |
) |
|
|
-31.6 |
|
Legal and professional fees |
|
|
600 |
|
|
|
479 |
|
|
|
121 |
|
|
|
25.3 |
|
Data processing costs |
|
|
1,435 |
|
|
|
1,305 |
|
|
|
130 |
|
|
|
10.0 |
|
Other |
|
|
1,757 |
|
|
|
1,745 |
|
|
|
12 |
|
|
|
0.7 |
|
Total non-interest expense |
|
$ |
11,788 |
|
|
$ |
11,140 |
|
|
$ |
648 |
|
|
|
5.8 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Non‑interest expenses for the year ended December 31, 2024, increased $648,000, or 5.8%, to $11.8 million compared to $11.1 million for the same twelve month period in 2023.
Salaries and employee benefit expenses increased $321,000, or 4.7%, to $7.2 million for the years ended December 31, 2024, compared to $6.9 million for the same period in 2023. Compensation increases are due to taxes, benefits and incentives due to current loan growth.
111
Financial Condition
Summary--September 30, 2025 compared to December 31, 2024 and December 31, 2023
|
|
|
|
|
|
|
|
|
|
|
$ Change |
|
|
% Change |
|
|||||||||||||
|
|
September 30, 2025 |
|
|
December 31, 2024 |
|
|
December 31, 2023 |
|
|
Sept. 2025 to Dec. 2024 |
|
|
Dec. 2024 to Dec. 2023 |
|
|
Sept. 2025 to Dec. 2024 |
|
|
Dec. 2024 to Dec. 2023 |
|
|||||||
ASSETS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Cash and due from banks |
|
$ |
37,830 |
|
|
$ |
10,678 |
|
|
$ |
12,438 |
|
|
$ |
27,152 |
|
|
$ |
(1,760 |
) |
|
|
254.3 |
% |
|
|
-14.2 |
% |
Fed Funds sold |
|
|
3,000 |
|
|
|
— |
|
|
|
2,100 |
|
|
|
3,000 |
|
|
|
(2,100 |
) |
|
N/M |
|
|
N/M |
|
||
Cash and cash equivalents |
|
|
40,830 |
|
|
|
10,678 |
|
|
|
14,538 |
|
|
|
30,152 |
|
|
|
(3,860 |
) |
|
|
282.4 |
|
|
|
(26.6 |
) |
Investment securities available-for-sale, at fair value |
|
|
30,583 |
|
|
|
32,905 |
|
|
|
35,890 |
|
|
|
(2,322 |
) |
|
|
(2,985 |
) |
|
|
(7.1 |
) |
|
|
(8.3 |
) |
Investment securities held-to-maturity, at amortized cost (fair value $10,210, $11,557 and $11,686 at September 30, 2025, December 31, 2024 and December 31, 2023, respectively) |
|
|
10,267 |
|
|
|
11,737 |
|
|
|
12,041 |
|
|
|
(1,470 |
) |
|
|
(304 |
) |
|
|
(12.5 |
) |
|
|
(2.5 |
) |
Restricted investment in stocks |
|
|
1,700 |
|
|
|
2,192 |
|
|
|
3,203 |
|
|
|
(492 |
) |
|
|
(1,011 |
) |
|
|
(22.4 |
) |
|
|
(31.6 |
) |
Loans, net |
|
|
392,111 |
|
|
|
390,954 |
|
|
|
364,383 |
|
|
|
1,157 |
|
|
|
26,571 |
|
|
|
0.3 |
|
|
|
7.3 |
|
Premises and equipment |
|
|
3,444 |
|
|
|
3,248 |
|
|
|
3,017 |
|
|
|
196 |
|
|
|
231 |
|
|
|
6.0 |
|
|
|
7.7 |
|
Bank-owned life insurance |
|
|
6,033 |
|
|
|
5,923 |
|
|
|
5,744 |
|
|
|
110 |
|
|
|
179 |
|
|
|
1.9 |
|
|
|
3.1 |
|
Other assets |
|
|
3,251 |
|
|
|
3,387 |
|
|
|
3,347 |
|
|
|
(136 |
) |
|
|
40 |
|
|
|
(4.0 |
) |
|
|
1.2 |
|
Total Assets |
|
$ |
488,219 |
|
|
$ |
461,024 |
|
|
$ |
442,163 |
|
|
$ |
27,195 |
|
|
$ |
18,861 |
|
|
|
5.9 |
% |
|
|
4.3 |
% |
LIABILITIES AND STOCKHOLDERS’ EQUITY |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Deposits |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Noninterest Bearing |
|
$ |
62,996 |
|
|
$ |
56,358 |
|
|
$ |
55,022 |
|
|
$ |
6,638 |
|
|
$ |
1,336 |
|
|
|
11.8 |
% |
|
|
2.4 |
% |
Interest Bearing |
|
|
373,747 |
|
|
|
340,722 |
|
|
|
309,010 |
|
|
|
33,025 |
|
|
|
31,712 |
|
|
|
9.7 |
|
|
|
10.3 |
|
Total Deposits |
|
|
436,743 |
|
|
|
397,080 |
|
|
|
364,032 |
|
|
|
39,663 |
|
|
|
33,048 |
|
|
|
10.0 |
|
|
|
9.1 |
|
Borrowings |
|
|
— |
|
|
|
15,440 |
|
|
|
36,200 |
|
|
|
(15,440 |
) |
|
|
(20,760 |
) |
|
|
(100.0 |
) |
|
|
(57.3 |
) |
Subordinated debt |
|
|
17,359 |
|
|
|
17,309 |
|
|
|
12,830 |
|
|
|
50 |
|
|
|
4,479 |
|
|
|
0.3 |
|
|
|
34.9 |
|
Other liabilities |
|
|
2,467 |
|
|
|
1,858 |
|
|
|
1,153 |
|
|
|
609 |
|
|
|
705 |
|
|
|
32.8 |
|
|
|
61.1 |
|
Total Liabilities |
|
|
456,569 |
|
|
|
431,687 |
|
|
|
414,215 |
|
|
|
24,882 |
|
|
|
17,472 |
|
|
|
5.8 |
|
|
|
4.2 |
|
Stockholders’ equity: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Common stock, $1 par value (authorized 10,000,000 shares; issued and outstanding 1,996,588, 1,977,362 and 1,971,362 shares at September 30, 2025, December 31, 2024 and December 31, 2023, respectively) |
|
|
1,997 |
|
|
|
1,977 |
|
|
|
1,971 |
|
|
|
20 |
|
|
|
6 |
|
|
|
1.0 |
|
|
|
0.3 |
|
Paid in capital |
|
|
14,881 |
|
|
|
14,654 |
|
|
|
14,561 |
|
|
|
227 |
|
|
|
93 |
|
|
|
1.5 |
|
|
|
0.6 |
|
Retained earnings |
|
|
15,729 |
|
|
|
14,523 |
|
|
|
13,374 |
|
|
|
1,206 |
|
|
|
1,149 |
|
|
|
8.3 |
|
|
|
8.6 |
|
Accumulated other comprehensive loss, net of taxes |
|
|
(957 |
) |
|
|
(1,817 |
) |
|
|
(1,958 |
) |
|
|
860 |
|
|
|
141 |
|
|
|
(47.3 |
) |
|
|
(7.2 |
) |
Total Stockholders’ Equity |
|
|
31,650 |
|
|
|
29,337 |
|
|
|
27,948 |
|
|
|
2,313 |
|
|
|
1,389 |
|
|
|
7.9 |
|
|
|
5.0 |
|
Total Liabilities and Stockholders’ Equity |
|
$ |
488,219 |
|
|
$ |
461,024 |
|
|
$ |
442,163 |
|
|
$ |
27,195 |
|
|
$ |
18,861 |
|
|
|
5.9 |
% |
|
|
4.3 |
% |
Our assets increased $27.2 million, or 5.9%, from $461.0 million as of December 31, 2024 to $488.2 million as of September 30, 2025. Our asset increase was primarily in cash and cash equivalents balances funded by an increase in deposits. This was offset in part by a decline in securities of $3.8 million or 8.5% including the paydown of Residential mortgage-backed securities of $2.68 million and U.S. government agency securities of $990,000. Our Cash and due from banks increased $27.2 million or 254.3% during the period from $10.7 million at December 31, 2024 to $37.8 million at September 30, 2025. Our net loans receivable increased $1.2 million, or 0.3%, from $391.0 million as of December 31, 2024 to $392.1 million as of September 30, 2025. Our available-for-sale securities decreased $2.32 million, or 7.06%, from $32.9 million as of December 31, 2024 to $30.6 million as of September 30, 2025. Borrowings were paid down to $0 at September 30, 2025 from $15.4 million at December 31, 2024 with funds from the $39.7 million increase in deposits during the same time period.
112
Our assets increased $18.9 million, or 4.3%, from $442.2 million as of December 31, 2023 to $461.0 million as of December 31, 2024. Our asset increase was primarily in loans receivable and offset by decreases in Cash and due from banks and Securities. Our cash and cash equivalents decreased $3.9 million or 26.65%, from $14.5 million as of December 31, 2023 to $10.7 million as of December 31, 2024. Our net loans receivable increased $26.6 million or 7.3%, from $364.4 million as of December 31, 2023 to $391.0 million as of December 31, 2024. Our Securities available-for-sale decreased $3.0 million or 8.3%, from $35.9 million as of December 31, 2023, to $32.9 million as of December 31, 2024. Our Held-to-maturity securities decreased $304,000 or 2.5%, from $12.0 million as of December 31, 2023, to $11.7 million as of December 31, 2024. Deposit increased $33.0 million from December 31, 2023 to December 31, 2024 primarily in certificates of deposits which increased $35.4 million. Borrowings decreased $20.8 million or 57.3% from December 31, 2023, to December 31, 2024 with funds from the increase in deposits and subordinated debt during the same time period.
Investment Securities
Total investments were $40.9 million as of September 30, 2025, versus $44.6 million as of December 31, 2024, and $47.9 million at December 31, 2023.
Total securities represented 8.4%, 9.6%, and 10.8% of total assets as of September 30, 2025, December 31, 2024, and December 31, 2023, respectively. There have been no securities purchased during the last 24 months.
All of our residential mortgage-backed securities are agency securities.
From December 31, 2024 to September 30, 2025, total securities have decreased from $44.6 million to $40.9 million. Securities are purchased based on yield and liquidity.
The following tables summarize the amortized cost and estimated fair value of investment securities as of the dates shown:
|
|
At September 30, 2025 |
|
|||||||||||||||||
Investment Securities |
|
Amortized |
|
|
Gross |
|
|
Gross |
|
|
Estimated |
|
|
Fair Value |
|
|||||
Available-for sale |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Residential mortgage-backed securities-government sponsored ("GSE") |
|
$ |
11,591 |
|
|
$ |
16 |
|
|
$ |
261 |
|
|
$ |
11,346 |
|
|
|
2.3 |
% |
US Government Agencies |
|
|
8,825 |
|
|
|
— |
|
|
|
628 |
|
|
|
8,197 |
|
|
|
1.7 |
% |
State and political subdivisions |
|
|
3,908 |
|
|
|
— |
|
|
|
20 |
|
|
|
3,888 |
|
|
|
0.8 |
% |
Corporate bonds |
|
|
7,470 |
|
|
|
8 |
|
|
|
326 |
|
|
|
7,152 |
|
|
|
1.5 |
% |
Total available-for sale |
|
$ |
31,794 |
|
|
$ |
24 |
|
|
$ |
1,235 |
|
|
$ |
30,583 |
|
|
|
6.3 |
% |
Held-to maturity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
GSE |
|
$ |
5,373 |
|
|
$ |
— |
|
|
$ |
32 |
|
|
$ |
5,341 |
|
|
|
1.1 |
% |
US Government Agencies |
|
|
1,704 |
|
|
|
— |
|
|
|
33 |
|
|
|
1,671 |
|
|
|
0.3 |
% |
State and political subdivisions |
|
|
2,690 |
|
|
|
36 |
|
|
|
1 |
|
|
|
2,725 |
|
|
|
0.6 |
% |
Corporate bonds |
|
|
500 |
|
|
|
— |
|
|
|
27 |
|
|
|
473 |
|
|
|
0.1 |
% |
Total held-to-maturity |
|
$ |
10,267 |
|
|
$ |
36 |
|
|
$ |
93 |
|
|
$ |
10,210 |
|
|
|
2.1 |
% |
Total Securities |
|
$ |
42,061 |
|
|
$ |
60 |
|
|
$ |
1,328 |
|
|
$ |
40,793 |
|
|
|
8.4 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
113
|
|
At December 31, 2024 |
|
|||||||||||||||||
Investment Securities |
|
Amortized |
|
|
Gross |
|
|
Gross |
|
|
Estimated |
|
|
Fair Value |
|
|||||
Available-for sale |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
GSE |
|
$ |
12,930 |
|
|
$ |
— |
|
|
$ |
662 |
|
|
$ |
12,268 |
|
|
|
2.7 |
% |
US Government Agencies |
|
|
9,558 |
|
|
|
— |
|
|
|
890 |
|
|
|
8,668 |
|
|
|
1.9 |
% |
State and political subdivisions |
|
|
4,247 |
|
|
|
— |
|
|
|
113 |
|
|
|
4,134 |
|
|
|
0.9 |
% |
Corporate bonds |
|
|
8,470 |
|
|
|
— |
|
|
|
635 |
|
|
|
7,835 |
|
|
|
1.7 |
% |
Total available-for sale |
|
$ |
35,205 |
|
|
$ |
— |
|
|
$ |
2,300 |
|
|
$ |
32,905 |
|
|
|
7.1 |
% |
Held-to maturity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
GSE |
|
$ |
6,571 |
|
|
$ |
— |
|
|
$ |
83 |
|
|
$ |
6,488 |
|
|
|
1.4 |
% |
US Government Agencies |
|
|
1,967 |
|
|
|
— |
|
|
|
93 |
|
|
|
1,874 |
|
|
|
0.4 |
% |
State and political subdivisions |
|
|
2,699 |
|
|
|
25 |
|
|
|
14 |
|
|
|
2,710 |
|
|
|
0.6 |
% |
Corporate bonds |
|
|
500 |
|
|
|
— |
|
|
|
15 |
|
|
|
485 |
|
|
|
0.1 |
% |
Total held-to-maturity |
|
$ |
11,737 |
|
|
$ |
25 |
|
|
$ |
205 |
|
|
$ |
11,557 |
|
|
|
2.5 |
% |
Total Securities |
|
$ |
46,942 |
|
|
$ |
25 |
|
|
$ |
2,505 |
|
|
$ |
44,462 |
|
|
|
9.6 |
% |
|
|
At December 31, 2023 |
|
|||||||||||||||||
Investment Securities |
|
Amortized |
|
|
Gross |
|
|
Gross |
|
|
Estimated |
|
|
Fair Value |
|
|||||
Available-for sale |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
GSE |
|
$ |
14,693 |
|
|
|
9 |
|
|
$ |
523 |
|
|
$ |
14,179 |
|
|
|
3.2 |
% |
US Government Agencies |
|
|
10,653 |
|
|
|
— |
|
|
|
849 |
|
|
|
9,804 |
|
|
|
2.2 |
% |
State and political subdivisions |
|
|
4,552 |
|
|
|
— |
|
|
|
124 |
|
|
|
4,428 |
|
|
|
1.0 |
% |
Corporate bonds |
|
|
8,470 |
|
|
|
— |
|
|
|
991 |
|
|
|
7,479 |
|
|
|
1.7 |
% |
Total available-for sale |
|
$ |
38,368 |
|
|
$ |
9 |
|
|
$ |
2,487 |
|
|
$ |
35,890 |
|
|
|
8.1 |
% |
Held-to maturity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
GSE |
|
$ |
6,561 |
|
|
|
— |
|
|
$ |
263 |
|
|
$ |
6,298 |
|
|
|
1.4 |
% |
US Government Agencies |
|
|
2,268 |
|
|
|
— |
|
|
|
107 |
|
|
|
2,161 |
|
|
|
0.5 |
% |
State and political subdivisions |
|
|
2,712 |
|
|
|
111 |
|
|
|
14 |
|
|
|
2,809 |
|
|
|
0.6 |
% |
Corporate bonds |
|
|
500 |
|
|
|
— |
|
|
|
82 |
|
|
|
418 |
|
|
|
0.1 |
% |
Total held-to-maturity |
|
$ |
12,041 |
|
|
$ |
111 |
|
|
$ |
466 |
|
|
$ |
11,686 |
|
|
|
2.6 |
% |
Total Securities |
|
$ |
50,409 |
|
|
$ |
120 |
|
|
$ |
2,953 |
|
|
$ |
47,576 |
|
|
|
10.8 |
% |
The following outlines the unrealized losses and estimated fair value by investment category and length of time that individual securities have been in a continuous unrealized loss position as of September 30, 2025, December 31, 2024, and 2023:
|
|
September 30, 2025 |
|
|
December 31, 2024 |
|
|
December 31, 2023 |
|
|||||||||||||||
Available-for-sale |
|
Estimated |
|
|
Unrealized |
|
|
Estimated |
|
|
Unrealized |
|
|
Estimated |
|
|
Unrealized |
|
||||||
Unrealized loss for less than 12 months: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
GSE |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
5,542 |
|
|
$ |
212 |
|
|
$ |
4,058 |
|
|
$ |
15 |
|
US Government Agencies |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
State and political subdivisions |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Corporate bonds |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Total less than 12 months |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
5,542 |
|
|
$ |
212 |
|
|
$ |
4,058 |
|
|
$ |
15 |
|
Unrealized loss for more than 12 months: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
GSE |
|
$ |
6,670 |
|
|
$ |
261 |
|
|
$ |
6,717 |
|
|
$ |
450 |
|
|
$ |
7,888 |
|
|
$ |
508 |
|
US Government Agencies |
|
|
8,197 |
|
|
|
628 |
|
|
|
8,668 |
|
|
|
890 |
|
|
|
9,804 |
|
|
|
849 |
|
State and political subdivisions |
|
|
2,850 |
|
|
|
28 |
|
|
|
4,134 |
|
|
|
113 |
|
|
|
4,428 |
|
|
|
124 |
|
Corporate bonds |
|
|
6,652 |
|
|
|
318 |
|
|
|
7,335 |
|
|
|
635 |
|
|
|
6,979 |
|
|
|
991 |
|
Total more than 12 months |
|
|
24,369 |
|
|
|
1,235 |
|
|
|
26,854 |
|
|
|
2,088 |
|
|
|
29,099 |
|
|
|
2,472 |
|
Total |
|
$ |
24,369 |
|
|
$ |
1,235 |
|
|
$ |
32,396 |
|
|
$ |
2,300 |
|
|
$ |
33,157 |
|
|
$ |
2,487 |
|
114
All of the securities that were in an unrealized loss position at September 30, 2025, December 31, 2024 and December 31, 2023, are bonds the Bank has determined are in a loss position due primarily to interest rate factors and not credit quality concerns. In management’s opinion, based on third party credit ratings and the amount of the impairment, credit risk for these securities is minimal. Management has the intent and ability to hold debt securities until recovery and does not believe it will have to sell the securities prior to recovery.
At September 30, 2025, the Bank had 42 securities in an unrealized loss position for 12 months or more and 0 securities in an unrealized loss position less than 12 months, none of which exceeded 20.1% of the security’s carrying amount. At December 31, 2024, the Bank had 50 securities in an unrealized loss position for 12 months or more and 3 securities in an unrealized loss position less than 12 months, none of which exceeded 22.3% of the security’s carrying amount.
At September 30, 2025, December 31, 2024 and December 31, 2023, there was no allowance for credit losses related to the available-for-sale portfolio. Accrued interest receivable on available-for-sale debt securities totaled $173,000, $151,000 and $207,000 at September 30, 2025, December 31, 2024 and December 31, 2023, respectively, and was excluded from the estimate of credit losses.
The amortized cost and estimated fair value of investment securities at September 30, 2025, by contractual maturity, are shown below. Expected maturities of mortgage-backed securities may differ from contractual maturities because the securities may be called without any penalties:
|
|
September 30, 2025 |
|
|||||
|
|
Amortized |
|
|
Estimated |
|
||
Available-for-sale: |
|
|
|
|
|
|
||
Maturing within one year |
|
$ |
1,040 |
|
|
$ |
1,046 |
|
Maturing in one to five years |
|
|
7,994 |
|
|
|
7,805 |
|
Maturing in five to ten years |
|
|
11,169 |
|
|
|
10,386 |
|
Maturing after ten years |
|
|
— |
|
|
|
— |
|
Mortgage-backed securities |
|
|
11,591 |
|
|
|
11,346 |
|
Total available-for-sale investment securities |
|
$ |
31,794 |
|
|
$ |
30,583 |
|
|
|
|
|
|
|
|
||
Held-to-maturity: |
|
|
|
|
|
|
||
Maturing within one year |
|
$ |
- |
|
|
$ |
- |
|
Maturing in one to five years |
|
|
2,327 |
|
|
|
2,293 |
|
Maturing in five to ten years |
|
|
2,567 |
|
|
|
2,576 |
|
Maturing after ten years |
|
|
— |
|
|
|
— |
|
Mortgage-backed securities |
|
|
5,373 |
|
|
|
5,341 |
|
Total held-to-maturity investment securities |
|
$ |
10,267 |
|
|
$ |
10,210 |
|
Victory did not sell any AFS investment securities during 2025, 2024, or 2023. There were no securities pledged as collateral at September 30, 2025, December 31, 2024 and 2023 to secure public deposits.
Loans and Allowance for Credit Losses
The portfolio segments include agricultural, commercial, consumer, construction, commercial real estate and residential real estate loans. Consumer loans rely on the historical cash flows of individual borrowers and on the collateral securing the loan. Agriculture, commercial, and commercial real estate, including construction, are comprised of loans with a reliance on historic or projected cash flows of small business borrowers and of small-scale investors, as well as the underlying collateral and any guarantors. The underwriting criteria across all segments consider the risk attributes to be impacted by the conditions of the market(s) in which the Bank operates.
115
The Victory Bank’s Board of Directors annually approves the loan underwriting policy which are used as guidelines in the underwriting process.
The following table summarizes our loan portfolio by type of loan as of September 30, 2025 and December 31, 2024 comparisons:
|
|
|
|
|
|
|
|
Change |
|
|||||||
|
|
September 30, 2025 |
|
|
December 31, 2024 |
|
|
$ |
|
|
% |
|
||||
Agricultural |
|
$ |
1,945 |
|
|
$ |
2,018 |
|
|
$ |
(73 |
) |
|
|
(3.6 |
)% |
Commercial |
|
|
33,921 |
|
|
|
40,100 |
|
|
|
(6,179 |
) |
|
|
(15.4 |
) |
Consumer |
|
|
5,093 |
|
|
|
2,920 |
|
|
|
2,173 |
|
|
|
74.4 |
|
Construction |
|
|
21,732 |
|
|
|
21,690 |
|
|
|
42 |
|
|
|
0.2 |
|
Commercial real estate |
|
|
237,458 |
|
|
|
233,179 |
|
|
|
4,279 |
|
|
|
1.8 |
|
Residential real estate |
|
|
96,449 |
|
|
|
95,625 |
|
|
|
824 |
|
|
|
0.9 |
|
Total loans |
|
|
396,598 |
|
|
|
395,532 |
|
|
|
1,066 |
|
|
|
0.3 |
|
Deferred loan fees |
|
|
(1,014 |
) |
|
|
(967 |
) |
|
|
(47 |
) |
|
|
4.9 |
|
Allowance for credit losses |
|
|
(3,473 |
) |
|
|
(3,611 |
) |
|
|
138 |
|
|
|
(3.8 |
) |
Net Loans |
|
$ |
392,111 |
|
|
$ |
390,954 |
|
|
$ |
1,157 |
|
|
|
0.3 |
% |
The following table summarizes our loan portfolio by type of loan as of December 31, 2023:
|
|
December 31, 2023 |
|
|
Commercial Term |
|
$ |
38,682 |
|
Commercial Mortgage |
|
|
224,500 |
|
Commercial Line |
|
|
20,665 |
|
Construction |
|
|
61,250 |
|
Home Equity |
|
|
2,740 |
|
Consumer |
|
|
20,937 |
|
Total loans |
|
|
368,774 |
|
Deferred loan fees |
|
|
(947 |
) |
Allowance for credit losses |
|
|
(3,444 |
) |
Net Loans |
|
$ |
364,383 |
|
The following table summarizes the allocation of the allowance for credit losses by loan type and the percentage of each loan type to total loans as of September 30, 2025 and December 31, 2024:
|
|
September 30, 2025 |
|
|
Loan portfolio % |
|
|
December 31, 2024 |
|
|
Loan portfolio % |
|
||||
Agricultural |
|
$ |
16 |
|
|
|
0.5 |
% |
|
$ |
15 |
|
|
|
0.5 |
% |
Commercial |
|
|
347 |
|
|
|
8.5 |
% |
|
|
381 |
|
|
|
10.1 |
% |
Consumer |
|
|
234 |
|
|
|
1.3 |
% |
|
|
170 |
|
|
|
0.7 |
% |
Construction |
|
|
91 |
|
|
|
5.5 |
% |
|
|
91 |
|
|
|
5.5 |
% |
Commercial real estate |
|
|
2,000 |
|
|
|
59.9 |
% |
|
|
2,224 |
|
|
|
59.0 |
% |
Residential real estate |
|
|
785 |
|
|
|
24.3 |
% |
|
|
730 |
|
|
|
24.2 |
% |
Allowance for credit losses |
|
$ |
3,473 |
|
|
|
100.0 |
% |
|
$ |
3,611 |
|
|
|
100.0 |
% |
The following table summarizes the allocation of the allowance for credit losses by loan type and the percentage of each loan type to total loans as of December 31, 2023:
116
|
|
December 31, 2023 |
|
|
Loan portfolio % |
|
||
Commercial Term |
|
$ |
363 |
|
|
|
10.5 |
% |
Commercial Mortgage |
|
|
1,962 |
|
|
|
60.9 |
% |
Commercial Line |
|
|
359 |
|
|
|
5.6 |
% |
Construction |
|
|
436 |
|
|
|
16.6 |
% |
Home Equity |
|
|
44 |
|
|
|
0.7 |
% |
Consumer |
|
|
280 |
|
|
|
5.7 |
% |
Total loans |
|
$ |
3,444 |
|
|
|
100.0 |
% |
As of September 30, 2025 total gross loans were $396.6 million. This represents an increase of $1.1 million compared to $395.5 million as of December 31, 2024. As of December 31, 2024, total gross loans were $395.5 million. This represents an increase of $26.8 million compared to $368.8 million as of December 31, 2023. Total gross loans as a percentage of deposits were 90.8%, 99.6% and 101.3% as of September 30, 2025, December 31, 2024 and December 31, 2023, respectively. Total gross loans as a percentage of assets were 81.2%, 85.8% and 83.4% as of September 30, 2025, December 31, 2024 and December 31, 2023, respectively.
As of September 30, 2025, commercial real estate loans were 59.9% of the loan portfolio compared to 59.0% as of December 31, 2024. Residential real estate loans were 24.3% of the loan portfolio at September 30, 2025 compared to 24.2% at December 31, 2024. Commercial loans decreased as a percentage of total loans to 8.5% at September 30, 2025 from 10.1% at December 31, 2024.
Commercial Real Estate Loans.
Commercial real estate loans are comprised of loans secured by multi-family residential properties, loans secured by non-farm, nonresidential properties, and loans secured by other non-farm, non-residential properties. This diversity helps reduce the exposure to adverse economic events that affect any single industry. Multifamily loans had the largest decline from December 31, 2024 to September 30, 2025 decreasing $5.9 million, or 11.5%. Owner occupied non-farm non-residential loans increased the most from December 31, 2024 to September 30, 2025 increasing $10.1 million or 10.3% to $108.0 million at September 30, 2025.
The following table details commercial real estate loans as of September 30, 2025 and December 31, 2024:
|
|
|
|
|
|
|
|
Change |
|
|||||||
Commercial Real Estate |
|
September 30, 2025 |
|
|
December 31, 2024 |
|
|
$ |
|
|
% |
|
||||
Secured by multi-family residential properties |
|
$ |
45,849 |
|
|
$ |
51,785 |
|
|
$ |
(5,936 |
) |
|
|
(11.5 |
)% |
Secured by owner-occupied, non-farm, non-residential properties |
|
|
107,977 |
|
|
|
97,926 |
|
|
|
10,051 |
|
|
|
10.3 |
|
Secured by other than non-farm, non-residential properties |
|
|
83,632 |
|
|
|
83,468 |
|
|
|
164 |
|
|
|
0.2 |
|
Total loans |
|
$ |
237,458 |
|
|
$ |
233,179 |
|
|
$ |
4,279 |
|
|
|
1.8 |
% |
The following tables set forth the contractual maturities of our total loan portfolio at September 30, 2025, December 31, 2024 and December 31, 2023. Demand loans, loans having no stated repayment schedule or maturity, and overdraft loans are reported as being due in one year or less. The tables present contractual maturities and do not reflect repricing or the effect of prepayments. Actual maturities may differ.
117
|
|
September 30, 2025 |
|
|||||||||||||||||
|
|
1 Year or Less |
|
|
1 to 5 Years |
|
|
5 to 15 Years |
|
|
After 15 Years |
|
|
Total |
|
|||||
Agricultural |
|
$ |
23 |
|
|
$ |
483 |
|
|
$ |
1,439 |
|
|
$ |
— |
|
|
$ |
1,945 |
|
Commercial |
|
|
11,275 |
|
|
|
10,763 |
|
|
|
11,883 |
|
|
|
— |
|
|
|
33,921 |
|
Consumer |
|
|
384 |
|
|
|
4,483 |
|
|
|
226 |
|
|
|
— |
|
|
|
5,093 |
|
Construction |
|
|
8,290 |
|
|
|
7,484 |
|
|
|
5,958 |
|
|
|
— |
|
|
|
21,732 |
|
Commercial real estate |
|
|
40,158 |
|
|
|
135,710 |
|
|
|
60,429 |
|
|
|
1,161 |
|
|
|
237,458 |
|
Residential real estate |
|
|
13,761 |
|
|
|
54,727 |
|
|
|
9,796 |
|
|
|
18,165 |
|
|
|
96,449 |
|
Total loans |
|
$ |
73,891 |
|
|
$ |
213,650 |
|
|
$ |
89,731 |
|
|
$ |
19,326 |
|
|
$ |
396,598 |
|
|
|
December 31,2024 |
|
|||||||||||||||||
|
|
1 Year or Less |
|
|
1 to 5 Years |
|
|
5 to 15 Years |
|
|
After 15 Years |
|
|
Total |
|
|||||
Agricultural |
|
$ |
12 |
|
|
$ |
391 |
|
|
$ |
1,615 |
|
|
$ |
— |
|
|
$ |
2,018 |
|
Commercial |
|
|
17,509 |
|
|
|
10,667 |
|
|
|
11,924 |
|
|
|
— |
|
|
|
40,100 |
|
Consumer |
|
|
215 |
|
|
|
2,463 |
|
|
|
242 |
|
|
|
— |
|
|
|
2,920 |
|
Construction |
|
|
16,061 |
|
|
|
2,900 |
|
|
|
2,729 |
|
|
|
— |
|
|
|
21,690 |
|
Commercial real estate |
|
|
29,567 |
|
|
|
146,783 |
|
|
|
55,652 |
|
|
|
1,177 |
|
|
|
233,179 |
|
Residential real estate |
|
|
10,576 |
|
|
|
58,397 |
|
|
|
9,796 |
|
|
|
16,856 |
|
|
|
95,625 |
|
Total loans |
|
$ |
73,940 |
|
|
$ |
221,601 |
|
|
$ |
81,958 |
|
|
$ |
18,033 |
|
|
$ |
395,532 |
|
|
|
December 31,2023 |
|
|||||||||||||||||
|
|
1 Year or Less |
|
|
1 to 5 Years |
|
|
5 to 15 Years |
|
|
After 15 Years |
|
|
Total |
|
|||||
Commercial Term |
|
$ |
12,049 |
|
|
$ |
8,567 |
|
|
$ |
18,066 |
|
|
$ |
— |
|
|
$ |
38,682 |
|
Commercial Mortgage |
|
|
20,527 |
|
|
|
151,582 |
|
|
|
51,391 |
|
|
|
1,000 |
|
|
|
224,500 |
|
Commercial Line |
|
|
18,966 |
|
|
|
1,699 |
|
|
|
— |
|
|
|
— |
|
|
|
20,665 |
|
Construction |
|
|
20,351 |
|
|
|
33,537 |
|
|
|
7,362 |
|
|
|
— |
|
|
|
61,250 |
|
Home Equity |
|
|
692 |
|
|
|
298 |
|
|
|
1,241 |
|
|
|
509 |
|
|
|
2,740 |
|
Consumer |
|
|
1,305 |
|
|
|
4,474 |
|
|
|
1,436 |
|
|
|
13,722 |
|
|
|
20,937 |
|
Total loans |
|
$ |
73,890 |
|
|
$ |
200,157 |
|
|
$ |
79,496 |
|
|
$ |
15,231 |
|
|
$ |
368,774 |
|
The following tables set forth our fixed and adjustable-rate loans at September 30, 2025 and December 31, 2024 that are contractually due after September 30, 2025 and December 31, 2024, respectively.
|
|
September 30, 2025 |
|
|
December 31, 2024 |
|
||||||||||
|
|
Adjustable |
|
|
Fixed Rate |
|
|
Adjustable |
|
|
Fixed Rate |
|
||||
Agricultural |
|
$ |
359 |
|
|
$ |
1,586 |
|
|
$ |
391 |
|
|
$ |
1,627 |
|
Commercial |
|
|
10,288 |
|
|
|
23,633 |
|
|
|
11,131 |
|
|
|
28,969 |
|
Consumer |
|
|
3,712 |
|
|
|
1,381 |
|
|
|
1,439 |
|
|
|
1,481 |
|
Construction |
|
|
4,237 |
|
|
|
17,495 |
|
|
|
3,539 |
|
|
|
18,151 |
|
Commercial real estate |
|
|
177,893 |
|
|
|
59,565 |
|
|
|
171,232 |
|
|
|
61,947 |
|
Residential real estate |
|
|
59381 |
|
|
|
37,068 |
|
|
|
60,189 |
|
|
|
35,436 |
|
Total loans |
|
$ |
255,870 |
|
|
$ |
140,728 |
|
|
$ |
247,921 |
|
|
$ |
147,611 |
|
Allowance for Credit Losses on Loans
We maintain an allowance for credit losses on loans ("ACL") that represents management’s best estimate of the credit losses and risks inherent in the loan portfolio. The estimate of expected credit losses is based on relevant information about historical events, current conditions, and reasonable and supportable forecasts that affect the collectability of the reported amounts. The Bank uses current
118
loan data and loss history, calculates the weighted average remaining maturity in each loan category, and utilizes leading economic indicators to provide a forward-looking feature. The Bank then takes that information, adds custom qualitative factors and specific reserves tied to collateral dependent loans to calculate its allowance for credit losses.
Although we believe that we have established our ACL in accordance with GAAP and that the allowance for credit losses is adequate to provide for expected losses in the portfolio at all times shown above, future provisions will be subject to ongoing evaluations of the risks in our loan portfolio. If we experience economic declines or if asset quality deteriorates, material additional provisions could be required.
The ACL represents management’s estimate of losses inherent in the loan portfolio as of the balance sheet date and is recorded as a reduction to loans. The allowance is increased by the provision for credit losses, and decreased by charge-offs, net of recoveries. Loans deemed to be uncollectible are charged against the allowance, and subsequent recoveries, if any, are credited to the allowance. All, or part, of the principal balance of loans receivable are charged off to the allowance as soon as it is determined that the repayment of all, or part, of the principal balance is highly unlikely. The Bank has elected to not estimate an allowance for credit losses on accrued interest receivable, as it already has a policy in place to reverse or write-off accrued interest in a timely manner.Victory’s estimate of the ACL reflects losses expected over the remaining contractual life of the assets.
The historical loss rate for the loan portfolio is determined by pooling loans into groups sharing similar risk characteristics and tracking historical net charge offs to calculate the historical loss rate.
The Bank also incorporates a reasonable and supportable loss forecast period to account for the effect of forecasted economic conditions and other factors on the performance of the loan portfolio which could differ from historical loss experience. Forward looking adjustments considers macro-economic indicators. The Bank generally utilizes a forecast period of 36 months. For the contractual term that extends beyond the forecast period, the Bank immediately reverts to historical loss rates.
The Bank uses several qualitative factors to supplement the other elements of its allowance for credit losses calculation under CECL. These qualitative factors are intended to estimate losses that differ from actual historical loss experience. Relevant factors included, but are not limited to, economic trends and conditions such as regional unemployment, experience and depth of lending staff, trends in delinquencies, trends in collateral values, and results of loan reviews and loan-related audits. Although the estimation of credit losses can be somewhat subjective, the application of such qualitative factors must be reasonable and supportable.
Collateral dependent loans are those loans that are non-accruing and on which the borrowers cannot demonstrate the ability to make and are not making regularly scheduled loan payments, thereby making repayment of the loan dependent upon the operation or sale of the collateral securing the loan. Collateral dependent loans are evaluated individually as they do not share similar risk characteristics with other loans and are removed from their respective homogeneous pools. Under CECL, for collateral dependent loans, the Bank has adopted the practical expedient to measure the allowance for credit losses based on the fair value of the collateral.
The Bank's policy is to obtain third-party appraisals on any significant pieces of collateral held on collateral dependent loans. For such loans secured by real estate, the Bank's policy is to estimate the allowance by discounting the appraised value by 20%, which considers estimated selling costs and additional discounts estimated to be incurred in a sale. For real estate collateral that is considered special- or limited-purpose or in industries that are undergoing heightened stress, the Bank may further discount the collateral values. For non-real estate collateral secured loans, the Bank generally discounts values by 0%-50% depending on the nature and marketability of the collateral. This provides for selling costs and liquidity discounts that are usually incurred when disposing of non-real estate collateral.
The following tables present the activity in the ACL by class of loans for the nine month period ended September 30, 2025, and the years ended December 31, 2024, and 2023.
119
|
|
Balance at December 31, 2024 |
|
|
Charge-Offs |
|
|
Recoveries |
|
|
Provision |
|
|
Balance September 30, 2025 |
|
|||||
Allowance for credit losses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Agricultural |
|
$ |
15 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
1 |
|
|
$ |
16 |
|
Commercial |
|
|
381 |
|
|
|
— |
|
|
|
16 |
|
|
|
(50 |
) |
|
|
347 |
|
Commercial Real Estate |
|
|
2,224 |
|
|
|
— |
|
|
|
— |
|
|
|
(224 |
) |
|
|
2,000 |
|
Construction |
|
|
91 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
91 |
|
Consumer |
|
|
170 |
|
|
|
(7 |
) |
|
|
3 |
|
|
|
68 |
|
|
|
234 |
|
Residential Real Estate |
|
|
730 |
|
|
|
— |
|
|
|
— |
|
|
|
55 |
|
|
|
785 |
|
Total |
|
$ |
3,611 |
|
|
$ |
(7 |
) |
|
$ |
19 |
|
|
$ |
(150 |
) |
|
$ |
3,473 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
|
|
Balance at December 31, 2023 |
|
|
Reallocation to New Pools |
|
|
Charge-Offs |
|
|
Recoveries |
|
|
Provision |
|
|
Balance December 31, 2024 |
|
||||||
Allowance for credit losses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Agricultural |
|
$ |
— |
|
|
$ |
15 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
15 |
|
Commercial |
|
|
— |
|
|
|
576 |
|
|
|
(33 |
) |
|
|
— |
|
|
|
(162 |
) |
|
|
381 |
|
Commercial Term |
|
|
363 |
|
|
|
(363 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Commercial Mortgage |
|
|
1,962 |
|
|
|
(1,962 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Commercial Line |
|
|
359 |
|
|
|
(359 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Commercial Real Estate |
|
|
— |
|
|
|
1,950 |
|
|
|
— |
|
|
|
— |
|
|
|
274 |
|
|
|
2,224 |
|
Construction |
|
|
436 |
|
|
|
(317 |
) |
|
|
— |
|
|
|
— |
|
|
|
(28 |
) |
|
|
91 |
|
Consumer |
|
|
280 |
|
|
|
(84 |
) |
|
|
— |
|
|
|
— |
|
|
|
(26 |
) |
|
|
170 |
|
Home Equity |
|
|
44 |
|
|
|
(44 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Residential Real Estate |
|
|
— |
|
|
|
588 |
|
|
|
(9 |
) |
|
|
— |
|
|
|
151 |
|
|
|
730 |
|
Total |
|
$ |
3,444 |
|
|
$ |
— |
|
|
$ |
(42 |
) |
|
$ |
— |
|
|
$ |
209 |
|
|
$ |
3,611 |
|
|
|
Balance at December 31, 2022 |
|
|
Charge-Offs |
|
|
Recoveries |
|
|
Provision |
|
|
Balance December 31, 2023 |
|
|||||
Allowance for credit losses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Commercial Term |
|
$ |
333 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
30 |
|
|
$ |
363 |
|
Commercial Mortgage |
|
|
1,839 |
|
|
|
— |
|
|
|
2 |
|
|
|
121 |
|
|
|
1,962 |
|
Commercial Line |
|
|
186 |
|
|
|
— |
|
|
|
— |
|
|
|
173 |
|
|
|
359 |
|
Construction |
|
|
453 |
|
|
|
— |
|
|
|
— |
|
|
|
(17 |
) |
|
|
436 |
|
Consumer |
|
|
315 |
|
|
|
— |
|
|
|
— |
|
|
|
(35 |
) |
|
|
280 |
|
Home Equity |
|
|
149 |
|
|
|
— |
|
|
|
— |
|
|
|
(105 |
) |
|
|
44 |
|
Total |
|
$ |
3,275 |
|
|
$ |
— |
|
|
$ |
2 |
|
|
$ |
167 |
|
|
$ |
3,444 |
|
As of September 30, 2025, Victory’s ACL was $3.5 million, which represents 0.88% of total loans outstanding. During the nine months ended September 30, 2025, Victory had net loan recoveries of approximately $12,000.
The following table represents the net-charge-offs to average loans for the nine-month period ending September 20, 2025 and 2024.
For the nine months ending: |
|
September 30, 2025 |
|
September 30, 2024 |
||||||||
|
|
Average Loans |
|
Net Charge-Off |
|
Net Charge-Offs to Average Loans |
|
Average Loans |
|
Net Charge-Off |
|
Net Charge-Offs to Average Loans |
Agricultural |
|
$1,967 |
|
$— |
|
0.00% |
|
$2,110 |
|
$— |
|
0.00% |
Commercial |
|
36,827 |
|
16 |
|
0.04% |
|
40,322 |
|
(29) |
|
-0.07% |
Consumer |
|
3,897 |
|
— |
|
0.00% |
|
3,798 |
|
— |
|
0.00% |
Construction |
|
19,898 |
|
— |
|
0.00% |
|
27,804 |
|
— |
|
0.00% |
Commercial Real Estate |
|
231,535 |
|
(4) |
|
0.00% |
|
228,762 |
|
— |
|
0.00% |
Residential Real Estate |
|
96,261 |
|
(0) |
|
0.00% |
|
85,828 |
|
(9) |
|
-0.01% |
Total |
|
$390,385 |
|
$12 |
|
0.00% |
|
$388,624 |
|
$(38) |
|
0.00% |
120
December 31, 2024, Victory’s ACL was $3.6 million, which represented 0.91% of total loans outstanding. During the twelve months ended December 31, 2024, Victory had net loan charge-offs of approximately $42,000. As of December 31, 2023, Victory’s ACL was $3.4 million, which represented 0.93% of total loans outstanding.
Past Due & Nonperforming Assets
A loan is considered to be in payment default once it is 30 days contractually past due under its terms. Loans are placed on nonaccrual status when, in management’s opinion, the borrower may be unable to meet payment obligations as they become due, as well as when required by regulatory provisions. Loans may be placed on nonaccrual status regardless of whether or not such loans are considered past due. When interest accrual is discontinued, all unpaid accrued interest is reversed. Interest income is subsequently recognized only to the extent cash payments are received in excess of principal due. Loans are returned to accrual status when all the principal and interest amounts contractually due are brought current and future payments are reasonably assured.
