Steele Bancorp posts $13.7M Q3 profit; assets reach $1.25B post-NUBC
Steele Bancorp reported sharply higher results and completed the NUBC acquisition. Q3 2025 net income was $13.7 million (EPS $4.77), up from $1.4 million a year ago, driven by a $17.8 million bargain purchase gain tied to the merger and offset by $3.9 million in merger costs and higher credit loss provisions.
The transaction closed on August 1, 2025 with total consideration of $40.4 million, including 1,546,725 shares issued at $26.00 per share, cash for fractional shares, and a dissenter settlement. Steele acquired $43.6 million of cash, $427.1 million of loans, and recognized a $14.7 million core deposit intangible. Post-deal scale increased: total assets reached $1.254 billion and deposits were $1.106 billion as of September 30, 2025.
Shares outstanding were 3,405,061 as of November 14, 2025. Operating trends also reflected higher net interest income and a larger balance sheet following integration of NUBC.
Positive
- None.
Negative
- None.
Insights
One-time merger gain drove Q3 profit; balance sheet doubled.
Steele Bancorp closed the NUBC acquisition, recording a $17.827M bargain purchase gain that lifted Q3 net income to $13.677M. The gain reflects purchase accounting where fair-value net assets exceeded consideration. Offsetting items included merger expenses of $3.873M and a higher provision for credit losses.
Scale effects are evident: assets reached $1.254B and deposits $1.106B by Sep 30, 2025. Consideration totaled $40.405M, including 1,546,725 shares at $26.00. The company recognized a core deposit intangible of $14.662M and acquired loans of $427.066M subject to discounts and ACL under ASC 805/326.
Given the one-time nature of the bargain gain, ongoing earnings will depend on net interest margin, credit costs, and realized merger synergies. Subsequent filings may provide additional fair value measurement updates within the one-year purchase accounting window.
Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
| | Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
For the quarterly period ended
| | Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
For the transition period from to .
Commission File No.
Steele Bancorp, Inc.
(Exact name of Registrant as specified in its Charter)
| | | |
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer | |
| | | |
| (Address of principal executive offices) | (Zip Code) |
Registrant’s telephone number, including area code: (
Mifflinburg Bancorp, Inc.
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act: None
Indicate by check mark whether the Registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the Registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, 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 | ☐ | Accelerated filer | ☐ |
| | ☒ | Smaller reporting company | |
| Emerging growth company | |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes
As of November 14, 2025, the registrant had
Table of Contents
| Part I - Financial Information | 3 |
| Item 1. Financial Statements |
|
| Consolidated Balance Sheets, September 30, 2025 (unaudited) and December 31, 2024 |
3 |
| Consolidated Statements of Income for the Three and Nine Months Ended September 30, 2025 and 2024 (Unaudited) |
4 |
| Consolidated Statements of Comprehensive Income for the Three and Nine Months Ended September 30, 2025 and 2024 (Unaudited) |
5 |
| Consolidated Statements of Changes in Stockholders’ Equity for the Three and Nine Months Ended September 30, 2025 and 2024 (Unaudited) |
6 |
| Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2025 and 2024 (Unaudited) |
7 |
| Notes to Consolidated Financial Statements (Unaudited) |
8 |
| Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations |
40 |
| Item 3. Quantitative and Qualitative Disclosures About Market Risk | 56 |
| Item 4. Controls and Procedures | 56 |
| Part II - Other Information | 56 |
| Item 1. Legal Proceedings | 56 |
| Item 1A. Risk Factors | 56 |
| Item 2. Unregistered Sales of Equity Securities and Use of Proceeds | 56 |
| Item 3. Defaults Upon Senior Securities | 56 |
| Item 4. Mine Safety Disclosure | 56 |
| Item 5. Other Information | 56 |
| Item 6. Exhibit Index |
57 |
| Signatures |
58 |
Part I - Financial Information
Item 1. Financial Statements
Steele Bancorp, Inc. and Subsidiary
Consolidated Balance Sheets
(in thousands, except share and per share data)
| (Unaudited) | ||||||||
| September 30, | December 31, | |||||||
| 2025 | 2024 * | |||||||
| Assets | ||||||||
| Cash and due from banks | $ | $ | ||||||
| Interest-bearing demand deposits | ||||||||
| Federal funds sold | ||||||||
| Total cash and cash equivalents | ||||||||
| Interest-bearing time deposits | ||||||||
| Debt securities available-for-sale, at fair value | ||||||||
| Marketable equity securities, at fair value | ||||||||
| Restricted investments in bank stock, at cost | ||||||||
| Loans | ||||||||
| Allowance for credit losses | ( | ) | ( | ) | ||||
| Loans, net | ||||||||
| Premises and equipment, net | ||||||||
| Accrued interest receivable | ||||||||
| Core deposit intangible, net | ||||||||
| Bank owned life insurance | ||||||||
| Net deferred tax asset | ||||||||
| Other assets | ||||||||
| Total Assets | $ | $ | ||||||
| Liabilities and Stockholders' Equity | ||||||||
| Liabilities | ||||||||
| Deposits: | ||||||||
| Noninterest-bearing deposits | $ | $ | ||||||
| Interest-bearing deposits | ||||||||
| Total deposits | ||||||||
| Repurchase agreements | ||||||||
| Federal Home Loan Bank advances | ||||||||
| Subordinated debt, at fair value | ||||||||
| Accrued interest payable | ||||||||
| Other liabilities | ||||||||
| Total Liabilities | ||||||||
| Commitments and Contingencies | ||||||||
| Redeemable Common Stock Held By Employee Stock Ownership Plan | ||||||||
| Stockholders' Equity | ||||||||
| Common stock, par value $1.00 per share; authorized 5,000,000 shares; issued 3,706,725 (2025) and 2,160,000 (2024) shares; outstanding 3,405,061 and 1,858,536 shares as of September 30, 2025 and December 31, 2024, respectively. | ||||||||
| Capital surplus | ||||||||
| Retained earnings | ||||||||
| Accumulated other comprehensive loss | ( | ) | ( | ) | ||||
| Unearned ESOP shares | ( | ) | ||||||
| Treasury stock, at cost: 2025: 301,664 shares; 2024: 301,464 shares | ( | ) | ( | ) | ||||
| Total Stockholders' Equity | ||||||||
| Less maximum cash obligation to ESOP shares | ||||||||
| Total Stockholders’ Equity Less Maximum Cash Obligations Related to ESOP Shares | ||||||||
| Total Liabilities and Stockholders' Equity | $ | $ | ||||||
See accompanying notes to consolidated financial statements
* Derived from consolidated audited financial statements
Steele Bancorp, Inc. and Subsidiary
Consolidated Statements of Income
(Unaudited)
(in thousands, except per share data)
| Three Months Ended September 30, |
Nine Months Ended September 30, |
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| 2025 |
2024 |
2025 |
2024 |
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| Interest and Dividend Income |
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| Interest and fees on loans |
$ | $ | $ | $ | ||||||||||||
| Interest-bearing deposits in banks and time deposits |
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| Federal funds sold |
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| Securities: |
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| Taxable |
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| Tax-exempt |
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| Dividends |
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| Total Interest and Dividend Income |
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| Interest Expense |
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| Deposits |
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| Federal Home Loan Bank advances |
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| Federal Discount Window borrowings |
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| Subordinated debt |
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| Total Interest Expense |
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| Net Interest Income |
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| Provision for credit losses |
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| Net Interest Income after provision for credit losses |
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| Noninterest Income |
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| Service charges on deposit accounts |
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| ATM fees and debit card income |
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| Mortgage banking revenue |
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| Trust and investment fee income |
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| Gain on sale of premises |
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| Loss on sale of securities |
( |
) | ( |
) | ||||||||||||
| Net marketable equity security gains (losses) |
( |
) | ( |
) | ||||||||||||
| Earnings on bank owned life insurance |
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| Bargain purchase gain |
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| Other |
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| Total Noninterest Income |
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| Noninterest Expense |
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| Salaries and employee benefits |
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| Net occupancy and equipment expense |
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| Amortization of core deposit intangible |
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| Data processing fees |
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| Pennsylvania shares tax |
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| Professional fees |
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| Advertising expense |
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| FDIC deposit insurance |
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| Merger-related expenses |
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| Other |
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| Total Noninterest Expense |
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| Income Before Income Taxes |
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| Income Taxes |
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| Net Income |
$ | $ | $ | $ | ||||||||||||
| Earnings Per Share - Basic and Diluted |
$ | $ | $ | $ | ||||||||||||
See accompanying notes to consolidated financial statements.
Steele Bancorp, Inc. and Subsidiary
Consolidated Statements of Comprehensive Income
(Unaudited)
(in thousands)
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
| 2025 | 2024 | 2025 | 2024 | |||||||||||||
| Net Income | $ | $ | $ | $ | ||||||||||||
| Other Comprehensive Income | ||||||||||||||||
| Unrealized holding gains on debt securities available-for-sale, net of income taxes of $620 and $522 for the three months ended and $859 and $180 for the nine months ended, respectively | ||||||||||||||||
| Reclassification adjustment for losses on available-for- sale securities included in net income, net of income taxes of $2 and $-0- for the three months ended and $2 and $-0- for the nine months ended, respectively | ||||||||||||||||
| Other comprehensive income | ||||||||||||||||
| Total Comprehensive Income | $ | $ | $ | $ | ||||||||||||
See accompanying notes to consolidated financial statements.
Steele Bancorp, Inc. and Subsidiary
Consolidated Statements of Changes in Stockholders’ Equity
(Unaudited)
(in thousands)
| Accumulated Other | Maximum Cash Obligation | |||||||||||||||||||||||||||
| Common Stock | Capital Surplus | Retained Earnings | Comprehensive (Loss) | Treasury Stock | Related to ESOP Shares | Total | ||||||||||||||||||||||
| Balance, December 31, 2023 | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | |||||||||||||||
| Net income | ||||||||||||||||||||||||||||
| Other comprehensive loss | ( | ) | ( | ) | ||||||||||||||||||||||||
| Change related to ESOP shares | ( | ) | ( | ) | ||||||||||||||||||||||||
| Balance, March 31, 2024 | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | |||||||||||||||
| Net income | ||||||||||||||||||||||||||||
| Other comprehensive loss | ( | ) | ( | ) | ||||||||||||||||||||||||
| Change related to ESOP shares | ||||||||||||||||||||||||||||
| Cash dividends declared ($0.72 per share) | ( | ) | ( | ) | ||||||||||||||||||||||||
| Balance, June 30, 2024 | $ | $ | 1,899 | $ | 63,568 | $ | (5,058 | ) | $ | (7,731 | ) | $ | (1,502 | ) | $ | 53,336 | ||||||||||||
| Net income | 1,381 | |||||||||||||||||||||||||||
| Other comprehensive income | - | - | 1,966 | - | - | 1,966 | ||||||||||||||||||||||
| Change related to ESOP shares | - | - | - | - | (450 | ) | (450 | ) | ||||||||||||||||||||
| Balance, September 30, 2024 | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | |||||||||||||||
| Accumulated Other | Maximum Cash Obligation | |||||||||||||||||||||||||||||||
| Common Stock | Capital Surplus | Retained Earnings | Comprehensive (Loss) | Treasury Stock | Unearned ESOP Shares | Related to ESOP Shares | Total | |||||||||||||||||||||||||
| Balance, December 31, 2024 | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | $ | ( | ) | $ | ||||||||||||||||||
| Net income | ||||||||||||||||||||||||||||||||
| Other comprehensive income | ||||||||||||||||||||||||||||||||
| Change related to ESOP shares | ||||||||||||||||||||||||||||||||
| Balance, March 31, 2025 | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | $ | ( | ) | $ | ||||||||||||||||||
| Net income | ||||||||||||||||||||||||||||||||
| Other comprehensive income | ||||||||||||||||||||||||||||||||
| Change related to ESOP shares | ( | ) | ( | ) | ||||||||||||||||||||||||||||
| Cash dividends declared ($0.74 per share) | ( | ) | ( | ) | ||||||||||||||||||||||||||||
| Balance, June 30, 2025 | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | $ | ( | ) | $ | ||||||||||||||||||
| Net income | ||||||||||||||||||||||||||||||||
| Other comprehensive income | ||||||||||||||||||||||||||||||||
| NUBC Acquisition | ||||||||||||||||||||||||||||||||
| Unearned ESOP shares assumed | ( | ) | ( | ) | ||||||||||||||||||||||||||||
| Change related to ESOP shares | ( | ) | ( | ) | ||||||||||||||||||||||||||||
| Balance, September 30, 2025 | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ||||||||||||||||
See accompanying notes to consolidated financial statements.
Steele Bancorp, Inc. and Subsidiary
Consolidated Statements of Cash Flows
(Unaudited)
(in thousands)
| Nine Months Ended September 30, |
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| Cash Flows from Operating Activities |
2025 |
2024 |
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| Net income |
$ | $ | ||||||
| Adjustments to reconcile net income to net cash provided by operating activities: |
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| Depreciation |
||||||||
| Net accretion of acquisition accounting adjustments |
( |
) | ||||||
| Net accretion of discounts and premiums on securities |
( |
) | ( |
) | ||||
| Bargain purchase gain |
( |
) | ||||||
| Deferred income tax benefit |
( |
) | ( |
) | ||||
| Provision for credit losses |
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| Decrease (increase) in accrued interest receivable |
( |
) | ||||||
| (Decrease) increase in accrued interest payable |
( |
) | ||||||
| Increase in cash surrender value of bank owned life insurance |
( |
) | ( |
) | ||||
| Net marketable equity security (gains) losses |
( |
) | ||||||
| Origination of loans held for sale |
( |
) | ( |
) | ||||
| Proceeds from loans sold |
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| Gain on sale of loans |
( |
) | ( |
) | ||||
| (Gain) loss on disposition of premises and equipment |
( |
) | ||||||
| Realized loss on sale of securities |
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| (Gain) loss on sale of foreclosed real estate |
( |
) | ||||||
| Change in other assets and liabilities, net |
( |
) | ||||||
| Net Cash Provided by Operating Activities |
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| Cash Flows from Investing Activities |
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| Debt securities available-for-sale: |
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| Purchases |
( |
) | ( |
) | ||||
| Proceeds from paydowns, maturities and calls |
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| Proceeds from sales |
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| Net increase in loans |
( |
) | ( |
) | ||||
| Decrease of interest-bearing time deposits |
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| Increase (decrease) in restricted investments in bank stock |
( |
) | ||||||
| Proceeds from sale of premises and equipment |
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| Proceeds from sale of foreclosed real estate |
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| Purchases of premises and equipment |
( |
) | ( |
) | ||||
| Cash acquired in the acquisition of NUBC, net of cash paid |
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| Net Cash Provided By (Used in) Investing Activities |
( |
) | ||||||
| Cash Flows from Financing Activities |
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| Increase in deposits |
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| Proceeds from Federal Home Loan Bank advances |
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| Repayment of Federal Home Loan Bank advances |
( |
) | ( |
) | ||||
| Decrease in Federal Funds purchased |
( |
) | ||||||
| Increase (decrease) in repurchase agreements |
( |
) | ||||||
| Dividends paid on common stock |
( |
) | ( |
) | ||||
| Net Cash (Used In) Provided by Financing Activities |
( |
) | ||||||
| Net increase in cash and cash equivalents |
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| Cash and Cash Equivalents, Beginning of Year |
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| Cash and Cash Equivalents, End of Year |
$ | $ | ||||||
| Supplementary Cash Flows Information |
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| Interest paid |
$ | $ | ||||||
| Income taxes paid |
$ | $ | ||||||
| Supplementary Disclosure of Noncash Transactions |
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| Other real estate acquired in settlement of loans |
$ | $ | ||||||
| Increase in maximum cash obligation related to ESOP shares |
$ | $ | ||||||
| ROU assets acquired in exchange for lease liabilities |
$ | $ | ||||||
See accompanying notes to consolidated financial statements.
1. Description of Business and Summary of Significant Accounting Policies
Steele Bancorp, Inc. (the Bancorp) is a Pennsylvania Corporation organized as the holding company of Central Penn Bank & Trust (the Bank) (collectively, the "Company"). The Bank is a state chartered commercial bank located in Mifflinburg, Pennsylvania, whose principal sources of revenues are derived from its commercial, mortgage, residential real estate, and consumer loan financing as well as a variety of deposit services provided to customers serviced by its thirteen offices. Milestone Insurance Services, LLC (Milestone) was formed in 2003 and is a wholly owned subsidiary of the Bank. Milestone is licensed to sell title insurance. The Bancorp is supervised by the Board of Governors of the Federal Reserve System while the Bank is subject to regulation and supervision by the Federal Deposit Insurance Company and the Pennsylvania Department of Banking and Securities.
Basis of Presentation
The accompanying unaudited consolidated financial statements have been prepared in accordance with Generally Accepted Accounting Principles ("GAAP") for interim reporting and with applicable quarterly reporting regulations for the U.S. Securities and Exchange Commission ("SEC"). They do not include all of the information and notes required by GAAP for complete financial statements. As such, these consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto as of and for the year ended December 31, 2024, included in the Company's Special Financial Report on Form 10-K for the year ended December 31, 2024 ("2024 Form 10-K").
Application of the principles of GAAP and practices within the banking industry requires management to make estimates, assumptions and judgements that affect the amounts reported in the financial statements and accompanying notes. These estimates, assumptions, and judgements are based on information available as of the date of the financial statements; accordingly, as this information changes, the financial statements may reflect different estimates, assumptions and judgements. Certain policies inherently rely more extensively on the use of estimates, assumptions, and judgements and as such may have a greater possibility of producing results that could be materially different than originally reported. Material estimates that are particularly susceptible to significant change in the near term relate to the determination of the allowance for credit losses on loans and acquisition accounting.
The results of operations for the three and nine months ended September 30, 2025, is not necessarily indicative of results of operations for the full year or any other interim period. The Company's significant accounting policies followed in preparation of the unaudited consolidated financial statements are disclosed in Note 1 of the 2024 Form 10-K. In addition to applying significant accounting policies disclosed in Note 1 of the 2024 Form 10-K, the Company implemented accounting policies appropriate for its merger with Northumberland Bancorp (“NUBC”). Business combinations are accounted for under Accounting Standards Codification (“ASC”) 805, Business Combinations, using the acquisition method of accounting. The acquisition method of accounting requires an acquirer to recognize the assets acquired and the liabilities assumed at the acquisition date measured at their fair values as of that date. To determine the fair values, the Company relies on internal or third-party valuations, such as appraisals, valuations based on discounted cash flow analyses, or other valuation techniques.
Under the acquisition method of accounting, the Company identifies the acquirer and the closing date and applies applicable recognition principles and conditions. Acquisition-related costs are costs the Company incurs to effect a business combination. Those costs include advisory, legal, accounting, valuation, and other professional or consulting fees. Some other examples of costs to the Company include systems conversions, integration planning consultants and advertising costs. The Company accounts for acquisition-related costs as expenses in the periods in which the costs are incurred and the services are received, with one exception. The costs to issue debt or equity securities are recognized in accordance with other applicable GAAP. These acquisition-related costs have been and will be included within the consolidated statements of income classified within the noninterest expenses caption.
