Executive Summary / Key Takeaways

• Robust Growth Trajectory: LINKBANCORP (NASDAQ:LNKB) demonstrated strong financial performance in the first nine months of 2025, with net income surging to $30.57 million, an increase of $11.90 million year-over-year, driven by strategic loan and deposit expansion and a significant gain from the New Jersey branch sale.
• Strategic Market Optimization: The successful divestiture of its New Jersey operations on March 31, 2025, yielded an after-tax gain of approximately $8.70 million, allowing the company to refine its geographic focus on core markets in Pennsylvania, Maryland, Delaware, and Virginia.
• Solid Loan and Deposit Expansion: Total assets grew by 8.46% to $3.12 billion, fueled by a $202.30 million increase in net loans receivable and a 13% rise in total deposits to $2.67 billion as of September 30, 2025, reflecting effective customer acquisition and retention strategies.
• Managing Credit and Interest Rate Dynamics: While net interest margin experienced a slight compression of seven basis points to 3.75% in Q3 2025, the company is actively managing its interest rate exposure through strategies like interest rate swaps, and maintains a well-capitalized status despite an increase in non-performing loans.
• Community-Centric Competitive Edge: LNKB leverages its deep community ties, localized branch network, and diversified small business and commercial real estate lending portfolio to foster customer loyalty and differentiate itself from larger, more technologically advanced regional and national competitors.

A Regional Powerhouse Forging Ahead

LINKBANCORP, Inc. (NASDAQ:LNKB) stands as a testament to the enduring value of community banking, strategically expanding its footprint and refining its operations within the dynamic financial services landscape. Incorporated in Pennsylvania in 2018, the company swiftly established its core through the acquisition of Stonebridge Bank, rebranding it as LINKBANK. This initial step set the stage for a series of transformative mergers, including the Gratz Merger in 2021 and the Partners Merger in 2023, which significantly broadened its operational reach across South Central and Southeastern Pennsylvania, northern Virginia, eastern Maryland, and Delaware. These strategic integrations, coupled with its initial public offering in September 2022, have shaped LNKB into a formidable regional player focused on building strong relationships and delivering value to its customers, employees, communities, and shareholders.

The company's core strategy revolves around its mission to positively impact lives through community banking. LINKBANK, its wholly-owned subsidiary, provides a full suite of traditional lending, deposit gathering, and cash management services, primarily targeting small businesses and nonprofit organizations. This focus allows for the development of a diverse loan portfolio, carefully managed across various collateral types and business segments with distinct cash flow generation and interest rate sensitivities. LNKB's operational model emphasizes personalized service and local expertise, a critical differentiator in an industry increasingly dominated by larger, more impersonal institutions.

In terms of technological capabilities, LINKBANCORP offers essential digital banking services such as online banking, mobile banking, direct and remote deposit, and cash management services. These offerings are standard for modern financial institutions, enabling convenience and efficiency for its customer base. However, the company does not appear to highlight a specific, proprietary, or technologically differentiated core technology with quantifiable benefits that would constitute a unique competitive moat in the same vein as a specialized fintech firm. While equipment and data processing expenses are noted, there are no disclosed R&D initiatives or new technological developments with stated goals, target metrics, or timelines that would suggest a significant technological lead over its peers. This implies that while LNKB utilizes technology to deliver services, its primary competitive advantage stems from its community-centric model and relationship banking rather than a distinct technological edge.

The competitive landscape for regional banks like LINKBANCORP is multifaceted, encompassing both larger national players and other regional institutions. Direct competitors such as PNC Financial Services Group (PNC), Citizens Financial Group (CFG), Fulton Financial Corporation (FULT), and WSFS Financial Corporation (WSFS) operate in overlapping markets. PNC and CFG, with their substantial scale and advanced digital platforms, often benefit from greater resource allocation for digital innovation and broader market reach. For instance, PNC's extensive branch network and digital tools offer efficiencies in customer onboarding and service delivery, potentially giving it an edge in shared markets for commercial and real estate lending. Similarly, CFG's emphasis on digital-first solutions provides faster processing for online transactions and broader accessibility.

In contrast, LINKBANCORP's strength lies in its localized presence and personalized approach, particularly in niche markets like agricultural and small business loans, where it can foster deeper customer loyalty. While LNKB may lead in operational execution for these specialized lending segments, it could lag in the speed of digital innovation compared to its larger rivals. Regional peers like Fulton Financial and WSFS Financial also present strong competition, with FULT's deep ties to Pennsylvania's business community and WSFS's focus on customer relationships and digital enhancement. LNKB's ability to offer a broader array of loan products, such as home equity and construction loans, provides a unique value proposition of comprehensive local support, but it must remain vigilant against competitors' established efficiencies and technological advancements.

Financial Performance and Operational Acumen

LINKBANCORP's recent financial results underscore its strategic effectiveness and operational resilience. For the nine months ended September 30, 2025, the company reported a net income of $30.57 million, a substantial increase of $11.90 million compared to $18.63 million in the same period of 2024. Diluted earnings per share also saw a significant rise to $0.82, up from $0.50 year-over-year. This impressive growth was notably bolstered by a strategic divestiture. On March 31, 2025, the company completed the sale of its New Jersey operations, which resulted in an after-tax gain of approximately $8.70 million, recorded within noninterest income. This transaction, involving the sale of $105 million in loans and $87.10 million in deposits, allowed LNKB to optimize its geographic focus and enhance profitability.