We have several procedures in place to assist in maintaining the overall quality of our loan portfolio. We have established underwriting guidelines to be followed by our loan officers, and we also monitor our delinquency levels for any negative or adverse trends. There can be no assurance, however, that our loan portfolio will not become subject to increasing pressures from deteriorating borrower credit due to general economic conditions.
We believe our lending approach and focused management of nonperforming assets has resulted in sound asset quality and timely resolution of problem assets.
The table below details non-performing assets as of September 30, 2025 and December 31, 2024:.
|
|
September 30, |
|
|
December 31, |
|
||
Non-Performing Assets |
|
2025 |
|
|
2024 |
|
||
Loans past due 90 days or more and accruing |
|
|
|
|
|
|
||
Agricultural |
|
$ |
— |
|
|
$ |
— |
|
Commercial |
|
|
— |
|
|
|
— |
|
Consumer |
|
|
— |
|
|
|
8 |
|
Construction |
|
|
— |
|
|
|
— |
|
Commercial real estate |
|
|
— |
|
|
|
— |
|
Residential real estate |
|
|
— |
|
|
|
206 |
|
Total loans past due 90 days or more and accruing |
|
|
— |
|
|
|
214 |
|
|
|
|
|
|
|
|
||
Non-accrual loans |
|
|
|
|
|
|
||
Agricultural |
|
|
— |
|
|
|
— |
|
Commercial |
|
|
— |
|
|
|
— |
|
Consumer |
|
|
— |
|
|
|
— |
|
Construction |
|
|
— |
|
|
|
— |
|
Commercial real estate |
|
|
— |
|
|
|
— |
|
Residential real estate |
|
|
— |
|
|
|
206 |
|
Total non-accrual loans |
|
|
— |
|
|
|
206 |
|
|
|
|
|
|
|
|
||
Other real estate owned |
|
|
— |
|
|
|
— |
|
Total non-performing assets |
|
$ |
— |
|
|
$ |
420 |
|
Total non-performing assets as a percent of total assets |
|
|
0.00 |
% |
|
|
0.09 |
% |
Nonaccrual loans to total loans |
|
|
0.00 |
% |
|
|
0.00 |
% |
Allowance for credit losses to nonaccrual loans |
|
N/M |
|
|
|
859.76 |
% |
|
121
The table below details non-performing assets as of December 31, 2023:.
|
|
December 31, |
|
|
Non-Performing Assets |
|
2023 |
|
|
Loans past due 90 days or more and accruing |
|
|
|
|
Agricultural |
|
$ |
— |
|
Commercial |
|
|
— |
|
Consumer |
|
|
— |
|
Construction |
|
|
— |
|
Commercial real estate |
|
|
— |
|
Residential real estate |
|
|
— |
|
Total loans past due 90 days or more and accruing |
|
|
— |
|
|
|
|
|
|
Non-accrual loans |
|
|
|
|
Commercial term |
|
|
— |
|
Commercial mortgage |
|
|
786 |
|
Commercial line |
|
|
694 |
|
Construction |
|
|
— |
|
Home equity |
|
|
57 |
|
Consumer |
|
|
636 |
|
Total non-accrual loans |
|
|
2,173 |
|
|
|
|
|
|
Other real estate owned |
|
|
— |
|
Total non-performing assets |
|
$ |
2,173 |
|
Total non-performing assets as a percent of total assets |
|
|
0.49 |
% |
Nonaccrual loans to total loans |
|
|
0.00 |
% |
Allowance for credit losses to nonaccrual loans |
|
|
158.49 |
% |
122
Collateral-Dependent and Non-Accrual Loans:
A loan is considered collateral dependent when the borrower is experiencing financial difficulty and repayment is expected to be provided substantially through the operation or sale of the collateral. The following table presents collateral dependent loans by portfolio segment and collateral type, including those loans on non-accrual with and without a related allowance allocation as of September 30, 2025, December 31, 2024, and 2023.
|
|
Collateral- Dependent Loans |
|
|
Non-Accrual Loans |
|
||||||||||||||||||||||
|
|
Residential Property |
|
|
Business Assets |
|
|
Commercial Property |
|
|
Total |
|
|
Without an |
|
|
With an |
|
|
Total |
|
|||||||
September 30, 2025: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Agricultural |
|
$ |
— |
|
|
$ |
— |
|
|
|
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
Commercial |
|
|
— |
|
|
|
61 |
|
|
|
— |
|
|
|
61 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Commercial Real Estate |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Construction |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Consumer |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Residential Real Estate |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Ending Balance |
|
$ |
— |
|
|
$ |
61 |
|
|
$ |
— |
|
|
$ |
61 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
December 31, 2024: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Agricultural |
|
$ |
— |
|
|
$ |
— |
|
|
|
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
Commercial |
|
|
117 |
|
|
|
64 |
|
|
|
— |
|
|
|
181 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Commercial Real Estate |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Construction |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Consumer |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Residential Real Estate |
|
|
206 |
|
|
|
— |
|
|
|
— |
|
|
|
206 |
|
|
|
— |
|
|
|
206 |
|
|
|
206 |
|
Ending Balance |
|
$ |
323 |
|
|
$ |
64 |
|
|
$ |
— |
|
|
$ |
387 |
|
|
$ |
— |
|
|
$ |
206 |
|
|
$ |
206 |
|
December 31, 2023: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Commercial Term |
|
$ |
— |
|
|
$ |
3 |
|
|
|
428 |
|
|
$ |
431 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
Commercial Mortgage |
|
|
— |
|
|
|
77 |
|
|
|
2,592 |
|
|
|
2,669 |
|
|
|
— |
|
|
|
786 |
|
|
|
786 |
|
Commercial Line |
|
|
— |
|
|
|
— |
|
|
|
2,518 |
|
|
|
2,518 |
|
|
|
— |
|
|
|
694 |
|
|
|
694 |
|
Construction |
|
|
— |
|
|
|
— |
|
|
|
138 |
|
|
|
138 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Home Equity |
|
|
57 |
|
|
|
— |
|
|
|
— |
|
|
|
57 |
|
|
|
57 |
|
|
|
— |
|
|
|
57 |
|
Consumer |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
613 |
|
|
|
23 |
|
|
|
636 |
|
Ending Balance |
|
$ |
57 |
|
|
$ |
80 |
|
|
$ |
5,676 |
|
|
$ |
5,813 |
|
|
$ |
670 |
|
|
$ |
1,503 |
|
|
$ |
2,173 |
|
Interest income recognized on loans on non-accrual status during the nine months ended September 30, 2025, and the years ended December 31, 2024 and 2023 was $0, $11,000 and $113,000. Additional interest income that would have been recognized on non-accrual loans, had the loans been performing in accordance with the original terms of their contracts totaled $0, $5,000 and $37,000 for the nine months ended September 30, 2025, and the years ended December 31, 2024 and 2023, respectively.
123
Past Due Loans:
Management monitors the performance and credit quality of the loan portfolio by analyzing the length of time a recorded payment is past due and by aggregating loans based on their delinquencies. The following tables present the aging of the recorded investment in the past due loans and nonaccrual loans as of September 30, 2025, December 31, 2024, and 2023, by class of loans:
|
|
30-59 |
|
|
60-89 |
|
|
90 Days |
|
|
Total |
|
|
Current |
|
|
Total |
|
|
Loans >90 Days and Accruing |
|
|||||||
September 30, 2025: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Agricultural |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
1,945 |
|
|
$ |
1,945 |
|
|
$ |
— |
|
Commercial |
|
|
3 |
|
|
|
51 |
|
|
|
— |
|
|
|
54 |
|
|
|
33,867 |
|
|
|
33,921 |
|
|
|
— |
|
Consumer |
|
|
113 |
|
|
|
— |
|
|
|
— |
|
|
|
113 |
|
|
|
4,980 |
|
|
|
5,093 |
|
|
|
— |
|
Construction |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
21,732 |
|
|
|
21,732 |
|
|
|
— |
|
Commercial real estate |
|
|
— |
|
|
|
31 |
|
|
|
— |
|
|
|
31 |
|
|
|
237,427 |
|
|
|
237,458 |
|
|
|
— |
|
Residential real estate |
|
|
160 |
|
|
|
121 |
|
|
|
— |
|
|
|
281 |
|
|
|
96,168 |
|
|
|
96,449 |
|
|
|
— |
|
Total |
|
$ |
276 |
|
|
$ |
203 |
|
|
$ |
— |
|
|
$ |
479 |
|
|
$ |
396,119 |
|
|
$ |
396,598 |
|
|
$ |
— |
|
December 31, 2024: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Agricultural |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
2,018 |
|
|
$ |
2,018 |
|
|
$ |
— |
|
Commercial |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
40,100 |
|
|
|
40,100 |
|
|
|
— |
|
Consumer |
|
|
— |
|
|
|
1 |
|
|
|
8 |
|
|
|
9 |
|
|
|
2,911 |
|
|
|
2,920 |
|
|
|
8 |
|
Construction |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
21,690 |
|
|
|
21,690 |
|
|
|
— |
|
Commercial real estate |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
233,179 |
|
|
|
233,179 |
|
|
|
— |
|
Residential real estate |
|
|
51 |
|
|
|
— |
|
|
|
206 |
|
|
|
257 |
|
|
|
95,368 |
|
|
|
95,625 |
|
|
|
— |
|
Total |
|
$ |
51 |
|
|
$ |
1 |
|
|
$ |
214 |
|
|
$ |
266 |
|
|
$ |
395,266 |
|
|
$ |
395,532 |
|
|
$ |
8 |
|
December 31, 2023: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Commercial Term |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
38,682 |
|
|
$ |
38,682 |
|
|
$ |
— |
|
Commercial Mortgage |
|
|
— |
|
|
|
833 |
|
|
|
— |
|
|
|
833 |
|
|
|
223,667 |
|
|
|
224,500 |
|
|
|
— |
|
Commercial Line |
|
|
— |
|
|
|
— |
|
|
|
694 |
|
|
|
694 |
|
|
|
19,971 |
|
|
|
20,665 |
|
|
|
— |
|
Construction |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
61,250 |
|
|
|
61,250 |
|
|
|
— |
|
Home Equity |
|
|
25 |
|
|
|
— |
|
|
|
57 |
|
|
|
82 |
|
|
|
2,658 |
|
|
|
2,740 |
|
|
|
— |
|
Consumer |
|
|
212 |
|
|
|
42 |
|
|
|
637 |
|
|
|
891 |
|
|
|
20,046 |
|
|
|
20,937 |
|
|
|
— |
|
Total |
|
$ |
237 |
|
|
$ |
875 |
|
|
$ |
1,388 |
|
|
$ |
2,500 |
|
|
$ |
366,274 |
|
|
$ |
368,774 |
|
|
$ |
— |
|
As of September 30, 2025 and December 31, 2023, there were no loans greater than 90 days past due and still accruing. As of December 31, 2024, there was one consumer loan greater than 90 days past due and still accruing.
As of September 30, 2025, December 31, 2024 and December 31, 2023, there are no foreclosed assets. As of September 30, 2025 and December 31, 2024, the Bank has not initiated formal foreclosure proceedings on any consumer residential mortgages.
Loan Restructurings:
The Bank closely monitors the performance of all loans that are modified to borrowers experiencing financial difficulty to better understand the effectiveness of its modification efforts. These modifications may or may not extend the term of the loan, provide for an adjustment to the interest rate, lower the payment amount, or otherwise delay payments during a defined period for the purpose of providing borrowers additional time to return to compliance with the original loan terms.
There were no loans experiencing financial difficulty that were modified during the nine months ended September 30, 2025, and the years ended December 31, 2024 and 2023. Prior to the adoption of ASU 2022-02, the restructuring of a loan was considered a troubled debt restructuring if both (1) the borrower was experiencing financial difficulties and (2) the creditor had granted a concession. The adoption of ASU 2022-02 on January 1, 2023 replaced the accounting for troubled debt restructurings with modified loans with financial difficulties.
Credit Quality:
Management monitors ongoing risk for loans with a commercial purpose using a nine-point internal grading system. The first five rating categories, representing the lowest risk to the Bank, are combined and given a Pass rating. The Special Mention category includes loans that have potential weaknesses that may, if not monitored or corrected, weaken the asset or inadequately protect the Bank’s position at some future date. These assets pose elevated risk, but their weakness does not justify a more severe, or criticized rating.
124
Management generally follows regulatory definitions in assigning criticized ratings to loans, including substandard, doubtful, or loss. Substandard loans are classified as they have a well-defined weakness or weaknesses that jeopardize liquidation of the debt. These loans are characterized by the distinct possibility that the Bank will sustain some loss if the deficiencies are not corrected.
Substandard loans include loans that management has determined are not adequately protected by current cash flows or net worth of the borrower.
A doubtful loan has the same weaknesses as a substandard loan, however, collection or liquidation of principal in full is questionable and improbable. For doubtful loans, loss is present, but may not be determined until specific factors occur.
Loss assets are considered uncollectible, as the underlying borrowers are often in bankruptcy, have suspended debt repayments, or ceased business operations. Once a loan is classified as Loss, there is little prospect of collecting the loan’s principal or interest and it is generally written off.
Loans with a consumer purpose, which also includes certain commercial loans, construction and land development loans, and residential loans, are not-rated and are monitored based on the length of time a loan is past due. Not-rated loans are categorized as either Performing or Non-performing. Non-performing loans would be those in nonaccrual status, which generally occurs when a loan is maintained on a cash basis due to deterioration in the financial condition of the borrower, full payment of principal or interest is not expected, or principal or interest has been in default for a period of 90 days or more.
The Bank’s Board of Directors reviews on a quarterly basis the ratings of all criticized loans. In addition, an independent third-party performs an annual loan review. The review focuses on a sample of business and consumer purpose loans, and all previously criticized loans over a certain dollar threshold.
Loans not meeting the criteria above that are analyzed individually as part of the above described process are considered to be Pass rated loans. The following tables present the Bank’s loan portfolio based on its internal risk rating system by origination year as of September 30, 2025, December 31, 2024 and December 31,2023:
125
|
|
Amortized cost basis by origination year |
Revolving |
|
|
|
|
|||||||||||||||||||||||||
September 30, 2025: |
|
2025 |
2024 |
2023 |
2022 |
2021 |
Prior |
Loans |
|
|
Total |
|
||||||||||||||||||||
Agriculture: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Pass |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
124 |
|
|
$ |
49 |
|
|
$ |
738 |
|
|
$ |
1,011 |
|
|
$ |
23 |
|
|
$ |
1,945 |
|
Special mention |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Substandard |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Doubtful |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Loss |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Not-rated |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Total agriculture |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
124 |
|
|
$ |
49 |
|
|
$ |
738 |
|
|
$ |
1,011 |
|
|
$ |
23 |
|
|
$ |
1,945 |
|
YTD Gross Charge-offs |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
Not-Rated loans: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Performing |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Non-performing |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Total not-rated |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Commercial: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Pass |
|
$ |
3,273 |
|
|
$ |
2,694 |
|
|
$ |
4,002 |
|
|
$ |
3,562 |
|
|
$ |
1,010 |
|
|
$ |
2,929 |
|
|
$ |
10,378 |
|
|
$ |
27,848 |
|
Special mention |
|
|
44 |
|
|
|
— |
|
|
|
— |
|
|
|
1,328 |
|
|
|
— |
|
|
|
783 |
|
|
|
318 |
|
|
|
2,473 |
|
Substandard |
|
|
— |
|
|
|
— |
|
|
|
462 |
|
|
|
359 |
|
|
|
— |
|
|
|
281 |
|
|
|
2,498 |
|
|
|
3,600 |
|
Doubtful |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Loss |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Not-rated |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Total commercial |
|
$ |
3,317 |
|
|
$ |
2,694 |
|
|
$ |
4,464 |
|
|
$ |
5,249 |
|
|
$ |
1,010 |
|
|
$ |
3,993 |
|
|
$ |
13,194 |
|
|
$ |
33,921 |
|
YTD Gross Charge-offs |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
Not-Rated loans: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Performing |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Non-performing |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Total not-rated |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Consumer: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Pass |
|
$ |
2,293 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
312 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
77 |
|
|
$ |
2,682 |
|
Special mention |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Substandard |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Doubtful |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Loss |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Not-rated |
|
|
155 |
|
|
|
39 |
|
|
|
88 |
|
|
|
8 |
|
|
|
— |
|
|
|
979 |
|
|
|
1,142 |
|
|
|
2,411 |
|
Total consumer |
|
$ |
2,448 |
|
|
$ |
39 |
|
|
$ |
88 |
|
|
$ |
320 |
|
|
$ |
— |
|
|
$ |
979 |
|
|
$ |
1,219 |
|
|
$ |
5,093 |
|
YTD Gross Charge-offs |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
7 |
|
|
$ |
— |
|
|
$ |
7 |
|
Not-Rated loans: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Performing |
|
|
155 |
|
|
|
39 |
|
|
|
88 |
|
|
|
8 |
|
|
|
— |
|
|
|
979 |
|
|
|
1,142 |
|
|
|
2,411 |
|
Non-performing |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Total not-rated |
|
|
155 |
|
|
|
39 |
|
|
|
88 |
|
|
|
8 |
|
|
|
— |
|
|
|
979 |
|
|
|
1,142 |
|
|
|
2,411 |
|
Construction: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Pass |
|
$ |
10,866 |
|
|
$ |
8,719 |
|
|
$ |
283 |
|
|
$ |
771 |
|
|
$ |
616 |
|
|
$ |
477 |
|
|
$ |
— |
|
|
$ |
21,732 |
|
Special mention |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Substandard |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Doubtful |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Loss |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Not-rated |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Total construction |
|
$ |
10,866 |
|
|
$ |
8,719 |
|
|
$ |
283 |
|
|
$ |
771 |
|
|
$ |
616 |
|
|
$ |
477 |
|
|
$ |
— |
|
|
$ |
21,732 |
|
YTD Gross Charge-offs |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
Not-Rated loans: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Performing |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Non-performing |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Total not-rated |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Commercial real estate: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Pass |
|
$ |
22,050 |
|
|
$ |
29,870 |
|
|
$ |
41,098 |
|
|
$ |
45,767 |
|
|
$ |
34,078 |
|
|
$ |
57,988 |
|
|
$ |
1,659 |
|
|
$ |
232,510 |
|
Special mention |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Substandard |
|
|
— |
|
|
|
2,585 |
|
|
|
— |
|
|
|
873 |
|
|
|
— |
|
|
|
1,490 |
|
|
|
— |
|
|
|
4,948 |
|
Doubtful |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Loss |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Not-rated |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Total commercial real estate |
|
$ |
22,050 |
|
|
$ |
32,455 |
|
|
$ |
41,098 |
|
|
$ |
46,640 |
|
|
$ |
34,078 |
|
|
$ |
59,478 |
|
|
$ |
1,659 |
|
|
$ |
237,458 |
|
YTD Gross Charge-offs |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
Not-Rated loans: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Performing |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Non-performing |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Total not-rated |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
126
|
|
Amortized cost basis by origination year |
Revolving |
|
|
|
|
|||||||||||||||||||||||||
September 30, 2025: |
|
2025 |
2024 |
2023 |
2022 |
2021 |
Prior |
Loans |
|
|
Total |
|
||||||||||||||||||||
Residential real estate: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Pass |
|
$ |
6,821 |
|
|
$ |
14,776 |
|
|
$ |
13,493 |
|
|
$ |
15,316 |
|
|
$ |
8,743 |
|
|
$ |
9,815 |
|
|
$ |
1,954 |
|
|
$ |
70,918 |
|
Special mention |
|
|
— |
|
|
|
— |
|
|
|
1,506 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
1,506 |
|
Substandard |
|
|
— |
|
|
|
135 |
|
|
|
— |
|
|
|
— |
|
|
|
562 |
|
|
|
— |
|
|
|
— |
|
|
|
697 |
|
Doubtful |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Loss |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Not-rated |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
712 |
|
|
|
22,616 |
|
|
|
23,328 |
|
Total residential real estate |
|
$ |
6,821 |
|
|
$ |
14,911 |
|
|
$ |
14,999 |
|
|
$ |
15,316 |
|
|
$ |
9,305 |
|
|
$ |
10,527 |
|
|
$ |
24,570 |
|
|
$ |
96,449 |
|
YTD Gross Charge-offs |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
Not-Rated loans: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Performing |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
712 |
|
|
|
22,616 |
|
|
|
23,328 |
|
Non-performing |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Total not-rated |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
712 |
|
|
|
22,616 |
|
|
|
23,328 |
|
Total Loans |
|
$ |
45,502 |
|
|
$ |
58,818 |
|
|
$ |
61,056 |
|
|
$ |
68,345 |
|
|
$ |
45,747 |
|
|
$ |
76,465 |
|
|
$ |
40,665 |
|
|
$ |
396,598 |
|
YTD Gross Charge-offs |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
7 |
|
|
$ |
— |
|
|
$ |
7 |
|
127
|
|
Amortized cost basis by origination year |
|
|
Revolving |
|
|
|
|
|||||||||||||||||||||||
December 31,2024: |
|
2024 |
|
|
2023 |
|
|
2022 |
|
|
2021 |
|
|
2020 |
|
|
Prior |
|
|
Loans |
|
|
Total |
|
||||||||
Agriculture: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Pass |
|
$ |
— |
|
|
$ |
139 |
|
|
$ |
53 |
|
|
$ |
753 |
|
|
$ |
1 |
|
|
$ |
1,060 |
|
|
$ |
12 |
|
|
$ |
2,018 |
|
Special mention |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Substandard |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Doubtful |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Loss |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Not-rated |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Total agriculture |
|
$ |
— |
|
|
$ |
139 |
|
|
$ |
53 |
|
|
$ |
753 |
|
|
$ |
1 |
|
|
$ |
1,060 |
|
|
$ |
12 |
|
|
$ |
2,018 |
|
YTD Gross Charge-offs |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
Not-Rated loans: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Performing |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Non-performing |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Total not-rated |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Commercial: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Pass |
|
$ |
3,048 |
|
|
$ |
4,636 |
|
|
$ |
6,074 |
|
|
$ |
1,305 |
|
|
$ |
1,172 |
|
|
$ |
3,487 |
|
|
$ |
14,566 |
|
|
$ |
34,288 |
|
Special mention |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
928 |
|
|
|
89 |
|
|
|
1,017 |
|
Substandard |
|
|
— |
|
|
|
780 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
3 |
|
|
|
4,012 |
|
|
|
4,795 |
|
Doubtful |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Loss |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Not-rated |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Total commercial |
|
$ |
3,048 |
|
|
$ |
5,416 |
|
|
$ |
6,074 |
|
|
$ |
1,305 |
|
|
$ |
1,172 |
|
|
$ |
4,418 |
|
|
$ |
18,667 |
|
|
$ |
40,100 |
|
YTD Gross Charge-offs |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
33 |
|
|
$ |
— |
|
|
$ |
33 |
|
Not-Rated loans: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Performing |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Non-performing |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Total not-rated |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Consumer: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Pass |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
332 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
82 |
|
|
$ |
414 |
|
Special mention |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Substandard |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Doubtful |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Loss |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Not-rated |
|
|
46 |
|
|
|
97 |
|
|
|
12 |
|
|
|
11 |
|
|
|
— |
|
|
|
1,110 |
|
|
|
1,230 |
|
|
|
2,506 |
|
Total consumer |
|
$ |
46 |
|
|
$ |
97 |
|
|
$ |
344 |
|
|
$ |
11 |
|
|
$ |
— |
|
|
$ |
1,110 |
|
|
$ |
1,312 |
|
|
$ |
2,920 |
|
YTD Gross Charge-offs |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
Not-Rated loans: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Performing |
|
|
46 |
|
|
|
97 |
|
|
|
12 |
|
|
|
11 |
|
|
|
— |
|
|
|
1,102 |
|
|
|
1,230 |
|
|
|
2,498 |
|
Non-performing |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
8 |
|
|
|
— |
|
|
|
8 |
|
Total not-rated |
|
|
46 |
|
|
|
97 |
|
|
|
12 |
|
|
|
11 |
|
|
|
— |
|
|
|
1,110 |
|
|
|
1,230 |
|
|
|
2,506 |
|
Construction: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Pass |
|
$ |
9,279 |
|
|
$ |
9,128 |
|
|
$ |
1,295 |
|
|
$ |
1,063 |
|
|
$ |
45 |
|
|
$ |
880 |
|
|
$ |
— |
|
|
$ |
21,690 |
|
Special mention |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Substandard |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Doubtful |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Loss |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Not-rated |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Total construction |
|
$ |
9,279 |
|
|
$ |
9,128 |
|
|
$ |
1,295 |
|
|
$ |
1,063 |
|
|
$ |
45 |
|
|
$ |
880 |
|
|
$ |
— |
|
|
$ |
21,690 |
|
YTD Gross Charge-offs |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
Not-Rated loans: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Performing |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Non-performing |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Total not-rated |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Commercial real estate: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Pass |
|
$ |
31,723 |
|
|
$ |
43,888 |
|
|
$ |
48,869 |
|
|
$ |
35,519 |
|
|
$ |
18,554 |
|
|
$ |
47,853 |
|
|
$ |
2,344 |
|
|
$ |
228,750 |
|
Special mention |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Substandard |
|
|
2,608 |
|
|
|
608 |
|
|
|
— |
|
|
|
— |
|
|
|
348 |
|
|
|
815 |
|
|
|
— |
|
|
|
4,379 |
|
Doubtful |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Loss |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Not-rated |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
50 |
|
|
|
50 |
|
Total commercial real estate |
|
$ |
34,331 |
|
|
$ |
44,496 |
|
|
$ |
48,869 |
|
|
$ |
35,519 |
|
|
$ |
18,902 |
|
|
$ |
48,668 |
|
|
$ |
2,394 |
|
|
$ |
233,179 |
|
YTD Gross Charge-offs |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
Not-Rated loans: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Performing |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
50 |
|
|
|
50 |
|
Non-performing |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Total not-rated |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
50 |
|
|
|
50 |
|
128
|
|
Amortized cost basis by origination year |
|
|
Revolving |
|
|
|
|
|||||||||||||||||||||||
December 31,2024: |
|
2024 |
|
|
2023 |
|
|
2022 |
|
|
2021 |
|
|
2020 |
|
|
Prior |
|
|
Loans |
|
|
Total |
|
||||||||
Residential real estate: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Pass |
|
$ |
17,588 |
|
|
$ |
15,333 |
|
|
$ |
16,551 |
|
|
$ |
10,151 |
|
|
$ |
3,733 |
|
|
$ |
8,195 |
|
|
$ |
1,562 |
|
|
$ |
73,113 |
|
Special mention |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Substandard |
|
|
99 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
206 |
|
|
|
305 |
|
Doubtful |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Loss |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Not-rated |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
897 |
|
|
|
21,310 |
|
|
|
22,207 |
|
Total residential real estate |
|
$ |
17,687 |
|
|
$ |
15,333 |
|
|
$ |
16,551 |
|
|
$ |
10,151 |
|
|
$ |
3,733 |
|
|
$ |
9,092 |
|
|
$ |
23,078 |
|
|
$ |
95,625 |
|
YTD Gross Charge-offs |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
9 |
|
|
$ |
9 |
|
Not-Rated loans: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Performing |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
897 |
|
|
|
21,310 |
|
|
|
22,207 |
|
Non-performing |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Total not-rated |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
897 |
|
|
|
21,310 |
|
|
|
22,207 |
|
Total Loans |
|
$ |
64,391 |
|
|
$ |
74,609 |
|
|
$ |
73,186 |
|
|
$ |
48,802 |
|
|
$ |
23,853 |
|
|
$ |
65,228 |
|
|
$ |
45,463 |
|
|
$ |
395,532 |
|
YTD Gross Charge-offs |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
33 |
|
|
$ |
9 |
|
|
$ |
42 |
|
129
|
|
Amortized cost basis by origination year |
|
|
Revolving |
|
|
|
|
|||||||||||||||||||||||
December 31,2023: |
|
2023 |
|
|
2022 |
|
|
2021 |
|
|
2020 |
|
|
2019 |
|
|
Prior |
|
|
Loans |
|
|
Total |
|
||||||||
Commercial Term: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Pass |
|
$ |
11,552 |
|
|
$ |
5,273 |
|
|
$ |
8,928 |
|
|
$ |
5,023 |
|
|
$ |
2,798 |
|
|
$ |
4,677 |
|
|
$ |
— |
|
|
$ |
38,251 |
|
Special mention |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Substandard |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
104 |
|
|
|
— |
|
|
|
327 |
|
|
|
— |
|
|
|
431 |
|
Doubtful |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Loss |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Not-rated |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Total commercial term |
|
$ |
11,552 |
|
|
$ |
5,273 |
|
|
$ |
8,928 |
|
|
$ |
5,127 |
|
|
$ |
2,798 |
|
|
$ |
5,004 |
|
|
$ |
— |
|
|
$ |
38,682 |
|
YTD Gross Charge-offs |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
Not-Rated loans: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Performing |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Non-performing |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Total not-rated |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Commercial Mortgage: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Pass |
|
$ |
40,848 |
|
|
$ |
58,988 |
|
|
$ |
41,081 |
|
|
$ |
19,915 |
|
|
$ |
16,609 |
|
|
$ |
43,581 |
|
|
$ |
809 |
|
|
$ |
221,831 |
|
Special mention |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Substandard |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
2,596 |
|
|
|
73 |
|
|
|
2,669 |
|
Doubtful |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Loss |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Not-rated |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Total commercial mortgage |
|
$ |
40,848 |
|
|
$ |
58,988 |
|
|
$ |
41,081 |
|
|
$ |
19,915 |
|
|
$ |
16,609 |
|
|
$ |
46,177 |
|
|
$ |
882 |
|
|
$ |
224,500 |
|
YTD Gross Charge-offs |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
Not-Rated loans: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Performing |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Non-performing |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Total not-rated |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Commercial Line: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Pass |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
18,147 |
|
|
$ |
18,147 |
|
Special mention |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Substandard |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
2,518 |
|
|
|
2,518 |
|
Doubtful |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Loss |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Not-rated |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Total commercial line |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
20,665 |
|
|
$ |
20,665 |
|
YTD Gross Charge-offs |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
Not-Rated loans: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Performing |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Non-performing |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Total not-rated |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Construction: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Pass |
|
$ |
24,439 |
|
|
$ |
18,692 |
|
|
$ |
5,622 |
|
|
$ |
1,457 |
|
|
$ |
914 |
|
|
$ |
9,988 |
|
|
$ |
— |
|
|
$ |
61,112 |
|
Special mention |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Substandard |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
138 |
|
|
|
— |
|
|
|
138 |
|
Doubtful |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Loss |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Not-rated |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Total consumer |
|
$ |
24,439 |
|
|
$ |
18,692 |
|
|
$ |
5,622 |
|
|
$ |
1,457 |
|
|
$ |
914 |
|
|
$ |
10,126 |
|
|
$ |
— |
|
|
$ |
61,250 |
|
YTD Gross Charge-offs |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
Not-Rated loans: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Performing |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Non-performing |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Total not-rated |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Home Equity: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Pass |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
Special mention |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Substandard |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Doubtful |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Loss |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Not-rated |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
457 |
|
|
|
1,070 |
|
|
|
837 |
|
|
|
376 |
|
|
|
2,740 |
|
Total home equity |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
457 |
|
|
$ |
1,070 |
|
|
$ |
837 |
|
|
$ |
376 |
|
|
$ |
2,740 |
|
YTD Gross Charge-offs |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
Not-Rated loans: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Performing |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
457 |
|
|
|
1,070 |
|
|
|
837 |
|
|
|
319 |
|
|
|
2,683 |
|
Non-performing |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
57 |
|
|
|
57 |
|
Total not-rated |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
457 |
|
|
|
1,070 |
|
|
|
837 |
|
|
|
376 |
|
|
|
2,740 |
|
130
Consumer: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Pass |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
Special mention |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Substandard |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Doubtful |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Loss |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Not-rated |
|
|
107 |
|
|
|
16 |
|
|
|
16 |
|
|
|
80 |
|
|
|
56 |
|
|
|
1,299 |
|
|
|
19,363 |
|
|
|
20,937 |
|
Total consumer |
|
$ |
107 |
|
|
$ |
16 |
|
|
$ |
16 |
|
|
$ |
80 |
|
|
$ |
56 |
|
|
$ |
1,299 |
|
|
$ |
19,363 |
|
|
$ |
20,937 |
|
YTD Gross Charge-offs |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
Not-Rated loans: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Performing |
|
|
107 |
|
|
|
16 |
|
|
|
16 |
|
|
|
80 |
|
|
|
56 |
|
|
|
1,276 |
|
|
|
18,749 |
|
|
|
20,300 |
|
Non-performing |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
23 |
|
|
|
614 |
|
|
|
637 |
|
Total not-rated |
|
|
107 |
|
|
|
16 |
|
|
|
16 |
|
|
|
80 |
|
|
|
56 |
|
|
|
1,299 |
|
|
|
19,363 |
|
|
|
20,937 |
|
Total Loans |
|
$ |
76,946 |
|
|
$ |
82,969 |
|
|
$ |
55,647 |
|
|
$ |
27,036 |
|
|
$ |
21,447 |
|
|
$ |
63,443 |
|
|
$ |
41,286 |
|
|
$ |
368,774 |
|
YTD Gross Charge-offs |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
There were no loans classified in the “doubtful” or “loss” risk rating categories for any of the periods ended September 30, 2025, December 31, 2024 or December 31, 2023.
Loans pledged at September 30, 2025, December 31, 2024 and December 31, 2023 had a carrying amount of $296 million, $305 million and $257 million and were pledged to secure FHLB advances.
Deposits
We offer a variety of deposit accounts having a wide range of interest rates and terms, including demand, savings and time accounts. We rely primarily on competitive pricing policies and personalized service to attract and retain these deposits.
Total deposits as of September 30, 2025, were $436.7 million, an increase of $39.7 million or 10.0% compared to $397.1 million as of December 31, 2024. Deposit increase was primarily due to an increase in money market demand accounts and certificates of deposit, in part related to the new branch opening in Horsham, Pennsylvania, in April 2025.
Noninterest-bearing deposits as of September 30, 2025 were $63.0 million, an increase of $6.6 million, or 11.8% over December 31, 2024. Noninterest-bearing deposits as of December 31, 2024 were $56.4 million compared to $55.0 million as of December 31, 2023, an increase of $1.3 million, or 2.4%.
The components of deposits at September 30, 2025, December 31, 2024 and December 31, 2023 are as follows:
|
|
As of September 30, 2025 |
|
|
As of December 31, 2024 |
|
|
As of December 31, 2023 |
|
|||
Demand, non-interest bearing |
|
$ |
62,996 |
|
|
$ |
56,358 |
|
|
$ |
55,022 |
|
Demand, interest bearing |
|
|
76,253 |
|
|
|
63,687 |
|
|
|
63,387 |
|
Money market accounts |
|
|
139,012 |
|
|
|
109,994 |
|
|
|
118,384 |
|
Savings accounts |
|
|
60,434 |
|
|
|
52,034 |
|
|
|
58,728 |
|
Time, $250,000 and over |
|
|
31,280 |
|
|
|
30,411 |
|
|
|
19,337 |
|
Time, other |
|
|
66,768 |
|
|
|
84,596 |
|
|
|
49,174 |
|
|
|
$ |
436,743 |
|
|
$ |
397,080 |
|
|
$ |
364,032 |
|
Total deposits as of September 30, 2025, were $436.7 million, an increase of $39.7 million, or 10.0%, compared to December 31, 2024. Total deposits as of December 31, 2024, were $397.1 million, an increase of $33.0 million, or 9.1%, compared to $364.0 million as of December 31, 2023.
At September 30, 2025, the scheduled maturities of time deposits are as follows:
131
|
|
|
|
|
2025 |
|
$ |
29,866 |
|
2026 |
|
|
61,410 |
|
2027 |
|
|
6,694 |
|
2028 |
|
|
60 |
|
2029 |
|
|
18 |
|
Thereafter |
|
|
— |
|
|
|
$ |
98,048 |
|
Average deposits for September 30, 2025, were $422.2 million, an increase of $38.2 million, or 10.0%, over the average at December 31, 2024. Average deposits for December 31, 2024, were $384.0 million, an increase of $23.4 million, or 6.5%, over the average at December 31, 2023 of $360.5. The rate paid on total deposits decreased over this period from 4.04% for December 31, 2024 to 3.63% for September 30, 2025.
|
|
Balance |
|
|
$ Change |
|
|
% Change |
|
|||||||||||||||||||
|
|
Nine Months ended September 30, 2025 |
|
|
Year ended December 31, 2024 |
|
|
Year ended December 31, 2023 |
|
|
Sept. 2025 to Dec. 2024 |
|
|
Dec. 2025 to Dec. 2023 |
|
|
Sept. 2025 to Dec. 2024 |
|
|
Dec. 2025 to Dec. 2023 |
|
|||||||
Non-interest bearing |
|
$ |
61,524 |
|
|
$ |
61,532 |
|
|
$ |
64,318 |
|
|
$ |
(8 |
) |
|
$ |
(2,786 |
) |
|
|
0.0 |
% |
|
|
-4.3 |
% |
Interest-bearing |
|
|
360,686 |
|
|
|
322,429 |
|
|
|
296,219 |
|
|
|
38,257 |
|
|
|
26,210 |
|
|
|
11.9 |
% |
|
|
8.8 |
% |
Total |
|
$ |
422,210 |
|
|
$ |
383,961 |
|
|
$ |
360,537 |
|
|
$ |
38,249 |
|
|
$ |
23,424 |
|
|
|
10.0 |
% |
|
|
6.5 |
% |
The following table presents the uninsured deposits of the Bank at September 30, 2025 and December 31, 2024 and 2023.
|
|
As of September 30, 2025 |
|
As of December 31, 2024 |
|
As of December 31, 2023 |
Uninsured deposits |
|
$62,832 |
|
$65,398 |
|
$60,394 |
Borrowings
The Bank has a $2.5 million line of credit with a correspondent bank of which $0 was outstanding at September 30, 2025 and December 31, 2024 and 2023. The Bank had a $5 million line of credit with a correspondent bank of which $0 was outstanding at December 31, 2024 and 2023, this line was raised to $6.5 million in 2025 and there was $0 outstanding at September 30, 2025. The Bank had maximum borrowing capacity of $190.99 million, $212.57 million and $209.49 million at September 30, 2025 and December 31, 2024 and 2023, respectively. As of September 30, 2025, December 31, 2024 and 2023, outstanding borrowings were $0, $15.4 million and $36.2 million, respectively.
As of September 30, 2025, December 31, 2024 and December 31, 2023, the weighted average rate was 0%, 3.84%, and 5.21%, respectively. Borrowing costs declined from December 31, 2023 to December 31, 2024, by 137 basis points. As of September 30, 2025, December 31, 2024 and December 31, 2023, the weighted average maturity was 0 years, 0.04 years, and 0.12 years, respectively.
The Bank maintains access to the Federal Reserve Bank’s discount window borrowing facility. Advances under this facility are secured by collateral pledged by the Bank and accepted by the Federal Reserve Bank. The Bank has pledged securities with a fair value of $33,466,000 at September 30, 2025 at the Federal Reserve Bank to secure potential borrowings through the discount window. The Bank had no outstanding borrowings under the discount window facility at September 30, 2025, December 31, 2024 and December 31, 2023.
There were no long-term borrowings at September 30, 2025 and $3.8 million at both December 31, 2024 and December 31, 2023. The borrowings consisted of FHLB borrowings with maturity date of March 4, 2025 and a fixed rate of 1.13%.
Subordinated Debt
132
On March 14, 2019, the Corporation closed a pooled private offering of $3.0 million of subordinated debt, net of offering costs of $25,000. Offering costs are amortized using the effective interest method and included within interest expense on the Consolidated Statements of Income. Unamortized offering costs were $8.4 million and $10.2 million at September 30, 2025 and December 31, 2024, respectively. The Bank may redeem the subordinated debentures, in whole or in part, in a principal amount with integral multiples of $100,000, on or after March 14, 2024, at 100% of the principal amount, plus accrued and unpaid interest. The subordinated debentures mature on March 14, 2029. The subordinated debentures are also redeemable in whole or in part from time to time, upon the occurrence of specific events defined within the Subordinated Loan Agreement.
The subordinated debt may be included in Tier 2 capital (with certain limitations applicable) under current regulatory guidelines and interpretations. The subordinated debentures had a fixed rate of interest of 6.5% through March 14, 2024, at which time the interest rate will float quarterly at the 3-month Secured Overnight Financing rate (“SOFR”) plus 390 basis points until the debt is paid off or matures. The interest rate at September 30, 2025 was 8.46%. The debt is subordinated to the claims of general creditors, is unsecured, and is ineligible as collateral for a loan by the Bank.
On June 23, 2020, the Corporation closed a pooled private offering of $10.0 million of subordinated debt, net of offering costs of $241,000. Unamortized offering costs were $115,000 and $133,000 at September 30, 2025 and December 31, 2024, respectively. Offering costs are amortized using the effective interest method and included within interest expense on the Consolidated Statements of Income. The Bank may redeem the subordinated debentures, in whole or in part, in a principal amount with integral multiples of $100,000, on or after June 30, 2025, at 100% of the principal amount, plus accrued and unpaid interest. The subordinated debentures mature on June 30, 2030. The subordinated debentures are also redeemable in whole or in part from time to time, upon the occurrence of specific events defined within the Subordinated Loan Agreement.
The subordinated debt may be included in Tier 2 capital (with certain limitations applicable) under current regulatory guidelines and interpretations. The subordinated debentures had a fixed rate of interest of 6.25% through June 30, 2025, at which time the interest rate will bear interest at a rate equal to the 3-month Secured Overnight Financing rate (“SOFR”) plus 613 basis points until the debt is paid off or matures. The interest rate at September 30, 2025 was 10.42%. The debt is subordinated to the claims of general creditors, is unsecured, and is ineligible as collateral for a loan by the Bank.
Liquidity and Capital Resources
Liquidity
Liquidity is our capacity to meet our cash and collateral obligations at a reasonable cost. Maintaining an adequate level of liquidity depends on The Bank’s ability to efficiently meet expected and unexpected cash flows and collateral needs without adversely affecting either daily operations or the financial conditions of the institution.
Liquidity involves our ability to utilize funds to support asset growth and acquisitions or reduce assets to meet deposit withdrawals and other payment obligations, and otherwise to operate on an ongoing basis and manage unexpected events. For all periods presented herein, The Bank’s liquidity needs were primarily met by core deposits, loan maturities, amortizing investments, and FHLB advances.
The following table illustrates, during the periods presented, the mix of our funding sources and the average assets in which those funds are invested as a percentage of average total assets for the period indicated. Average assets totaled $474.4 million for the nine months ended September 30, 2025. Average assets totaled $460.5 million and $415.2 million for the years ended December 31, 2024 and 2023, respectively.
