リンクバンコープの四半期報告

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q


☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2024


☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _____ to ______

Commission File Number 001-41505

LINKBANCORP, Inc.

(Exact name of registrant as specified in its charter)



Pennsylvania	82-5130531
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

1250 Camp Hill Bypass, Suite 202 Camp Hill, PA 17011 (Address of principal executive offices)

Registrant’s telephone number, including area code: (855) 569-2265

Former name, former address, and former fiscal year, if changed since last report: N/A

Securities registered pursuant to Section 12(b) of the Act.



Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $0.01 par value per share	LNKB	The NASDAQ Stock Market LLC

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. Yes ☒ No ☐.

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 during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐.

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company”, and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):



Large Accelerated Filer	☐	Accelerated Filer	☐

Non-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 Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act.) Yes ☐ No ☒.

Indicate the number of shares of the Registrant’s Common Stock outstanding as of the latest practicable date: 37,370,317 shares as of November 6, 2024.

LINKBANCORP, Inc.

FORM 10-Q

INDEX



PART I - FINANCIAL INFORMATION
		PAGE
Item 1 -	Financial Statements (Unaudited)
	Consolidated Balance Sheets as of September 30, 2024 and December 31, 2023	1
	Consolidated Statements of Operations for the three and nine months ended September 30, 2024 and 2023	2
	Consolidated Statements of Comprehensive Income for the three and nine months ended September 30, 2024 and 2023	3
	Consolidated Statements of Shareholders’ Equity for the three and nine months ended September 30, 2024 and 2023	4
	Consolidated Statements of Cash Flows for the nine months ended September 30, 2024 and 2023	6
	Notes to Consolidated Financial Statements (Unaudited)	8
Item 2 -	Management’s Discussion and Analysis of Financial Condition and Results of Operations	43
Item 3 -	Quantitative and Qualitative Disclosures About Market Risk	57
Item 4 -	Controls and Procedures	57

PART II - OTHER INFORMATION
Item 1 -	Legal Proceedings	57
Item 1A -	Risk Factors	57
Item 2 -	Unregistered Sales of Equity Securities and Use of Proceeds	57
Item 3 -	Defaults Upon Senior Securities	58
Item 4 -	Mine Safety Disclosures	58
Item 5 -	Other Information	58
Item 6 -	Exhibits	59
SIGNATURES		60

PART I - FINANCIAL INFORMATION

Item 1 - Consolidated Financial Statements

LINKBANCORP, Inc. and Subsidiaries

Consolidated Balance Sheets (Unaudited)


	September 30, 2024			December 31, 2023
(In Thousands, except share and per share data)
ASSETS
Noninterest-bearing cash equivalents	$	15,295		$	13,089
Interest-bearing deposits with other institutions		175,937			67,101
Cash and cash equivalents		191,232			80,190
Securities available for sale, at fair value		149,315			115,490
Securities held to maturity (Fair value of $32,823 and $34,236, respectively)		34,626			36,735
Less: Allowance for credit losses - securities		(471	)		(512	)
Securities held to maturity, net		34,155			36,223
Loans receivable		2,215,868			2,128,284
Less: Allowance for credit losses - loans		(26,542	)		(23,767	)
Net loans		2,189,326			2,104,517
Investments in restricted bank stock		4,904			3,965
Premises and equipment, net		17,623			20,130
Right-of-Use Asset – Premises		14,150			15,497
Bank-owned life insurance		51,646			48,847
Goodwill		58,806			56,968
Other intangible assets, net		22,118			25,733
Deferred tax asset		21,662			24,153
Assets held for sale		104,660			115,499
Accrued interest receivable and other assets		20,344			22,113
TOTAL ASSETS	$	2,879,941		$	2,669,325
LIABILITIES
Deposits:
Demand, noninterest bearing	$	658,473		$	624,780
Interest bearing		1,714,179			1,574,019
Total deposits		2,372,652			2,198,799
Long-term borrowings		40,000			—
Short-term borrowings		—			10,000
Note payable		572			590
Subordinated debt		61,843			61,444
Lease liabilities		14,911			16,361
Allowance for credit losses - unfunded commitments		1,857			2,189
Liabilities held for sale		94,228			99,777
Accrued interest payable and other liabilities		16,525			14,369
TOTAL LIABILITIES		2,602,588			2,403,529
COMMITMENTS AND CONTINGENT LIABILITIES (Note 11)
SHAREHOLDERS’ EQUITY
Preferred stock (At September 30, 2024 and December 31, 2023: no par value; 5,000,000 shares authorized; no shares issued and outstanding.)		—			—
Common stock (At September 30, 2024 and December 31, 2023: $0.01 par value; 50,000,000 shares authorized; 37,361,560 and 37,340,700 shares issued and outstanding, respectively.)		370			369
Surplus		264,059			263,310
Retained earnings		15,147			4,843
Accumulated other comprehensive loss		(2,223	)		(3,209	)
Total equity attributable to parent		277,353			265,313
Noncontrolling interest in consolidated subsidiary		—			483
TOTAL SHAREHOLDERS' EQUITY		277,353			265,796
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	$	2,879,941		$	2,669,325

See accompanying notes to the unaudited consolidated financial statements.

LINKBANCORP, Inc. and Subsidiaries

Consolidated Statements of Operations (Unaudited)


	Three Months Ended September 30,					Nine Months Ended September 30,
	2024		2023			2024		2023
(In Thousands, except share and per share data)
INTEREST AND DIVIDEND INCOME
Loans receivable, including fees	$	36,856	$	13,068		$	109,093	$	37,330
Investment securities and certificates of deposit:
Taxable		1,683		833			4,666		2,309
Exempt from federal income tax		359		300			1,069		895
Other		1,296		577			3,590		1,561
Total interest and dividend income		40,194		14,778			118,418		42,095
INTEREST EXPENSE
Deposits		13,292		5,434			38,210		15,193
Other borrowings		949		550			2,967		1,196
Subordinated debt		972		442			2,892		1,311
Total interest expense		15,213		6,426			44,069		17,700
NET INTEREST INCOME BEFORE PROVISION FOR (CREDIT TO) CREDIT LOSSES		24,981		8,352			74,349		24,395
Provision for (credit to) credit losses		84		(349	)		125		(549	)
NET INTEREST INCOME AFTER PROVISION FOR (CREDIT TO) CREDIT LOSSES		24,897		8,701			74,224		24,944
NONINTEREST INCOME
Service charges on deposit accounts		1,052		198			2,697		593
Bank-owned life insurance		430		177			1,199		488
Net realized gains (losses) on the sales of debt securities		—		—			4		(2,370	)
Gain on sale of loans		138		—			200		296
Other		1,060		505			2,167		905
Total noninterest income		2,680		880			6,267		(88	)
NONINTEREST EXPENSE
Salaries and employee benefits		9,855		4,193			30,914		12,350
Occupancy		1,440		701			4,577		2,104
Equipment and data processing		1,640		934			5,290		2,519
Professional fees		763		363			2,299		1,162
FDIC insurance and supervisory fees		812		276			1,709		619
Bank shares tax		752		278			2,103		834
Intangible amortization		1,205		59			3,615		179
Merger & restructuring expenses		171		777			858		1,679
Advertising		163		77			505		268
Other		1,651		336			4,731		1,833
Total noninterest expense		18,452		7,994			56,601		23,547
Income before income tax expense		9,125		1,587			23,890		1,309
Income tax expense		2,030		347			5,265		276
NET INCOME	$	7,095	$	1,240		$	18,625	$	1,033
EARNINGS PER SHARE, BASIC	$	0.19	$	0.08		$	0.50	$	0.06
EARNINGS PER SHARE, DILUTED	$	0.19	$	0.08		$	0.50	$	0.06
WEIGHTED-AVERAGE COMMON SHARES OUTSTANDING,
BASIC		36,983,637		16,235,144			36,972,127		15,984,151
DILUTED		37,090,111		16,235,144			37,061,512		15,984,151

See accompanying notes to the unaudited consolidated financial statements.

LINKBANCORP, Inc. and Subsidiaries

Consolidated Statements of Comprehensive Income (Unaudited)


	Three Months Ended September 30,						Nine Months Ended September 30,
	2024			2023			2024			2023
(In Thousands)
Net income	$	7,095		$	1,240		$	18,625		$	1,033
Components of other comprehensive income:
Unrealized gain (loss) on available-for-sale securities		4,058			(2,812	)		2,086			(2,405	)
Tax effect		(854	)		591			(440	)		503
Net of tax amount		3,204			(2,221	)		1,646			(1,902	)

Unrealized (loss) gain on cash flow hedges		(1,952	)		1,716			320			3,835
Adjustment for amounts reclassified into net income		(383	)		(375	)		(1,156	)		(572	)
Tax effect		490			(282	)		176			(685	)
Net of tax amount		(1,845	)		1,059			(660	)		2,578

Total other comprehensive income (loss)		1,359			(1,162	)		986			676
Total comprehensive income	$	8,454		$	78		$	19,611		$	1,709

See accompanying notes to the unaudited consolidated financial statements.

LINKBANCORP, Inc. and Subsidiaries

Consolidated Statements of Shareholders’ Equity (Unaudited)


(In Thousands, except share data)	Common Stock Shares			Common Stock Amount		Surplus		Retained Earnings			Accumulated Other Comprehensive Loss			Total
Balance, June 30, 2024		37,356,278		$	370	$	263,795	$	10,826		$	(3,582	)	$	271,409
Net income		—			—		—		7,095			—			7,095
Dividends declared ($0.075 per share)		—			—		—		(2,774	)		—			(2,774	)
Employee stock purchase plan		7,641			—		44		—			—			44
Stock compensation amortization		—			—		220		—			—			220
Retirement of restricted shares		(2,359	)		—		—		—			—			—
Other comprehensive income		—			—		—		—			1,359			1,359
Balance, September 30, 2024		37,361,560		$	370	$	264,059	$	15,147		$	(2,223	)	$	277,353

(In Thousands, except share data)	Common Stock Shares			Common Stock Amount		Surplus		Retained Earnings			Accumulated Other Comprehensive Loss			Total
Balance, June 30, 2023		16,228,440		$	162	$	127,818	$	19,039		$	(4,567	)	$	142,452
Net income		—			—		—		1,240			—			1,240
Dividends declared ($0.075 per share)		—			—		—		(1,217	)		—			(1,217	)
Employee stock purchase plan		7,431			—		—		—			—			—
Stock option expense		—			—		38		—			—			38
Other comprehensive loss		—			—		—		—			(1,162	)		(1,162	)
Balance, September 30, 2023		16,235,871		$	162	$	127,856	$	19,062		$	(5,729	)	$	141,351


(In Thousands, except share data)	Common Stock Shares			Common Stock Amount		Surplus		Retained Earnings			Accumulated Other Comprehensive Loss			Total Equity Attributable to Parent			Noncontrolling interest in consolidated subsidiary			Total Shareholders' Equity
Balance, December 31, 2023		37,340,700		$	369	$	263,310	$	4,843		$	(3,209	)	$	265,313		$	483		$	265,796
Net income		—			—		—		18,625			—			18,625			—			18,625
Dividends declared ($0.225 per share)		—			—		—		(8,321	)		—			(8,321	)		—			(8,321	)
Exercise of stock options		1,777			—		11		—			—			11			—			11
Employee stock purchase plan		21,442			1		98		—			—			99			—			99
Stock compensation amortization		—			—		640		—			—			640			—			640
Dissolution of Minority Interest		—			—		—		—			—			—			(483	)		(483	)
Retirement of restricted shares		(2,359	)		—		—		—			—			—			—			—
Other comprehensive income		—			—		—		—			986			986			—			986
Balance, September 30, 2024		37,361,560		$	370	$	264,059	$	15,147		$	(2,223	)	$	277,353		$	-		$	277,353

(In Thousands, except share data)	Common Stock Shares			Common Stock Amount		Surplus		Retained Earnings			Accumulated Other Comprehensive Income (Loss)			Total
Balance, December 31, 2022		14,939,640		$	149	$	117,709	$	27,100		$	(6,405	)	$	138,553
Cumulative effect of change in accounting principles (Note 1)		—			—		—		(5,419	)		—			(5,419	)
Balance, January 1, 2023 as adjusted		14,939,640			149		117,709		21,681			(6,405	)		133,134
Net income		—			—		—		1,033			—			1,033
Dividends declared ($0.225 per share)		—			—		—		(3,652	)		—			(3,652	)
Issuance of shares of common stock, net proceeds		1,282,052			13		9,967		—			—			9,980
Employee stock purchase plan		14,179			—		84		—			—			84
Stock option expense		—			—		96		—			—			96
Other comprehensive income		—			—		—		—			676			676
Balance, September 30, 2023		16,235,871		$	162	$	127,856	$	19,062		$	(5,729	)	$	141,351

See accompanying notes to the unaudited consolidated financial statements.

LINKBANCORP, Inc. and Subsidiaries

Consolidated Statement of Cash Flows (Unaudited)


	For the Nine Months Ended September 30,
(In Thousands)	2024			2023
OPERATING ACTIVITIES
Net income	$	18,625		$	1,033
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for (credit to) credit losses		125			(549	)
Depreciation		1,472			779
Amortization of intangible assets		3,615			179
Accretion of discounts, net		(8,796	)		(447	)
Origination of loans to be sold		(6,722	)		(3,745	)
Proceeds from loan sales		6,922			4,041
Gain on sale of loans		(200	)		(296	)
Share-based and deferred compensation		1,338			627
Bank-owned life insurance income		(1,199	)		(488	)
(Gain) loss on sale of debt securities, available for sale		(4	)		2,370
Change in accrued interest receivable and other assets		3,062			328
Change in accrued interest payable and other liabilities		1,458			(495	)
Other, net		(113	)		—
Net cash used in operating activities		19,583			3,337

INVESTING ACTIVITIES
Investment securities available for sale:
Proceeds from sales		1,691			1,847
Proceeds from calls and maturities		8,375			-
Proceeds from principal repayments		8,920			5,645
Purchases		(50,379	)		(9,756	)
Investment securities held to maturity:
Proceeds from principal repayments		2,137			2,379
Purchases		—			(11,289	)
Proceeds from redemptions of certificates of deposit with other banks		—			5,374
Purchase of restricted investment in bank stocks		(13,131	)		(6,862	)
Redemption of restricted investment in bank stocks		12,192			7,132
Increase in loans, net		(65,137	)		(49,565	)
Purchase of bank-owned life insurance		(1,600	)		(5,000	)
Cash paid to buy-out minority interest		(483	)		—
Proceeds from disposal of premises and equipment		2,310			—
Purchase of premises and equipment		(1,389	)		(664	)
Net cash used in investing activities		(96,494	)		(60,759	)

FINANCING ACTIVITIES
Increase in deposits, net		166,164			95,000
Change in short-term borrowings, net		(10,000	)		(5,938	)
Proceeds from long-term borrowings		40,000			—
Issuance of shares from exercise of stock options		11			—
Dividends paid		(8,321	)		(3,652	)
Net proceeds from issuance of common stock		99			9,980
Net cash provided by financing activities		187,953			95,390
Increase in cash and cash equivalents		111,042			37,968
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD		80,190			30,011
CASH AND CASH EQUIVALENTS AT END OF PERIOD	$	191,232		$	67,979

See accompanying notes to the unaudited consolidated financial statements.

LINKBANCORP, Inc. and Subsidiaries

Consolidated Statement of Cash Flows (Unaudited)


	For the Nine Months Ended September 30,
	2024			2023
SUPPLEMENTAL CASH FLOW DISCLOSURES
Cash paid during the period for:
Interest	$	43,056		$	17,331
Income taxes	$	—		$	—
Reclassification of New Jersey branch loans from portfolio loans to assets held-for-sale, net	$	10,839		$	—
Reclassification of New Jersey branch assets to assets held-for-sale	$	197		$	—
Reclassification of New Jersey branch deposits to liabilities held-for-sale, net	$	(5,549	)	$	—
Reclassification of New Jersey branch liabilities to liabilities held-for-sale	$	(159	)	$	—

See accompanying notes to the unaudited consolidated financial statements.

LINKBANCORP, Inc. and Subsidiaries

Notes to the Consolidated Financial Statements (Unaudited)

[In Thousands, Except Share Data]

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

A summary of significant accounting and reporting policies applied in the presentation of the accompanying consolidated financial statements follows:

Nature of Operations

LINKBANCORP, Inc. (the “Company” or "LINKBANCORP") was incorporated on April 6, 2018, under the laws of the Commonwealth of Pennsylvania. The Company was formed with the intent of becoming a bank holding company through acquisition of a bank.

On September 17, 2018, the Pennsylvania Department of Banking and Securities (the "PADOBS") approved the acquisition of 100 percent of the shares of Stonebridge Bank. On October 5, 2018, LINKBANCORP purchased 100 percent of the outstanding shares of Stonebridge Bank, from its former parent company Stonebridge Financial Corp. under section 363 of the Bankruptcy Code. LINKBANCORP subsequently renamed the bank LINKBANK.

On December 10, 2020, the Company and its wholly owned subsidiary, LINKBANK, and GNB Financial Services, Inc. (“GNBF”), and its wholly owned subsidiary, The Gratz Bank (the "Bank”) entered into an Agreement and Plan of Merger pursuant to which GNBF merged with and into the Company, with the Company as the surviving corporation. LINKBANK merged with and into The Gratz Bank, with The Gratz Bank as the surviving institution (collectively, the "Gratz Merger"). The Gratz Merger was consummated effective September 18, 2021. In markets other than the pre-merger Gratz Bank areas, the Bank operated as "LINKBANK, a division of The Gratz Bank." Effective November 4, 2022, the Bank legally changed its name and began to operate under one brand under the name LINKBANK.

On November 30, 2023, the Company completed its merger with Partners Bancorp ("Partners"), and its wholly owned subsidiaries, The Bank of Delmarva and Virginia Partners Bank, pursuant to which Partners merged with and into the Company with the Company as the surviving corporation (the "Partners Merger"). The Bank of Delmarva and Virginia Partners Bank merged with and into LINKBANK with LINKBANK as the surviving bank. In connection with the announcement of the Partners Merger in the first quarter of 2023, LINKBANCORP completed a private placement of $10.0 million with certain directors of LINKBANCORP as well as other accredited investors.

The Bank is a full-service commercial bank providing personal and business lending and deposit services. The Bank’s operations are conducted from its eight solutions centers located in Dauphin, Chester, Cumberland, Lancaster, Northumberland, and Schuylkill Counties, and loan production offices located in Chester and York Counties, in Pennsylvania, eight solutions centers in Wicomico, Charles, Anne Arundel, and Worcester counties in Maryland, and a loan production office in Anne Arundel County in Maryland, four solutions centers and a loan production office in Sussex county in Delaware, three solutions centers in Camden and Burlington counties in New Jersey, one solutions center in Spotsylvania County in Virginia, and three solutions centers in the cities of Fredericksburg and Reston, Virginia. The Company’s corporate office resides in Camp Hill, Pennsylvania. As a state chartered, non-Federal Reserve member bank, the Bank is subject to regulation and supervision by the PADOBS and the Federal Deposit Insurance Corporation (the "FDIC"). The Company is regulated by the Federal Reserve Bank of Philadelphia. The Bank’s deposits are insured up to the applicable limits by the FDIC.

Initial Public Offering

In September 2022, the Company completed its initial public offering whereby it issued and sold 5,101,205 shares of common stock at a public offering price of $7.50 per share. The Company received net proceeds of $34,659 after deducting underwriting discounts and commissions of $2,487 and other offering expenses of $1,114. The Company's common stock trades on the Nasdaq Capital Market under the symbol "LNKB."

Pending sale of New Jersey Solutions Centers

On May 9, 2024, the Bank entered into a purchase and assumption agreement (the “Agreement”) with American Heritage Federal Credit Union (“AHFCU”) pursuant to which AHFCU will purchase certain assets and assume certain liabilities (the “Transaction”) of the New Jersey operations of the Bank, including all three branch locations (including two branch leases).

LINKBANCORP, Inc. and Subsidiaries

Notes to the Consolidated Financial Statements (Unaudited)

[In Thousands, Except Share Data]

AHFCU will pay book value for fixed assets, real estate and any other assets located at the owned branch. As of September 30, 2024, approximately $102.3 million in loans and $94.0 million in deposits were classified as held for sale in connection with the Transaction.