The most significant assessment of fair value in the Company’s accounting for business combinations relates to the valuation of an acquired loan portfolio. At acquisition, loans are classified as either (i) purchase credit-deteriorated (“PCD”) loans or (ii) non-PCD loans and are recorded at fair value on the date of acquisition. PCD loans are those for which there is more than insignificant evidence of credit deterioration since origination. Fair values are determined primarily through a discounted cash flow approach which considers the acquired loans’ underlying characteristics, including account types, remaining terms, annual interest rates, interest types, timing of principal and interest payments, current market rates, and remaining balances. Estimates of fair value also include estimates of default, loss severity, and estimated prepayments.
At acquisition, an allowance for credit losses (“ACL”) for PCD loans is determined based upon the Company’s methodology for estimating the ACL on loans. This allowance is credited to the ACL on loans with a corresponding adjustment to the amortized cost basis of the loan on the date of the acquisition. The difference between the new amortized cost basis and the unpaid principal balance is either a noncredit discount or premium that is amortized or accreted to interest income over the remaining life of the loan. Disposals of PCD loans, which may include sale of loans to third parties, receipt of payments in full or in part from the borrower or foreclosure of the collateral, result in removal of the loan from the loan portfolio at its carrying amount.
For non-PCD loans, an ACL is established in a manner that is consistent with the Company’s originated loans. The ACL is determined using the Company’s methodology and the related ACL for non-PCD loans is recorded through a charge to the provision for credit losses in the period in which the loans are purchased or acquired. The entirety of any purchase discount or premium on non-PCD loans is amortized or accreted to interest income over the remaining life of the loan.
In accordance with ASC 805, the Company also identified intangible assets acquired. Other intangible assets lack physical substance but have contractual or other legal rights or are capable of being sold or exchanged either on their own or in combination with a related contract, asset or liability. Intangible assets are initially recorded at fair value. Determining fair value is subjective, requiring the use of estimates, assumptions and management judgment. Intangible assets that have finite lives are amortized over their estimated useful lives and are subject to impairment testing. Upon acquisition of NUBC, the Company recognized a core deposit intangible asset, which represents the value of customer deposit relationships. Core deposit intangible assets are amortized over an estimated useful life of 10 years using an accelerated method which approximates the estimated attrition of the acquired deposits.
Certain items in the prior period financial statement have been reclassified to conform to the current presentation. These reclassifications had no effect on prior year net income or stockholder's equity.
The accounting policies followed by the Company and the methods of applying these policies conform with accounting principles generally accepted in the United States of America (GAAP) and with general practices within the banking industry. All significant intercompany accounts and transactions between the Company and its subsidiary have been eliminated. The accompanying interim period financial statements are unaudited; however, in the opinion of the Company's management, all adjustments consisting of normal recurring adjustments, which are necessary for a fair presentation of the consolidated financial statements have been included.
Recent Accounting Pronouncements
In December 2023, the Financial Accounting Standards Board (FASB) issued ASU 2023-09, “Income Taxes (Topic 740): Improvements to Income Tax Disclosures.” The amendments in this ASU require an entity to disclose specific categories in the rate reconciliation and provide additional information for reconciling items that meet a quantitative threshold, which is greater than five percent of the amount computed by multiplying pretax income by the entity’s applicable statutory rate, on an annual basis. Additionally, the amendments in this ASU require an entity to disclose the amount of income taxes paid (net of refunds received) disaggregated by federal, state, and foreign taxes and the amount of income taxes paid (net of refunds received) disaggregated by individual jurisdictions that are equal to or greater than five percent of total income taxes paid (net of refunds received). Lastly, the amendments in this ASU require an entity to disclose income (or loss) from continuing operations before income tax expense (or benefit) disaggregated between domestic and foreign and income tax expense (or benefit) from continuing operations disaggregated by federal, state, and foreign. This ASU is effective for annual periods beginning after December 15, 2024. Early adoption is permitted. The amendments should be applied on a prospective basis; however, retrospective application is permitted. The Company does not expect the adoption of ASU 2023-09 to have a material impact on its consolidated financial statements.
In November 2024, the Financial Accounting Standards Board (FASB) issued ASU 2024-03, “Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses.” ASU 2024-03 requires public companies to disclose, in the notes to the financial statements, specified information about certain costs and expenses at each interim and annual reporting period. This includes disclosing amounts related to employee compensation, depreciation, and intangible asset amortization. In addition, public companies will need to provide qualitative description of the amounts remaining in relevant expense captions that are not separately disaggregated quantitatively. ASU 2024-03 is effective for public business entities for annual reporting periods beginning after December 15, 2026, and interim reporting periods beginning after December 15, 2027. Implementation of ASU 2024-03 may be applied prospectively or retrospectively. The Company does not expect the adoption of ASU 2024-03 to have a material impact on its consolidated financial statements.
In January 2025, the Financial Accounting Standards Board (FASB) issued ASU 2025-01, “Income Statement – Reporting Comprehensive Income – Expense Disaggregation Disclosures (Subtopic 220-40): Clarifying the Effective Date.” ASU 2025-01 amends the effective date of ASU 2024-03 to clarify that all public business entities are required to adopt the guidance in annual reporting periods beginning after December 15, 2026, and interim periods within annual reporting periods beginning after December 15, 2027. Early adoption of Update ASU 2024-03 is permitted. The Company does not expect the adoption of ASU-2025-01 to have a material impact on its consolidated financial statements.
Common stock held by ESOP
The Company classifies equity securities as temporary equity if those securities are redeemable at the option of the holder or upon the occurrence of an event not solely within the issuer control. Thus, shares of common stock held by an ESOP, whether non-leveraged or leveraged, that are redeemable at the option of the participant must be classified within temporary equity and classified as Redeemable Common Stock Held By Employee Stock Ownership Plan. Changes in the value of the redeemable ESOP shares are recognized in the Maximum Cash Obligation Related to ESOP shares as a component of stockholders’ equity.
The Company’s maximum cash obligations related to these shares is classified outside stockholders’ equity because the shares are not readily traded and could be put to the Company for cash.
2. Business Combinations
On August 1, 2025 (the “Acquisition Date”), the Company completed the acquisition of Northumberland Bancorp ("NUBC"), in accordance with the definitive agreement that was entered into on September 24, 2024, as amended on December 4, 2024, by and among the Company and NUBC. The primary reasons for the merger included: expansion of the branch network and increased market share positions in central Pennsylvania; attractive low-cost funding base; strong cultural alignment and a deep commitment to shareholders, customers, employees, and communities served by Steele and NUBC, meaningful value creation to shareholders; and increased trading liquidity for both companies and increased dividends for NUBC shareholders. In connection with the completion of the merger, former NUBC shareholders received
The acquisition of NUBC was accounted for as a business combination using the acquisition method of accounting and, accordingly, assets acquired, liabilities assumed, and consideration paid are recorded at estimated fair values on the Acquisition Date. The provisional amount of bargain purchase gain as of the Acquisition Date was approximately $
As a result of the integration of operations of NUBC, it is not practicable to determine revenue or net income included in the Company’s consolidated operating results relating to NUBC since the Acquisition Date, as NUBC’s results cannot be separately identified. Comparative pro-forma financial statements for the prior year period were not presented, as adjustments to those statements would not be indicative of what would have occurred had the acquisition taken place on January 1, 2025. In particular, adjustments that would have been necessary to be made to record the loans at fair value, the provision of credit losses or the core deposit intangible would not be practical to estimate.
| The following table summarizes the consideration paid for NUBC and the amounts of the assets acquired and liabilities assumed | ||||||||
| recognized at the acquisition date of August 1, 2025: | ||||||||
| (in thousands, Except Share and Per Share Data) | ||||||||
| Purchase Price Consideration | ||||||||
| Mifflinburg Bancorp, Inc. shares to be issued | ||||||||
| Per share value assigned to shares issued | $ | |||||||
| Total purchase price assigned to shares issued | $ | |||||||
| Cash in lieu of fractional shares | ||||||||
| Dissenter's shares (1) | ||||||||
| Fair value of Dissenter's shares | $ | |||||||
| Total fair value of Dissenter's shares | ||||||||
| Fair value of total consideration transferred | $ | |||||||
| Recognized amounts of identifiable assets acquired and liabilities assumed, at fair value | ||||||||
| Cash and cash equivalents | $ | |||||||
| Securities, available for sale | ||||||||
| Loans held for sale | ||||||||
| Loans gross | ||||||||
| Allowance for credit losses | ( | ) | ||||||
| Loans, net of allowance | ||||||||
| Bank owned life insurance | ||||||||
| Premises | ||||||||
| Furniture, fixtures and equipment | ||||||||
| Accrued interest receivable | ||||||||
| Restricted investment in bank stock | ||||||||
| Deferred tax asset | ||||||||
| Core deposit intangible | ||||||||
| Customer list intangibles | ||||||||
| Operating lease right of use asset | ||||||||
| Other assets | ||||||||
| Total identifiable assets acquired at fair value | $ | |||||||
| Deposits | $ | |||||||
| Borrowings | ||||||||
| Subordinated debt | ||||||||
| Accrued interest payable | ||||||||
| Operating lease liability | ||||||||
| Other liabilities | ||||||||
| Total liabilities assumed | $ | |||||||
| Total identifiable net assets, at fair value | $ | |||||||
| Preliminary bargain purchase gain | $ | |||||||
(1) NUBC stockholder with
The Company recorded all loans acquired at the estimated fair value on the acquisition date with no carryover of the related allowance for loan losses. The Company determined the net discounted value of cash flows on gross loans totaling $
Management made significant estimates and exercised significant judgement in accounting for the acquisition of NUBC. The following is a brief description of the valuation methodologies used to estimate the fair values of major categories of assets acquired and liabilities assumed. The Company utilized a valuation specialist to assist with the determination of fair values for certain acquired assets and assumed liabilities.
Cash and equivalents
Included in cash and equivalents are an investment in time deposits of other financial institutions, valued at the present value of the expected contractual payments discounted at market rates for instruments with similar terms.
Securities
The estimated fair value of the acquired portfolio of debt securities was based on quoted market prices. The Company sold available-for-sale securities with a total par value of $
Loans
The fair valuation process identified loans with credit risk indicators that qualified for “purchase credit deteriorated” (“PCD”) status. PCD and non-PCD loans were then evaluated for credit risk and other fair value indicators. Consistent with GAAP, FCB’s related allowance for credit losses on loans and deferred fees and costs were not recorded.
Credit risk was quantified using a probability of default (“PD”)/loss given default(“LGD”) methodology from a market participant perspective and applied to each loan’s outstanding principal balance. PD/LGD rates were tailored to PCD or non-PCD status. Other fair value indicators were quantified using a discounted cash flow methodology, with discounts applied for current market rates, credit risk and liquidity. Cash flows were generated based upon the loans’ underlying characteristics and estimated prepayment speeds.
The following table provides information on PCD and non-PCD loans as of the Acquisition Date:
| August 1, 2025 | ||||||||
| (Dollars in Thousands) | PCD Loans | Non-PCD Loans | ||||||
| Number of loans | ||||||||
| NUBC recorded value | $ | $ | ||||||
| Discount for credit risk | ( | ) | ( | ) | ||||
| Discount for non-credit factors | ( | ) | ( | ) | ||||
| Fair value | $ | $ | ||||||
Premises and equipment
The fair value of premises acquired was based on a recent third-party appraisal. Acquired equipment was based on the remaining net book value of NUBC, which approximated fair value.
Core Deposit Intangible
Core deposit relationships provide a stable source of funds for lending and contribute to profitability. The core deposit intangible was valued using an income approach focused on cost savings, which recognizes the cost savings represented by the expense of maintaining the core deposit base versus the cost of an alternative funding source. The valuation incorporates assumptions related to account retention, discount rates, deposit interest rates, deposit maintenance costs and alternative funding rates.
Leases: right of use asset, lease liability and fair value
Right of use assets (included in other assets) and lease liabilities (included in other liabilities) for branch locations were measured at the acquisition date. The fair value of leases was determined by applying a discounted cash flow methodology discounted by current lease rates within the appropriate market.
Deposits
Deposits were valued using methods appropriate to their characteristics. The fair value of noninterest bearing demand deposits, interest bearing demand deposits, money market and savings deposit accounts were assumed to approximate the carrying value as these accounts have no stated maturity and are payable on demand. Time deposits were valued at the present value of the expected contractual payments discounted at market rates for instruments with similar terms.
Borrowings
The estimated fair value of borrowings was determined by obtaining payoff quotes from the lender. Borrowings were paid off upon completion of the acquisition.
Subordinated Debt
The estimated fair value of subordinated debt was determined by the present value of the expected contractual payments discounted by market rates for similar subordinated debt market rates estimate.
Customer List Intangible Asset ("CLI")
The customer list intangible asset fair value is derived from the revenues generated by NUBC's Trust and Financial Services Divisions.
Mortgage Servicing Rights
The estimated fair value of mortgage servicing rights was determined through a discounted cash flow analysis and calculated using a computer pricing model.
Deferred Tax Asset
Application of fair value measurements resulted in an increase to the deferred tax asset, included in other assets.
3. Securities
The amortized cost and fair value of debt securities available-for-sale along with gross unrealized gains and losses as of the dates indicated are summarized as follows (in thousands):
| September 30, 2025 | December 31, 2024 | |||||||||||||||||||||||||||||||
| Gross | Gross | Gross | Gross | |||||||||||||||||||||||||||||
| Amortized | Unrealized | Unrealized | Fair | Amortized | Unrealized | Unrealized | Fair | |||||||||||||||||||||||||
| Cost | Gains | Losses | Value | Cost | Gains | Losses | Value | |||||||||||||||||||||||||
| U.S. Treasury | $ | $ | $ | $ | $ | $ | $ | ( | ) | $ | ||||||||||||||||||||||
| U.S. government agencies | ( | ) | ( | ) | ||||||||||||||||||||||||||||
| Taxable state and municipal | ( | ) | ( | ) | ||||||||||||||||||||||||||||
| Tax exempt state and municipal | ( | ) | ( | ) | ||||||||||||||||||||||||||||
| U.S. government sponsored enterprise mortgage-backed | ( | ) | ( | ) | ||||||||||||||||||||||||||||
| Corporate | ( | ) | ( | ) | ||||||||||||||||||||||||||||
| Total debt securities available-for-sale | $ | $ | $ | ( | ) | $ | $ | $ | $ | ( | ) | $ | ||||||||||||||||||||
Accrued interest receivable on available-for-sale securities totaled $
The deferred tax asset for the net unrealized loss on securities available for sale was $
The amortized cost and estimated fair value of debt securities available-for-sale at September 30, 2025, by expected maturity for mortgage-backed securities and debt securities with call features and by contractual maturity for all other securities, are shown below. Expected maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties (in thousands).
| Amortized | Fair | |||||||
| Cost | Value | |||||||
| Due in one year or less | $ | $ | ||||||
| Due after one year through five years | ||||||||
| Due after five years through ten years | ||||||||
| Due after ten years | ||||||||
| Total | $ | $ | ||||||
The following tables show the Company's debt securities available-for-sale gross unrealized losses and fair value, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position, as of September 30, 2025 and December 31, 2024 (in thousands):
| September 30, 2025 | Less than 12 Months | 12 Months or Longer | Total | |||||||||||||||||||||
| Unrealized | Unrealized | Unrealized | ||||||||||||||||||||||
| Fair Value | Losses | Fair Value | Losses | Fair Value | Losses | |||||||||||||||||||
| U.S. Treasury | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
| U.S. government agencies | ||||||||||||||||||||||||
| Taxable state and municipal | ||||||||||||||||||||||||
| Tax-exempt state and municipal | ||||||||||||||||||||||||
| U.S. government sponsored enterprise mortgage-backed | ||||||||||||||||||||||||
| Corporate | ||||||||||||||||||||||||
| Total debt securities available-for-sale | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
| December 31, 2024 | Less than 12 Months | 12 Months or Longer | Total | |||||||||||||||||||||
| Unrealized | Unrealized | Unrealized | ||||||||||||||||||||||
| Fair Value | Losses | Fair Value | Losses | Fair Value | Losses | |||||||||||||||||||
| U.S. Treasury | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
| U.S. government agencies | ||||||||||||||||||||||||
| Taxable state and municipal | ||||||||||||||||||||||||
| Tax-exempt state and municipal | ||||||||||||||||||||||||
| U.S. government sponsored enterprise mortgage-backed | ||||||||||||||||||||||||
| Corporate | ||||||||||||||||||||||||
| Total debt securities available-for-sale | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
At September 30, 2025, the $
The Company considers payment history, risk ratings from external parties, financial statements for municipal and corporate securities, public statements from issuers and other available credible published sources in evaluating credit risk. No credit risk was found and
During the three and nine months ended September 30, 2025, the Company sold available-for-sale securities with a total par value of $
The Company did not sell or recognize any gain or loss for any securities for the three and nine months ended September 30, 2024.
Securities with a carrying value of $
As of September 30, 2025 and December 31, 2024, the Company had $
| Three Months Ended September 30, 2025 | Three Months Ended September 30, 2024 | Nine Months Ended September 30, 2025 | Nine Months Ended September 30, 2024 | |||||||||||||
| Net change in the unrealized gain (loss) recognized during the period on marketable equity securities | $ | $ | ( | ) | $ | $ | ( | ) | ||||||||
| Add: Net realized gain (loss) recognized on marketable equity securities sold during the period | ||||||||||||||||
| Net gain (loss) recognized in net income during the period on marketable equity securities still held at the reporting date | $ | $ | ( | ) | $ | $ | ( | ) | ||||||||
Restricted Investments in Bank and Other Stock
Restricted investments in bank stock represent required investments in the common stock of correspondent banks and consist of common stock of the Federal Home Loan Bank of Pittsburgh (FHLB) of $
4. Loans and Other Real Estate Owned ("OREO")
Major categories of loans are summarized as follows as of September 30, 2025 and December 31, 2024 (in thousands):
| 2025 | 2024 | |||||||
| Commercial | $ | $ | ||||||
| Commercial real estate | ||||||||
| Residential mortgage | ||||||||
| Home equity | ||||||||
| Consumer, other | ||||||||
| Consumer, automobile | ||||||||
| Less: net deferred loan fees | ( | ) | ( | ) | ||||
| Total loans net of deferred loan fees | ||||||||
| Less: allowance for credit losses | ( | ) | ( | ) | ||||
| Net Loans | $ | $ | ||||||
The Company has elected to exclude accrued interest from the amortized cost basis in its determination of the allowance for credit losses for loans, as well as elected the policy to write-off accrued interest receivable directly through the reversal of interest income. Accrued interest receivable totaled $
An initial allowance for credit losses on non-PCD loans of $
The following table provides details related to the fair value of acquired PCD loans:
| (Dollars in Thousands) | Par Value | Purchase (Premium) Discount | Allowance | Purchase Price | ||||||||||||
| Commercial | $ | $ | ( | ) | $ | $ | ||||||||||
| Commercial Real Estate | ( | ) | ||||||||||||||
| Residential Mortgage | ( | ) | ||||||||||||||
| Home Equity | ||||||||||||||||
| Consumer - Other | ( | ) | ||||||||||||||
| Consumer - Auto | ||||||||||||||||
| Total | $ | $ | ( | ) | $ | $ | ||||||||||
The following table provides details related to the fair value of acquired Non-PCD loans:
| (Dollars in Thousands) | Par Value | Purchase (Premium) Discount | Purchase Price | |||||||||
| Commercial | $ | $ | ( | ) | $ | |||||||
| Commercial Real Estate | ( | ) | ||||||||||
| Residential Mortgage | ( | ) | ||||||||||
| Home Equity | ( | ) | ||||||||||
| Consumer - Other | ( | ) | ||||||||||
| Consumer - Auto | ||||||||||||
| Total | $ | $ | ( | ) | $ | |||||||
Other Real Estate Owned
Foreclosed assets held for sale consist of real estate acquired in settlement of foreclosed loans and is initially recorded at fair value less estimated costs to sell at the time of transfer from loans to foreclosed, establishing a new cost basis. Subsequent to the transfer, foreclosed assets are carried at the lower of the adjusted cost or fair value less costs to sell. Additional write-downs are charged against operating expenses. Costs related to the acquisition and holding of foreclosed assets are charged to operations when incurred. The fair value of real estate acquired through foreclosure is generally determined by reference to an outside appraisal. The Company did not hold any foreclosed assets as of September 30, 2025 and December 31, 2024. At September 30, 2025 there were
Mortgage Servicing
The Company retains the servicing rights on certain mortgage loans sold to the FHLB and Fannie Mae and receives mortgage banking fee income based upon the principal balance outstanding. The mortgage servicing rights recorded as an asset are not material. Total loans serviced for the FHLB and Fannie Mae amounted to $
5. Allowance for Credit Losses
Credit Quality Indicators
A Loan Risk Rating Grading System has been developed and is being utilized to categorize loans with similar characteristics. There are six (6) “Pass” Ratings and the standard “Classified” Watchlist Ratings. The loans are assessed based upon the information in the Loan Committee Package and a lender identified score. Further, any reassessment would be performed when the annual loan review is performed or when the loan account exhibits signs of financial difficulty or improvement. The definition of each Loan Risk Rating is outlined below:
Pass (Grades 1-6) – These loans are to customers with credit quality ranging from an acceptable to very high quality and are protected by the current net worth and paying capacity of the obligor or by the value of the underlying collateral.