133
|
|
September 30, 2025 |
|
|
December 31, 2024 |
|
|
December 31, 2023 |
|
|||
Sources of Funds: |
|
|
|
|
|
|
|
|
|
|||
Total Deposits |
|
|
88.99 |
% |
|
|
83.38 |
% |
|
|
86.82 |
% |
Borrowings |
|
|
0.38 |
% |
|
|
7.08 |
% |
|
|
3.19 |
% |
Subordinated debt |
|
|
3.65 |
% |
|
|
2.79 |
% |
|
|
3.31 |
% |
Other liabilities |
|
|
0.57 |
% |
|
|
0.49 |
% |
|
|
0.39 |
% |
Stockholders' Equity |
|
|
6.41 |
% |
|
|
6.26 |
% |
|
|
6.29 |
% |
Total |
|
|
100.00 |
% |
|
|
100.00 |
% |
|
|
100.00 |
% |
Uses of Funds: |
|
|
|
|
|
|
|
|
|
|||
Net Loans |
|
|
81.53 |
% |
|
|
84.14 |
% |
|
|
82.31 |
% |
Securities |
|
|
9.57 |
% |
|
|
10.75 |
% |
|
|
12.44 |
% |
Cash & Deposits in Other Banks |
|
|
3.55 |
% |
|
|
0.33 |
% |
|
|
1.06 |
% |
Other Assets |
|
|
5.35 |
% |
|
|
4.78 |
% |
|
|
4.19 |
% |
Total |
|
|
100.00 |
% |
|
|
100.00 |
% |
|
|
100.00 |
% |
Average Loans to Average Assets |
|
|
82.28 |
% |
|
|
84.91 |
% |
|
|
83.10 |
% |
Average Loans to Average Deposits |
|
|
92.46 |
% |
|
|
101.83 |
% |
|
|
95.71 |
% |
Our primary sources of funds are deposits and FHLB advances. Our primary use of funds is loans. We do not expect a change in the primary source or use of our funds in the foreseeable future. Our average net loans remained level for the nine months ended September 30, 2025, compared to the year ended December 31, 2024. Our average net loans increased 13.3% for the year ended December 31, 2024, compared to the same period in 2023.
For all periods presented herein, we had no exposure to future cash requirements associated with known uncertainties or capital expenditures of a material nature. As of September 30, 2025, we had cash and cash equivalents of $40.8 million compared to $10.7 million as of December 31, 2024, and $14.5 million as of December 31, 2023.
Capital Resources
Total stockholders’ equity increased to $31.7 million as of September 30, 2025, compared to December 31, 2024, an increase of $2.3 million, or 7.9%. Total stockholders’ equity increased to $29.3 million as of December 31, 2024, compared to $27.9 million as of December 31, 2023, and increase of $1.4 million, or 5.0%.
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 possibly additional discretionary actions by regulators that, if undertaken, could have a direct material effect on the Bank’s financial statements. Under certain 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. Victory Bank’s capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings, and other factors.
Quantitative measures established by regulation to ensure capital adequacy require the Bank to maintain minimum amounts and ratios of total common equity Tier 1, total and Tier 1 capital to risk-weighted assets and of Tier 1 capital to average assets. Management believes, as of September 30, 2025, December 31, 2024, and 2023, that the Bank met all capital adequacy requirements to which it is subject.
As of September 30, 2025, December 31, 2024, and 2023, the most recent notification from the FDIC categorized the Bank as well capitalized under the regulatory framework for prompt corrective action. To be categorized as well capitalized, the Bank must maintain minimum common equity Tier 1 risk-based, total risk-based, Tier 1 risk-based and Tier 1 leverage ratios as set forth below. There are no conditions or events since that notification that management believes have changed the institution’s category.
134
The Bank’s actual capital amounts and ratios, and minimum amounts under current regulatory standards, as of September 30, 2025, December 31, 2024, and 2023, are presented in the following table:
|
|
Actual |
|
|
For Capital Adequacy Purposes |
|
|
To Be Well Capitalized Under Prompt Corrective Action Provisions |
|
|||||||||||||||
The Victory Bank |
|
Amount |
|
|
Ratio |
|
|
Amount |
|
|
Ratio |
|
|
Amount |
|
|
Ratio |
|
||||||
|
|
|
|
|
|
|
|
(Dollars in Thousands) |
|
|
|
|
|
|
|
|||||||||
September 30, 2025: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Common Equity Tier 1 Capital to Risk-Weighted Assets |
|
$ |
48,460 |
|
|
|
11.82 |
% |
|
$ |
18,448 |
|
|
|
4.50 |
% |
|
$ |
26,646 |
|
|
|
6.50 |
% |
Total Capital to Risk-Weighted Assets |
|
$ |
52,005 |
|
|
|
12.69 |
% |
|
$ |
32,796 |
|
|
|
8.00 |
% |
|
$ |
40,995 |
|
|
|
10.00 |
% |
Tier 1 Capital to Risk-Weighted Assets |
|
$ |
48,460 |
|
|
|
11.82 |
% |
|
$ |
24,597 |
|
|
|
6.00 |
% |
|
$ |
32,796 |
|
|
|
8.00 |
% |
Tier I Capital to Average Assets |
|
$ |
48,460 |
|
|
|
9.83 |
% |
|
$ |
19,719 |
|
|
|
4.00 |
% |
|
$ |
24,649 |
|
|
|
5.00 |
% |
December 31, 2024: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Common Equity Tier 1 Capital to Risk-Weighted Assets |
|
$ |
46,187 |
|
|
|
11.27 |
% |
|
$ |
18,435 |
|
|
|
4.50 |
% |
|
$ |
26,628 |
|
|
|
6.50 |
% |
Total Capital to Risk-Weighted Assets |
|
$ |
49,798 |
|
|
|
12.16 |
% |
|
$ |
32,773 |
|
|
|
8.00 |
% |
|
$ |
40,967 |
|
|
|
10.00 |
% |
Tier 1 Capital to Risk-Weighted Assets |
|
$ |
46,187 |
|
|
|
11.27 |
% |
|
$ |
24,580 |
|
|
|
6.00 |
% |
|
$ |
32,773 |
|
|
|
8.00 |
% |
Tier I Capital to Average Assets |
|
$ |
46,187 |
|
|
|
9.92 |
% |
|
$ |
18,632 |
|
|
|
4.00 |
% |
|
$ |
23,291 |
|
|
|
5.00 |
% |
December 31,2023: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Common Equity Tier 1 Capital to Risk-Weighted Assets |
|
$ |
41,444 |
|
|
|
10.61 |
% |
|
$ |
17,580 |
|
|
|
4.50 |
% |
|
$ |
25,393 |
|
|
|
6.50 |
% |
Total Capital to Risk-Weighted Assets |
|
$ |
44,966 |
|
|
|
11.51 |
% |
|
$ |
31,253 |
|
|
|
8.00 |
% |
|
$ |
39,067 |
|
|
|
10.00 |
% |
Tier 1 Capital to Risk-Weighted Assets |
|
$ |
41,444 |
|
|
|
10.61 |
% |
|
$ |
23,440 |
|
|
|
6.00 |
% |
|
$ |
31,253 |
|
|
|
8.00 |
% |
Tier 1 Capital to Average Assets |
|
$ |
41,444 |
|
|
|
9.61 |
% |
|
$ |
17,250 |
|
|
|
4.00 |
% |
|
$ |
21,562 |
|
|
|
5.00 |
% |
Off-Balance Sheet Items
We have limited off-balance sheet arrangements that have, or are reasonably likely to have, a current or future material effect on our financial condition, revenues, expenses, results of operations, liquidity, capital expenditures or capital resources. In the ordinary course of business, the Bank enters into financial commitments to meet the financing needs of its customers. These financial instruments include commitments to extend credit and letters of credit. Those instruments involve to varying degrees, elements of credit and interest rate risk not recognized in the Bank’s financial statements. The Bank’s exposure to credit loss in the event of nonperformance on these financial commitments is represented by the contractual amount of those instruments. The Bank uses the same credit policies in making commitments as it does for loans reflected in the financial statements. Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Since many of the commitments are expected to expire without being drawn upon, the total amounts do not necessarily represent future cash requirements. The Bank evaluates each client’s credit worthiness on a case-by-case basis. The amount of collateral obtained if deemed necessary by the Bank is based on management’s credit evaluation of the customer.
A summary of commitments is as follows for each period end:
|
|
September 30, 2025 |
|
|
December 31, 2024 |
|
|
December 31, 2023 |
|
|||
Financial instruments whose contract amounts |
|
|
|
|
|
|
|
|
|
|||
Commitments to extend credit |
|
$ |
88,488 |
|
|
$ |
75,874 |
|
|
$ |
82,482 |
|
Stand-by letters of credit |
|
$ |
4,301 |
|
|
$ |
2,903 |
|
|
$ |
2,281 |
|
135
Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Since many of the commitments may expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. The Bank evaluates each customer’s creditworthiness on a case-by-case basis. The amount of collateral obtained, if deemed necessary by the Bank, upon extension of credit is based on management’s credit evaluation. Collateral held varies, but may include unimproved and improved real estate, certificates of deposit, or personal property.
Standby letters of credit are conditional commitments issued by the Bank to guarantee the performance of a customer to a third party. Those guarantees are primarily issued to businesses within the Bank’s trade area.
The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan facilities to customers. The Bank holds real estate and assignments of deposit accounts as collateral supporting those commitments for which collateral is deemed necessary. The extent of collateral held for these commitments at September 30, 2025, December 31, 2024, and 2023, varies.
The Bank maintain an ACL on unfunded lending commitments and letters of credit to provide for the risk of loss expected in these arrangements. The allowance is computed using a methodology similar to that used to determine the ACL for loans, modified to take into account the probability of a drawdown on the commitment. The ACL on unfunded loan commitments is classified as a liability account on the balance sheet within other liabilities, while the corresponding provision for these credit losses is recorded as a component of other expense. The allowance for credit losses on unfunded commitments was $72,000, $67,000 and $78,000 at September 30, 2025, December 31, 2024, and 2023, respectively.
The following table presents the balance and activity in the allowance for credit losses for unfunded loan commitments for the nine-month period ended September 30, 2025, and the years ended December 31, 2024, and 2023.
|
|
Allowance for Credit Losses — Unfunded Commitments |
|
|
Balance, December 31, 2023 |
|
$ |
78 |
|
Provision for unfunded commitments |
|
|
(11 |
) |
Balance, December 31, 2024 |
|
$ |
67 |
|
Provision for unfunded commitments |
|
|
5 |
|
Balance, September 30, 2025 |
|
$ |
72 |
|
Interest Rate Sensitivity and Market Risk
As a financial institution, our primary component of market risk is interest rate volatility. Our asset liability management policy provides management with the guidelines for effective funds management, and we have established a measurement system for monitoring our net interest rate sensitivity position. We manage our sensitivity position within our established guidelines.
Fluctuations in interest rates will ultimately impact both the level of income and expense recorded on most of our assets and liabilities, and the market value of all interest-earning assets and interest-bearing liabilities, other than those which have a short term to maturity. Interest rate risk is the potential of economic losses due to future interest rate changes. These economic losses can be reflected as a loss of future net interest income and/or a loss of current fair market values. The objective is to measure the effect on net interest income and to adjust the balance sheet to minimize the inherent risk, while at the same time maximizing income.
We manage our exposure to interest rates by structuring our balance sheet in the ordinary course of business and the limited utilization of interest rate swaps, We do not enter into instruments such as leveraged derivatives, financial options, financial futures contracts or forward delivery contracts for the purpose of reducing interest rate risk. Based upon the nature of our operations, we are not subject to foreign exchange or commodity price risk. We do not own any trading assets.
Our exposure to interest rate risk is managed by the asset & liability management committee, in accordance with policies approved by the Board of Directors, which consists of six directors. The committee formulates strategies based on appropriate levels of interest rate risk. In determining the appropriate level of interest rate risk, the committee considers the impact on earnings and capital of
136
the current outlook on interest rates, potential changes in interest rates, regional economies, liquidity, business strategies and other factors. The committee meets regularly to review, among other things, the sensitivity of assets and liabilities to interest rate changes, the book and market values of assets and liabilities, unrealized gains and losses, purchase and sale activities, commitments to originate loans, and the maturities of investments and borrowings. Additionally, the committee reviews liquidity, cash flow flexibility, maturities of deposits and consumer and commercial deposit activity. Management employs methodologies to manage interest rate risk which include an analysis of relationships between interest-earning assets and interest-bearing liabilities, and an interest rate shock simulation model.
We use interest rate risk simulation models and shock analysis to test the interest rate sensitivity of net interest income and fair value of equity, and the impact of changes in interest rates on other financial metrics. Contractual maturities and re-pricing opportunities of loans are incorporated in the model as are prepayment assumptions, maturity data and call options within the investment portfolio. Average life of non-maturity deposit accounts is based on standard regulatory decay assumptions and are also incorporated into the model. Model assumptions are revised and updated as more accurate information becomes available. The assumptions used are inherently uncertain and, as a result, the model cannot precisely measure future net interest income or precisely predict the impact of fluctuations in market interest rates on net interest income. Actual results will differ from the model’s simulated results due to timing, magnitude and frequency of interest rate changes, as well as changes in market conditions and the application and timing of various management strategies.
Internal policy regarding interest rate simulations currently specifies that for shifts of the yield curve, estimated fair value of equity should not decline by more than 30% for a 300BP shift, 20% for a 200BP shift, and 10% for a 100BP shift. The Bank has been outside of policy limits for economic value of equity parallel rate shocks of -100bp, -200bp and -300bp at (10.85%), (24.97%) and (42.56%), respectively, as of September 30, 2025 but within policy limits at December 31, 2024. The Bank has been within policy limits for economic value of equity parallel rate shocks of at both December 31, 2024 and 2023. The Bank monitors its fair value of equity quarterly, reviews any variances from policy guidelines, and reports them to the Asset Liability Committee. Management works with its asset-liability advisor to evaluate balance-sheet strategies, including when adjustments are needed, and presents informed recommendations to the ALCO Committee.
Impact of Inflation
Our financial statements and related notes included elsewhere in this statement have been prepared in accordance with GAAP. These require the measurement of financial position and operating results in terms of historical dollars, without considering changes in the relative value of money over time due to inflation or recession.
Unlike many industrial companies, substantially all of our assets and liabilities are monetary in nature. As a result, interest rates have a more significant impact on our performance than the effects of general levels of inflation. Interest rates may not necessarily move in the same direction or in the same magnitude as the prices of goods and services. However, other operating expenses do reflect general levels of inflation.
The table below sets forth, as of September 30, 2025, the calculation of the estimated changes in the Bank’s net interest income that would result from the designated immediate changes in the United States Treasury yield curve.
Change in Interest Rates (basis points)(1) |
|
Net Interest Income |
|
|
Year 1 Change |
|
||
(Dollars in thousands) |
|
|||||||
+300 |
|
$ |
16,388 |
|
|
|
(4.56 |
)% |
+200 |
|
|
16,718 |
|
|
|
(0.03 |
) |
+100 |
|
|
16,977 |
|
|
|
(0.01 |
) |
Level |
|
|
17,171 |
|
|
|
— |
|
-100 |
|
|
17,214 |
|
|
|
0.00 |
|
-200 |
|
|
16,958 |
|
|
|
(0.01 |
) |
-300 |
|
|
17,140 |
|
|
|
(0.00 |
) |
137
Critical Accounting Policies
In preparing financial statements management is required to make estimates and assumptions that affect the reported amounts in the financial statements. Actual results could differ significantly from those estimates.
Material estimates common to the banking industry that are particularly susceptible to significant change in the near term include, but are not limited to, the determination of the allowance for credit losses.
Allowance for Credit Losses:
The allowance for credit losses (“allowance”) represents management’s estimate of losses expected in the loan portfolio as of the balance sheet date and is recorded as a reduction to loans. The allowance is increased by the provision for credit losses, and decreased by charge-offs, net of recoveries. Loans deemed to be uncollectible are charged against the allowance, and subsequent recoveries, if any, are credited to the allowance. All, or part, of the principal balance of loans receivable are charged off to the allowance as soon as it is determined that the repayment of all, or part, of the principal balance is highly unlikely.
The estimate of expected credit losses is based on relevant information about historical events, current conditions, and reasonable and supportable forecasts that affect the collectability of the reported amounts. The Bank uses current loan data and loss history, calculates the weighted average remaining maturity in each loan category, and utilizes leading economic indicators to provide a forward-looking feature. The Bank then takes that information, adds custom qualitative factors and specific reserves tied to collateral dependent loans to calculate its allowance for credit losses.
The historical loss rate for the loan portfolio is determined by pooling loans into groups sharing similar risk characteristics and tracking historical net charge offs to calculate the historical loss rate.
The Bank also incorporates a reasonable and supportable loss forecast period to account for the effect of forecasted economic conditions and other factors on the performance of the loan portfolio which could differ from historical loss experience. Forward looking adjustments considers macro-economic indicators. The Bank generally utilizes a forecast period ranging over 12 - 24 months. For the contractual term that extends beyond the forecast period, the Bank immediately reverts to historical loss rates.
The Bank uses several qualitative factors to supplement the other elements of its allowance for credit losses calculation under CECL. These qualitative factors are intended to estimate losses that differ from actual historical loss experience. Relevant factors included, but are not limited to, economic trends and conditions such as regional unemployment, experience and depth of lending staff, trends in delinquencies, trends in collateral values, and results of loan reviews and loan-related audits. Although the estimation of credit losses can be somewhat subjective, the application of such qualitative factors must be reasonable and supportable.
Collateral dependent loans are those loans that are non-accruing and on which the borrowers cannot demonstrate the ability to make and are not making regularly scheduled loan payments, thereby making repayment of the loan dependent upon the operation or sale of the collateral securing the loan. Collateral dependent loans are evaluated individually as they do not share similar risk characteristics with other loans and are removed from their respective homogeneous pools. Under CECL, for collateral dependent loans, the Bank has adopted the practical expedient to measure the allowance for credit losses based on the fair value of the collateral.
DESCRIPTION OF CAPITAL STOCK OF QNB
As a result of the merger, holders of Victory common stock who receive shares of QNB common stock in the merger will become shareholders of QNB. The rights of QNB shareholders are governed by Pennsylvania law and the Articles of Incorporation, as amended, and Amended and Restated Bylaws of QNB. The following briefly summarizes the material terms of QNB common stock. This discussion does not purport to be a complete description of these rights and may not contain all of the information regarding QNB’s capital stock that is important to you. These rights can be determined in full only by reference to federal and state banking laws and regulations, the PBCL and the QNB Articles of Incorporation, as amended, and Amended and Restated Bylaws, copies of which are filed with the SEC as exhibits to the registration statement of which this prospectus is a part, and applicable law, which QNB and Victory urge you to read. Copies of QNB’s governing documents have been filed with the SEC. To find out where copies of
138
these documents can be obtained, as well as to obtain copies of Victory’s governing documents, see “Where You Can Find More Information” beginning on page 162. As used in this section, unless the context otherwise requires, references to “QNB,” “we,” “us” and “our” refer to QNB Corp. and its consolidated subsidiaries, unless the context indicates otherwise.
Overview
QNB is incorporated in the Commonwealth of Pennsylvania. Accordingly, the rights of its shareholders are generally covered by Pennsylvania law, including the Pennsylvania Business Corporation Law of 1988, as amended, or PBCL, and its articles of incorporation, as amended, and its amended and restated bylaws, as the same may be amended from time to time.
QNB’s articles of incorporation authorize the issuance of up to 10,000,000 shares of common stock, $0.625 par value per share. QNB common stock is registered under Section 12 of the Securities Exchange Act of 1934, as amended.
As of December 17, 2025, [_____] shares of QNB common stock were issued and outstanding and held by approximately [___] shareholders of record. Also, as of December 17, 2025, [____] shares of QNB common were reserved for issuance pursuant to outstanding stock options to purchase shares of QNB common stock held by its employees, officers and directors. QNB has also reserved an additional [_____] shares for issuance in connection with equity awards that may be granted under QNB Corp. 2025 Equity Incentive Plan.
Common Stock
Voting Rights
Holders of QNB common stock are entitled to one vote for every share having voting power on all matters submitted for action by the shareholders. Holders of QNB common stock do not have cumulative voting rights in the election of directors.
QNB’s articles of incorporation generally provide that any merger, consolidation, sale of substantially all of the Corporation’s assets, or other “Business Combination” transaction more fully described below, must be approved by the affirmative vote of not less than 75% of QNB’s then outstanding voting stock. Under the articles of incorporation, the 75% affirmative shareholder vote would not be required if: (a) a majority of the board of directors has given prior approval to the acquisition by the Related Person (as defined below) involved in the Business Combination of 20% or more of the outstanding shares of QNB common stock which resulted in that person becoming a Related Person; or (b) a majority of the board of directors has approved the Business Combination prior to the time that the person became a Related Person.
The term “Business Combination” means:
139
“Related Person” means any individual, corporation, partnership or other person or entity which, together with its “affiliates” and “associates” (as those terms are defined in QNB’s articles of incorporation) is the beneficial owner, directly or indirectly, of 20% or more of QNB’s outstanding voting stock. As Victory is not a Related Person of QNB, the 75% vote requirement is inapplicable to the merger.
Dividends and Distributions
Holders of QNB common stock are entitled to dividends and other distributions ratably as and when declared by the board of directors of QNB from assets legally available therefor. Specifically, dividends may be paid in cash, property or shares of QNB common stock, unless QNB is insolvent or the dividend payment would render it insolvent. Dividend payments and distributions are subject to other legal requirements and, generally, may be paid in cash or property provided that, after giving effect to the dividend or distribution, the total assets of QNB would not be less than the total liabilities of QNB plus the amount necessary to satisfy the preferential rights, if any, of shareholders whose preferential rights are superior to those receiving the dividend or distribution.
Ranking
Upon the voluntary or involuntary dissolution, liquidation or winding up of the affairs of QNB, after the payment in full of its debts and other liabilities, the remainder of its assets, if any, are to be distributed ratably among the holders of QNB common stock.
No Conversion Rights; No Preemptive Rights; No Redemption
Holders of QNB common stock have no preemptive or conversion rights and are not subject to further calls or assessment by QNB. There are no redemption or sinking fund provisions applicable to QNB common stock.
Fully Paid and Nonassessable
Outstanding shares of QNB common stock are validly issued, fully-paid and nonassessable.
Anti-Takeover Provisions
Certain provisions of QNB’s articles of incorporation, bylaws and the PBCL may have the have the effect of delaying, deferring, or preventing a change in control of QNB:
Pennsylvania Anti-Takeover Provisions
Certain anti‑takeover provisions of the PBCL apply to Pennsylvania registered corporations (e.g., publicly traded companies) including those relating to (1) control share acquisitions, (2) disgorgement of profits by certain controlling persons, (3) business combination transactions with interested shareholders, and (4) the rights of shareholders to demand fair value for their stock following a control transaction. Pennsylvania law allows corporations to opt-out of these anti‑takeover sections under certain circumstances, but QNB has not opted out of any of these provisions. A general summary of these applicable anti‑takeover provisions is set forth below.
Control Share Acquisitions. Pennsylvania law regarding control share acquisitions relates to the act of acquiring for the first time voting power over voting shares (other than (i) shares owned continuously by the same natural person since January 1, 1988, (ii) shares beneficially owned by any natural person or trust, estate, foundation or similar entity to the extent such shares were acquired solely by gift, inheritance, bequest, device or other testamentary distribution, directly or indirectly, from a natural person who beneficially owned the shares prior to January 1, 1988 or (iii) shares acquired pursuant to a stock split, stock dividend or similar distribution with respect to shares that have been beneficially owned continuously since their issuance by the corporation by the shareholder that acquired them from the corporation or that were acquired from such shareholder pursuant to (ii) above) equal to: (a) at least 20% but less than 33 1/3%; (b) at least 33 1/3% but less than 50%; or (c) 50% or more of the voting power of the corporation. Once a control share acquisition has occurred, then all shares in excess of the triggering threshold, plus shares purchased at any time with the intention of acquiring such voting power or shares purchased within 180 days of the date the triggering threshold was exceeded, are considered control shares. Control shares cannot vote either until their voting rights have been restored by two separate
140
votes of the shareholders, as described below, or until they have been transferred to a person who is not an affiliate of the transferor and does not thereby also become the holder of control shares.
The holder of control shares may wait until the next annual or special meeting after the acquisition took place to submit the question of the restoration of voting rights to the shareholders, or the acquiring person may accelerate the process by agreeing to underwrite the cost of a special meeting of shareholders for that purpose. In either case, the acquiring person is required to furnish for distribution to the shareholders an information statement containing a detailed disclosure concerning the acquiring person, its intentions with respect to ownership of securities of the corporation and other matters. As an alternative, a person submitting a bona fide written offer to make a control share acquisition may request prospective approval by the shareholders of the exercise of the voting rights of the shares proposed to be acquired, provided that the control share acquisition is consummated within 90 days after shareholder approval is obtained. Two shareholder votes are required to approve the restoration of voting rights. First, the approval of a majority of all voting power must be obtained. Second, the approval of a majority of all disinterested shareholders must be obtained.
For a period of 24 months after the later of (a) a control share acquisition by an acquiring person who does not properly request consideration of voting rights, or (b) the denial of such a request or lapse of voting rights, the corporation may redeem all the control shares at the average of the high and low public market sales price of the shares on the date notice of the call for redemption is given by the corporation.
Disgorgement of Profits by Certain Controlling Persons. Pennsylvania law regarding disgorgement of profits by certain controlling persons applies in the event that (a) any person or group directly or indirectly publicly discloses or causes to be disclosed that the person or group may seek to acquire control of the corporation, or (b) a person or group acquires, offers to acquire or directly or indirectly publicly discloses or causes to be disclosed an intent to acquire) 20% or more of the voting power of the corporation and, in either case, sells shares within 18 months thereafter. Any profits from sales of equity securities of the corporation received by the person or group during such 18‑month period will belong to the corporation if the securities that were sold were acquired during the 18‑month period after or within 24 months prior to becoming a controlling person.
Business Combination Transactions with Interested Shareholders. Pennsylvania law regarding business combination transactions with interested shareholders provides that a person who acquires the direct or indirect beneficial ownership of shares entitled to cast at least 20% of the votes entitled to be cast for the election of directors or an affiliate or associate of the corporation who at any time within the prior five years was the beneficial owner, directly or indirectly, of 20% of the voting shares of the corporation is an “interested shareholder.” A corporation subject to this provision may not effect mergers or certain other business combinations with the interested shareholder for a period of five years, unless:
After the five-year restricted period, an interested shareholder of the corporation may engage in a business combination with the corporation if (a) the business combination is approved by the affirmative vote of a majority of the shares other than those beneficially owned by the interested shareholder and its affiliates, or (b) the merger is approved at a shareholders meeting and certain fair price requirements are met.
Rights of Shareholders to Demand Full Value for their Stock Following Control Transaction. Under Pennsylvania law, a control transaction is an acquisition by a person or group of the voting power over at least 20% of the voting shares of the corporation. Subject to exceptions, if a Pennsylvania registered corporation is subject to a control transaction, the controlling person or group must provide prompt notice of the transaction to the court and each shareholder of record holding voting shares. Any holder of voting shares may make a written demand on the controlling person or group for payment in cash of the fair value of each voting share at the
141
date on which the control transaction occurs. The minimum value that a shareholder can receive is the highest price paid per share by the controlling person or group within the 90‑day period ending on and including the date of the control transaction. If any shareholder believes the fair value of her shares is higher than the price offered by the controlling person or group, the shareholder may file a petition with the court seeking appraisal of the shares.
Staggered Board of Directors
The bylaws provide for the classification of the board of directors into three classes with each class serving a staggered three-year term. As a result of this classification, only one-third of the entire board of directors stands for election in any one year and a minimum of two annual meetings would be required to elect a majority of the board of directors.
Calling of Special Meetings of Shareholders
Pursuant to the bylaws, special meetings of shareholders may only be called by the President of QNB, or by a majority of QNB’s board of directors.
Advance Notice Requirements for Shareholder Proposals and Director Nominations
The bylaws provide that notice of any proposal by a shareholder which the shareholder desires to submit to a vote at an annual meeting, including any director nominations, must made by notice in writing, delivered or mailed by first class United States mail, postage prepaid, to the President of QNB not less than ninety (90) days nor more than one hundred twenty (120) days prior to any annual meeting of shareholders. The bylaws also specify requirements as to the contents of the shareholder’s notice or nomination. If notice is not provided in accordance with these provisions, a shareholder’s proposal will not appear on the meeting agenda.
Removal of Directors
Under Pennsylvania law, directors of QNB can be removed from office by a vote of shareholders only for cause.
Board of Directors May Consider Factors When Evaluating Take-Over Offer
The articles of incorporation provide that, when evaluating any offer by another party or a tender or exchange offer for any equity security of QNB or to enter into a merger or other business combination with QNB, the board may consider, among other factors: (i) the social and economic effects on the employees, customers and other constituents of QNB and its subsidiaries and on the communities in which QNB and its subsidiaries operate or are located, and (ii) the desirability of QNB continuing as an independent entity.
Amendments to Articles of Incorporation
The articles of incorporation provide that, in addition to any affirmative vote required by law, the articles of incorporation may be amended by the affirmative vote of the holders of a majority of the outstanding shares of voting stock; provided, however the approval of any amendment to Article V (shares), Article VII (business combinations) and Article VIII (amendments) of the articles of incorporation requires the affirmative vote of holders of at least 75% of the outstanding shares of voting stock. The PBCL also provides that our shareholders are not entitled by statute to propose amendments to the articles of incorporation.
Amendments to Bylaws
The bylaws provide that our bylaws may be amended or repealed, in whole or in part, by the affirmative vote of a majority of the board of directors at any regular or special meeting of the board of directors. The PBCL provides that the ability of our board of directors to adopt, amend or repeal the bylaws is subject to the power of shareholders to change such action. The PBCL also provides that the board of directors does not have the authority to adopt or change a bylaw on specified subjects, including, but not limited to, authorized capital, the personal liability of directors, various matters relating to our board of directors, and matters relating to the voting rights of shareholders.
142
Notice and Approval Requirements. Federal banking laws also impose notice, approval and ongoing regulatory requirements on any shareholder or other party that seeks to acquire direct or “indirect” control of an FDIC-insured depository institution. These laws include the Bank Holding Company Act of 1956 and the Change in Bank Control Act.
The overall effect of these provisions may be to deter a future offer or other merger or acquisition proposals that a majority of QNB’s shareholders might view to be in their best interests as the offer might include a substantial premium over the market price of QNB common stock at that time. In addition, these provisions may have the effect of assisting the board of directors and management in retaining their respective positions and placing them in a better position to resist changes that the shareholders may want to make if dissatisfied with the conduct of QNB’s business.
143
Both QNB and Victory are incorporated under Pennsylvania law. Upon completion of the merger, the QNB articles of incorporation and bylaws in effect immediately prior to the effective time of the merger will be the articles of incorporation and bylaws of the combined company. Because both QNB and Victory are organized under the laws of the Commonwealth of Pennsylvania, differences in the rights of holders of QNB common stock and the rights of holders of Victory common stock arise only from differing provisions of their respective articles of incorporation and bylaws. The material differences between the rights of holders of QNB common stock and the rights of holders of Victory common stock resulting from any differing provisions of their articles of incorporation and bylaws are summarized below.
The following summary does not purport to be a complete statement of the rights of QNB shareholders and Victory shareholders. The summary is necessarily general, and it is not intended to be a complete statement of all differences affecting the rights of shareholders of QNB or Victory, respectively, or a complete description of the specific provisions referred to below. This summary contains a list of the material differences but is not meant to be relied upon as an exhaustive list or a detailed description of the provisions discussed and is qualified in its entirety by reference to the PBCL and the governing documents of QNB and Victory, to which the shareholders of Victory are referred. Copies of the governing documents of QNB are available, without charge, to any person, including any beneficial owner of Victory common stock to whom this joint proxy statement/prospectus is delivered, by following the instructions listed under “Where You Can Find More Information” beginning on page 162.
|
|
QNB Shareholder Rights |
|
Victory Shareholder Rights |
|
|
|
|
|
Corporate Governance |
|
QNB is a Pennsylvania corporation. |
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Victory is a Pennsylvania corporation |
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Authorized Capital Stock |
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The rights of QNB shareholders are governed by the PBCL, the Articles of Incorporation, as amended (which we refer to as the “QNB articles,” and the Amended and Restated Bylaws of QNB (which we refer to as the “QNB bylaws”). The QNB articles authorize it to issue 10,000,000 shares of common stock, $0.625 par value per share. As of December 17, 2025, the record date for the QNB special meeting, there were [ ] shares of QNB common stock issued and outstanding. |
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The rights of Victory shareholders are governed by the PBCL, the Victory Articles of Incorporation (which we refer to as the “Victory articles”), and the Victory Amended and Restated Bylaws (which we refer to as the “Victory bylaws”). The Victory articles authorize it to issue 9,000,000 shares of voting common stock, par value $1.00 per share (which we refer to as "common stock"), 1,000,000 shares of non-voting common stock, and 2,000,000 shares of preferred stock, par value $1.00 per share. The Victory articles authorize Victory’s board of directors to issue shares of preferred stock in one or more series and to fix the designations, preferences, rights, qualifications, limitations, or restrictions of the shares of Victory preferred stock in each series. As of December 17, 2025, the record date for the Victory special meeting, there were 1,998,500 shares of Victory common stock issued and outstanding and no shares of non-voting common stock and preferred stock are issued and outstanding. |
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Preemptive Rights |
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No holder of QNB common stock has a right under the PBCL, or the QNB articles or the QNB bylaws to purchase shares of common stock upon any future issuance. |
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No holder of Victory common stock has a right under the PBCL, or the Victory articles, or the Victory bylaws, to purchase shares of common stock upon any future issuance. |
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Voting Rights |
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Each holder of QNB common stock is entitled to one vote for each share on all matters submitted to a vote of shareholders, except as otherwise required by law and subject to the rights and preferences of the holders of any shares of preferred stock that QNB may issue. |
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Each holder of a share of Victory common stock is entitled to one vote for each share standing in his name on the books of Victory. |
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Victory Shareholder Rights |
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Cumulative Voting |
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The QNB articles do not provide for cumulative voting in the election of directors. Accordingly, cumulative voting in the election of directors is not permitted. |
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The Victory articles do not provide for cumulative voting in the election of directors. Accordingly, cumulative voting in the election of directors is not permitted. |
Restrictions on Transfers |
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QNB shareholders are not subject to any agreements restricting transfer of shares. |
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Victory shareholders are not subject to any agreements restricting transfer of shares. |
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Size of the board of directors |
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The QNB bylaws provide for a board of directors consisting of between seven and 15 directors as fixed from time to time by QNB’s board. Currently, there are 10 directors on QNB’s board of directors. |
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The Victory bylaws provide for a board of directors consisting of between five and 25 directors, divided into three classes. Currently there are nine directors on Victory’s board of directors. |
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Independent Directors |
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While QNB is not subject to any requirement with respect to independent directors, QNB's board of directors considers the rules adopted by the SEC and the Nasdaq Stock Market for determining a director's independence. |
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Victory is not subject to any requirement with respect to independent directors, however, Victory considers the regulations of the FDIC for purposes of determining a director’s independence. |
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Term of Directors and Classified Board |
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The QNB bylaws provide for a classified board divided into three classes in as nearly equal numbers as possible. Except with respect to a vacancy on the board of directors, QNB directors are elected at the annual meeting of shareholders for a term of three years and each director, including a director elected to fill a vacancy, holds office until his successor is elected and qualified or until his earlier death, resignation or removal. |
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The Victory articles provide for a classified board divided into three classes in as nearly equal numbers as possible. Except with respect to a vacancy on the board of directors, Victory directors are elected at the annual meeting of shareholders for a term of three years and each director, including a director elected to fill a vacancy, holds office until his successor is elected and qualified or until his earlier death, resignation or removal. |
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Election of Directors |
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QNB’s directors are elected by the affirmative vote of a majority of the votes cast with respect to that director’s election at the meeting of shareholders in which the director is elected; provided, however, that directors are to be elected by a plurality of votes cast in connection with contested director elections. |
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Victory’s directors are elected by plurality of the votes cast at a meeting at which a quorum is present. |
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Removal of Directors |
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Under Pennsylvania law, because of QNB's staggered board, directors of QNB can be removed from office by a vote of shareholders only for cause. |
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The entire board of directors or an individual director of Victory may be removed with or without cause by the affirmative vote of the holders of a majority of the shares of Victory entitled to vote at an annual election of directors. The Victory bylaws also provide that a director of Victory may also be removed by the board of directors if such director (i) is adjudicated an incompetent by a court, (ii) is convicted of a felony, (iii) does not, within 60 days after being elected, properly accept the office and fill other requirements for holding the office of director, or (iv) fails to attend regular meetings of the board of directors for six consecutive meetings without having been excused by the board. |
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Filling Vacancies of Directors |
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The QNB bylaws provide that vacancies in the QNB board of directors, including vacancies resulting from an increase in the number of |
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Any vacancy occurring on Victory’s board of directors may be only be filled by the affirmative vote of a majority of the remaining directors then |
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Victory Shareholder Rights |
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directors, may be filled by a majority of the remaining members of the QNB board of directors though less than a quorum, and each person so elected shall be a director until his or her successor is duly elected by the shareholders, who may make such election at the next annual meeting of the QNB shareholders or at any special meeting duly called for that purpose and held prior thereto, or until his or her earlier resignation or removal. Shareholders are also able to fill vacancies on the board of directors of Victory under the provisions of the PBCL. |
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in office, although less than a quorum. Shareholders are also able to fill vacancies on the board of directors of Victory under the provisions of the PBCL. |
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Amendments to Articles |
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The QNB articles of incorporation provide that, in addition to any affirmative vote required by law, the articles of incorporation may be amended by the affirmative vote of the holders of a majority of the outstanding shares of voting stock; provided, however the approval of any amendment to Article V (shares), Article VII (business combinations) and Article VIII (amendments) of the QNB articles of incorporation requires the affirmative vote of holders of at least 75% of the outstanding shares of voting stock. The PBCL also provides that QNB shareholders are not entitled by statute to propose amendments to the articles of incorporation. |
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The Victory articles may be amended in accordance with the PBCL, which generally requires the approval of the Victory board of directors and the holders of a majority of the votes entitled to be cast on the amendment.
The Victory articles of incorporation provide that, in addition to any affirmative vote required by law, the articles of incorporation may be amended by the affirmative vote of the holders of at least a majority of the votes entitled to be cast thereon; provided, however the approval of any amendment to Article FIFTH (shares), Article SIXTH (board size), Article SEVENTH (bylaw amendments), Article NINTH (fiduciary duty standard), Article TENTH (director exculpation), Article ELEVENTH (indemnification) and Article TWELFTH (amendments) of the articles of incorporation requires the affirmative vote of holders of at least 66 2/3% of each class of Victory capital stock entitled to vote thereon.
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Bylaw Amendments |
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The QNB bylaws may be amended or repealed, in whole or in part, by the affirmative vote of a majority of the board of directors at any regular or special meeting of the board of directors. The PBCL provides that the ability of the QNB board of directors to adopt, amend or repeal the QNB bylaws is subject to the power of shareholders to change such action. The PBCL also provides that the QNB board of directors does not have the authority to adopt or change a bylaw on specified subjects, including, but not limited to, authorized capital, the personal liability of directors, various matters relating to our board of directors, and matters relating to the voting rights of shareholders. |
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The Victory bylaws may be altered, amended, added to or repealed by a vote of a majority of the Victory board of directors, except that the Victory board of directors shall not make or alter any bylaws fixing the qualifications, classifications or terms of office of members of the Victory board of directors. Such action by the Victory board of directors is subject, however, to the general right of the Victory shareholders to change such action. |
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Merger, Consolidations, or Sales of Substantially All |
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Under the PBCL, subject to certain exceptions, a merger, share exchange or sale, lease, exchange or transfer of all or substantially all of the |
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The provisions of the PBCL are also applicable to Victory shareholders.