The Transaction is expected to close in the fourth quarter of 2024 or the first quarter of 2025 and is subject to receipt of regulatory approvals and certain other customary closing conditions.

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements include the accounts of the Company and the Bank. All significant intercompany accounts and transactions have been eliminated in consolidation. The accounting and reporting practices of the Company conform to accounting principles generally accepted in the United States of America (GAAP) and to general practices within the banking industry. In the opinion of management, all adjustments (all of which are of a normal recurring nature) that are necessary for a fair statement are reflected in the unaudited condensed consolidated financial statements.

The Company has evaluated events and transactions occurring subsequent to the consolidated balance sheet date of September 30, 2024 for items that should potentially be recognized or disclosed in these unaudited condensed consolidated financial statements. The evaluation was conducted through the date these unaudited condensed consolidated financial statements were issued.

Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Material estimates that are particularly susceptible to significant change in the near term relate to the allowance for credit losses, accounting for business combinations, and the valuation of deferred tax assets.

Interim Financial Information

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with GAAP for interim financial information. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements.

In the opinion of management, all adjustments considered necessary for a fair presentation have been included. Operating results for the three and nine months ended September 30, 2024 are not necessarily indicative of the results that may be expected for the year ending December 31, 2024. The accompanying unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto, included in the Company's Annual Report on Form 10-K for the year ended December 31, 2023.

Reclassification of Prior Period Financial Statements

Certain previously reported items have been reclassified to conform to the current year's classifications. Refer to the supplemental cash flow disclosures section of the Consolidated Statements of Cash Flows. Reclassifications had no effect on prior year net income or shareholders' equity.

Unregistered Sale of Equity Securities

On February 21, 2023, the Company entered into Investment Agreements with certain directors of the Company as well as other accredited investors under which it issued and sold 1,282,052 shares of its common stock, par value $0.01, at a price of $7.80 per share. The shares were issued on February 21, 2023, in a private placement exempt from registration under Section 4(a)(2) of the Securities Act of 1933, as amended, and Regulation D of the rules and regulations promulgated thereunder. The offering resulted in gross proceeds of $10.0 million. There were no underwriting discounts or commissions.

Recently Adopted Accounting Standards

Reference Rate Reform

LINKBANCORP, Inc. and Subsidiaries

Notes to the Consolidated Financial Statements (Unaudited)

[In Thousands, Except Share Data]

In January 2021, the FASB issued ASU 2021-01, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting, which added to ASU 2020-04 optional expedients and exceptions to the U.S. GAAP guidance on contract modifications and hedge accounting to ease the financial reporting burdens of the expected market transition from LIBOR and other interbank offered rates to alternative reference rates, such as the Secured Overnight Financing Rate. Entities can elect not to apply certain modification accounting requirements to contracts affected by what the guidance calls “reference rate reform” if certain criteria are met. An entity that makes this election would not have to remeasure the contracts at the modification date or reassess a previous accounting determination. Also, entities can elect various optional expedients that would allow them to continue applying hedge accounting for hedging relationships affected by reference rate reform if certain criteria are met, and can make a onetime election to sell and/or reclassify held-to-maturity debt securities that reference an interest rate affected by reference rate reform. ASU 2022-06, Reference Rate Reform (Topic 848): Deferral of the Sunset Date of Topic 848 deferred the sunset date of Topic 848 from December 31, 2022 to December 31, 2024. The amendments in this ASU are effective for all entities upon issuance through December 31, 2024. The Company identified its loan receivables that have an interest rate indexed to LIBOR, verified proper transition language existed in the contracts and executed contractual updates, as needed, with the impacted borrowers. The Company replaced LIBOR in most cases with one-month Term SOFR or Daily SOFR. The adoption of this standard did not have a material effect on the Company's operating results or financial condition.

Goodwill Impairment

In January 2017, the FASB issued ASU 2017-04, Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment. This standard simplifies the test for goodwill impairment by eliminating the requirement to calculate the implied fair value of goodwill, which had been Step 2 of the goodwill impairment test. Instead, the goodwill impairment test consists of a single quantitative step comparing the fair value of the reporting unit with its carrying amount. An entity should recognize a goodwill impairment charge for the amount by which the carrying amount exceeds the reporting unit's fair value. The new standard was effective for annual and any interim goodwill impairment tests in reporting periods beginning after December 15, 2022. The Company adopted ASU 2017-04 on January 1, 2023. The adoption of this standard did not have a material effect on the Company's operating results or financial condition.

Derivatives

On March 28, 2022, the Financial Accounting Standards Board issued Accounting Standards Update (ASU) 2022-01, Derivatives and Hedging (Topic 815): Fair Value Hedging – Portfolio Layer Method. The purpose of this updated guidance is to further align risk management objectives with hedge accounting results on the application of the last-of-layer method, which was first introduced in ASU 2017-12, Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities. ASU 2022-01 is effective for public business entities for fiscal years beginning after December 15, 2022, with early adoption in the interim period permitted. For entities who have already adopted ASU 2017-12, immediate adoption is allowed. ASU 2022-01 requires a modified retrospective transition method for basis adjustments in which the entity will recognize the cumulative effect of the change on the opening balance of each affected component of equity in the statement of financial position as of the date of adoption. The Company adopted ASU 2022-01 on January 1, 2023. The adoption of this standard did not have a material effect on the Company's operating results or financial condition.

Current Expected Credit Losses

On January 1, 2023, the Company adopted ASU 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, as amended, which replaces the impairment model for most financial assets measured at amortized cost, including loan receivables and held-to-maturity debt securities. This model is also applicable to off-balance sheet credit exposures not accounted for as insurance, such as loan commitments, standby letters of credit, financial guarantees, and other similar instruments. In addition, the amendments in ASU 2016-03 require credit losses on available-for-sale debt securities to be presented as a valuation allowance rather than as a direct write down.

The Company adopted ASC 326 using the modified retrospective method for all financial assets measured at amortized cost, and off-balance-sheet credit exposures. Results for reporting periods beginning after January 1, 2023 are presented under ASC 326 while prior period amounts continue to be reported in accordance with previously applicable GAAP. At January 1, 2023, the Company increased the allowance for credit losses for loans by $5.7 million, the allowance for credit losses for unfunded loan commitments by $910 thousand, and the allowance on held-to-maturity securities by $602 thousand. At January 1, 2023, the Company reported a cumulative-effect adjustment of $5.4 million which decreased retained earnings.

LINKBANCORP, Inc. and Subsidiaries

Notes to the Consolidated Financial Statements (Unaudited)

[In Thousands, Except Share Data]

The Company did not record an allowance for credit losses on its available-for-sale debt securities under the newly codified available-for-sale debt security impairment model, as the majority of these securities are government agency-backed securities for which the risk of loss is minimal.

The Company adopted ASC 326 using the prospective transition approach for financial assets purchased with credit deterioration (PCD) that were previously classified as purchased credit impaired and accounted for under ASC 310-30. In accordance with the standard, management did not reassess whether PCI assets met the criteria of PCD assets as of the date of the adoption. On January 1, 2023, the amortized cost basis of the PCD assets were adjusted to reflect the addition of $308 thousand to the allowance for credit losses. The remaining noncredit discount (based on the adjusted amortized cost basis) will be accreted into interest income at the effective interest rate as of January 1, 2023.

The Federal Reserve and the FDIC have adopted a rule that provides a banking organization the option to phase-in, over a three year period, the effects of CECL on its regulatory capital upon the adoption of the CECL standard. The Company has elected to exercise this phase-in option.

In March 2022, the FASB issued ASU 2022-02, Financial Instruments - Credit Losses: Troubled Debt Restructurings and Vintage Disclosures, which eliminates accounting guidance for troubled debt restructurings ("TDRs") by creditors that have adopted ASU 2016-13 and its related amendments. The amendments require that an entity evaluate whether the loan modification represents a new loan or a continuation of an existing loan, and introduce new requirements related to modifications made to borrowers experiencing financial difficulty. The amendments also require public business entities to disclose current-period gross write-offs for financing receivables by year of origination in the vintage disclosures. For entities that have adopted ASU 2016-13, the amendments in this ASU are effective for fiscal years beginning after December 15, 2022. For entities that have not adopted ASU 2016-13, the amendments in this update are effective at the time the entity adopts ASU 2016-13. The Company adopted this standard effective January 1, 2023 in conjunction with ASC 326. The adoption of this standard did not have a material effect on the Company's operating results or financial condition.

Recent Accounting Pronouncements

In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures. This standard update requires additional interim and annual disclosures about a reportable segment's expenses, even for companies with only one reportable segment. This Update is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. The Company is currently evaluating the guidance; however, the adoption of this standard is not expected to have a material effect on the Company's operating results or financial condition.

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures. This standard update requires additional interim and annual disclosures about a company's income taxes, including more detailed information around the annual rate reconciliation and income taxes paid. For public business entities, this Update is effective for fiscal years beginning after December 15, 2024. The Company is currently evaluating the guidance; however, the adoption of this standard is not expected to have a material effect on the Company's operating results or financial condition.

MERGER AND ACQUISITION

As described in Note 1. Summary of Significant Accounting Policies, effective November 30, 2023 the Company completed its merger with Partners.

Pursuant to the Partners Merger Agreement, Partners merged with and into LINKBANCORP with LINKBANCORP as the surviving corporation. Additionally, the Bank of Delmarva and Virginia Partners Bank each merged with and into LINKBANK, with LINKBANK as the surviving bank.

The Partners Merger constituted a business combination and was accounted for using the acquisition method of accounting, in accordance with the provisions of FASB ASC 805 Business Combinations. As such, LINKBANCORP was the accounting acquirer and Partners was the accounting acquiree and the historical financial statements of the combined company are the historical financial statements of LINKBANCORP.

Under the Partners Merger Agreement, Partners shareholders received 1.150 LINKBANCORP common shares for each share they owned, and cash in lieu of fractional shares. LINKBANCORP issued 20.7 million common shares to Partners shareholders which represented approximately 55.4% of the post-merger outstanding common shares of the Company. The fair value of the common shares issued as the consideration paid for Partners was determined by the closing price of the Company's common shares at the acquisition date.

LINKBANCORP, Inc. and Subsidiaries

Notes to the Consolidated Financial Statements (Unaudited)

[In Thousands, Except Share Data]

The total fair value consideration was $135.8 million which consisted of $133.8 million for the fair value of common stock issued and $2.0 million for the fair value of Partners restricted stock shares.

The following condensed statement reflects the amounts acquired at the acquisition date for each major class of assets acquired and liabilities assumed.


Total Consideration in the Merger				$	135,779

Calculated Fair Value of Assets Acquired
	Cash and cash equivalents	$	34,586
	Federal Funds Sold		7,159
	Securities available for sale		123,440
	Loans, net of ACL(1)		1,238,087
	Premises and equipment		15,422
	Right-of-use asset		6,042
	Core deposit intangibles		25,344
	Deferred taxes		14,986
	Investments in restricted bank stock		6,763
	Accrued interest receivable and other assets		29,855
Total Assets Acquired			1,501,684

Calculated Fair Value of Liabilities Assumed
	Deposits		1,299,867
	Long term borrowings		55,292
	Subordinated debt		21,078
	Operating lease liabilities		6,908
	Other liabilities		5,724
Total Liabilities Assumed			1,388,869
Net Assets Acquired					112,815
Goodwill From the Merger				$	22,964
(1) The Company recorded a $2.3 million measurement period adjustment to the carrying value of goodwill related to a PCD loan at June 30, 2024

LINKBANCORP, Inc. and Subsidiaries

Notes to the Consolidated Financial Statements (Unaudited)

[In Thousands, Except Share Data]

The following table summarizes the Partners Merger as of November 30, 2023:


Consideration paid
(dollars in thousands)
Common stock consideration:
Common shares of Partners Bancorp					17,985,577
Exchange ratio					1.15
LINKBANCORP, Inc. common stock issued					20,683,158
LINKBANCORP, Inc. stock price on acquisition date				$	6.47
Purchase price assigned to Partners Bancorp common shares					133,820

Restricted stock consideration
Partners Bancorp restricted stock shares					297,726
LINKBANCORP, Inc. stock price on acquisition date				$	6.47
Total purchase price assigned to Partners Bancorp restricted shares					1,926

Cash paid in exchange for Partners Bancorp stock options and fractional shares					33
Total consideration				$	135,779

Net Assets Acquired
Partners Bancorp shareholders’ equity	$	143,817
Partners Bancorp goodwill and intangibles		(10,699	)

Fair Value Adjustments:
Securities available for sale		(921	)
Loans
Interest rate		(53,681	)
General credit		(11,607	)
Credit adjustment for loans acquired with deteriorated credit quality (1)		(8,263	)
Remove existing deferred loan fees, net at acquisition		2,462
Remove the allowance for credit losses present at acquisition		16,124
Premises and equipment		2,963

Core deposit intangible		25,344
Other assets		4,527

Liabilities
Time deposits		3,595
Subordinated debt		1,179
Other liabilities		(2,025	)
					112,815
Goodwill From the Merger				$	22,964
(1) The Company recorded a $2.3 million measurement period adjustment to the carrying value of goodwill related to a PCD loan at June 30, 2024

Pursuant to accounting standards, the Company assigned a fair value to the assets acquired and liabilities assumed of Partners. ASC 820 defines fair value as “the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.”

The assets acquired and liabilities assumed in the acquisition of Partners were recorded at their estimated fair values based on management’s best estimates using information available at the date of the acquisition and are subject to adjustment for up to one year after the closing date of the acquisition. While the fair values are not expected to be materially different from the estimates, any material adjustments to the estimates will be reflected, retroactively, as of the date of the acquisition. The items most susceptible to adjustment are the fair value adjustments on loans, core deposit intangible and the deferred income tax assets resulting from the acquisition. The Company is continuing to finalize the fair values of all aspects of the acquisition. During the second quarter of 2024, management identified a loan which, at the time of acquisition, met the criteria to be considered purchase credit deteriorated. The analysis of the loan resulted in $2,300 added to the allowance for credit losses, and $1,838 added to goodwill.

LINKBANCORP, Inc. and Subsidiaries

Notes to the Consolidated Financial Statements (Unaudited)

[In Thousands, Except Share Data]

The resulting changes to loans, goodwill, and deferred taxes are reflected within this footnote.

Goodwill represents consideration transferred in excess of the fair value of the net assets acquired. The goodwill resulting from the acquisition represents the value expected from the expansion of the Company's market and enhancement of operations and efficiencies. Goodwill acquired in the acquisition is not deductible for tax purposes.

Investment securities available-for-sale

The estimated fair values of the investment securities available for sale, primarily comprised of U.S. Government agency mortgage-backed securities, obligations of states and political subdivisions, and obligations of U.S. Government agencies and corporations were determined using Level 1 and Level 2 inputs in the fair value hierarchy. A fair value discount of $921 was recorded and will be amortized over the estimated life of the investments using the interest rate method.

Loans

Acquired loans are classified into two categories: PCD loans and non-PCD loans. PCD loans are defined as a loan or group of loans that have experienced more than insignificant credit deterioration since origination. Non-PCD loans will have an allowance established on acquisition date, which is recognized as an expense through provision for credit losses. The allowance for credit losses on non-PCD loans of $9.7 million was recorded through the provision for credit losses within the Consolidated Statements of Operations.

For PCD loans, an allowance is recognized at acquisition by adding it to the fair value of the loan, which is the “Day 1 amortized cost”. There is no provision for credit loss expense recognized on PCD loans because the initial allowance is established by grossing-up the amortized cost of the PCD loan. At the date of acquisition, of the $1.3 billion of loans acquired from Partners, $435.7 million, or 34%, of Partners’ loan portfolio, was accounted for as PCD loans. The fair value of PCD loans was $406.4 million at the date of acquisition. The gross contractual amounts receivable related to the PCD loans was $435.7 million. The Company estimates, on the date of acquisition, that $2,458 of the contractual cash flows specific to the PCD loans will not be collected.

Leased Facilities

The Company assumed leases on 11 facilities of Partners. The Company believes that the current lease costs were at market terms therefore no fair value adjustment is needed.

Owned Facilities

The Company acquired 13 locations previously owned by Partners as branches and administration offices. A fair value adjustment of $5.9 million was recorded at acquisition date.

Core Deposit Intangible

The fair value of the core deposit intangible was determined based on a discounted cash flow analysis using a discount rate commensurate with market participants. To calculate cash flows, deposit account servicing costs (net of deposit fee income) and interest expense on deposits were compared to the higher cost of alternative funding sources available through national brokered CD offering rates and FHLB advance rates. The projected cash flows were developed using expected deposit attrition. The core deposit intangible will be amortized over ten years using the sum-of-years digits method.

Time Deposits

The fair value adjustment for time deposits was based on a discounted cash flow methodology of the contract rates and contractual repayments of fixed maturity deposits using prevailing market interest rates for similar-term time deposits. The time deposit fair value adjustment will be amortized into income on a level yield amortization method over the contractual life of the deposits.

Long Term Borrowings

The Company reviewed the cost of the borrowings to market interest rates for similar instruments and believed that the rates were comparable and that no fair value adjustment was recorded.

Subordinated Debt

The fair value of the subordinated debt was determined using a discounted cash flow method using a market participant discount rate for similar instruments. The subordinated debt fair value adjustment will be amortized into income on a level yield amortization method based upon the assumed market rate and the term of the subordinated debt.

LINKBANCORP, Inc. and Subsidiaries

Notes to the Consolidated Financial Statements (Unaudited)

[In Thousands, Except Share Data]

Pro Forma Combined Results of Operations (Unaudited)

The following pro forma financial information presents the consolidated results of operations of Partners and LINKBANCORP as if the Partners Merger occurred as of January 1, 2022 with pro forma adjustments. The pro forma adjustments give effect to any change in interest income due to the accretion of discounts (premiums) associated with the fair value adjustments of acquired loans, any change in interest expense due to estimated premium amortization/discount accretion associated with the fair value adjustments to acquired time deposits and other debt, and the amortization of the core deposit intangible that would have resulted had the deposits been acquired as of January 1, 2022. Merger related expenses incurred by the Company during the year ended December 31, 2023 are not reflected in the pro forma amounts. The pro forma information does not necessarily reflect the results of operations that would have occurred had Partners merged with LINKBANCORP, Inc. at the beginning of 2023. The pro forma amounts for the three and nine months ended September 30, 2023 do not reflect the anticipated cost savings that had not yet been realized.


	Three Months Ended September 30,		Nine Months Ended September 30,
(Dollars in thousands)	2023		2023
Net interest income	$	26,487	$	78,094
Non-interest income		1,986		3,320
Net income (loss)		7,519		18,820
Basic earnings (loss) per common share	$	0.20	$	0.51
Diluted earnings (loss) per common share	$	0.20	$	0.51

LINKBANCORP, Inc. and Subsidiaries

Notes to the Consolidated Financial Statements (Unaudited)

[In Thousands, Except Share Data]

INVESTMENT SECURITIES

The amortized cost, gross unrealized gains and losses, and fair value of investment securities available for sale are summarized as follows:


	September 30, 2024
(In Thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Allowance for Credit Losses		Fair Value
Available for Sale:
US Government Agency securities	$	11,935	$	442	$	—		$	—	$	12,377
Obligations of state and political subdivisions		51,124		134		(2,663	)		—		48,595
Mortgage-backed securities in government-sponsored entities		88,528		1,333		(2,033	)		—		87,828
Other securities		524		—		(9	)		—		515
	$	152,111	$	1,909	$	(4,705	)	$	—	$	149,315

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value		Allowance for Credit Losses
Held to Maturity:
Corporate debentures	$	15,000	$	—	$	(1,198	)	$	13,802	$	(471	)
Structured mortgage-backed securities		19,626		2		(607	)		19,021		—
	$	34,626	$	2	$	(1,805	)	$	32,823	$	(471	)

	December 31, 2023
(In Thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Allowance for Credit Losses		Fair Value
Available for Sale:
US Government Agency securities	$	12,711	$	279	$	(5	)	$	—	$	12,985
US Government Treasury securities		4,925		17		—			—		4,942
Obligations of state and political subdivisions		49,640		420		(3,015	)		—		47,045
Mortgage-backed securities in government-sponsored entities		50,795		515		(3,129	)		—		48,181
Other securities		2,301		49		(13	)		—		2,337
	$	120,372	$	1,280	$	(6,162	)	$	—	$	115,490

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value		Allowance for Credit Losses
Held to Maturity:
Corporate debentures	$	15,000	$	—	$	(1,592	)	$	13,408	$	(512	)
Structured mortgage-backed securities		21,735		—		(907	)		20,828		—
	$	36,735	$	—	$	(2,499	)	$	34,236	$	(512	)

LINKBANCORP, Inc. and Subsidiaries

Notes to the Consolidated Financial Statements (Unaudited)

[In Thousands, Except Share Data]

The following tables summarize the Company's debt securities in an unrealized loss position for which an allowance for credit losses has not been recorded, aggregated by security type and length of time in a continuous unrealized loss position.