Special Mention (Grade 7) – This loan grade is in accordance with regulatory guidance and includes loans where a potential weakness or risk exists, which could cause a more serious problem if not corrected.
Substandard (Grade 8) – This loan grade is in accordance with regulatory guidance and includes loans that have a well-defined weakness based on objective evidence and are characterized by the distinct possibility that the Company will sustain some loss if the deficiencies are not corrected.
Doubtful (Grade 9) – This loan grade is in accordance with regulatory guidance and includes loans that have all the weaknesses inherent in a substandard asset. In addition, these weaknesses make collection or liquidation in full highly questionable and improbable, based on existing circumstances.
Loss (Grade 10) – This loan grade is in accordance with regulatory guidance and includes loans that are considered uncollectible, or of such value that continuance as an asset is not warranted.
To help ensure that risk ratings are accurate and reflect the present and future capacity of borrowers to repay the loan as agreed, the Company’s loan rating process includes several layers of internal and external oversight. The Company’s loan officers are responsible for the timely and accurate risk rating of the loans in each of their portfolios at origination and on an ongoing basis under the supervision of management. All commercial, agricultural and state and political relationships over $
The following tables present the classes of the loan portfolio summarized by the aggregate pass rating and the classified ratings of special mention, substandard and doubtful within the Company's internal risk rating system as of September 30, 2025 and December 31, 2024 and gross year-to-date charge-offs for the respective periods (in thousands):
| Term Loans by Year of Origination | ||||||||||||||||||||||||||||||||
| September 30, 2025 | 2025 | 2024 | 2023 | 2022 | 2021 | Prior | Revolving | Total | ||||||||||||||||||||||||
| Commercial | ||||||||||||||||||||||||||||||||
| Pass | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
| Special Mention | ||||||||||||||||||||||||||||||||
| Substandard | ||||||||||||||||||||||||||||||||
| Doubtful | ||||||||||||||||||||||||||||||||
| Loss | ||||||||||||||||||||||||||||||||
| Commercial – Total | ||||||||||||||||||||||||||||||||
| Current Year Gross Charge-Offs | ||||||||||||||||||||||||||||||||
| Commercial Real Estate | ||||||||||||||||||||||||||||||||
| Pass | ||||||||||||||||||||||||||||||||
| Special Mention | ||||||||||||||||||||||||||||||||
| Substandard | ||||||||||||||||||||||||||||||||
| Doubtful | ||||||||||||||||||||||||||||||||
| Loss | ||||||||||||||||||||||||||||||||
| Commercial Real Estate – Total | ||||||||||||||||||||||||||||||||
| Current Year Gross Charge-Offs | ||||||||||||||||||||||||||||||||
| Residential Mortgage | ||||||||||||||||||||||||||||||||
| Pass | ||||||||||||||||||||||||||||||||
| Special Mention | ||||||||||||||||||||||||||||||||
| Substandard | ||||||||||||||||||||||||||||||||
| Doubtful | ||||||||||||||||||||||||||||||||
| Loss | ||||||||||||||||||||||||||||||||
| Residential Mortgage – Total | ||||||||||||||||||||||||||||||||
| Current Year Gross Charge-Offs | ||||||||||||||||||||||||||||||||
| Home Equity | ||||||||||||||||||||||||||||||||
| Pass | ||||||||||||||||||||||||||||||||
| Special Mention | ||||||||||||||||||||||||||||||||
| Substandard | ||||||||||||||||||||||||||||||||
| Doubtful | ||||||||||||||||||||||||||||||||
| Loss | ||||||||||||||||||||||||||||||||
| Home Equity – Total | ||||||||||||||||||||||||||||||||
| Current Year Gross Charge-Offs | ||||||||||||||||||||||||||||||||
| Consumer - Other | ||||||||||||||||||||||||||||||||
| Pass | ||||||||||||||||||||||||||||||||
| Special Mention | ||||||||||||||||||||||||||||||||
| Substandard | ||||||||||||||||||||||||||||||||
| Doubtful | ||||||||||||||||||||||||||||||||
| Loss | ||||||||||||||||||||||||||||||||
| Consumer - Other – Total | ||||||||||||||||||||||||||||||||
| Current Year Gross Charge-Offs | ||||||||||||||||||||||||||||||||
| Consumer – Auto | ||||||||||||||||||||||||||||||||
| Pass | ||||||||||||||||||||||||||||||||
| Special Mention | ||||||||||||||||||||||||||||||||
| Substandard | ||||||||||||||||||||||||||||||||
| Doubtful | ||||||||||||||||||||||||||||||||
| Loss | ||||||||||||||||||||||||||||||||
| Consumer - Auto – Total | ||||||||||||||||||||||||||||||||
| Current Year Gross Charge-Offs | ||||||||||||||||||||||||||||||||
| Overall – Total | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
| Term Loans by Year of Origination | ||||||||||||||||||||||||||||||||
| December 31, 2024 | 2024 | 2023 | 2022 | 2021 | 2020 | Prior | Revolving | Total | ||||||||||||||||||||||||
| Commercial | ||||||||||||||||||||||||||||||||
| Pass | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
| Special Mention | ||||||||||||||||||||||||||||||||
| Substandard | ||||||||||||||||||||||||||||||||
| Doubtful | ||||||||||||||||||||||||||||||||
| Loss | ||||||||||||||||||||||||||||||||
| Commercial – Total | ||||||||||||||||||||||||||||||||
| Current Year Gross Charge-Offs | ||||||||||||||||||||||||||||||||
| Commercial Real Estate | ||||||||||||||||||||||||||||||||
| Pass | ||||||||||||||||||||||||||||||||
| Special Mention | ||||||||||||||||||||||||||||||||
| Substandard | ||||||||||||||||||||||||||||||||
| Doubtful | ||||||||||||||||||||||||||||||||
| Loss | ||||||||||||||||||||||||||||||||
| Commercial Real Estate – Total | ||||||||||||||||||||||||||||||||
| Current Year Gross Charge-Offs | ||||||||||||||||||||||||||||||||
| Residential Mortgage | ||||||||||||||||||||||||||||||||
| Pass | ||||||||||||||||||||||||||||||||
| Special Mention | ||||||||||||||||||||||||||||||||
| Substandard | ||||||||||||||||||||||||||||||||
| Doubtful | ||||||||||||||||||||||||||||||||
| Loss | ||||||||||||||||||||||||||||||||
| Residential Mortgage – Total | ||||||||||||||||||||||||||||||||
| Current Year Gross Charge-Offs | ||||||||||||||||||||||||||||||||
| Home Equity | ||||||||||||||||||||||||||||||||
| Pass | ||||||||||||||||||||||||||||||||
| Special Mention | ||||||||||||||||||||||||||||||||
| Substandard | ||||||||||||||||||||||||||||||||
| Doubtful | ||||||||||||||||||||||||||||||||
| Loss | ||||||||||||||||||||||||||||||||
| Home Equity – Total | ||||||||||||||||||||||||||||||||
| Current Year Gross Charge-Offs | ||||||||||||||||||||||||||||||||
| Consumer - Other | ||||||||||||||||||||||||||||||||
| Pass | ||||||||||||||||||||||||||||||||
| Special Mention | ||||||||||||||||||||||||||||||||
| Substandard | ||||||||||||||||||||||||||||||||
| Doubtful | ||||||||||||||||||||||||||||||||
| Loss | ||||||||||||||||||||||||||||||||
| Consumer - Other – Total | ||||||||||||||||||||||||||||||||
| Current Year Gross Charge-Offs | ||||||||||||||||||||||||||||||||
| Consumer – Auto | ||||||||||||||||||||||||||||||||
| Pass | ||||||||||||||||||||||||||||||||
| Special Mention | ||||||||||||||||||||||||||||||||
| Substandard | ||||||||||||||||||||||||||||||||
| Doubtful | ||||||||||||||||||||||||||||||||
| Loss | ||||||||||||||||||||||||||||||||
| Consumer - Auto – Total | ||||||||||||||||||||||||||||||||
| Current Year Gross Charge-Offs | ||||||||||||||||||||||||||||||||
| Overall – Total | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
There were
The performance and credit quality of the loan portfolio is also monitored by analyzing the age of the loans receivable as determined by the length of time a recorded payment is past due. The following tables present the classes of the loan portfolio summarized by past due and nonaccrual status as of September 30, 2025 and December 31, 2024 (in thousands):
| Greater | Total Past | |||||||||||||||||||||||
| than 90 | Due and | Total | ||||||||||||||||||||||
| 30-89 Days | Days and | Non- | Non- | Loans | ||||||||||||||||||||
| September 30, 2025 | Past Due | Accruing | accrual | accrual | Current | Receivable | ||||||||||||||||||
| Commercial | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
| Commercial real estate | ||||||||||||||||||||||||
| Residential mortgage | ||||||||||||||||||||||||
| Home equity | ||||||||||||||||||||||||
| Consumer, other | ||||||||||||||||||||||||
| Consumer, automobile | ||||||||||||||||||||||||
| Total | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
| Greater | Total Past | |||||||||||||||||||||||
| than 90 | Due and | Total | ||||||||||||||||||||||
| 30-89 Days | Days and | Non- | Non- | Loans | ||||||||||||||||||||
| December 31, 2024 | Past Due | Accruing | accrual | accrual | Current | Receivable | ||||||||||||||||||
| Commercial | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
| Commercial real estate | ||||||||||||||||||||||||
| Residential mortgage | ||||||||||||||||||||||||
| Home equity | ||||||||||||||||||||||||
| Consumer, other | ||||||||||||||||||||||||
| Consumer, automobile | ||||||||||||||||||||||||
| Total | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
The following tables present nonaccrual loans, by loan class, as of September 30, 2025 and December 31, 2024 (in thousands):
| Nonaccruals | Nonaccruals | |||||||
| with No | with an | |||||||
| Allowance | Allowance | |||||||
| for Credit | for Credit | |||||||
| September 30, 2025 | Losses | Losses | ||||||
| Commercial | $ | $ | ||||||
| Commercial real estate | ||||||||
| Residential mortgage | ||||||||
| Home equity | ||||||||
| Consumer, other | ||||||||
| Consumer, automobile | ||||||||
| Total | $ | $ | ||||||
| Nonaccruals | Nonaccruals | |||||||
| with No | with an | |||||||
| Allowance | Allowance | |||||||
| for Credit | for Credit | |||||||
| December 31, 2024 | Losses | Losses | ||||||
| Commercial | $ | $ | ||||||
| Commercial real estate | ||||||||
| Residential mortgage | ||||||||
| Home equity | ||||||||
| Consumer, other | ||||||||
| Consumer, automobile | ||||||||
| Total | $ | $ | ||||||
During the three and nine months ended September 30, 2025 and 2024,
The following tables summarize the activity in the allowance for credit losses by loan class for the nine months ended September 30, 2025 and 2024, and the year ended December 31, 2024 and information in regard to the allowance for credit losses and the recorded investment in loans receivable by loan class as of September 30, 2025 and December 31, 2024 (in thousands):
| Beginning | Merger | Provisions | Ending | |||||||||||||||||||||
| September 30, 2025 | Balance | Adjustments | Charge-offs | Recoveries | (Credits) | Balance | ||||||||||||||||||
| Commercial | $ | $ | $ | ( | ) | $ | $ | $ | ||||||||||||||||
| Commercial real estate | ||||||||||||||||||||||||
| Residential mortgage | ||||||||||||||||||||||||
| Home equity | ||||||||||||||||||||||||
| Consumer, other | ( | ) | ||||||||||||||||||||||
| Consumer, automobile | ( | ) | ||||||||||||||||||||||
| Total | $ | $ | $ | ( | ) | $ | $ | $ | ||||||||||||||||
| Beginning | Provisions | Ending | ||||||||||||||||||
| September 30, 2024 | Balance | Charge-offs | Recoveries | (Credits) | Balance | |||||||||||||||
| Commercial | $ | $ | $ | $ | $ | |||||||||||||||
| Commercial real estate | ||||||||||||||||||||
| Residential mortgage | ||||||||||||||||||||
| Home equity | ||||||||||||||||||||
| Consumer, other | ( | ) | ( | ) | ||||||||||||||||
| Consumer, automobile | ( | ) | ||||||||||||||||||
| Unallocated | ( | ) | ||||||||||||||||||
| Total | $ | $ | ( | ) | $ | $ | $ | |||||||||||||
| Beginning | Provision | Ending | ||||||||||||||||||
| December 31, 2024 | Balance | Charge-offs | Recoveries | (Credits) | Balance | |||||||||||||||
| Commercial | $ | $ | $ | $ | $ | |||||||||||||||
| Commercial real estate | ||||||||||||||||||||
| Residential mortgage | ||||||||||||||||||||
| Home equity | ||||||||||||||||||||
| Consumer, other | ( | ) | ( | ) | ||||||||||||||||
| Consumer, automobile | ( | ) | ||||||||||||||||||
| Unallocated | ( | ) | ||||||||||||||||||
| Total | $ | $ | ( | ) | $ | $ | $ | |||||||||||||
| Allowance for Credit Losses | Loans Receivable | |||||||||||||||||||||||
| Ending Balance September 30, 2025 | Ending Balance September 30, 2025 | |||||||||||||||||||||||
| Individually | Collectively | Individually | Collectively | |||||||||||||||||||||
| Evaluated | Evaluated | Total | Evaluated | Evaluated | Total | |||||||||||||||||||
| Commercial | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
| Commercial real estate | ||||||||||||||||||||||||
| Residential mortgage | ||||||||||||||||||||||||
| Home equity | ||||||||||||||||||||||||
| Consumer, other | ||||||||||||||||||||||||
| Consumer, automobile | ||||||||||||||||||||||||
| Total | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
| Allowance for Credit Losses | Loans Receivable | |||||||||||||||||||||||
| Ending Balance December 31, 2024 | Ending Balance December 31, 2024 | |||||||||||||||||||||||
| Individually | Collectively | Individually | Collectively | |||||||||||||||||||||
| Evaluated | Evaluated | Total | Evaluated | Evaluated | Total | |||||||||||||||||||
| Commercial | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
| Commercial real estate | ||||||||||||||||||||||||
| Residential mortgage | ||||||||||||||||||||||||
| Home equity | ||||||||||||||||||||||||
| Consumer, other | ||||||||||||||||||||||||
| Consumer, automobile | ||||||||||||||||||||||||
| Total | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
The Company individually evaluates loans for impairment when a loan meets the following criteria: credit risk rated substandard or doubtful and on non-accrual status, or a previously modified loan that is now past due 30 days or more.
The Company has certain loans for which repayment is dependent upon the operation or sale of collateral when the borrower is experiencing financial difficulty. Under ASU 2016-13, for collateral dependent loans, the Company has adopted the practical expedient to measure the allowance for credit losses based on the fair value of the collateral. The allowance for credit losses is calculated on an individual loan basis on the shortfall between the fair value of the loan's collateral, which is adjusted for liquidation costs, and amortized cost. If the fair value of the collateral exceeds the amortized cost, no allowance is required. The following table details the amortized costs of the collateral dependent loans as of September 30, 2025 and December 31, 2024 (in thousands):
| Real Estate | Other | |||||||||||
| September 30, 2025 | Collateral | Collateral | Total | |||||||||
| Commercial | $ | $ | $ | |||||||||
| Commercial real estate | ||||||||||||
| Residential mortgage | ||||||||||||
| Home equity | ||||||||||||
| Consumer, other | ||||||||||||
| Consumer, automobile | ||||||||||||
| Total | $ | $ | $ | |||||||||
| Real Estate | Other | |||||||||||
| December 31, 2024 | Collateral | Collateral | Total | |||||||||
| Commercial | $ | $ | $ | |||||||||
| Commercial real estate | ||||||||||||
| Residential mortgage | ||||||||||||
| Home equity | ||||||||||||
| Consumer, other | ||||||||||||
| Consumer, automobile | ||||||||||||
| Total | $ | $ | $ | |||||||||
Modifications
In situations where a borrower is experiencing financial difficulty, management grants a concession to the borrower that it would not otherwise consider, and the modification results in a more than insignificant change in contractual cash flows, the related loan is subject to specific disclosure requirements. Management strives to identify borrowers in financial difficulty early and work with them to modify their loans to more affordable terms before their loans reach nonaccrual status. These modified terms may include rate reductions, principal forgiveness, payment forbearance and other actions intended to minimize the economic loss and to avoid foreclosure or repossession of the collateral. Occasionally, we may modify a loan by providing principal forgiveness. In some cases, we will modify a loan by providing multiple types, or combinations, of concessions.