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Victory Shareholder Rights |
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Assets; Anti-Takeover Provisions |
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corporation’s assets generally must be approved at a meeting of a corporation’s shareholders by the: (i) affirmative vote of a majority of the votes cast by all shareholders entitled to vote on the matter; and (ii) in addition, with respect to a merger or share exchange, affirmative vote of a majority of all the votes entitled to be cast by holders of the shares of each voting group entitled to vote separately on the transaction as a group by the articles of incorporation. QNB’s articles of incorporation generally provide that any merger, consolidation, sale of substantially all of the Corporation’s assets, or other “Business Combination” transaction more fully described below, must be approved by the affirmative vote of not less than 75% of QNB’s then outstanding voting stock. Under the articles of incorporation, the 75% affirmative shareholder vote would not be required if: (a) a majority of the board of directors has given prior approval to the acquisition by the Related Person (as defined below) involved in the Business Combination of 20% or more of the outstanding shares of QNB common stock which resulted in that person becoming a Related Person; or (b) a majority of the board of directors has approved the Business Combination prior to the time that the person became a Related Person. The term “Business Combination” means: • any merger or consolidation of QNB or a subsidiary with or into a Related Person; • any sale, lease, exchange, transfer or other disposition, including without limitation mortgage or any other security device of all or any substantial part of the assets of QNB (including without limitation any securities of a subsidiary) or of a subsidiary, to a Related Person; • any merger or consolidation of a Related Person with or into QNB or a subsidiary; • any sale, lease, exchange, transfer or other disposition of all or any substantial part of the assets of a Related Person to QNB or a subsidiary; |
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Victory's articles of incorporation also provide that, in no event shall any record owner of any outstanding common stock that is beneficially owned, directly or indirectly, by a person who, as of any record date for determination of shareholders entitled to vote on any matter, beneficially owns in excess of 10% of the then-outstanding shares of common stock (the "Limit"), be entitled, or permitted to any vote in respect of the shares held in excess of the Limit except as described in the following sentence. Any votes cast by such record owner in respect of such shares held in excess of the Limit shall be deemed to have been voted in the same ratio as all other shares voted on the particular matter being considered by shareholders (exclusive of the record owner's votes over the Limit). The Victory board of directors shall have the power to construe and apply these provisions of the Victory articles of incorporation and make all determinations necessary or desirable to implement these provisions of the Victory articles of incorporation. |
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• the issuance of any securities of QNB or a subsidiary to a Related Person; • the acquisition by QNB or a subsidiary of any securities of a Related Person; • any reclassification of voting stock of the Corporation, or any recapitalization involving voting stock of the Corporation, consummated within five years after a Related Person became a Related Person; • any loan or other extension of credit by QNB or a subsidiary to the Related Person or any guarantees by QNB or a subsidiary of any loan or other extension of credit by any person to a Related Person; and • any agreement, contract or other arrangement provided for any of the transactions described in this definition of Business Combination. “Related Person” means any individual, corporation, partnership or other person or entity which, together with its “affiliates” and “associates” (as those terms are defined in QNB’s articles of incorporation) is the beneficial owner, directly or indirectly, of 20% or more of QNB’s outstanding voting stock. Certain anti‑takeover provisions of the PBCL apply to Pennsylvania registered corporations (e.g., publicly traded companies) including those relating to (1) control share acquisitions, (2) disgorgement of profits by certain controlling persons, (3) business combination transactions with interested shareholders, and (4) the rights of shareholders to demand fair value for their stock following a control transaction. Pennsylvania law allows corporations to opt-out of these anti‑takeover sections under certain circumstances, but QNB has not opted out of any of these provisions. A general summary of these applicable anti‑takeover provisions is set forth below: Control Share Acquisitions. Pennsylvania law regarding control share acquisitions relates to the act of acquiring for the first time voting power |
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Victory Shareholder Rights |
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over voting shares (other than (i) shares owned continuously by the same natural person since January 1, 1988, (ii) shares beneficially owned by any natural person or trust, estate, foundation or similar entity to the extent such shares were acquired solely by gift, inheritance, bequest, device or other testamentary distribution, directly or indirectly, from a natural person who beneficially owned the shares prior to January 1, 1988 or (iii) shares acquired pursuant to a stock split, stock dividend or similar distribution with respect to shares that have been beneficially owned continuously since their issuance by the corporation by the shareholder that acquired them from the corporation or that were acquired from such shareholder pursuant to (ii) above) equal to: (a) at least 20% but less than 33 1/3%; (b) at least 33 1/3% but less than 50%; or (c) 50% or more of the voting power of the corporation. Once a control share acquisition has occurred, then all shares in excess of the triggering threshold, plus shares purchased at any time with the intention of acquiring such voting power or shares purchased within 180 days of the date the triggering threshold was exceeded, are considered control shares. Control shares cannot vote either until their voting rights have been restored by two separate votes of the shareholders, as described below, or until they have been transferred to a person who is not an affiliate of the transferor and does not thereby also become the holder of control shares. The holder of control shares may wait until the next annual or special meeting after the acquisition took place to submit the question of the restoration of voting rights to the shareholders, or the acquiring person may accelerate the process by agreeing to underwrite the cost of a special meeting of shareholders for that purpose. In either case, the acquiring person is required to furnish for distribution to the shareholders an information statement containing a detailed disclosure concerning the acquiring person, its intentions with respect to ownership of securities of the corporation and other matters. As an alternative, a person submitting a bona fide written offer to make a control share acquisition may request prospective approval by the shareholders of the exercise of the voting rights of the shares proposed to be acquired, provided that the control share acquisition is consummated within 90 days after shareholder approval is obtained. Two shareholder votes are required to approve the restoration of voting rights. First, the approval of |
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Victory Shareholder Rights |
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a majority of all voting power must be obtained. Second, the approval of a majority of all disinterested shareholders must be obtained. For a period of 24 months after the later of (a) a control share acquisition by an acquiring person who does not properly request consideration of voting rights, or (b) the denial of such a request or lapse of voting rights, the corporation may redeem all the control shares at the average of the high and low public market sales price of the shares on the date notice of the call for redemption is given by the corporation. Disgorgement of Profits by Certain Controlling Persons. Pennsylvania law regarding disgorgement of profits by certain controlling persons applies in the event that (a) any person or group directly or indirectly publicly discloses or causes to be disclosed that the person or group may seek to acquire control of the corporation, or (b) a person or group acquires, offers to acquire or directly or indirectly publicly discloses or causes to be disclosed an intent to acquire) 20% or more of the voting power of the corporation and, in either case, sells shares within 18 months thereafter. Any profits from sales of equity securities of the corporation received by the person or group during such 18‑month period will belong to the corporation if the securities that were sold were acquired during the 18‑month period after or within 24 months prior to becoming a controlling person. Business Combination Transactions with Interested Shareholders. Pennsylvania law regarding business combination transactions with interested shareholders provides that a person who acquires the direct or indirect beneficial ownership of shares entitled to cast at least 20% of the votes entitled to be cast for the election of directors or an affiliate or associate of the corporation who at any time within the prior five years was the beneficial owner, directly or indirectly, of 20% of the voting shares of the corporation is an “interested shareholder.” A corporation subject to this provision may not effect mergers or certain other business combinations with the interested shareholder for a period of five years, unless: • the business combination or the acquisition of stock by means of which the interested shareholder became an interested shareholder is |
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Victory Shareholder Rights |
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approved by the corporation’s board of directors prior to such stock acquisition; • the business combination is approved by the affirmative vote of the holders of all the outstanding common shares of the corporation; or • the business combination is approved by the affirmative vote of the holders of a majority of all shares entitled to vote, excluding votes of shares held by the interested shareholders or their affiliates, and at the time of such vote, the interested shareholder is the beneficial owner of at least 80% of the voting shares of the corporation. This exception applies only if the value of the consideration to be paid by the interested shareholder in connection with the business combination satisfies certain fair price requirements. After the five-year restricted period, an interested shareholder of the corporation may engage in a business combination with the corporation if (a) the business combination is approved by the affirmative vote of a majority of the shares other than those beneficially owned by the interested shareholder and its affiliates, or (b) the merger is approved at a shareholders meeting and certain fair price requirements are met. Rights of Shareholders to Demand Full Value for their Stock Following Control Transaction. Under Pennsylvania law, a control transaction is an acquisition by a person or group of the voting power over at least 20% of the voting shares of the corporation. Subject to exceptions, if a Pennsylvania registered corporation is subject to a control transaction, the controlling person or group must provide prompt notice of the transaction to the court and each shareholder of record holding voting shares. Any holder of voting shares may make a written demand on the controlling person or group for payment in cash of the fair value of each voting share at the date on which the control transaction occurs. The minimum value that a shareholder can receive is the highest price paid per share by the controlling person or group within the 90‑day period ending on and including the date of the control transaction. If any shareholder |
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Victory Shareholder Rights |
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believes the fair value of her shares is higher than the price offered by the controlling person or group, the shareholder may file a petition with the court seeking appraisal of the shares. |
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Annual Meetings of the Shareholders |
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The QNB bylaws provide that the annual meeting of the shareholders is held on a date each year designated by the board of directors. The time and place of such meeting shall be determined by the board of directors of QNB. At the annual meeting, the shareholders elect a board of directors and transact such other business as may properly come before the meeting. |
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Victory’s bylaws provide that the annual meeting of the shareholders is held at such time as designated by the board of directors. At the annual meeting, the shareholders elect a board of directors and transact such other business properly brought before the meeting. |
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Special Meetings of the Shareholders |
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Under the QNB bylaws, special meetings of the shareholders may be called by the President or by a majority of the board of directors. Upon the written request of any person or persons entitled to call a special meeting, which request shall set forth the purpose for which the meeting is desired, it shall be the duty of the Secretary to fix the date of such meeting to be held at such time, not less than five (5) nor more than sixty (60) days after the receipt of such request, as the Secretary may determine, and to give due notice thereof. If the Secretary neglects or refuses to fix the date of such meeting and to give notice thereof within five days after receipt of such request, the person or persons calling the special meeting of shareholders may do so. |
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The Victory bylaws provide that special meetings of Victory’s shareholders may be called by the Chief Executive Officer, the board of directors, or upon the written request of holders of not less than one-fifth of all shares entitled to vote at the particular meeting. |
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Advance Notice Provisions for Shareholder Nominations and Shareholder Business Proposals at Annual Meetings |
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The QNB bylaws require shareholders to provide timely notice in proper form of their intent to bring a matter for shareholder action or director nomination at an annual meeting of the shareholders. To be timely given, a shareholder’s notice must be delivered to, or mailed and received at, the principal executive offices of QNB not less than 90 days, nor more than 120 days, prior to the anniversary date of the immediately preceding year’s annual meeting; provided, however, that in the event that the annual meeting is called for a date that is not within 30 days before or after such anniversary date, notice by the shareholder to be timely must be so delivered not later than the close of business on the fifth (5th) day following the earlier of the date on which such notice of the date of the meeting was mailed or public disclosure of the date of the meeting was made. To be in proper form, a shareholder’s notice to the Secretary regarding shareholder action shall be in writing and shall set forth: (a) the name and address of the shareholder who intends to bring the business before the annual meeting ("Proposing Shareholder"); (b) the name and address of the beneficial owner, if different than the Proposing |
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The Victory bylaws require shareholders to provide timely notice in proper form of their intent to bring a matter for shareholder action or director nomination at an annual meeting of the shareholders.
To be timely given, a shareholder’s notice must be delivered to, or mailed and received by, the Secretary of Victory at least 40 days before the date of the annual meeting; provided, however, that in the event that less than 50 days notice or prior public disclosure of the date of the meeting is given or made to Victory shareholders, notice by the shareholder must be received not later than the close of business on the 10th day following the day on which such notice of the date of the annual meeting was mailed or such public disclosure was made. To be in proper form, a shareholder’s notice to the Secretary shall be in writing and shall set forth: (a) a brief description of the business desired to be brought before the annual meeting; and (b) the name and address of the shareholder who intends to propose the business and the class or series and number of shares of Victory stock |
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Victory Shareholder Rights |
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Shareholder, of any of the shares owned of record by the Proposing Shareholder ("Beneficial Owner"); (c) the number of shares of each class and series of shares of QNB which are owned of record and beneficially by the Proposing Shareholder and the number which are owned beneficially by any Beneficial Owner; (d) any interest (other than an interest solely as a shareholder) which the Proposing Shareholder or a Beneficial Owner has in the business being proposed by the Proposing Shareholder; (e) a representation that there are (and will be) no undisclosed arrangements and understandings between the Proposing Shareholder and any Beneficial Owner and any other person or persons (naming such person or persons) pursuant to which the proposal in the Shareholder Notice is being made; (f) a description of the business which the Proposing Shareholder seeks to bring before the annual meeting, the reason for doing so and, if a specific action is to be proposed, the text of the resolution or resolutions which the Proposing Shareholder proposes that QNB adopt; and (g) a representation that the Proposing Shareholder is at the time of giving the shareholder notice, was or will be on the record date for the meeting, and will be on the meeting date a holder of record of shares of QNB entitled to vote at such meeting, and intends to appear in person or by proxy at the meeting to bring the business specified in the shareholder notice before the meeting. The presiding officer of the meeting may, in such officer's sole discretion, refuse to acknowledge any business proposed by a shareholder which the presiding officer determines is not made in compliance with the foregoing procedure. Rule 14a-8 promulgated by the SEC under the Exchange Act establishes the rules for shareholder proposals intended to be included in a public company’s proxy statement. Rule 14a-8 applies to QNB. Under the rule, a shareholder proposal must be received by the subject company at least 120 days before the anniversary of the date on which the company first mailed the previous year’s proxy statement to shareholders. If, however, the annual meeting date has been changed by more than 30 days from the date of the prior year’s meeting, or for special meetings, the proposal must be submitted within a reasonable time before the subject company begins to print and mail its proxy materials. Additionally, to be in proper form, a shareholder’s notice to the Secretary regarding a director nomination shall be in writing and shall set forth: (i) the name and address of the shareholder who intends to make the nomination |
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which are owned beneficially or of record by such shareholder. Rule 14a-8 of the Exchange Act does not apply to Victory. |
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Victory Shareholder Rights |
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("Nominating Shareholder"); (ii) the name and address of the beneficial owner, if different than the Nominating Shareholder, of any of the shares owned of record by the Nominating Shareholder ("Beneficial Holder"); (iii) the number of shares of each class and series of shares of QNB which are owned of record and beneficially by the Nominating Shareholder and the number which are owned beneficially by any Beneficial Holder; (iv) a representation that there are (and will be) no undisclosed arrangements and understandings between the Nominating Shareholder and any Beneficial Holder and any other person or persons pursuant to which the nomination is being made; (v) the name and address of the person or persons to be nominated; (vi) a representation that the Nominating Shareholder is at the time of giving of the notice, was or will be on the record date for the meeting, and will be on the meeting date a holder of record of shares of QNB entitled to vote at such meeting, and intends to appear in person or by proxy at the meeting to nominate the person or persons specified in the notice; (vii) such other information regarding each nominee proposed by the Nominating Shareholder as would have been required to be included in a proxy statement filed pursuant to the proxy rules of the SEC had the nominee been nominated, or intended to be nominated, by the QNB board of directors; (viii) a description of any agreement, arrangement or understanding (including any derivative or short positions, profit interests, options, hedging transactions, and borrowed or loaned shares) that has been entered into as of the date of the Nominating Shareholder's notice by, or on behalf of, the Nominating Shareholder or any of its affiliates or associates, the effect or intent of which is to mitigate loss to, manage risk or benefit of share price exchanges for, or increase or decrease the voting power of the Nominating Shareholder or any of its affiliates or associates with respect to shares of stock of the Corporation; and (ix) the written consent of each nominee to serve as a director of QNB if so elected. The presiding officer of the meeting may, in such officer's sole discretion, refuse to acknowledge the nomination of any person which the presiding officer determines is not made in compliance with the foregoing procedure. |
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Notice of Shareholder Meetings |
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QNB must give written or printed notice of the place, day and hour of each annual and special shareholders’ meeting no fewer than 10 days before the meeting date, unless otherwise required by Pennsylvania law, to each shareholder of record |
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Victory must give each shareholder entitled to vote at a meeting written or printed notice of a meeting of shareholders stating the place, date and time of the meeting and, in the case of a special meeting, the general nature of the |
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Victory Shareholder Rights |
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entitled to vote at the meeting, at the discretion of, or in the name of, the QNB board of directors, President, Vice President, Secretary or Assistant Secretary. When a meeting is adjourned, it shall not be necessary to give any notice of the adjourned meeting or of the business to be transacted at an adjourned meeting, other than by announcement at the meeting at which such adjournment is taken. |
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business to be transacted at the meeting, at least 10 days before the day of the meeting. |
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Indemnification of Directors and Officers |
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The QNB bylaws provide for mandatory indemnification of, and mandatory advancement of expenses for, QNB’s directors and officers against liabilities arising out of their status as directors or officers of QNB, subject to a determination that such director or officer is entitled to indemnification pursuant to the applicable provisions of the PBCL. The PBCL requires a corporation to indemnify a director who was wholly successful, on the merits or otherwise, in the defense of any proceeding to which he or she was a party because he or she was a director of the corporation against reasonable expenses incurred by the director in connection with the proceeding. |
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The Victory articles of incorporation and bylaws provide for mandatory indemnification of Victory’s directors and officers against liabilities and reasonable expenses arising out of their status as directors or officers of Victory, subject to a determination that such director or officer is entitled to indemnification pursuant to the applicable provisions of the PBCL. |
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Limitation of Director Liability |
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The PBCL provides that a corporation’s articles of incorporation may set forth a provision eliminating or limiting the liability of a director to the corporation or its shareholders for monetary damages for any action taken, or any failure to take any action, as a director, except liability: (i) for any appropriation, in violation of his or her duties, of any business opportunity of the corporation; (ii) for acts or omissions which involve intentional misconduct or a knowing violation of law; (iii) for unlawful distributions; or (iv) for any transaction from which the director received an improper personal benefit; provided, in each case, that no such provision shall eliminate or limit the liability of a director for any act or omission occurring prior to the date when such provision becomes effective. The QNB articles of incorporation provide that a QNB director shall not be personally liable for monetary damages for any action taken, or any failure to take any action, provided however, that such provision of the QNB articles of incorporation shall not eliminate or limit the liability of a QNB director to the extent that such elimination or limitation of liability is expressly prohibited by the Pennsylvania Directors' Liability Act as in effect at the time of the alleged action or failure to take action by such director. |
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The provisions of the PBCL also apply to Victory. The Victory articles provide for limitation of director liability as provided for by the PBCL. |
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Victory Shareholder Rights |
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Dividends |
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The PBCL prohibits a Pennsylvania corporation from making any distributions to its shareholders if, after giving it effect, (1) the corporation would not be able to pay its debts as they become due in the usual course of business, or (2) the corporation’s total assets would be less than the sum of its total liabilities plus the amount that would be needed, if the corporation were to be dissolved at the time of the distribution, to satisfy the preferential rights upon dissolution of shareholders whose preferential rights are superior to those receiving distribution. The QNB articles allow the board of directors, with respect to each series of preferred stock to determine the dividend rate on the shares of the series, whether dividends shall be cumulative, and, if so, from which date or dates, and the relative rights of priority, if any, of payments of dividends on shares of that series. |
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The provisions of the PBCL regarding dividends also apply to Victory. |
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Dissenters’ Rights |
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Under the PBCL, a shareholder is entitled to dissent from and obtain the fair value in cash of his or her shares in connection with certain corporate actions, including some mergers, share exchanges, sales or exchanges of all or substantially all of the corporation’s property other than in the usual and regular course of business and certain amendments to the corporation’s articles of incorporation. A shareholder of a corporation is not entitled to dissent in connection with a merger under the PBCL if: • the corporation is a parent corporation merging into its 90% owned subsidiary; • surviving corporation, with each shareholder of the corporation whose shares were outstanding immediately prior to the merger will receive a like number of shares of the designations, preferences, limitations, and relative rights identical to those previously held by each such shareholder; and • the number and kind of shares of the surviving corporation outstanding immediately following the merger, plus the number and kind of shares issuable as a result of the merger and by conversion of securities issued pursuant to the merger, will not exceed the total number and kind of shares of the corporation authorized by its articles of incorporation immediately prior to the merger. Additionally, except in limited circumstances, dissenters’ rights are not available to holders of shares: (1) listed on a national securities exchange; or (2) held of record by more than 2,000 shareholders. |
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Victory shareholders are entitled to dissenters’ rights. The provisions of the PBCL are also applicable to Victory and its shareholders. |
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MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER
The following is a general discussion of the anticipated material U.S. federal income tax consequences of the merger to “U.S. holders” (as defined below) of Victory common stock that exchange their shares for the merger consideration. The following discussion is based upon the Code, the U.S. Treasury regulations promulgated thereunder, judicial and administrative authorities, rulings, and decisions, all as in effect on the date of this joint proxy statement/prospectus. These authorities may change, possibly with retroactive effect, and any such change could affect the accuracy of the statements and conclusions set forth in this discussion. This discussion does not address any tax consequences arising under the laws of any state, local or non-U.S. jurisdiction, or under any U.S. federal laws other than those pertaining to the income tax.
Further, this discussion is for general information only and does not purport to consider all aspects of U.S. federal income taxation that might be relevant to U.S. holders in light of their particular circumstances and does not apply to U.S. holders subject to special treatment under the U.S. federal income tax laws, including, without limitation, dealers or brokers in securities, commodities or currencies, traders in securities that elect to apply a mark-to-market method of accounting, banks and certain other financial institutions, insurance companies, mutual funds, tax-exempt organizations and entities, including pension plans, individual retirement accounts and employee stock ownership plans, holders subject to the alternative minimum tax provisions of the Code, partnerships, S corporations or other pass-through entities or investors in such entities, regulated investment companies, real estate investment trusts, former citizens or residents of the United States, holders whose functional currency is not the U.S. dollar, or holders who hold shares of Victory common stock as part of a hedge, straddle, constructive sale, conversion transaction or other integrated investment.
The discussion applies only to U.S. holders of shares of Victory common stock who hold such shares as a capital asset within the meaning of Section 1221 of the Code (generally, property held for investment). For purposes of this discussion, the term “U.S. holder” means a beneficial owner of Victory common stock that is for U.S. federal income tax purposes: (1) an individual citizen or resident of the United States; (2) a corporation (or other entity taxable as a corporation for U.S. federal income tax purposes) created or organized in or under the laws of the United States, any state thereof or the District of Columbia; (3) a trust if (a) a court within the United States is able to exercise primary supervision over the administration of the trust and one or more U.S. persons (within the meaning of Section 7701(a)(30) of the Code) have the authority to control all substantial decisions of the trust or (b) such trust was in existence on August 20, 1996 and has a valid election in place to be treated as a U.S. person for U.S. federal income tax purposes; or (4) an estate, the income of which is includible in gross income for U.S. federal income tax purposes regardless of its source.
If a partnership (including an entity or arrangement treated as a partnership for U.S. federal income tax purposes) holds Victory common stock, the tax treatment of a partner in the partnership who would constitute a U.S. holder (if otherwise treated as a beneficial owner of Victory common stock) generally will depend on the status of the partner and the activities of the partnership. Any entity or arrangement treated as a partnership for U.S. federal income tax purposes that holds Victory common stock, and any partners in such partnership, should consult their tax advisors regarding the tax consequences of the merger to their specific circumstances.
Determining the actual tax consequences of the merger to you may be complex and will depend on your specific situation. You should consult with your own tax advisor as to the specific tax consequences of the merger in your particular circumstances, including the applicability and effect of the alternative minimum tax and any state, local, non-U.S. or other tax laws and of possible changes in those laws after the date of this joint proxy statement/prospectus.
U.S. Federal Income Tax Consequences of the Merger Generally
The parties expect the merger to qualify as a “reorganization” within the meaning of Section 368(a) of the Code. In connection with the filing with the SEC of the registration statement of which this joint proxy statement/prospectus is a part, Stevens & Lee, P.C., counsel to QNB, has rendered its tax opinion to QNB and Kilpatrick Townsend & Stockton LLP, counsel to Victory, has rendered its tax opinion to Victory, in each case to the effect that the merger will qualify as a “reorganization” within the meaning of Section 368(a) of the Code. Copies of such tax opinions are attached as Exhibits 8.1 and 8.2 to the registration statement.
The obligations of the parties to complete the merger are conditioned on, among other things, the receipt by QNB and Victory of tax opinions from Stevens & Lee, P.C. and Kilpatrick Townsend & Stockton LLP, respectively, dated the closing date of the merger, to the effect that the merger will be treated as a reorganization within the meaning of Section 368(a) of the Code. The conditions relating to receipt of such closing tax opinions may be waived by both QNB and Victory. Neither QNB nor Victory currently intends to waive this condition to its obligation to consummate the merger. If either QNB or Victory waives this condition
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after this registration statement is declared effective by the SEC, and if the tax consequences of the merger to Victory shareholders have materially changed, QNB and Victory will recirculate appropriate materials to resolicit the votes of Victory shareholders.
The opinions of Stevens & Lee, P.C. and Kilpatrick Townsend & Stockton LLP provided to QNB and Victory, respectively, are and will be subject to customary qualifications and assumptions, including assumptions regarding the absence of changes in existing facts and completion of the merger strictly in accordance with the merger agreement and the registration statement of which this joint proxy statement/prospectus forms a part. In rendering their legal opinions, Stevens & Lee, P.C. and Kilpatrick Townsend & Stockton LLP will rely on representations and covenants of QNB and Victory, including those representations contained in certificates of officers of QNB and Victory, reasonably satisfactory in form and substance to each such counsel, and will assume that such representations are true, correct and complete without any regard to any knowledge limitation and that such covenants will be complied with. If any of these assumptions or representations are or become inaccurate in any way, or any of the covenants are not complied with, these opinions could be adversely affected. The opinions represent each counsel’s best legal judgment but have no binding effect or official status of any kind, and no assurance can be given that contrary positions will not be taken by the IRS or a court considering the issues. QNB and Victory have not sought and will not seek any ruling from the IRS regarding any matters relating to the merger, and there can be no assurance that the IRS will not assert, or that a court would not sustain, a position contrary to any of the conclusions set forth below or described in the tax opinions.
The following discussion assumes that the merger qualifies as a “reorganization” within the meaning of Section 368(a) of the Code.
U.S. Holders that Exchange Victory Common Stock Solely for QNB Common Stock
For U.S. federal income tax purposes, subject to the discussion below relating to the receipt of cash instead of a fractional share, a U.S. holder that exchanges Victory common stock solely for shares of QNB common stock would generally:
If you acquired different blocks of Victory common stock at different times or at different prices, the adjusted tax basis and holding period of each block of QNB common stock you receive would be determined on a block-for-block basis depending on the adjusted tax basis and holding period of the blocks of Victory common stock surrendered in such exchanges. U.S. holders should consult their tax advisors regarding the manner in which shares of QNB common stock should be allocated among different blocks of their Victory common stock surrendered in the merger.
For U.S. federal income tax purposes, if a U.S. holder receives cash instead of a fractional share of QNB common stock, the U.S. holder would generally be treated as having received such fractional share of QNB common stock in the merger and then as having exchanged the fractional share of QNB common stock for cash. As a result, the U.S. holder generally would recognize gain or loss equal to the difference between the amount of cash received and the U.S. holder’s aggregate tax basis allocable to the fractional share of QNB common stock. Such gain or loss generally would be capital gain or loss and would be long-term capital gain or loss if, as of the effective time, the U.S. holder’s holding period for such fractional share (including the holding period of shares of Victory common stock surrendered therefor) exceeds one year. Long-term capital gain of non‑corporate taxpayers, including individuals, is generally taxed at preferential rates. The deductibility of capital losses may be subject to limitations.
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Potential Dividend Treatment
In some cases, if a U.S. holder of Victory common stock also actually or constructively owns shares of QNB common stock (other than the QNB common stock received as consideration in connection with the merger), the U.S. holder’s recognized gain could be treated as having the effect of the distribution of a dividend under the tests set forth in Section 302 of the Code, in which case such gain would be treated as dividend income to the extent of the U.S. Holder’s ratable share of QNB’s accumulated earnings and profits (as calculated for U.S. federal income tax purposes). The determination in such circumstances of whether a U.S. holder will recognize capital gain or dividend income as a result of its exchange of Victory common stock in the merger is complex and must be determined on a shareholder-by-shareholder basis. Accordingly, each U.S. holder should consult his, her, or its own independent tax advisor as to the tax consequences of the merger, including such determination, in its particular circumstances.
Backup Withholding
Backup withholding at the applicable rate (currently 24%) may apply with respect to certain cash payments to a U.S. holder of Victory common stock unless the holder:
Any amounts withheld under the backup withholding rules are not an additional tax and would generally be allowed as a refund or credit against the U.S. holder’s U.S. federal income tax liability, provided the holder timely furnishes the required information to the IRS.
Certain Reporting Requirements
If a U.S. holder that receives QNB common stock in the merger is considered a “significant holder,” such U.S. holder would be required to (1) file a statement with its U.S. federal income tax return in accordance with Treasury Regulations Section 1.368‑3(b) providing certain facts pertinent to the merger, including such U.S. holder’s tax basis in, and the fair market value of, the Victory common stock surrendered by such U.S. holder in the merger and (2) retain permanent records relating to the merger. A “significant holder” is any Victory shareholder that, immediately before the merger owned (1) at least 5% (by vote or value) of the outstanding shares of Victory common stock or (2) Victory securities with a tax basis of $1.0 million or more.
This discussion of certain material U.S. federal income tax consequences does not purport to be a complete analysis of all potential tax consequences of the merger. It is for general information purposes only and is not intended to be and does not constitute tax advice. Holders of Victory common stock are urged to consult their tax advisors as to the U.S. federal income tax consequences of the merger (or exercise of appraisal rights), in light of their particular situations, as well as any tax consequences arising under any other U.S. federal tax laws, including, without limitation, the applicability and effect of the net investment income tax, the alternative minimum tax, or under the laws of any state, local, non-U.S. or other taxing jurisdiction or under any applicable tax treaty. Holders of Victory common stock are also urged to consult their tax advisors with respect to the effect of possible changes in any of those laws after the date of this joint proxy statement/prospectus.
LEGAL MATTERS
The validity of the QNB common stock to be issued in the merger will be passed upon for QNB by Stevens & Lee, P.C., Reading, Pennsylvania. Certain U.S. federal income tax consequences relating to the merger will also be passed upon for QNB by Stevens & Lee, Reading, Pennsylvania, and for Victory by Kilpatrick Townsend & Stockton LLP, Washington, DC.
EXPERTS
The consolidated financial statements of QNB as of December 31, 2024 and 2023 and for each of the two years in the period ended December 31, 2024 have been audited by Baker Tilly US, LLP, an independent registered public accounting firm, as set forth in their report appearing in our Annual Report on Form 10‑K for the year ended December 31, 2024 and incorporated by reference
159
herein. Such consolidated financial statements have been so incorporated in reliance upon the report of such firm given their authority as experts in accounting and auditing.
The consolidated financial statements of Victory as of December 31, 2024 and for the year then ended included in this Prospectus have been so included in reliance on the report of Crowe LLP, independent auditors, given on the authority of said firm as experts in auditing and accounting.
The consolidated financial statements of Victory as of December 31, 2023 and for the year ended December 31, 2023 included in this joint proxy statement/prospectus have been so included in reliance on the report of BDO USA, P.C., independent auditors, given on the authority of said firm as experts in auditing and accounting.
If QNB’s shareholders wish to include a proposal in the proxy statement for the 2026 annual meeting of shareholders under applicable SEC rules, your written proposal must be received by QNB no later than December 9, 2025. The proposal should be mailed by certified mail, return receipt requested, and must comply in all respects with applicable rules and regulations of the SEC. Shareholder proposals may be mailed to the Secretary of QNB, QNB Corp., P.O. Box 9005, Quakertown, PA 18951‑9005.
In accordance with QNB’s bylaws, a shareholder who desires to propose a matter for consideration at an annual meeting of shareholders, even if the proposal is not submitted by the deadline for inclusion in QNB’s proxy materials under applicable SEC rules, must comply with the procedures specified in the bylaws, including providing notice in writing, delivered or mailed to the attention of the Chairman of the Board of Directors at the address set forth above, not less than 90 days nor more than 120 days prior to the anniversary date of the previous year’s annual meeting. In accordance with QNB’s bylaws, nominations of individuals for election to QNB’s board of directors may be made by a QNB shareholder if made in writing and delivered or mailed to the attention of the Chairman of the Board of Directors at the address set forth above not less than 90 days nor more than 120 days prior to the anniversary date of the previous year’s annual meeting of QNB shareholders. Assuming the annual meeting of QNB shareholders in 2026 is held within thirty days before or after May 20, 2026, the period for notices of proposals by QNB shareholders of matters for consideration at the 2026 annual meeting or for the nomination of individuals for election to QNB’s board of directors at the 2026 annual meeting will begin on January 20, 2026 and will end on February 19, 2026. Notices of proposals by QNB shareholders of matters for consideration at the annual meeting of QNB shareholders or for the nomination of individuals for election to QNB’s board of directors must include the information specified in the bylaws. Notice of proposals or nominations not made in accordance with QNB’s bylaws, including the foregoing, may be disregarded by the Chairman at the QNB annual meeting of shareholders. In addition to satisfying the QNB bylaw requirements described above, under SEC Rule 14a-19, any shareholder proposing to solicit proxies in support of director nominees other than the nominees of QNB’s board of directors must provide a notice containing the information contained in SEC Rule 14a-19 no later than March 21, 2026, assuming the 2026 annual meeting of QNB’s shareholders date is within thirty days before or after May 20, 2026.
The rules of the SEC provide that, if QNB does not receive notice of a shareholder proposal at least 45 days prior to the first anniversary of the date of mailing of the prior year’s proxy statement, then QNB will be permitted to use its discretionary voting authority when the proposal is raised at the annual meeting. The deadline for these proposals for the year 2026 annual meeting of QNB’s shareholders is February 20, 2026. If a QNB shareholder gives notice of such a proposal after this deadline, QNB’s proxy holders will be allowed to use their discretionary authority to vote against the shareholder proposal when and if the proposal is raised at QNB’s 2026 annual meeting of shareholders.
HOUSEHOLDING
The SEC’s proxy rules permit companies and intermediaries, such as brokers and banks, to satisfy delivery requirements for proxy statements with respect to two or more shareholders sharing the same address by delivering a single proxy statement to those shareholders. This method of delivery, often referred to as householding, should reduce the amount of duplicate information that shareholders receive and lower printing and mailing costs for companies. QNB and certain intermediaries are householding this joint proxy statement/prospectus for QNB shareholders of record in connection with the QNB special meeting. This means that:
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WHERE YOU CAN FIND MORE INFORMATION
QNB has filed with the SEC a registration statement on Form S‑4 under the Securities Act to register the shares of its common stock that Victory shareholders will be entitled to receive in connection with the merger. This joint proxy statement/prospectus is a part of that registration statement. The registration statement, including the attached annexes, exhibits and schedules, contains additional information about QNB and QNB common stock. The rules and regulations of the SEC allow QNB to omit certain information included in the registration statement from this joint proxy statement/prospectus.
QNB also files annual, quarterly and current reports, and other information with the SEC. QNB’s SEC filings are available to the public at the SEC’s web site at www.sec.gov. You will also be able to obtain these documents, free of charge, from QNB by accessing QNB’s website at www.QNBbank.com. Copies can also be obtained, free of charge, by directing a written request to:
QNB Corp.
15 North Third Street
P.O. Box 9005
Quakertown, PA 18951 9005
Attn: Corporate Secretary
Telephone: (215) 538 5600
The SEC allows QNB to “incorporate by reference” into this joint proxy statement/prospectus certain information in documents filed by QNB with the SEC, which means that QNB can disclose important information to you by referring you to those documents without actually including the specific information in this joint proxy statement/prospectus. The information incorporated by reference is considered to be a part of this prospectus and should be read with the same care. You should not assume that the information in this joint proxy statement/prospectus is current as of any date other than the date of this joint proxy statement/prospectus or that any information incorporated by reference herein is accurate as of any date other than the date of the document incorporated by reference (or, with respect to particular information contained in such document, as of any date other than the date set forth within such document as the date as of which such particular information is provided). QNB incorporates by reference into this joint proxy statement/prospectus the documents listed below (other than any portions thereof deemed furnished and not filed in accordance with SEC rules):
All reports and other documents QNB subsequently files under Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act (other than any portions thereof deemed furnished and not filed in accordance with SEC rules), prior to the termination of this offering, will also be incorporated by reference into this joint proxy statement/prospectus and deemed to be part of this joint proxy statement/prospectus from the date of the filing of such reports and documents. The most recent information that QNB files with the SEC automatically updates and supersedes older information. The information contained in any such filing will be deemed to be a part of this joint proxy statement/prospectus commencing on the date on which the document is filed.
You may obtain from QNB a copy of any documents incorporated by reference into this joint proxy statement/prospectus without charge to you either from QNB or from the SEC as described above.
Victory is a private company and accordingly does not file reports or other information with the SEC. If you would like to request documents from Victory, please send a request in writing or by telephone to Victory at the following address:
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The Victory Bancorp, Inc.
542 N. Lewis Road
Limerick, Pennsylvania 19468
Attention: Corporate Secretary
Telephone: (610) 948‑9000
If you would like to request documents, please do so by [______] to receive them before the Victory special meeting, and by [______] to receive them before the QNB special meeting. If you request any incorporated documents from QNB, then QNB will mail them to you by first-class mail, or another equally prompt means, within one business day after QNB receives your request.
QNB has supplied all information contained in or incorporated by reference into this joint proxy statement/prospectus relating to QNB, and Victory has supplied all information contained in this joint proxy statement/prospectus relating to Victory.
Neither QNB nor Victory has authorized anyone to give any information or make any representation about the merger, the QNB common stock to be received by Victory shareholders in the merger or their companies that is different from, or in addition to, that contained in this joint proxy statement/prospectus or in any of the materials that have been incorporated by reference into this joint proxy statement/prospectus. Therefore, if anyone does give you information of this sort, you should not rely on it. If you are in a jurisdiction where offers to exchange or sell, or solicitations of offers to exchange or purchase, the securities offered by this joint proxy statement/prospectus or the solicitation of proxies is unlawful, or if you are a person to whom it is unlawful to direct these types of activities, then the offer presented in this joint proxy statement/ prospectus does not extend to you. The information contained herein speaks only as of the date of this joint proxy statement/prospectus unless the information specifically indicates that another date applies.
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THE VICTORY BANCORP, INC. INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
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Page |
Independent Auditors’ Reports |
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F-3 |
Consolidated Balance Sheets as of December 31, 2024 and 2023 |
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F-8 |
Consolidated Statements of Income for the years ended December 31, 2024 and 2023 |
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F-9 |
Consolidated Statements of Comprehensive Income for the years ended December 31, 2024 and 2023 |
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F-10 |
Consolidated Statements of Stockholders’ Equity for the years ended December 31, 2024 and 2023 |
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F-11 |
Consolidated Statements of Cash Flows for the years ended December 31, 2024 and 2023 |
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F-12 |
Notes to Consolidated Financial Statements |
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F-13 |
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Consolidated Balance Sheets at September 30, 2025 (unaudited) and December 31, 2024 |
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F-46 |
Consolidated Statements of Income for nine months ended September 30, 2025 and 2024 (unaudited) |
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F-47 |
Consolidated Statements of Comprehensive Income for the nine months ended September 30, 2025 and 2024 (unaudited) |
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F-48 |
Consolidated Statements of Changes in Stockholders’ Equity for the nine months ended September 30, 2025 and 2024 (unaudited) |
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F-49 |
Consolidated Statements of Cash Flows for the nine months ended September 30, 2025 and 2024 (unaudited) |
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F-50 |
Notes to Consolidated Financial Statements (unaudited) |
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F-51 |
F-1
The Victory Bancorp, Inc.
Consolidated Financial Statements
December 31, 2024 and 2023
F-2
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Crowe LLP Independent Member Crowe Global |
INDEPENDENT AUDITOR'S REPORT
Board of Directors
The Victory Bancorp, Inc.
Limerick, Pennsylvania
Opinion
We have audited the consolidated financial statements of The Victory Bancorp, Inc., which comprise the consolidated balance sheet as of December 31, 2024, and the related consolidated statements of income, comprehensive income, stockholders’ equity, and cash flows for the year then ended, and the related notes to the consolidated financial statements.
In our opinion, the accompanying consolidated financial statements present fairly, in all material respects, the financial position of The Victory Bancorp, Inc. as of December 31, 2024, and the results of its operations and its cash flows for the year then ended in accordance with accounting principles generally accepted in the United States of America.
Basis for Opinion
We conducted our audit in accordance with auditing standards generally accepted in the United States of America (GAAS). Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Statements section of our report. We are required to be independent of The Victory Bancorp, Inc. and to meet our other ethical responsibilities, in accordance with the relevant ethical requirements relating to our audit. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Other Matter
The financial statements of The Victory Bancorp, Inc. for the year ended December 31, 2023, were audited by other auditors, who expressed an unmodified opinion on those statements on April 22, 2024.
Responsibilities of Management for the Financial Statements
Management is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with accounting principles generally accepted in the United States of America, and for the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the consolidated financial statements, management is required to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about The Victory Bancorp, Inc.’s ability to continue as a going concern for one year from the date the consolidated financial statements are available to be issued.
Auditor’s Responsibilities for the Audit of the Financial Statements
Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance but is not absolute assurance and therefore is not a guarantee that an
F-3
audit conducted in accordance with GAAS will always detect a material misstatement when it exists. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Misstatements are considered material if there is a substantial likelihood that, individually or in the aggregate, they would influence the judgment made by a reasonable user based on the consolidated financial statements.
In performing an audit in accordance with GAAS, we:
We are required to communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit, significant audit findings, and certain internal control–related matters that we identified during the audit.
Crowe LLP
Columbus, Ohio
April 23, 2025, except for Note 15 as to which the date is December 18, 2025
F-4
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Tel: 215-564-1900 Fax: 215-564-3940 www.bdo.com |
Ten Penn Center 1801 Market Street, Suite 1200 Philadelphia, PA 19103 |
Independent Auditor’s Report
To the Board of Directors
The Victory Bancorp, Inc.
Limerick, Pennsylvania
Opinion
We have audited the consolidated financial statements of The Victory Bancorp, Inc. (the Company), which comprise the consolidated balance sheet as of December 31, 2023, and the related consolidated statements of income, comprehensive income, stockholders’ equity, and cash flows for the year then ended, and the related notes to the consolidated financial statements.
In our opinion, the accompanying consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2023, and the results of its operations and its cash flows for the year then ended in accordance with accounting principles generally accepted in the United States of America.
Basis for Opinion
We conducted our audits in accordance with auditing standards generally accepted in the United States of America (GAAS). Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Statements section of our report. We are required to be independent of the Company and to meet our other ethical responsibilities, in accordance with the relevant ethical requirements relating to our audits. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Emphasis of Matter
As discussed in Note 1 to the consolidated financial statements, effective January 1, 2023, the Company changed its method of accounting for the allowance for credit losses due to the adoption of Accounting Standards Codification Topic 326, Financial Instruments – Credit Losses (“ASC 326”).
Responsibilities of Management for the Financial Statements
Management is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with accounting principles generally accepted in the United States of America, and for the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the consolidated financial statements, management is required to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the Company’s ability to continue as a going concern within one year after the date that the consolidated financial statements are issued or available to be issued.
F-5
Auditor’s Responsibilities for the Audit of the Financial Statements
Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance but is not absolute assurance and therefore is not a guarantee that an audit conducted in accordance with GAAS will always detect a material misstatement when it exists. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Misstatements are considered material if there is a substantial likelihood that, individually or in the aggregate, they would influence the judgment made by a reasonable user based on the consolidated financial statements.
In performing an audit in accordance with GAAS, we:
We are required to communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit, significant audit findings, and certain internal control-related matters that we identified during the audit.
/s/ BDO USA, P.C.
Philadelphia, Pennsylvania
April 22, 2024
F-6
Consolidated Financial Statements
F-7
The Victory Bancorp, Inc.
Consolidated Balance Sheets
(in thousands, except share and per share data)
December 31, |
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2024 |
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2023 |
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Assets |
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Cash and due from banks |
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$ |
10,678 |
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$ |
12,438 |
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Federal funds sold |
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— |
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2,100 |
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Cash and cash equivalents |
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10,678 |
|
|
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14,538 |
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Securities available-for-sale, at fair value |
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32,905 |
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|
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35,890 |
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Securities held-to-maturity (fair value $11,557 at December 31, 2024 and |
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11,737 |
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|
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12,041 |
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Loans receivable, net of allowance for credit losses ($3,611 at December 31, 2024 and |
|
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390,954 |
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364,383 |
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Premises and equipment, net |
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3,248 |
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3,017 |
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Restricted investment in bank stocks |
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2,192 |
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|
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3,203 |
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Accrued interest receivable |
|
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1,581 |
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|
|
1,613 |
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Bank owned life insurance |
|
|
5,923 |
|
|
|
5,744 |
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Other assets |
|
|
1,806 |
|
|
|
1,734 |
|
Total Assets |
|
$ |
461,024 |
|
|
$ |
442,163 |
|
|
|
|
|
|
|
|
||
Liabilities and Stockholders’ Equity |
|
|
|
|
|
|
||
Liabilities |
|
|
|
|
|
|
||
Deposits: |
|
|
|
|
|
|
||
Non-interest bearing |
|
$ |
56,358 |
|
|
$ |
55,022 |
|
Interest-bearing |
|
|
340,722 |
|
|
|
309,010 |
|
Total Deposits |
|
|
397,080 |
|
|
|
364,032 |
|
Borrowings |
|
|
15,440 |
|
|
|
36,200 |
|
Subordinated debt |
|
|
17,309 |
|
|
|
12,830 |
|
Accrued interest payable and other liabilities |
|
|
1,858 |
|
|
|
1,153 |
|
Total Liabilities |
|
|
431,687 |
|
|
|
414,215 |
|
|
|
|
|
|
|
|
||
Stockholders’ Equity |
|
|
|
|
|
|
||
Common stock, $1 par value; authorized 10,000,000 shares; issued and outstanding |
|
|
1,977 |
|
|
|
1,971 |
|
Surplus |
|
|
14,654 |
|
|
|
14,561 |
|
Retained earnings |
|
|
14,523 |
|
|
|
13,374 |
|
Accumulated other comprehensive loss |
|
|
(1,817 |
) |
|
|
(1,958 |
) |
Total Stockholders’ Equity |
|
|
29,337 |
|
|
|
27,948 |
|
Total Liabilities and Stockholders’ Equity |
|
$ |
461,024 |
|
|
$ |
442,163 |
|
See accompanying notes to consolidated financial statements.
F-8
The Victory Bancorp, Inc.
Consolidated Statements of Income
(in thousands, except share and per share data)
Years Ended December 31, |
|
2024 |
|
|
2023 |
|
||
Interest Income |
|
|
|
|
|
|
||
Interest and fees on loans |
|
$ |
26,552 |
|
|
$ |
22,297 |
|
Interest on investment securities |
|
|
2,101 |
|
|
|
2,109 |
|
Other interest income |
|
|
214 |
|
|
|
260 |
|
Total Interest Income |
|
|
28,867 |
|
|
|
24,666 |
|
Interest Expense |
|
|
|
|
|
|
||
Deposits |
|
|
13,030 |
|
|
|
9,685 |
|
Borrowings |
|
|
2,673 |
|
|
|
1,478 |
|
Total Interest Expense |
|
|
15,703 |
|
|
|
11,163 |
|
Net interest income |
|
|
13,164 |
|
|
|
13,503 |
|
|
|
|
|
|
|
|
||
Provision for Credit Losses |
|
|
198 |
|
|
|
245 |
|
Net Interest Income After Provision for Credit Losses |
|
|
12,966 |
|
|
|
13,258 |
|
Non-Interest Income |
|
|
|
|
|
|
||
Service charges and activity fees |
|
503 |
|
|
|
223 |
|
|
Net gains on sales of loans |
|
160 |
|
|
|
108 |
|
|
Other income |
|
283 |
|
|
|
279 |
|
|
Total Non-Interest Income |
|
|
946 |
|
|
|
610 |
|
Non-Interest Expenses |
|
|
|
|
|
|
||
Salaries and employee benefits |
|
|
7,180 |
|
|
|
6,859 |
|
Occupancy and equipment |
|
749 |
|
|
|
654 |
|
|
Legal and professional fees |
|
600 |
|
|
|
479 |
|
|
Advertising and promotion |
|
67 |
|
|
|
98 |
|
|
Loan expenses |
|
122 |
|
|
|
195 |
|
|
Data processing costs |
|
|
1,435 |
|
|
|
1,305 |
|
Supplies, printing and postage |
|
115 |
|
|
|
100 |
|
|
Telephone |
|
47 |
|
|
|
39 |
|
|
Entertainment |
|
|
145 |
|
|
|
147 |
|
Mileage and tolls |
|
44 |
|
|
|
48 |
|
|
Insurance |
|
67 |
|
|
|
61 |
|
|
FDIC insurance premiums |
|
349 |
|
|
|
250 |
|
|
Dues and subscription |
|
85 |
|
|
|
92 |
|
|
Shares tax |
|
406 |
|
|
|
370 |
|
|
Other |
|
377 |
|
|
|
443 |
|
|
Total Non-Interest Expense |
|
|
11,788 |
|
|
|
11,140 |
|
Income before income taxes |
|
|
2,124 |
|
|
|
2,728 |
|
Income Taxes |
|
|
462 |
|
|
|
587 |
|
Net Income Available to Common Stockholders |
|
$ |
1,662 |
|
|
$ |
2,141 |
|
Basic earnings per common share |
|
$ |
0.84 |
|
|
|
1.09 |
|
Diluted earnings per common share |
|
$ |
0.82 |
|
|
$ |
1.06 |
|
|
|
|
|
|
|
|
||
Weighted Average Common Shares Outstanding: |
|
|
|
|
|
|
||
Basic |
|
|
1,972,940 |
|
|
|
1,971,362 |
|
Diluted |
|
|
2,021,715 |
|
|
|
2,028,543 |
|
See accompanying notes to consolidated financial statements.