	September 30, 2024
	Less Than Twelve Months					Twelve Months or Greater					Total
(In Thousands)	Fair Value		Gross Unrealized Loss			Fair Value		Gross Unrealized Loss			Fair Value		Gross Unrealized Loss
Available for Sale:
Obligations of state and political subdivisions		5,216		(76	)		32,544		(2,587	)		37,760		(2,663	)
Mortgage-backed securities in government-sponsored entities		4,146		—			32,078		(2,033	)		36,224		(2,033	)
Other securities		—		—			481		(9	)		481		(9	)
	$	9,362	$	(76	)	$	65,103	$	(4,629	)	$	74,465	$	(4,705	)

	December 31, 2023
	Less Than Twelve Months					Twelve Months or Greater					Total
(In Thousands)	Fair Value		Gross Unrealized Loss			Fair Value		Gross Unrealized Loss			Fair Value		Gross Unrealized Loss
Available for Sale:
US Government Agency Securities	$	1,995	$	(5	)	$	—	$	—		$	1,995	$	(5	)
Obligations of state and political subdivisions		4,836		(247	)		27,736		(2,768	)		32,572		(3,015	)
Mortgage-backed securities in government-sponsored entities		4,703		(136	)		31,249		(2,993	)		35,952		(3,129	)
Other securities		—		—			601		(13	)		601		(13	)
	$	11,534	$	(388	)	$	59,586	$	(5,774	)	$	71,120	$	(6,162	)

No allowance for credit losses on available for sale debt securities was needed at September 30, 2024 or December 31, 2023. The Company reviews its position quarterly and believes that as of September 30, 2024 and December 31, 2023, the declines outlined in the above tables represent temporary declines, and the Company does not intend to sell, and does not believe it will be required to sell, these debt securities before recovery of their cost basis, which may be at maturity. There were 175 and 164 available for sale debt securities with unrealized losses at September 30, 2024 and December 31, 2023, respectively. The Company has concluded that the unrealized losses disclosed above are the result of interest rate changes and market conditions that are not expected to result in the non-collection of principal and interest during the year.

LINKBANCORP, Inc. and Subsidiaries

Notes to the Consolidated Financial Statements (Unaudited)

[In Thousands, Except Share Data]

Accrued interest receivable on available for sale debt securities totaled $710 thousand at September 30, 2024 and is excluded from the estimate of credit losses.

There were 11 and 12 held to maturity debt securities with unrealized losses at September 30, 2024 and December 31, 2023, respectively.

The Company monitors the credit quality of corporate debentures held to maturity through the use of credit ratings, where available, and financial analysis, including capital monitoring and financial performance analysis. The Company monitors these securities on a quarterly basis.

The following tables present the activity in the allowance for credit losses for corporate debentures held to maturity for the three and nine months ended September 30, 2024 and 2023.


	For the Three Months Ended September 30,
(in Thousands)	2024
Balance, June 30, 2024	$	502
Changes in the allowance for credit losses		(31	)
Balance September 30, 2024	$	471

	For the Three Months Ended September 30,
(in Thousands)	2023
Balance, June 30, 2023	$	586
Changes in the allowance for credit losses		(74	)
Balance September 30, 2023	$	512


	For the Nine Months Ended September 30,
(in Thousands)	2024
Balance, December 31, 2023	$	512
Changes in the allowance for credit losses		(41	)
Balance September 30, 2024	$	471

	For the Nine Months Ended September 30,
(in Thousands)	2023
Balance, December 31, 2022	$	-
Impact of adopting ASC 326		602
Changes in the allowance for credit losses		51
Securities charged-off		(141	)
Balance, September 30, 2023	$	512

Accrued interest receivable on held-to-maturity debt securities totaled $180 thousand at September 30, 2024 which is excluded from the estimate of credit losses.

LINKBANCORP, Inc. and Subsidiaries

Notes to the Consolidated Financial Statements (Unaudited)

[In Thousands, Except Share Data]

As of September 30, 2024, amortized cost and fair value by contractual maturity, where applicable, are shown below. Actual maturities may differ from contractual maturities because the borrower may have the right to prepay obligations with or without penalty.


	Available for Sale Securities				Held to Maturity Securities
(In Thousands)	Amortized Cost		Fair Value		Amortized Cost		Fair Value
Due within one year	$	2,072	$	2,068	$	3,000	$	2,980
Due after one year through five years		13,693		13,621		3,000		2,959
Due after five years through ten years		20,162		19,749		9,000		7,863
Due after ten years		27,132		25,534		—		—
Mortgage-backed securities and Collateralized mortgage obligations		88,528		87,828		19,626		19,021
Other securities		524		515		—		—
	$	152,111	$	149,315	$	34,626	$	32,823

The following tables summarize sales of debt securities for the three and nine months ended September 30, 2024 and 2023. There were no sales of debt securities for the three months ended September 30, 2024 and 2023.



	For the Nine Months Ended September 30,
(In Thousands)	2024		2023
Proceeds	$	1,691		$	1,847
Gross gains		4			—
Gross losses		—			2,370
Net gains (losses)	$	4		$	(2,370	)

The tax (provision) benefit related to these realized gains and losses was approximately ($1) and $498 as of September 30, 2024 and 2023, respectively.

The Company had pledged debt securities with a carrying value of $61.4 million and $65.9 million to secure public deposits and certain borrowing capacity as of September 30, 2024 and December 31, 2023, respectively.

LINKBANCORP, Inc. and Subsidiaries

Notes to the Consolidated Financial Statements (Unaudited)

[In Thousands, Except Share Data]

LOANS RECEIVABLE

The portfolio segments and classes of loans are as follows:


(In Thousands)	September 30, 2024			December 31, 2023
Agriculture and farmland loans	$	65,166		$	65,861
Construction loans		162,032			161,825
Commercial & industrial loans		235,144			232,412
Commercial real estate loans
Multifamily		206,867			176,843
Owner occupied		479,361			474,964
Non-owner occupied		598,681			551,481
Residential real estate loans
First liens		374,130			376,092
Second liens and lines of credit		72,061			66,648
Consumer and other loans		17,496			16,740
Municipal loans		4,296			5,244
		2,215,234			2,128,110
Deferred costs		634			174
Allowance for credit losses		(26,542	)		(23,767	)
Total	$	2,189,326		$	2,104,517

The above table does not include loans that are held for sale related to the New Jersey branch sale.

The Company originates commercial, residential, and consumer loans within its primary market areas of southcentral and southeastern Pennsylvania, northern Virginia, eastern Maryland, Delaware, and southern New Jersey. A significant portion of the loan portfolio is secured by real estate.

At September 30, 2024 and December 31, 2023 the recorded investment of consumer mortgage loans secured by residential real estate properties for which formal foreclosure proceedings are in process was $647 thousand and $264 thousand, respectively.

ALLOWANCE FOR CREDIT LOSSES

The segments of the Company’s loan portfolio are disaggregated to a level that allows management to monitor risk and performance. The loan segments used are consistent with the internal reports evaluated by the Company’s management and Board of Directors to monitor risk and performance within various segments of its loan portfolio and, therefore, no further disaggregation is considered necessary. The Company’s loan portfolio consists primarily of real estate loans on commercial and residential property. The portfolio also includes agricultural loans, commercial loans, municipal loans, and consumer loans.

The Company’s primary lending activity is the origination of commercial loans extended to small and mid-sized commercial and industrial entities.

Commercial loans are primarily underwritten on the basis of the borrowers’ ability to service such debt from income. The cash flows of borrowers, however, may not be as expected and the collateral securing these loans may fluctuate in value. As a general practice, the Company takes as collateral a security interest in any equipment, or other chattel, although loans may also be made on an unsecured basis. Collateralized working capital loans typically are secured by short-term assets whereas long-term loans are primarily secured by long-term assets.

Construction and Land loans are to finance the construction of owner-occupied and income producing properties. These loans are categorized within commercial or one-to-four family residential loans based upon the underlying collateral and intended use following the completion of the construction period. Real estate development and construction loans are approved based on an analysis of the borrower and guarantor, the viability of the project and on an acceptable percentage of the appraised value of the property securing the loan. Construction loan funds are disbursed periodically based on the percentage of construction or development completed. The Company carefully monitors these loans with on-site inspections and requires the receipt of lien waivers on funds advanced.

LINKBANCORP, Inc. and Subsidiaries

Notes to the Consolidated Financial Statements (Unaudited)

[In Thousands, Except Share Data]

The Company considers the market conditions and feasibility of proposed projects, the financial condition and reputation of the borrower and guarantors, the amount of the borrower’s equity in the project, independent appraisals, cost estimates and pre-construction sale information. The Company also makes loans on occasion for the purchase of land for future development by the borrower. Land loans are extended for the future development for either commercial or residential use by the borrower. The Company carefully analyzes the intended use of the property and the viability thereof.

The Company’s commercial real estate loans consist of mortgage loans secured by nonresidential real estate, such as by apartment buildings, small office buildings, and owner-occupied properties. Commercial real estate loans are secured by the subject property and are underwritten based on loan to value limits, cash flow coverage and general creditworthiness of the obligors. These loans tend to involve larger loan balances and their repayment is typically dependent upon the successful operation and management of the underlying real estate.

Residential real estate loans are underwritten based on the borrower’s repayment capacity and source, value of the underlying property, credit history and stability. These loans are secured by a first or second mortgage on the borrower’s principal residence or their second/vacation home (excluding investment/rental property).

In addition to the main types of loans discussed above, the Company also originates agricultural loans, consumer loans, and municipal loans. The agricultural loan portfolio consists of loans to local farmers and agricultural businesses that are generally secured by farmland and equipment. The consumer loan portfolio consists of lending in the form of home equity loans secured by financed property and personal consumer loans, which may be secured or unsecured. The municipal loan portfolio consists of loans to qualified local municipalities, which are generally supported by the taxing authority of the borrowing municipality, and is frequently secured by collateral.

Management systematically monitors the loan portfolio and the appropriateness of the allowance for credit losses on a quarterly basis to provide for expected losses inherent in the portfolio. For segments determined by discounted cash flow analysis, the Company's estimate of future economic conditions utilized in its estimate is primarily dependent on the Federal Open Market Committee's forecasts related to Real Gross Domestic Product and Unemployment rate. For segments determined by the remaining life method, an average loss rate is generally calculated based on peer losses and applied to the future outstanding loan balances at quarter end.

Certain qualitative factors are then added to the historical allocation percentage to get the adjusted factor to be applied to non-classified loans. The following qualitative factors are analyzed for each portfolio segment:

•

Levels of and trends in delinquencies

•

Trends in volume and terms

•

Changes in collateral

•

Changes in management and lending staff

•

Economic trends

•

Concentrations of credit

•

Changes in lending policies

•

External factors

•

Changes in underwriting process

•

Trends in credit quality ratings

These qualitative factors are reviewed each quarter and adjusted based upon relevant changes within the portfolio.

The total allowance reflects management’s estimate of credit losses inherent in the loan portfolio at the Consolidated Balance Sheet date. The Company considers the allowance for credit losses adequate to cover loan losses inherent in the loan portfolio at September 30, 2024 and December 31, 2023.

Accrued interest receivable on loans totaled $8,577 at September 30, 2024 and was reported within accrued interest receivable and other assets on the consolidated balance sheets and is excluded from the estimate of credit losses.

LINKBANCORP, Inc. and Subsidiaries

Notes to the Consolidated Financial Statements (Unaudited)

[In Thousands, Except Share Data]

The following tables summarize the activity in the allowance for credit losses by loan segment for the three and nine months ended September 30, 2024 and 2023.


	Beginning balance		Charge-offs			Recoveries		Provision for credit losses			Ending balance
(In Thousands)	For the Three Months Ended September 30, 2024
Allowance for credit losses:
Agriculture and farmland	$	12	$	—		$	—	$	—		$	12
Construction		1,841		—			1		(537	)		1,305
Commercial & industrial		3,435		—			37		(368	)		3,104
Commercial real estate
Multifamily		1,914		—			—		263			2,177
Owner occupied		5,882		(23	)		—		148			6,007
Non-owner occupied		8,026		—			—		730			8,756
Residential real estate
First liens		4,047		—			6		(285	)		3,768
Second liens and lines of credit		977		—			3		119			1,099
Municipal		64		—			—		1			65
Consumer		91		—			4		154			249
Total	$	26,289	$	(23	)	$	51	$	225		$	26,542

	Beginning balance		Charge-offs			Recoveries		Provision for credit losses			Ending balance
(In Thousands)	For the Three Months Ended September 30, 2023
Allowance for credit losses:
Agriculture and farmland	$	209	$	—		$	—	$	(130	)	$	79
Construction		728		—			—		(275	)		453
Commercial & industrial		729		—			—		126			855
Commercial real estate									—
Multifamily		673		—			—		(254	)		419
Owner occupied		1,559		—			—		197			1,756
Non-owner occupied		4,350		—			—		(220	)		4,130
Residential real estate									—
First liens		1,397		—			11		44			1,452
Second liens and lines of credit		383		—			1		(58	)		326
Municipal		7		—			—		—			7
Consumer		22		—			—		2			24
Unallocated		171		—			—		292			463
Total	$	10,228	$	-		$	12	$	(276	)	$	9,964

LINKBANCORP, Inc. and Subsidiaries

Notes to the Consolidated Financial Statements (Unaudited)

[In Thousands, Except Share Data]


	Beginning balance		Charge-offs			Recoveries		Allowance for Credit Losses on PCD Acquired Loans		Provision for credit losses			Ending balance
(In Thousands)	For the Nine Months Ended September 30, 2024
Allowance for credit losses:
Agriculture and farmland	$	12	$	—		$	—	$	—	$	—		$	12
Construction		959		—			3		—		343			1,305
Commercial & industrial		2,940		(10	)		46		—		128			3,104
Commercial real estate
Multifamily		1,483		—			2		—		692			2,177
Owner occupied		6,572		(29	)		1		—		(537	)		6,007
Non-owner occupied		5,773		(54	)		5		2,300		732			8,756
Residential real estate
First liens		4,778		—			19		—		(1,029	)		3,768
Second liens and lines of credit		1,072		—			12		—		15			1,099
Municipal		79		—			—		—		(14	)		65
Consumer		99		(25	)		8		—		167			249
Total	$	23,767	$	(118	)	$	96	$	2,300	$	497		$	26,542

	Beginning balance, prior to adoption of ASC 326		Impact of adopting ASC 326			Charge-offs		Recoveries		Provision for credit losses			Ending balance
(In Thousands)	For the Nine Months Ended September 30, 2023
Allowance for credit losses:
Agriculture and farmland	$	279	$	(190	)	$	—	$	—	$	(10	)	$	79
Construction		274		513			—		—		(334	)		453
Commercial & industrial		583		283			—		1		(12	)		855
Commercial real estate
Multifamily		480		340			—		—		(401	)		419
Owner occupied		635		760			—		—		361			1,756
Non-owner occupied		1,116		3,195			—		—		(181	)		4,130
Residential real estate
First liens		1,029		635			—		50		(262	)		1,452
Second liens and lines of credit		218		140			—		60		(92	)		326
Municipal		12		(2	)		—		—		(3	)		7
Consumer		40		(19	)		—		—		3			24
Unallocated		—		—			—		—		463			463
Total	$	4,666	$	5,655		$	—	$	111	$	(468	)	$	9,964

LINKBANCORP, Inc. and Subsidiaries

Notes to the Consolidated Financial Statements (Unaudited)

[In Thousands, Except Share Data]

The following tables present the amortized cost basis of nonaccrual loans and loans past due 90 days or greater and still accruing by segments of the loan portfolio:


	As of September 30, 2024
(In Thousands)	Nonaccrual with No Allowance for Credit Loss		Nonaccrual with a related Allowance for Credit Loss		Total Nonaccrual		Loans 90 days or greater past due still accruing
Agriculture and farmland	$	—	$	—	$	—	$	—
Construction		10		—		10		87
Commercial & industrial		112		100		212		199
Commercial real estate
Multifamily		—		—		—		—
Owner occupied		9,114		680		9,794		—
Non-owner occupied		401		3,952		4,353		—
Residential real estate
First liens		1,980		—		1,980		209
Second liens and lines of credit		382		—		382		—
Municipal		—		—		—		—
Consumer		2		150		152		—
Total	$	12,001	$	4,882	$	16,883	$	495

	As of December 31, 2023
(In Thousands)	Nonaccrual with No Allowance for Credit Loss		Nonaccrual with a related Allowance for Credit Loss		Total Nonaccrual		Loans 90 days or greater past due still accruing
Agriculture and farmland	$	—	$	—	$	—	$	—
Construction		191		—		191		—
Commercial & industrial		53		8		61		58
Commercial real estate
Multifamily		—		—		—		—
Owner occupied		2,465		83		2,548		6
Non-owner occupied		948		281		1,229		—
Residential real estate
First liens		2,346		361		2,707		149
Second liens and lines of credit		294		—		294		—
Municipal		—		—		—		—
Consumer		7		—		7		—
Total	$	6,304	$	733	$	7,037	$	213

The Company recognized $79 and $530 of interest income on nonaccrual loans during the three and nine months ended September 30, 2024 respectively and $35 and $49 for the three and nine months ended September 30, 2023, respectively.

The following tables present, by class of loans, the carrying value of collateral dependent nonaccrual loans and type of collateral as of September 30, 2024 and December 31, 2023.

LINKBANCORP, Inc. and Subsidiaries

Notes to the Consolidated Financial Statements (Unaudited)

[In Thousands, Except Share Data]


	September 30, 2024
(In Thousands)	Real Estate		Business Assets		Other		Total
Agriculture and farmland loans	$	—	$	—	$	—	$	—
Construction		10		—		—		10
Commercial & industrial loans		—		212		—		212
Commercial real estate loans
Multifamily		—		—		—		—
Owner occupied		9,794		—		—		9,794
Non-owner occupied		4,353		—		—		4,353
Residential real estate loans
First liens		1,980		—		—		1,980
Second liens and lines of credit		382		—		—		382
Municipal		—		—		—		—
Consumer		—		—		152		152
	$	16,519	$	212	$	152	$	16,883

	December 31, 2023
(In Thousands)	Real Estate		Business Assets		Other		Total
Agriculture and farmland loans	$	—	$	—	$	—	$	—
Construction		191		—		—		191
Commercial & industrial loans		—		61		—		61
Commercial real estate loans
Multifamily		—		—		—		—
Owner occupied		2,548		—		—		2,548
Non-owner occupied		1,229		—		—		1,229
Residential real estate loans
First liens		2,707		—		—		2,707
Second liens and lines of credit		294		—		—		294
Municipal		—		—		—		—
Consumer		—		—		7		7
	$	6,969	$	61	$	7	$	7,037

LINKBANCORP, Inc. and Subsidiaries

Notes to the Consolidated Financial Statements (Unaudited)

[In Thousands, Except Share Data]

The following tables present an aging analysis of the recorded investment of past due loans at September 30, 2024 and December 31, 2023.