The following table presents the amortized cost basis of loans at September 30, 2025 that were both experiencing financial difficulty and modified during the three and nine months ended September 30, 2025. The percentage of amortized cost basis of loans that were modified to borrowers in financial distress as compared to the amortized cost basis of each financing receivable is also presented below. All loan categories with modifications are included in the table below (in thousands):
| Combination | % of Total | |||||||||||||||||||||||||||
| Term Extension | Class of | |||||||||||||||||||||||||||
| Principal | Payment | Term | Interest Rate | and Payment | Financing | |||||||||||||||||||||||
| September 30, 2025 | Forgiveness | Delay | Extension | Reduction | Delay | Total | Receivable | |||||||||||||||||||||
| Commercial | $ | $ | $ | $ | $ | $ | % | |||||||||||||||||||||
| Total | $ | $ | $ | $ | $ | $ | % | |||||||||||||||||||||
There were
There were
There were
Unfunded Commitments
The Company maintains an allowance for off-balance sheet credit exposures such as unfunded balances for existing lines of credit, commitments to extend future credit, as well as both standby and commercial letters of credit when there is a contractual obligation to extend credit and when this extension of credit is not unconditionally cancellable by the Company. The allowance for off-balance sheet credit exposures is adjusted as a provision for (or recovery of) credit losses and is included in provision for (recovery of) credit losses in the Consolidated Statements of Income. The estimate includes consideration of the likelihood that funding will occur, which is based on a historical funding study derived from internal information, and an estimate of expected credit losses on commitments expected to be funded over its estimated life, which are the same loss rates that are used in computing the allowance for loan credit losses. The allowance for credit losses for unfunded loan commitments of $
| Allowance for | ||||
| Credit Losses | ||||
| Unfunded | ||||
| Commitments | ||||
| Beginning balance, December 31, 2024 | $ | |||
| Provision for credit losses | $ | ( | ) | |
| Ending balance, September 30, 2025 | $ | |||
| Allowance for | ||||
| Credit Losses | ||||
| Unfunded | ||||
| Commitments | ||||
| Beginning balance, December 31, 2023 | $ | |||
| Provision for credit losses | ||||
| Ending balance, September 30, 2024 | $ | |||
6. Intangible Assets – Core Deposit Intangible
The Corporation recorded a core deposit intangible asset in 2025 related to the deposit premium paid for the acquisition of Northumberland Bancorp’s subsidiary, Northumberland National Bank. This intangible asset is being amortized on a sum of the years digits method over
The estimated amortization expense of the core deposit intangible over its remaining life is as follows:
| In Thousands | ||||
| 2025 | $ | |||
| 2026 | ||||
| 2027 | ||||
| 2028 | ||||
| 2029 | ||||
| Thereafter | ||||
| Total | $ |
7. Borrowings and Subordinated Debt
The Company maintains a borrowing agreement with the FHLB of Pittsburgh with an available funding capacity of approximately $
Federal Home Loan Bank advances consist of separate loans with the FHLB of Pittsburgh as of September 30, 2025 and December 31, 2024 as follows (dollars in thousands):
| 2025 | 2024 | |||||||||||||||
| Weighted | Weighted | |||||||||||||||
| Amount | Average Rate | Amount | Average Rate | |||||||||||||
| FHLB fixed-rate advances maturing: | ||||||||||||||||
| 2025 | $ | % | $ | % | ||||||||||||
| 2026 | ||||||||||||||||
| 2027 | ||||||||||||||||
| 2029 | ||||||||||||||||
| Total | $ | $ | ||||||||||||||
Subordinated Debt
As part of the acquisition of Northumberland, the Company acquired previously issued $
The Company may redeem or prepay any or all of the subordinated debt, in whole or in part, without premium or penalty, at any time on or after June 30, 2026, and prior to the maturity date at a price of 100% of the principal amount, plus interest accrued and unpaid to the date of redemption or prepayment.
8. Benefits Plans
Section 401(k) Plan
The Company sponsors a contributory defined contribution Section 401(k) plan covering substantially all employees who have completed one year of service, have worked
The Company has a profit-sharing employer contribution component to the 401(k) Plan. The profit-sharing employer contribution is made at the discretion of management and the Board of Directors based upon current year earnings. The Company's contributions were $
Employee Stock Ownership Plan
In accordance with the Merger Agreement, following the Closing, Mifflinburg shall take steps to merge the assets and liabilities of the Northumberland Bancorp Employee Stock Ownership Plan (the "Northumberland ESOP") with and into the Mifflinburg Bank and Trust Company Employee Stock Ownership Plan (the "Mifflinburg ESOP") in accordance with Section 414(l) of the Code. The participants in the Northumberland ESOP that meet the applicable allocation requirements shall be eligible to share in an allocation under the Mifflinburg ESOP as of December 31, 2025 on the same terms as participants in the Mifflinburg ESOP; provided, however, that for the avoidance of doubt, eligibility requirements for participation and allocation under the Mifflinburg ESOP shall be deemed to have been satisfied by participants in the Northumberland ESOP who have satisfied the participation and allocation requirements under the Northumberland ESOP.
The Company sponsors an Employee Stock Ownership Plan (ESOP) covering substantially all employees who have completed one year of service, have worked
In the event a terminated plan participant desires to sell his or her shares of the Company stock, or for certain employees who elect to diversify their account balances, the Company may be required to purchase the shares from the participant at their fair value. To the extent that shares of common stock held by the ESOP are not readily traded, a sponsor must reflect the maximum cash obligation related to those securities outside of stockholders’ equity.
As of September 30, 2025 and December 31, 2024, the shares held by the ESOP, fair value and maximum cash obligation were as follows:
| As of | September 30, 2025 | December 31, 2024 | ||||||
| Shares held by the ESOP | ||||||||
| Fair value per share | $ | $ | ||||||
| Maximum cash obligation | $ | $ | ||||||
Deferred Directors' Compensation
The Company maintains deferred compensation plans with directors through which the payments of the directors' fees are deferred. The future liability of these agreements, which is payable in ten annual installments, was financed through the purchase of life insurance contracts.
The present value of the future liability of the plans at September 30, 2025 and December 31, 2024 was $
Supplemental Retirement Plans
The Company has an unfunded, non-qualified supplemental executive retirement plan (SERP) for certain key executives. The SERP is designed to provide certain executives, upon attaining age
Bank Owned Life Insurance
The Company invests in bank owned life insurance (BOLI) as a source of funding for employee and director benefit expenses. BOLI involves the purchasing of life insurance by the Company on a chosen group of officers and directors. The Company is the owner and beneficiary of the policies. This life insurance investment is carried at the cash surrender value of the underlying policies. Income from the increase in the cash surrender value of the policies is included with noninterest income on the Consolidated Statements of Income. The policies can be liquidated, if necessary, with tax costs associated. However, the Company intends to hold these policies and accordingly, the Company has not provided for deferred income taxes on the earnings from the increase in cash surrender value.
The Company recognizes a liability for postretirement benefits provided through an endorsed split-dollar life insurance arrangement. The liability for post-retirement benefits under these arrangements was $
The Company holds bank-owned life insurance (BOLI) with a cash value of $
9. Regulatory Matters
Cash and Due from Banks
Deposits with correspondent financial institutions are insured up to $250,000 per institution. The Company maintains cash and cash equivalents with certain correspondent financial institutions in excess of the insured amount.
Regulatory Capital Requirements
The Bank is subject to various regulatory capital requirements administered by the 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 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 its assets, liabilities, and certain off-balance-sheet items as calculated under regulatory accounting practices. The 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 maintenance of minimum amounts and ratios (set forth in the following table) of total capital, Tier 1 capital (as defined in the regulations) and common equity Tier 1 capital to risk-weighted assets, and of Tier 1 capital to average assets. A capital conservation buffer of
The Bank has elected the community bank leverage ratio framework. This framework simplifies the regulatory capital requirements by requiring the Bank meet only the Tier 1 capital to average assets (leverage) ratio. The Bank must only maintain a leverage ratio greater than the
Management believes, as of September 30, 2025, that the Bank meets all capital adequacy requirements to which they are subject. As of September 30, 2025, the most recent notification from the Federal Deposit Insurance Corporation categorized the Bank as well capitalized under the regulatory framework for prompt corrective action. To be categorized as well capitalized, an institution must maintain minimum ratios as set forth in the following tables. There are no conditions or events since that notification that management believes have changed the Bank's category. The Bank's actual capital amounts and ratios are as follows as of September 30, 2025 and December 31, 2024 (dollar in thousands):
| To be Well Capitalized | ||||||||||||||||
| under Prompt Corrective | ||||||||||||||||
| September 30, 2025 | Actual | Action Provisions (CBLR) | ||||||||||||||
| Amount | Ratio | Amount | Ratio | |||||||||||||
| Tier 1 (Core) Capital to average total assets Bank | $ | % | $ | % | ||||||||||||
| To be Well Capitalized | ||||||||||||||||
| under Prompt Corrective | ||||||||||||||||
| December 31, 2024 | Actual | Action Provisions (CBLR) | ||||||||||||||
| Amount | Ratio | Amount | Ratio | |||||||||||||
| Tier 1 (Core) Capital to average total assets Bank | $ | % | $ | % | ||||||||||||
The Federal Reserve Bank has established capital guidelines for bank holding companies. These guidelines allow small bank holding companies, as defined, an exemption from regulatory capital requirements. The Bancorp meets the eligibility criteria and is exempt from regulatory capital requirements.
Dividends
Banking regulations limit the amount of dividends that may be paid by the Bank to the Company without prior regulatory approval and are subject to the minimum capital ratio requirements noted above.
10. Fair Value Measurements
Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. The fair value measurements and disclosure topic specifies a hierarchy of valuation techniques based on whether the inputs to these valuation techniques are observable or unobservable. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect the Company’s market assumptions. U.S. GAAP requires that valuation techniques maximize the use of observable inputs and minimize the use of unobservable inputs.
Fair Value Hierarchy
U.S. GAAP establishes a fair value hierarchy which prioritizes the valuation inputs into three broad levels. Based on the underlying inputs, each fair value measurement in its entirety is reported in one of the three levels. These levels are:
Level 1 - Valuation is based on quoted prices in active markets for identical assets and liabilities that the reporting entity has the ability to access at the measurement date. Level 1 assets and liabilities generally include debt and equity securities that are traded in an active exchange market. Valuations are obtained from readily available pricing sources for market transactions involving identical assets or liabilities.
Level 2 - Valuation is based on inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. The valuation may be based on quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the asset or liability.
Level 3 - Valuation is based on unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. Level 3 assets and liabilities include financial instruments whose value is determined using pricing models, discounted cash flow methodologies, or similar techniques, as well as instruments for which determination of fair value requires significant management judgment or estimation.
An asset or liability's categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement.
Assets and Liabilities Measured at Fair Value on a Recurring Basis
The following describes the valuation techniques used by the Company to measure certain financial assets and liabilities recorded at fair value on a recurring basis in the financial statements:
Securities Available for Sale & Equity Securities
Debt securities available for sale and equity securities are recorded at fair value on a recurring basis. Fair value measurement is based upon quoted market prices, when available (Level 1). If quoted market prices are not available, fair values are measured utilizing independent valuation techniques of identical or similar securities for which significant assumptions are derived primarily from or corroborated by observable market data (Level 2). If the inputs used to provide the evaluation for certain securities are unobservable and/or there is little, if any, market activity then the security would fall to the lowest level of the hierarchy (Level 3).
The Company's investment portfolio is valued using fair value measurements that are considered to be Level 1 or Level 2. The Bank has contracted with a securities portfolio accounting service provider for valuation of its securities portfolio. Most security types are priced using the vendor’s internally developed pricing software, however, subscription pricing services may be used to supplement the internal pricing system. The software uses the discounted cash flow analysis based on the net present value of a security’s projected cash flow to arrive at fair market value. Generally, the methodology involves market quotes, current yields, proprietary models, as well as extensive quality control programs. Valuations for direct obligations of the U.S. Treasury, exchange listed stock and preferred stock are obtained from on-line real-time databases.
The vendor utilizes proprietary valuation matrices for valuing all municipal securities. The initial curves for determining the price, movement, and yield relationships within the municipal matrices are derived from industry benchmark curves or sourced from a municipal trading desk. The securities are further broken down according to issuer, credit support, state of issuance and rating to incorporate additional spreads to the industry benchmark curves.
The following table presents the balances of financial assets measured at fair value on a recurring basis (in thousands):
| Quoted Prices in | Significant | Significant | ||||||||||||||
| Active Markets for | Other Observable | Unobservable | ||||||||||||||
| Identical Assets | Inputs | Inputs | ||||||||||||||
| September 30, 2025 | Total | (Level 1) | (Level 2) | (Level 3) | ||||||||||||
| Debt securities available-for-sale: | ||||||||||||||||
| U.S. Treasury | $ | $ | $ | $ | ||||||||||||
| U.S. government agencies | ||||||||||||||||
| Taxable state and municipal | ||||||||||||||||
| Tax-exempt state and municipal | ||||||||||||||||
| U.S. government sponsored enterprise mortgage-backed | ||||||||||||||||
| Corporate | ||||||||||||||||
| Total Debt Securities Available-for-Sale | $ | $ | $ | $ | ||||||||||||
| Marketable equity securities | $ | $ | $ | $ | ||||||||||||
| Quoted Prices in | Significant | Significant | ||||||||||||||
| Active Markets for | Other Observable | Unobservable | ||||||||||||||
| Identical Assets | Inputs | Inputs | ||||||||||||||
| December 31, 2024 | Total | (Level 1) | (Level 2) | (Level 3) | ||||||||||||
| Debt securities available-for-sale: | ||||||||||||||||
| U.S. Treasury | $ | $ | $ | $ | ||||||||||||
| U.S. government agencies | ||||||||||||||||
| Taxable state and municipal | ||||||||||||||||
| Tax-exempt state and municipal | ||||||||||||||||
| U.S. government sponsored enterprise mortgage-backed | ||||||||||||||||
| Corporate | ||||||||||||||||
| Total Debt Securities Available-for-Sale | $ | $ | $ | $ | ||||||||||||
| Marketable equity securities | $ | $ | $ | $ | ||||||||||||
Assets Measured at Fair Value on a Non-recurring Basis
Certain assets are measured at fair value on a nonrecurring basis in accordance with generally accepted accounting principles. Adjustments to the fair value of these assets usually result from the application of lower-of-cost-or-market accounting or write-downs of individual assets.
Loans Held for Sale
Loans held for sale are carried at the lower of cost of fair value. These loans currently consist of one-to-four family residential loans originated for sale in the secondary market. Fair value is based on the price secondary markets are currently offering for similar loans using observable market data which is not materially different than cost due to the short duration between origination and sale (Level 2). As such, the Company records any fair value adjustments on a recurring basis. No nonrecurring fair value adjustments were recorded on loans held for sale at September 30, 2025 or December 31, 2024.
Collateral Dependent Loans with an ACL
In accordance with ASC 326, we may determine that an individual loan exhibits unique risk characteristics which differentiate it from other loans within our loan pools. In such cases, the loans are evaluated for expected credit losses on an individual basis and excluded from the collective evaluation. Specific allocations of the ACL are determined by analyzing the borrower's ability to repay amounts owed, collateral deficiencies, the relative risk grade of the loan and economic conditions affecting the borrower's industry, among other things. A loan is considered to be collateral dependent when, based upon management's assessment, the borrower is experiencing financial difficulty and repayment is expected to be provided substantially through the operation or sale of the collateral. In such cases, expected credit losses are based on the fair value of the collateral at the measurement date, adjusted for estimated selling costs if satisfaction of the loan depends on the sale of the collateral. We reevaluate the fair value of collateral supporting collateral dependent loans on a quarterly basis. The fair value of real estate collateral supporting collateral dependent loans is evaluated by appraisal services using a methodology that is consistent with the Uniform Standards of Professional Appraisal Practice. The Bank held three collateral dependent loans totaling $
Other Real Estate Owned
Other real estate owned (OREO) is measured at fair value less costs to sell. Valuation of OREO is determined using current appraisals from independent parties, a Level 2 input. If current appraisals cannot be obtained, or if declines in value are identified after a recent appraisal is received, appraisal values may be discounted, resulting in a Level 3 estimate. If the Company markets the property with a realtor, estimated selling costs reduce the fair value, resulting in a valuation based on Level 3 inputs. Fair value adjustments are recorded in the period incurred and expensed against current earnings. The Bank held
The following table presents the Company's assets that were measured at fair value on a nonrecurring basis as of September 30, 2025 (dollars in thousands).
| Quoted Prices in | Significant | Significant | ||||||||||||||
| Active Markets for | Other Observable | Unobservable | ||||||||||||||
| Identical Assets | Inputs | Inputs | ||||||||||||||
| September 30, 2025 | Total | (Level 1) | (Level 2) | (Level 3) | ||||||||||||
| Collateral Dependent, net | $ | $ | $ | $ | ||||||||||||
The following table presents additional quantitative information about assets measured at fair value on a nonrecurring basis and for which Level 3 inputs were utilized to determine fair value at September 30, 2025 (in thousands):
| Valuation | Unobservable | Range | ||||||||
| September 30, 2025 | Fair Value | Technique | Input | (Weighted Average) | ||||||
| Collateral Dependent, net | $ | Appraisal of collateral | Appraisal adjustments | 20% (20)% | ||||||
| Liquidation expenses | 10% (10)% | |||||||||
The Company had
The following information should not be interpreted as an estimate of the fair value of the entire Company since the fair value calculation is only provided for a limited portion of the Company's assets and liabilities. Due to a wide range of valuation techniques and the degree of subjectivity used in making the estimates, comparisons between the Company's disclosures and those of other companies may not be meaningful.