F-9
The Victory Bancorp, Inc.
Consolidated Statements of Comprehensive Income
(in thousands)
Years Ended December 31, |
|
2024 |
|
|
2023 |
|
||
Net Income |
|
$ |
1,662 |
|
|
$ |
2,141 |
|
|
|
|
|
|
|
|
||
Other Comprehensive Income |
|
|
|
|
|
|
||
Unrealized holding gain arising on securities available-for-sale |
|
|
178 |
|
|
|
82 |
|
Tax Impact |
|
|
(37 |
) |
|
|
(18 |
) |
Other comprehensive income |
|
|
141 |
|
|
|
64 |
|
Total Comprehensive Income |
|
$ |
1,803 |
|
|
$ |
2,205 |
|
See accompanying notes to consolidated financial statements.
F-10
The Victory Bancorp, Inc.
Consolidated Statements of Stockholders’ Equity
(in thousands, except per share data)
|
|
Common |
|
|
Surplus |
|
|
Retained |
|
|
Accumulated |
|
|
Total |
|
|||||
Balance, December 31, 2022 |
|
$ |
1,971 |
|
|
$ |
14,505 |
|
|
$ |
11,745 |
|
|
$ |
(2,022 |
) |
|
$ |
26,199 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Net income |
|
|
— |
|
|
|
— |
|
|
|
2,141 |
|
|
|
— |
|
|
|
2,141 |
|
Other comprehensive income |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
64 |
|
|
|
64 |
|
Share based compensation expense |
|
|
— |
|
|
|
56 |
|
|
|
— |
|
|
|
— |
|
|
|
56 |
|
Cash dividends paid on common stock of $0.26 |
|
|
— |
|
|
|
— |
|
|
|
(512 |
) |
|
|
— |
|
|
|
(512 |
) |
Balance, December 31, 2023 |
|
$ |
1,971 |
|
|
$ |
14,561 |
|
|
$ |
13,374 |
|
|
$ |
(1,958 |
) |
|
$ |
27,948 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Net income |
|
|
— |
|
|
|
— |
|
|
|
1,662 |
|
|
|
— |
|
|
|
1,662 |
|
Other comprehensive income |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
141 |
|
|
|
141 |
|
Share based compensation expense |
|
|
— |
|
|
|
56 |
|
|
|
— |
|
|
|
— |
|
|
|
56 |
|
Exercise of stock options (6,000 shares) |
|
|
6 |
|
|
|
37 |
|
|
|
— |
|
|
|
— |
|
|
|
43 |
|
Cash dividends paid on common stock of $0.26 |
|
|
— |
|
|
|
— |
|
|
|
(513 |
) |
|
|
— |
|
|
|
(513 |
) |
Balance, December 31, 2024 |
|
$ |
1,977 |
|
|
$ |
14,654 |
|
|
$ |
14,523 |
|
|
$ |
(1,817 |
) |
|
$ |
29,337 |
|
See accompanying notes to consolidated financial statements.
F-11
The Victory Bancorp, Inc.
Consolidated Statements of Cash Flows
(in thousands)
Years Ended December 31, |
|
2024 |
|
|
2023 |
|
||
|
|
|
|
|
|
|
||
Cash Flows from Operating Activities |
|
|
|
|
|
|
||
Net income |
|
$ |
1,662 |
|
|
$ |
2,141 |
|
Adjustments to reconcile net income to net cash provided by operating activities: |
|
|
|
|
|
|
||
Provision for loan losses |
|
|
198 |
|
|
|
245 |
|
Depreciation and amortization |
|
|
261 |
|
|
|
301 |
|
Share-based compensation |
|
|
56 |
|
|
|
56 |
|
Deferred income tax (benefit) expense, net of change in valuation allowance |
|
|
(58 |
) |
|
|
69 |
|
Net accretion of investment securities |
|
|
(70 |
) |
|
|
(58 |
) |
Earnings on bank owned life insurance |
|
|
(179 |
) |
|
|
(153 |
) |
Net realized gains on sale of SBA loans held for sale |
|
|
(160 |
) |
|
|
(108 |
) |
Origination of SBA loans held for sale |
|
|
(2,090 |
) |
|
|
(1,091 |
) |
Proceeds from sale of SBA loans held for sale |
|
|
2,273 |
|
|
|
1,199 |
|
Amortization of debt issuance costs |
|
|
31 |
|
|
|
26 |
|
Change in: |
|
|
|
|
|
|
||
Investment broker receivable |
|
|
— |
|
|
|
20,113 |
|
Accrued interest receivable |
|
|
32 |
|
|
|
(257 |
) |
Other assets |
|
|
(50 |
) |
|
|
(42 |
) |
Accrued interest payable |
|
|
124 |
|
|
|
212 |
|
Other liabilities |
|
|
581 |
|
|
|
(417 |
) |
Net Cash Provided by Operating Activities |
|
|
2,611 |
|
|
|
22,236 |
|
|
|
|
|
|
|
|
||
Cash Flows from Investing Activities |
|
|
|
|
|
|
||
Available-for-sale securities: |
|
|
|
|
|
|
||
Proceeds from sales, maturities, calls and principal pay downs |
|
|
3,239 |
|
|
|
3,146 |
|
Held-to-maturity securities: |
|
|
|
|
|
|
||
Proceeds from maturities, calls, and principal pay downs |
|
|
297 |
|
|
|
829 |
|
Net increase in loans |
|
|
(26,792 |
) |
|
|
(37,184 |
) |
Purchase of restricted stock |
|
|
— |
|
|
|
(1,465 |
) |
Proceeds from sale of restricted stock |
|
|
1,011 |
|
|
|
— |
|
Purchases of premises and equipment |
|
|
(492 |
) |
|
|
(123 |
) |
Proceeds from BOLI |
|
|
— |
|
|
|
19 |
|
Net Cash Used in Investing Activities |
|
|
(22,737 |
) |
|
|
(34,778 |
) |
|
|
|
|
|
|
|
||
Cash Flows from Financing Activities |
|
|
|
|
|
|
||
Net increase (decrease) in deposits |
|
|
33,048 |
|
|
|
(15,912 |
) |
Net proceeds from issuance of subordinated debt |
|
|
4,448 |
|
|
|
— |
|
Exercise of stock options |
|
|
43 |
|
|
|
— |
|
Cash dividends on common stock |
|
|
(513 |
) |
|
|
(512 |
) |
Net increase (decrease) in short-term borrowing |
|
|
(20,760 |
) |
|
|
32,450 |
|
Net Cash Provided by Financing Activities |
|
|
16,266 |
|
|
|
16,026 |
|
Net increase (decrease) in cash and cash equivalents |
|
|
(3,860 |
) |
|
|
3,484 |
|
Cash and Cash Equivalents, Beginning |
|
|
14,538 |
|
|
|
11,054 |
|
Cash and Cash Equivalents, Ending |
|
$ |
10,678 |
|
|
$ |
14,538 |
|
|
|
|
|
|
|
|
||
Supplementary Cash Flows Information |
|
|
|
|
|
|
||
Income taxes paid |
|
$ |
626 |
|
|
$ |
558 |
|
Interest paid |
|
|
15,579 |
|
|
|
10,951 |
|
See accompanying notes to consolidated financial statements.
F-12
The Victory Bancorp, Inc.
Notes to Consolidated Financial Statements
1. Summary of Significant Accounting Policies
Principles of Consolidation
The accompanying consolidated financial statements of The Victory Bancorp, Inc. (the “Corporation”) are prepared on the accrual basis and include the accounts of The Victory Bancorp, Inc. and its wholly-owned subsidiary, The Victory Bank (the “Bank”), together referred to as “the Bank”. All significant intercompany accounts and transactions have been eliminated from the accompanying consolidated financial statements.
In preparing these consolidated financial statements, the Bank evaluated the events and transactions that occurred from December 31, 2024, through April 23, 2025 the date these consolidated financial statements were available for issuance.
Organization and Nature of Operations
The Victory Bancorp, Inc. is a registered bank holding company, which owns 100% of the outstanding capital stock of The Victory Bank. The Corporation was incorporated under the laws of the State of Pennsylvania in 2009 for the purpose of serving as The Victory Bank’s holding company. The holding company structure provides flexibility for growth through expansion of core business activities and access to varied capital raising operations. The Corporation’s primary business activity consists of ownership of all of the outstanding stock of The Victory Bank. As of December 31, 2024, the Corporation had 340 common stockholders of record.
The Bank is a Pennsylvania chartered commercial bank which was chartered in January 2008. The Bank operates a full-service commercial and consumer banking business in Montgomery County, Pennsylvania. The Bank’s focus is on small- and middle-market commercial and retail customers. The Bank originates secured and unsecured commercial loans, commercial mortgage loans, consumer loans and construction loans and does not make subprime loans. The Bank also offers revolving credit loans, small business loans and automobile loans. The Bank offers a variety of deposit products, including demand and savings deposits, regular savings accounts, investment certificates and fixed-rate certificates of deposit. As a state-chartered bank, the Bank is subject to regulation of the Pennsylvania Department of Banking and Federal Deposit Insurance Corporation.
Recent Accounting Pronouncements
Accounting Standards Codification (ASC) Topic 326: Financial Instrument – Credit Losses (ASC 326). On January 1, 2023, the Bank adopted ASC 326 which replaces the incurred loss methodology with an expected loss methodology that is referred to as the current expected credit loss (CECL) methodology. The measurement of expected credit losses under the CECL methodology is applicable to financial assets measured at amortized cost, including loan receivables and held to maturity debt securities. It also applies to off-balance sheet credit exposures such as loan commitments, standby letters of credit, financial guarantees and other similar instruments. In addition, ASC 326 makes changes to the accounting for credit-related impairment of available-for-sale debt securities by eliminating other-than-temporary impairment charges. Following the expected loss model, credited-related losses on available-for-sale debt securities will be reflected as a valuation allowance for credit losses on those securities.
Accrued interest for all financial instruments is included in a separate line on the face of the Consolidate Balance Sheets. The Bank elected not to measure an allowance for credit losses for accrued interest receivable and instead elected to reverse interest income on loans or securities that are placed on nonaccrual status, which is generally when the instrument is 90 days past due, or earlier if the Bank believes the collection of interest is doubtful. The Bank has concluded that this policy results in the timely reversal of uncollectible interest.
In adopting ASC 326, the Bank utilized the modified retrospective method for all financial assets measured at amortized cost and off-balance sheet credit exposures. The resulting calculation resulted in an immaterial impact to the allowance for credit losses, and therefore no adjustment was recorded effective January 1, 2023. There are no credit losses in the available-for-sale security portfolio.
ASU 2022-02, Financial Instruments-Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures. The amendments contained in this Accounting Standards Update (ASU) eliminate the accounting guidance for troubled debt restructurings
F-13
The Victory Bancorp, Inc.
Notes to Consolidated Financial Statements
by creditors, while enhancing disclosure requirements for certain loan refinancing and restructurings by creditors when a borrower is experiencing financial difficulty. This ASU also requires entities to disclose current period gross write-offs by year of origination for financing receivables. The Bank adopted ASU 2022-02 effective January 1, 2023 using a modified retrospective transition approach for the amendments related to the recognition and measurement of troubled debt restructurings. The impact of the adoption resulted in no change to the allowance for credit losses as there were no troubled debt restructurings for 2022.
Estimates
The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated balance sheet and the reported amounts of revenues and expenses during the reporting year. Actual results could differ 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, the fair value of financial instruments, and the valuation of deferred tax assets.
Significant Group Concentrations of Credit Risk
Most of the Bank’s activities are with customers located within Montgomery County, Pennsylvania. Note 4 discusses the types of lending that the Bank engages in. Although the Bank has a diversified loan portfolio, its borrowers’ ability to honor their contracts is influenced by the economy of Montgomery County and the surrounding areas.
The Bank monitors potential concentrations of loans to particular borrowers or groups of borrowers, industries, and geographic regions. The Bank also monitors exposures to credit risk that could arise from potential concentrations of lending products and practices such as loans that subject borrowers to substantial payment increases (e.g. principal deferral periods, loans with initial interest-only periods, etc.) and loans with high loan to value ratios. Additionally, there are industry practices that could subject the Bank to increased credit risk should economic conditions change over the course of a loan’s life. For example, the Bank makes variable rate loans and fixed rate principal-amortizing loans with maturities prior to the loan being fully paid (i.e. balloon payment loans). These loans are underwritten and monitored to manage the associated risks. The Bank has determined that there is no concentration of credit risk associated with its lending policies or practices.
Cash and Cash Equivalents
For purposes of reporting cash flows, cash and cash equivalents include cash on hand, amounts due from banks and federal funds sold, all of which mature within ninety days. Generally, federal funds are sold for one day periods.
Securities
Management determines the appropriate classification of debt investment securities at the time of purchase and re-evaluates such designation as of each consolidated balance sheet date. As of December 31, 2024 and 2023, the Bank’s investment portfolio contained available-for-sale and held-to-maturity investment securities.
Investment securities that are classified as available-for-sale are stated at fair value. Unrealized gains and losses on investment securities classified as available-for-sale are excluded from results of operations and are reported as other comprehensive income or loss, a separate component of stockholders’ equity, net of taxes. Investment securities classified as available-for-sale include investment securities that may be sold in response to changes in interest rates, changes in prepayment risks or for asset/liability management purposes.
Investment securities which the Bank has the intent and ability to hold until maturity are classified as held-to-maturity and are recorded at cost, adjusted for amortization of premiums and accretion of discounts.
The cost of investment securities is adjusted for amortization of premiums and accretion of discounts to maturity, or in the case of mortgage-backed securities, over the estimated life of the security. Such amortization or accretion recorded as adjustments to interest and dividends are included in interest income from investments using the interest method. Realized gains and losses are included in gains (losses) on sales of investment securities in the consolidated statements of income. Gains and losses on the sale of securities are recorded on the trade date and are determined based on the specific-identification method.
F-14
The Victory Bancorp, Inc.
Notes to Consolidated Financial Statements
The investment portfolio is classified into the following major security types: Corporate bonds, Collateralized mortgage obligations, U.S. agency securities, and State and municipal securities.
All corporate bonds and state and municipal securities undergo an initial and ongoing credit analysis. The analysis includes the review of various financial and demographic information. All securities have a minimum evaluation rating of ”A” or higher.
All collateralized mortgage obligations held by the Bank are guaranteed by Ginnie Mae, a U.S. government agency, or a government sponsored enterprise (GSEs) Fannie Mae or Freddie Mac. These securities along with U.S. agency securities are explicitly guaranteed by the U.S. government or guaranteed by the GSEs that have credit ratings and perceived credit risk comparable to the U.S. government, are highly rated by major rating agencies, and have a history of no credit losses.
For available-for-sale debt securities with an unrealized loss position, the Bank will determine whether it has the intent to sell the debt security or whether it is more likely than not it will be required to sell the debt security before the recovery of its amortized cost basis. If either of the criteria regarding intent or requirement to sell is met, the security’s amortized cost basis is written down to fair value through income with the establishment of an allowance under CECL. For available-for-sale debt securities that do not meet the criteria, the Bank evaluates whether any decline in fair value is due to credit loss factors. In making this assessment, management considers any changes to the rating of the security by a rating agency and adverse conditions specifically related to the security, among other factors. If this assessment indicates that a credit loss exists, the present value of cash flows expected to be collected from the security is compared to the amortized cost basis of the security. If the present value of cash flows expected to be collected is less than the amortized cost basis, a credit loss exists and an allowance for credit loss is recorded for the credit loss, limited by the amount that the fair value is less than the amortized cost basis. Any impairment that has not been recorded through an allowance for credit losses is recognized in other comprehensive income.
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 balance. 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 Bank is generally amortizing these amounts over the contractual life of the loan. Premiums and discounts on purchased loans are amortized as adjustments to interest income using the effective yield method.
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. Past due status is based on contractual terms of the loan. A loan is considered to be past due when a scheduled payment has not been received 30 days after the contractual due date.
When a loan is placed on nonaccrual status, unpaid interest is reversed against interest. The amount of accrued interest reversed against interest income totaled $5,000 and $37,000 for the year ended December 31, 2024 and 2023, respectively. Interest received on nonaccrual loans generally 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 Bank’s loan receivable portfolio is comprised of commercial and consumer loans. Presentation of loans was updated to reflect segmentation per the Allowance for Credit Losses in the current year. Under the 2024 presentation, Commercial loans consist of the following classes: agriculture, commercial, construction and commercial real estate. Consumer loans consist of the following classes: consumer and residential real estate. Under the 2023 presentation, Commercial loans consist of the following classes: commercial term, commercial mortgage, commercial lines of credit, and construction. Consumer loans consist of the following classes: home equity and other consumer.
F-15
The Victory Bancorp, Inc.
Notes to Consolidated Financial Statements
A description of the risk characteristics for each class under the 2024 presentation is included below:
Agriculture loans include loans originated for various purposes secured by farmland, including farm residential and other improvements. Risks associated with these loans generally relate to the uncertainty associated with the borrower’s ability to successfully raise and market the commodity. Adverse weather conditions and other natural perils can dramatically affect production and ability to service debt. Production problems may also cause unbudgeted expenses that reduce profitability or even result in losses. Unexpected expenses may occur because of increased production or harvesting costs caused by inclement weather, higher transportation or fertilization costs caused by market disruption, feed shortages, etc. Business cycles longer than one year (e.g., vineyards, orchards, and some livestock operations) may increase the risk of unexpected expenses. Volatile commodity prices present another risk as well as changes in government policies.
The Bank’s credit policies determine advance rates against the different forms of collateral that can be pledged against commercial and commercial real estate loan. Typically, the majority of loans will be limited to a percentage of their underlying collateral values such as real estate values, equipment, eligible accounts receivable and inventory. Individual loan advance rates may be higher or lower depending upon the financial strength of the borrower and/or term of the loan. The assets financed through commercial loans are used within the business for its ongoing operation. Repayment of these kinds of loans generally comes from the cash flow of the business or the ongoing conversions of assets. Commercial real estate loans include long-term loans financing commercial properties. Repayment of this kind of loan is dependent upon either the ongoing cash flow of the borrowing entity or the resale of or lease of the subject property. Commercial real estate loans typically require a loan to value ratio of not greater than 80% and vary in terms.
Consumer loans include installment loans, car loans, and overdraft lines of credit. The majority of these loans are unsecured. Risks associated with other consumer loans tend to be greater due to unsecured position or the rapidly depreciating nature of the underlying assets.
Construction loans are generally considered to involve high risk due to the concentration of principal in a limited number of loans and borrowers and the effects of general economic conditions on developers and builders. Moreover, a construction loan can involve additional risks because of the inherent difficulty in estimating both a property’s value at completion of the project and the estimated cost (including interest) of the project. The nature of these loans is such that they are generally difficult to evaluate and monitor.
Residential real estate loans consist of single-family, equity line of credit, and other residential loans. Single-family mortgage loans include permanent conventional mortgage loans secured by single-family residences located within our primary market area. Credit approval for residential real estate loans requires demonstration of sufficient income to repay the principal and interest and the real estate taxes and insurance, stability of employment and an established credit record. Repayment of these loans is dependent on general economic conditions and unemployment levels in the Bank’s market area.
A description of the risk characteristics for each class under the 2023 presentation is included below:
The Bank’s credit policies determine advance rates against the different forms of collateral that can be pledged against commercial term, lines of credit and mortgage loans. Typically, the majority of loans will be limited to a percentage of their underlying collateral values such as real estate values, equipment, eligible accounts receivable and inventory. Individual loan advance rates may be higher or lower depending upon the financial strength of the borrower and/or term of the loan. The assets financed through commercial loans are used within the business for its ongoing operation. Repayment of these kinds of loans generally comes from the cash flow of the business or the ongoing conversions of assets. Commercial mortgage loans include long-term loans financing commercial properties. Repayment of this kind of loan is dependent upon either the ongoing cash flow of the borrowing entity or the resale of or lease of the subject property. Commercial mortgage loans typically require a loan to value ratio of not greater than 80% and vary in terms.
Construction lending is generally considered to involve high risk due to the concentration of principal in a limited number of loans and borrowers and the effects of general economic conditions on developers and builders. Moreover, a construction loan can involve additional risks because of the inherent difficulty in estimating both a property’s value at completion of the project and the estimated cost (including interest) of the project. The nature of these loans is such that they are generally difficult to evaluate and monitor.
F-16
The Victory Bancorp, Inc.
Notes to Consolidated Financial Statements
Home equity loans are secured by the borrower’s residential real estate in either a first or second lien position. Residential mortgages and home equity loans have varying loan rates depending on the financial condition of the borrower and the loan to value ratio. Risks associated with home equity loans in second lien positions are greater than those in first position due to the subordinate nature of the loans.
Other consumer loans include installment loans, car loans, and overdraft lines of credit. The majority of these loans are unsecured. Risks associated with other consumer loans tend to be greater due to unsecured position or the rapidly depreciating nature of the underlying assets.
Allowance for Credit Losses
The allowance for credit losses (“allowance”) represents management’s estimate of losses inherent in the loan portfolio as of the balance sheet date and is recorded as a reduction to loans. The allowance is increased by the provision for credit losses, and decreased by charge-offs, net of recoveries. Loans deemed to be uncollectible are charged against the allowance, and subsequent recoveries, if any, are credited to the allowance. All, or part, of the principal balance of loans receivable are charged off to the allowance as soon as it is determined that the repayment of all, or part, of the principal balance is highly unlikely. The Bank has elected to not estimate an allowance for credit losses on accrued interest receivable, as it already has a policy in place to reverse or write-off accrued interest in a timely manner.
The Bank adopted ASC 326 January 1, 2023 which replaced the incurred loss methodology with the current expected credit loss (CECL) approach. CECL requires an estimate of the credit losses expected over the life of an exposure (or pool of exposures) whereas the incurred loss approach delayed the recognition of a credit loss until it was probable a loss event was incurred.
The estimate of expected credit losses is based on relevant information about historical events, current conditions, and reasonable and supportable forecasts that affect the collectability of the reported amounts. The Bank uses current loan data and loss history, calculates the weighted average remaining maturity in each loan category, and utilizes leading economic indicators to provide a forward-looking feature. The Bank then takes that information, adds custom qualitative factors and specific reserves tied to collateral dependent loans to calculate its allowance for credit losses.
The historical loss rate for the loan portfolio is determined by pooling loans into groups sharing similar risk characteristics and tracking historical net charge offs to calculate the historical loss rate.
The Bank also incorporates a reasonable and supportable loss forecast period to account for the effect of forecasted economic conditions and other factors on the performance of the loan portfolio which could differ from historical loss experience. Forward looking adjustments considers macro-economic indicators. The Bank generally utilizes a forecast period ranging over 12 - 24 months. For the contractual term that extends beyond the forecast period, the Bank immediately reverts to historical loss rates.
The Bank uses several qualitative factors to supplement the other elements of its allowance for credit losses calculation under CECL. These qualitative factors are intended to estimate losses that differ from actual historical loss experience. Relevant factors included, but are not limited to, economic trends and conditions such as regional unemployment, experience and depth of lending staff, trends in delinquencies, trends in collateral values, and results of loan reviews and loan-related audits. Although the estimation of credit losses can be somewhat subjective, the application of such qualitative factors must be reasonable and supportable.
Collateral dependent loans are those loans that are non-accruing and on which the borrowers cannot demonstrate the ability to make and are not making regularly scheduled loan payments, thereby making repayment of the loan dependent upon the operation or sale of the collateral securing the loan. Collateral dependent loans are evaluated individually as they do not share similar risk characteristics with other loans and are removed from their respective homogeneous pools. Under CECL, for collateral dependent loans, the Bank has adopted the practical expedient to measure the allowance for credit losses based on the fair value of the collateral.
The Bank's policy is to obtain third-party appraisals on any significant pieces of collateral held on collateral dependent loans. For such loans secured by real estate, the Bank's policy is to estimate the allowance by discounting the appraised value by 20%, which considers estimated selling costs and additional discounts estimated to be incurred in a sale. For real estate collateral that is considered special- or limited-purpose or in industries that are undergoing heightened stress, the Bank may further discount the collateral values. For non-real estate collateral secured loans, the Bank generally discounts values by 0%-50% depending on the nature and marketability of the collateral. This provides for selling costs and liquidity discounts that are usually incurred when disposing of non-real estate collateral.
F-17
The Victory Bancorp, Inc.
Notes to Consolidated Financial Statements
During the year ended December 31, 2023, the Bank adopted ASU 2022-02, Financial Instruments – Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures, which eliminated the accounting guidance for troubled debt restructurings by creditors while enhancing disclosure requirements for certain loan refinancings and restructurings by creditors when a borrower is experiencing financial difficulty.
Modifications to borrowers experiencing financial difficulty may include interest rate reductions, principal or interest forgiveness, forbearances, term extensions, and other actions intended to minimize economic loss and to avoid foreclosure or repossession of collateral.
The Bank maintains an allowance for credit losses for lending-related commitments such as unfunded loan commitments and letters of credit. The Bank estimates expected credit losses over the contractual period in which the Bank is exposed to credit risk via a contractual obligation to extend credit unless that obligation is unconditionally cancellable by the Bank. The allowance for lending-related commitments on off-balance sheet credit exposures is adjusted as a provision for credit losses. 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 credit losses on loans and discussed previously in Note 1. The allowance for credit losses for unfunded loan commitments of $67,000 and $78,000 at December 31, 2024 and December 31, 2023, respectively, were separately classified on the Consolidated Balance Sheets within other liabilities.
Transfers of Financial Assets
Transfers of financial assets, including loan and loan participation sales, 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 Bank, put presumptively beyond the reach of the transferor and its creditors, even in bankruptcy or other receivership; (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, (3) the Bank does not maintain effective control over the transferred assets through an agreement to repurchase them before their maturity, and (4) transfers that do meet the criteria to be accounted for as sales are accounted for a secured borrowings.
Premises and Equipment
Premises (including leasehold improvements) and equipment are stated at cost less accumulated depreciation and amortization. Depreciation is computed on the straight-line method over the estimated useful lives and amortization of leasehold improvements is computed over the shorter of the estimated useful life or lease term of the related assets.
Restricted Investment in Bank Stocks
Restricted investment in bank stocks, which represents required investments in the common stock of correspondent banks, is carried at cost, and consists of $60,000 common stock of the Atlantic Community Bankers Bank (“ACBB”) at December 31, 2024 and 2023, Federal Home Loan Bank of Pittsburgh (“FHLB”) stock totaling $1,544,000 and $2,531,000 at December 31, 2024 and 2023, and Federal Reserve Bank (“FRB”) stock of $588,000 and $612,000 at December 31, 2024 and 2023, respectively.
Management considers whether these long-term investments are impaired based on the ultimate recoverability of the cost basis rather than by recognizing temporary declines in value. Management believes no impairment has occurred related to these investments at December 31, 2024 and 2023.
Bank Owned Life Insurance
The Bank is the owner and beneficiary of life insurance policies on certain employees and directors. The life insurance investment is carried at the cash surrender value of the underlying owned policies. The increase in the cash surrender value is recognized as a component of non-interest income. The policies can be liquidated, if necessary, with tax costs associated. However, the Bank intends to hold these policies and, accordingly, the Bank has not provided for deferred income taxes on the earnings from the increase in cash surrender value.
F-18
The Victory Bancorp, Inc.
Notes to Consolidated Financial Statements
Income Taxes
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 Corporation determines deferred income taxes using the asset and 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 basis of assets and liabilities, net operating loss carryforwards, and enacted changes in tax rates and laws are recognized in the period in which they occur.
Deferred income tax expense (benefit) results from changes in deferred tax assets and liabilities between periods. Deferred tax assets are reduced by a valuation allowance if, based on the weight of the evidence available, it is more likely than not that some portion or all of a deferred tax asset will not be realized.
The Corporation evaluates the carrying amount of its deferred tax assets on a quarterly basis or more frequently, if necessary, in applying the criteria set forth therein to determine whether it is more likely than not (i.e., a likelihood of more than 50%) that some portion, or all, of the deferred tax asset will not be realized within its life cycle, based on the weight of available evidence. If management makes a determination based on the available evidence that it is more likely than not that some portion or all of the deferred tax assets will not be realized in future periods, a valuation allowance is calculated and recorded. These determinations are inherently subjective and dependent upon estimates and judgments concerning management’s evaluation of both positive and negative evidence.
In conducting the deferred tax asset analysis, the Corporation believes it is important to consider the unique characteristics of an industry or business. In particular, characteristics such as business model, level of capital and reserves held by financial institutions and their ability to absorb potential losses are important distinctions to be considered for bank holding companies like the Corporation. Most importantly, it is also important to consider that net operating losses for federal income tax purposes can generally be carried forward for a period of twenty years. In order to realize deferred tax assets, the Corporation must generate sufficient taxable income in such future years.
In assessing the need for a valuation allowance, the Corporation carefully weighed both positive and negative evidence currently available. Judgment is required when considering the relative impact of such evidence. The weight given to the potential effect of positive and negative evidence must be commensurate with the extent to which it can be objectively verified. A cumulative loss in recent years is a significant piece of negative evidence that is difficult to overcome. As a result of limited sources of state income that can be used to realize state net operating losses generated by the holding company, the Corporation has concluded that a full valuation allowance is required related to state net operating loss carryforwards at December 31, 2024 and 2023.
The Corporation 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. At December 31, 2024 and 2023, the Corporation did not have any uncertain tax positions.
The Corporation recognizes interest and penalties on income taxes, if any, as a component of the provision for income taxes. There were no interest and penalties recognized during the years ended December 31, 2024 or 2023. With limited exception, tax years prior to 2021 are no longer subject to examination by tax authorities.
Comprehensive Income
Accounting principles generally accepted in the United States of America require 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 available-for-sale securities, are reported as a separate component of stockholders’ equity section of the Consolidated Balance Sheets, such items along with net income are components of comprehensive income.
F-19
The Victory Bancorp, Inc.
Notes to Consolidated Financial Statements
Fair Value of Financial Instruments
Fair values of financial instruments are estimated using relevant market information and other assumptions, as more fully disclosed in Note 13. Fair value estimates involve uncertainties and matters of significant judgment. Changes in assumptions or in market conditions could significantly affect the estimates.
Off-Balance Sheet Financial Instruments
In the ordinary course of business, the Bank has entered into off-balance sheet financial instruments consisting of commitments to extend credit. Such financial instruments are recorded in the Consolidated Balance Sheets when they are funded.
Derivatives
At the inception of a derivative contract, the Bank designates the derivative as a fair value hedge, a cash flow hedge or an instrument with no hedging designation. This designation is based on the Bank’s intentions and belief as to likely effectiveness as a hedge. The Bank formally documents the relationship between derivatives and hedge items, as well as the risk-management objective and the strategy for undertaking hedge transactions at the inception of the hedging relationship. This documentation includes linking fair value or cash flow hedges to specific assets and liabilities on the balance sheet or to specific firm commitments or forecasted transactions. The Bank also formally assesses, both at the hedge’s inception and on an ongoing basis, whether the derivative instruments that are designated are highly effective in offsetting changes in fair values or cash flows of hedged items. The Bank uses interest rate swap agreements as part of its asset liability management strategy to manage its interest rate risk position. The notional amounts of interest rate swaps as of December 31, 2024 and 2023 were $30,000,000 and $0 and designated as portfolio layer hedges of certain fixed rate loans. The hedge was deemed to be effective during all periods presented.
Employee Benefit Plan
The Bank has established a 401(k) plan (“the Plan”). Under the Plan, all employees are eligible to contribute the maximum allowed by the Internal Revenue Code of 1986, as amended. The Bank may make discretionary matching contributions. For the years ended December 31, 2024 and 2023, expense recorded in salaries and employee benefits attributable to the Plan amounted to $203,000 and $199,000, respectively.
Share-Based Compensation
The Bank recognizes the cost of employee and organizer services received in share-based payment transactions and measure the cost based on the grant-date fair value of the award. The cost will be recognized over the period during which the employee or organizer is required to provide service in exchange for the award.
Compensation cost for all stock awards is calculated and recognized over the employee’s service period, generally defined as the vesting period. For awards with graded-vesting, compensation cost is recognized on a straight-line basis over the requisite service period for the entire award. A Black-Scholes model is used to estimate the fair value of stock options, while the fair value of the Corporation’s common stock at the date of grant is used for restricted stock awards. Because of the insignificant amount of forfeitures the Corporation has experienced, forfeitures are recognized as they occur.
Earnings per Share
Basic earnings per share (“EPS”) represents net income available to common shareholders divided by the weighted-average number of common shares outstanding during the period. Diluted EPS includes all potentially dilutive common shares outstanding during the period. Potential common shares that may be issued related to outstanding stock options are determined using the treasury stock method.
F-20
The Victory Bancorp, Inc.
Notes to Consolidated Financial Statements
The following table sets forth the composition of basic and diluted earnings per share.
Years Ended December 31, |
|
2024 |
|
|
2023 |
|
||
|
|
(In thousands, except for share and per share data) |
|
|||||
Net income available to common stockholders |
|
$ |
1,662 |
|
|
$ |
2,141 |
|
Basic weighted average shares outstanding |
|
|
1,972,940 |
|
|
|
1,971,362 |
|
Plus: effect of dilutive options |
|
|
48,775 |
|
|
|
57,181 |
|
Diluted weighted average common shares |
|
|
2,021,715 |
|
|
|
2,028,543 |
|
Earnings per share: |
|
|
|
|
|
|
||
Basic |
|
$ |
0.84 |
|
|
$ |
1.09 |
|
Diluted |
|
$ |
0.82 |
|
|
$ |
1.06 |
|
Operating Segments
The Bank’s reportable segment, banking, is determined by the Chief Financial Officer, which is the designated chief operating decision maker, based upon information provided about the Bank’s products and services offered, primarily banking operations. The segment is also distinguished by the level of information provided to the chief operating decision maker, who uses such information to review performance of various components of the business, which are aggregated because services and customers are similar. The chief operating decision maker evaluates financial performance of the Bank’s business components by evaluating revenue streams, significant expenses and budget to actual results in assessment the segment and in the determination of allocating resources. The chief operating decision maker uses consolidated net income to evaluate Bank performance. The significant products, revenue and expense are reported on the consolidated balance sheets and statements of income
Reclassifications
Some items in the prior year financial statements and footnotes were reclassified to conform to the current presentation. Reclassifications had no effect on prior year net income or stockholders’ equity.
2. Restrictions on Cash and Due from Banks
In return for services obtained through correspondent banks, the Bank is required to maintain non-interest-bearing cash balances in those correspondent banks. Compensating balances totaled $1,000,000 at December 31, 2024 and 2023, included in cash and due from banks.
3. Securities
The amortized cost and fair value of securities as of December 31, 2024 and 2023 is summarized as follows (in thousands):
December 31, 2024 |
|
Amortized |
|
|
Gross |
|
|
Gross |
|
|
Fair |
|
||||
Available-for-sale: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Corporate bonds |
|
$ |
8,470 |
|
|
$ |
— |
|
|
$ |
(635 |
) |
|
$ |
7,835 |
|
Residential mortgage-backed securities – government |
|
|
12,930 |
|
|
|
— |
|
|
|
(662 |
) |
|
|
12,268 |
|
U.S. government agency |
|
|
9,558 |
|
|
|
— |
|
|
|
(890 |
) |
|
|
8,668 |
|
State and Political Subdivisions |
|
|
4,247 |
|
|
|
— |
|
|
|
(113 |
) |
|
|
4,134 |
|
|
|
$ |
35,205 |
|
|
$ |
— |
|
|
$ |
(2,300 |
) |
|
$ |
32,905 |
|
F-21
The Victory Bancorp, Inc.
Notes to Consolidated Financial Statements
December 31, 2024 |
|
Amortized |
|
|
Gross |
|
|
Gross |
|
|
Fair |
|
||||
Held-to-Maturity: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Corporate bonds |
|
$ |
500 |
|
|
$ |
— |
|
|
$ |
(15 |
) |
|
$ |
485 |
|
Residential mortgage-backed securities – government |
|
|
6,571 |
|
|
|
— |
|
|
|
(83 |
) |
|
|
6,488 |
|
U.S. government agency |
|
|
1,967 |
|
|
|
— |
|
|
|
(93 |
) |
|
|
1,874 |
|
State and Political Subdivisions |
|
|
2,699 |
|
|
|
25 |
|
|
|
(14 |
) |
|
|
2,710 |
|
|
|
$ |
11,737 |
|
|
$ |
25 |
|
|
$ |
(205 |
) |
|
$ |
11,557 |
|
December 31, 2023 |
|
Amortized |
|
|
Gross |
|
|
Gross |
|
|
Fair |
|
||||
Available-for-sale: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Corporate bonds |
|
$ |
8,470 |
|
|
$ |
— |
|
|
$ |
(991 |
) |
|
$ |
7,479 |
|
Residential mortgage-backed securities – government |
|
|
14,693 |
|
|
|
9 |
|
|
|
(523 |
) |
|
|
14,179 |
|
U.S. government agency |
|
|
10,653 |
|
|
|
— |
|
|
|
(849 |
) |
|
|
9,804 |
|
State and Political Subdivisions |
|
|
4,552 |
|
|
|
— |
|
|
|
(124 |
) |
|
|
4,428 |
|
|
|
$ |
38,368 |
|
|
$ |
9 |
|
|
$ |
(2,487 |
) |
|
$ |
35,890 |
|
December 31, 2023 |
|
Amortized |
|
|
Gross |
|
|
Gross |
|
|
Fair |
|
||||
Held-to-Maturity: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Corporate bonds |
|
$ |
500 |
|
|
$ |
— |
|
|
$ |
(82 |
) |
|
$ |
418 |
|
Residential mortgage-backed securities – government |
|
|
6,561 |
|
|
|
— |
|
|
|
(263 |
) |
|
|
6,298 |
|
U.S. government agency |
|
|
2,268 |
|
|
|
— |
|
|
|
(107 |
) |
|
|
2,161 |
|
State and Political Subdivisions |
|
|
2,712 |
|
|
|
111 |
|
|
|
(14 |
) |
|
|
2,809 |
|
|
|
$ |
12,041 |
|
|
$ |
111 |
|
|
$ |
(466 |
) |
|
$ |
11,686 |
|
The unrealized losses and related fair value of investment securities available for sale with unrealized losses less than 12 months and those with unrealized losses 12 months or longer as of December 31, 2024 and 2023, for which an allowance for credit losses has not been recorded, are as follows (in thousands):
December 31, 2024 |
|
Less than 12 Months |
|
|
12 Months or More |
|
|
Total |
|
|||||||||||||||
|
|
Fair |
|
|
Unrealized |
|
|
Fair |
|
|
Unrealized |
|
|
Fair |
|
|
Unrealized |
|
||||||
Available-for-sale: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Corporate Bonds |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
7,335 |
|
|
$ |
(635 |
) |
|
$ |
7,335 |
|
|
$ |
(635 |
) |
Residential mortgage-backed securities – |
|
|
5,542 |
|
|
|
(212 |
) |
|
|
6,717 |
|
|
|
(450 |
) |
|
|
12,259 |
|
|
|
(662 |
) |
U.S. government agency |
|
|
— |
|
|
|
— |
|
|
|
8,668 |
|
|
|
(890 |
) |
|
|
8,668 |
|
|
|
(890 |
) |
State and Political Subdivisions |
|
|
— |
|
|
|
— |
|
|
|
4,134 |
|
|
|
(113 |
) |
|
|
4,134 |
|
|
|
(113 |
) |
Total |
|
$ |
5,542 |
|
|
$ |
(212 |
) |
|
$ |
26,854 |
|
|
$ |
(2,088 |
) |
|
$ |
32,396 |
|
|
$ |
(2,300 |
) |
F-22
The Victory Bancorp, Inc.
Notes to Consolidated Financial Statements
December 31, 2024 |
|
Less than 12 Months |
|
|
12 Months or More |
|
|
Total |
|
|||||||||||||||
|
|
Fair |
|
|
Unrecognized |
|
|
Fair |
|
|
Unrecognized |
|
|
Fair |
|
|
Unrecognized |
|
||||||
Held-to-maturity: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Corporate Bonds |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
485 |
|
|
$ |
(15 |
) |
|
$ |
485 |
|
|
$ |
(15 |
) |
Residential mortgage-backed securities – |
|
|
— |
|
|
|
— |
|
|
|
6,488 |
|
|
|
(83 |
) |
|
|
6,488 |
|
|
|
(83 |
) |
U.S government agency |
|
|
— |
|
|
|
— |
|
|
|
1,874 |
|
|
|
(93 |
) |
|
|
1,874 |
|
|
|
(93 |
) |
State and Political Subdivisions |
|
|
610 |
|
|
|
(14 |
) |
|
|
— |
|
|
|
— |
|
|
|
610 |
|
|
|
(14 |
) |
Total |
|
$ |
610 |
|
|
$ |
(14 |
) |
|
$ |
8,847 |
|
|
$ |
(191 |
) |
|
$ |
9,457 |
|
|
$ |
(205 |
) |
December 31, 2023 |
|
Less than 12 Months |
|
|
12 Months or More |
|
|
Total |
|
|||||||||||||||
|
|
Fair |
|
|
Unrealized |
|
|
Fair |
|
|
Unrealized |
|
|
Fair |
|
|
Unrealized |
|
||||||
Available-for-sale: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Corporate bonds |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
6,979 |
|
|
$ |
(991 |
) |
|
$ |
6,979 |
|
|
$ |
(991 |
) |
Residential mortgage-backed securities – |
|
|
4,058 |
|
|
|
(15 |
) |
|
|
7,888 |
|
|
|
(508 |
) |
|
|
11,946 |
|
|
|
(523 |
) |
U.S. government agency |
|
|
— |
|
|
|
— |
|
|
|
9,804 |
|
|
|
(849 |
) |
|
|
9,804 |
|
|
|
(849 |
) |
State and Political Subdivisions |
|
|
— |
|
|
|
— |
|
|
|
4,428 |
|
|
|
(124 |
) |
|
|
4,428 |
|
|
|
(124 |
) |
Total |
|
$ |
4,058 |
|
|
$ |
(15 |
) |
|
$ |
29,099 |
|
|
$ |
(2,472 |
) |
|
$ |
33,157 |
|
|
$ |
(2,487 |
) |
December 31, 2023 |
|
Less than 12 Months |
|
|
12 Months or More |
|
|
Total |
|
|||||||||||||||
|
|
Fair |
|
|
Unrecognized |
|
|
Fair |
|
|
Unrecognized |
|
|
Fair |
|
|
Unrecognized |
|
||||||
Held-to-maturity: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Corporate Bonds |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
418 |
|
|
$ |
(82 |
) |
|
$ |
418 |
|
|
$ |
(82 |
) |
Residential mortgage-backed securities – |
|
|
— |
|
|
|
— |
|
|
|
6,298 |
|
|
|
(263 |
) |
|
|
6,298 |
|
|
|
(263 |
) |
U.S government agency |
|
|
— |
|
|
|
— |
|
|
|
2,161 |
|
|
|
(107 |
) |
|
|
2,161 |
|
|
|
(107 |
) |
State and Political Subdivisions |
|
|
— |
|
|
|
— |
|
|
|
611 |
|
|
|
(14 |
) |
|
|
611 |
|
|
|
(14 |
) |
Total |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
9,488 |
|
|
$ |
(466 |
) |
|
$ |
9,488 |
|
|
$ |
(466 |
) |
All of the securities that were in an unrealized loss position at December 31, 2024 and 2023, are bonds the Bank has determined are in a loss position due primarily to interest rate factors and not credit quality concerns. In management’s opinion, based on third party credit ratings and the amount of the impairment, credit risk for these securities is minimal. Management has the intent and ability to hold debt securities until recovery and does not believe it will have to sell the securities prior to recovery.