		September 30, 2024
(In Thousands)		30-59 Days Past Due		60-89 Days Past Due		90 Days or Greater Past Due		Total Past Due		Current		Total Loans
Agriculture and farmland		$	91	$	—	$	—	$	91	$	65,075	$	65,166
Construction			771		10		87		868		161,164		162,032
Commercial & industrial			69		—		411		480		234,664		235,144
Commercial real estate
Multifamily			163		—		—		163		206,704		206,867
Owner occupied			—		177		9,618		9,795		469,566		479,361
Non-owner occupied			200		—		401		601		598,080		598,681
Residential real estate
First liens			485		197		1,187		1,869		372,261		374,130
Second liens and lines of credit			419		53		337		809		71,252		72,061
Municipal			—		—		—		—		17,496		17,496
Consumer			24		3		152		179		4,117		4,296
Total		$	2,222	$	440	$	12,193	$	14,855	$	2,200,379	$	2,215,234

	December 31, 2023
(In Thousands)		30-59 Days Past Due		60-89 Days Past Due		90 Days or Greater Past Due		Total Past Due		Current		Total Loans
Agriculture and farmland		$	14	$	—	$	—	$	14	$	65,847	$	65,861
Construction			10		—		191		201		161,624		161,825
Commercial & industrial			46		1		118		165		232,247		232,412
Commercial real estate
Multifamily			—		—		—		—		176,843		176,843
Owner occupied			156		2,802		137		3,095		471,869		474,964
Non-owner occupied			—		86		1,239		1,325		550,156		551,481
Residential real estate
First liens			719		419		872		2,010		374,082		376,092
Second liens and lines of credit			279		128		97		504		66,144		66,648
Municipal			—		—		—		—		16,740		16,740
Consumer			15		15		7		37		5,207		5,244
Total		$	1,239	$	3,451	$	2,661	$	7,351	$	2,120,759	$	2,128,110

Credit Quality Information

The following tables represent credit exposures by internally assigned grades as of September 30, 2024 and December 31, 2023. The grading analysis estimates the capability of the borrower to repay the contractual obligations of the loan agreements as scheduled or at all.

The Company’s internally assigned grades are as follows:

Pass – loans that are protected by the current net worth and paying capacity of the obligor or by the value of the underlying collateral. There are four sub-grades within the Pass category to further distinguish the loan.

Special Mention – loans where a potential weakness or risk exists, which could cause a more serious problem if not corrected.

Substandard – loans that have a well-defined weakness based on objective evidence and are characterized by the distinct possibility that the Bank will sustain some loss if the deficiencies are not corrected.

Doubtful – loans classified as Doubtful 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 – loans classified as a Loss are considered uncollectible and are immediately charged against allowances.

LINKBANCORP, Inc. and Subsidiaries

Notes to the Consolidated Financial Statements (Unaudited)

[In Thousands, Except Share Data]

The following tables present the classes of the loan portfolio summarized by the internal risk rating system as of September 30, 2024.


	September 30, 2024
	Term Loans Amortized Cost Basis by Origination Year
(In Thousands)	2024		2023		2022		2021		2020		Prior		Revolving loans amortized cost basis		Revolving loans converted to term		Total
Agriculture and farmland
Pass	$	8,618	$	1,159	$	13,823	$	9,063	$	4,875	$	21,326	$	4,589	$	—	$	63,453
Special mention		—		11		—		58		—		1,412		232		—		1,713
Substandard or lower		—		—		—		—		—		—		—		—		—
Total Agriculture and farmland	$	8,618	$	1,170	$	13,823	$	9,121	$	4,875	$	22,738	$	4,821	$	—	$	65,166
Agriculture and farmland
Current period gross charge-offs		—		—		—		—		—		—		—		—		—
Construction
Pass		19,699		63,145		36,057		21,445		1,257		9,420		6,523		4,198		161,744
Special mention		—		—		—		—		—		—		—		—		—
Substandard or lower		—		201		—		—		—		—		—		87		288
Total Construction		19,699		63,346		36,057		21,445		1,257		9,420		6,523		4,285		162,032
Construction
Current period gross charge-offs		—		—		—		—		—		—		—		—		—
Commercial & industrial
Pass		29,155		23,773		20,312		20,608		11,362		8,934		107,010		25		221,179
Special mention		18		162		4,636		100		—		379		6,543		—		11,838
Substandard or lower		—		78		462		93		—		332		1,162		—		2,127
Total Commercial & industrial		29,173		24,013		25,410		20,801		11,362		9,645		114,715		25		235,144
Commercial & industrial
Current period gross charge-offs		—		—		—		—		4		6		—		—		10
Commercial real estate - Multifamily
Pass		29,461		9,802		85,776		50,770		19,666		10,613		779		—		206,867
Special mention		—		—		—		—		—		—		—		—		—
Substandard or lower		—		—		—		—		—		—		—		—		—
Total Commercial real estate - Multifamily		29,461		9,802		85,776		50,770		19,666		10,613		779		—		206,867
Commercial real estate - Multifamily
Current period gross charge-offs		—		—		—		—		—		—		—		—		—

LINKBANCORP, Inc. and Subsidiaries

Notes to the Consolidated Financial Statements (Unaudited)

[In Thousands, Except Share Data]


	September 30, 2024
	Term Loans Amortized Cost Basis by Origination Year
(In Thousands)	2024		2023		2022		2021		2020		Prior		Revolving loans amortized cost basis		Revolving loans converted to term		Total
Commercial real estate - Owner occupied
Pass		43,553		55,583		102,551		86,993		48,793		105,750		12,316		—		455,539
Special mention		—		—		367		2,397		417		5,793		300		—		9,274
Substandard or lower		—		—		9,412		—		—		5,009		127		—		14,548
Total Commercial real estate - Owner occupied		43,553		55,583		112,330		89,390		49,210		116,552		12,743		—		479,361
Commercial real estate - Owner occupied
Current period gross charge-offs		—		—		—		—		23		6		—		—		29
Commercial real estate - Non-owner occupied
Pass		49,559		55,116		171,283		115,689		51,234		133,419		10,578		—		586,878
Special mention		1,000		—		—		38		3,376		3,089		—		—		7,503
Substandard or lower		—		—		—		3,899		—		327		74		—		4,300
Total Commercial real estate - Non-owner occupied		50,559		55,116		171,283		119,626		54,610		136,835		10,652		—		598,681
Commercial real estate - Non-owner occupied
Current period gross charge-offs		—		—		—		—		—		54		—		—		54
Municipal
Pass		44		428		—		369		935		2,435		85		—		4,296
Special mention		—		—		—		—		—		—		—		—		—
Substandard or lower		—		—		—		—		—		—		—		—		—
Total Commercial real estate - Municipal		44		428		—		369		935		2,435		85		—		4,296
Municipal
Current period gross charge-offs		—		—		—		—		—		—		—		—		—
Total
Pass	$	180,089	$	209,006	$	429,802	$	304,937	$	138,122	$	291,897	$	141,880	$	4,223	$	1,699,956
Special mention		1,018		173		5,003		2,593		3,793		10,673		7,075		—		30,328
Substandard or lower		—		279		9,874		3,992		—		5,668		1,363		87		21,263
Total	$	181,107	$	209,458	$	444,679	$	311,522	$	141,915	$	308,238	$	150,318	$	4,310	$	1,751,547

LINKBANCORP, Inc. and Subsidiaries

Notes to the Consolidated Financial Statements (Unaudited)

[In Thousands, Except Share Data]

The following tables present the classes of the loan portfolio summarized by the internal risk rating system as of December 31, 2023.


	December 31, 2023
	Term Loans Amortized Cost Basis by Origination Year
(In Thousands)	2023		2022		2021		2020		2019		Prior		Revolving loans amortized cost basis		Revolving loans converted to term		Total
Agriculture and farmland
Pass	$	1,466	$	14,372	$	9,613	$	5,147	$	2,319	$	22,627	$	5,114	$	29	$	60,687
Special mention		—		—		30		—		811		1,206		342		—		2,389
Substandard or lower		13		—		15		121		—		2,576		60		—		2,785
Total Agriculture and farmland	$	1,479	$	14,372	$	9,658	$	5,268	$	3,130	$	26,409	$	5,516	$	29	$	65,861
Agriculture and farmland
Current period gross charge-offs		—		—		—		—		—		—		—		—		—
Construction
Pass		55,462		45,206		30,593		2,932		6,161		5,446		14,424		1,317		161,541
Special mention		—		—		—		—		—		—		93		—		93
Substandard or lower		—		—		—		98		—		—		—		93		191
Total Construction		55,462		45,206		30,593		3,030		6,161		5,446		14,517		1,410		161,825
Construction
Current period gross charge-offs		—		—		—		—		—		—		—		—		—
Commercial & industrial
Pass		29,586		31,653		24,184		13,831		4,285		7,536		119,602		68		230,745
Special mention		—		113		139		—		15		4		1,071		—		1,342
Substandard or lower		—		—		47		—		194		—		43		41		325
Total Commercial & industrial		29,586		31,766		24,370		13,831		4,494		7,540		120,716		109		232,412
Commercial & industrial
Current period gross charge-offs		—		—		—		—		—		—		200		—		200
Commercial real estate - Multifamily
Pass		12,587		80,127		50,320		18,871		6,031		6,737		298		—		174,971
Special mention		—		—		—		—		—		—		—		—		—
Substandard or lower		—		—		—		—		—		1,872		—		—		1,872
Total Commercial real estate - Multifamily		12,587		80,127		50,320		18,871		6,031		8,609		298		—		176,843
Commercial real estate - Multifamily
Current period gross charge-offs		—		—		—		—		—		—		—		—		—

LINKBANCORP, Inc. and Subsidiaries

Notes to the Consolidated Financial Statements (Unaudited)

[In Thousands, Except Share Data]


	December 31, 2023
	Term Loans Amortized Cost Basis by Origination Year
(In Thousands)	2023		2022		2021		2020		2019		Prior		Revolving loans amortized cost basis		Revolving loans converted to term		Total
Commercial real estate - Owner occupied
Pass		53,765		127,684		96,193		50,888		39,043		83,753		7,801		6		459,133
Special mention		—		377		3,125		—		6,318		—		429		—		10,249
Substandard or lower		—		—		—		626		2,408		2,391		157		—		5,582
Total Commercial real estate - Owner occupied		53,765		128,061		99,318		51,514		47,769		86,144		8,387		6		474,964
Commercial real estate - Owner occupied
Current period gross charge-offs		—		—		—		—		—		—		—		—		—
Commercial real estate - Non-owner occupied
Pass		58,210		173,415		118,081		56,025		59,792		78,465		6,177		86		550,251
Special mention		—		—		42		—		—		—		—		—		42
Substandard or lower		—		—		325		—		56		558		249		—		1,188
Total Commercial real estate - Non-owner occupied		58,210		173,415		118,448		56,025		59,848		79,023		6,426		86		551,481
Commercial real estate - Non-owner occupied
Current period gross charge-offs		—		—		—		—		—		—		—		—		—
Municipal
Pass		529		—		420		1,675		—		2,526		94		—		5,244
Special mention		—		—		—		—		—		—		—		—		—
Substandard or lower		—		—		—		—		—		—		—		—		—
Total Commercial real estate - Municipal		529		—		420		1,675		—		2,526		94		—		5,244
Municipal
Current period gross charge-offs		—		—		—		—		—		—		—		—		—
Total
Pass	$	211,605	$	472,457	$	329,404	$	149,369	$	117,631	$	207,090	$	153,510	$	1,506	$	1,642,572
Special mention		—		490		3,336		—		7,144		1,210		1,935		—		14,115
Substandard or lower		13		—		387		845		2,658		7,397		509		134		11,943
Total	$	211,618	$	472,947	$	333,127	$	150,214	$	127,433	$	215,697	$	155,954	$	1,640	$	1,668,630

The Company considers the performance of the loan portfolio and its impact on the allowance for credit losses. As part of our adoption of CECL, the Company will monitor small balance, homogeneous loans, such as home equity, residential mortgage, and consumer loans based on delinquency status rather than the assignment of loan specific risk ratings. The Company will evaluate credit quality based on the aging status of the loan.

LINKBANCORP, Inc. and Subsidiaries

Notes to the Consolidated Financial Statements (Unaudited)

[In Thousands, Except Share Data]

The following tables present the amortized cost of these loans based on payment activity, by origination year, as of September 30, 2024 and December 31, 2023.


	September 30, 2024
	Term Loans Amortized Cost Basis by Origination Year
(In Thousands)	2024		2023		2022		2021		2020		Prior		Revolving loans amortized cost basis		Revolving loans converted to term		Total
Residential real estate - First liens
Performing	$	25,492	$	45,884	$	88,268	$	83,872	$	36,371	$	81,295	$	10,759	$	—	$	371,941
Nonperforming		—		—		—		22		—		2,167		—		—		2,189
Total Residential real estate - First liens	$	25,492	$	45,884	$	88,268	$	83,894	$	36,371	$	83,462	$	10,759	$	—	$	374,130
Residential real estate - First liens
Current period gross charge-offs		—		—		—		—		—		—		—		—		—
Residential real estate - Second liens and lines of credit
Performing		1,961		954		1,465		364		63		2,089		64,778		5		71,679
Nonperforming		—		—		—		—		—		162		220		—		382
Total Residential real estate - Second liens and lines of credit		1,961		954		1,465		364		63		2,251		64,998		5		72,061
Residential real estate - Second liens and lines of credit
Current period gross charge-offs		—		—		—		—		—		—		—		—		—
Consumer and other
Performing		2,644		4,685		1,952		126		69		66		7,802		—		17,344
Nonperforming		—		—		2		—		—		—		150		—		152
Total Consumer and other		2,644		4,685		1,954		126		69		66		7,952		—		17,496
Consumer and other
Current period gross charge-offs		—		—		2		5		2		16		—		—		25
Total
Performing	$	30,097	$	51,523	$	91,685	$	84,362	$	36,503	$	83,450	$	83,339	$	5	$	460,964
Nonperforming		—		—		2		22		—		2,329		370		—		2,723
Total	$	30,097	$	51,523	$	91,687	$	84,384	$	36,503	$	85,779	$	83,709	$	5	$	463,687

LINKBANCORP, Inc. and Subsidiaries

Notes to the Consolidated Financial Statements (Unaudited)

[In Thousands, Except Share Data]


	December 31, 2023
	Term Loans Amortized Cost Basis by Origination Year
(In Thousands)	2023		2022		2021		2020		2019		Prior		Revolving loans amortized cost basis		Revolving loans converted to term		Total
Residential real estate - First liens
Performing	$	41,984	$	90,220	$	95,232	$	37,966	$	22,934	$	75,918	$	8,982	$	—	$	373,236
Nonperforming		—		—		33		101		208		2,514		—		—		2,856
Total Residential real estate - First liens	$	41,984	$	90,220	$	95,265	$	38,067	$	23,142	$	78,432	$	8,982	$	—	$	376,092
Residential real estate - First liens
Current period gross charge-offs		—		—		—		—		—		—		—		—		—
Residential real estate - Second liens and lines of credit
Performing		1,045		1,702		386		184		205		2,259		60,573		—		66,354
Nonperforming		—		—		—		—		—		—		294		—		294
Total Residential real estate - Second liens and lines of credit		1,045		1,702		386		184		205		2,259		60,867		—		66,648
Residential real estate - Second liens and lines of credit
Current period gross charge-offs		—		—		—		—		—		—		—		—		—
Consumer and other
Performing		5,007		437		213		150		73		85		10,768		—		16,733
Nonperforming		—		—		—		—		—		—		7		—		7
Total Consumer and other		5,007		437		213		150		73		85		10,775		—		16,740
Consumer and other
Current period gross charge-offs		—		—		—		—		—		—		1		—		1
Total
Performing	$	48,036	$	92,359	$	95,831	$	38,300	$	23,212	$	78,262	$	80,323	$	—	$	456,323
Nonperforming		—		—		33		101		208		2,514		301		—		3,157
Total	$	48,036	$	92,359	$	95,864	$	38,401	$	23,420	$	80,776	$	80,624	$	—	$	459,480

Modifications to Borrowers Experiencing Financial Difficulty

The Company may modify loans to borrowers experiencing financial difficulty by providing principal forgiveness, term extension, interest rate reduction or an other-than-insignificant payment delay. When principal forgiveness is provided, the amount of forgiveness is charged off against the allowance for credit losses. The Company may also provide multiple types of modifications on an individual loan. For the nine months ended September 30, 2024, the Company provided a payment delay to a Non Owner Occupied Commercial Real Estate borrower experiencing financial difficulty. At September 30, 2024, the amortized cost basis of the loan is $3,952 and has been placed on non-accrual. For the three months ended September 30, 2023, the Company did not extend any modifications to borrowers experiencing financial difficulty that had a more-than-insignificant direct change in the contractual cash flows of the loans.

Purchased Credit Deteriorated Loans

The Company has purchased loans for which there was, at acquisition, evidence of more than insignificant deterioration of credit quality since origination. The carrying amount of these loans is as follows.


(In Thousands)	2023
Purchase price of loans at acquisition	$	435,704
Allowance for credit losses at acquisition		6,603
Non-credit (discount) premium at acquisition		(16,981	)
Par value of acquired loans at acquisition	$	425,326

LINKBANCORP, Inc. and Subsidiaries

Notes to the Consolidated Financial Statements (Unaudited)

[In Thousands, Except Share Data]

DEPOSITS

Deposit accounts are summarized as follows:


	September 30, 2024					December 31, 2023
(Dollars in Thousands)	Amount		%			Amount		%
Demand, noninterest-bearing	$	658,473		27.76	%	$	624,780		28.42	%
Demand, interest-bearing		534,228		22.51			425,551		19.35
Money market and savings		569,996		24.02			554,204		25.20
Time deposits, $250 and over		160,592		6.77			128,334		5.84
Time deposits, other		374,363		15.78			346,519		15.76
Brokered time deposits		75,000		3.16			119,411		5.43
	$	2,372,652		100.0	%	$	2,198,799		100.0	%

The above table does not include deposits that are held for sale related to the New Jersey branch sale.

The brokered deposits outstanding at September 30, 2024 matured in October 2024.

LINKBANCORP, Inc. and Subsidiaries

Notes to the Consolidated Financial Statements (Unaudited)

[In Thousands, Except Share Data]

BORROWINGS

Borrowings and subordinated debt were as follows:


(in Thousands)	September 30, 2024		December 31, 2023
Long-term borrowings	$	40,000	$	—
Short-term borrowings		—		10,000
Note payable		572		590
Subordinated debt		61,843		61,444
Total	$	102,415	$	72,034

Subordinated Notes Sale - 2022

On April 8, 2022, LINKBANCORP entered into Subordinated Note Purchase Agreements (the “Agreements”) with certain institutional accredited investors (the “Purchasers”) and, pursuant to the Agreements, issued to the Purchasers $20,000 in aggregate principal amount of its 4.50% Fixed-to-Floating Rate Subordinated Notes due 2032 (the “Notes”). The investors included a related party entity that is controlled by a member of the Board of Directors of the Company, which purchased $7,000 in principal amount of the note. During the year ended December 31, 2022, the Company contributed $15,000 of the subordinated note proceeds to the Bank as equity capital, the impact of which can be seen within Note 10 Regulatory Capital Requirements later in this document.

The Notes, which mature on April 15, 2032, bear interest at a fixed annual rate of 4.50% for the period up to but excluding April 15, 2027 (the “Fixed Interest Rate Period”). From April 15, 2027 until maturity or redemption (the “Floating Interest Rate Period”), the interest rate will adjust to a floating rate equal to a benchmark rate, which is expected to be the then-current three-month Secured Overnight Financing Rate ("SOFR"), plus 203 basis points. The Company will pay interest in arrears semi-annually during the Fixed Interest Rate Period and quarterly during the Floating Interest Rate Period. The Notes constitute unsecured and subordinated obligations of the Company and rank junior in right of payment to any senior indebtedness and obligations to general and secured creditors. Subject to limited exceptions, the Company cannot redeem the Notes before the fifth anniversary of the issuance date.

The Notes are intended to qualify at the holding company level as Tier 2 capital under the capital guidelines of the Federal Reserve Board. The Agreements and Notes contain customary subordination provisions, representations and warranties, covenants, and events of default.

Subordinated Notes - Gratz Merger

As part of the Gratz Merger, the Company assumed Fixed-to-Floating Rate Subordinated Notes with a carrying value of $20.2 million. The notes (the "Merger Subordinated Notes") mature October 1, 2030 and will initially bear interest at a fixed rate of 5.0% until October 1, 2025. From October 1, 2025 to the stated maturity date or early redemption date, the interest rate will reset semi-annually to an annual floating rate equal to the then-current three-month term SOFR plus a spread of 475 basis points, but no less than 5.0%. The Company may redeem the Merger Subordinated Notes, in whole or in part, on or after October 1, 2025, plus accrued and unpaid interest. The Merger Subordinated Notes are also redeemable in whole or in part upon the occurrence of specific events defined within the indenture.