The estimated fair values (in thousands) of the Company's financial instruments were as follows at September 30, 2025 and December 31, 2024.
| Carrying | Fair | |||||||||||||||||||
| September 30, 2025 | Value | Value | Level 1 | Level 2 | Level 3 | |||||||||||||||
| Financial assets: | ||||||||||||||||||||
| Cash and cash equivalents | $ | $ | $ | $ | $ | |||||||||||||||
| Interest-bearing time deposits | ||||||||||||||||||||
| Debt securities available-for-sale | ||||||||||||||||||||
| Marketable equity securities | ||||||||||||||||||||
| Restricted investments in bank stock | ||||||||||||||||||||
| Loans, net | ||||||||||||||||||||
| Accrued interest receivable | ||||||||||||||||||||
| Bank owned life insurance | ||||||||||||||||||||
| Financial liabilities: | ||||||||||||||||||||
| Deposits | ||||||||||||||||||||
| Repurchase agreements | ||||||||||||||||||||
| FHLB advances | ||||||||||||||||||||
| Accrued interest payable | ||||||||||||||||||||
| Carrying | Fair | |||||||||||||||||||
| December 31, 2024 | Value | Value | Level 1 | Level 2 | Level 3 | |||||||||||||||
| Financial assets: | ||||||||||||||||||||
| Cash and cash equivalents | $ | $ | $ | $ | $ | |||||||||||||||
| Interest-bearing time deposits | ||||||||||||||||||||
| Debt securities available-for-sale | ||||||||||||||||||||
| Marketable equity securities | ||||||||||||||||||||
| Restricted investments in bank stock | ||||||||||||||||||||
| Loans, net | ||||||||||||||||||||
| Accrued interest receivable | ||||||||||||||||||||
| Bank owned life insurance | ||||||||||||||||||||
| Financial liabilities: | ||||||||||||||||||||
| Deposits | ||||||||||||||||||||
| Repurchase agreements | ||||||||||||||||||||
| FHLB advances | ||||||||||||||||||||
| Accrued interest payable | ||||||||||||||||||||
11. Earnings Per Share
Earnings Per Share
The Company does not have any common stock equivalents and, therefore, basic earnings per share, which represents net income divided by the weighted average shares outstanding during the period is the same as diluted earnings per share. ESOP shares are considered outstanding for this calculation unless unearned.
| Three Months Ended September 30, |
Nine Months Ended September 30, |
|||||||||||||||
| (In thousands, except per share amounts) |
2025 |
2024 |
2025 |
2024 |
||||||||||||
| Net income attributable to common stock |
$ | $ | $ | $ | ||||||||||||
| Denominator: |
||||||||||||||||
| Weighted average common shares outstanding (basic) |
||||||||||||||||
| Weighted average common shares outstanding (diluted) |
||||||||||||||||
| Earnings per share: |
||||||||||||||||
| Basic |
$ | $ | $ | $ | ||||||||||||
| Diluted |
$ | $ | $ | $ | ||||||||||||
12. Accumulated Other Comprehensive Income
The following tables provide information about components of accumulated other comprehensive income (loss) as of the dates indicated:
| Net Unrealized Loss on Securities | Accumulated Other Comprehensive Loss | |||||||
| Balance at June 30, 2024 | $ | ( | ) | $ | ( | ) | ||
| Unrealized holding gain on available for sale securities, net of tax $522 | ||||||||
| Balance at September 30, 2024 | $ | ( | ) | $ | ( | ) | ||
| Balance at June 30, 2025 | $ | ( | ) | $ | ( | ) | ||
| Unrealized holding gain on available for sale securities, net of tax $622 | ||||||||
| Balance at September 30, 2025 | $ | ( | ) | $ | ( | ) | ||
| Balance at December 31, 2023 | $ | ( | ) | $ | ( | ) | ||
| Unrealized holding gain on available for sale securities, net of tax $180 | ||||||||
| Balance at September 30, 2024 | $ | ( | ) | $ | ( | ) | ||
| Balance at December 31, 2024 | $ | ( | ) | $ | ( | ) | ||
| Unrealized holding gain on available for sale securities, net of tax $861 | ||||||||
| Balance at September 30, 2025 | $ | ( | ) | $ | ( | ) | ||
13. Revenue Recognition
All the revenue from contracts with customers, within the scope of ASC 606 is recognized in Non Interest Income. The following table presents the Company’s sources of Non-Interest Income for the three and nine months ended September 30, 2025 and 2024, respectively. Items outside the scope of ASC 606 are noted as such.
| Three Months ended September 30, |
Nine Months ended September 30, |
|||||||||||||||
| 2025 |
2024 |
2025 |
2024 |
|||||||||||||
| Noninterest Income |
||||||||||||||||
| Service charges on deposit accounts |
$ | $ | $ | $ | ||||||||||||
| ATM fees and debit card income |
||||||||||||||||
| Mortgage banking revenue |
||||||||||||||||
| Trust and investment fee income |
||||||||||||||||
| Gain on sale of premises * |
||||||||||||||||
| Loss on sale of securities * |
( |
) | ( |
) | ||||||||||||
| Gain on sale of other real estate owned * |
||||||||||||||||
| Net marketable equity security gains (losses) * |
( |
) | ( |
) | ||||||||||||
| Earnings on bank owned life insurance * |
||||||||||||||||
| Bargain purchase gain * |
||||||||||||||||
| Other * |
||||||||||||||||
| Total Noninterest Income |
$ | $ | $ | $ | ||||||||||||
“*” Not within the scope of ASC 606
Sources of revenue for the Company which fall within the scope of ASC 606 are described as follows:
| ● |
Service Charges on Deposit Accounts – The Bank earns fees from its deposit customers for various services, including transaction-based services and periodic account maintenance. Transaction based services include, but are not limited to stop payment fees, overdraft fees, check cashing fees, wire transfer fees, and early withdrawal penalties. Maintenance fees include account maintenance fees, minimum balance fees, and monthly service charge. Transaction based fees are only recognized when the transaction is complete, and maintenance fees are recognized when the period of the obligation is complete. |
| ● |
Trust and Investment Fee Income - The Trust department receives fees for providing trust related services including Investment Management, Security Custody, and Other Trust Services. These fees are based upon the value of assets under management and are assessed using a tiered rate schedule. Fees are recognized on a monthly basis when the service obligation is complete. These fees are recognized in trust services income on the Consolidated Statement of Income. The trust department provides estate settlement services. These fees are based on the estimated fair value of the estate according to a tiered rate schedule. Each estate is unique in the nature, size, and complexity, and may include many tasks or milestones to complete. Fees are recognized in proportion to the number of milestones completed which is a judgement made by the trust management team. These fees are included in trust services income on the Consolidated Statements of Income. |
| ● |
ATM Fees and Debit Card Income – The Bank provides electronic funds transfer processing services for the debit cards it offers to its customers. The Bank earns interchange fees from each cardholder transaction conducted through various networks. The fees are transaction based and are earned when the transaction is complete. ATM service charges are earned when non customers use Bank ATMs. These fees are recognized when the transaction is complete. These fees are recognized in other income on the Consolidated Statements of Income. |
| ● |
Mortgage Banking Revenue – The Bank recognizes revenue from the sale and servicing of loans to third parties. These gains/losses are included in other income on the Consolidated Statements of Income. |
Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OF STEELE BANCORP, INC.
Management’s Discussion and Analysis of Financial Condition and Results of Operations, or MD&A, represents an overview of the financial condition and results of operations of Steele Bancorp, Inc. (“Steele”). Please refer to the financial statements and other information in this report as well as the Company's Form SP 15D2 for an understanding of the following discussion and analysis.
Subsequent events have been considered through the date of this filing on Form 10-Q.
Steele is a financial holding company that, through its sole subsidiary Central Penn Bank & Trust “CPBT”, provides full-service banking to individual, municipality and corporate customers. CPBT operates thirteen offices spanning the counties of Union, Snyder, Northumberland and Centre in Northcentral Pennsylvania. Gathering deposits and making loans are the major lines of business. The deposits are mainly deposits of individuals and small businesses and include various types of checking accounts, statement savings, money market accounts, interest checking accounts, individual retirement accounts, and certificates of deposit. Milestone Insurance Services, LLC (Milestone) was formed in 2003 and is a wholly owned subsidiary of the CPBT. Milestone is licensed to sell title insurance. Steele is supervised by the Board of Governors of the Federal Reserve System while CPBT is subject to regulation and supervision by the Federal Deposit Insurance Company and the Pennsylvania Department of Banking and Securities.
Steele’s core strategy is to further its mission of being an independent bank which strives to be the community bank that bridges communities and builds your future by providing quality financial services to its customers, a rewarding work environment for its employees, exceptional long-term value for its shareholders and an unwavering commitment to community reinvestment.
Steele’s revenues consist primarily of interest income it earns on loans and investments. Interest income is partially offset by interest expense incurred on deposits, borrowings and other interest-bearing liabilities. Net interest income is affected by the balances of interest-earning assets and interest-bearing liabilities and their relative interest rates. Net interest income is typically further reduced by Steele’s provision for credit losses.
Non-interest income also contributes to Steele’s operating results, consisting of service charges and fees, interchange fees, brokerage, and gains and losses on the sales of securities and loans. Non-interest expenses, which include salaries and employee benefits, occupancy and equipment costs, data processing, professional services, advertising and other general and administrative expenses, are Steele’s primary expenditures incurred as a result of Steele’s operations.
Financial institutions like Steele are significantly affected by economic conditions, competition, and the monetary and fiscal policies of the federal government. Lending activities are influenced by the demand for and supply of housing and commercial real estate, competition among lenders, interest rate conditions, and funds availability. Steele’s operations and lending are concentrated in Northcentral Pennsylvania in Union, Snyder, Northumberland, and Centre Counties, and Steele’s operations are influenced by local economic conditions. Deposit balances and cost of funds are influenced by prevailing market rates on competing investments, customer preferences, and levels of personal income and savings in Steele’s primary market area. Operations are also significantly impacted by government policies and actions of regulatory authorities. Future changes in applicable law, regulations or government policies may materially impact Steele.
To operate successfully, Steele must manage various types of risk, including but not limited to: interest rate risk, credit risk, liquidity risk, operational and information technology risk, reputation risk, and compliance risk.
Cautionary Note Regarding Forward Looking Statements
This quarterly report on Form 10-Q contains forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. Forward -looking statements are not statements of current or historical fact and involve substantial risks and uncertainties. Words such as “anticipates,” “believes,” estimates,” “expects,” “forecasts,” “intends,” “plans,” “projects,” “may,” “will,” “should” and other similar expressions can be used to identify forward-looking statements. Such statements are subject to factors that could cause actual results to differ materially from anticipated results. Among the risks and uncertainties that could cause actual results to differ from those described in the forward-looking statements include, but are not limited to the following: costs or difficulties associated with newly developed or acquired operations; risks related to the merger with Northumberland Bancorp; changes in consumer demand for financial services; our ability to control costs and expenses; adverse developments in borrower industries and, in particular, declines in real estate values; changes in and compliance with federal and state laws that regulate our business and capital levels; our ability to raise capital as needed; and the other factors discussed in other reports Steele may file with the U.S. Securities and Exchange Commission (the “SEC”) . We do not undertake and specifically disclaim any obligation to publicly revise any forward-looking statements to reflect the occurrence of anticipated or unanticipated events or circumstances after the date of such statements, expect as required by law. Accordingly, readers should not place undue reliance on forward-looking statements.
Market Conditions
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”) requires management to measure Steele’s financial position and operating results primarily in terms of historic dollars. Changes in the relative value of money due to inflation or recession are generally not considered. The primary effect of inflation on Steele’s operations is related to increases in operating expenses. Management considers changes in interest rates to impact our financial condition and results of operations to a far greater degree than changes in prices due to inflation. Although interest rates are influenced by changes in the inflation rate, they do not necessarily change at the same rate or in the same magnitude as the inflation rate. Steele manages interest rate risk in several ways. There can be no assurance that Steele will not be materially adversely affected by future changes in interest rates, as interest rates are highly sensitive to many factors that are beyond its control. Additionally, inflation may adversely impact the financial condition of Steele’s borrowers and could impact their ability to repay their loans, which could negatively affect Steele’s asset quality through higher delinquency rates and increased charge-offs. Management carefully considers the impact of inflation and rising interest rates on Steele borrowers in managing credit risk related to the loan portfolio.
Critical Accounting Policies
Critical accounting policies are most important to the portrayal of the Company's financial condition or results of operations and require management's most difficult, subjective, and complex judgements about matters that are inherently uncertain. If conditions occur that differ from our assumptions, depending upon the severity of such differences, the Company's financial condition or results of operations may be materially impacted. The Company has designated the governing of the allowance for credit losses on loans as the critical accounting policy. The Company evaluates its critical accounting estimates and assumptions on an ongoing basis and updates them as needed. Please refer to the Company's Note 1: Description of Business and Summary of Significant Accounting Policies in the Financial Statements included in Item 1 of this report for information on these and other accounting policies.
Goodwill and Bargain Purchase Gain
Goodwill represents the excess of the cost of an acquisition over the fair value of the net assets acquired. Determining fair value is subjective, requiring the use of estimates, assumptions and management judgment. Goodwill is tested at least annually for impairment, usually during the fourth quarter, or on an interim basis if circumstances dictate. Impairment testing requires a qualitative assessment or that the fair value of each of the Company’s reporting units be compared to the carrying amount of its net assets, including goodwill. If the fair value of a reporting unit is less than book value, an expense may be required to write down the related goodwill to record an impairment loss.
A bargain purchase gain represents the excess of the fair value of net assets acquired over the cost of an acquisition. Determining fair value is subjective, requiring the use of estimates, assumptions and management judgement. Bargain purchase gain is recorded within noninterest income in the period it was generated. An acquirer has a measurement period not to exceed 12 months from the acquisition date to finalize the accounting for a business combination which could adjust bargain purchase gain if material facts or circumstances arise.
Loans Acquired in a Business Combination
Acquired loans are classified as either (i) purchase credit-deteriorated (“PCD”) loans or (ii) purchased performing loans and are recorded at fair value on the date of acquisition.
PCD loans are those for which there is more than insignificant evidence of credit deterioration since origination. When determining fair value, PCD loans are aggregated into pools based on common risk characteristics as of the date of acquisition such as loan type, date of origination, and evidence of credit quality deterioration such as internal risk grades and past due and nonaccrual status. At the acquisition date, the ACL is determined and added to the fair value of the loan to determine the new amortized cost basis. The difference between the new amortized cost basis and the unpaid principal balance is either a noncredit discount or premium that will be amortized or accredited into the interest income over the remaining life of the loan. Disposals of loans, which may include sale of loans to third parties, receipt of payments in full or in part from the borrower or foreclosure of the collateral, result in removal of the loan from the PCD loan portfolio at its carrying amount.
The Company accounts for purchased performing loans using the contractual cash flows method of recognizing discount accretion based on the acquired loans’ contractual cash flows. Purchased performing loans are recorded at fair value, including a credit discount. The fair value discount is accreted as an adjustment to yield over the estimated lives of the loans. Purchased performing loans do not have a more-than-insignificant deterioration in credit quality since origination and have an ACL established in a manner that is consistent with the Company's originated loans. The allowance for PCD loans is determined based upon the Company’s methodology for estimating the allowance under CECL, and is recorded as an adjustment to the acquired loan balance on the date of acquisition. Additionally, upon the purchase or acquisition of non-PCD loans, the Company measures and records a reserve for credit losses based on the Company’s methodology for determining the allowance under CECL. The allowance for non-PCD loans is recorded through a charge to provision for credit losses in the period in which the loans were purchased or acquired.
Non-GAAP Financial Measures
This report refers to certain financial measures that are computed under a basis other than GAAP ("non-GAAP"). The Company uses certain non-GAAP financial measures, including tax-equivalent net interest income and efficiency ratio, to provide meaningful supplemental information regarding the Company's operational performance and to enhance investors' overall understanding of such financial performance. The methodology for determining these non-GAAP measures may differ among companies. Non-GAAP measures are supplemental and not a substitute for, or more important than, financial measures prepared in accordance with GAAP, nor are they necessarily comparable to non-GAAP performance measures which may be presented by other companies.
Merger with Northumberland Bancorp
The Company's merger with Northumberland Bancorp ("NUBC") was completed on August 1, 2025. NUBC was a Pennsylvania corporation that conducted its business primarily through its wholly owned subsidiary The Northumberland National Bank, which operated from a main office in Northumberland, Pennsylvania, and had six branches throughout Central Pennsylvania.
At the effective time of the merger, NUBC’s shareholders received a fixed exchange ratio of 1.185 shares of the Company’s common stock for each NUBC common share they owned, except to the extent of cash received for fractional shares at $24.30 per share. Total purchase consideration was $40,405,000, including common stock with a fair value of $40,215,000, cash of $3,000 paid for fractional shares, and cost of dissenter's shares of $187,000. Holders of NUBC common stock prior to the consummation of the merger held approximately 45.4% of the Corporation’s common stock outstanding immediately following the merger.
In connection with the acquisition, effective August 1, 2025, the Company recorded a bargain purchase gain of $17.8 million and a core deposit intangible asset of $14.7 million. Assets acquired totaled $688.2 million, including gross loans valued at $427.1 million, available-for-sale debt securities valued at $165.7 million, bank-owned life insurance valued at $14.8 million and premises and equipment, net, valued at $9.2 million. Liabilities assumed totaled $630.0 million, including deposits valued at $597.1 million and borrowings valued at $20.1 million. The fair value adjustments made to the acquired assets and liabilities of NUBC are considered preliminary at this time and are subject to change as the Corporation finalizes its fair value determinations. The assets purchased and liabilities assumed in the acquisition were recorded at their preliminary estimated fair values at the time of closing and may be adjusted for up to one year subsequent to the acquisition.
For the year-to-date ended September 30, 2025, the Company incurred pre-tax merger-related expenses related to the NUBC transaction of $4.1 million. Merger-related expenses include voluntary severance and similar expenses as well as expenses related to conversion of NUBC’s core banking system into the Corporation’s core system and legal and other professional expenses. Also during the third quarter 2025, the Company recorded a one-time provision for credit losses of $4.0 million for acquired non-Purchase Credit Deteriorated (“non-PCD”) loans.
Performance Summary
The following table presents CPBT's key ratios and other performance data year-to-date as of the periods indicated.
| ($ in thousands) |
September 30, 2025 |
December 31, 2024 |
September 30, 2024 |
|||||||||
| Average Balances |
||||||||||||
| Cash and due from banks |
$ | 6,506 | $ | 5,510 | $ | 5,618 | ||||||
| Interest-bearing deposits |
19,846 | 15,540 | 16,417 | |||||||||
| Securities available for sale, at fair value |
145,832 | 125,023 | 124,467 | |||||||||
| Mortgage loans held for sale |
122 | 48 | 50 | |||||||||
| Loans, gross |
556,485 | 405,159 | 399,296 | |||||||||
| Loans, net of allowance for credit losses |
551,079 | 401,292 | 395,450 | |||||||||
| Total assets |
753,186 | 573,353 | 566,683 | |||||||||
| Noninterest bearing deposits |
113,548 | 81,328 | 80,439 | |||||||||
| Interest-bearing and savings deposits |
343,705 | 282,389 | 278,989 | |||||||||
| Time deposits |
182,327 | 117,729 | 116,321 | |||||||||
| Total deposits |
639,580 | 481,446 | 475,749 | |||||||||
| Stockholders' equity |
$ | 70,833 | $ | 56,129 | $ | 55,496 | ||||||
| Financial Ratios |
||||||||||||
| Return on average assets |
3.07 | % | 0.78 | % | 0.96 | % | ||||||
| Return on average equity |
32.66 | % | 7.98 | % | 9.77 | % | ||||||
| Efficiency ratio |
48.47 | % | 70.08 | % | 64.03 | % | ||||||
| Allowance for Loan Credit Losses |
||||||||||||
| Beginning balance |
$ | 4,379 | $ | 3,861 | $ | 3,861 | ||||||
| Merger adjustments |
$ | 725 | $ | - | $ | - | ||||||
| Provision for credit losses |
4,490 | 569 | 117 | |||||||||
| Charge-Offs |
(97 | ) | (62 | ) | (37 | ) | ||||||
| Recoveries |
15 | 11 | 10 | |||||||||
| Ending balance |
$ | 9,512 | $ | 4,379 | $ | 3,951 | ||||||
Comparison of Financial Condition at September 30, 2025 and December 31, 2024
Total assets at September 30, 2025, were $1.3 billion, an increase of $656.9 million, or 110.1 percent from $596.7 million at December 31, 2024. The increase in assets was primarily due to the NUBC merger. The increase in total assets was primarily due to the net increase in gross loans receivable of $464.3 million, an increase in interest-bearing demand deposits of $38.6 million, and an increase of $107.8 million in securities available-for-sale, all increases primarily related to the merger.
Total average assets increased 31.4 percent from $573.4 million at December 31, 2024 to $753.2 million at September 30, 2025. Average earning assets were $550.5 million at December 31, 2024 and $723.9 million at September 30, 2025. Average interest-bearing liabilities were $429.2 million at December 31, 2024 and $560.9 million at September 30, 2025.
Cash and cash equivalents increased $44.8 million or 488.5 percent from $9.2 million at December 31, 2024 to $54.0 million at September 30, 2025. The increase is primarily related to increased correspondent bank balances of approximately $43.6 million being acquired in the merger.
Loans increased 106.4 percent to $900.6 million at September 30, 2025 from $436.3 million at December 31, 2024. The increase is related to NUBC merger as well as strong new loan origination in 2025.