At December 31, 2024, the Bank had 50 securities in an unrealized loss position for 12 months or more and 3 securities in an unrealized loss position less than 12 months, none of which exceeded 22.3% of the security’s carrying amount. At December 31, 2023, the Bank had 51 securities in an unrealized loss position for 12 months or more and 1 security in an unrealized loss position less than 12 months, none of which exceeded 21.4% of the security’s carrying amount.
At December 31, 2024 and 2023, there was no allowance for credit losses related to the available-for-sale portfolio. Accrued interest receivable on available-for-sale debt securities totaled $151,000 and $207,000 at December 31, 2024 and 2023, respectfully, and was excluded from the estimate of credit losses. At December 31, 2024 and 2023, the Bank evaluated its held-to-maturity debt securities under the CECL standards and based on the credit reviews of the issuers of the corporate debt securities determined no allowance for credit losses was required.
F-23
The Victory Bancorp, Inc.
Notes to Consolidated Financial Statements
The amortized cost and fair value of securities as of December 31, 2024 and 2023, by contractual maturity, are shown below. Expected maturities of mortgage-backed securities may differ from contractual maturities because the securities may be called without any penalties (in thousands):
|
|
2024 |
|
|
2023 |
|
||||||||||
|
|
Amortized |
|
|
Fair |
|
|
Amortized |
|
|
Fair |
|
||||
Available-for-sale: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Less than a year |
|
$ |
1,406 |
|
|
$ |
1,395 |
|
|
$ |
— |
|
|
$ |
— |
|
Due after one year through five years |
|
|
4,731 |
|
|
|
4,551 |
|
|
|
3,989 |
|
|
|
3,881 |
|
Due after five years through ten years |
|
|
16,138 |
|
|
|
14,691 |
|
|
|
19,686 |
|
|
|
17,830 |
|
Due after 10 years |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Mortgage-backed investment securities |
|
|
12,930 |
|
|
|
12,268 |
|
|
|
14,693 |
|
|
|
14,179 |
|
Total |
|
$ |
35,205 |
|
|
$ |
32,905 |
|
|
$ |
38,368 |
|
|
$ |
35,890 |
|
|
|
2024 |
|
|
2023 |
|
||||||||||
|
|
Amortized |
|
|
Fair |
|
|
Amortized |
|
|
Fair |
|
||||
Held-to-maturity: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Due after one year through five years |
|
$ |
2,591 |
|
|
$ |
2,485 |
|
|
$ |
2,893 |
|
|
$ |
2,773 |
|
Due after five years through ten years |
|
|
2,575 |
|
|
|
2,584 |
|
|
|
2,587 |
|
|
|
2,615 |
|
Due after 10 years |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Mortgage-backed investment securities |
|
|
6,571 |
|
|
|
6,488 |
|
|
|
6,561 |
|
|
|
6,298 |
|
Total |
|
$ |
11,737 |
|
|
$ |
11,557 |
|
|
$ |
12,041 |
|
|
$ |
11,686 |
|
There were no securities pledged as collateral at December 31, 2024 and 2023 to secure public deposits.
There were no gross gains or losses on the sale or call of securities in 2024 and 2023.
4. Loans Receivable
The composition of loans receivable at December 31, 2024 and 2023 is as follows (in thousands):
|
|
2024 |
|
|
Agricultural |
|
$ |
2,018 |
|
Commercial |
|
|
40,100 |
|
Consumer |
|
|
2,920 |
|
Construction |
|
|
21,690 |
|
Commercial Real Estate |
|
|
233,179 |
|
Residential Real Estate |
|
|
95,625 |
|
Total loans |
|
$ |
395,532 |
|
Deferred Fees, net |
|
|
(967 |
) |
Allowance for credit losses |
|
|
(3,611 |
) |
Net Loans |
|
$ |
390,954 |
|
F-24
The Victory Bancorp, Inc.
Notes to Consolidated Financial Statements
|
|
2023 |
|
|
Commercial Term |
|
$ |
38,682 |
|
Commercial Mortgage |
|
|
224,500 |
|
Commercial Line |
|
|
20,665 |
|
Construction |
|
|
61,250 |
|
Home Equity |
|
|
2,740 |
|
Consumer |
|
|
20,937 |
|
Total loans |
|
$ |
368,774 |
|
Deferred Fees, net |
|
|
(947 |
) |
Allowance for credit losses |
|
|
(3,444 |
) |
Net Loans |
|
$ |
364,383 |
|
The Bank elected to exclude accrued interest receivable from the amortized cost basis of loans disclosed throughout this footnote. As of December 31, 2024 and 2023, accrued interest receivable for loans totaled $1,363,000 and $1,339,000, respectively, and is included in the accrued interest receivable line item on the Bank’s Consolidated Balance Sheets.
Presentation of loans was updated to reflect segmentation per the Allowance for Credit Losses in the current year. The following tables presents the activity in the allowance for credit losses by loan portfolio segment for the years ended December 31, 2024 and 2023 under the CECL methodology (in thousands):
December 31, 2024 |
|
Beginning |
|
|
Allocation of |
|
|
Loans |
|
|
Recoveries |
|
|
Provision |
|
|
Total |
|
||||||
Agricultural |
|
$ |
— |
|
|
$ |
15 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
15 |
|
Commercial |
|
|
— |
|
|
|
576 |
|
|
|
(33 |
) |
|
|
— |
|
|
|
(162 |
) |
|
|
381 |
|
Commercial Term |
|
|
363 |
|
|
|
(363 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
--0Commercial Mortgage |
|
|
1,962 |
|
|
|
(1,962 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Commercial Line |
|
|
359 |
|
|
|
(359 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Commercial Real Estate |
|
|
— |
|
|
|
1,950 |
|
|
|
— |
|
|
|
— |
|
|
|
274 |
|
|
|
2,224 |
|
Construction |
|
|
436 |
|
|
|
(317 |
) |
|
|
— |
|
|
|
— |
|
|
|
(28 |
) |
|
|
91 |
|
Consumer |
|
|
280 |
|
|
|
(84 |
) |
|
|
— |
|
|
|
— |
|
|
|
(26 |
) |
|
|
170 |
|
Home Equity |
|
|
44 |
|
|
|
(44 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Residential Real Estate |
|
|
— |
|
|
|
588 |
|
|
|
(9 |
) |
|
|
— |
|
|
|
151 |
|
|
|
730 |
|
Ending balance |
|
$ |
3,444 |
|
|
$ |
— |
|
|
$ |
(42 |
) |
|
$ |
— |
|
|
$ |
209 |
|
|
$ |
3,611 |
|
December 31, 2023 |
|
Commercial |
|
|
Commercial |
|
|
Commercial |
|
|
Construction |
|
|
Home Equity |
|
|
Consumer |
|
|
Total |
|
|||||||
Allowance for credit losses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Beginning balance |
|
$ |
333 |
|
|
$ |
1,839 |
|
|
$ |
186 |
|
|
$ |
453 |
|
|
$ |
149 |
|
|
$ |
315 |
|
|
$ |
3,275 |
|
Charge-offs |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Recoveries |
|
|
— |
|
|
|
2 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
2 |
|
Provision for credit losses on loans |
|
|
30 |
|
|
|
121 |
|
|
|
173 |
|
|
|
(17 |
) |
|
|
(105 |
) |
|
|
(35 |
) |
|
|
167 |
|
Ending balance |
|
$ |
363 |
|
|
$ |
1,962 |
|
|
$ |
359 |
|
|
$ |
436 |
|
|
$ |
44 |
|
|
$ |
280 |
|
|
$ |
3,444 |
|
As discussed in Note 1, the Bank identifies loans in which the borrower cannot demonstrate the ability to make regularly scheduled payments and the repayment of the loan is dependent upon the operation or sale of the collateral of the loan. These collateral dependent loans are evaluated individually for allowance for credit losses based on the fair value of the collateral. The Bank believes that there is no significant over-coverage of collateral for any of the loans noted below.
F-25
The Victory Bancorp, Inc.
Notes to Consolidated Financial Statements
The following tables present an analysis of collateral-dependent loans of the Bank by class of loans as of December 31, 2024 and 2023 (in thousands):
December 31, 2024 |
|
Residential |
|
|
Business |
|
|
Commercial |
|
|
Total Collateral- |
|
||||
Agricultural |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
Commercial |
|
|
117 |
|
|
|
64 |
|
|
|
— |
|
|
|
181 |
|
Consumer |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Construction |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Commercial Real Estate |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Residential Real Estate |
|
|
206 |
|
|
|
— |
|
|
|
— |
|
|
|
206 |
|
Total |
|
$ |
323 |
|
|
$ |
64 |
|
|
$ |
— |
|
|
$ |
387 |
|
December 31, 2023 |
|
Residential |
|
|
Business |
|
|
Commercial |
|
|
Total Collateral- |
|
||||
Commercial Term |
|
$ |
— |
|
|
$ |
3 |
|
|
$ |
428 |
|
|
$ |
431 |
|
Commercial Mortgage |
|
|
— |
|
|
|
77 |
|
|
|
2,592 |
|
|
|
2,669 |
|
Commercial Line |
|
|
— |
|
|
|
— |
|
|
|
2,518 |
|
|
|
2,518 |
|
Construction |
|
|
— |
|
|
|
— |
|
|
|
138 |
|
|
|
138 |
|
Home Equity |
|
|
57 |
|
|
|
— |
|
|
|
— |
|
|
|
57 |
|
Consumer |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Total |
|
$ |
57 |
|
|
$ |
80 |
|
|
$ |
5,676 |
|
|
$ |
5,813 |
|
The Bank monitors ongoing risk for loans with a commercial purpose using a nine-point internal grading system. The first five rating categories, representing the lowest risk to the Bank, are combined and given a Pass rating. The Special Mention category includes loans that have potential weaknesses that may, if not monitored or corrected, weaken the asset or inadequately protect the Bank’s position at some future date. These assets pose elevated risk, but their weakness does not justify a more severe, or criticized rating.
Management generally follows regulatory definitions in assigning criticized ratings to loans, including substandard, doubtful, or loss. Substandard loans are classified as they have a well-defined weakness or weaknesses that jeopardize liquidation of the debt. These loans are characterized by the distinct possibility that the Bank will sustain some loss if the deficiencies are not corrected. Substandard loans include loans that management has determined are not adequately protected by current cash flows or net worth of the borrower. A doubtful loan has the same weaknesses as a substandard loan, however, collection or liquidation of principal in full is questionable and improbable. For doubtful loans, loss is present, but may not be determined until specific factors occur. Loss assets are considered uncollectible, as the underlying borrowers are often in bankruptcy, have suspended debt repayments, or ceased business operations. Once a loan is classified as Loss, there is little prospect of collecting the loan’s principal or interest and it is generally written off.
Loans with a consumer purpose, which also includes certain commercial loans, construction and land development loans, and residential loans, are not-rated and are monitored based on the length of time a loan is past due. Not-rated loans are categorized as either Performing or Non-performing. Non-performing loans would be those in non-accrual status, which generally occurs when a loan is maintained on a cash basis due to deterioration in the financial condition of the borrower, full payment of principal or interest is not expected, or principal or interest has been in default for a period of 90 days or more.
The Bank’s Board of Directors reviews on a quarterly basis the ratings of all criticized loans. In addition, an independent third-party performs an annual loan review. The review focuses on a sample of business and consumer purpose loans, and all previously criticized loans over a certain dollar threshold.
F-26
The Victory Bancorp, Inc.
Notes to Consolidated Financial Statements
The following tables present the Bank’s loan portfolio based on its internal risk rating system by origination year as of December 31, 2024 and 2023 (in thousands):
|
|
2024 |
|
|
2023 |
|
|
2022 |
|
|
2021 |
|
|
2020 |
|
|
Prior |
|
|
Revolving |
|
|
Total |
|
||||||||
Agriculture |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Pass |
|
$ |
— |
|
|
$ |
139 |
|
|
$ |
53 |
|
|
$ |
753 |
|
|
$ |
1 |
|
|
$ |
1,060 |
|
|
$ |
12 |
|
|
$ |
2,018 |
|
Special mention |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Substandard |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Doubtful |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Loss |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Not-rated |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Total |
|
|
— |
|
|
|
139 |
|
|
|
53 |
|
|
|
753 |
|
|
|
1 |
|
|
|
1,060 |
|
|
|
12 |
|
|
|
2,018 |
|
Gross charge-offs, YTD |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
Not-rated loans: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Performing |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Not-performing |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Total not-rated |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Commercial |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Pass |
|
$ |
3,048 |
|
|
$ |
4,636 |
|
|
$ |
6,074 |
|
|
$ |
1,305 |
|
|
$ |
1,172 |
|
|
$ |
3,487 |
|
|
$ |
14,566 |
|
|
$ |
34,288 |
|
Special mention |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
928 |
|
|
|
89 |
|
|
|
1,017 |
|
Substandard |
|
|
— |
|
|
|
780 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
3 |
|
|
|
4,012 |
|
|
|
4,795 |
|
Doubtful |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Loss |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Not-rated |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Total |
|
|
3,048 |
|
|
|
5,416 |
|
|
|
6,074 |
|
|
|
1,305 |
|
|
|
1,172 |
|
|
|
4,418 |
|
|
|
18,667 |
|
|
|
40,100 |
|
Gross charge-offs, YTD |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
33 |
|
|
$ |
— |
|
|
$ |
33 |
|
Not-rated loans: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Performing |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Not-performing |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Total not-rated |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Consumer |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Pass |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
332 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
82 |
|
|
$ |
414 |
|
Special mention |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Substandard |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Doubtful |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Loss |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Not-rated |
|
|
46 |
|
|
|
97 |
|
|
|
12 |
|
|
|
11 |
|
|
|
— |
|
|
|
1,110 |
|
|
|
1,230 |
|
|
|
2,506 |
|
Total |
|
|
46 |
|
|
|
97 |
|
|
|
344 |
|
|
|
11 |
|
|
|
— |
|
|
|
1,110 |
|
|
|
1,312 |
|
|
|
2,920 |
|
Gross charge-offs, YTD |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
Not-rated loans: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Performing |
|
|
46 |
|
|
|
97 |
|
|
|
12 |
|
|
|
11 |
|
|
|
— |
|
|
|
1,102 |
|
|
|
1,230 |
|
|
|
2,498 |
|
Not-performing |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
8 |
|
|
|
— |
|
|
|
8 |
|
Total not-rated |
|
$ |
46 |
|
|
$ |
97 |
|
|
$ |
12 |
|
|
$ |
11 |
|
|
$ |
— |
|
|
$ |
1,110 |
|
|
$ |
1,230 |
|
|
$ |
2,506 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Construction |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Pass |
|
$ |
9,279 |
|
|
$ |
9,128 |
|
|
$ |
1,295 |
|
|
$ |
1,063 |
|
|
$ |
45 |
|
|
$ |
880 |
|
|
$ |
— |
|
|
$ |
21,690 |
|
Special mention |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Substandard |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Doubtful |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Loss |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Not-rated |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Total |
|
|
9,279 |
|
|
|
9,128 |
|
|
|
1,295 |
|
|
|
1,063 |
|
|
|
45 |
|
|
|
880 |
|
|
|
— |
|
|
|
21,690 |
|
Gross charge-offs, YTD |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
Not-rated loans: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Performing |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Non-performing |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Total not-rated |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Commercial Real Estate |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Pass |
|
$ |
31,723 |
|
|
$ |
43,888 |
|
|
$ |
48,869 |
|
|
$ |
35,519 |
|
|
$ |
18,554 |
|
|
$ |
47,853 |
|
|
$ |
2,344 |
|
|
$ |
228,750 |
|
F-27
The Victory Bancorp, Inc.
Notes to Consolidated Financial Statements
|
|
2024 |
|
|
2023 |
|
|
2022 |
|
|
2021 |
|
|
2020 |
|
|
Prior |
|
|
Revolving |
|
|
Total |
|
||||||||
Special mention |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Substandard |
|
|
2,608 |
|
|
|
608 |
|
|
|
— |
|
|
|
— |
|
|
|
348 |
|
|
|
815 |
|
|
|
— |
|
|
|
4,379 |
|
Doubtful |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Loss |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Not-rated |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
50 |
|
|
|
50 |
|
Total |
|
|
34,331 |
|
|
|
44,496 |
|
|
|
48,869 |
|
|
|
35,519 |
|
|
|
18,902 |
|
|
|
48,668 |
|
|
|
2,394 |
|
|
|
233,179 |
|
Gross charge-offs, YTD |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
Not-rated loans: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Performing |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
50 |
|
|
|
50 |
|
Non-performing |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Total not-rated |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
50 |
|
|
$ |
50 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Residential Real Estate |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Pass |
|
$ |
17,588 |
|
|
$ |
15,333 |
|
|
$ |
16,551 |
|
|
$ |
10,151 |
|
|
$ |
3,733 |
|
|
$ |
8,195 |
|
|
$ |
1,562 |
|
|
$ |
73,113 |
|
Special mention |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Substandard |
|
|
99 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
206 |
|
|
|
305 |
|
Doubtful |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Loss |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Not-rated |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
897 |
|
|
|
21,310 |
|
|
|
22,207 |
|
Total |
|
|
17,687 |
|
|
|
15,333 |
|
|
|
16,551 |
|
|
|
10,151 |
|
|
|
3,733 |
|
|
|
9,092 |
|
|
|
23,078 |
|
|
|
95,625 |
|
Gross charge-offs, YTD |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
9 |
|
|
$ |
9 |
|
Not-rated loans: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Performing |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
897 |
|
|
|
21,310 |
|
|
|
22,207 |
|
Not-performing |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Total not-rated |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
897 |
|
|
$ |
21,310 |
|
|
$ |
22,207 |
|
F-28
The Victory Bancorp, Inc.
Notes to Consolidated Financial Statements
|
|
2023 |
|
|
2022 |
|
|
2021 |
|
|
2020 |
|
|
2019 |
|
|
Prior |
|
|
Revolving |
|
|
Total |
|
||||||||
Commercial Term |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Pass |
|
$ |
11,552 |
|
|
$ |
5,273 |
|
|
$ |
8,928 |
|
|
$ |
5,023 |
|
|
$ |
2,798 |
|
|
$ |
4,677 |
|
|
$ |
— |
|
|
$ |
38,251 |
|
Special mention |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Substandard |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
104 |
|
|
|
— |
|
|
|
327 |
|
|
|
— |
|
|
|
431 |
|
Doubtful |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Not-rated |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Total |
|
|
11,552 |
|
|
|
5,273 |
|
|
|
8,928 |
|
|
|
5,127 |
|
|
|
2,798 |
|
|
|
5,004 |
|
|
|
— |
|
|
|
38,682 |
|
Gross charge-offs, YTD |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
Not-rated loans: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Performing |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Non-performing |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Total not-rated |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Commercial Mortgage |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Pass |
|
$ |
40,848 |
|
|
$ |
58,988 |
|
|
$ |
41,081 |
|
|
$ |
19,915 |
|
|
$ |
16,609 |
|
|
$ |
43,581 |
|
|
$ |
809 |
|
|
$ |
221,831 |
|
Special mention |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Substandard |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
2,596 |
|
|
|
73 |
|
|
|
2,669 |
|
Doubtful |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Not-rated |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Total |
|
|
40,848 |
|
|
|
58,988 |
|
|
|
41,081 |
|
|
|
19,915 |
|
|
|
16,609 |
|
|
|
46,177 |
|
|
|
882 |
|
|
|
224,500 |
|
Gross charge-offs, YTD |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
Not-rated loans: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Performing |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Non-performing |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Total not-rated |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Commercial Line |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Pass |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
18,147 |
|
|
$ |
18,147 |
|
Special mention |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Substandard |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
2,518 |
|
|
|
2,518 |
|
Doubtful |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Not-rated |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Total |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
20,665 |
|
|
|
20,665 |
|
Gross charge-offs YTD |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
Not-rated loans: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Performing |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
Non-performing |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Total not-rated |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Construction |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Pass |
|
$ |
24,439 |
|
|
$ |
18,692 |
|
|
$ |
5,622 |
|
|
$ |
1,457 |
|
|
$ |
914 |
|
|
$ |
9,988 |
|
|
$ |
— |
|
|
$ |
61,112 |
|
Special mention |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Substandard |
|
|
— |
|
|
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
138 |
|
|
|
— |
|
|
|
138 |
|
||
Doubtful |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Not-rated |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Total |
|
|
24,439 |
|
|
|
18,692 |
|
|
|
5,622 |
|
|
|
1,457 |
|
|
|
914 |
|
|
|
10,126 |
|
|
|
— |
|
|
|
61,250 |
|
Gross charge-offs, YTD |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
Not-rated loans: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Performing |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
Non-performing |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Total not-rated |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Home Equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Pass |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
Special mention |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Substandard |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Doubtful |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Not-rated |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Total |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Gross charge-offs YTD |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
F-29
The Victory Bancorp, Inc.
Notes to Consolidated Financial Statements
|
|
2023 |
|
|
2022 |
|
|
2021 |
|
|
2020 |
|
|
2019 |
|
|
Prior |
|
|
Revolving |
|
|
Total |
|
||||||||
Not-rated loans: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Performing |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
457 |
|
|
$ |
1,070 |
|
|
$ |
837 |
|
|
$ |
319 |
|
|
$ |
2,683 |
|
Non-performing |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
57 |
|
|
|
57 |
|
Total not-rated |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
457 |
|
|
$ |
1,070 |
|
|
$ |
837 |
|
|
$ |
376 |
|
|
$ |
2,740 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Consumer |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Pass |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
Special mention |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Substandard |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Doubtful |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Not-rated |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Total |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Gross charge-offs YTD |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
|
— |
|
|
$ |
— |
|
|
$ |
— |
|
Not-rated loans: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Performing |
|
$ |
107 |
|
|
$ |
16 |
|
|
$ |
16 |
|
|
$ |
80 |
|
|
$ |
56 |
|
|
$ |
1,276 |
|
|
$ |
18,749 |
|
|
$ |
20,300 |
|
Non-performing |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
23 |
|
|
|
614 |
|
|
|
637 |
|
Total not-rated |
|
$ |
107 |
|
|
$ |
16 |
|
|
$ |
16 |
|
|
$ |
80 |
|
|
$ |
56 |
|
|
$ |
1,299 |
|
|
$ |
19,363 |
|
|
$ |
20,937 |
|
Management monitors the performance and credit quality of the loan portfolio by analyzing the length of time a recorded payment is past due, by aggregating loans based on their delinquencies. The following tables present an aging of the payment status of the Bank’s loans as of December 31, 2024 and 2023 (in thousands):
December 31, 2024 |
|
30-59 Days |
|
|
60-90 Days |
|
|
Greater Than |
|
|
Total |
|
|
Current |
|
|
Total Loans |
|
|
Loans Receivable |
|
|||||||
Agricultural |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
2,018 |
|
|
$ |
2,018 |
|
|
$ |
— |
|
Commercial |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
40,100 |
|
|
|
40,100 |
|
|
|
— |
|
Consumer |
|
|
— |
|
|
|
1 |
|
|
|
8 |
|
|
|
9 |
|
|
|
2,911 |
|
|
|
2,920 |
|
|
|
8 |
|
Construction |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
21,690 |
|
|
|
21,690 |
|
|
|
— |
|
Commercial Real Estate |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
233,179 |
|
|
|
233,179 |
|
|
|
— |
|
Residential Real Estate |
|
|
51 |
|
|
|
— |
|
|
|
206 |
|
|
|
257 |
|
|
|
95,368 |
|
|
|
95,625 |
|
|
|
— |
|
Total |
|
$ |
51 |
|
|
$ |
1 |
|
|
$ |
214 |
|
|
$ |
266 |
|
|
$ |
395,266 |
|
|
$ |
395,532 |
|
|
$ |
8 |
|
December 31, 2023 |
|
30-59 Days |
|
|
60-90 Days |
|
|
Greater Than |
|
|
Total |
|
|
Current |
|
|
Total Loans |
|
|
Loans Receivable |
|
|||||||
Commercial term |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
38,682 |
|
|
$ |
38,682 |
|
|
$ |
— |
|
Commercial mortgage |
|
|
— |
|
|
|
833 |
|
|
|
— |
|
|
|
833 |
|
|
|
223,667 |
|
|
|
224,500 |
|
|
|
— |
|
Commercial line |
|
|
— |
|
|
|
— |
|
|
|
694 |
|
|
|
694 |
|
|
|
19,971 |
|
|
|
20,665 |
|
|
|
— |
|
Construction |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
61,250 |
|
|
|
61,250 |
|
|
|
— |
|
Home equity |
|
|
25 |
|
|
|
— |
|
|
|
57 |
|
|
|
82 |
|
|
|
2,658 |
|
|
|
2,740 |
|
|
|
— |
|
Consumer |
|
|
212 |
|
|
|
42 |
|
|
|
637 |
|
|
|
891 |
|
|
|
20,046 |
|
|
|
20,937 |
|
|
|
— |
|
Total |
|
$ |
237 |
|
|
$ |
875 |
|
|
$ |
1,388 |
|
|
$ |
2,500 |
|
|
$ |
366,274 |
|
|
$ |
368,774 |
|
|
$ |
— |
|
Loans pledged at December 31, 2024 and 2023 had a carrying amount of $305 million and $257 million and were pledged to secure FHLB advances.
F-30
The Victory Bancorp, Inc.
Notes to Consolidated Financial Statements
The following tables is a summary of the Bank’s nonaccrual loans by major categories for the years ended December 31, 2024 and 2023 (in thousands):
|
|
CECL December 31, 2024 |
|
|||||||||
|
|
Non-accrual Loans with No Allowance |
|
|
Non-accrual Loans with an Allowance |
|
|
Total Non-accrual Loans |
|
|||
Agricultural |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
Commercia |
|
|
— |
|
|
|
— |
|
|
|
— |
|
Consumer |
|
|
— |
|
|
|
— |
|
|
|
— |
|
Construction |
|
|
— |
|
|
|
— |
|
|
|
— |
|
Commercial Real Estate |
|
|
— |
|
|
|
— |
|
|
|
— |
|
Residential Real Estate |
|
|
— |
|
|
|
206 |
|
|
|
206 |
|
Total |
|
$ |
— |
|
|
|
206 |
|
|
|
206 |
|
|
|
CECL December 31, 2023 |
|
|||||||||
|
|
Non-accrual Loans with No Allowance |
|
|
Non-accrual Loans with an Allowance |
|
|
Total Non-accrual Loans |
|
|||
Commercial Term |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
Commercial Mortgage |
|
|
— |
|
|
|
786 |
|
|
|
786 |
|
Commercial Line |
|
|
— |
|
|
|
694 |
|
|
|
694 |
|
Construction |
|
|
— |
|
|
|
— |
|
|
|
— |
|
Home Equity |
|
|
57 |
|
|
|
— |
|
|
|
57 |
|
Consumer |
|
|
613 |
|
|
|
23 |
|
|
|
636 |
|
Total |
|
$ |
670 |
|
|
$ |
1,503 |
|
|
$ |
2,173 |
|
Interest income recognized on loans on non-accrual status during the year ended December 31,2024 and 2023 was $11,000 and 113,000. Additional interest income that would have been recognized on non-accrual loans, had the loans been performing in accordance with the original terms of their contracts totaled $5,000 and $37,000 for the years ended December 31, 2024 and 2023, respectively.
As of December 31, 2024 and 2023, there are no foreclosed assets. As of December 31, 2024 and 2023, the Bank has not initiated formal foreclosure proceedings on any consumer residential mortgages.
The Bank closely monitors the performance of all loans that are modified to borrowers experiencing financial difficulty to better understand the effectiveness of its modification efforts. These modifications may or may not extend the term of the loan, provide for an adjustment to the interest rate, lower the payment amount, or otherwise delay payments during a defined period for the purpose of providing borrowers additional time to return to compliance with the original loan terms.
There were no loans experiencing financial difficulty that were modified during the years ended December 31, 2024 and 2023. Prior to the adoption of ASU 2022-02, the restructuring of a loan was considered a troubled debt restructuring if both (1) the borrower was experiencing financial difficulties and (2) the creditor had granted a concession. The adoption of ASU 2022-02 on January 1, 2023 replaced the accounting for troubled debt restructurings with modified loans with financial difficulties.
F-31
The Victory Bancorp, Inc.
Notes to Consolidated Financial Statements
The following tables summarize the activity in the allowance for credit losses for unfunded loan commitments for the year ended December 31, 2024 and 2023 (in thousands):
|
|
Total Allowance for |
|
|
Beginning balance at December 31, 2023 |
|
$ |
78 |
|
Charge-offs |
|
|
— |
|
Recoveries |
|
|
— |
|
Provision for credit losses |
|
|
(11 |
) |
Ending balance at December 31, 2024 |
|
$ |
67 |
|
|
|
Total Allowance for |
|
|
Beginning balance at December 31, 2022 |
|
$ |
— |
|
Adjustment due to the adoption of CECL |
|
|
— |
|
Charge-offs |
|
|
— |
|
Recoveries |
|
|
— |
|
Provision for credit losses |
|
|
78 |
|
Ending balance at December 31, 2023 |
|
$ |
78 |
|
Loan Sales
The Bank originates and sells loans secured by the SBA. The Bank retains the unguaranteed portion of the loan and the servicing on the loans sold and receives a fee based upon the principal balance outstanding. During the years ended December 31, 2024 and 2023, the Bank sold SBA loans held for sale for total proceeds of $2,237,000 and $1,199,000, respectively. The SBA loan sales resulted in realized gains of $160,000 and $108,000 for the years ended December 31, 2024 and 2023, respectively. There were no SBA loans held for sale at December 31, 2024 and 2023.
Loans serviced for others are not included in the accompanying Consolidated Balance Sheets. The risks inherent in the servicing assets included in the other assets on the balance sheet relate primarily to changes in prepayments that result from shifts in interest rates. The unpaid principal balances of loans serviced for others were $4,844,000 and $3,835,000 at December 31, 2024 and 2023, respectively.
F-32
5. Bank Premises and Equipment
The components of premises and equipment at December 31, 2024 and 2023 are as follows (in thousands):
|
|
Estimated |
|
2024 |
|
|
2023 |
|
||
Land |
|
|
|
$ |
1,200 |
|
|
$ |
1,200 |
|
Leasehold improvements |
|
10 - 20 years |
|
|
1,384 |
|
|
|
1,089 |
|
Building |
|
40 years |
|
|
1,687 |
|
|
|
1,687 |
|
Computer equipment and software |
|
3 - 5 years |
|
|
1,523 |
|
|
|
1,435 |
|
Automobiles |
|
3 years |
|
|
268 |
|
|
|
268 |
|
Bank unique equipment |
|
5 years |
|
|
352 |
|
|
|
279 |
|
Furniture, fixtures and equipment |
|
3 - 10 years |
|
|
463 |
|
|
|
427 |
|
|
|
|
|
|
6,877 |
|
|
|
6,385 |
|
Accumulated depreciation |
|
|
|
|
(3,629 |
) |
|
|
(3,368 |
) |
|
|
|
|
$ |
3,248 |
|
|
$ |
3,017 |
|
Depreciation and amortization expense charged to operations amounted to $261,000 and $301,000 for the years ended December 31, 2024 and 2023, respectively and is included within occupancy and equipment on the Statements of Income.
6. Deposits
The components of deposits at December 31, 2024 and 2023 are as follows (in thousands):
|
|
2024 |
|
|
2023 |
|
||
Demand, non-interest bearing |
|
$ |
56,358 |
|
|
$ |
55,022 |
|
Demand interest bearing |
|
|
63,687 |
|
|
|
63,387 |
|
Money market accounts |
|
|
109,994 |
|
|
|
118,384 |
|
Savings accounts |
|
|
52,034 |
|
|
|
58,728 |
|
Time, $250 and over |
|
|
30,411 |
|
|
|
19,337 |
|
Time, other |
|
|
84,596 |
|
|
|
49,174 |
|
|
|
$ |
397,080 |
|
|
$ |
364,032 |
|
At December 31, 2024, the scheduled maturities of time deposits are as follows (in thousands):
Years ending December 31, |
|
|
|
|
2025 |
|
$ |
100,645 |
|
2026 |
|
|
8,252 |
|
2027 |
|
|
6,061 |
|
2028 |
|
|
31 |
|
2029 |
|
|
18 |
|
Thereafter |
|
|
— |
|
|
|
$ |
115,007 |
|
The Bank had brokered deposits of $20,477,000 and $15,065,000 included in time deposits at December 31, 2024 and 2023, respectively.
At December 31, 2024 and 2023, the Bank reclassified overdrafts from deposits of approximately $17,000 and $14,000, respectively.
7. Borrowings
F-33
The Holding Company has a $2,500,000 unsecured line of credit with a correspondent bank with an interest rate of Prime plus 0.25%. There was no outstanding balance as of December 31, 2024 and 2023, respectively.
The Bank has a $5,000,000 unsecured federal funds overnight line of credit with a correspondent bank with an interest rate of 5.5% at December 31, 2024. There was no outstanding balance as of December 31, 2024 and 2023, respectively.
The Bank maintains access to the Federal Reserve Bank’s discount window borrowing facility. Advances under this facility are secured by collateral pledged by the Bank and accepted by the Federal Reserve Bank. The Bank has pledged securities with a fair value of $36,422,495 at December 31, 2024 at the Federal Reserve Bank to secure potential borrowings through the discount window. The Bank had no outstanding borrowings under the discount window facility at December 31, 2024. At December 31, 2023, the Bank had no collateral pledged and no outstanding borrowings under the discount window facility.
The Bank has an agreement with the Federal Home Loan Bank of Pittsburgh (“FHLB”) which allows for borrowings up to a percentage of qualifying assets. All FHLB advances are collateralized by a security agreement covering qualifying loans. As of December 31, 2024, qualifying loans totaled $305,400,000. In addition, all FHLB advances are secured by the FHLB capital stock owned by the Bank having a par value of $1,544,000 and $2,531,000 at December 31, 2024 and 2023, respectively. The Bank can borrow a maximum of $212,473,845 from the FHLB. There were short-term borrowings outstanding of $11,690,000 and $32,450,000 at December 31, 2024 and 2023, respectively.
Long-term borrowings at December 31, 2024 and 2023 consisted of FHLB borrowings with the following maturity dates and interest rates (in thousands):
|
|
2024 |
|
|
2023 |
|
||
Fixed note at 1.13%, maturing on March 4, 2025 |
|
$ |
3,750 |
|
|
$ |
3,750 |
|
Subordinated Debt
On March 14, 2019, the Corporation closed a pooled private offering of $3 million of subordinated debt, net of offering costs of $25,000. Offering costs are amortized using the effective interest method and included within interest expense on the Consolidated Statements of Income. Unamortized offering costs were $10,242 and $12,700 at December 31, 2024 and 2023, respectively. The Bank may redeem the subordinated debentures, in whole or in part, in a principal amount with integral multiples of $100,000, on or after March 14, 2024, at 100% of the principal amount, plus accrued and unpaid interest. The subordinated debentures mature on March 14, 2029. The subordinated debentures are also redeemable in whole or in part from time to time, upon the occurrence of specific events defined within the Subordinated Loan Agreement.
The subordinated debt may be included in Tier 2 capital (with certain limitations applicable) under current regulatory guidelines and interpretations. The subordinated debentures had a fixed rate of interest of 6.5% through March 14, 2024, at which time the interest rate will float quarterly at the 3-month Secured Overnight Financing rate (“SOFR”) plus 390 basis points until the debt is paid off or matures. The debt is subordinated to the claims of general creditors, is unsecured, and is ineligible as collateral for a loan by the Bank.
On June 23, 2020, the Corporation closed a pooled private offering of $10 million of subordinated debt, net of offering costs of $241,000. Unamortized offering costs were $132,616 and $156,728 at December 31, 2024 and 2023, respectively. Offering costs are amortized using the effective interest method and included within interest expense on the Consolidated Statements of Income. The Bank may redeem the subordinated debentures, in whole or in part, in a principal amount with integral multiples of $100,000, on or after June 30, 2025, at 100% of the principal amount, plus accrued and unpaid interest. The subordinated debentures mature on June 30, 2030. The subordinated debentures are also redeemable in whole or in part from time to time, upon the occurrence of specific events defined within the Subordinated Loan Agreement.
The subordinated debt may be included in Tier 2 capital (with certain limitations applicable) under current regulatory guidelines and interpretations. The subordinated debentures had a fixed rate of interest of 6.25% through June 30, 2025, at which time the interest rate will bear interest at a rate equal to the 3-month Secured Overnight Financing rate (“SOFR”) plus 613 basis points until the debt is paid off or matures. The debt is subordinated to the claims of general creditors, is unsecured, and is ineligible as collateral for a loan by the Bank.
F-34
On December 5, 2024, the Corporation closed a pooled private offering of $4.65 million of subordinated debt and offering costs of $202,000. Unamortized offering costs were $199,000 at December 31, 2024. Offering costs are amortized using the effective interest method and included within interest expense on the Consolidated Statements of Income. The Bank may redeem the subordinated debentures, in whole or in part, on or after December 31, 2027, at 100% of the principal amount, plus accrued and unpaid interest. The subordinated debentures mature on December 31, 2029. The subordinated debentures are also redeemable in whole or in part from time to time, upon the occurrence of specific events defined within the Subordinated Loan Agreement.
The subordinated debt may be included in Tier 2 capital (with certain limitations applicable) under current regulatory guidelines and interpretations. The subordinated debentures had a fixed rate of interest of 8.5% through December 31, 2026, at which time the interest rate will bear interest at a rate equal to the 3-month Term Secured Overnight Financing rate (“SOFR”) plus 442 basis points until the debt is paid off or matures. The debt is subordinated to the claims of general creditors, is unsecured, and is ineligible as collateral for a loan by the Bank.
Subordinated debt of $3 million is scheduled to mature in 2029, $4.65 million is scheduled to mature in 2029, and $10 million is scheduled to mature in 2030.
8. Federal Income Taxes
The components of income tax expense for the years ended December 31, 2024 and 2023 are as follows (in thousands):
|
|
2024 |
|
|
2023 |
|
||
Current |
|
$ |
520 |
|
|
$ |
518 |
|
Deferred |
|
|
(58 |
) |
|
|
69 |
|
|
|
$ |
462 |
|
|
$ |
587 |
|
A reconciliation of the statutory federal income tax at a rate of 21% to federal income tax expense included in the statements of income for the years ended December 31, 2024 and 2023 are as follows (in thousands):
|
|
2024 |
|
|
2023 |
|
||
Federal income tax at statutory rate |
|
$ |
446 |
|
|
$ |
573 |
|
Bank owned life insurance income |
|
|
(38 |
) |
|
|
(38 |
) |
Non-deductible dues |
|
|
13 |
|
|
|
2 |
|
Non-deductible meals and entertainment |
|
|
29 |
|
|
|
29 |
|
Other |
|
|
12 |
|
|
|
21 |
|
|
|
$ |
462 |
|
|
$ |
587 |
|
F-35
The components of the net deferred tax asset at December 31, 2024 and 2023 are as follows (in thousands):
|
|
2024 |
|
|
2023 |
|
||
Deferred tax assets: |
|
|
|
|
|
|
||
Allowance for credit losses |
|
$ |
714 |
|
|
|
670 |
|
Nonqualified stock options |
|
|
— |
|
|
|
43 |
|
Net operating losses |
|
|
258 |
|
|
|
434 |
|
Other |
|
|
14 |
|
|
|
3 |
|
Unrealized loss on available-for-sale securities |
|
|
483 |
|
|
|
520 |
|
Total deferred tax assets |
|
|
1,469 |
|
|
|
1,670 |
|
Valuation Allowance |
|
|
(258 |
) |
|
|
(434 |
) |
Net deferred tax assets |
|
|
1,211 |
|
|
|
1,236 |
|
|
|
|
|
|
|
|
||
Deferred tax liabilities: |
|
|
|
|
|
|
||
Depreciation |
|
|
(74 |
) |
|
|
(119 |
) |
Deferred loan costs |
|
|
(100 |
) |
|
|
(105 |
) |
Servicing asset |
|
|
(11 |
) |
|
|
(11 |
) |
Other |
|
|
(3 |
) |
|
|
— |
|
Total deferred tax liabilities |
|
|
(188 |
) |
|
|
(235 |
) |
Net Deferred Tax Asset, Included in Other Assets |
|
$ |
1,023 |
|
|
$ |
1,001 |
|
The realization of deferred tax assets is largely dependent upon future taxable income, future reversals of existing taxable temporary differences and the ability to carryback losses to available tax years. In assessing the need for a valuation allowance, we consider positive and negative evidence, including taxable income in carry-back years, scheduled reversals of deferred tax liabilities, expected future taxable income and tax planning strategies. It was determined that a full valuation allowance was needed for state net operating loss carryforwards at December 31, 2024 and 2023.
9. Transactions with Executive Officers, Directors and Principal Stockholders
The Bank has had, and may be expected to have in the future, banking transactions in the ordinary course of business with its executive officers, directors, principal stockholders, their immediate families and affiliated companies (commonly referred to as related parties). There were loans receivable from related parties totaling $3,347,000 and $3,546,000 at December 31, 2024 and 2023, respectively. Balance of net advances in 2024 for related parties totaled $251,000 and $422,000 and payments received were $450,000 and $432,000 for the years ended December 31, 2024 and 2023, respectively. Deposits of related parties totaled $4,348,391 and $3,568,000 as of December 31, 2024 and 2023, respectively.
10. Share-Based Compensation
In 2013, the Board of Directors adopted the 2013 Equity Incentive Plan (“2013 Plan”). Under the 2013 Plan 228,000 shares were available to be issued in the form of performance awards that can be settled in stock or cash, restricted stock and restricted stock units, incentive stock options, non-qualified stock options, and stock appreciation rights. The awards under the plan vest over a period up to 7 years.
In 2021 the Victory Bancorp Board of Directors adopted, and the shareholders approved the 2021 Omnibus Incentive Plan (“2021 Plan”). The purpose of the plan was to help the Company attract, retain and motivate directors, officers and employees. The 2021 Plan replaced the Company’s 2013 Equity Incentive Plan. The 2021 Plan provides that the aggregate number of shares of the company’s common stock available for delivery pursuant to award granted under the 2021 Plan was 200,000, plus 39,000 shares available for grant under the 2013 Plan.
In 2024, the Victory Bancorp Board of Directors adopted, and the shareholders approved an amendment to the 2021 Omnibus Incentive Plan (“2021 Plan”) that would increase the shares reserved for issuance by 80,000 shares. All other terms and conditions of the 2021 Plan remained unchanged.
F-36
The following table summarizes stock option activity for the year ended December 31, 2024:
|
|
Shares |
|
|
Weighted |
|
|
Weighted |
|
|||
Outstanding, January 1, 2024 |
|
|
160,000 |
|
|
$ |
7.25 |
|
|
|
5 |
|
Granted |
|
|
— |
|
|
|
— |
|
|
|
— |
|
Exercised |
|
|
(6,000 |
) |
|
|
7.25 |
|
|
|
— |
|
Forfeited |
|
|
(1,000 |
) |
|
|
7.25 |
|
|
|
— |
|
Outstanding, December 31, 2024 |
|
|
153,000 |
|
|
|
7.30 |
|
|
|
4 |
|
Exercisable, December 31, 2024 |
|
|
108,716 |
|
|
$ |
7.31 |
|
|
|
4 |
|
At December 31, 2024 and 2023, the intrinsic value of the 153,000 and 160,000 options outstanding was $522,000 and $649,000, respectively.