The company's balance sheet reflects robust expansion. Total assets at September 30, 2025, reached $3.12 billion, an increase of $243.60 million, or 8.46%, from $2.88 billion at December 31, 2024. This growth was primarily driven by a $202.30 million increase in net loans receivable, reaching $2.43 billion. Commercial real estate loans surged by $172.20 million, and commercial loans increased by $20.90 million, reflecting successful new originations. Deposits also demonstrated strong momentum, growing by $307.50 million, or 13%, to $2.67 billion, largely due to new account openings across interest-bearing demand, money market, and time deposit categories.

Net interest income before provision for credit losses increased by $1.40 million, or 5.62%, for the three months ended September 30, 2025, compared to the same period in 2024. This was primarily attributable to an increase in the average balance of interest-earning assets, partially offset by a slight decrease in the average yield on these assets. The net interest margin experienced a modest decrease of seven basis points, settling at 3.75% for the third quarter of 2025 and 3.82% for the nine months ended September 30, 2025. This compression was generally attributed to a reduced amount of income recognized from the amortization of net loan discounts, particularly those stemming from purchase accounting adjustments related to the Partners Merger. Interest expense, while increasing due to higher average balances of interest-bearing liabilities, saw its average rate paid decrease by nineteen basis points for the three months ended September 30, 2025, indicating effective cost of funds management.

Non-interest income for the nine months ended September 30, 2025, saw a significant boost of $12.70 million, primarily from the $11.10 million gain on the New Jersey Branch Sale. Other income, including a $522 thousand increase in swap fee income, and service charges on deposit accounts also contributed positively. Non-interest expense decreased by $707 thousand for the nine months ended September 30, 2025, largely due to reduced merger and restructuring expenses, professional fees, and occupancy costs, partially offset by an increase in salaries and employee benefits and equipment and data processing costs.

Liquidity, Capital, and Risk Management

LINKBANCORP maintains a robust liquidity position, crucial for funding operations and meeting loan demand. Its primary funding sources include deposits, principal repayments from loans and securities, and cash generated from operations. As of September 30, 2025, the company reported $712.90 million in available borrowing capacity from the Federal Home Loan Bank (FHLB), $77 million in unsecured lines of credit with correspondent banks, and $23.40 million in available credit at the Federal Reserve Bank's Discount Window. This substantial liquidity ensures operational flexibility and stability. The Bank consistently meets all capital adequacy requirements, maintaining its "well capitalized" status, with internal targets set above regulatory minimums.

Credit quality, a critical aspect for any financial institution, shows careful management. Non-performing loans increased to $24.60 million, or 1% of total gross loans, at September 30, 2025, up from $17.20 million, or 0.76%, at December 31, 2024. This increase was primarily due to one commercial and industrial loan. The allowance for credit losses on loans decreased to $25.30 million, or 1.03% of total gross loans, from $26.40 million, or 1.17%, at December 31, 2024, largely due to a $2 million charge-off from the sale of a purchase credit deteriorated (PCD) loan.

The company acknowledges its concentration in commercial real estate (CRE) loans, a common characteristic among community banks. Non-owner-occupied CRE loans, including construction and land development loans, represented 357.68% of total risk-based capital at September 30, 2025. Management has implemented heightened risk management procedures, including periodic stress testing and evaluation of cash flows and collateral values, to mitigate associated risks. However, this concentration may necessitate higher capital levels, potentially impacting shareholder returns. The allowance for credit losses model is sensitive to economic forecasts, with a 25% increase in the FOMC's projected U.S. civilian unemployment rate, a 25% decrease in U.S. GDP growth, and a 25% decrease in the Home Price Index potentially increasing the allowance by approximately $5.70 million, or 22.60%. Conversely, favorable economic shifts could decrease the allowance by approximately $4 million, or 15.60%.

Conclusion

LINKBANCORP's journey since its inception in 2018 has been marked by strategic acquisitions and a steadfast commitment to community banking, culminating in a robust financial performance through the first nine months of 2025. The company's ability to drive significant loan and deposit growth, coupled with a profitable strategic divestiture, highlights its operational effectiveness and disciplined approach to market optimization. While LNKB may not boast a unique technological moat compared to larger, digitally-focused competitors, its strength lies in its deep community ties, personalized service, and diversified regional lending portfolio, which cultivate strong customer loyalty.

Looking ahead, LINKBANCORP's investment thesis is anchored in its continued execution of its community-centric strategy, prudent risk management of its commercial real estate portfolio, and efficient capital allocation. Investors should monitor the company's ability to maintain its net interest margin in a dynamic interest rate environment, manage credit quality amidst economic shifts, and potentially enhance its digital offerings to remain competitive. Despite facing competition from larger and more technologically advanced institutions, LNKB's foundational strengths and strategic focus position it for continued relevance and value creation within its chosen regional markets.