What changed in this filing

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Item 1. Business

2023-03-10 compared with 2022-03-11 · 39 added, 55 removed, 547 unchanged (15% of the section changed)

7 unchanged sentences

Community Bank is a Pennsylvania-chartered commercial bank headquartered in Carmichaels, Pennsylvania.

After the consolidation and sale of eight branches in 2021 and consolidation of two branches in 2020, the Bank reduced the total number of branches to 14 and operates from 11 offices in Greene, Allegheny, Washington, Fayette and Westmoreland Counties in southwestern Pennsylvania and three offices in Marshall and Ohio Counties in West Virginia.

After the consolidation of one branch in 2022 and the consolidation and sale of eight branches in 2021, the Bank reduced the total number of branches to 13 and operates from 10 offices in Greene, Allegheny, Washington, Fayette and Westmoreland Counties in southwestern Pennsylvania and three offices in Marshall and Ohio Counties in West Virginia.

The Bank also has one loan production office in Allegheny County, a corporate center in Washington County and an operations center in Greene County in Pennsylvania.

33 unchanged sentences

We believe that we have a competitive advantage in the markets we serve because of our knowledge of the local marketplace and our long-standing history of providing superior, relationship-based customer service.

We will continue to grow and create value for our shareholders.

We will continue to grow and create value for our stockholders.

Our employees will be treated fairly and given opportunities for personal growth.

20 unchanged sentences

Human Capital

The Bank's culture is defined by our mission of being an exceptional, independent financial institution.

The Bank's culture is defined by our mission to partner with individuals, businesses, and communities to realize their dreams, protect their financial futures and improve their lives.

Our Motto and Cornerstone are “Client Experience First”.

To have a truly great client experience we must have a phenomenal employee experience.

Our Team members need to have the tools, training, processes, and leadership to support their delivery of a truly exceptional client experience.

Improving our operational efficiency empowers our employees to work smarter and enables us to be more responsive to our clients.

We value our employees by investing in a healthy work-life balance, competitive compensation and benefit packages and a vibrant, team-oriented environment centered on professional service and open communication.

42 unchanged sentences

(1) Based on the latest data published by the U.S.

Census Bureau (July 2021)

Census Bureau (State - July 2022;

County - July 2021)

(2) Based on the latest data published by the U.S.

5 unchanged sentences

The Marcellus Shale Formation extends throughout much of the Appalachian Basin and most of Pennsylvania, West Virginia and Eastern Ohio.

formations are located near high-demand markets along the East Coast.

Both formations are located near high-demand markets along the East Coast.

The proximity to these markets makes it an attractive target for energy development and has resulted in significant job creation through the development of gas wells and transportation of gas.

13 unchanged sentences

Our principal lending activity has been the origination in our local market area of residential one- to four-family, commercial real estate, construction, commercial and industrial, and consumer loans.

At December 31, 2021, our total loans receivable, which excludes the allowance for loan losses, decreased $24.0 million, or 2.3%, to $1.02 billion compared to $1.04 billion at December 31, 2020.

At December 31, 2022, our total loans receivable, which excludes the allowance for loan losses, increased $29.1 million, or 2.8%, to $1.05 billion compared to $1.02 billion at December 31, 2021.

Residential Real Estate Loans .

19 unchanged sentences

Fixed-rate one- to four-family residential mortgage loans with terms of 15 years or more are originated for resale to the secondary market.

During the years ended December 31, 2021 and 2020, we originated $12.6 million and $32.1 million of fixed-rate residential mortgage loans, respectively, which were subsequently sold in the secondary mortgage market.

The origination of fixed-rate mortgage loans versus adjustable-rate mortgage loans is monitored on an ongoing basis and is affected significantly by the level of market interest rates, customer preference, our interest rate risk position and our

competitors’ loan products.

During the years ended December 31, 2022 and 2021, we originated none and $12.6 million of fixed-rate residential mortgage loans, respectively, which were subsequently sold in the secondary mortgage market.

Adjustable-rate mortgage loans secured by one- to four-family residential real estate totaled $46.7 million at December 31, 2022.

35 unchanged sentences

In evaluating the property securing the loan, the factors considered include the net operating income of the mortgaged property before debt service and depreciation, and the ratio of the loan amount to the appraised value of the property.

We generally will not lend to high volatility commercial real estate projects.

We generally will not lend to high

volatility commercial real estate projects.

All commercial real estate loans are appraised by outside independent state certified general appraisers.

21 unchanged sentences

We originate commercial and industrial loans and lines of credit to borrowers located in our market area that are generally secured by collateral other than real estate, such as equipment, accounts receivable, inventory, and other business assets.

At December 31, 2021, $89.0 million, or 8.7% of our total loan portfolio, consisted of commercial and industrial loans, of which $24.5 million are SBA guaranteed Payroll Protection Program ("PPP") loans.