Information regarding share-based compensation for the year ended December 31, 2024, is set forth below:
|
|
2024 |
|
|
Stock based compensation expense recognized |
|
$ |
56,000 |
|
Number of unvested stock options |
|
|
62,000 |
|
Amount remaining to be recognized as expense |
|
$ |
62,000 |
|
The stock-based compensation recognized in earnings in 2024 and 2023 was $56,000 and $56,000, respectively. The remaining amount of $62,000 will be recognized ratably as expense through 2027.
Victory Bank entered into a Supplemental Executive Retirement Plan (SERP) with the CEO that provides annual retirement benefits starting December 31, 2018 and continuing until the earlier of a Separation of Service or January 1, 2028. The SERP requires the Bank to provide an Annual Contribution and Interest Credit on each December 31. The Bank accrued $450,000 and $373,000 SERP liability as of December 31, 2024 and December 31, 2023, respectively which is included in Accrued interest payable and other liabilities. The related expense is recorded in Salaries and employee benefits.
11. Commitments and Contingencies
The Bank is a party to financial instruments with off-balance sheet risk in the normal course of business to meet the financing needs of its customers. These financial instruments include commitments to extend credit and letters of credit. Such commitments involve, to varying degrees, elements of credit and interest rate risk in excess of the amount recognized in the Consolidated Balance Sheets.
The Bank’s exposure to credit loss in the event of nonperformance by the other party to the financial instrument for commitments to extend credit is represented by the contractual amount of those instruments. The Bank uses the same credit policies in making commitments and conditional obligations as it does for on-balance sheet instruments.
The following off-balance sheet financial instruments whose contract amounts represent credit risk at December 31, 2024 and 2023 (in thousands):
|
|
2024 |
|
|
2023 |
|
||
Unfunded commitments under lines of credit |
|
$ |
75,874 |
|
|
$ |
82,482 |
|
Unfunded commitments under letters of credit |
|
|
2,903 |
|
|
|
2,281 |
|
Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Since many of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. Commitments generally have fixed expiration dates or other
F-37
termination clauses and may require payment of a fee. The Bank evaluates each customer’s credit worthiness on a case-by-case basis. The amount of collateral obtained, if deemed necessary by the Bank upon extension of credit, is based on management’s credit evaluation. Collateral held varies but may include personal or commercial real estate, accounts receivable, inventory and equipment.
Outstanding letters of credit written are conditional commitments issued by the Bank 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 loan facilities to customers. The Bank requires collateral supporting these letters of credit as deemed necessary. Management believes that the proceeds through a liquidation of such collateral would be sufficient to cover the maximum potential amount of future payments required under the corresponding guarantees. The amount of the liability as of December 31, 2024 and 2023 for guarantees under standby letters of credit is not material.
The Corporation, in the normal course of business, may be subject to various pending and threatened lawsuits in which claims for monetary damages are asserted. The Corporation is not involved in any legal proceedings which, in management’s opinion, could have a material effect on the consolidated financial position of the Corporation.
The Bank maintains an allowance for credit loss for unfunded loan commitments which is included in the balance of other liabilities in the Consolidated Balance Sheets. The allowance for credit loss for unfunded loan commitments is determined as part of the monthly allowance for credit loss analysis. See Note 1 and Note 4 for further detail.
12. Regulatory Matters
The Bank is subject to various regulatory capital requirements administered by the federal banking agencies. Failure to meet the minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by regulators that, if undertaken, could have a direct material effect on the Corporation’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 classification are also subject to qualitative judgments by the regulators about components, risk-weightings and other factors.
The U.S. Basel III Capital Rules requires the Bank to:
The U.S. Basel III Capital Rules use a standardized approach for risk weightings that expands the risk-weightings for assets and off-balance sheet exposures from the previous 0%, 20%, 50% and 100% categories to a much larger and more risk-sensitive number of categories, depending on the nature of the assets and off-balance sheet exposures and resulting in higher risk weights for a variety of asset categories.
As of December 31, 2024 and 2023, the Bank met the applicable minimum requirements of the U.S. Basel III Capital Rules, and each of the Bank’s capital ratios exceeded the amounts required to be considered “well capitalized” as defined in the regulations. As of December 31, 2024 and 2023, the Bank’s capital levels met the fully-phased in minimum capital requirements, including the capital conservation buffers.
F-38
A comparison of the Bank’s actual capital amounts to the regulatory requirements as of December 31, 2024 and 2023 are presented below (in thousands):
December 31, 2024 |
|
Actual |
|
|
For Capital Adequacy |
|
Minimum Capital |
|
To Be Well Capitalized |
|||||||||||
|
|
Amount |
|
|
Ratio |
|
|
Amount |
|
Ratio |
|
Amount |
|
Ratio |
|
Amount |
|
Ratio |
||
Total capital (to risk weighted assets) |
|
|
49,798 |
|
|
|
12.16 |
% |
|
≥32,773 |
|
≥8.00% |
|
≥43,015 |
|
≥10.50% |
|
≥40,967 |
|
≥10.00% |
Tier 1 capital (to risk weighted assets) |
|
|
46,187 |
|
|
|
11.27 |
% |
|
≥24,580 |
|
≥6.00% |
|
≥34,822 |
|
≥8.50% |
|
≥32,773 |
|
≥8.00% |
Common equity Tier 1 capital (to risk |
|
|
46,187 |
|
|
|
11.27 |
% |
|
≥18,435 |
|
≥4.50% |
|
≥28,677 |
|
≥7.00% |
|
≥26,628 |
|
≥6.50% |
Tier 1 capital (to average assets) |
|
|
46,187 |
|
|
|
9.92 |
% |
|
≥18,632 |
|
≥4.00% |
|
≥18,632 |
|
≥4.00% |
|
≥23,291 |
|
≥5.00% |
December 31, 2023 |
|
Actual |
|
|
For Capital Adequacy |
|
Minimum Capital |
|
To Be Well Capitalized |
|||||||||||
|
|
Amount |
|
|
Ratio |
|
|
Amount |
|
Ratio |
|
Amount |
|
Ratio |
|
Amount |
|
Ratio |
||
Total capital (to risk weighted assets) |
|
|
44,966 |
|
|
|
11.51 |
% |
|
≥31,253 |
|
≥8.00% |
|
≥41,020 |
|
≥10.50% |
|
≥39,067 |
|
≥10.00% |
Tier 1 capital (to risk weighted assets) |
|
|
41,444 |
|
|
|
10.61 |
% |
|
≥23,440 |
|
≥6.00% |
|
≥33,207 |
|
≥8.50% |
|
≥31,253 |
|
≥8.00% |
Common equity Tier 1 capital (to risk |
|
|
41,444 |
|
|
|
10.61 |
% |
|
≥17,580 |
|
≥4.50% |
|
≥27,347 |
|
≥7.00% |
|
≥25,393 |
|
≥6.50% |
Tier 1 capital (to average assets) |
|
|
41,444 |
|
|
|
9.61 |
% |
|
≥17,250 |
|
≥4.00% |
|
≥17,250 |
|
≥4.00% |
|
≥21,562 |
|
≥5.00% |
The Bank is subject to certain restrictions on the amount of dividends that it may declare due to regulatory considerations. The Pennsylvania Banking Code provides that cash dividends may be declared and paid only out of accumulated net earnings.
13. Fair Value Measurements
Management uses its best judgment in estimating the fair value of the Bank’s financial instruments; however, there are inherent weaknesses in any estimation technique. Therefore, for substantially all financial instruments, the fair value estimates herein are not necessarily indicative of the amounts the Bank could have realized in a sales transaction on the dates indicated. The estimated fair value amounts have been measured as of their respective year-ends and have not been re-evaluated or updated for purposes of these financial statements subsequent to those respective dates. As such, the estimated fair values of these financial instruments subsequent to the respective reporting dates may be different than the amounts reported at each year end.
Determination of Fair Value
The Bank uses fair value measurements to record fair value adjustments to certain assets and liabilities and to determine fair value disclosures. Accounting guidance defines the fair value of a financial instrument as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Fair value is best determined based upon quoted market prices. However, in many instances, there are no quoted market prices for the Bank’s various financial instruments. In cases where quoted market prices are not available, fair values are based on estimates using present value or other valuation techniques. Those techniques are significantly affected by the assumptions used, including the discount rate and estimates of future cash flows. Accordingly, the fair value estimates may not be realized in an immediate settlement of the instruments.
The definition of fair value focuses on exit price in an orderly transaction (that is, not a forced liquidation or distressed sale) between market participants at the measurement date under current market conditions. If there has been a significant decrease in the volume and level of activity for the asset or liability, a change in valuation technique or the use of multiple valuation techniques may be appropriate. In such instances, determining the price at which willing market participants would transact at the measurement date under current market conditions depends on the facts and circumstances and requires the use of significant judgment. The fair value is a reasonable point within the range that is most representative of fair value under current market conditions. A three-level hierarchy exists for fair value measurements based upon the inputs to the valuation of an asset or liability. The classification within the hierarchy is determined based on the lowest level input that is significant to the fair value measurement.
F-39
Fair Value Hierarchy
The Bank groups its financial assets and financial liabilities generally measured at fair value in three levels, based on the markets in which the assets and liabilities are traded and the reliability of the assumptions used to determine fair value.
Level 1 - Valuation is based on unadjusted quoted prices in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date.
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.
For financial assets measured at fair value on a recurring basis, the fair value measurements by level within the fair value hierarchy used are as follows (in thousands):
December 31, 2024 |
|
Total |
|
|
(Level 1) |
|
|
(Level 2) |
|
|
(Level 3) |
|
||||
Available-for-sale: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Corporate Bonds |
|
$ |
7,835 |
|
|
$ |
— |
|
|
$ |
7,835 |
|
|
$ |
— |
|
Residential mortgage-backed securities - GSE |
|
|
12,268 |
|
|
|
— |
|
|
|
12,268 |
|
|
|
— |
|
U.S. government agency |
|
|
8,668 |
|
|
|
— |
|
|
|
8,668 |
|
|
|
— |
|
State and Political Subdivisions |
|
|
4,134 |
|
|
|
— |
|
|
|
4,134 |
|
|
|
— |
|
Total |
|
$ |
32,905 |
|
|
$ |
— |
|
|
$ |
32,905 |
|
|
$ |
— |
|
December 31, 2023 |
|
Total |
|
|
(Level 1) |
|
|
(Level 2) |
|
|
(Level 3) |
|
||||
Available-for-sale: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Corporate Bonds |
|
$ |
7,479 |
|
|
$ |
— |
|
|
$ |
7,479 |
|
|
$ |
— |
|
Residential mortgage-backed securities - GSE |
|
|
14,179 |
|
|
|
— |
|
|
|
14,179 |
|
|
|
— |
|
U.S. government agency |
|
|
9,804 |
|
|
|
— |
|
|
|
9,804 |
|
|
|
— |
|
State and Political Subdivisions |
|
|
4,428 |
|
|
|
— |
|
|
|
4,428 |
|
|
|
— |
|
Total |
|
$ |
35,890 |
|
|
$ |
— |
|
|
$ |
35,890 |
|
|
$ |
— |
|
The Bank’s available-for-sale investment securities, which includes debt securities and mortgage-backed securities, are reported at fair value. These securities are valued by an independent third party. The valuations are based on market data. They utilize evaluated pricing models that vary by asset and incorporate available trade, bid and other market information. For securities that do not trade on a daily basis, their evaluated pricing applications apply available information such as benchmarking and matrix pricing. The market inputs normally sought in the evaluation of securities include benchmark yields, reported trades, broker/dealer quotes (only obtained from market makers or broker/dealers recognized as market participants), issuer spreads, two-sided markets, benchmark securities, bid, offers and reference data. For certain securities additional inputs may be used or some market inputs may not be applicable. Inputs are prioritized differently on any given day based on market conditions.
There were no transfers between Levels 1, 2, and 3 during the years ended December 31, 2024 and 2023.
There were no financial assets measured at fair value on a nonrecurring basis at December 31, 2024.
For financial assets measured at fair value on a nonrecurring basis at December 31, 2023, the fair value measurements by level within the fair value hierarchy used are as follows (in thousands):
F-40
December 31, 2023 |
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
|
Total |
|
||||
Individually evaluated loans |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
544 |
|
|
$ |
544 |
|
The following table presents additional quantitative information about assets measured at fair value on a nonrecurring basis and for which the Bank has utilized Level 3 inputs to determine fair value at December 31, 2023 (dollars in thousands):
December 31, 2023 |
|
Fair Value |
|
|
Valuation |
|
Unobservable |
|
Range |
|
||
Individually evaluated loans – valued at collateral value |
|
$ |
544 |
|
|
Appraisal of collateral |
|
Liquidation expenses and valuation of property |
|
|
10 |
% |
The following information should not be interpreted as an estimate of the fair value of the entire Bank since a fair value calculation is only provided for a limited portion of the Bank’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 Bank’s disclosures and those of other companies may not be meaningful.
The fair values, and related carrying amounts, of the Bank’s financial instruments were as follows at December 31, 2024 and 2023 (in thousands):
|
|
|
|
2024 |
|
|
2023 |
|
||||||||||
|
|
Level in Fair |
|
Carrying |
|
|
Fair Value |
|
|
Carrying |
|
|
Fair Value |
|
||||
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Cash and cash equivalents |
|
Level 1 |
|
$ |
10,678 |
|
|
$ |
10,678 |
|
|
$ |
14,538 |
|
|
$ |
14,538 |
|
Securities available-for-sale |
|
Level 2 |
|
|
32,905 |
|
|
|
32,905 |
|
|
|
35,890 |
|
|
|
35,890 |
|
Securities held-to-maturity |
|
Level 2 |
|
|
11,737 |
|
|
|
11,557 |
|
|
|
12,041 |
|
|
|
11,686 |
|
Restricted investments in bank stocks |
|
N/A |
|
|
2,192 |
|
|
N/A |
|
|
|
3,203 |
|
|
N/A |
|
||
Loans receivable, net |
|
Level 3 |
|
|
390,954 |
|
|
|
390,239 |
|
|
|
364,383 |
|
|
|
361,731 |
|
Accrued interest receivable |
|
Level 2 & 3 |
|
|
1,581 |
|
|
|
1,581 |
|
|
|
1,613 |
|
|
|
1,613 |
|
Investment broker receivable |
|
Level 2 |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Deposits |
|
Level 2 |
|
|
397,080 |
|
|
|
373,711 |
|
|
|
364,032 |
|
|
|
334,974 |
|
Debt |
|
Level 2 |
|
|
15,440 |
|
|
|
15,446 |
|
|
|
36,200 |
|
|
|
36,118 |
|
Subordinated debt |
|
Level 2 |
|
|
17,309 |
|
|
|
17,592 |
|
|
|
12,830 |
|
|
|
13,169 |
|
Accrued interest payable |
|
Level 2 |
|
|
354 |
|
|
|
354 |
|
|
|
230 |
|
|
|
230 |
|
14. Revenue Recognition
All of the Bank’s revenues that are in the scope of the “Revenue from Contracts with Customers’ accounting standard (ASC 606) are recognized within noninterest income. ASC 606 does not apply to revenue associated with financial instruments, including revenue from loans and securities. In addition, certain noninterest income streams such as gains or losses on sale of loans and securities are not in scope of the guidance. ASC 606 applicable noninterest revenue streams such as deposit related fees and interchange fees are recognized when the Bank’s performance obligations have been satisfied, either on an individual transaction basis or ratably over a period of time. Substantially all of the Bank’s revenue is generated from contracts with customers. Noninterest revenue streams in-scope of ASC 606 are discussed below.
Service Charges and Activity Fees on Deposits
Service charges on deposit accounts consist of monthly ATM Income, Wire Transfer Fees, Non-Sufficient Funds Charges, and other Deposit related fees. The Bank’s performance obligation for monthly service fees is generally satisfied, and the related revenue recognized, over the period in which the service is provided. Revenue is primarily transactional and recognized when earned, which is at the time the respective initiating transaction occurs and the related service charge is subsequently processed. Check orders and other deposit account related fees are largely transactional based, and therefore, the Bank’s performance obligation is satisfied,
F-41
and related revenue recognized, when the service is provided. Payment for service charges on deposit accounts is primarily received immediately or in the following month through a direct charge to customers’ accounts. The Bank’s performance obligation for wire transfers and returned deposit fees, are largely satisfied, and related revenue recognized, when the services are rendered. Payment is typically received immediately or in the following month.
Other
Other fees are primarily comprised of Remote/Mobile Deposit Fees and other service charges. Other noninterest income consists primarily of other non-recurring revenue which is not recorded in the categories listed above. This revenue is miscellaneous in nature and is recognized as income upon receipt.
The following presents noninterest income, segregated by revenue streams in-scope and out-of-scope of Topic 606, for the years ended December 31, 2024 and 2023.
|
|
2024 |
|
|
2023 |
|
||
Non-Interest Income |
|
|
|
|
|
|
||
In-scope of Topic 606 |
|
|
|
|
|
|
||
Service Charges and Activity Fees |
|
$ |
503 |
|
|
$ |
223 |
|
Other |
|
|
35 |
|
|
|
46 |
|
|
|
|
|
|
|
|
||
Non-Interest Income (in-scope of Topic 606) |
|
|
538 |
|
|
|
269 |
|
Non-Interest Income (out-of-scope of Topic 606) |
|
|
408 |
|
|
|
341 |
|
Total Non-Interest (Loss) Income |
|
$ |
946 |
|
|
$ |
610 |
|
Contract Balances
A contract asset balance occurs when an entity performs a service for a customer before the customer pays consideration (resulting in a contract receivable) or before payment is due (resulting in a contract asset). A contract liability balance is an entity’s obligation to transfer a service to a customer for which the entity has already received payment (or payment is due) from the customer. The Bank’s noninterest revenue streams are largely based on transactional activity. Consideration is often received immediately or shortly after the Bank satisfies its performance obligation and revenue is recognized. The Bank does not typically enter into long-term revenue contracts with customers, and therefore, does not experience significant contract balances. As of December 31, 2024 and December 31, 2023, the Bank did not have any contract balances.
Contract Acquisition Costs
The Bank expenses contract acquisition costs immediately because the contract life is one year or less.
15. Parent Company Only - Condensed Financial Information
Condensed financial information of The Victory Bancorp, Inc. follows:
F-42
CONDENSED BALANCE SHEETS
|
|
December 31, |
|
|
December 31, |
|
||
ASSETS |
|
|
|
|
|
|
||
Cash and cash equivalents |
|
$ |
846 |
|
|
$ |
55 |
|
Prepaid Expenses |
|
|
1,488 |
|
|
|
1,267 |
|
Investment in banking subsidiaries |
|
|
44,368 |
|
|
|
39,486 |
|
Total assets |
|
$ |
46,702 |
|
|
$ |
40,808 |
|
|
|
|
|
|
|
|
||
LIABILITIES AND EQUITY |
|
|
|
|
|
|
||
Payable to subsidiaries |
|
$ |
29 |
|
|
$ |
29 |
|
Accrued expenses and other liabilities |
|
|
27 |
|
|
|
0 |
|
Subordinated Debt |
|
|
17,309 |
|
|
|
12,831 |
|
Shareholders' equity |
|
|
29,337 |
|
|
|
27,948 |
|
Total liabilities and shareholders' equity |
|
$ |
46,702 |
|
|
$ |
40,808 |
|
CONDENSED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
|
|
For the year ended |
|
|
For the year ended |
|
||
|
|
December 31, |
|
|
December 31, |
|
||
Dividend from subsidiary |
|
$ |
251 |
|
|
$ |
1,100 |
|
Interest expense |
|
|
(935 |
) |
|
|
(826 |
) |
Legal and professional expense |
|
|
— |
|
|
|
— |
|
Other expense |
|
|
(117 |
) |
|
|
(107 |
) |
Loss before income tax effect |
|
|
(801 |
) |
|
|
167 |
|
Income tax expense (benefit) |
|
|
(221 |
) |
|
|
(184 |
) |
Equity in undistributed subsidiary income |
|
|
2,242 |
|
|
|
1,790 |
|
Net Loss |
|
$ |
1,662 |
|
|
$ |
2,141 |
|
Comprehensive income |
|
$ |
1,803 |
|
|
$ |
2,205 |
|
F-43
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
|
For the year ended |
|
|
For the year ended |
|
||
|
|
December 31, 2024 |
|
|
December 31, 2023 |
|
||
Cash flows from operating activities |
|
|
|
|
|
|
||
Net income |
|
$ |
1,662 |
|
|
$ |
2,141 |
|
Adjustments: |
|
|
|
|
|
|
||
Equity in undistributed subsidiary income |
|
|
(2,242 |
) |
|
|
(1,790 |
) |
Change in prepaid expenses |
|
|
(221 |
) |
|
|
(187 |
) |
Amortization of debt issuance costs |
|
|
30 |
|
|
|
27 |
|
Stock based compensation expense |
|
|
56 |
|
|
|
56 |
|
Change in accrued expenses and other liab |
|
|
28 |
|
|
|
— |
|
Net cash from operating activities |
|
|
(687 |
) |
|
|
247 |
|
|
|
|
|
|
|
|
||
Cash flows from investing activities |
|
|
|
|
|
|
||
Investments in subsidiaries |
|
|
(2,500 |
) |
|
|
— |
|
Other |
|
|
— |
|
|
|
— |
|
Net cash from investing activities |
|
|
(2,500 |
) |
|
|
— |
|
Cash flows from financing activities |
|
|
|
|
|
|
||
Proceeds of borrowings |
|
|
592 |
|
|
|
— |
|
Repayments of borrowings |
|
|
(592 |
) |
|
|
— |
|
Net proceeds from issuance of subordinated debt |
|
|
4,448 |
|
|
|
— |
|
Proceeds from stock issue |
|
|
43 |
|
|
|
— |
|
Dividends paid |
|
|
(513 |
) |
|
|
(512 |
) |
Net cash from financing activities |
|
|
3,978 |
|
|
|
(512 |
) |
Net change in cash and cash equivalents |
|
|
791 |
|
|
|
(265 |
) |
Beginning cash and cash equivalents |
|
|
55 |
|
|
|
320 |
|
Ending cash and cash equivalent |
|
$ |
846 |
|
|
$ |
55 |
|
F-44
The Victory Bancorp, Inc. Consolidated Financial Statements September 30, 2025 and December 31, 2024 |
F-45
The Victory Bancorp, Inc.
Consolidated Balance Sheets
(in thousands, except share and per share data)
|
|
September 30, |
|
|
December 31, |
|
||
Assets |
|
|
|
|
|
|
||
Cash and due from banks |
|
$ |
37,830 |
|
|
$ |
10,678 |
|
Federal funds sold |
|
|
3,000 |
|
|
|
— |
|
Cash and cash equivalents |
|
|
40,830 |
|
|
|
10,678 |
|
Securities available-for-sale, at fair value |
|
|
30,583 |
|
|
|
32,905 |
|
Securities held-to-maturity (fair value $10,210 at September 30, 2025 and $11,557 at |
|
|
10,267 |
|
|
|
11,737 |
|
Loans receivable, net of allowance for credit losses ($3,473 at September 30, 2025 |
|
|
392,111 |
|
|
|
390,954 |
|
Premises and equipment, net |
|
|
3,444 |
|
|
|
3,248 |
|
Restricted investment in bank stocks |
|
|
1,700 |
|
|
|
2,192 |
|
Accrued interest receivable |
|
|
1,615 |
|
|
|
1,581 |
|
Bank owned life insurance |
|
|
6,033 |
|
|
|
5,923 |
|
Other assets |
|
|
1,636 |
|
|
|
1,806 |
|
Total Assets |
|
$ |
488,219 |
|
|
$ |
461,024 |
|
|
|
|
|
|
|
|
||
Liabilities and Stockholders’ Equity |
|
|
|
|
|
|
||
Liabilities |
|
|
|
|
|
|
||
Deposits: |
|
|
|
|
|
|
||
Non-interest bearing |
|
$ |
62,996 |
|
|
$ |
56,358 |
|
Interest-bearing |
|
|
373,747 |
|
|
|
340,722 |
|
Total Deposits |
|
|
436,743 |
|
|
|
397,080 |
|
Borrowings |
|
|
— |
|
|
|
15,440 |
|
Subordinated debt |
|
|
17,359 |
|
|
|
17,309 |
|
Accrued interest payable and other liabilities |
|
|
2,467 |
|
|
|
1,858 |
|
Total Liabilities |
|
|
456,569 |
|
|
|
431,687 |
|
|
|
|
|
|
|
|
||
Stockholders’ Equity |
|
|
|
|
|
|
||
Common stock, $1 par value; authorized 10,000,000 shares; issued and outstanding |
|
|
1,997 |
|
|
|
1,977 |
|
Surplus |
|
|
14,881 |
|
|
|
14,654 |
|
Retained earnings |
|
|
15,729 |
|
|
|
14,523 |
|
Accumulated other comprehensive loss |
|
|
(957 |
) |
|
|
(1,817 |
) |
Total Stockholders’ Equity |
|
|
31,650 |
|
|
|
29,337 |
|
Total Liabilities and Stockholders’ Equity |
|
$ |
488,219 |
|
|
$ |
461,024 |
|
See accompanying notes to consolidated financial statements.
F-46
The Victory Bancorp, Inc.
Consolidated Statements of Income
(in thousands, except share and per share data)
For the Nine Months Ended September 30, |
|
2025 |
|
|
2024 |
|
||
Interest Income |
|
|
|
|
|
|
||
Interest and fees on loans |
|
$ |
19,583 |
|
|
$ |
19,824 |
|
Interest on investment securities |
|
|
1,427 |
|
|
|
1,591 |
|
Other interest income |
|
|
541 |
|
|
|
171 |
|
Total Interest Income |
|
|
21,551 |
|
|
|
21,586 |
|
Interest Expense |
|
|
|
|
|
|
||
Deposits |
|
|
9,805 |
|
|
|
9,664 |
|
Borrowings |
|
|
1,186 |
|
|
|
2,153 |
|
Total Interest Expense |
|
|
10,991 |
|
|
|
11,817 |
|
Net interest income |
|
|
10,560 |
|
|
|
9,769 |
|
|
|
|
|
|
|
|
||
Provision for Credit Losses |
|
|
(145 |
) |
|
|
230 |
|
Net Interest Income After Provision for Credit Losses |
|
|
10,705 |
|
|
|
9,539 |
|
Non-Interest Income |
|
|
|
|
|
|
||
Service charges and activity fees |
|
|
446 |
|
|
|
376 |
|
Net gains on sales of loans |
|
|
— |
|
|
|
59 |
|
Other income |
|
|
224 |
|
|
|
212 |
|
Total Non-Interest Income |
|
|
670 |
|
|
|
647 |
|
Non-Interest Expenses |
|
|
|
|
|
|
||
Salaries and employee benefits |
|
|
5,527 |
|
|
|
5,403 |
|
Occupancy and equipment |
|
|
547 |
|
|
|
557 |
|
Legal and professional fees |
|
|
725 |
|
|
|
440 |
|
Advertising and promotion |
|
|
182 |
|
|
|
51 |
|
Loan expenses |
|
|
93 |
|
|
|
15 |
|
Data processing costs |
|
|
1,066 |
|
|
|
1,086 |
|
Supplies, printing and postage |
|
|
110 |
|
|
|
74 |
|
Telephone |
|
|
33 |
|
|
|
33 |
|
Entertainment |
|
|
86 |
|
|
|
119 |
|
Mileage and tolls |
|
|
44 |
|
|
|
35 |
|
Insurance |
|
|
52 |
|
|
|
37 |
|
FDIC insurance premiums |
|
|
178 |
|
|
|
263 |
|
Dues and subscription |
|
|
71 |
|
|
|
61 |
|
Shares tax |
|
|
299 |
|
|
|
315 |
|
Other |
|
|
334 |
|
|
|
298 |
|
Total Non-Interest Expense |
|
|
9,347 |
|
|
|
8,787 |
|
Income before income taxes |
|
|
2,028 |
|
|
|
1,399 |
|
Income Taxes |
|
|
434 |
|
|
|
294 |
|
Net Income Available to Common Stockholders |
|
$ |
1,594 |
|
|
$ |
1,105 |
|
Basic earnings per common share |
|
$ |
0.80 |
|
|
|
0.56 |
|
Diluted earnings per common share |
|
$ |
0.77 |
|
|
$ |
0.55 |
|
|
|
|
|
|
|
|
||
Weighted Average Common Shares Outstanding: |
|
|
|
|
|
|
||
Basic |
|
|
1,990,427 |
|
|
|
1,971,450 |
|
Diluted |
|
|
2,082,596 |
|
|
|
2,014,691 |
|
See accompanying notes to consolidated financial statements.
F-47
The Victory Bancorp, Inc.
Consolidated Statements of Comprehensive Income
(in thousands, except share and per share data)
For the Nine Months Ended September 30, |
|
2025 |
|
|
2024 |
|
||
Net Income |
|
$ |
1,594 |
|
|
$ |
1,105 |
|
Other Comprehensive Income |
|
|
|
|
|
|
||
Unrealized holding gain arising on securities available-for-sale |
|
|
1,089 |
|
|
|
862 |
|
Tax Impact |
|
|
(229 |
) |
|
|
(180 |
) |
Other comprehensive income |
|
|
860 |
|
|
|
682 |
|
Total Comprehensive Income |
|
$ |
2,454 |
|
|
$ |
1,787 |
|
See accompanying notes to consolidated financial statements.
F-48
The Victory Bancorp, Inc.
Consolidated Statements of Stockholders’ Equity
(in thousands, except share and per share data)
|
|
Common |
|
|
Surplus |
|
|
Retained |
|
|
Accumulated |
|
|
Total |
|
|||||
Balance, December 31, 2023 |
|
$ |
1,971 |
|
|
$ |
14,561 |
|
|
$ |
13,374 |
|
|
$ |
(1,958 |
) |
|
$ |
27,948 |
|
Net income |
|
|
— |
|
|
|
— |
|
|
|
1,105 |
|
|
|
— |
|
|
|
1,105 |
|
Other comprehensive income |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
682 |
|
|
|
682 |
|
Share based compensation expense |
|
|
— |
|
|
|
43 |
|
|
|
— |
|
|
|
— |
|
|
|
43 |
|
Exercise of stock options (6,000 shares) |
|
|
6 |
|
|
|
37 |
|
|
|
— |
|
|
|
— |
|
|
|
43 |
|
Cash dividends paid on common stock of $0.195 |
|
|
— |
|
|
|
— |
|
|
|
(384 |
) |
|
|
— |
|
|
|
(384 |
) |
Balance, September 30, 2024 |
|
$ |
1,977 |
|
|
$ |
14,641 |
|
|
$ |
14,095 |
|
|
$ |
(1,276 |
) |
|
$ |
29,437 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Balance, December 31, 2024 |
|
$ |
1,977 |
|
|
$ |
14,654 |
|
|
$ |
14,523 |
|
|
$ |
(1,817 |
) |
|
$ |
29,337 |
|
Net income |
|
|
— |
|
|
|
— |
|
|
|
1,594 |
|
|
|
— |
|
|
|
1,594 |
|
Other comprehensive income |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
860 |
|
|
|
860 |
|
Share based compensation expense |
|
|
— |
|
|
|
42 |
|
|
|
— |
|
|
|
— |
|
|
|
42 |
|
Stock Issuance under Stock Incentive Plan |
|
|
20 |
|
|
|
185 |
|
|
|
— |
|
|
|
— |
|
|
|
205 |
|
Cash dividends paid on common stock of $0.26 |
|
|
— |
|
|
|
— |
|
|
|
(388 |
) |
|
|
— |
|
|
|
(388 |
) |
Balance, September 30, 2025 |
|
$ |
1,997 |
|
|
$ |
14,881 |
|
|
$ |
15,729 |
|
|
$ |
(957 |
) |
|
$ |
31,650 |
|
See accompanying notes to consolidated financial statements.
F-49
The Victory Bancorp, Inc.
Consolidated Statements of Cash Flows
(in thousands)
For the Nine Months Ended September 30, |
|
2025 |
|
|
2024 |
|
||
Cash Flows from Operating Activities |
|
|
|
|
|
|
||
Net income |
|
$ |
1,594 |
|
|
$ |
1,105 |
|
Adjustments to reconcile net income to net cash provided by |
|
|
|
|
|
|
||
Provision for loan losses |
|
|
(145 |
) |
|
|
230 |
|
Depreciation and amortization |
|
|
185 |
|
|
|
194 |
|
Share-based compensation |
|
|
42 |
|
|
|
43 |
|
Deferred income tax (benefit) expense, net of change in valuation allowance |
|
|
198 |
|
|
|
(63 |
) |
Net accretion of investment securities |
|
|
(59 |
) |
|
|
(50 |
) |
Earnings on bank owned life insurance |
|
|
(110 |
) |
|
|
(133 |
) |
Net realized gains on sale of SBA loans held for sale |
|
|
— |
|
|
|
(59 |
) |
Origination of SBA loans held for sale |
|
|
— |
|
|
|
(781 |
) |
Proceeds from sale of SBA loans held for sale |
|
|
— |
|
|
|
853 |
|
Amortization of debt issuance costs |
|
|
50 |
|
|
|
21 |
|
Change in: |
|
|
— |
|
|
|
|
|
Accrued interest receivable |
|
|
(34 |
) |
|
|
(112 |
) |
Other assets |
|
|
(257 |
) |
|
|
(276 |
) |
Accrued interest payable |
|
|
(48 |
) |
|
|
235 |
|
Other liabilities |
|
|
657 |
|
|
|
1,402 |
|
Net Cash Provided by Operating Activities |
|
|
2,073 |
|
|
|
2,609 |
|
|
|
|
|
|
|
|
||
Cash Flows from Investing Activities |
|
|
|
|
|
|
||
Available-for-sale securities: |
|
|
|
|
|
|
||
Proceeds from sales, maturities, calls and principal pay downs |
|
|
3,471 |
|
|
|
2,528 |
|
Held-to-maturity securities: |
|
|
|
|
|
|
||
Proceeds from maturities, calls, and principal pay downs |
|
|
1,469 |
|
|
|
205 |
|
Net increase in loans |
|
|
(1,012 |
) |
|
|
(31,073 |
) |
Purchase of restricted stock |
|
|
— |
|
|
|
— |
|
Proceeds from sale of restricted stock |
|
|
492 |
|
|
|
623 |
|
Purchases of premises and equipment |
|
|
(393 |
) |
|
|
(214 |
) |
Proceeds from disposal of fixed assets |
|
|
12 |
|
|
|
— |
|
Net Cash Used in Investing Activities |
|
|
4,039 |
|
|
|
(27,931 |
) |
|
|
|
|
|
|
|
||
Cash Flows from Financing Activities |
|
|
|
|
|
|
||
Net increase (decrease) in deposits |
|
|
39,663 |
|
|
|
34,137 |
|
Exercise of stock options |
|
|
— |
|
|
|
43 |
|
Proceeds from issuance under stock incentive plan |
|
|
205 |
|
|
|
43 |
|
Cash dividends on common stock |
|
|
(388 |
) |
|
|
(384 |
) |
Net increase (decrease) in short-term borrowing |
|
|
(15,440 |
) |
|
|
(11,508 |
) |
Net Cash Provided by Financing Activities |
|
|
24,040 |
|
|
|
22,331 |
|
Net increase (decrease) in cash and cash equivalents |
|
|
30,152 |
|
|
|
(3,034 |
) |
Cash and Cash Equivalents, Beginning |
|
|
10,678 |
|
|
|
14,538 |
|
Cash and Cash Equivalents, Ending |
|
$ |
40,830 |
|
|
$ |
11,504 |
|
|
|
|
|
|
|
|
||
Supplementary Cash Flows Information |
|
|
|
|
|
|
||
Income taxes paid |
|
$ |
265 |
|
|
$ |
341 |
|
Interest paid |
|
|
11,011 |
|
|
|
11,582 |
|
See accompanying notes to consolidated financial statements.
F-50
The Victory Bancorp, Inc.
Notes to Consolidated Financial Statements
1. Summary of Significant Accounting Policies
Principles of Consolidation
The accompanying consolidated financial statements of The Victory Bancorp, Inc. (the “Corporation”) are prepared on the accrual basis and include the accounts of The Victory Bancorp, Inc. and its wholly-owned subsidiary, The Victory Bank (the “Bank”), together referred to as “the Bank”. All significant intercompany accounts and transactions have been eliminated from the accompanying consolidated financial statements.
In preparing these consolidated financial statements, the Bank evaluated the events and transactions that occurred from December 31, 2024, through December 18, 2025 the date these consolidated financial statements were available for issuance.
Organization and Nature of Operations
The Victory Bancorp, Inc. is a registered bank holding company, which owns 100% of the outstanding capital stock of The Victory Bank. The Corporation was incorporated under the laws of the State of Pennsylvania in 2009 for the purpose of serving as The Victory Bank’s holding company. The holding company structure provides flexibility for growth through expansion of core business activities and access to varied capital raising operations. The Corporation’s primary business activity consists of ownership of all of the outstanding stock of The Victory Bank. As of September 30, 2025, the Corporation had 299 common stockholders of record.
The Bank is a Pennsylvania chartered commercial bank which was chartered in January 2008. The Bank operates a full-service commercial and consumer banking business in Montgomery County, Pennsylvania. The Bank’s focus is on small- and middle-market commercial and retail customers. The Bank originates secured and unsecured commercial loans, commercial mortgage loans, consumer loans and construction loans and does not make subprime loans. The Bank also offers revolving credit loans, small business loans and automobile loans. The Bank offers a variety of deposit products, including demand and savings deposits, regular savings accounts, investment certificates and fixed-rate certificates of deposit. As a state-chartered bank, the Bank is subject to regulation of the Pennsylvania Department of Banking and Federal Deposit Insurance Corporation.
Estimates
The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated balance sheet and the reported amounts of revenues and expenses during the reporting year. Actual results could differ 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, the fair value of financial instruments, and the valuation of deferred tax assets.
Significant Group Concentrations of Credit Risk
Most of the Bank’s activities are with customers located within Montgomery County, Pennsylvania. Note 4 discusses the types of lending that the Bank engages in. Although the Bank has a diversified loan portfolio, its borrowers’ ability to honor their contracts is influenced by the economy of Montgomery County and the surrounding areas.
The Bank monitors potential concentrations of loans to particular borrowers or groups of borrowers, industries, and geographic regions. The Bank also monitors exposures to credit risk that could arise from potential concentrations of lending products and practices such as loans that subject borrowers to substantial payment increases (e.g. principal deferral periods, loans with initial interest-only periods, etc.) and loans with high loan to value ratios. Additionally, there are industry practices that could subject the Bank to increased credit risk should economic conditions change over the course of a loan’s life. For example, the Bank makes variable rate loans and fixed rate principal-amortizing loans with maturities prior to the loan being fully paid (i.e. balloon payment loans). These loans are underwritten and monitored to manage the associated risks. The Bank has determined that there is no concentration of credit risk associated with its lending policies or practices.
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Cash and Cash Equivalents
For purposes of reporting cash flows, cash and cash equivalents include cash on hand, amounts due from banks and federal funds sold, all of which mature within ninety days. Generally, federal funds are sold for one day periods.
Securities
Management determines the appropriate classification of debt investment securities at the time of purchase and re-evaluates such designation as of each consolidated balance sheet date. As of September 30, 2025 and December 31, 2024, the Bank’s investment portfolio contained available-for-sale and held-to-maturity investment securities.
Investment securities that are classified as available-for-sale are stated at fair value. Unrealized gains and losses on investment securities classified as available-for-sale are excluded from results of operations and are reported as other comprehensive income or loss, a separate component of stockholders’ equity, net of taxes. Investment securities classified as available-for-sale include investment securities that may be sold in response to changes in interest rates, changes in prepayment risks or for asset/liability management purposes.
Investment securities which the Bank has the intent and ability to hold until maturity are classified as held-to-maturity and are recorded at cost, adjusted for amortization of premiums and accretion of discounts.
The cost of investment securities is adjusted for amortization of premiums and accretion of discounts to maturity, or in the case of mortgage-backed securities, over the estimated life of the security. Such amortization or accretion recorded as adjustments to interest and dividends are included in interest income from investments using the interest method. Realized gains and losses are included in gains (losses) on sales of investment securities in the consolidated statements of income. Gains and losses on the sale of securities are recorded on the trade date and are determined based on the specific-identification method.
The investment portfolio is classified into the following major security types: Corporate bonds, Collateralized mortgage obligations, U.S. agency securities, and State and municipal securities.
All corporate bonds and state and municipal securities undergo an initial and ongoing credit analysis. The analysis includes the review of various financial and demographic information. All securities have a minimum evaluation rating of ”A” or higher.
All collateralized mortgage obligations held by the Bank are guaranteed by Ginnie Mae, a U.S. government agency, or a government sponsored enterprise (GSEs) Fannie Mae or Freddie Mac. These securities along with U.S. agency securities are explicitly guaranteed by the U.S. government or guaranteed by the GSEs that have credit ratings and perceived credit risk comparable to the U.S. government, are highly rated by major rating agencies, and have a history of no credit losses.
For available-for-sale debt securities with an unrealized loss position, the Bank will determine whether it has the intent to sell the debt security or whether it is more likely than not it will be required to sell the debt security before the recovery of its amortized cost basis. If either of the criteria regarding intent or requirement to sell is met, the security’s amortized cost basis is written down to fair value through income with the establishment of an allowance under CECL. For available-for-sale debt securities that do not meet the criteria, the Bank evaluates whether any decline in fair value is due to credit loss factors. In making this assessment, management considers any changes to the rating of the security by a rating agency and adverse conditions specifically related to the security, among other factors. If this assessment indicates that a credit loss exists, the present value of cash flows expected to be collected from the security is compared to the amortized cost basis of the security. If the present value of cash flows expected to be collected is less than the amortized cost basis, a credit loss exists and an allowance for credit loss is recorded for the credit loss, limited by the amount that the fair value is less than the amortized cost basis. Any impairment that has not been recorded through an allowance for credit losses is recognized in other comprehensive income.
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 balance. 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 Bank is generally amortizing these amounts over
F-52
the contractual life of the loan. Premiums and discounts on purchased loans are amortized as adjustments to interest income using the effective yield method.
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. Past due status is based on contractual terms of the loan. A loan is considered to be past due when a scheduled payment has not been received 30 days after the contractual due date.
When a loan is placed on nonaccrual status, unpaid interest is reversed against interest. The amount of accrued interest reversed against interest income totaled $0 and $5,000 for the nine months ended September 30, 2025 and year ended December 31, 2024, respectively. Interest received on nonaccrual loans generally 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 Bank’s loan receivable portfolio is comprised of commercial and consumer loans. Commercial loans consist of the following classes: agriculture, commercial, construction and commercial real estate. Consumer loans consist of the following classes: consumer and residential real estate.
A description of the risk characteristics for each class is included below:
Agriculture loans include loans originated for various purposes secured by farmland, including farm residential and other improvements. Risks associated with these loans generally relate to the uncertainty associated with the borrower’s ability to successfully raise and market the commodity. Adverse weather conditions and other natural
perils can dramatically affect production and ability to service debt. Production problems may also cause unbudgeted expenses that reduce profitability or even result in losses. Unexpected expenses may occur because of increased production or harvesting costs caused by inclement weather, higher transportation or fertilization costs caused by market disruption, feed shortages, etc. Business cycles longer than one year (e.g., vineyards, orchards, and some livestock operations) may increase the risk of unexpected expenses. Volatile commodity prices present another risk as well as changes in government policies.
The Bank’s credit policies determine advance rates against the different forms of collateral that can be pledged against commercial and commercial real estate loan. Typically, the majority of loans will be limited to a percentage of their underlying collateral values such as real estate values, equipment, eligible accounts receivable and inventory. Individual loan advance rates may be higher or lower depending upon the financial strength of the borrower and/or term of the loan. The assets financed through commercial loans are used within the business for its ongoing operation. Repayment of these kinds of loans generally comes from the cash flow of the business or the ongoing conversions of assets. Commercial real estate loans include long-term loans financing commercial properties. Repayment of this kind of loan is dependent upon either the ongoing cash flow of the borrowing entity or the resale of or lease of the subject property. Commercial real estate loans typically require a loan to value ratio of not greater than 80% and vary in terms.