Interest bearing deposits increased 112.3 percent to $891.0 million at September 30, 2025 from $419.8 million at December 31, 2024. Noninterest-bearing deposits increased 208.2 percent from $69.7 million at December 31, 2024 to $214.9 million at September 30, 2025. The increases were primarily the result of NUBC merger.
Total stockholder’s equity increased by $59.0 million, or 105.5 percent, from $55.9 million at December 31, 2024, to $114.9 million at September 30, 2025. The increase is primarily attributable to the merger with NUBC. Accumulated other comprehensive loss decreased from $4.4 million as of December 31, 2024 to $1.2 million as of September 30, 2025.
The loan-to-deposit ratio is a key measurement of liquidity. Our loan-to-deposit ratio was 81.4% as of September 30, 2025 compared to 89.1% at December 31, 2024.
It is our opinion that the asset/liability mix and the interest rate risk associated with the balance sheet are within manageable parameters. Constant monitoring using asset/liability reports and interest rate risk scenarios are in place along with quarterly asset/liability management meetings on the committee level by the Bank’s Board of Directors.
Investment Securities
Debt Securities – Available for Sale
Debt securities available-for-sale increased by $107.6 million or 92.7 percent to $223.6 million at September 30, 2025 from $116.1 million at December 31, 2024. The increase is primarily related to the merger with NUBC. Within the portfolio U.S. government agencies increased $24.1 million, U.S. government sponsored enterprise mortgage-backed securities increased $18.4 million, tax exempt state and municipal bonds increased $35.6 million, and taxable state and municipal securities increased $28.5 million. Gross unrealized losses decreased from $5.7 million as of December 31, 2024 to $3.2 million as of September 30, 2025. The fair value of these securities was influenced by market interest rates, prepayment speeds on mortgage securities, bid to offer spreads in the market place and credit premiums for the various types of agency debt. Steele did not consider the debt securities to be impaired since it had both the intent and ability to hold the securities until a recovery of fair value, which may be maturity.
The following tables summarize the maturity distribution and yields of available-for-sale securities as of September 30, 2025 and December 31, 2024:
| As of September 30, 2025 |
Due in one year or less |
Due after 1 through 5 years |
Due after 5 through 10 years |
Due after 10 years |
Total |
|||||||||||||||
| Securities available for sale: |
||||||||||||||||||||
| U.S. Treasury |
4.68 | % | 4.42 | % | 0.00 | % | 0.00 | % | 4.55 | % | ||||||||||
| U.S. Government Agencies |
3.75 | % | 4.45 | % | 5.13 | % | 5.16 | % | 4.37 | % | ||||||||||
| Taxable state and municipal |
3.77 | % | 3.88 | % | 4.34 | % | 0.00 | % | 3.97 | % | ||||||||||
| U.S. government sponsored enterprise mortgage-backed |
3.52 | % | 4.09 | % | 4.63 | % | 5.25 | % | 4.07 | % | ||||||||||
| Corporate |
1.09 | % | 2.02 | % | 5.61 | % | 0.00 | % | 3.04 | % | ||||||||||
| Total taxable |
3.57 | % | 4.16 | % | 4.69 | % | 5.18 | % | 4.13 | % | ||||||||||
| Tax exempt state and municipal (1) |
2.48 | % | 3.40 | % | 3.37 | % | 2.51 | % | 3.31 | % | ||||||||||
| Total |
3.42 | % | 3.89 | % | 3.87 | % | 3.49 | % | 3.80 | % | ||||||||||
| (1) |
Yields on tax-exempt securities have been computed on a tax-equivalent basis using a federal tax rate of 21%. |
| As of December 31, 2024 |
Due in one year or less |
Due after 1 through 5 years |
Due after 5 through 10 years |
Due after 10 years |
Total |
|||||||||||||||
| Securities available for sale: |
||||||||||||||||||||
| U.S. Treasury |
3.16 | % | 4.55 | % | 0.00 | % | 0.00 | % | 4.39 | % | ||||||||||
| U.S. Government Agencies |
2.16 | % | 3.52 | % | 0.00 | % | 0.00 | % | 3.15 | % | ||||||||||
| Taxable state and municipal |
0.86 | % | 1.47 | % | 2.95 | % | 0.00 | % | 1.48 | % | ||||||||||
| U.S. government sponsored enterprise mortgage-backed |
4.37 | % | 3.73 | % | 3.79 | % | 6.78 | % | 3.77 | % | ||||||||||
| Corporate |
2.66 | % | 1.56 | % | 2.49 | % | 0.00 | % | 2.09 | % | ||||||||||
| Total taxable |
2.47 | % | 3.40 | % | 3.44 | % | 6.78 | % | 3.23 | % | ||||||||||
| Tax exempt state and municipal (1) |
1.24 | % | 2.15 | % | 2.98 | % | 2.76 | % | 2.59 | % | ||||||||||
| Total |
2.31 | % | 3.03 | % | 3.02 | % | 2.64 | % | 2.94 | % | ||||||||||
| (1) |
Yields on tax-exempt securities have been computed on a tax-equivalent basis using a federal tax rate of 21%. |
Equity Securities
At September 30, 2025 and 2024, Steele had $518,000 and $171,000 in marketable equity securities recorded at fair value, respectively. At December 31, 2024 Steele had $268,000 in marketable equity securities recorded at fair value. The following is a summary of unrealized and realized gains and losses recognized in net income on equity securities during the three and nine months ended September 30, 2025 and 2024:
| ($ In Thousands) |
For the Three Months Ended September 30, |
For the Nine Months Ended September 30, |
||||||||||||||
| 2025 |
2024 |
2025 |
2024 |
|||||||||||||
| Net change in the unrealized gains and (losses) recognized during the period on marketable equity securities |
$ | 60 | $ | (80 | ) | $ | 57 | $ | (112 | ) | ||||||
See Note 3 within Steele’s Notes to the Consolidated Financial Statements for more information regarding Steele’s Investment portfolio as of September 30, 2025 and December 31, 2024.
Loans
Gross loans receivable increased 106.2 percent from $437.2 million at December 31, 2024 to $901.6 million at September 30, 2025. The increase was primarily related to the merger with NUBC, which included $427.1 million of gross loans being acquired. The percentage change and distribution of the loan portfolio is shown in the table below:
| ($ In Thousands) |
Change |
|||||||||||||||
| 2025 |
2024 |
Amount |
% |
|||||||||||||
| Commercial |
$ | 161,695 | $ | 87,990 | $ | 73,705 | 83.8 | % | ||||||||
| Commercial real estate: |
||||||||||||||||
| Commercial mortgages |
216,096 | 129,036 | 87,060 | 67.5 | ||||||||||||
| Other construction and land development loans |
31,468 | 16,649 | 14,819 | 89.0 | ||||||||||||
| Secured by farmland |
94,031 | 66,910 | 27,121 | 40.5 | ||||||||||||
| Residential mortgage: |
||||||||||||||||
| Multifamily |
14,319 | 4,725 | 9,594 | 203.0 | ||||||||||||
| 1-4 family residential mortgages |
335,156 | 115,311 | 219,845 | 190.7 | ||||||||||||
| Construction |
4,595 | 1,309 | 3,286 | 251.0 | ||||||||||||
| Home Equity |
31,224 | 7,186 | 24,038 | 334.5 | ||||||||||||
| Consumer, other |
4,442 | 1,526 | 2,916 | 191.1 | ||||||||||||
| Consumer, automobile |
8,598 | 6,516 | 2,082 | 32.0 | ||||||||||||
| Gross loans |
$ | 901,624 | $ | 437,158 | $ | 464,466 | 106.2 | % | ||||||||
Allowance for Credit Losses on Loans ("ACLL")
The allowance for credit losses was $9.5 million at September 30, 2025, compared to $4.4 million at December 31, 2024. This allowance equaled 1.06 percent and 1.00 percent of total loans, net of unearned income, as of September 30, 2025 and December 31, 2024, respectively. The Bank's provision for credit losses for the third quarter of 2025 was $4.2 million and consisted of $4.0 million related to the acquisition of NUBC non-purchase credit deteriorated ("PCD") legacy loans and $219,000 related to third quarter activity. The Bank recorded a CECL allowance credit loss adjustment of $725,000 for the acquisition of PCD accruing loans. The credit loss reserve is analyzed quarterly and reviewed by the CPBT’s Board of Directors. No concentration or apparent deterioration in classes of loans or pledged collateral was evident. Regular loan meetings with the CPBT’s Board of Directors are held to review new loans. Delinquent loans, loan exceptions and certain large loans are addressed by the full Board no less than monthly to determine compliance with policies. Allowance for credit losses was considered adequate based on delinquency trends and actual loans written off as it relates to the loan portfolio.
Individually Evaluated Loans
Individually evaluated loans were $2,225,000 as of September 30, 2025, an increase from $2,105,000 as of December 31, 2024. As of September 30, 2025, there was a required reserve of $21,000 for individually evaluated loans, as compared to the reserve of $20,000 at December 31, 2024. Please see Note 5 within Steele’s Notes to the Consolidated Financial Statements for more information regarding Steele’s loan portfolio as of September 30, 2025 and December 31, 2024.
Collectively Evaluated Loans
Collectively evaluated loans totaled $899,399,000, with an ACL of $9,491,000 as of September 30, 2025 and $435,053,000 with an ACL of $4,359,000 as of December 31, 2024.
Collectively evaluated loans are divided into pools based upon risk characteristics, management has elected to use the FDIC call report loan codes to group loans. Utilizing a discounted cash flow (DCF) model, the Company calculates the sum of expected losses via a gross loss rate and recovery rate assumption based on call report loan codes to determine its allowance for credit losses. Management has elected to perform cash flow modeling without the present value component due to lack of loan loss history and simplification of the model. Call report loan codes are allocated additional loss estimates based upon Management’s analysis of qualitative factors including changes in lending policies, procedures, and strategies, economic conditions, changes in nature and volume of portfolio, credit and lending staff, changes in delinquencies, changes in quality of the loan review system, trends in underlying collateral, concentration risk, and external factors.
The allowance for collectively evaluated loans increased $5,132,000 when compared to December 31, 2024 primarily due to the increase in loan balances as a result of the acquisition of NUBC.
Conclusion
Based upon the calculation, management’s current judgements about the credit quality of the loan portfolio, and after considering all known relevant internal and external factors that affect loan collectability, management believes the level of ACLL is reasonable for the credit risk in the loan portfolio as of September 30, 2025 and December 31, 2024.
Deposits
The average balance and average rate paid on deposits year-to-date for the periods ending September 30, 2025 and December 31, 2024 are summarized as follows:
| September 30, 2025 |
December 31, 2024 |
Change |
||||||||||||||||||||||
| Average | Average | Average | Average | Amount | % |
|||||||||||||||||||
| ($ In Thousands) |
Balance |
Rate |
Balance |
Rate |
||||||||||||||||||||
| Non-interest bearing |
$ | 113,548 | — | % | $ | 81,328 | — | % | $ | 32,220 | 39.6 | % | ||||||||||||
| Savings |
88,843 | 0.19 | 67,256 | 0.21 | % | 21,587 | 32.1 | |||||||||||||||||
| Now deposits |
204,564 | 1.80 | 180,064 | 1.99 | % | 24,500 | 13.6 | |||||||||||||||||
| Money market deposits |
50,298 | 1.17 | 35,069 | 1.06 | % | 15,229 | 43.4 | |||||||||||||||||
| Time deposits |
182,327 | 3.97 | 117,729 | 3.81 | % | 64,598 | 54.9 | |||||||||||||||||
| Total deposits |
$ | 639,580 | 2.22 | % | $ | 481,446 | 2.15 | % | $ | 158,134 | 32.8 | % | ||||||||||||
Borrowed Funds
The average balance of borrowed funds increased $5.8 million to $34.9 million as of September 30, 2025 from $29.1 million as of December 31, 2024 due to the following:
| ● |
Securities sold under agreements to repurchase (short-term) average balance decreased $30,000 to $1,530,000 in 2025 from $1,560,000 in 2024. |
| ● |
Federal funds purchased (short-term) average balance decreased $18,000 to $19,000 in 2025 from $37,000 in 2024. |
| ● |
Federal Reserve Bank Borrowing average balance decreased $9.2 million to $-0- in 2025 from $9.2 million in 2024. |
| ● |
Federal Home Loan Bank Advances average balance increased $12.8 million to $31.1 million in 2025 from $18.3 million in 2024. |
|
| ● | Subordinated Debt average balance increased $2.2 million to $2.2 million in 2025 from $-0- million in 2024. |
Total borrowed funds consisted of the following year-to-date at September 30, 2025 and December 31, 2024:
| September 30, 2025 |
||||||||||||
| Ending |
Average |
Average Rate |
||||||||||
| ($ In Thousands) |
Balance |
Balance |
At Quarter End |
|||||||||
| Securities sold under agreements to repurchase |
$ | 1,414 | $ | 1,530 | 4.54 | % | ||||||
| Federal funds purchased |
- | 19 | 7.04 | % | ||||||||
| Federal Reserve Bank Borrowings |
- | - | 0.00 | % | ||||||||
| Federal Home Loan Bank Advances |
8,000 | 31,089 | 4.64 | % | ||||||||
| Subordinated Debt |
9,808 | 2,222 | 4.51 | % | ||||||||
| Total Borrowed Funds |
$ | 19,222 | $ | 34,860 | 4.63 | % | ||||||
| December 31, 2024 |
||||||||||||
| Ending |
Average |
Average Rate |
||||||||||
| ($ In Thousands) |
Balance |
Balance |
At Year End |
|||||||||
| Securities sold under agreements to repurchase |
$ | 1,143 | $ | 1,560 | 5.26 | % | ||||||
| Federal funds purchased |
- | 37 | 5.41 | |||||||||
| Federal Reserve Bank Borrowings |
- | 9,189 | 4.90 | % | ||||||||
| Federal Home Loan Bank Advances |
43,050 | 18,339 | 3.86 | % | ||||||||
| Total Borrowed Funds |
$ | 44,193 | $ | 29,125 | 4.26 | % | ||||||
See Note 7 within Steele’s Notes to the Consolidated Financial Statements for more information regarding Steele’s borrowed funds as of September 30, 2025 and December 31, 2024.
Stockholders’ Equity and Capital Adequacy
Details concerning capital ratios at September 30, 2025 and December 31, 2024 are presented in Note 9, “Regulatory Matters,” to the consolidated financial statements for the three and nine months ended September 30, 2025 and year ended December 31, 2024 included elsewhere in this document. Steele meets the conditions of the Federal Reserve’s small bank holding company policy statement and is therefore excluded from consolidated capital requirements. CPBT is subject to various regulatory capital requirements administered by the 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 adverse effect on Steele’s financial statements. Management believes, as of September 30, 2025, that CPBT met all capital adequacy requirements to which it was subject.
Future dividend payments and repurchases of common stock will depend upon maintenance of a strong financial condition, future earnings and capital and regulatory requirements. In addition, CPBT is subject to restrictions on the amount of dividends that may be paid without approval of banking regulatory authorities. Further, although Steele is not subject to the specific consolidated capital requirements, its ability to pay dividends, repurchase stock or engage in other activities may be limited by the Federal Reserve if it fails to hold sufficient capital consistent with its overall risk profile.
CPBT’s total Tier 1 Capital increased $44.4 million to $102.0 million at September 30, 2025 from $57.5 million at December 31, 2024. The Bank’s resulting Tier 1 Leverage Ratio increased to 9.93% at September 30, 2025 from 9.67% at December 31, 2024.
Comparison of Earnings for the Three and Nine Months Ended September 30, 2025 and 2024
Three Months Ended September 30,
General: Net income was $13.7 million for the three months ended September 30, 2025, or $4.77 per share, an increase of $12.3 million, or 890.4 percent, compared to net income of $1.4 million, or $0.74 per share, for the three months ended September 30, 2024. Net income for the three months ended September 30, 2025, reflected an increase in net interest income after provision for credit losses of $1.5 million, an increase in non-interest income of $18.7 million and an increase in non-interest expenses of $8.0 million. The increase in non-interest income is the result of a $17.8 million bargain purchase gain that resulted from the merger with NUBC. The increase in non-interest expense is the result of a $3.8 million increase in merger related expenses and by a $2.5 million increase in salaries and benefits resulting from the merger.
Net Interest Income: Net interest income before provision for (recovery of) credit losses increased by $5.6 million, or 129.4 percent, to $9.9 million for the three months ended September 30, 2025, compared to $4.3 million for the three months ended September 30, 2024. Interest income and interest expense both increased for the three months ended September 30, 2025 when compared to the three months ended September 30, 2024, due to increased average balances in loans due to merger and higher rates on loans and investment securities, offset by the increased deposit and other borrowing expense due to an increase in balances and rates. Yield on earning assets increased quicker than the cost of funds, resulting in an increase in net interest income. Net interest margin (tax equivalent) increased from 3.17% for the three months ended September 30, 2024 to 3.97% for the same period in 2025.
Interest Income: Interest income increased $7.6 million, or 111.8 percent, to $14.4 million for the three months ended September 30, 2025, compared with $6.8 million for the three months ended September 30, 2024. The average yield on the earning assets increased 80 basis points from 4.98 percent for the three months ended September 30, 2024 to 5.78 percent for the three months ended September 30, 2025. This increase in rates was in addition to the growth in average balance of earning assets from the merger which increased $450.0 million to $1.0 billion for the three months ended September 30, 2025 compared to $552.8 million for 2024.
Interest Expense: Interest expense increased by $2.0 million or 81.6 percent to $4.6 million for the three months ended September 30, 2025, compared to $2.5 million for the three months ended September 30, 2024. The increase was the result of an increase in rates paid on interest bearing deposits of 8 basis points from 2.19 percent for 2024 to 2.27 percent in 2025. The increase is also the result of an increase in average balance of interest-bearing deposits of $333.4 million as result of the merger to $736.1 million for the three months ended September 30, 2025 compared to $402.6 million for 2024. The increase in expense is also attributed to an increase in average balance of borrowings of $1.0 million to $28.4 million for the three months ended September 30, 2025 compared to $27.4 million for 2024. Rates paid on borrowings increased 66 basis points from 4.21 percent for 2024 to 4.87 percent in 2025.
Nine Months Ended September 30,
General: Net income was $17.3 million for the nine months ended September 30, 2025, or $7.87 per share, an increase of $13.2 million, or 326.2 percent, compared to net income of $4.1 million, or $2.18 per share, for the nine months ended September 30, 2024. Net income for the nine months ended September 30, 2025, reflected an increase in net interest income after provision for credit losses of $3.2 million, an increase in non-interest income of $18.8 million and an increase in non-interest expenses of $8.6 million. The increase in non-interest income is the result of a $17.8 million bargain purchase gain that results from the merger with NUBC. The increase in non-interest expense is the result of a $4.0 million increase in merger related expenses and by a $2.7 million increase in salaries and benefits resulting from the merger.
Net Interest Income: Net interest income before provision for (recovery of) credit losses increased by $7.4 million, or 61.3 percent, to $19.6 million for the nine months ended September 30, 2025, compared to $12.2 million for the nine months ended September 30, 2024. Interest income and interest expense both increased for the nine months ended September 30, 2025 when compared to the nine months ended September 30, 2024, due to increased average balances in loans due to the merger and higher rates on loans and investment securities, offset by the increased deposit and other borrowing expense due to an increase in balances and rates. Yield on earning assets increased quicker than the cost of funds, resulting in an increase in net interest income. Net interest margin (tax equivalent) increased from 2.98% for the nine months ended September 30, 2024 to 3.69% for the same period in 2025.