Exclusive of PPP loans, commercial and industrial loans generally have terms of maturity from five to seven years with adjustable interest rates tied to the prime rate, LIBOR or the weekly average of the FHLB of Pittsburgh three- to ten-year fixed rates.

At December 31, 2022, $70.0 million, or 6.7% of our total loan portfolio, consisted of commercial and industrial loans, of which $126,000 are SBA guaranteed Payroll Protection Program ("PPP") loans.

Exclusive of PPP loans, commercial and industrial loans generally have terms of maturity from five to seven years with adjustable interest rates tied to the prime rate, LIBOR, SOFR or the weekly average of the FHLB of Pittsburgh three- to ten-year fixed rates.

We generally obtain personal guarantees from the borrower or a third party as a condition to originating the loan.

11 unchanged sentences

Commercial and industrial business loans involve a greater risk of default than one- to four-residential mortgage loans of like duration because their repayment generally depends on the successful operation of the borrower’s business and the sufficiency of collateral, if any.

The Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) was signed into law on March 27, 2020 and provided over $2.0 trillion in emergency economic relief to individuals and businesses impacted by the COVID-19 pandemic, which included authorizing the Small Business Administration (“SBA”) to temporarily guarantee loans under a new 7(a) loan program called the Paycheck Protection Program (“PPP”).

On April 16, 2020, the original $349 billion funding cap was reached.

On April 23, 2020, the Paycheck Protection Program and Health Care Enhancement Act (the “PPP Enhancement Act”) was signed into law and included an additional $484 billion in COVID-19 relief, including allocating an additional $310 billion

to replenish the PPP.

PPP was designed to help small businesses keep their workforce employed and cover expenses during the COVID-19 crisis.

Under the PPP, participating SBA and other qualifying lenders originated loans to eligible businesses that are fully guaranteed by the SBA as to principal and accrued interest, have more favorable terms than traditional SBA loans and may be forgiven if the proceeds are used by the borrower for certain eligible purposes.

PPP loans have an interest rate of 1% per annum.

Loans issued prior to June 5, 2020 have a term to maturity of two-years and loans issued after June 5, 2020 have a term to maturity of five-years.

The PPP Flexibility Act of 2020 extended the deferral period for borrower payments of principal, interest, and fees on all PPP loans to the date that the SBA remits the borrower’s loan forgiveness amount to the lender (or, if the borrower does not apply for loan forgiveness, 10 months after the end of the borrower’s loan forgiveness covered period).

Previously the deferral period could end after six months.

In 2020, the Bank received a processing fee from the SBA ranging from 1% to 5% depending on the size of the loan, which was offset by a 0.75% third-party servicing agent fee.

The SBA reopened the PPP in January 2021 and began accepting applications for both First Draw and Second Draw PPP Loans.

Second Draw PPP Loans were available for certain eligible borrowers that previously received a PPP loan.

A Second Draw PPP Loan has the same general terms as the First Draw PPP Loan.

A borrower was generally eligible for a Second Draw PPP Loan if the borrower previously received a First Draw PPP Loan and will or had used the full amount only for authorized uses, had no more than 300 employees, and demonstrated at least a 25% reduction in gross receipts between comparable quarters in 2019 and 2020.

For most borrowers, the maximum amount of a Second Draw PPP Loan was 2.5x average monthly 2019 or 2020 payroll costs up to $2.0 million.

Loan payments are deferred for borrowers who apply for loan forgiveness until the SBA remits the borrower's loan forgiveness amount to the lender.

If a borrower does not apply for loan forgiveness, payments are deferred 10 months after the end of the covered period for the borrower’s loan forgiveness (either 8 weeks or 24 weeks).

For PPP loans made in 2021, the processing fee from the SBA was the lesser of 50% or $2,500 for loans up to $50,000, 5% for loans greater than $50,000 and up to $350,000, 3% for loans greater than $350,000 and less than $2.0 million and 1% for loans of at least $2.0 million.

The Bank originated $71.1 million of PPP loans in 2020 and $34.6 million in 2021.

Net deferred loan origination fees were $2.2 million in 2020 and $1.3 million in 2021, of which $1.1 million was recognized during the year ended December 31, 2020 and $1.7 million during the year ended December 31, 2021.

After processing forgiveness, there is $24.5 million of PPP loans remaining at December 31, 2021, net of the unearned $678,000 in deferred loan origination fees.

Consumer Loans.

22 unchanged sentences

Our lending activities follow written, non-discriminatory underwriting standards and loan origination procedures established by the Board of Directors (the “Board”).

In the approval process for residential loans, we assess the borrower’s

ability to repay the loan and the value of the property securing the loan.

In the approval process for residential loans, we assess the borrower’s ability to repay the loan and the value of the property securing the loan.

To assess the borrower’s ability to repay, we review the borrower’s income and expenses and employment and credit history.

100 unchanged sentences

At December 31, 2022, we had a maximum borrowing capacity with the FHLB of up to $435.3 million and available borrowing capacity of $407.4 million.