The Merger Subordinated Notes may be included in Tier I capital (subject to certain limitations) under current regulatory guidelines and interpretations.

Subordinated Notes - Partners Merger

As part of the Partners Merger, the Company assumed Subordinated Notes with a total carrying value of $21.7 million with one tranche having a face value of $4.5 million and the other with face value of $18.1 million. The first tranche that has a face value of $4.5 million bears interest at a fixed rate of 6.875%. These notes mature in April 2028.

The second tranche that has a face value of $18.1 million bears interest at a fixed rate of 6.0% which began on June 25, 2022 to but excluding July 1, 2025, payable semi-annually in arrears. From and including July 1, 2025 to but excluding July 1, 2030, or up to an early redemption date, the interest rate shall reset quarterly to an interest rate per annum equal to the then current three-month SOFR plus 590 basis points, payable quarterly in arrears. Beginning on July 1, 2025 through maturity, the subordinated notes may be redeemed, at the Company’s option, on any scheduled interest payment date. The subordinated notes will mature on July 1, 2030. The subordinated notes are subject to customary representations, warranties and covenants made by the Company and the purchasers.

LINKBANCORP, Inc. and Subsidiaries

Notes to the Consolidated Financial Statements (Unaudited)

[In Thousands, Except Share Data]

Note Payable - Partners Merger

As part of the Partners Merger, the Company assumed a one-half undivided interest in 410 William Street, Fredericksburg, Virginia. Partners purchased a one-half interest in the land for cash, plus additional settlement costs, and assumption of one-half of the remaining deed of trust loan on December 14, 2012. Partners indemnified the indemnities, who are the personal guarantors of the deed of trust loan in the amount of $886 thousand, which was one-half of the outstanding balance of the loan as of the purchase date. The Company has a remaining obligation under the note payable of $572 thousand as of September 30, 2024. The loan was refinanced on April 30, 2015 with a twenty-five year amortization. The interest rate is fixed at 3.60% for the first 10 years, and then becomes a variable rate of 3.0% plus the 10 year Treasury rate until maturity.

Borrowings - FHLB

The Company had $40,000 and $0 in long-term FHLB Advances outstanding as of September 30, 2024 and December 31, 2023, respectively. The FHLB Advance has a fixed rate of 4.827% and will mature on February 20, 2026.

The Company had $0 and $10,000 in short-term FHLB Advances outstanding as of September 30, 2024 and December 31, 2023, respectively.

At September 30, 2024, the Company had remaining available capacity with FHLB, subject to certain collateral restrictions, of approximately $742.8 million

Available Lines of Credit

The Company and Bank have available unsecured lines of credit, with interest based on the daily Federal Funds rate, with seven correspondent banks totaling $77 million at September 30, 2024. There were no borrowings under these lines of credit at September 30, 2024 and December 31, 2023.

FAIR VALUE MEASUREMENTS

Management uses its best judgment in estimating the fair value of the Company’s financial instruments; however, there are inherent weaknesses in an estimation technique. Therefore, for substantially all financial instruments, the fair value estimates herein are not necessarily indicative of the amounts The Company could have realized in a sales transaction on the dates indicated. The estimated fair value amounts have been measured as of their respective year-ends and have not been re-evaluated or updated for purposes of these financial statements subsequent to those respective dates. As such, the estimated fair values of these financial instruments subsequent to the respective reporting dates may be different than the amounts reported at each year-end.

The Company uses fair value measurements to record fair value adjustments to certain assets and liabilities and to determine fair value disclosures. In accordance with the fair value measurements accounting guidance (FASB ASC 820, Fair Value Measurements), the fair value of a financial instrument is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Fair value is best determined based upon quoted market prices. However, in many instances, there are no quoted market prices for the Company’s various financial instruments. In cases where quoted market prices are not available, fair values are based on estimates using present value or other valuation techniques. Those techniques are significantly affected by the assumptions used, including the discount rate and estimates of future cash flows. Accordingly, the fair value estimates may not be realized in an immediate settlement of the instrument.

The Company uses a consistent definition of fair value, which focuses on exit price in an orderly transaction (that is, not a forced liquidation or distressed sale) between market participants at the measurement date under current market conditions. If there has been a significant decrease in the volume and level of activity for the asset or liability, a change in valuation technique or the use of multiple valuation techniques may be appropriate. In such instances, determining the price at which willing market participants would transact at the measurement date under current market conditions depends on the facts and circumstances and requires the use of significant judgment. The fair value guidance establishes a fair value hierarchy that prioritizes the inputs to valuation methods used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements).

LINKBANCORP, Inc. and Subsidiaries

Notes to the Consolidated Financial Statements (Unaudited)

[In Thousands, Except Share Data]

The three levels of the fair value hierarchy are as follows:

The following disclosures show the hierarchal disclosure framework associated with the level of pricing observations utilized in measuring assets and liabilities at fair value. The three broad levels of pricing are as follows:


	Level I:	Quoted prices are available in active markets for identical assets or liabilities as of the reported date.

	Level II:	Pricing inputs are other than the quoted prices in active markets, which are either directly or indirectly observable as of the reported date. The nature of these assets and liabilities includes items for which quoted prices are available but traded less frequently and items that are fair-valued using other financial instruments, the parameters of which can be directly observed.

	Level III:	Valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable.

This hierarchy requires the use of observable market data when available.

The estimated fair values of the Company’s financial instruments that are not required to be measured or reported at fair value are as follows:


	At September 30, 2024				At December 31, 2023
(In Thousands)	Carrying Amount		Fair Value		Carrying Amount		Fair Value
Financial assets:
Cash and cash equivalents (Level 1)	$	191,232	$	191,232	$	80,190	$	80,190
Securities held to maturity (Level 2)		34,626		32,823		36,735		34,236
Loans, net of allowance for credit losses (Level 3)		2,189,326		2,208,344		2,104,517		2,027,937
Accrued interest receivable (Level 1)		9,588		9,588		9,831		9,831
Restricted investments in bank stock (Level 1)		4,904		4,904		3,965		3,965
Cash surrender value of life insurance (Level 1)		51,646		51,646		48,847		48,847
Financial liabilities:
Non-maturity deposits (Level 1)		1,762,697		1,762,697		1,604,535		1,604,535
Time Deposits (Level 3)		609,955		608,781		594,264		589,699
Long-term borrowings (Level 3)		40,000		40,000		—		—
Short-term borrowings (Level 1)		—		—		10,000		10,000
Note payable (Level 3)		572		572		590		590
Subordinated Notes (Level 3)		61,843		59,197		61,444		57,303
Accrued interest payable (Level 1)		2,479		2,479		1,466		1,466

The following tables present the assets reported on the Consolidated Balance Sheet at their fair value on a recurring basis as of September 30, 2024 and December 31, 2023, by level within the fair value hierarchy. Financial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement.

The Company’s available-for-sale investment securities are reported at fair value. These securities are valued by an independent third party. The valuations are based on market data. The valuations utilize evaluated pricing models that vary by asset and incorporate available trade, bid and other market information. For securities that do not trade on a daily basis, their evaluated pricing applications apply available information such as benchmarking and matrix pricing. The market inputs normally sought in the evaluation of securities include benchmark yields, reported trades, broker/dealer quotes (only obtained from market makers or broker/dealers recognized as market participants), issuer spreads, two-sided markets, benchmark securities, bid, offers and reference data. For certain securities additional inputs may be used or some market inputs may not be applicable. Inputs are prioritized differently on any given day based on market conditions.

LINKBANCORP, Inc. and Subsidiaries

Notes to the Consolidated Financial Statements (Unaudited)

[In Thousands, Except Share Data]


	September 30, 2024
(In Thousands)	Level I		Level II		Level III		Total
Assets:
US Government Agency securities	$	—	$	12,377	$	—	$	12,377
Obligations of state and political subdivisions		—		48,595		—		48,595
Mortgage backed securities in government-sponsored entities		—		87,828		—		87,828
Other securities		—		515		—		515
Total	$	—	$	149,315	$	—	$	149,315

Liabilities:
Derivative	$	—	$	—	$	120	$	120

	December 31, 2023
(In Thousands)	Level I		Level II		Level III		Total
Assets:
US Government Agency Securities	$	—	$	12,985	$	—	$	12,985
US Government Treasury Securities		—		4,942		—		4,942
Obligations of state and political subdivisions		—		47,045		—		47,045
Mortgage backed securities in government-sponsored entities		—		48,181		—		48,181
Other securities		—		2,337		—		2,337
Total	$	—	$	115,490	$	—	$	115,490

Derivative	$	—	$	—	$	716	$	716

For financial assets measured at fair value on a nonrecurring basis, the fair value measurements by level within the fair value hierarchy used as of September 30, 2024 and December 31, 2023 are presented in the table below.


	September 30, 2024
(In Thousands)	Level I		Level II		Level III		Total
Loans individually evaluated	$	—	$	—	$	21,410	$	21,410

	December 31, 2023
(In Thousands)	Level I		Level II		Level III		Total
Loans individually evaluated	$	—	$	—	$	13,223	$	13,223

The following tables provide information describing the valuation processes used to determine nonrecurring fair value measurements categorized within Level III of the fair value hierarchy:

         
        September 30, 2024

         
        Quantitative Information About Level III Fair Value Measurements

        (In Thousands)

        Fair Value

        Valuation
Techniques

        Unobservable
Input

        Range (Weighted
Average)

Loans individually evaluated

21,410

Appraisal of
collateral

(1

)

Liquidation
expenses

10

         
        December 31, 2023

         
        Quantitative Information About Level III Fair Value Measurements

        (In Thousands)

        Fair Value

        Valuation
Techniques

        Unobservable
Input

        Range (Weighted
Average)

Loans individually evaluated

13,223

Appraisal of
collateral

(1

)

Liquidation
expenses

10

LINKBANCORP, Inc. and Subsidiaries

Notes to the Consolidated Financial Statements (Unaudited)

[In Thousands, Except Share Data]

(1)

Fair value is generally determined through independent appraisals of the underlying collateral, which include various Level III inputs that are not identifiable.

Appraisals may be adjusted by management for qualitative factors, such as economic conditions, aging, and/or estimated liquidation expenses incurred when selling the collateral. The range and weighted average of appraisal adjustments and liquidation expenses are presented as a percentage of the appraisal.

STOCK-BASED COMPENSATION

The LINKBANCORP, Inc. 2019 Equity Incentive Plan (the "2019 Plan") authorized the issuance or delivery to participants of up to 450,000 shares of LINKBANCORP common stock pursuant to grants of incentive and non-statutory stock options. The Plan is administered by the members of LINKBANCORP’s Compensation Committee (the "Committee"). Unless the Committee specified a different vesting schedule, awards under the Plan were granted with a vesting rate of 20 percent per year. Vesting may be accelerated under certain conditions or at the discretion of the Committee at any time. Employees and directors of LINKBANCORP or its subsidiaries were eligible to receive awards under the plan, except that nonemployees were not granted incentive stock options. Stock options are either “incentive” stock options or “nonqualified” stock options. Incentive stock options have certain tax advantages and must comply with the requirements of Section 422 of the Internal Revenue Code. The 2019 Plan was frozen such that no new awards would be granted under the 2019 Plan following receipt of shareholder approval of the LINKBANCORP, Inc. 2022 Equity Incentive Plan described within this footnote.

On May 26, 2022, the Company's shareholders approved the LINKBANCORP, Inc. 2022 Equity Incentive Plan (the "2022 Plan"). The 2022 Plan authorizes the issuance or delivery to participants of up to 475,000 shares of the Company's common stock pursuant to grants of restricted stock, restricted stock units, stock options, and non-qualified stock options. The 2022 Plan is administered by the Committee. At least 95% of the awards under the 2022 Plan will vest no earlier than one year after the grant date.

The table below provides details of the Company's stock options at September 30, 2024.


	Number of Shares			Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Term in Years		Aggregate Intrinsic Value (in ‘000s)
Outstanding, December 31, 2023		570,693		$	9.37		6.1	$	155
Granted		93,500			6.58		9.5		—
Expired/terminated		(52,025	)		7.94		—
Exercised		(1,777	)		5.07		—
Outstanding, September 30, 2024		610,391		$	9.08		6.3	$	14
Exercisable at period end		377,591		$	9.74		4.9	$	14

The exercise prices for options outstanding as of September 30, 2024 ranged from $5.45 to $12.98. The company recognized compensation expense for options of $33 and $96 during the three and nine months ended September 30, 2024 and $28 and $86 during the three and nine months ended September 30, 2023, respectively.

The table below provides details of the Company's restricted stock activity at September 30, 2024.


	Number of Shares			Average Market Price at Grant
Outstanding, December 31, 2023		384,724		$	6.30
Granted		120,000			6.58
Expired/terminated		—
Vested		(17,400	)
Outstanding, September 30, 2024		487,324		$	6.34

LINKBANCORP, Inc. and Subsidiaries

Notes to the Consolidated Financial Statements (Unaudited)

[In Thousands, Except Share Data]

The Company recognized stock-based compensation expense related to restricted shares of $187 and $544 for the three and nine months ended September 30, 2024, respectively, and $10 for the three and nine months ended September 30, 2023. At September 30, 2024, the total unrecognized stock-based compensation costs totaled $2.47 million and $214 thousand for restricted stock awards and stock options, respectively. These expenses will be recognized ratably as expense through May 2029.

The Company issued stock purchase warrants in connection with its initial stock offering via private placement, giving organizers the right to purchase shares of common stock at the initial offering price of $10 per share. For organizers, the warrants serve as a reward for bearing the financial risk of the Company’s organization by advancing “seed money” for its organizational and pre-opening expenses. The organizers’ warrants are non-voting and are exercisable for a period of ten years from the date of grant. All grants were issued during 2019. These warrants are transferable in accordance with the warrant agreement, but are not puttable to the Company. These shares may be issued from previously authorized but unissued shares of stock. The Board has made no additional authorization to issue any further warrants as of September 30, 2024 and has no current plans for future issuance of warrants. To date, organizers have not exercised any warrants since their issuance. As of September 30, 2024, there were 1,537,484 warrants outstanding with a strike price of $10 and an intrinsic value of $0.

10.

REGULATORY CAPITAL REQUIREMENTS

The Bank is subject to various regulatory capital requirements administered by the Federal Deposit Insurance Corporation and the Pennsylvania Department of Banking and Securities. Failure to meet minimum capital requirements can initiate certain mandatory, and possible additional discretionary, actions by regulators that, if undertaken, could have a direct material effect on the Company’s consolidated financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Bank must meet specific capital guidelines that involve quantitative measures of the Bank’s assets, liabilities, and certain off-balance sheet items as calculated under regulatory accounting practices. The Bank’s capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk-weightings, and other factors.

The Bank is subject to regulatory capital requirements administered by banking agencies. Capital adequacy guidelines and prompt corrective action regulations involve quantitative measures of assets, liabilities, and certain off-balance-sheet items calculated under regulatory accounting practices. Capital amounts and classifications are also subject to qualitative judgments by regulators about components, risk weightings, and other factors and the regulators can lower classifications in certain cases. Failure to meet various capital requirements can initiate regulatory action that could have a direct material effect on the financial statements. As of September 30, 2024, the Bank has met all capital adequacy requirements to which it is subject.

The prompt corrective action regulations provide five classifications, including well capitalized, adequately capitalized, under-capitalized, significantly undercapitalized, and critically undercapitalized, although these terms are not used to represent overall financial condition. If an institution is adequately capitalized, regulatory approval is required before the institution may accept brokered deposits. If an institution is undercapitalized, capital distributions are limited, as is asset growth and expansion, and plans for capital restoration are required.

The capital conservation buffer is designed to absorb losses during periods of economic stress. Banking institutions with a ratio of Common Equity Tier 1 capital to risk-weighted assets above the minimum but below the conservation buffer will face limitations on dividends, stock repurchases and certain discretionary bonus payments to management based on the amount of the shortfall. Under Basel III rules, banks must hold a capital conservation buffer above the adequately capitalized risk-based capital ratios. The required capital conservation buffer is 2.50%.

The following table presents actual and required capital ratios as of September 30, 2024 and December 31, 2023 under the Basel III Capital Rules. Bank capital levels required to be considered well capitalized are based upon prompt corrective action regulations.

LINKBANCORP, Inc. and Subsidiaries

Notes to the Consolidated Financial Statements (Unaudited)

[In Thousands, Except Share Data]


	September 30, 2024					December 31, 2023
(Dollars in Thousands)	Amount		Ratio			Amount		Ratio
Total capital
(to risk-weighted assets)
Actual	$	277,027		11.44	%	$	251,042		10.62	%
For capital adequacy purposes		193,699		8.00			188,807		8.00
To be well capitalized		242,124		10.00			236,009		10.00
Tier 1 capital
(to risk-weighted assets)
Actual	$	257,229		10.62	%	$	234,533		9.92	%
For capital adequacy purposes		145,274		6.00			141,605		6.00
To be well capitalized		193,699		8.00			188,807		8.00
Common equity
(to risk-weighted assets)
Actual	$	257,229		10.62	%	$	234,533		9.92	%
For capital adequacy purposes		108,956		4.50			106,204		4.50
To be well capitalized		157,381		6.50			153,406		6.50
Tier 1 capital
(to average assets)
Actual	$	257,229		9.41	%	$	234,533		14.13	%
For capital adequacy purposes		109,387		4.00			66,412		4.00
To be well capitalized		136,734		5.00			83,016		5.00

The federal banking agencies, including the FDIC, issued a rule pursuant to The Economic Growth, Regulatory Relief and Consumer Protection Act of 2018 to establish for institutions with assets of less than $10 billion a “community bank leverage ratio” (the ratio of a bank’s tier 1 capital to average total consolidated assets) of 9% that qualifying institutions may elect to use in lieu of the generally applicable leverage and risk-based capital requirements under Basel III. If an election to use the community bank leverage ratio capital framework is made, a qualifying bank with less than $10 billion in assets with capital exceeding the specified community bank leverage ratio is considered compliant with all applicable regulatory capital and leverage requirements, including the requirement to be “well capitalized.” As of September 30, 2024 and December 31, 2023, the Bank had not elected to be subject to the alternative framework.

Federal and state banking regulations place certain restrictions on dividends paid by the Bank. The Pennsylvania Banking Code provides that cash dividends may be declared and paid out of accumulated net earnings. In addition, dividends paid by the Bank would be prohibited if the effect thereof would cause the Bank’s capital to be reduced below applicable minimum capital requirements. Loans or advances by the Bank to the Company are limited to 10 percent of the Bank’s capital stock and surplus and must have collateral securing the loans or advances.

The Federal Reserve and the FDIC have adopted a rule that provides a banking organization the option to phase-in over a three-year period the effects of CECL on its regulatory capital upon the adoption of the CECL standard. The Company opted to exercise this phase-in option.

11.

FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK

The Company is a party to financial instruments with off-balance sheet risk in the normal course of business to meet the financing needs of its customers. These financial instruments include commitments to extend credit. Such commitments involve, to varying degrees, elements of credit and interest rate risk in excess of the amount recognized in the consolidated balance sheets.

The Company’s exposure to credit loss in the event of nonperformance by the other party to the financial instrument for commitments to extend credit is represented by the contractual amount of those instruments. The Company uses the same credit policies in making and monitoring commitments and conditional obligations as it does for on-balance sheet instruments. At September 30, 2024 and December 31, 2023, the Company has an allowance for credit losses for off-balance sheet instruments of $1,857 and $2,189, respectively, included within the liabilities section of the balance sheet. The corresponding debit to provision for credit losses for the three and nine months ended September 30, 2024 was $110 and $331, respectively. The credit to the provision for credit losses for the three and nine months ended September 30, 2023 was $0 and $60, respectively.