Interest Income: Interest income increased by $10.2 million, or 52.5 percent, to $29.5 million for the nine months ended September 30, 2025, compared with $19.4 million for the nine months ended September 30, 2024. The average yield on the earning assets increased 69 basis points from 4.84 percent for the nine months ended September 30, 2024 to 5.53 percent for the nine months ended September 30, 2025. This increase in rates was in addition to the growth in average balance of earning assets due to the merger, which increased $180.0 million to $723.9 million for the nine months ended September 30, 2025 compared to $543.9 million for 2024.
Interest Expense: Interest expense increased by $2.7 million or 37.9 percent to $9.9 million for the nine months ended September 30, 2025, compared to $7.2 million for the nine months ended September 30, 2024. The increase was the result of an increase in rates paid on interest bearing deposits of 10 basis points from 2.12 percent for 2024 to 2.22 percent in 2025. The increase is also the result of an increase in average balance of interest-bearing deposits due to merger of $130.7 million to $526.0 million for the nine months ended September 30, 2025 compared to $395.3 million for 2024. The increase in expense is also attributed to an increase in average balance of borrowings of $5.9 million to $34.9 million for the nine months ended September 30, 2025 compared to $29.0 million for 2024. The increase is also due to an increase in rates paid on borrowings of 36 basis points from 4.27 percent for 2024 to 4.63 percent in 2025.
Analysis of Net Interest Income
Net interest income represents the difference between the interest Steele earns on its interest-earning assets, such as loans and investment securities, and the expense Steele pays on interest-bearing liabilities, such as deposits and borrowings. Net interest income depends on both the volume of Steele’s interest-earning assets and interest-bearing liabilities and the interest rates Steele earns or pays on them.
Average Balances, Interest and Average Yields: The following table sets forth certain information relating to Steele’s average balance sheets and reflects the average yield on interest-earning assets and average cost of interest-bearing liabilities, interest earned and interest paid for the years indicated. Such yields and costs are derived by dividing income or expenses by the average balance of interest-earning assets or interest-bearing liabilities, respectively, for the years presented. Average balances are derived from daily balances over the years indicated. The loan yields include net amortization of certain deferred fees and costs that are considered adjustments to yields.
AVERAGE BALANCE SHEET AND RATE ANALYSIS
Three Months Ended September 30,
| ($ In Thousands) |
For the Three Months Ended September 30, |
|||||||||||||||||||||||
| 2025 |
2024 |
|||||||||||||||||||||||
| (1) |
(1) |
|||||||||||||||||||||||
| Average Balance |
Interest |
Average Rate |
Average Balance |
Interest |
Average Rate |
|||||||||||||||||||
| ASSETS : |
||||||||||||||||||||||||
| Tax-exempt loans |
$ | 30,166 | $ | 222 | 2.92 | % | $ | 18,057 | $ | 134 | 2.95 | % | ||||||||||||
| All other loans |
735,825 | 12,059 | 6.50 | % | 389,569 | 5,627 | 5.75 | % | ||||||||||||||||
| Total loans (2)(3)(4) |
765,991 | 12,281 | 6.36 | % | 407,626 | 5,761 | 5.62 | % | ||||||||||||||||
| Taxable securities |
114,730 | 1,224 | 4.23 | % | 60,794 | 471 | 3.08 | % | ||||||||||||||||
| Tax-exempt securities (3) |
77,613 | 635 | 3.25 | % | 56,813 | 378 | 2.65 | % | ||||||||||||||||
| Other securities (7) |
5,112 | 101 | 7.84 | % | 3,688 | 51 | 5.50 | % | ||||||||||||||||
| Total securities |
197,455 | 1,960 | 3.94 | % | 121,295 | 900 | 2.95 | % | ||||||||||||||||
| Federal funds sold |
3,994 | 45 | 4.47 | % | 9,109 | 123 | 5.37 | % | ||||||||||||||||
| Interest-bearing deposits |
35,422 | 316 | 3.54 | % | 14,784 | 132 | 3.55 | % | ||||||||||||||||
| Total interest-earning assets |
1,002,862 | 14,602 | 5.78 | % | 552,814 | 6,916 | 4.98 | % | ||||||||||||||||
| Other assets |
43,191 | 23,236 | ||||||||||||||||||||||
| TOTAL ASSETS |
$ | 1,046,053 | $ | 576,050 | ||||||||||||||||||||
| LIABILITIES : |
||||||||||||||||||||||||
| Savings |
$ | 132,720 | 61 | 0.18 | % | $ | 69,329 | 38 | 0.22 | % | ||||||||||||||
| Now deposits |
237,738 | 1,103 | 1.84 | % | 179,239 | 902 | 2.00 | % | ||||||||||||||||
| Money market deposits |
83,388 | 242 | 1.15 | % | 34,825 | 97 | 1.11 | % | ||||||||||||||||
| Time deposits |
282,205 | 2,800 | 3.94 | % | 119,222 | 1,181 | 3.94 | % | ||||||||||||||||
| Total deposits |
736,051 | 4,206 | 2.27 | % | 402,615 | 2,218 | 2.19 | % | ||||||||||||||||
| Securities sold under repurchase agreement |
1,411 | 16 | 4.50 | % | 1,383 | 18 | 5.18 | % | ||||||||||||||||
| Fed Funds purchased |
2 | - | 0.00 | % | - | - | 0.00 | % | ||||||||||||||||
| Federal reserve bank borrowings |
- | - | 0.00 | % | 9,500 | 117 | 4.90 | % | ||||||||||||||||
| Federal Home Loan Bank advances |
20,345 | 258 | 5.03 | % | 16,500 | 155 | 3.74 | % | ||||||||||||||||
| Subordinated debt |
6,667 | 75 | 4.46 | % | - | - | 0.00 | % | ||||||||||||||||
| Total borrowings |
28,425 | 349 | 4.87 | % | 27,383 | 290 | 4.21 | % | ||||||||||||||||
| Total interest-bearing liabilities |
764,476 | 4,555 | 2.36 | % | 429,998 | 2,508 | 2.32 | % | ||||||||||||||||
| Demand deposits |
176,336 | 83,106 | ||||||||||||||||||||||
| Other liabilities |
8,940 | 6,696 | ||||||||||||||||||||||
| Stockholders’ equity |
96,301 | 56,250 | ||||||||||||||||||||||
| TOTAL LIABILITIES AND STOCKHOLDERS ‘ EQUITY |
$ | 1,046,053 | $ | 576,050 | ||||||||||||||||||||
| Interest rate spread (6) |
3.42 | % | 2.66 | % | ||||||||||||||||||||
| Net interest income/margin (5) |
$ | 10,047 | 3.97 | % | $ | 4,408 | 3.17 | % | ||||||||||||||||
| (1) |
Average volume information was compared using daily averages for interest-earning and bearing accounts. |
| (2) |
Interest on loans includes loan fee income. |
| (3) |
Tax exempt interest revenue is shown on a tax-equivalent basis using a statutory federal income tax rate of 21 percent for 2025 and 2024. |
| (4) |
Nonaccrual loans have been included with loans for the purpose of analysis. Nonaccrual loans totaled $1,591 and $493 as of September 30, 2025 and 2024, respectively. |
| (5) |
Net interest margin is computed by dividing tax-equivalent net interest income by total interest earning assets. |
| (6) |
Interest rate spread represents the difference between the average rate earned on interest-earning assets and the average rate paid on interest-bearing liabilities. |
| (7) | Average balance includes restricted investments in bank stock and money market funds. |
AVERAGE BALANCE SHEET AND RATE ANALYSIS
Nine Months Ended September 30,
| ($ In Thousands) |
For the Nine Months Ended September 30, |
|||||||||||||||||||||||
| 2025 | 2024 | |||||||||||||||||||||||
| (1) |
(1) | |||||||||||||||||||||||
| Average Balance |
Interest |
Average Rate |
Average Balance |
Interest |
Average Rate |
|||||||||||||||||||
| ASSETS : |
||||||||||||||||||||||||
| Tax-exempt loans |
$ | 21,626 | $ | 476 | 2.94 | % | $ | 18,254 | $ | 401 | 2.93 | % | ||||||||||||
| All other loans |
534,859 | 25,000 | 6.25 | % | 381,042 | 15,999 | 5.61 | % | ||||||||||||||||
| Total loans (2)(3)(4) |
556,485 | 25,476 | 6.12 | % | 399,296 | 16,400 | 5.49 | % | ||||||||||||||||
| Taxable securities |
78,731 | 2,244 | 3.81 | % | 62,733 | 1,414 | 3.01 | % | ||||||||||||||||
| Tax-exempt securities (3) |
62,463 | 1,378 | 2.95 | % | 57,903 | 1,158 | 2.67 | % | ||||||||||||||||
| Other securities (7) |
4,638 | 215 | 6.20 | % | 3,831 | 150 | 5.23 | % | ||||||||||||||||
| Total securities |
145,832 | 3,837 | 3.52 | % | 124,467 | 2,722 | 2.92 | % | ||||||||||||||||
| Federal funds sold |
1,691 | 55 | 4.35 | % | 3,718 | 147 | 5.28 | % | ||||||||||||||||
| Interest-bearing deposits |
19,846 | 553 | 3.73 | % | 16,417 | 420 | 3.42 | % | ||||||||||||||||
| Total interest-earning assets |
723,854 | 29,921 | 5.53 | % | 543,898 | 19,689 | 4.84 | % | ||||||||||||||||
| Other assets |
29,332 | 22,785 | ||||||||||||||||||||||
| TOTAL ASSETS |
$ | 753,186 | $ | 566,683 | ||||||||||||||||||||
| LIABILITIES : |
||||||||||||||||||||||||
| Savings |
$ | 88,843 | 129 | 0.19 | % | $ | 67,833 | 104 | 0.20 | % | ||||||||||||||
| Now deposits |
204,564 | 2,750 | 1.80 | % | 176,154 | 2,638 | 2.00 | % | ||||||||||||||||
| Money market deposits |
50,298 | 439 | 1.17 | % | 35,002 | 271 | 1.03 | % | ||||||||||||||||
| Time deposits |
182,327 | 5,411 | 3.97 | % | 116,321 | 3,268 | 3.75 | % | ||||||||||||||||
| Total deposits |
526,032 | 8,729 | 2.22 | % | 395,310 | 6,281 | 2.12 | % | ||||||||||||||||
| Securities sold under repurchase agreement |
1,530 | 52 | 4.54 | % | 1,686 | 66 | 5.23 | % | ||||||||||||||||
| Fed Funds purchased |
19 | 1 | 7.04 | % | 3 | - | 0.00 | % | ||||||||||||||||
| Federal reserve bank borrowings |
- | - | 0.00 | % | 9,500 | 348 | 4.89 | % | ||||||||||||||||
| Federal Home Loan Bank advances |
31,089 | 1,078 | 4.64 | % | 17,770 | 511 | 3.84 | % | ||||||||||||||||
| Subordinated debt |
2,222 | 75 | 4.51 | % | - | - | 0.00 | % | ||||||||||||||||
| Total borrowings |
34,860 | 1,206 | 4.63 | % | 28,959 | 925 | 4.27 | % | ||||||||||||||||
| Total interest-bearing liabilities |
560,892 | 9,935 | 2.37 | % | 424,269 | 7,206 | 2.27 | % | ||||||||||||||||
| Demand deposits |
113,693 | 80,439 | ||||||||||||||||||||||
| Other liabilities |
7,768 | 6,479 | ||||||||||||||||||||||
| Stockholders’ equity |
70,833 | 55,496 | ||||||||||||||||||||||
| TOTAL LIABILITIES AND STOCKHOLDERS ‘ EQUITY |
$ | 753,186 | $ | 566,683 | ||||||||||||||||||||
| Interest rate spread (6) |
3.16 | % | 2.57 | % | ||||||||||||||||||||
| Net interest income/margin (5) |
$ | 19,986 | 3.69 | % | $ | 12,483 | 2.98 | % | ||||||||||||||||
| (1) |
Average volume information was compared using daily averages for interest-earning and bearing accounts. |
| (2) |
Interest on loans includes loan fee income. |
| (3) |
Tax exempt interest revenue is shown on a tax-equivalent basis using a statutory federal income tax rate of 21 percent for 2025 and 2024. |
| (4) |
Nonaccrual loans have been included with loans for the purpose of analysis. Nonaccrual loans totaled $1,591 and $493 as of September 30, 2025 and 2024, respectively. |
| (5) |
Net interest margin is computed by dividing tax-equivalent net interest income by total interest earning assets. |
| (6) |
Interest rate spread represents the difference between the average rate earned on interest-earning assets and the average rate paid on interest-bearing liabilities. |
| (7) | Average balance includes restricted investments in bank stock and money market funds. |
Reconcilement of Taxable Equivalent Net Interest Income
| For the Three Months Ended September 30, |
For the Nine Months Ended September 30, |
|||||||||||||||
| ($ In Thousands) |
2025 |
2024 |
2025 |
2024 |
||||||||||||
| Total interest income (GAAP) |
$ | 14,419 | $ | 6,809 | $ | 29,528 | $ | 19,359 | ||||||||
| Total interest expense (GAAP) |
4,555 | 2,508 | 9,935 | 7,206 | ||||||||||||
| Net interest income (GAAP) |
9,864 | 4,301 | 19,593 | 12,153 | ||||||||||||
| Tax equivalent adjustment |
180 | 107 | 389 | 330 | ||||||||||||
| Net interest income (fully taxable equivalent) (Non-GAAP) |
$ | 10,044 | $ | 4,408 | $ | 19,982 | $ | 12,483 | ||||||||
Rate/Volume Analysis
To enhance the understanding of the effects of volumes (the average balance of earning assets and costing liabilities) and average interest rate fluctuations on the balance sheet as it pertains to net interest income on a tax equivalent basis, the tables below reflects these changes for September 30, 2025 versus 2024:
| ($ In Thousands) |
For the Three Months Ended September 30, |
For the Nine Months Ended September 30, |
||||||||||||||||||||||
| 2025 vs 2024 |
2025 vs 2024 |
|||||||||||||||||||||||
| Increase (Decrease) |
Increase (Decrease) |
|||||||||||||||||||||||
| Due to |
Due to |
|||||||||||||||||||||||
| Volume |
Rate |
Net |
Volume |
Rate |
Net |
|||||||||||||||||||
| Interest income: |
||||||||||||||||||||||||
| Loans, tax-exempt |
$ | 90 | $ | (2 | ) | $ | 88 | $ | 74 | $ | 1 | $ | 75 | |||||||||||
| Loans |
5,345 | 1,087 | 6,432 | 6,821 | 2,180 | 9,001 | ||||||||||||||||||
| Taxable investment securities |
497 | 256 | 753 | 408 | 422 | 830 | ||||||||||||||||||
| Tax-exempt investment securities |
155 | 102 | 257 | 96 | 124 | 220 | ||||||||||||||||||
| Other securities |
24 | 26 | 50 | 31 | 34 | 65 | ||||||||||||||||||
| Federal funds sold |
(63 | ) | (15 | ) | (78 | ) | (77 | ) | (15 | ) | (92 | ) | ||||||||||||
| Interest bearing deposits |
184 | - | 184 | 92 | 41 | 133 | ||||||||||||||||||
| Total interest-earning assets |
6,232 | 1,454 | 7,686 | 7,445 | 2,787 | 10,232 | ||||||||||||||||||
| Interest expense: |
||||||||||||||||||||||||
| Savings |
32 | (9 | ) | 23 | 31 | (6 | ) | 25 | ||||||||||||||||
| Now deposits |
283 | (82 | ) | 201 | 404 | (292 | ) | 112 | ||||||||||||||||
| Money market deposits |
138 | 7 | 145 | 126 | 42 | 168 | ||||||||||||||||||
| Time deposits |
1,618 | 1 | 1,619 | 1,906 | 237 | 2,143 | ||||||||||||||||||
| Securities sold under repurchase agreements |
1 | (3 | ) | (2 | ) | (6 | ) | (8 | ) | (14 | ) | |||||||||||||
| Federal funds purchased |
- | - | - | 1 | - | 1 | ||||||||||||||||||
| Federal Reserve Bank borrowings |
(117 | ) | - | (117 | ) | (348 | ) | - | (348 | ) | ||||||||||||||
| Federal Home Loan Bank advances |
43 | 60 | 103 | 397 | 170 | 567 | ||||||||||||||||||
| Subordinated debt |
75 | - | 75 | 75 | - | 75 | ||||||||||||||||||
| Total interest-bearing liabilities |
2,073 | (26 | ) | 2,047 | 2,586 | 143 | 2,729 | |||||||||||||||||
| Change in net interest income (fully taxable equivalent) |
$ | 4,159 | $ | 1,480 | $ | 5,639 | $ | 4,859 | $ | 2,644 | $ | 7,503 | ||||||||||||
Provision for (Recovery of) Credit Losses: During the third quarter of 2025, Steele recorded a $4.2 million provision to the allowance for credit losses. For the nine months ended September 30, 2025, Steele recorded a $4.4 million provision to the allowance for credit losses. The provision included a $4.5 million provision for credit losses on loans, offset by a $100 thousand recovery of credit losses on unfunded commitments. The provision recorded in the third quarter of 2025 included a one-time $4.0 million provision for credit losses on loans for acquired non-PCD loans. The provisions for credit losses on loans for the three and nine months ended September 30, 2025, are primarily due to the acquisitions of loans due to the merger with NUBC. As of the three and nine months ended September 30, 2024 Steele recorded a $138 thousand and $169 thousand provision to the allowance for credit losses, respectively.
Steele completes a comprehensive quarterly evaluation to determine its provision for (recovery of) credit losses on loans. The evaluation reflected analyses of individual borrowers and historical loss experiences, and changes in net loan balances, supplemented as necessary by credit judgment that considers observable trends, conditions, and other relevant environmental and economic factors.
See Note 5 within Steele’s Notes to the Consolidated Financial Statements for more information regarding Steele’s provision for (recovery of) credit losses as of September 30, 2025.