Consumer loans include installment loans, car loans, and overdraft lines of credit. The majority of these loans are unsecured. Risks associated with other consumer loans tend to be greater due to unsecured position or the rapidly depreciating nature of the underlying assets.
Construction loans are generally considered to involve high risk due to the concentration of principal in a limited number of loans and borrowers and the effects of general economic conditions on developers and builders. Moreover, a construction loan can involve additional risks because of the inherent difficulty in estimating both a property’s value at completion of the project and the estimated cost (including interest) of the project. The nature of these loans is such that they are generally difficult to evaluate and monitor.
Residential real estate loans consist of single-family, equity line of credit, and other residential loans. Single-family mortgage loans include permanent conventional mortgage loans secured by single-family residences located within our primary market area. Credit approval for residential real estate loans requires demonstration of sufficient income to repay the principal and interest and the
F-53
real estate taxes and insurance, stability of employment and an established credit record. Repayment of these loans is dependent on general economic conditions and unemployment levels in the Bank’s market area.
Allowance for Credit Losses
The allowance for credit losses (“allowance”) represents management’s estimate of losses inherent in the loan portfolio as of the balance sheet date and is recorded as a reduction to loans. The allowance is increased by the provision for credit losses, and decreased by charge-offs, net of recoveries. Loans deemed to be uncollectible are charged against the allowance, and subsequent recoveries, if any, are credited to the allowance. All, or part, of the principal balance of loans receivable are charged off to the allowance as soon as it is determined that the repayment of all, or part, of the principal balance is highly unlikely. The Bank has elected to not estimate an allowance for credit losses on accrued interest receivable, as it already has a policy in place to reverse or write-off accrued interest in a timely manner.
The estimate of expected credit losses is based on relevant information about historical events, current conditions, and reasonable and supportable forecasts that affect the collectability of the reported amounts. The Bank uses current loan data and loss history, calculates the weighted average remaining maturity in each loan category, and utilizes leading economic indicators to provide a forward-looking feature. The Bank then takes that information, adds custom qualitative factors and specific reserves tied to collateral dependent loans to calculate its allowance for credit losses.
The historical loss rate for the loan portfolio is determined by pooling loans into groups sharing similar risk characteristics and tracking historical net charge offs to calculate the historical loss rate.
The Bank also incorporates a reasonable and supportable loss forecast period to account for the effect of forecasted economic conditions and other factors on the performance of the loan portfolio which could differ from historical loss experience. Forward looking adjustments considers macro-economic indicators. The Bank generally utilizes a forecast period ranging over 12 - 24 months. For the contractual term that extends beyond the forecast period, the Bank immediately reverts to historical loss rates.
The Bank uses several qualitative factors to supplement the other elements of its allowance for credit losses calculation under CECL. These qualitative factors are intended to estimate losses that differ from actual historical loss experience. Relevant factors included, but are not limited to, economic trends and conditions such as regional unemployment, experience and depth of lending staff, trends in delinquencies, trends in collateral values, and results of loan reviews and loan-related audits. Although the estimation of credit losses can be somewhat subjective, the application of such qualitative factors must be reasonable and supportable.
Collateral dependent loans are those loans that are non-accruing and on which the borrowers cannot demonstrate the ability to make and are not making regularly scheduled loan payments, thereby making repayment of the loan dependent upon the operation or sale of the collateral securing the loan. Collateral dependent loans are evaluated individually as they do not share similar risk characteristics with other loans and are removed from their respective homogeneous pools. Under CECL, for collateral dependent loans, the Bank has adopted the practical expedient to measure the allowance for credit losses based on the fair value of the collateral.
The Bank's policy is to obtain third-party appraisals on any significant pieces of collateral held on collateral dependent loans. For such loans secured by real estate, the Bank's policy is to estimate the allowance by discounting the appraised value by 20%, which considers estimated selling costs and additional discounts estimated to be incurred in a sale. For real estate collateral that is considered special- or limited-purpose or in industries that are undergoing heightened stress, the Bank may further discount the collateral values. For non-real estate collateral secured loans, the Bank generally discounts values by 0%-50% depending on the nature and marketability of the collateral. This provides for selling costs and liquidity discounts that are usually incurred when disposing of non-real estate collateral.
Modifications to borrowers experiencing financial difficulty may include interest rate reductions, principal or interest forgiveness, forbearances, term extensions, and other actions intended to minimize economic loss and to avoid foreclosure or repossession of collateral.
The Bank maintains an allowance for credit losses for lending-related commitments such as unfunded loan commitments and letters of credit. The Bank estimates expected credit losses over the contractual period in which the Bank is exposed to credit risk via a contractual obligation to extend credit unless that obligation is unconditionally cancellable by the Bank. The allowance for lending-related commitments on off-balance sheet credit exposures is adjusted as a provision for credit losses. The estimate includes
F-54
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 credit losses on loans. The allowance for credit losses for unfunded loan commitments of $72,000 and $67,000 at September 30, 2025 and December 31, 2024, respectively, were separately classified on the Consolidated Balance Sheets within other liabilities.
Transfers of Financial Assets
Transfers of financial assets, including loan and loan participation sales, 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 Bank, put presumptively beyond the reach of the transferor and its creditors, even in bankruptcy or other receivership; (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, (3) the Bank does not maintain effective control over the transferred assets through an agreement to repurchase them before their maturity, and (4) transfers that do meet the criteria to be accounted for as sales are accounted for a secured borrowings.
Premises and Equipment
Land is carried at cost. Premises and equipment are stated at cost less accumulated depreciation. Leasehold improvements are depreciated using the straight-line (or accelerated) method with useful lives ranging from 5 to 20 years. Buildings and related components are depreciated using the straight-line (or accelerated) method with useful lives of 39 years. Computer equipment and software are depreciated using the straight-line (or accelerated) method with useful lives ranging from 3 to 7 years. Automobiles are depreciated using the straight-line (or accelerated) method with useful lives ranging from 3 to 5 years. Bank unique equipment is depreciated using the straight-line (or accelerated) method with useful lives ranging from 3 to 10 years. Furniture, fixtures and equipment are depreciated using the straight-line (or accelerated) method with useful lives ranging from 3 to 5 years.
Restricted Investment in Bank Stocks
Restricted investment in bank stocks, which represents required investments in the common stock of correspondent banks, is carried at cost, and consists of $60,000 common stock of the Atlantic Community Bankers Bank (“ACBB”) at September 30, 2025 and December 31, 2024, Federal Home Loan Bank of Pittsburgh (“FHLB”) stock totaling $977,000 and $1,544,000 at September 30, 2025 and December 31, 2024, respectively, and Federal Reserve Bank (“FRB”) stock of $663,000 and $588,000 at September 30, 2025 and December 31, 2024, respectively.
Management considers whether these long-term investments are impaired based on the ultimate recoverability of the cost basis rather than by recognizing temporary declines in value. Management believes no impairment has occurred related to these investments at September 30, 2025 and December 31, 2024.
Bank Owned Life Insurance
The Bank is the owner and beneficiary of life insurance policies on certain employees and directors. The life insurance investment is carried at the cash surrender value of the underlying owned policies. The increase in the cash surrender value is recognized as a component of non-interest income. The policies can be liquidated, if necessary, with tax costs associated. However, the Bank intends to hold these policies and, accordingly, the Bank has not provided for deferred income taxes on the earnings from the increase in cash surrender value.
Income Taxes
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 Corporation determines deferred income taxes using the asset and 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 basis of assets and liabilities, net operating loss carryforwards, and enacted changes in tax rates and laws are recognized in the period in which they occur.
F-55
Deferred income tax expense (benefit) results from changes in deferred tax assets and liabilities between periods. Deferred tax assets are reduced by a valuation allowance if, based on the weight of the evidence available, it is more likely than not that some portion or all of a deferred tax asset will not be realized.
The Corporation evaluates the carrying amount of its deferred tax assets on a quarterly basis or more frequently, if necessary, in applying the criteria set forth therein to determine whether it is more likely than not (i.e., a likelihood of more than 50%) that some portion, or all, of the deferred tax asset will not be realized within its life cycle, based on the weight of available evidence. If management makes a determination based on the available evidence that it is more likely than not that some portion or all of the deferred tax assets will not be realized in future periods, a valuation allowance is calculated and recorded. These determinations are inherently subjective and dependent upon estimates and judgments concerning management’s evaluation of both positive and negative evidence.
In conducting the deferred tax asset analysis, the Corporation believes it is important to consider the unique characteristics of an industry or business. In particular, characteristics such as business model, level of capital and reserves held by financial institutions and their ability to absorb potential losses are important distinctions to be considered for bank holding companies like the Corporation. Most importantly, it is also important to consider that net operating losses for federal income tax purposes can generally be carried forward for a period of twenty years. In order to realize deferred tax assets, the Corporation must generate sufficient taxable income in such future years.
In assessing the need for a valuation allowance, the Corporation carefully weighed both positive and negative evidence currently available. Judgment is required when considering the relative impact of such evidence. The weight given to the potential effect of positive and negative evidence must be commensurate with the extent to which it can be objectively verified. A cumulative loss in recent years is a significant piece of negative evidence that is difficult to overcome. As a result of limited sources of state income that can be used to realize state net operating losses generated by the holding company, the Corporation has concluded that a full valuation allowance is required related to state net operating loss carryforwards at September 30, 2025 and December 31, 2024.
The Corporation 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. At September 30, 2025 and December 31, 2024, the Corporation did not have any uncertain tax positions.
The Corporation recognizes interest and penalties on income taxes, if any, as a component of the provision for income taxes. There were no interest and penalties recognized during the nine months ended September 30, 2025 and the nine months ended September 30, 2024. With limited exception, tax years prior to 2022 are no longer subject to examination by tax authorities.
Comprehensive Income
Accounting principles generally accepted in the United States of America require 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 available-for-sale securities, are reported as a separate component of stockholders’ equity section of the Consolidated Balance Sheets, such items along with net income are components of comprehensive income.
Fair Value of Financial Instruments
Fair values of financial instruments are estimated using relevant market information and other assumptions, as more fully disclosed in Note 13. Fair value estimates involve uncertainties and matters of significant judgment. Changes in assumptions or in market conditions could significantly affect the estimates.
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Off-Balance Sheet Financial Instruments
In the ordinary course of business, the Bank has entered into off-balance sheet financial instruments consisting of commitments to extend credit. Such financial instruments are recorded in the Consolidated Balance Sheets when they are funded.
Derivatives
At the inception of a derivative contract, the Bank designates the derivative as a fair value hedge, a cash flow hedge or an instrument with no hedging designation. This designation is based on the Bank’s intentions and belief as to likely effectiveness as a hedge. The Bank formally documents the relationship between derivatives and hedge items, as well as the risk-management objective and the strategy for undertaking hedge transactions at the inception of the hedging relationship. This documentation includes linking fair value or cash flow hedges to specific assets and liabilities on the balance sheet or to specific firm commitments or forecasted transactions. The Bank also formally assesses, both at the hedge’s inception and on an ongoing basis, whether the derivative instruments that are designated are highly effective in offsetting changes in fair values or cash flows of hedged items. The Bank uses interest rate swap agreements as part of its asset liability management strategy to manage its interest rate risk position. The notional amounts of interest rate swaps as of September 30, 2025 and December 31, 2024 were $30,000,000 and $30,000,000 and designated as portfolio layer hedges of certain fixed rate loans. The hedge was deemed to be effective during all periods presented.
Employee Benefit Plan
The Bank has established a 401(k) plan (“the Plan”). Under the Plan, all employees are eligible to contribute the maximum allowed by the Internal Revenue Code of 1986, as amended. The Bank may make discretionary matching contributions. For the nine months ended September 30, 2025 and the nine months ended September 30, 2024, expense recorded in salaries and employee benefits attributable to the Plan amounted to $150,000 and $153,000, respectively.
Share-Based Compensation
The Bank recognizes the cost of employee and organizer services received in share-based payment transactions and measures the cost based on the grant-date fair value of the award. The cost will be recognized over the period during which the employee or organizer is required to provide service in exchange for the award.
Compensation cost for all stock awards is calculated and recognized over the employee’s service period, generally defined as the vesting period. For awards with graded-vesting, compensation cost is recognized on a straight-line basis over the requisite service period for the entire award. A Black-Scholes model is used to estimate the fair value of stock options, while the fair value of the Corporation’s common stock at the date of grant is used for restricted stock awards. Because of the insignificant amount of forfeitures the Corporation has experienced, forfeitures are recognized as they occur.
Earnings per Share
Basic earnings per share (“EPS”) represents net income available to common shareholders divided by the weighted-average number of common shares outstanding during the period. Diluted EPS includes all potentially dilutive common shares outstanding during the period. Potential common shares that may be issued related to outstanding stock options are determined using the treasury stock method.
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The following table sets forth the composition of basic and diluted earnings per share.
For the Nine Months Ended September 30, |
|
2025 |
|
|
2024 |
|
||
|
|
(In thousands, except for share |
|
|||||
Net income available to common stockholders |
|
$ |
1,594 |
|
|
$ |
1,105 |
|
Basic weighted average shares outstanding |
|
|
1,990,427 |
|
|
|
1,971,450 |
|
Plus: effect of dilutive options |
|
|
92,169 |
|
|
|
43,241 |
|
Diluted weighted average common shares |
|
|
2,082,596 |
|
|
|
2,014,691 |
|
Earnings per share: |
|
|
|
|
|
|
||
Basic |
|
$ |
0.80 |
|
|
$ |
0.56 |
|
Diluted |
|
$ |
0.77 |
|
|
$ |
0.55 |
|
Operating Segments
The Bank’s reportable segment, banking, is determined by the Chief Financial Officer, which is the designated chief operating decision maker, based upon information provided about the Bank’s products and services offered, primarily banking operations. The segment is also distinguished by the level of information provided to the chief operating decision maker, who uses such information to review performance of various components of the business, which are aggregated because services and customers are similar. The chief operating decision maker evaluates financial performance of the Bank’s business components by evaluating revenue streams, significant expenses and budget to actual results in assessing the segment and in the determination of allocating resources. The chief operating decision maker uses consolidated net income to evaluate Bank performance. The significant products, revenue and expense are reported on the consolidated balance sheets and statements of income.
Reclassifications
Some items in the prior year financial statements and footnotes were reclassified to conform to the current presentation. Reclassifications had no effect on prior year net income or stockholders’ equity.
2. Restrictions on Cash and Due from Banks
In return for services obtained through correspondent banks, the Bank is required to maintain non-interest-bearing cash balances in those correspondent banks. Compensating balances totaled $1,000,000 at September 30, 2025 and December 31, 2024, included in cash and due from banks.
3. Securities
The amortized cost and fair value of securities as of September 30, 2025 and December 31, 2024 is summarized as follows (in thousands):
September 30,2025 |
|
Amortized |
|
|
Gross |
|
|
Gross |
|
|
Fair Value |
|
||||
Available-for-sale: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Corporate bonds |
|
$ |
7,470 |
|
|
$ |
— |
|
|
$ |
(318 |
) |
|
$ |
7,152 |
|
Residential mortgage-backed securities – government |
|
|
11,591 |
|
|
|
16 |
|
|
|
(261 |
) |
|
|
11,346 |
|
U.S. government agency |
|
|
8,825 |
|
|
|
— |
|
|
|
(628 |
) |
|
|
8,197 |
|
State and Political Subdivisions |
|
|
3,908 |
|
|
|
8 |
|
|
|
(28 |
) |
|
|
3,888 |
|
|
|
$ |
31,794 |
|
|
$ |
24 |
|
|
$ |
(1,235 |
) |
|
$ |
30,583 |
|
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September 30, 2025 |
|
Amortized |
|
|
Gross |
|
|
Gross |
|
|
Fair Value |
|
||||
Held-to-Maturity: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Corporate bonds |
|
$ |
500 |
|
|
$ |
— |
|
|
$ |
(27 |
) |
|
$ |
473 |
|
Residential mortgage-backed securities – government |
|
|
5,373 |
|
|
|
— |
|
|
|
(32 |
) |
|
|
5,341 |
|
U.S. government agency |
|
|
1,704 |
|
|
|
— |
|
|
|
(33 |
) |
|
|
1,671 |
|
State and Political Subdivisions |
|
|
2,690 |
|
|
|
36 |
|
|
|
(1 |
) |
|
|
2,725 |
|
|
|
$ |
10,267 |
|
|
$ |
36 |
|
|
$ |
(93 |
) |
|
$ |
10,210 |
|
December 31, 2024 |
|
Amortized |
|
|
Gross |
|
|
Gross |
|
|
Fair Value |
|
||||
Available-for-sale: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Corporate bonds |
|
$ |
8,470 |
|
|
$ |
— |
|
|
$ |
(635 |
) |
|
$ |
7,835 |
|
Residential mortgage-backed securities – government |
|
|
12,930 |
|
|
|
— |
|
|
|
(662 |
) |
|
|
12,268 |
|
U.S. government agency |
|
|
9,558 |
|
|
|
— |
|
|
|
(890 |
) |
|
|
8,668 |
|
State and Political Subdivisions |
|
|
4,247 |
|
|
|
— |
|
|
|
(113 |
) |
|
|
4,134 |
|
|
|
$ |
35,205 |
|
|
$ |
— |
|
|
$ |
(2,300 |
) |
|
$ |
32,905 |
|
December 31, 2024 |
|
Amortized |
|
|
Gross |
|
|
Gross |
|
|
Fair Value |
|
||||
Held-to-Maturity: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Corporate bonds |
|
$ |
500 |
|
|
$ |
— |
|
|
$ |
(15 |
) |
|
$ |
485 |
|
Residential mortgage-backed securities – government |
|
|
6,571 |
|
|
|
— |
|
|
|
(83 |
) |
|
|
6,488 |
|
U.S. government agency |
|
|
1,967 |
|
|
|
— |
|
|
|
(93 |
) |
|
|
1,874 |
|
State and Political Subdivisions |
|
|
2,699 |
|
|
|
25 |
|
|
|
(14 |
) |
|
|
2,710 |
|
|
|
$ |
11,737 |
|
|
$ |
25 |
|
|
$ |
(205 |
) |
|
$ |
11,557 |
|
The unrealized losses and related fair value of investment securities available for sale with unrealized losses less than 12 months and those with unrealized losses 12 months or longer as of September 30, 2025 and December 31, 2024, for which an allowance for credit losses has not been recorded, are as follows (in thousands):
September 30, 2025 |
|
Less than 12 Months |
|
|
12 Months or More |
|
|
Total |
|
|||||||||||||||
|
|
Fair |
|
|
Unrealized |
|
|
Fair |
|
|
Unrealized |
|
|
Fair |
|
|
Unrealized |
|
||||||
Available-for-sale: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Corporate Bonds |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
6,652 |
|
|
$ |
318 |
|
|
$ |
6,652 |
|
|
$ |
318 |
|
Residential mortgage-backed |
|
|
— |
|
|
|
— |
|
|
|
6,670 |
|
|
|
261 |
|
|
|
6,670 |
|
|
|
261 |
|
U.S. government agency |
|
|
— |
|
|
|
— |
|
|
|
8,197 |
|
|
|
628 |
|
|
|
8,197 |
|
|
|
628 |
|
State and Political Subdivisions |
|
|
— |
|
|
|
— |
|
|
|
2,850 |
|
|
|
28 |
|
|
|
2,850 |
|
|
|
28 |
|
Total |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
24,369 |
|
|
$ |
1,235 |
|
|
$ |
24,369 |
|
|
$ |
1,235 |
|
F-59
December 31, 2024 |
|
Less than 12 Months |
|
|
12 Months or More |
|
|
Total |
|
|||||||||||||||
|
|
Fair |
|
|
Unrealized |
|
|
Fair |
|
|
Unrealized |
|
|
Fair |
|
|
Unrealized |
|
||||||
Available-for-sale: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Corporate Bonds |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
7,335 |
|
|
$ |
(635 |
) |
|
$ |
7,335 |
|
|
$ |
(635 |
) |
Residential mortgage-backed |
|
|
5,542 |
|
|
|
(212 |
) |
|
|
6,717 |
|
|
|
(450 |
) |
|
|
12,259 |
|
|
|
(662 |
) |
U.S. government agency |
|
|
— |
|
|
|
— |
|
|
|
8,668 |
|
|
|
(890 |
) |
|
|
8,668 |
|
|
|
(890 |
) |
State and Political Subdivisions |
|
|
— |
|
|
|
— |
|
|
|
4,134 |
|
|
|
(113 |
) |
|
|
4,134 |
|
|
|
(113 |
) |
Total |
|
$ |
5,542 |
|
|
$ |
(212 |
) |
|
$ |
26,854 |
|
|
$ |
(2,088 |
) |
|
$ |
32,396 |
|
|
$ |
(2,300 |
) |
All of the securities that were in an unrealized loss position at September 30, 2025 and December 31, 2024, are bonds the Bank has determined are in a loss position due primarily to interest rate factors and not credit quality concerns. In management’s opinion, based on third party credit ratings and the amount of the impairment, credit risk for these securities is minimal. Management has the intent and ability to hold debt securities until recovery and does not believe it will have to sell the securities prior to recovery.
At September 30, 2025, the Bank had 42 securities in an unrealized loss position for 12 months or more and 0 securities in an unrealized loss position less than 12 months, none of which exceeded 20.1% of the security’s carrying amount. At December 31, 2024, the Bank had 50 securities in an unrealized loss position for 12 months or more and 3 securities in an unrealized loss position less than 12 months, none of which exceeded 22.3% of the security’s carrying amount.
At September 30, 2025 and December 31, 2024, there was no allowance for credit losses related to the available-for-sale portfolio. Accrued interest receivable on available-for-sale debt securities totaled $173,000 and $151,000 at September 30, 2025 and December 31, 2024, respectively, and was excluded from the estimate of credit losses. At September 30, 2025 and December 31, 2024, the Bank evaluated its held-to-maturity debt securities under the CECL standards and based on the credit reviews of the issuers of the corporate debt securities determined no allowance for credit losses was required.
The amortized cost and fair value of securities as of September 30, 2025 and December 31, 2024, by contractual maturity, are shown below. Expected maturities of mortgage-backed securities may differ from contractual maturities because the securities may be called without any penalties (in thousands):
|
|
September 30, 2025 |
|
|
December 31, 2024 |
|
||||||||||
|
|
Amortized |
|
|
Fair |
|
|
Amortized |
|
|
Fair |
|
||||
Available-for-sale: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Less than a year |
|
$ |
1,040 |
|
|
$ |
1,046 |
|
|
$ |
1,406 |
|
|
$ |
1,395 |
|
Due after one year through five years |
|
|
7,994 |
|
|
|
7,805 |
|
|
|
4,731 |
|
|
|
4,551 |
|
Due after five years through ten years |
|
|
11,170 |
|
|
|
10,387 |
|
|
|
16,138 |
|
|
|
14,691 |
|
Due after ten years |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Mortgage-backed investment securities |
|
|
11,591 |
|
|
|
11,346 |
|
|
|
12,930 |
|
|
|
12,268 |
|
Total |
|
$ |
31,795 |
|
|
$ |
30,583 |
|
|
$ |
35,205 |
|
|
$ |
32,905 |
|
|
|
September 30, 2025 |
|
|
December 31, 2024 |
|
||||||||||
|
|
Amortized |
|
|
Fair |
|
|
Amortized |
|
|
Fair |
|
||||
Held-to-maturity: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Less than a year |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
Due after one year through five years |
|
|
2,327 |
|
|
|
2,293 |
|
|
|
2,591 |
|
|
|
2,485 |
|
Due after five years through ten years |
|
|
2,567 |
|
|
|
2,576 |
|
|
|
2,575 |
|
|
|
2,584 |
|
Due after 10 years |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Mortgage-backed investment securities |
|
|
5,373 |
|
|
|
5,341 |
|
|
|
6,571 |
|
|
|
6,488 |
|
Total |
|
$ |
10,267 |
|
|
$ |
10,210 |
|
|
$ |
11,737 |
|
|
$ |
11,557 |
|
F-60
There were no securities pledged as collateral at September 30, 2025 and December 31, 2024 to secure public deposits.
There were no gross gains or losses on the sale or call of securities in nine months ended September 30, 2025 and September 30, 2024.
4. Loans Receivable
The composition of loans receivable at September 30, 2025 and December 31, 2024 is as follows (in thousands):
|
|
September 30, |
|
|
December 31, |
|
||
Agricultural |
|
$ |
1,945 |
|
|
$ |
2,018 |
|
Commercial |
|
|
33,921 |
|
|
|
40,100 |
|
Consumer |
|
|
5,093 |
|
|
|
2,920 |
|
Construction |
|
|
21,732 |
|
|
|
21,690 |
|
Commercial Real Estate |
|
|
237,458 |
|
|
|
233,179 |
|
Residential Real Estate |
|
|
96,449 |
|
|
|
95,625 |
|
Total loans |
|
|
396,598 |
|
|
|
395,532 |
|
Deferred Fees, net |
|
|
(1,014 |
) |
|
|
(967 |
) |
Allowance for credit losses |
|
|
(3,473 |
) |
|
|
(3,611 |
) |
Net Loans |
|
$ |
392,111 |
|
|
$ |
390,954 |
|
The Bank elected to exclude accrued interest receivable from the amortized cost basis of loans disclosed throughout this footnote. As of September 30, 2025 and December 31, 2024, accrued interest receivable for loans totaled $1,383,000 and $1,363,000, respectively, and is included in the accrued interest receivable line item on the Bank’s Consolidated Balance Sheets.
The following tables presents the activity in the allowance for credit losses by loan portfolio segment for the nine months ended September 30, 2025 and September 30, 2024 under the CECL methodology (in thousands):
September 30, 2025 |
|
Beginning |
|
|
Loans |
|
|
Recoveries |
|
|
Provision |
|
|
Total |
|
|||||
Agricultural |
|
$ |
15 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
1 |
|
|
$ |
16 |
|
Commercial |
|
|
381 |
|
|
|
— |
|
|
|
16 |
|
|
|
(50 |
) |
|
|
347 |
|
Commercial Real Estate |
|
|
2,224 |
|
|
|
— |
|
|
|
— |
|
|
|
(224 |
) |
|
|
2,000 |
|
Construction |
|
|
91 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
91 |
|
Consumer |
|
|
170 |
|
|
|
(7 |
) |
|
|
3 |
|
|
|
68 |
|
|
|
234 |
|
Residential Real Estate |
|
|
730 |
|
|
|
— |
|
|
|
— |
|
|
|
55 |
|
|
|
785 |
|
Ending balance |
|
$ |
3,611 |
|
|
$ |
(7 |
) |
|
$ |
19 |
|
|
$ |
(150 |
) |
|
$ |
3,473 |
|
September 30, 2024 |
|
Beginning |
|
|
Allocation of |
|
|
Loans |
|
|
Recoveries |
|
|
Provision |
|
|
Total |
|
||||||
Agricultural |
|
$ |
— |
|
|
$ |
15 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
1 |
|
|
$ |
16 |
|
Commercial |
|
|
— |
|
|
|
576 |
|
|
|
(30 |
) |
|
|
— |
|
|
|
(158 |
) |
|
|
388 |
|
Commercial Term |
|
|
363 |
|
|
|
(363 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Commercial Mortgage |
|
|
1,962 |
|
|
|
(1,962 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Commercial Line |
|
|
359 |
|
|
|
(359 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Commercial Real Estate |
|
|
— |
|
|
|
1,950 |
|
|
|
— |
|
|
|
— |
|
|
|
317 |
|
|
|
2,267 |
|
Construction |
|
|
436 |
|
|
|
(317 |
) |
|
|
— |
|
|
|
— |
|
|
|
(29 |
) |
|
|
90 |
|
Consumer |
|
|
280 |
|
|
|
(84 |
) |
|
|
— |
|
|
|
— |
|
|
|
(16 |
) |
|
|
180 |
|
Home Equity |
|
|
44 |
|
|
|
(44 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
0 |
|
Residential Real Estate |
|
|
— |
|
|
|
588 |
|
|
|
(9 |
) |
|
|
— |
|
|
|
128 |
|
|
|
707 |
|
Ending balance |
|
$ |
3,444 |
|
|
$ |
— |
|
|
$ |
(39 |
) |
|
$ |
— |
|
|
$ |
243 |
|
|
$ |
3,648 |
|
F-61
As discussed in Note 1, the Bank identifies loans in which the borrower cannot demonstrate the ability to make regularly scheduled payments and the repayment of the loan is dependent upon the operation or sale of the collateral of the loan. These collateral dependent loans are evaluated individually for allowance for credit losses based on the fair value of the collateral.
The following tables present an analysis of collateral-dependent loans of the Bank by class of loans as of September 30, 2025 and December 31, 2024 (in thousands):
September 30, 2025 |
|
Residential |
|
|
Business |
|
|
Commercial |
|
|
Total Collateral- |
|
||||
Agricultural |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
Commercial |
|
|
— |
|
|
|
61 |
|
|
|
— |
|
|
|
61 |
|
Consumer |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Construction |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Commercial Real Estate |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Residential Real Estate |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Total |
|
$ |
— |
|
|
$ |
61 |
|
|
$ |
— |
|
|
$ |
61 |
|
December 31, 2024 |
|
Residential |
|
|
Business |
|
|
Commercial |
|
|
Total Collateral- |
|
||||
Agricultural |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
Commercial |
|
|
117 |
|
|
|
64 |
|
|
|
— |
|
|
|
181 |
|
Consumer |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Construction |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Commercial Real Estate |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Residential Real Estate |
|
|
206 |
|
|
|
— |
|
|
|
— |
|
|
|
206 |
|
Total |
|
$ |
323 |
|
|
$ |
64 |
|
|
$ |
— |
|
|
$ |
387 |
|
The Bank monitors ongoing risk for loans with a commercial purpose using a nine-point internal grading system. The first five rating categories, representing the lowest risk to the Bank, are combined and given a Pass rating. The Special Mention category includes loans that have potential weaknesses that may, if not monitored or corrected, weaken the asset or inadequately protect the Bank’s position at some future date. These assets pose elevated risk, but their weakness does not justify a more severe, or criticized rating.
Management generally follows regulatory definitions in assigning criticized ratings to loans, including substandard, doubtful, or loss. Substandard loans are classified as they have a well-defined weakness or weaknesses that jeopardize liquidation of the debt. These loans are characterized by the distinct possibility that the Bank will sustain some loss if the deficiencies are not corrected. Substandard loans include loans that management has determined are not adequately protected by current cash flows or net worth of the borrower. A doubtful loan has the same weaknesses as a substandard loan, however, collection or liquidation of principal in full is questionable and improbable. For doubtful loans, loss is present but may not be determined until specific factors occur. Loss assets are considered uncollectible, as the underlying borrowers are often in bankruptcy, have suspended debt repayments, or ceased business operations. Once a loan is classified as Loss, there is little prospect of collecting the loan’s principal or interest and it is generally written off.
Loans with a consumer purpose, which also includes certain commercial loans, construction and land development loans, and residential loans, are not-rated and are monitored based on the length of time a loan is past due. Not-rated loans are categorized as either Performing or Non-performing. Non-performing loans would be those in non-accrual status, which generally occurs when a loan is maintained on a cash basis due to deterioration in the financial condition of the borrower, full payment of principal or interest is not expected, or principal or interest has been in default for a period of 90 days or more.
The Bank’s Board of Directors reviews on a quarterly basis the ratings of all criticized loans. In addition, an independent third-party performs an annual loan review. The review focuses on a sample of business and consumer purpose loans, and all previously criticized loans over a certain dollar threshold.
F-62
The following tables present the Bank’s loan portfolio based on its internal risk rating system by origination year as of September 30, 2025 and December 31, 2024 (in thousands):
|
|
2025 |
|
|
2024 |
|
|
2023 |
|
|
2022 |
|
|
2021 |
|
|
Prior |
|
|
Revolving |
|
|
Total |
|
||||||||
Agriculture |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Pass |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
124 |
|
|
$ |
49 |
|
|
$ |
738 |
|
|
$ |
1,011 |
|
|
$ |
23 |
|
|
$ |
1,945 |
|
Special mention |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Substandard |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Doubtful |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Loss |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Not-rated |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Total |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
124 |
|
|
$ |
49 |
|
|
$ |
738 |
|
|
$ |
1,011 |
|
|
$ |
23 |
|
|
$ |
1,945 |
|
Gross charge-offs, YTD |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
Not-rated loans: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Performing |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Not-performing |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Total not-rated |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Commercial |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Pass |
|
$ |
3,273 |
|
|
$ |
2,694 |
|
|
$ |
4,002 |
|
|
$ |
3,562 |
|
|
$ |
1,010 |
|
|
$ |
2,929 |
|
|
$ |
10,378 |
|
|
$ |
27,848 |
|
Special mention |
|
|
44 |
|
|
|
— |
|
|
|
— |
|
|
|
1,328 |
|
|
|
— |
|
|
|
783 |
|
|
|
318 |
|
|
|
2,473 |
|
Substandard |
|
|
— |
|
|
|
— |
|
|
|
462 |
|
|
|
359 |
|
|
|
— |
|
|
|
281 |
|
|
|
2,498 |
|
|
|
3,600 |
|
Doubtful |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Loss |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Not-rated |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Total |
|
|
3,317 |
|
|
|
2,694 |
|
|
|
4,464 |
|
|
|
5,249 |
|
|
|
1,010 |
|
|
|
3,993 |
|
|
|
13,194 |
|
|
|
33,921 |
|
Gross charge-offs, YTD |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
Not-rated loans: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Performing |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Not-performing |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Total not-rated |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Consumer |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Pass |
|
$ |
2,293 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
312 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
77 |
|
|
$ |
2,682 |
|
Special mention |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Substandard |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Doubtful |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Loss |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Not-rated |
|
|
155 |
|
|
|
39 |
|
|
|
88 |
|
|
|
8 |
|
|
|
— |
|
|
|
979 |
|
|
|
1,142 |
|
|
|
2,411 |
|
Total |
|
$ |
2,448 |
|
|
$ |
39 |
|
|
$ |
88 |
|
|
$ |
320 |
|
|
$ |
— |
|
|
$ |
979 |
|
|
$ |
1,219 |
|
|
$ |
5,093 |
|
Gross charge-offs, YTD |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
Not-rated loans: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Performing |
|
|
155 |
|
|
|
39 |
|
|
|
88 |
|
|
|
8 |
|
|
|
— |
|
|
|
979 |
|
|
|
1,142 |
|
|
|
2,411 |
|
Not-performing |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Total not-rated |
|
$ |
155 |
|
|
$ |
39 |
|
|
$ |
88 |
|
|
$ |
8 |
|
|
$ |
— |
|
|
$ |
979 |
|
|
$ |
1,142 |
|
|
$ |
2,411 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Construction |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Pass |
|
$ |
10,866 |
|
|
$ |
8,719 |
|
|
$ |
283 |
|
|
$ |
771 |
|
|
$ |
616 |
|
|
$ |
477 |
|
|
$ |
— |
|
|
$ |
21,732 |
|
Special mention |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Substandard |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Doubtful |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Loss |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Not rated |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Total |
|
$ |
10,866 |
|
|
$ |
8,719 |
|
|
$ |
283 |
|
|
$ |
771 |
|
|
$ |
616 |
|
|
$ |
477 |
|
|
$ |
— |
|
|
$ |
21,732 |
|
Gross charge-offs, YTD |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
Not-rated loans: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Performing |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Non-performing |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Total not-rated |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
F-63
|
|
2025 |
|
|
2024 |
|
|
2023 |
|
|
2022 |
|
|
2021 |
|
|
Prior |
|
|
Revolving |
|
|
Total |
|
||||||||
Commercial Real Estate |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Pass |
|
$ |
22,050 |
|
|
$ |
29,870 |
|
|
$ |
41,098 |
|
|
$ |
45,767 |
|
|
$ |
34,078 |
|
|
$ |
57,988 |
|
|
$ |
1,659 |
|
|
$ |
232,510 |
|
Special mention |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Substandard |
|
|
— |
|
|
|
2,585 |
|
|
|
— |
|
|
|
873 |
|
|
|
— |
|
|
|
1,490 |
|
|
|
— |
|
|
|
4,948 |
|
Doubtful |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Loss |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Not-rated |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Totals |
|
$ |
22,050 |
|
|
$ |
32,455 |
|
|
$ |
41,098 |
|
|
$ |
46,640 |
|
|
$ |
34,078 |
|
|
$ |
59,478 |
|
|
$ |
1,659 |
|
|
$ |
237,458 |
|
Gross charge-offs, YTD |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
Not-rated loans: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Performing |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Non-performing |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Total not-rated |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Residential Real Estate |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Pass |
|
$ |
6,821 |
|
|
$ |
14,776 |
|
|
$ |
13,493 |
|
|
$ |
15,316 |
|
|
$ |
8,743 |
|
|
$ |
9,815 |
|
|
$ |
1,954 |
|
|
$ |
70,918 |
|
Special mention |
|
|
— |
|
|
|
— |
|
|
|
1,506 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
1,506 |
|
Substandard |
|
|
— |
|
|
|
135 |
|
|
|
— |
|
|
|
— |
|
|
|
562 |
|
|
|
— |
|
|
|
— |
|
|
|
697 |
|
Doubtful |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Loss |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Not-rated |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
712 |
|
|
|
22,616 |
|
|
|
23,328 |
|
Total |
|
$ |
6,821 |
|
|
$ |
14,911 |
|
|
$ |
14,999 |
|
|
$ |
15,316 |
|
|
$ |
9,305 |
|
|
$ |
10,527 |
|
|
$ |
24,570 |
|
|
$ |
96,449 |
|
Gross charge-offs, YTD |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
Not-rated loans: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Performing |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
712 |
|
|
|
22,616 |
|
|
|
23,328 |
|
Not-performing |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Total not-rated |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
712 |
|
|
$ |
22,616 |
|
|
$ |
23,328 |
|
F-64
December 31, 2024
|
|
2024 |
|
|
2023 |
|
|
2022 |
|
|
2021 |
|
|
2020 |
|
|
Prior |
|
|
Revolving |
|
|
Total |
|
||||||||
Agriculture |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Pass |
|
$ |
— |
|
|
$ |
139 |
|
|
$ |
53 |
|
|
$ |
753 |
|
|
$ |
1 |
|
|
$ |
1,060 |
|
|
$ |
12 |
|
|
$ |
2,018 |
|
Special mention |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Substandard |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Doubtful |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Not-rated |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Total |
|
$ |
— |
|
|
$ |
139 |
|
|
$ |
53 |
|
|
$ |
753 |
|
|
$ |
1 |
|
|
$ |
1,060 |
|
|
$ |
12 |
|
|
$ |
2,018 |
|
Gross charge-offs, YTD |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
Not-rated loans: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Performing |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Non-performing |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Total not-rated |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Commercial |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Pass |
|
$ |
3,048 |
|
|
$ |
4,636 |
|
|
$ |
6,074 |
|
|
$ |
1,305 |
|
|
$ |
1,172 |
|
|
$ |
3,487 |
|
|
$ |
14,566 |
|
|
$ |
34,288 |
|
Special mention |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
928 |
|
|
|
89 |
|
|
|
1,017 |
|
Substandard |
|
|
— |
|
|
|
780 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
3 |
|
|
|
4,012 |
|
|
|
4,795 |
|
Doubtful |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Not-rated |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Total |
|
$ |
3,048 |
|
|
$ |
5,416 |
|
|
$ |
6,074 |
|
|
$ |
1,305 |
|
|
$ |
1,172 |
|
|
$ |
4,418 |
|
|
$ |
18,667 |
|
|
$ |
40,100 |
|
Gross charge-offs, YTD |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
33 |
|
|
$ |
— |
|
|
$ |
33 |
|
Not-rated loans: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Performing |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Non-performing |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Total not-rated |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
F-65
|
|
2024 |
|
|
2023 |
|
|
2022 |
|
|
2021 |
|
|
2020 |
|
|
Prior |
|
|
Revolving |
|
|
Total |
|
||||||||
Consumer |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Pass |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
332 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
82 |
|
|
$ |
414 |
|
Special mention |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Substandard |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Doubtful |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Not-rated |
|
|
46 |
|
|
|
97 |
|
|
|
12 |
|
|
|
11 |
|
|
|
— |
|
|
|
1,110 |
|
|
|
1,230 |
|
|
|
2,506 |
|
Total |
|
$ |
46 |
|
|
$ |
97 |
|
|
$ |
344 |
|
|
$ |
11 |
|
|
$ |
— |
|
|
$ |
1,110 |
|
|
$ |
1,312 |
|
|
$ |
2,920 |
|
Gross charge-offs YTD |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
Not-rated loans: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Performing |
|
$ |
46 |
|
|
$ |
97 |
|
|
$ |
12 |
|
|
$ |
11 |
|
|
$ |
— |
|
|
$ |
1,102 |
|
|
$ |
1,230 |
|
|
$ |
2,498 |
|
Non-performing |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
8 |
|
|
|
— |
|
|
|
8 |
|
Total not-rated |
|
$ |
46 |
|
|
$ |
97 |
|
|
$ |
12 |
|
|
$ |
11 |
|
|
$ |
— |
|
|
$ |
1,110 |
|
|
$ |
1,230 |
|
|
$ |
2,506 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Construction |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Pass |
|
$ |
9,279 |
|
|
$ |
9,128 |
|
|
$ |
1,295 |
|
|
$ |
1,063 |
|
|
$ |
45 |
|
|
$ |
880 |
|
|
$ |
— |
|
|
$ |
21,690 |
|
Special mention |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Substandard |
|
|
— |
|
|
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
||
Doubtful |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Loss |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Not-rated |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Total |
|
$ |
9,279 |
|
|
$ |
9,128 |
|
|
$ |
1,295 |
|
|
$ |
1,063 |
|
|
$ |
45 |
|
|
$ |
880 |
|
|
$ |
— |
|
|
$ |
21,690 |
|
Gross charge-offs, YTD |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
Not-rated loans: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Performing |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Non-performing |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Total not-rated |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Commercial Real Estate |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Pass |
|
$ |
31,723 |
|
|
$ |
43,888 |
|
|
$ |
48,869 |
|
|
$ |
35,519 |
|
|
$ |
18,554 |
|
|
$ |
47,853 |
|
|
$ |
2,344 |
|
|
$ |
228,750 |
|
Special mention |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Substandard |
|
|
2,608 |
|
|
|
608 |
|
|
|
— |
|
|
|
— |
|
|
|
348 |
|
|
|
815 |
|
|
|
— |
|
|
|
4,379 |
|
Doubtful |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Loss |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Not-rated |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
50 |
|
|
|
50 |
|
Total |
|
|
34,331 |
|
|
|
44,496 |
|
|
|
48,869 |
|
|
|
35,519 |
|
|
|
18,902 |
|
|
|
48,668 |
|
|
|
2,394 |
|
|
|
233,179 |
|
Gross charge-offs, YTD |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
Not-rated loans: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Performing |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
||
Non-performing |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
||
Total not-rated |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
|
|
|
|
|
||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Residential Real Estate |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Pass |
|
$ |
17,588 |
|
|
$ |
15,333 |
|
|
$ |
16,551 |
|
|
$ |
10,151 |
|
|
$ |
3,733 |
|
|
$ |
8,195 |
|
|
$ |
1,562 |
|
|
$ |
73,113 |
|
Special mention |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Substandard |
|
|
99 |
|
|
|||||||||||||||||||||||||||
FAQ
What is the exchange ratio in the QNB Corp (QNBC) and Victory merger?
What do existing QNB Corp (QNBC) shareholders receive in the merger?
How was the implied value for Victory shares illustrated in the QNB–Victory merger?
Is the QNB–Victory merger expected to be tax‑free for Victory shareholders?
What approvals are required to complete the QNB Corp and Victory merger?
Do Victory shareholders have dissenters’ rights in the QNB–Victory merger?
When is the QNB–Victory merger expected to close?