LINKBANCORP, Inc. and Subsidiaries

Notes to the Consolidated Financial Statements (Unaudited)

[In Thousands, Except Share Data]

At September 30, 2024 and December 31, 2023, the following financial instruments were outstanding whose contract amounts represent credit risk:


(In Thousands)	September 30, 2024		December 31, 2023
Unfunded commitments under lines of credit:
Home equity loans	$	111,588	$	116,964
Commercial real estate, construction, and land development		137,570		186,966
Commercial and industrial		328,759		306,024
Total	$	577,917	$	609,954

Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Since many of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. The Company evaluates each customer’s credit worthiness on a case-by-case basis. The amount of collateral obtained, if deemed necessary by the Company upon extension of credit, is based on management’s credit evaluation. Collateral held varies but may include personal or commercial real estate, accounts receivable, inventory, and equipment.

12.

EARNINGS PER SHARE

The following table sets forth the composition of earnings per share:


	Three Months Ended September 30,				Nine Months Ended September 30,
(In Thousands, except share and per share data)	2024		2023		2024		2023
Net income	$	7,095	$	1,240	$	18,625	$	1,033
Basic weighted average common shares outstanding		36,983,637		16,235,144		36,972,127		15,984,151
Net effect of dilutive stock options and warrants		2,734		—		4,380		—
Net effect of dilutive restricted stock awards and units		103,740		—		85,005		—
Diluted weighted average common shares outstanding		37,090,111		16,235,144		37,061,512		15,984,151
Net income per common share:
Basic	$	0.19	$	0.08	$	0.50	$	0.06
Diluted	$	0.19	$	0.08	$	0.50	$	0.06

The following is a summary of securities that could potentially dilute basic earnings per common share in future periods that were included in the computation of diluted earnings per common share in the periods presented.


	Three Months Ended September 30,				Nine Months Ended September 30,
	2024		2023		2024		2023
Stock Options		24,691		—		116,191		—
Warrants		—		—		—		—
Restricted Stock Awards and Units		487,324		—		487,324		—
Total dilutive securities		512,015		—		603,515		—

The following is a summary of securities that could potentially dilute basic earnings per share in future periods that were not included in the computation of diluted earnings per share because to do so would have been anti-dilutive for the periods presented.

LINKBANCORP, Inc. and Subsidiaries

Notes to the Consolidated Financial Statements (Unaudited)

[In Thousands, Except Share Data]


	Three Months Ended September 30,				Nine Months Ended September 30,
	2024		2023		2024		2023
Stock Options		585,700		260,000		494,200		260,000
Warrants		1,537,484		1,537,484		1,537,484		1,537,484
Restricted Stock Awards and Units		—		87,000		—		87,000
Total anti-dilutive securities		2,123,184		1,884,484		2,031,684		1,884,484

13. DERIVATIVES

During the second quarter of 2023 the Company entered into a pay fixed / received variable interest rate swap with a notional amount of $75,000 which has a fixed rate of 3.28%, a maturity of five years and is designated against either a mix of one-month FHLB advances or brokered certificates of deposit. The Company will utilize, from time to time, interest rate swap agreements as part of its asset liability management strategy to help manage its interest rate risk position. The notional amount of the interest rate swaps does not represent amounts exchanged by the parties. The amount exchanged is determined by reference to the notional amount and the other terms of the individual interest rate swap agreements. Interest rate swaps designated as cash flow hedges involve the receipt of variable amounts from a counterparty in exchange for the Company making fixed-rate payments over the life of the agreements without exchange of the underlying notional amount. At September 30, 2024, the derivative contract is used to hedge the variable cash flows associated with monthly brokered deposits.

For derivatives designated and that qualify as cash flow hedges of inte94rest rate risk, the gain or loss on the derivative is recorded in Accumulated Other Comprehensive Income (loss) and subsequently reclassified into interest expense in the same period(s) during which the hedged transaction affects earnings. Amounts reported in Accumulated Other Comprehensive Income related to derivatives will be reclassified to interest expense as interest payments are made on the Company’s variable-rate debt. The amounts reclassified to interest expense were $383 thousand and $1.2 million for the three and nine months ended September 30, 2024, respectively. Comparatively, the amounts reclassified to interest expense for three and nine months ended September 30, 2023 were $375 thousand and $572 thousand, respectively. Over the next 12 months, the Company estimates that an additional $371 thousand will be reclassified as a reduction to interest expense.

The Company recorded ($120) thousand and $716 thousand within other assets on the Consolidated Balance Sheet, which represented the fair value of this derivative at September 30, 2024 and December 31, 2023, respectively.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

This discussion and analysis reflects the Company’s consolidated financial statements and other relevant statistical data and is intended to enhance your understanding of the Company’s consolidated financial condition and results of operations. This Management’s Discussion and Analysis is presented in the following sections:

•

Forward Looking Statements

•

Overview and Strategy

•

Pending Sale of New Jersey Solutions Centers

•

Partners Merger

•

Financial Highlights

•

Comparison of Financial Condition at September 30, 2024 and December 31, 2023

•

Comparison of Operating Results for the Three Months Ended September 30, 2024 and 2023.

•

Comparison of Operating Results for the Nine Months Ended September 30, 2024 and 2023.

•

Liquidity, Commitments, and Capital Resources

•

Off-Balance Sheet Arrangements

•

Critical Accounting Estimates

•

Recently Issued Accounting Standards

Forward Looking Statements

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, which can be identified by the use of words such as “estimate,” “project,” “believe,” “intend,” “anticipate,” “plan,” “seek,” “expect” or words of similar meaning, or future or conditional verbs, such as “will,” “would,” “should,” “could,” or “may.” A forward-looking statement is neither a prediction nor a guarantee of future events.

These forward-looking statements include, but are not limited to:

•

statements of our goals, intentions and expectations;

•

statements regarding our business plans, prospects, growth and operating strategies;

•

statements regarding the quality of our loan and investment portfolios; and

•

estimates of our risks and future costs and benefits.

These forward-looking statements are based on current beliefs and expectations of our management and are inherently subject to significant business, economic and competitive uncertainties and contingencies, many of which are beyond our control. In addition, these forward-looking statements are subject to assumptions with respect to future business strategies and decisions that are subject to change.

The following factors, among others, could cause actual results to differ materially from the anticipated results or other expectations expressed in the forward-looking statements:

•

inflation and changes in market interest rates that reduce our margins and yields, reduce the fair value of financial instruments or reduce our volume of loan originations, or increase the level of defaults, losses and prepayments on loans we have made and make, whether held in portfolio or sold in the secondary market;

•

general economic conditions, either nationally or in our market area, that are worse than expected;

•

competition within our market area that is stronger than expected;

•

changes in the level and direction of loan delinquencies and charge-offs and changes in estimates of the adequacy of the allowance for credit losses;

•

our ability to access cost-effective funding;

•

fluctuations in real estate values and both residential and commercial real estate market conditions;

•

demand for loans and deposits in our market area;

•

our ability to continue to implement our business strategies;

•

competition among depository and other financial institutions;

•

any future FDIC insurance premium increases, or special assessment may adversely affect our earnings;

•

adverse changes in the securities markets;

•

changes in laws or government regulations or policies affecting financial institutions, including changes in regulatory fees and capital requirements;

•

our ability to manage market risk, credit risk and operational risk;

•

our ability to enter new markets successfully and capitalize on growth opportunities;

•

the imposition of tariffs or other domestic or international governmental polices impacting the value of the products of our borrowers;

•

the timing and receipt of regulatory approvals to complete the sale of our New Jersey branches;

•

our ability to successfully integrate into our operations Partners' assets, liabilities or systems we acquired, as well as new management personnel or customers, and our ability to realize related revenue synergies and cost savings within expected time frames and any goodwill charges related thereto;

•

changes in consumer spending, borrowing and savings habits;

•

our ability to maintain our reputation;

•

our ability to prevent or mitigate fraudulent activity;

•

changes in accounting policies and practices, as may be adopted by the bank regulatory agencies, the Financial Accounting Standards Board, the Securities and Exchange Commission or the Public Company Accounting Oversight Board; our ability to retain key employees and our existing customers;

•

a breach in security of our information systems, including the occurrence of a cyber incident or a deficiency in cyber security;

•

political instability or civil unrest;

•

risks and uncertainties related to a pandemic and resulting governmental and societal response and its effects on our business and operations;

•

acts of war or terrorism;

•

our ability to evaluate the amount and timing of recognition of future tax assets and liabilities;

•

our compensation expense associated with equity benefits allocated or awarded to our employees; and

•

changes in the financial condition, results of operations or future prospects of issuers of securities that we own.

Because of these and other uncertainties, our actual future results may be materially different from the results indicated by these forward-looking statements. We disclaim any obligation to revise or update any forward-looking statements contained in this Quarterly Report on Form 10-Q to reflect future events or developments.

Overview and Strategy

The Company’s core strategy is to further its mission of “positively impacting lives” through community banking by building strong relationships that bring value to its customers, employees, the communities it serves and its shareholders. In pursuing this mission, the Company specifically desires to invest in the development of strong future leaders for the banking industry and our communities, to contribute to economically and socially flourishing communities, and to demonstrate the continued viability and integral role of community banking for our economic and social development.

The Company operates primarily through its wholly-owned subsidiary, LINKBANK, which provides traditional lending, deposit gathering and cash services to retail customers, small businesses and nonprofit organizations. The Bank focuses its lending activities on small businesses, targeted to create a diverse loan portfolio in relation to its underlying collateral and different business segments with unique cash flow generation and varied interest rate sensitivity. The Bank offers a full suite of deposit products and cash management services focused on the small business and nonprofit segments.

Our revenues consist primarily of interest income earned 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 a provision for credit losses.

Non-interest income also contributes to our operating results, consisting of service charges on deposit accounts, earnings on bank-owned life insurance, revenue from the sale of securities, and revenue from the sale of SBA loans and residential mortgage loans to the secondary market and related servicing fees. Non-interest expenses, which include salaries and employee benefits, occupancy and equipment costs, data processing, professional fees, FDIC insurance expense, merger and system conversion expense, and other general and administrative expenses, are the Company’s primary expenditures incurred as a result of operations.

Financial institutions, in general, 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. Our operations and lending are concentrated in South Central Pennsylvania in Dauphin, Chester, Cumberland, Lancaster, Northumberland, Schuylkill, and York Counties. In 2023 as a result of the completion of the Partners Merger, we entered the counties of Wicomico, Charles, Anne Arundel, and Worcester counties in Maryland, Sussex county in Delaware, Camden and Burlington counties in New Jersey, Spotsylvania county in Virginia, and the cities of Fredericksburg and Reston, Virginia. Our operations and lending 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 our 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 the Company.

Pending Sale of New Jersey Solutions Centers

Under the Agreement, AHFCU will acquire substantially all of the loans, three branch locations (along with associated personal property and fixtures) and will assume substantially all of the deposits. The total deposit premium to be paid by AHFCU equates to approximately 7.0% of all deposits assumed at closing. With respect to the acquired loans, AHFCU will pay an amount equal to the principal balances plus any accrued but unpaid interest and late charges on the loans measured as of the closing date. AHFCU will pay book value for fixed assets, real estate and any other assets located at the owned branch. As of September 30, 2024, approximately $102.3 million in loans and $94.0 million in deposits were classified as held for sale in connection with the Transaction.

The Transaction is expected to close in the fourth quarter of 2024 or the first quarter of 2025 and is subject to receipt of regulatory approvals and certain other customary closing conditions.

Partners Merger

On November 30, 2023, LINKBANCORP completed its merger with Partners Bancorp ("Partners"), and its wholly owned subsidiaries, The Bank of Delmarva and Virginia Partners Bank, pursuant to which Partners merged with and into the Company with the Company as the surviving corporation (the "Partners Merger"). The Bank of Delmarva and Virginia Partners Bank merged with and into LINKBANK with LINKBANK as the surviving bank. In connection with the announcement of the Partners Merger in the first quarter of 2023, LINKBANCORP completed a private placement of $10.0 million with certain directors of LINKBANCORP as well as other accredited investors.

Financial Highlights

The following is a summary of the financial highlights as of and for the three and nine months ended September 30, 2024:

•

Quarterly Net Income and Net Income Per Share - Net income was $7.1 million for the three months ended September 30, 2024, a $5.8 million increase from the same period in 2023 and a $1.3 million increase from the three months ended June 30, 2024 ("Linked Quarter"). Diluted earnings per share was $0.19 for the three months ended September 30, 2024, compared to $0.08 per diluted share for the comparable period in 2023.

•

YTD Net Income - Net income was $18.6 million for the nine months ended September 30, 2024, a $17.6 million increase from the same period in 2023.

•

Net Interest Income - Net interest income before provision for credit losses increased $16.6 million or 199.1% for the three months ended September 30, 2024 compared to the same period in 2023. Net interest margin for the third quarter of 2024 was 3.82%, representing a 93 basis points increase over the same period in 2023. Compared to the Linked Quarter, net interest income before provision for credit losses increased $497 thousand and net interest margin decreased 1 basis point.

See the sections below for a complete analysis of the results of operations for the three and nine months ended September 30, 2024.

Comparison of Financial Condition at September 30, 2024 and December 31, 2023

Total assets at September 30, 2024, were $2.88 billion, an increase of $210.6 million, or 7.9%, from $2.67 billion at December 31, 2023. The increase in total assets was primarily due to an increase in cash and cash equivalents of $111.0 million, from $80.2 million at December 31, 2023 to $191.2 million at September 30, 2024, an increase in loans held for investment of $87.6 million, from $2.13 billion at December 31, 2023 to $2.22 billion at September 30, 2024, and an increase in securities available-for-sale from $115.5 million at December 31, 2023 to $149.3 million at September 30, 2024.

Cash and cash equivalents increased $111.0 million, or 138.5%, from $80.2 million at December 31, 2023 to $191.2 million at September 30, 2024. The increase was primarily due to:

Primary Cash Inflows

•

Net increase in deposits of $166.2 million;

•

Proceeds from long-term borrowings of $40.0 million;

•

Net cash from investment securities (sales, calls, maturities, and principal repayments) of $21.1 million; and

•

Cash from operating activities of $19.6 million.

Primary Cash Outflows

•

Net increase in cash funding of loans receivable of $65.1 million;

•

Purchase of investment securities available for sale of $50.4 million; Repayment of short-term borrowings of $10.0 million; and

•

Dividends paid of $8.3 million.

Securities available-for-sale increased by $33.8 million during the nine months ended September 30, 2024, with a balance of $149.3 million at September 30, 2024 and $115.5 million as of December 31, 2023. The increase was primarily due to purchases of investment securities of $50.4 million and an increase in the fair value of our securities of $2.1 million as a result of changes in market conditions. The increase was partially offset by sales/calls/repayments totaling $19.0 million. Securities held to maturity decreased $2.1 million, or 5.7% to $34.6 million at September 30, 2024 from $36.7 million at December 31, 2023. This decrease was primarily the result of principal repayments of $2.1 million.

Net loans receivable increased during the nine months ended September 30, 2024 as shown in the table below:


(dollars in thousands)	September 30, 2024			December 31, 2023			Change			%
Agriculture loans	$	65,166		$	65,861		$	(695	)		(1.06	)%
Construction loans		162,032			161,825			207			0.13
Commercial loans		235,144			232,412			2,732			1.18
Commercial real estate loans
Multifamily		206,867			176,843			30,024			16.98
Owner occupied		479,361			474,964			4,397			0.93
Non-owner occupied		598,681			551,481			47,200			8.56
Residential real estate loans
First liens		374,130			376,092			(1,962	)		(0.52	)
Second liens and lines of credit		72,061			66,648			5,413			8.12
Consumer and other loans		17,496			16,740			756			4.52
Municipal loans		4,296			5,244			(948	)		(18.08	)
Total Loans		2,215,234			2,128,110			87,124			4.09
Deferred costs		634			174			460			264.37
Allowance for credit losses		(26,542	)		(23,767	)		(2,775	)		11.68
Total	$	2,189,326		$	2,104,517			84,809			4.03	%

The above table does not include loans that are held for sale related to the New Jersey branch sale.

Commercial real estate loans increased $81.6 million during the first nine months of 2024. This growth was not attributable to any one significant relationship and was primarily the result of current balances of new loan originations of $122.3 million partially offset by net loan repayment activity. Construction loans increased $207 thousand during the first nine months of 2024 primarily due to draws on existing loans of $36.7 million and new loan originations for the year to date of $20.2 million. Payoffs on construction loans existing at December 31, 2023 were $35.1 million and $26.0 million in construction loans were reclassified into other loan segments upon completion of construction. Commercial loans increased $2.7 million from December 31, 2023, resulting from $32.5 million in balances on newly originated loans offset by net loan repayments on existing loans.

The allowance for credit losses-loans increased $2.8 million from $23.8 million at December 31, 2023 to $26.5 million at September 30, 2024. The primary driver of the increased allowance for credit losses-loans was a measurement period adjustment resulting in a $2.3 million provision related to a non-owner-occupied commercial real estate loan from the Partners Merger that experienced credit deterioration that existed at acquisition and was considered purchase-credit deteriorated. The recorded investment of this loan was $3.95 million at September 30, 2024. Refer to Note 5 within the Consolidated Financial Statements for further information.

At September 30, 2024, non-performing loans, which is defined as non-accrual loans, and loans delinquent greater than 90 days and still accruing interest, was $17.4 million or 0.78% of total gross loans held for investment. This compares to $7.3 million of non-performing loans at December 31, 2023, which equated to 0.34% of total gross loans held for investment. The increase in non-accrual loans was due to the loan acquired in the Partners Merger described above, and an owner-occupied commercial real estate relationship totaling $6.5 million that experienced deterioration and was downgraded. This credit was placed on non-accrual status during the third quarter of 2024, at which time the Company obtained updated appraisals of the underlying collateral indicating that there was sufficient collateral value resulting in no required specific reserve as of September 30, 2024. Additionally, our allowance for credit losses for loans totaled $26.5 million at September 30, 2024 and represented 1.20% of our total gross loans held for investment, compared to $23.8 million or 1.06% of our total gross loans at December 31, 2023. At September 30, 2024 and December 31, 2023, the Company had no other real estate owned.

The federal banking regulators have issued guidance for those institutions which are deemed to have concentrations in commercial real estate lending. Pursuant to the supervisory criteria contained in the guidance for identifying institutions with a potential commercial real estate concentration risk, institutions which have (1) total reported loans for construction, land development and other land acquisitions which represent 100% or more of an institution’s total risk-based capital; or (2) total commercial real estate loans representing 300% or more of the institution’s total risk-based capital and the institution’s commercial real estate loan portfolio has increased 50% or more during the prior 36 months are identified as having potential commercial real estate concentration risk. Institutions which are deemed to have concentrations in commercial real estate lending are expected to employ heightened levels of risk management with respect to their commercial real estate portfolios and may be required to hold higher levels of capital. The Company, like many community banks, has a concentration in commercial real estate loans, and the Company has experienced growth in its commercial real estate portfolio in recent years, including through the recently completed Partners Merger.

At September 30, 2024, non-owner-occupied commercial real estate loans (including construction, land and land development loans) represented 365.86% of total risk based capital compared to 374.5% at December 31, 2023. Construction, land and land development loans represented 63.31% of total risk based capital at September 30, 2024 compared to 64.46% at December 31, 2023. These percentages of non-owner-occupied commercial real estate loans to total risk based capital, and construction loans to total risk based capital were calculated using total loans, including loans held for sale as of September 30, 2024, in accordance with prevailing regulatory guidance. Management has implemented and continues to maintain heightened risk management procedures and prudent underwriting criteria with respect to its commercial real estate portfolio. Loan monitoring practices include but are not limited to periodic stress testing analysis to evaluate changes to cash flows and changes in collateral values to determine the loan level of stress over key underwriting metrics such as debt service coverage ratios, and loan-to-value ratios. Nevertheless, we may be required to maintain higher levels of capital as a result of our commercial real estate concentrations, which could require us to obtain additional capital and may adversely affect shareholder returns. The Company's Capital Policy and Capital Plan has established internal minimum targets for regulatory capital ratios that are in excess of well capitalized ratios.

At September 30, 2024 and December 31, 2023, the Company had no concentrations of loans in any one industry exceeding 10% of its total loan portfolio. An industry for this purpose is defined as a group of businesses that are engaged in similar activities and have similar economic characteristics that would cause their ability to meet contractual obligations to be similarly affected by changes in economic or other conditions.