Non-interest Income for the Three Months Ended: Non-interest income increased by $18.7 million, or 4,550.0%, to $19.1 million for the three months ended September 30, 2025, from the $410 thousand recognized during the same period of 2024. Bargain purchase gain of $17.8 million was recognized in association with the merger with NUBC in the third quarter of 2025. (See Note 2 within Steele's Notes to the Consolidated Financial Statements for more detail.) Service charges on deposit accounts increased by $112 thousand to $225 thousand for the three months ended September 30, 2025 compared to $113 thousand recognized during the same period of 2024. ATM fees and debit card income increased $167 thousand and marketable equity security gain increased by $140 thousand from ($80) thousand for the three months ended September 30, 2024 to $60 thousand for the three months ended September 30, 2025.
| ($ In Thousands) |
Three Months Ended |
|||||||||||||||||||||||
| September 30, 2025 |
September 30, 2024 |
Change |
||||||||||||||||||||||
| Amount |
% Total |
Amount |
% Total |
Amount |
% |
|||||||||||||||||||
| Service charges on deposit accounts |
$ | 225 | 1.2 | % | $ | 113 | 27.6 | % | $ | 112 | 99.1 | % | ||||||||||||
| ATM fees and debit card income |
368 | 1.9 | 201 | 49.0 | 167 | 83.1 | ||||||||||||||||||
| Mortgage banking revenue |
134 | 0.7 | 52 | 12.7 | 82 | 157.7 | ||||||||||||||||||
| Trust and investment fee income |
129 | 0.7 | 19 | 4.6 | 110 | 578.9 | ||||||||||||||||||
| Loss on sale of securities |
(8 | ) | 0.0 | - | - | (8 | ) | 100.0 | ||||||||||||||||
| Net marketable equity security gains (losses) |
60 | 0.3 | (80 | ) | (19.5 | ) | 140 | (175.0 | ) | |||||||||||||||
| Earnings on bank owned life insurance |
130 | 0.7 | 65 | 15.9 | 65 | 101.0 | ||||||||||||||||||
| Bargain purchase gain |
17,827 | 93.4 | - | - | 17,827 | 100.0 | ||||||||||||||||||
| Other |
203 | 1.1 | 40 | 9.7 | 163 | 407.5 | ||||||||||||||||||
| Total non-interest income |
$ | 19,068 | 100.0 | % | $ | 410 | 100.0 | % | $ | 18,658 | 4550.7 | % | ||||||||||||
Non-interest Income for the Nine Months Ended: Non-interest income increased by $18.8 million, or 1351.6%, to $20.1 million for the nine months ended September 30, 2025, from the $1.4 million recognized during the same period of 2024. Bargain purchase gain of $17.8 million was recognized in association with the merger with NUBC in the third quarter of 2025. (See Note 2 within Steele's Notes to the Consolidated Financial Statements for more detail.) Included in non-interest income for the nine months ended September 30, 2025, is a gain on sale premises of $52 thousand, for which there was no comparable gain during 2024. Service charges on deposit accounts increased by $156 thousand to $486 thousand for the nine months ended September 30, 2025 compared to $330 thousand recognized during the same period of 2024, marketable equity security loss increase by $169 thousand from ($112) thousand as of September 30, 2024 to $57 thousand as of September 30, 2025, and ATM fees and debit card income increasing $159 thousand during 2025.
| ($ In Thousands) |
Nine Months Ended |
|||||||||||||||||||||||
| September 30, 2025 |
September 30, 2024 |
Change |
||||||||||||||||||||||
| Amount |
% Total |
Amount |
% Total |
Amount |
% |
|||||||||||||||||||
| Service charges on deposit accounts |
$ | 486 | 2.4 | % | $ | 330 | 23.7 | % | $ | 156 | 47.3 | % | ||||||||||||
| ATM fees and debit card income |
738 | 3.7 | 579 | 41.7 | 159 | 27.5 | ||||||||||||||||||
| Mortgage banking revenue |
243 | 1.2 | 187 | 13.5 | 56 | 29.9 | ||||||||||||||||||
| Trust and investment fee income |
207 | 1.0 | 64 | 4.6 | 143 | 223.4 | ||||||||||||||||||
| Gain on sale of premises |
52 | 0.2 | - | - | 52 | 100.0 | ||||||||||||||||||
| Loss on sale of securities |
(8 | ) | 0.0 | - | - | (8 | ) | 100.0 | ||||||||||||||||
| Net marketable equity security gains (losses) |
57 | 0.3 | (112 | ) | (8.1 | ) | 169 | (150.9 | ) | |||||||||||||||
| Earnings on bank owned life insurance |
256 | 1.3 | 192 | 13.8 | 64 | 101.0 | ||||||||||||||||||
| Bargain purchase gain |
17,827 | 88.3 | - | - | 17,827 | 100.0 | ||||||||||||||||||
| Other |
323 | 1.6 | 150 | 10.8 | 173 | 115.3 | ||||||||||||||||||
| Total non-interest income |
$ | 20,181 | 100.0 | % | $ | 1,390 | 100.0 | % | $ | 18,791 | 1351.9 | % | ||||||||||||
Non-interest Expense for the Three Months Ended: Non-interest expenses increased $8.0 million or 275.3 percent, from $2.9 million for the three months ended September 30, 2024, to $10.9 million for the three months ended September 30, 2025. The increase was largely due to a $3.8 million increase in merger related expenses and an increase of $2.5 million in salaries and employee benefit expenses due to the merger with NUBC, an increase in amortization of core deposit intangible of $444 thousand as result of the merger with NUBC for which there was no comparable expense during 2024, and by a $842 thousand increase in other expenses due to the merger.
| ($ In Thousands) |
Three Months Ended |
|||||||||||||||||||||||
| September 30, 2025 |
September 30, 2024 |
Change |
||||||||||||||||||||||
| Amount |
% Total |
Amount |
% Total |
Amount |
% |
|||||||||||||||||||
| Salaries and employee benefits |
$ | 4,310 | 39.5 | % | $ | 1,779 | 61.1 | % | $ | 2,531 | 142.3 | % | ||||||||||||
| Net occupancy and equipment expense |
442 | 3.9 | 270 | 9.3 | 172 | 63.7 | ||||||||||||||||||
| Amortization of core deposit intangible |
444 | 4.1 | - | - | 444 | 100.0 | ||||||||||||||||||
| Data processing fees |
252 | 2.3 | 171 | 5.9 | 81 | 47.4 | ||||||||||||||||||
| Pennsylvania shares tax |
108 | 1.0 | 114 | 3.9 | (6 | ) | (5.3 | ) | ||||||||||||||||
| Professional fees |
112 | 1.0 | 30 | 1.0 | 82 | 273.3 | ||||||||||||||||||
| Advertising expense |
67 | 0.6 | 32 | 1.1 | 35 | 109.4 | ||||||||||||||||||
| FDIC deposit insurance |
127 | 1.2 | 64 | 2.2 | 63 | 98.4 | ||||||||||||||||||
| Merger-related expenses |
3,873 | 35.5 | 105 | 3.6 | 3,768 | 3,588.6 | ||||||||||||||||||
| Other |
1,187 | 10.9 | 345 | 11.9 | 842 | 244.1 | ||||||||||||||||||
| Total non-interest expense |
$ | 10,922 | 100.0 | % | $ | 2,910 | 100.0 | % | $ | 8,012 | 275.3 | % | ||||||||||||
Non-interest Expense for the Nine Months Ended: Non-interest expenses increased $8.6 million or 100.2 percent, from $8.6 million for the nine months ended September 30, 2024, to $17.1 million for the nine months ended September 30, 2025. The increase was largely due to $4.0 million in merger related expenses and an increase of $2.7 million in salaries and employee benefit expenses due to the merger with NUBC, an increase in amortization of core deposit intangible of $444 thousand as result of the merger with NUBC for which there was no comparable expense during 2024, and by a $982 thousand increase in other expenses due to the merger.
| ($ In Thousands) |
Nine Months Ended |
|||||||||||||||||||||||
| September 30, 2025 |
September 30, 2024 |
Change |
||||||||||||||||||||||
| Amount |
% Total |
Amount |
% Total |
Amount |
% |
|||||||||||||||||||
| Salaries and employee benefits |
$ | 7,997 | 46.6 | % | $ | 5,303 | 61.9 | % | $ | 2,694 | 50.8 | % | ||||||||||||
| Net occupancy and equipment expense |
1,040 | 6.1 | 871 | 10.2 | 169 | 19.4 | ||||||||||||||||||
| Amortization of core deposit intangible |
444 | 2.6 | - | - | 444 | 100.0 | ||||||||||||||||||
| Data processing fees |
598 | 3.5 | 514 | 6.0 | 84 | 16.3 | ||||||||||||||||||
| Pennsylvania shares tax |
332 | 1.9 | 335 | 3.9 | (3 | ) | (0.9 | ) | ||||||||||||||||
| Professional fees |
191 | 1.1 | 108 | 1.3 | 83 | 76.9 | ||||||||||||||||||
| Advertising expense |
141 | 0.8 | 97 | 1.1 | 44 | 45.4 | ||||||||||||||||||
| FDIC deposit insurance |
263 | 1.5 | 190 | 2.2 | 73 | 38.4 | ||||||||||||||||||
| Merger-related expenses |
4,120 | 24.1 | 105 | 1.2 | 4,015 | 3,823.8 | ||||||||||||||||||
| Other |
2,023 | 11.8 | 1,041 | 12.2 | 982 | 94.3 | ||||||||||||||||||
| Total non-interest expense |
$ | 17,149 | 100.0 | % | $ | 8,564 | 100.0 | % | $ | 8,585 | 100.2 | % | ||||||||||||
Provision for Income Taxes: Steele recorded income tax expense of $105 thousand in the third quarter of 2025, a decrease of $177 thousand, or 62.8%, compared to $282 thousand in the third quarter of 2024. Steele recorded income tax expense of $932 thousand for the nine months ended September 30, 2025, an increase of $182 thousand, or 24.3 percent, compared to $750 thousand for the nine months ended September 30, 2024. The increase in income tax expense was due to higher taxable income in 2025 as compared to 2024. Steele’s effective tax rate decreased to 5.11% at September 30, 2025, compared to 15.59% at September 30, 2024, which resulted primarily from non-taxable income and nondeductible merger expenses in 2025 as compared to 2024. Included in non-interest income is the bargain purchase gain of $17.8 million, which is non-taxable as result of the tax-free exchange associated with the acquisition of NUBC.
Management evaluates the carrying amount of its deferred tax assets on a quarterly basis, or more frequently, as necessary, in accordance with guidance set forth in ASC Topic 740 “Income Taxes,” and applies the criteria in the guidance to determine whether it is more likely than not 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 determines based on available evidence, both positive and negative, that it is more likely than not that some portion or all of the deferred tax asset will not be realized in future periods, a valuation allowance is calculated and recorded. These determinations are inherently subjective and depend upon management’s estimates and judgments used in their evaluation of both positive and negative evidence.
Liquidity
The Company's liquidity, represented by cash and due from banks, is a product of its operating, investing and financing activities. The Company's primary source of funds are deposits, securities sold under agreements to repurchase, principal repayments of securities and outstanding loans, funds provided from operations, federal fund borrowings from Atlantic Community Bankers Bank and short and long term Federal Home Loan Bank ("FHLB") advances. In addition, the Company invests excess funds in short-term interest earning assets such as overnight deposits or U.S. agency securities, which provide liquidity to meet lending requirements. While scheduled payments from the amortization of loans and securities and short-term investments are relatively predictable sources of funds, general interest rates, economic conditions and competition greatly influence deposit flows and repayments on loans and mortgage-backed securities.
The Company strives to maintain sufficient liquidity to fund operations, loan demand and to satisfy fluctuations in deposit levels. The Company is required to have enough investments to qualify as liquid assets in order to maintain sufficient liquidity to ensure safe and sound banking operations. Liquidity may increase or decrease depending upon the availability of funds and comparative yields on investments in relation to the return on loans. The Company attempts to maintain adequate but not excessive liquidity, and liquidity management is both a daily and long-term function of its business management. The Company manages its liquidity in accordance with a board of directors-approved asset liability policy, which is administered by its asset-liability committee ("ALCO"). ALCO reports interest rate sensitivity, liquidity, capital and investment-related matters on a quarterly basis to the Company's board of directors.
The Company reviews cash flow projections regularly and updates them in order to maintain liquid assets at levels believed to meet the requirements of normal operations, including loan commitments and potential deposit outflows from maturing certificates of deposit and saving withdrawals. While deposits and securities sold under agreements to repurchase are its primary source of funds, when needed it is also able to generate cash through borrowings from the FHLB. At September 30, 2025, the Bank had remaining available capacity with FHLB, subject to certain collateral restrictions, of $472.4 million.
Liquidity management is required to ensure that adequate funds will be available to meet anticipated and unanticipated deposit withdrawals, debt service payments, investment commitments, commercial and consumer loan demand, and ongoing operating expenses. Funding sources include principal repayments on loans, sale of assets, growth in time and core deposits, short and long-term borrowings, investment securities coming due, loan prepayments and repurchase agreements. Regular loan payments are a dependable source of funds, while the sale of investment securities, deposit growth and loan prepayments are significantly influenced by general economic conditions and the level of interest rates.
The Company manages liquidity on a daily basis. Management believes that the liquidity is sufficient to meet present and future financial obligations and commitments on a timely basis.
Interest Rate Risk Management
Interest rate risk is the risk to earnings or capital arising from movements in market interest rates. When interest-earning assets and interest-bearing liabilities reprice at different times or in different degrees or when call options are exercised, in response to change in market interest rates, future net interest income is impacted. When interest-earning assets mature or re-price more quickly than interest-bearing liabilities, the balance sheet is considered “asset sensitive”. An asset sensitive position will produce relatively more net interest income when interest rates rise and less net interest income when rates decline. Conversely, when interest-bearing liabilities mature or re-price more quickly than interest-earning assets in a given period, the balance sheet is considered “liability sensitive”. A liability sensitive position will produce relatively more net interest income when interest rates fall and less net interest income when rates increase. The Company considers interest rate risk to be a significant risk and manages its exposure through policies approved by its Asset Liability Committee ("ALCO") and Board of Directors. ALCO reviews periodic reports of the Company's interest rate risk position, including results of simulation analysis. Simulation analysis applies interest rate shocks, hypothetical immediate shifts in interest rates, to the Company’s financial instruments and determines the impact to projected one-year net interest income and other key measures. The following table shows the results of rate shocks on net interest income projected for one year from the reporting date. For purposes of this analysis, noninterest income and expenses are assumed to be flat.
| Changes in Projected Net Interest Income |
||||||||
| as of September 30, |
||||||||
| Rate Shift (basis points) |
2025 |
2024 |
||||||
| 400 |
-4.85 | % | -14.47 | % | ||||
| 300 |
-3.30 | % | -10.46 | % | ||||
| 200 |
-1.77 | % | -6.42 | % | ||||
| 100 |
-0.62 | % | -2.98 | % | ||||
| (-)100 |
1.05 | % | 3.43 | % | ||||
| (-)200 |
-0.31 | % | 3.26 | % | ||||
| (-)300 |
-3.73 | % | 0.47 | % | ||||
| (-)400 |
-4.54 | % | 0.10 | % | ||||
Results of the net interest income simulation indicate that the Company is liability sensitive as of September 30, 2025 and September 30, 2024. The simulation process requires certain estimates and assumptions including, but not limited to, asset growth, the mix of assets and liabilities, the interest rate environment and local and national economic conditions. Asset growth and the mix of assets can, to a degree, be influenced by management. Other areas, such as the interest rate environment and economic factors, cannot be controlled. In addition, competitive pressures can make it difficult to price deposits and loans in a manner that optimally minimizes interest rate risk. Actual results will differ from simulated results due to the timing, magnitude, and frequency of interest rate changes; changes in market conditions and customer behavior; and changes in management strategies.
While the asset/liability management program is designed to protect the Company over the long term, it does not provide near-term protection from interest rate shocks, as interest rate sensitive assets and liabilities do not by their nature move up or down in tandem in response to changes in the overall rate environment. The Company’s profitability in the near-term may be temporarily negatively affected in a period of rapidly rising or rapidly falling rates, because it takes some time for the Company’s portfolio to reflect changes to offering rates in response to a new interest rate environment.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Not required for smaller reporting companies.
Item 4. Controls and Procedures
Our Chief Executive Officer (CEO) and Chief Financial Officer (CFO) have concluded that our disclosure controls and procedures (as defined in Rules 13a–15(e) and 15d–15(e) under the Securities Exchange Act of 1934, as amended), based on their evaluation of these controls and procedures as of the end of the period covered by this Report, were effective as of such date at the reasonable assurance level as discussed below to ensure that information required to be disclosed by us in the reports we file under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission and that such information is accumulated and communicated to our management, including its principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.
Our management, including the CEO and CFO, does not expect that our disclosure controls and internal controls will prevent all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the system are met. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within our company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. In addition, controls can be circumvented by the individual acts of some persons, by collusion of two or more people or by management override of the controls.
The CEO and CFO have evaluated the changes to our internal controls over financial reporting that occurred during our fiscal quarter ended September 30, 2025, as required by paragraph (d) Rules 13a–15 and 15d–15 under the Securities Exchange Act of 1934, as amended, and have concluded that there were no changes that materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.
Effective on August 1, 2025, the Company completed its Merger with Northumberland. During the third quarter of 2025, management commenced an evaluation of the design and operating effectiveness of internal controls over financial reporting related to the Northumberland acquired business. The evaluation of changes to processes, technology systems, and other components of internal control over financial reporting related to the Northumberland acquired business is ongoing. Except for the changes made in connection with the Merger, there were no changes in our internal control over financial reporting that occurred during the quarter ended September 30, 2025, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Part II - Other Information
Item 1. Legal Proceedings
At September 30, 2025, the Company was not involved in any legal proceedings other than routine legal proceedings in the ordinary course of business, which involve amounts which, in the aggregate, are believed by management to be immaterial to the financial condition of the Company. In addition, no material proceedings are pending or are known to be threatened or contemplated against the Company by government authorities.
Item 1A. Risk Factors
Not required for smaller reporting companies.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
None.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
None.
Item 5. Other Information
(a) There was no information the Company was required to disclose in a report on Form 8-K during the fiscal quarter ended September 30, 2025 that was not disclosed.
(b) There were no material changes to the procedures by which security holders may recommend nominees to the Company's board of directors during the fiscal quarter ended September 30, 2025.
(c) During the fiscal quarter ended September 30, 2025,
Item 6. Exhibits
EXHIBIT INDEX
| Exhibit No. |
Description |
| 3.1 | Amended and Restated Articles of Incorporation, as amended (incorporated by reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K filed on August 1, 2025). |
| 3.2 | Amended and Restated Bylaws (incorporated by reference to Exhibit 3.2 to Registrant’s Registration Statement on Form S-4 (File No. 333-284191) filed on January 10, 2025). |
| 31.1 |
Rule 13a-14(a)/15d-14(a) Certification of Principal Executive Officer |
| 31.2 |
Rule 13a-14(a)/15d-14(a) Certification of Principal Financial Officer |
| 32.1 |
Section 1350 Certification of Chief Executive Officer and Principal Financial Officer |
| 101 |
The following materials from the Company's Quarterly Report on Form 10-Q for the period ended September 30, 2025, formatted in XBRL (Extensible Business Reporting Language); (i) the Consolidated Balance Sheets (unaudited), (ii) the Consolidated Statements of Income (unaudited), (iii) the Consolidated Statement of Comprehensive Income (unaudited), (iv) the Consolidated Statement of Changes in Stockholders' Equity (unaudited), (v) the Consolidated Statements of Cash Flows (unaudited), and (vi) the Notes to Consolidated Financial Statements (unaudited). |
|
|
|
| 104 |
Cover Page for Interactive Data File (embedded with the Inline XBRL document) |
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| STEELE BANCORP, INC. | |||
| /s/ Jeffrey J. Kapsar | |||
| Date: November 14, 2025 | By: | ||
| Jeffrey J. Kapsar, President and Chief Executive Officer | |||
| /s/ Thomas C. Graver, Jr. | |||
| By: | |||
| Thomas C. Graver, Jr. Senior Executive Vice President and Chief Financial Officer | |||