Deposits grew by $173.9 million, or 7.9%, to $2.37 billion at September 30, 2024 from $2.20 billion at December 31, 2023. Changes in the deposit types are presented in the table below:


(in thousands)	September 30, 2024		December 31, 2023		Change			%
Demand, noninterest-bearing	$	658,473	$	624,780	$	33,693			5.4	%
Demand, interest-bearing		534,228		425,551		108,677			25.5
Money market and savings		569,996		554,204		15,792			2.8
Time deposits, $250,000 and over		160,592		128,334		32,258			25.1
Time deposits, other		374,363		346,519		27,844			8.0
Brokered deposits		75,000		119,411		(44,411	)		(37.2	)
Total deposits	$	2,372,652	$	2,198,799	$	173,853			7.9	%

The above table does not include deposits that are held for sale related to the New Jersey branch sale.

The increase of $142.4 million in demand deposits during the first nine months of 2024 was the result of new accounts opened during the first nine months of 2024, primarily interest-bearing, partially offset by net decreases in existing account balances, with new accounts contributing approximately $153.6 million in balance at September 30, 2024. New accounts opened during the first nine months of 2024 also explained the growth in money market and savings accounts, contributing $61.6 million to the overall balance growth of $15.8 million.

The Company has estimated deposits that exceed the FDIC insurance limit of $250,000 of $844.0 million, or 34.22% of total deposits and $713.4 million, or 31.04% of total deposits at September 30, 2024 and December 31, 2023, respectively. Total uninsured deposits is calculated based on regulatory reporting requirements and reflects the portion of any deposit of a customer at an insured depository institution that exceeds the applicable FDIC insurance coverage for that depositor at that institution and amounts in any other uninsured investment or deposit accounts that are classified as deposits and not subject to any federal or state deposit insurance regime. As of September 30, 2024 and December 31, 2023, the total uninsured deposits includes $52.0 million and $41.2 million, respectively, of municipal deposits that exceed the FDIC insurance limits.

These municipal deposits are fully secured with pledged securities from our available for sale securities portfolio.

At September 30, 2024 and December 31, 2023, long-term borrowings consisted of $40.0 million and $0, respectively, in long-term FHLB advances. In the first quarter of 2024, the Company replaced some of its overnight borrowings with a lower cost, $40.0 million term advance with a fixed interest rate of 4.827%, maturing in February 2026.

At September 30, 2024 and December 31, 2023, short term FHLB advances were $0 and $10.0 million, respectively.

During the second quarter of 2023, the Company entered into a pay fixed/received variable interest rate swap with a notional amount of $75 million which has a fixed rate of 3.28%, and a maturity of five years. As part of the transaction, the Company will receive an offset to the interest incurred on either a mix of one-month FHLB advances or brokered certificates of deposit at a rate equal to one-month SOFR. Our time deposits balance as of September 30, 2024 contains $75 million of one-month maturity brokered deposits that matured in October 2024. As part of our interest rate swap transaction, the Company has committed to maintain either one-month advances from the FHLB or brokered deposits with a duration of one month through May 2028.

Subordinated debt with a fair value of $20.7 million was assumed as part of the Gratz Merger. These notes bear interest at a fixed interest rate of 5.0% per year for five years and then float at an index tied to the SOFR. The notes have a term of ten years, with a maturity date of October 1, 2030. The notes are redeemable at the option of the Company, in whole or in part, subject to any required regulatory approvals after five years, or October 1, 2025. Additionally, on April 8, 2022, LINKBANCORP issued subordinated debt with a carrying value of $20.0 million. These notes bear interest at a fixed annual rate of 4.50% per year up to April 15, 2027 and then float to an index tied to the three-month SOFR, plus 203 basis points. Subject to limited exceptions, the Company cannot redeem the notes before the fifth anniversary of the issuance date. The balance of subordinated debt was $40.4 million and $40.5 million at September 30, 2024 and December 31, 2023, respectively.

Subordinated notes with carrying value of $21.4 million were assumed in the Partners Merger within two tranches of debt issuances. The first tranche has a face value of $4.5 million and bear interest at a fixed rate of 6.875% per year for four years. The second tranche has a face value of $18.05 million and bear interest at a fixed rate of 6.0% per year for 18 additional months.

Total shareholders’ equity increased by $11.6 million, or 4.4%, to $277.4 million at September 30, 2024 from $265.8 million at December 31, 2023. The increase was primarily attributable to net income of $18.6 million for the first nine months ended September 30, 2024. This increase was offset by dividends of $8.3 million for the nine months ended September 30, 2024 and a dissolution of a minority interest of $483 thousand.

Comparison of Results of Operations for the Three Months Ended September 30, 2024 and 2023

General: Net income was $7.1 million for the three months ended September 30, 2024, or $0.19 per diluted share, an increase of $5.9 million compared to net income of $1.2 million, or $0.08 per diluted share, for the three months ended September 30, 2023.

The increase in net income for the three months ended September 30, 2024, as compared to the same prior year period was primarily the result of an increase in interest and dividend income of $25.4 million and an increase in non-interest income of $1.8 million. Offsetting the increase in net income was an increase in interest expense of $8.8 million, and an increase in non-interest expense of $10.5 million primarily as a result of the increase in salaries and employee benefits of $5.7 million due to the Partners Merger for the three months ended September 30, 2024 as compared to the same prior year period.

Analysis of Net Interest Income

Net interest income represents the difference between the interest the Company earns on its interest-earning assets, such as loans and investment securities, and the expense the Company pays on interest-bearing liabilities, such as deposits and borrowings. Net interest income depends on both the volume of our interest-earning assets and interest-bearing liabilities and the interest rates the Company earns or pays on them. In general, the shift in the interest rate environment that began in March of 2022 resulted in higher interest rates earned on loans, securities, and interest-earning cash as well as higher interest rates paid on deposits and borrowed money when comparing the three months ended September 30, 2024 to the same period in 2023. Since December 31, 2021, the Federal Funds Target Rate rose from a range of 0.00% - 0.25% to a range of 5.25% - 5.50% as of September 30, 2023 which held until September 2024 and decreased to a range of 4.75% - 5.00% as of September 30, 2024. While this interest rate index is not used for all financial instruments, the interest rate indices and interest rate curves have increased over this same time horizon. The results of this overall upward shift in interest rates has generally caused net interest margins at financial institutions to contract when comparing the third quarter of 2024 to the third quarter of 2023 as the cost of funds of financial institutions, generally, have risen at a faster pace than the yield on interest earning assets. While this trend is generally accurate across the broader banking sector, our results for the third quarter of 2024 have been positively impacted by the Partners Merger by adding increased yield on interest earning assets which outpaced the rise in funding costs when compared to the same period in 2023.

As shown in the table below and subsequent discussion, the average yield on interest earning assets increased 103 basis points when comparing the third quarter of 2024 to the third quarter of 2023, while our average cost of funds increased seven basis points over that same period, resulting in an increase to net interest margin of 93 basis points.

Average Balances, Interest and Average Yields: The following table sets forth certain information relating to average balance sheets and reflects the average annualized yield on interest-earning assets and average annualized cost of interest-bearing liabilities, interest earned and interest paid for the periods indicated. Such yields and costs are derived by dividing income or expense by the average balance of interest-earning assets or interest-bearing liabilities, respectively, for the periods presented. Average balances are derived from daily balances over the periods indicated. The average balances for loans are net of allowance for credit losses, but include non-accrual loans. The loan yields include net amortization of certain deferred fees and costs that are considered adjustments to yields. Yields on earning assets are shown on a fully taxable-equivalent basis assuming a tax rate of 21%.


	For the Three Months Ended September 30,
	2024								2023
(Dollars in thousands)	Avg Bal		Interest (2)			Yield/Rate			Avg Bal		Interest (2)			Yield/Rate
Int. Earn. Cash	$	114,383	$	1,296			4.51	%	$	55,514	$	577			4.12	%
Securities
Taxable (1)		133,443		1,683			5.02	%		82,499		833			4.01	%
Tax-Exempt		42,800		453			4.21	%		38,589		378			3.89	%
Total Securities		176,243		2,136			4.82	%		121,088		1,211			3.97	%
Total Cash Equiv. and Investments		290,626		3,432			4.70	%		176,602		1,788			4.02	%
Total Loans (3)(4)		2,313,228		36,856			6.34	%		971,877		13,068			5.33	%
Total Interest-Earning Assets		2,603,854		40,288			6.16	%		1,148,479		14,856			5.13	%
Other Assets		208,407								97,995
Total Assets	$	2,812,261							$	1,246,474
Interest bearing demand(5)	$	497,100	$	2,902			2.32	%	$	254,725	$	1,490			2.32	%
Money market demand(5)		580,766		3,396			2.33	%		254,849		1,827			2.84	%
Time deposits(5)		613,402		6,993			4.54	%		265,573		2,117			3.16	%
Total Borrowings (6)		153,699		1,922			4.97	%		102,669		992			3.83	%
Total Interest-Bearing Liabilities		1,844,967		15,213			3.28	%		877,816		6,426			2.90	%
Non Int Bearing Deposits(5)		659,825								209,054
Total Cost of Funds	$	2,504,792	$	15,213			2.42	%	$	1,086,870	$	6,426			2.35	%
Other Liabilities		33,534								17,230
Total Liabilities	$	2,538,326							$	1,104,100
Shareholders' Equity	$	273,935							$	142,374
Total Liabilities & Shareholders' Equity	$	2,812,261							$	1,246,474
Net Interest Income/Spread (FTE)				25,075			2.88	%				8,430			2.23	%
Tax-Equivalent Basis Adjustment				(94	)							(78	)
Net Interest Income			$	24,981							$	8,352
Net Interest Margin							3.82	%							2.89	%
(1) Taxable income on securities includes income from available for sale securities and income from certificates of deposits with other banks.
(2) Income stated on a tax equivalent basis which is non-GAAP and is reconciled to GAAP at the bottom of the table.
(3) Includes the balances of nonaccrual loans.
(4) Includes the balances of loans held for sale.
(5) Includes the balances of deposits held for sale.
(6) Includes the effect of the interest rate swap, which reduced interest expense by $383 thousand during the three months ended September 30, 2024.

Rate/Volume Analysis

The following table reflects the sensitivity of the Company’s interest income and interest expense to changes in volume and in yields on interest-earning assets and costs of interest-bearing liabilities during the periods indicated.


	Three Months Ended September 30, 2024 vs. 2023 Increase (Decrease) Due To:
(Dollars in thousands)	Rate			Volume		Net
Interest Income:
Int. Earn. Cash	$	111		$	608	$	719
Securities
Taxable		332			518		850
Tax-Exempt		34			41		75
Total Securities		366			559		925
Total Loans		5,809			17,979		23,788
Total Interest-Earning Assets		6,286			19,146		25,432
Interest Expense:
Interest bearing demand		0			1,412		1,412
Money market demand		(736	)		2,305		1,569
Time deposits		2,108			2,768		4,876
Total Borrowings		436			494		930
Total Interest-Bearing Liabilities		1,808			6,979		8,787
Change in Net Interest Income	$	4,478		$	12,167	$	16,645

Net Interest Income: Net interest income increased by $16.6 million, or 199.1%, to $25.0 million for the three months ended September 30, 2024, compared to $8.4 million for the three months ended September 30, 2023. The increase can be mostly attributed to higher average balances in loans as well as a 103 basis points increase in the average yield on interest-earning assets. The increase was partially offset by an increase in interest expense resulting from increased average rates paid on interest-bearing liabilities due to the higher interest rate environment and an increase in average interest bearing liabilities. The increase in average balances of interest earning assets and interest bearing liabilities was a result of the completion of the Partners Merger. The net interest margin increased 93 basis points to 3.82% for the three months ended September 30, 2024 from 2.89% for the three months ended September 30, 2023.

Interest Income: Interest income increased to $40.2 million for the three months ended September 30, 2024, compared with $14.8 million for the three months ended September 30, 2023 primarily due to an increase in interest income on loans as a result of the growth in average loans as well as the increase in average yields earned on all categories of interest earning assets. The growth in the average balance of interest earning assets which increased $1.5 billion to $2.6 billion for the three months ended September 30, 2024 compared to $1.1 billion for the comparable period in 2023 contributed $19.1 million to the increase in interest income. The growth in the average balance of interest earning assets was due primarily to the increase in the average balance of loans which increased $1.3 billion to $2.3 billion for the three months ended September 30, 2024 as compared to the same period in 2023, as a result of growth in the commercial loan portfolio primarily due to the completion of the Partners Merger and, contributed $18.0 million to the increase in interest income. The average yield on loans increased 101 basis points on an annualized basis from 5.33% for the three months ended September 30, 2023 to 6.34% for the three months ended September 30, 2024, which contributed $5.8 million to the increase in interest income. Normal amortization of net loan discounts recorded as part of purchase accounting adjustments to acquired loans contributed $3.3 million to the increase in interest income during the three months ended September 30, 2024. Overall the average yield of interest earning assets increased 103 basis points on an annualized basis to 6.16% for the three months ended September 30, 2024 as compared to the same period in 2023 due primarily to a larger concentration of interest earning assets in loans along with an increase in the average yield earned on loans due to the current higher interest rate environment.

Interest Expense: Interest expense increased by $8.8 million, or 136.8%, to $15.2 million for the three months ended September 30, 2024, compared to $6.4 million for the three months ended September 30, 2023. The increase in interest expense was primarily due to the increase in the average balance of interest bearing liabilities, which increased $967 million to $1.8 billion for the three months ended September 30, 2024 compared to $877.8 million for the three months ended September 30, 2023 as a result of the increase in the average balance of our deposits and borrowings due to the completion of the Partners Merger. The increase in interest expense was also impacted by an increase in the interest rate paid on interest bearing liabilities. The average rate paid on interest-bearing liabilities increased 38 basis points on an annualized basis from 2.90% for the three months ended September 30, 2023 to 3.28% for the three months ended September 30, 2024 due to the higher interest rate environment and in particular its impact on deposit cost. Normal amortization of net discounts on acquired interest bearing liabilities recorded as part of purchase accounting adjustments through the Partners Merger contributed $359 thousand to the increase in interest expense during the three months ended September 30, 2024.

Interest expense on borrowings was reduced by $383 thousand during the third quarter of 2024 due to the impact of the interest rate swap.

Provision for Credit Losses: The provision for credit losses is the resulting expense from the allowances for credit losses on loans, unfunded commitments, and held-to-maturity securities. The provision for credit losses was $84 thousand for the three months ended September 30, 2024, compared to a negative provision of $349 thousand for the three months ended September 30, 2023. The majority of the provision for credit losses can be attributable to an increase in specific reserves at September 30, 2024 when compared to September 30, 2023.

The Company completes a comprehensive quarterly evaluation to determine its provision for credit losses. The evaluation reflects analyses of individual borrowers and historical loss experience, and changes in net loan balances, supplemented as necessary by credit judgment that considers observable trends, conditions, and other relevant environmental and economic factors.

Refer to Note 5 of the Notes to the Consolidated Financial Statement for additional details on the provision for credit losses.

Non-interest Income: Non-interest income increased by $1.8 million to $2.7 million for the three months ended September 30, 2024, from $880 thousand recognized during the same period in 2023. The increase was primarily due to an increase of $854 thousand in service charges on deposit accounts and an increase of $253 thousand from income on bank-owned life insurance.

Non-interest Expense: Non-interest expense increased $10.5 million, or 130.8%, to $18.5 million for the three months ended September 30, 2024 from $8.0 million for the three months ended September 30, 2023. The increase was largely due to: (1) an increase in salaries and employee benefits expense of $5.7 million related to an increase in the number of employees due to the completion of the Partners Merger; (2) an increase of $1.1 million in intangible amortization; (3) an increase of $739 thousand in occupancy expense related to increased property maintenance costs, lease costs, and deprecation expense mostly related to facilities acquired in the Partners Merger; (4) an increase of $706 thousand in equipment and data processing; and (5) an increase of $1.3 million in other expenses which consist of items such as communications expenses, insurance expenses and other administrative expenses.

Income Tax Expense: Income tax expense for the three months ended September 30, 2024 totaled $2.0 million compared to an income tax expense of $347 thousand for the same period in 2023 as a result of an increase in income before income tax expense. The income tax expense recognized for the three months ended September 30, 2024 and 2023 was the direct result of our net income adjusted for tax free income and non-deductible merger related expenses. We recognized an income tax expense for the three months ended September 30, 2024 at an effective tax rate of 22.2%. As a result of the Partners Merger, the Company now has nexus in states with applicable state corporate income taxes which is adding to the effective tax rate and resulting in a rate greater than our statutory federal tax rate of 21%. This is compared to income tax expense for the three months ended September 30, 2023 which resulted in an effective tax rate of 21.9% which is more than our federal statutory rate of 21%.

Comparison of Results of Operations for the Nine Months Ended September 30, 2024 and 2023

General: Net income was $18.6 million for the nine months ended September 30, 2024, or $0.50 per diluted share, an increase of $17.6 million compared to net income of $1.0 million, or $0.06 per diluted share, for the nine months ended September 30, 2023.

The increase in net income for the nine months ended September 30, 2024, as compared to the same prior year period was primarily the result of an increase in interest and dividend income of $76.3 million and an increase in noninterest income of $6.4 million. Offsetting the increase in net income was an increase in interest expense of $26.4 million, and an increase in non-interest expense of $33.1 million primarily as a result of the increase in salaries and employee benefits of $18.6 million due to the Partners Merger for the nine months ended September 30, 2024 as compared to the same prior year period.

Analysis of Net Interest Income

Net interest income represents the difference between the interest the Company earns on its interest-earning assets, such as loans and investment securities, and the expense the Company pays on interest-bearing liabilities, such as deposits and borrowings. Net interest income depends on both the volume of our interest-earning assets and interest-bearing liabilities and the interest rates the Company earns or pays on them. In general, the shift in the interest rate environment that began in March of 2022 resulted in higher interest rates earned on loans, securities, and interest-earning cash as well as higher interest rates paid on deposits and borrowed money when comparing the nine months ended September 30, 2024 to the same period in 2023. Since December 31, 2021, the Federal Funds Target Rate rose from a range of 0.00% - 0.25% to a range of 5.25% - 5.50% as of September 30, 2023 which held until September 2024 and decreased to a range of 4.75% - 5.00% as of September 30, 2024. While this interest rate index is not used for all financial instruments, the interest rate indices and interest rate curves have increased over this same time horizon. The results of this overall upward shift in interest rates has generally caused net interest margins at financial institutions to contract when comparing the first nine months of 2024 to the same period in 2023 as the cost of funds of financial institutions, generally, have risen at a faster pace than the yield on interest earning assets.

While this trend is generally accurate across the broader banking sector, our results for the first nine months of 2024 have been positively impacted by the Partners Merger by adding increased yield on interest earning assets which outpaced the rise in funding costs when compared to the same period in 2023. As shown in the following table and subsequent discussion, our average yield on interest earning assets increased 121 basis points when comparing the nine months ended September 30, 2024 to the same period in 2023, while our average cost of funds increased 18 basis points over that same period, resulting in an increase to net interest margin of 101 basis points.


	For the Nine Months Ended September 30,
	2024								2023
(Dollars in thousands)	Avg Bal		Interest (2)			Yield/Rate			Avg Bal		Interest (2)			Yield/Rate
Int. Earn. Cash	$	106,334	$	3,590			4.51	%	$	51,547	$	1,561			4.05	%
Securities
Taxable (1)		125,264		4,666			4.98	%		83,449		2,309			3.70	%
Tax-Exempt		42,606		1,353			4.24	%		38,617		1,133			3.92	%
Total Securities		167,870		6,019			4.79	%		122,066		3,442			3.77	%
Total Cash Equiv. and Investments		274,204		9,609			4.68	%		173,613		5,003			3.85	%
Total Loans (3)(4)		2,279,378		109,093			6.39	%		958,382		37,330			5.21	%
Total Interest-Earning Assets		2,553,582		118,702			6.21	%		1,131,995		42,333			5.00	%
Other Assets		210,962								95,294
Total Assets	$	2,764,544							$	1,227,289
Interest bearing demand(5)	$	458,184	$	7,301			2.13	%	$	250,830	$	3,938			2.10	%
Money market demand(5)		582,998		9,841			2.25	%		248,731		4,766			2.56	%
Time deposits(5)		621,881		21,068			4.53	%		285,666		6,489			3.04	%
Total Borrowings (6)		147,557		5,859			5.30	%		81,749		2,507			4.10	%
Total Interest-Bearing Liabilities		1,810,620		44,069			3.25	%		866,976		17,700			2.73	%
Non Int Bearing Deposits(5)		650,384								203,284
Total Cost of Funds	$	2,461,004	$	44,069			2.39	%	$	1,070,260	$	17,700			2.21	%
Other Liabilities		33,086								17,024
Total Liabilities	$	2,494,090							$	1,087,284
Shareholders' Equity	$	270,454							$	140,005
Total Liabilities & Shareholders' Equity	$	2,764,544							$	1,227,289
Net Interest Income/Spread (FTE)				74,633			2.96	%				24,633			2.27	%
Tax-Equivalent Basis Adjustment				(284	)							(238	)
Net Interest Income			$	74,349							$	24,395
Net Interest Margin							3.89	%							2.88	%
(1) Taxable income on securities includes income from available for sale securities and income from certificates of deposits with other banks.
(2) Income stated on a tax equivalent basis which is non-GAAP and is reconciled to GAAP at the bottom of the table.
(3) Includes the balances of nonaccrual loans.
(4) Includes the balances of loans held for sale
(5) includes the balances of deposits held for sale
(6) Includes the effect of the interest rate swap, which reduced interest expense by $1.2 million during the nine months ended September 30, 2024.

Rate/Volume Analysis


	Nine Months Ended September 30, 2024 vs. 2023 Increase (Decrease) Due To:
(Dollars in thousands)	Rate			Volume		Net
Interest Income:
Int. Earn. Cash	$	366		$	1,663	$	2,029
Securities
Taxable		1,199			1,158		2,357
Tax-Exempt		103			117		220
Total Securities		1,302			1,275		2,577
Total Loans		20,136			51,627		71,763
Total Interest-Earning Assets		21,804			54,565		76,369
Interest Expense:
Interest bearing demand		103			3,260		3,363
Money market demand		(1,353	)		6,428		5,075
Time deposits		6,937			7,642		14,579
Total Borrowings		1,326			2,026		3,352
Total Interest-Bearing Liabilities		7,013			19,356		26,369
Change in Net Interest Income	$	14,791		$	35,209	$	50,000

Net Interest Income: Net interest income increased by $50.0 million, or 204.8%, to $74.3 million for the nine months ended September 30, 2024, compared to $24.4 million for the nine months ended September 30, 2023. This increase can be attributed to an increase in interest income resulting from a higher average balance in interest-earning assets and an increase in the average yield on interest earning assets as compared to the same period in 2023. The increase was partially offset by an increase in interest expense resulting from increased average rates paid on interest-bearing liabilities due to the higher interest rate environment and an increase in average interest bearing liabilities. The increase in average balances of interest earning assets and interest bearing liabilities was a result of the completion of the Partners Merger. The net interest margin increased 101 basis points to 3.89% for the nine months ended September 30, 2024 from 2.88% for the nine months ended September 30, 2023.

Interest Income: Interest income increased to $118.4 million for the nine months ended September 30, 2024, compared with $42.1 million for the nine months ended September 30, 2023 primarily due to an increase in interest income on loans as a result of the growth in average loans as well as the increase in average yields earned on all categories of interest earning assets. The growth in average balance of interest earning assets which increased $1.4 billion to $2.6 billion for the nine months ended September 30, 2024 compared to $1.1 billion for the comparable period in 2023 contributed $54.6 million to the increase in interest income. The growth in the average balance of interest earning assets was due primarily to the increase in the average balance of loans which increased $1.3 billion to $2.3 billion for the nine months ended September 30, 2024 as compared to the same period in 2023 as a result of growth in the commercial loan portfolio primarily due to the completion of the Partners Merger. The average yield on loans increased 118 basis points on an annualized basis from 5.21% for the nine months ended September 30, 2023 to 6.39% for the nine months ended September 30, 2024, which contributed $20.1 million to the increase in interest income. Normal amortization of net loan discounts recorded as part of purchase accounting adjustments to acquired loans contributed $11.4 million to interest income during the nine months ended September 30, 2024. Overall the average yield of interest earning assets increased 121 basis points on an annualized basis to 6.21% for the nine months ended September 30, 2024 as compared to the same period in 2023 due primarily to a larger concentration of interest earning assets in loans along with an increase in the average yield of interest earning cash, securities and loans.

Interest Expense: Interest expense increased by $26.4 million, or 149.0%, to $44.1 million for the nine months ended September 30, 2024, compared to $17.7 million for the nine months ended September 30, 2023. The increase in interest expense was primarily due to the increase in the average balance of interest-bearing liabilities, which increased $944 million to $1.8 billion for the nine months ended September 30, 2024 compared to $867.0 million for the nine months ended September 30, 2023 as a result of the increase in the average balance of our deposits and borrowings due to the completion of the Partners Merger. The increase in interest expense was also impacted by an increase in the interest rate paid on interest bearing liabilities. The average rate paid on interest-bearing liabilities increased 52 basis points on an annualized basis from 2.73% for the nine months ended September 30, 2023 to 3.25% for the nine months ended September 30, 2024 due to the higher interest rate environment and in particular its impact on deposits costs. Normal amortization of net discounts on acquired interest bearing liabilities recorded as part of purchase accounting adjustments through the Partners Merger contributed $2.0 million to the increase in interest expense during the nine months ended September 30, 2024. Interest expense on borrowings was reduced by $1.2 million due to the impact of the interest rate swap.

Provision for Credit Losses: The provision for credit losses increased by $674 thousand from a negative provision of $549 thousand for the nine months ended September 30, 2023 to a provision of $125 thousand for the nine months ended September 30, 2024. The provision for credit losses for the nine months ended September 30, 2024 consisted of $497 thousand related to loans, ($331) thousand related to unfunded commitments, and ($41) thousand related to held-to-maturity securities.

The majority of the provision for credit losses can be attributable to an increase in specific reserves at September 30, 2024 when compared to September 30, 2023.

Refer to Note 5 of the Notes to the Consolidated Financial Statement for additional details on the provision for credit losses.

Non-interest Income: Non-interest income increased by $6.4 million to $6.3 million for the nine months ended September 30, 2024, from a net loss of approximately $88 thousand recognized during the same period of 2023. The increase was primarily the result of a loss on the sale in the first nine months of 2023 of an investment in the subordinated notes of Signature Bank which was taken into FDIC receivership during the 2023 first quarter. The Company sold our investment and recognized a loss of $2.4 million during the nine months ended September 30, 2023. Service charges on deposit accounts increased $2.1 million, from $593 thousand for the nine months ended September 30, 2023 to $2.7 million for the nine months ended September 30, 2024.

Non-interest Expense: Non-interest expense increased $33.1 million, or 140.4%, from $23.5 million for the nine months ended September 30, 2023 to $56.6 million for the nine months ended September 30, 2024. The increase was primarily due to: (1) an increase in salaries and employee benefits expense of $18.6 million related to an increase in the number of employees due to the completion of the Partners Merger; (2) an increase of $3.4 million of amortization of intangible assets as a result of intangibles acquired from the Partners Merger; (3) an increase of $2.8 million in equipment and data processing costs; and (4) an increase of $2.5 million in occupancy expense related to increased property maintenance costs, lease costs, and depreciation expense mostly related to facilities acquired in the Partners Merger.

Income Tax Expense: Income tax expense for the nine months ended September 30, 2024 totaled $5.3 million compared to an income tax expense of $276 thousand for the same period in 2023 as a result of an increase in income before income tax expense. The income tax expense recognized for the nine months ended September 30, 2024 was the direct result of our net income adjusted for tax free income and non-deductible merger related expenses. We recognized an income tax expense for the nine months ended September 30, 2024 at an effective tax rate of 22.0%. As a result of the Partners Merger, the Company now has nexus in states with applicable state corporate income taxes which is adding to the effective tax rate and resulting in a rate greater than our statutory federal tax rate of 21%. This is compared to income tax benefit for the nine months ended September 30, 2023 which resulted in an effective tax rate of 21.1%.

Liquidity, Commitments, and Capital Resources

The Company’s liquidity, represented by cash and due from banks, is a product of our operating, investing and financing activities. The Company’s primary sources of funds are deposits, principal repayments of securities and outstanding loans, and funds provided from operations. In addition, the Company invests excess funds in short-term interest-earnings 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 that qualify as liquid assets in order to maintain sufficient liquidity to ensure safe and sound banking operations. Liquidity may increase or decrease depending upon the availability of funds and comparative yields on investments in relation to the return on loans. Our attempts to maintain adequate but not excessive liquidity, and liquidity management is both a daily and long-term function of the Company’s business management. We manage our liquidity in accordance with a board of directors-approved asset liability policy, which is administered by the Company’s 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 savings withdrawals. Certificates of deposit due within one year of September 30, 2024, totaled $588.3 million, or 96.3% of our certificates of deposit, and 23.8% of total deposits. Of these certificates of deposit, $75 million are brokered deposits. If these deposits do not remain with us, we will be required to seek other sources of funds, including other deposits and FHLB advances. Depending on market conditions, we may be required to pay higher rates on such deposits or borrowings than we currently pay. We believe, however, based on past experience that a significant portion of such deposits will remain with us. We have the ability to attract and retain deposits by adjusting the interest rates offered. Additionally, management noted that approximately 10.18% of our deposits (measured on a year-to-date average balance) consisted of balances in escrow-type deposits which are distributed among different customers with no customer exceeding our policy limits on size of deposits. While deposits are the Company’s primary source of funds, when needed the Company is also able to generate cash through borrowings from the Federal Home Loan Bank of Pittsburgh (“FHLB”).

At September 30, 2024, the Company had $40.0 million in outstanding FHLB borrowings with a remaining available capacity with FHLB, subject to certain collateral restrictions, of approximately $742.8 million.

In addition to our available borrowing capacity at the FHLB, the Company has lines of credit with multiple financial institutions that provide an available $77 million of additional liquidity at September 30, 2024. The Company also maintains available credit at the Federal Reserve Bank's Discount Window of $26.2 million at September 30, 2024.

The following table shows the Company's available liquidity at September 30, 2024.


(In Thousands)
Liquidity Source	Capacity		Outstanding		Available
Federal Home Loan Bank	$	782,807	$	40,000	$	742,807
Federal Reserve Bank Discount Window		26,191		-		26,191
Correspondent Banks		77,000		-		77,000
Total	$	885,998	$	40,000	$	845,998

Consistent with the Company’s goals to operate as a sound and profitable financial institution, the Company actively seeks to maintain the Bank's status as a well-capitalized institution in accordance with regulatory standards. As of September 30, 2024 and December 31, 2023, the Bank met the capital requirements to be considered “well capitalized.” See Note 10 within the Notes to the Consolidated Financial Statements for more information regarding our capital resources.

Off-Balance Sheet Arrangements and Contractual Obligations

See Note 11 within the Notes to the Consolidated Financial Statements beginning for more information regarding the Company’s off-balance sheet arrangements.

Critical Accounting Estimates

It is management’s opinion that accounting estimates covering certain aspects of the Company’s business have more significance than others due to the relative importance of those areas to overall performance, or the level of subjectivity required in making such estimate, which have a material impact on the carrying value of certain assets and liabilities. The judgments and assumptions used by management are based on historical experience and other factors, which are believed to be reasonable under the circumstances. The more significant area in which the Company's management applies critical assumptions and estimates include the following:

Allowance for credit losses: The loan portfolio is the biggest asset on the Company's balance sheet. The allowance for credit losses represents management's estimate of credit losses in the loan portfolio at the balance sheet date. A provision for credit losses is recorded to adjust the level of the allowance for credit losses as deemed necessary by management. The allowance for credit losses consists of reserves on loans that share similar risk characteristics, and reserves on loans that do not share similar risk characteristics.

Expected credit losses are estimated over the contractual term of the loan, adjusted for expected prepayments when appropriate. The contractual term excludes expected extensions, renewals, and modifications unless either of the following applies: management has a reasonable expectation at the reporting date that a restructured loan will be executed with an individual borrower or the extension or renewal options are included in the original or modified contract at the reporting date and are not unconditionally cancelable by the Company. Management’s determination of the adequacy of the allowance for credit losses is based on periodic evaluations of past events, including historical credit loss experience on financial assets with similar risk characteristics, historical credit losses experienced by peer institutions on financial assets with similar risk characteristics, current conditions, and reasonable and supportable forecasts that affect the collectability of the remaining cash flows over the contractual term of the financial assets. This evaluation has subjective components requiring material estimates, including forecasted national economic conditions such as GDP, unemployment, and housing price indexes. Other components impacting the estimate include expected default probabilities, the expected loss given default, and the amounts and timing of expected future cash flows. Of the previously listed components, the economic forecasts are the most sensitive to change.

Generally, loans that do not share similar risk characteristics are collateral-dependent and impairment is measured through the collateral method. When the measurement of these loans is less than the recorded investment in the loan, the shortfall is recorded through the allowance for credit losses. To the extent that actual results differ from management estimates, additional provisions for credit losses may be required that would adversely impact earnings in future periods.

Business Combinations: The Company accounts for acquisitions under the acquisition method of accounting. Assets acquired and liabilities assumed in a business combination are recorded at their estimated fair value on their purchase date. As provided for under accounting principles generally accepted in the United States of America, management has up to 12 months following the date of the acquisition to finalize the fair values of acquired assets and assumed liabilities. Management continues to finalize the fair values of acquired assets and assumed liabilities.

The valuation of acquired loans involves significant estimates, assumptions and judgment based on information available as of the acquisition date. Loans acquired in a business combination transaction are evaluated either individually or in pools of loans with similar characteristics; including consideration of a credit component. A number of factors are considered in determining the estimated fair value of purchased loans including, among other things, the remaining life of the acquired loans, estimated prepayments, estimated loss ratios, estimated value of the underlying collateral, estimated holding periods, contractual interest rates compared to market interest rates, and net present value of cash flows expected to be received.

Recently Issued Accounting Standards

Recently issued accounting standards are included in Note 1 of the Notes to the Consolidated Financial Statements.

Item 3. Quantitative and Qualitative Disclosure About Market Risk

Not required for smaller reporting companies.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

As of the end of the period covered by this Quarterly Report on Form 10-Q, the Company carried out an evaluation, under the supervision and with the participation of its management, including its Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of its disclosure controls and procedures. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management was required to apply judgment in evaluating its controls and procedures. Based on their evaluation of the Company’s disclosure controls and procedures as of September 30, 2024, the Company’s Chief Executive Officer and Chief Financial Officer have concluded that the Company’s disclosure controls and procedures (as defined in 13a-15(e) and Rule 15d-15(e) under the Securities Exchange Act of 1934, as amended (“Exchange Act”)) are designed to ensure that information required to be disclosed by the Company in reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission rules and regulations and are operating in an effective manner.

Changes in Internal Control Over Financial Reporting

There were no changes in the Company’s internal control over financial reporting (as such term is defined in 13a-15(f) and Rule 15d-15(f) under the Exchange Act) that occurred during the quarter ended September 30, 2024, that materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART II - OTHER INFORMATION

Item 1. Legal Proceedings

At September 30, 2024, the Company is not involved in any pending legal proceedings other than routine legal proceedings occurring in the ordinary course of business, which involve amounts in the aggregate believed by management to be immaterial to the financial condition and operating results of the Company.

Item 1A – Risk Factors

There have been no material changes to the risk factors set forth under Item 1.A. Risk Factors as set forth in the Company's Annual Report on Form 10-K for the year ended December 31, 2023.

Item 2. Unregistered Sales of Equity Securities, Use of Proceeds, and Issuer Purchases of Equity Securities Item 3.

None

Defaults Upon Senior Securities

None

Item 4. Mine Safety Disclosures

Not applicable

Item 5. Other Information

During the third quarter of 2024, none of our directors or officers adopted or terminated any contract, instruction or written plan for the purchase or sale of Company securities that was intended to satisfy the affirmative defense conditions of Rule 10b5-1(c) or any “non-Rule 10b5-1 trading arrangement,” as that term is used in SEC regulations.

Item 6. Exhibits

EXHIBIT INDEX



Exhibit Number	Description

3.1	Articles of Incorporation, as amended, incorporated by reference to Exhibit 3.1 to Form S-4 Registration Statement, filed May 7, 2021

3.2	Amended and Restated Bylaws, incorporated by reference to Exhibit 3.1 to Form 8-K, filed December 1, 2023

31.1	Certification of Principal Executive Officer as required by Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended.

31.2	Certification of Principal Financial Officer as required by Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended.

32	Section 1350 Certification

101 INS**	The instance document does not appear in the interactive data file because its XBRL tags are embedded within the inline XBRL document

101 SCH**	Inline XBRL Taxonomy Extension Schema Document

101 CAL**	Inline XBRL Taxonomy Extension Calculation Linkbase Document

101 DEF**	Inline XBRL Taxonomy Extension Definition Linkbase Document

101 LAB**	Inline XBRL Taxonomy Extension Label Linkbase Document

101 PRE**	Inline XBRL Taxonomy Extension Presentation Linkbase Document

104	Cover Page Interactive Data File - the cover page interactive data file does not appear in the interactive date file because its XBRL tags are embedded with the inline XBRL document.

** Attached as Exhibit 101 to this report are the following formatted in Inline XBRL (eXtensible Business Reporting Language): (i) Consolidated Balance Sheet as of September 30, 2024 and December 31, 2023; (ii) Consolidated Statements of Operations for the three and nine months ended September 30, 2024 and 2023; (iii) Consolidated Statements of Comprehensive Income for the three and nine months ended September 30, 2024 and 2023; (iv) Consolidated Statements of Cash Flows for the nine months ended September 30, 2024 and 2023; (v) Consolidated Statements of Changes in Shareholders’ Equity for the three and nine months ended September 30, 2024 and 2023; and (vi) Notes to Unaudited Consolidated Financial Statements.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Date: November 8, 2024

LINKBANCORP, INC.


By:	/s/ Andrew Samuel
	Andrew Samuel
	Vice Chairman and Chief Executive Officer
	(Principal Executive Officer)

By:	/s/ Kristofer Paul
	Kristofer Paul
	Chief Financial Officer
	(Principal Financial Officer)
	(Principal Accounting Officer)

EX-31.1 2 lnkb-ex31_1.htm EX-31.1 EX-31.1

Exhibit 31.1

CERTIFICATION

I, Andrew Samuel, certify that:

I have reviewed this quarterly report on Form 10-Q of LINKBANCORP, INC.;

Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rule 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)

Designed such internal control over financial reporting, or caused such internal control over financial reporting, to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of consolidated financial statement for external purposes in accordance with generally accepted accounting principles;

(c)

Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)

Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a)

All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b)

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.



Date:	November 8, 2024

/s/ Andrew Samuel
Andrew Samuel
Chief Executive Officer
(Principal Executive Officer)

EX-31.2 3 lnkb-ex31_2.htm EX-31.2 EX-31.2

Exhibit 31.2

CERTIFICATION

I, Kristofer Paul, certify that:

I have reviewed this quarterly report on Form 10-Q of LINKBANCORP, INC.;

The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)

(b)

Designed such internal control over financial reporting, or caused such internal control over financial reporting, to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of consolidated financial statements for external purposes in accordance with generally accepted accounting principles;

(c)

(d)

(a)

(b)

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.



Date:	November 8, 2024

/s/ Kristofer Paul
Kristofer Paul
Chief Financial Officer
(Principal Financial Officer)
(Principal Accounting Officer)

EX-32 4 lnkb-ex32.htm EX-32 EX-32

Exhibit 32

CERTIFICATION

Pursuant to 18 U.S.C. § 1350, the undersigned officers of LINKBANCORP, INC. (the “Company”) hereby certify that the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2024 (the “Report”) fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934 and that the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

November 8, 2024

    /s/ Andrew Samuel

   

    Andrew Samuel

   

    Chief Executive Officer

   

    (Principal Executive Officer)

   

    /s/ Kristofer Paul

   

    Kristofer Paul

   

    Chief Financial Officer

   

    (Principal Financial Officer)

   

    (Principal Accounting Officer)

   