At December 31, 2021, we had $3.0 million in FHLB advances outstanding, of which all were long-term borrowings.

At December 31, 2022, we had no FHLB advances outstanding.

As an alternative to pledging securities, the facility is also used for standby letters of credit to collateralize public deposits in excess of the level insured by the FDIC.

8 unchanged sentences

The 2031 Note is an unsecured subordinated obligation of the Company and may be repaid in whole or in part, without penalty, on any interest payment date on or after December 15, 2026 and at any time upon the occurrence of certain events.

The 2031 Note initially bears a fixed interest rate of 3.875% per year to, but excluding, December 15, 2026 and thereafter at a floating rate equal to the then-current three-month term SOFR plus 280 basis points.

The 2031 Note initially bears a fixed interest rate of 3.875% per year to,

but excluding, December 15, 2026 and thereafter at a floating rate equal to the then-current three-month term SOFR plus 280 basis points.

The 2031 Note qualifies as Tier 2 capital under regulatory guidelines.

4 unchanged sentences

REGULATION AND SUPERVISION

CB Financial Services, Inc., is a bank holding company within the meaning of the Bank Holding Company Act of 1956, as amended.

CB Financial Services, Inc.

is a bank holding company within the meaning of the Bank Holding Company Act of 1956, as amended.

As such, it is registered with, subject to examination and supervision by, and otherwise required to comply with the rules and regulations of the Federal Reserve Board.

23 unchanged sentences

The legislation also increased the maximum amount of deposit insurance for banks to $250,000 per depositor.

The Dodd-Frank Act increased shareholder influence over boards of directors by requiring companies to give shareholders a non-binding vote on executive compensation and so called “golden parachute” payments.

The Dodd-Frank Act increased shareholder influence over boards of directors by requiring companies to give stockholders a non-binding vote on executive compensation and so called “golden parachute” payments.

The legislation also directs the Federal Reserve to promulgate rules prohibiting excessive compensation paid to bank holding company executives, regardless of whether the company is publicly traded or not.

Further, the legislation requires that originators of securitized loans retain a percentage of the risk for transferred loans, directs the Federal Reserve to regulate pricing of certain debit card interchange fees and contains a number of reforms related to mortgage origination.

Further, the legislation requires that originators of securitized loans retain a percentage of the risk for transferred loans, directs the

Federal Reserve to regulate pricing of certain debit card interchange fees and contains a number of reforms related to mortgage origination.

The Dodd Frank Act has resulted in an increased regulatory burden and compliance, operating and interest expense for the Company and the Bank.

8 unchanged sentences

In determining the amount of risk weighted assets, all assets, including certain off-balance sheet assets, are multiplied by a risk-weight factor of 0% to 1250%, assigned by the regulations, based on the risks believed inherent in the type of asset.

Core capital is defined as common shareholders’ equity (including retained earnings), certain noncumulative perpetual preferred stock and related surplus and minority interests in equity accounts of consolidated subsidiaries, less intangibles other than certain mortgage servicing rights and credit card relationships.

Core capital is defined as common stockholders’ equity (including retained earnings), certain noncumulative perpetual preferred stock and related surplus and minority interests in equity accounts of consolidated subsidiaries, less intangibles other than certain mortgage servicing rights and credit card relationships.

The components of supplementary capital include cumulative preferred stock, long-term perpetual preferred stock, mandatory convertible securities, subordinated debt and intermediate preferred stock, the allowance for loan losses limited to a maximum of 1.25% of risk-weighted assets and up to 45% of net unrealized gains on available-for-sale securities with readily determinable fair market values.

1 unchanged sentence

Additionally, an institution that retains credit risk in connection with an asset sale is required to maintain additional regulatory capital because of the purchaser’s recourse against the institution.

an institution’s capital adequacy, the FDIC takes into consideration not only these numeric factors, but qualitative factors as well and has the authority to establish higher capital requirements for individual associations where necessary.

In assessing an institution’s capital adequacy, the FDIC takes into consideration not only these numeric factors, but qualitative factors as well and has the authority to establish higher capital requirements for individual associations where necessary.

At December 31, 2022, the Bank’s capital exceeded all applicable requirements.

3 unchanged sentences

The rule also requires unrealized gains and losses on certain available-for-sale securities to be included for purposes of calculating regulatory capital requirements unless a one-time opt-in or opt-out is exercised.

The Bank elected the one-time opt-out election for accumulated other comprehensive income (“AOCI”) to be excluded from the regulatory capital calculation.

The Bank elected the one-time opt-out election for accumulated other comprehensive loss (“AOCL”) to be excluded from the regulatory capital calculation.

The rule limits a banking organization’s capital distributions and certain discretionary bonus payments if the banking organization does not hold a capital conservation buffer consisting of 2.5% of common equity Tier 1 capital to risk-weighted assets in addition to the amount necessary to meet its minimum risk-based capital requirements.

9 unchanged sentences

Community Reinvestment Act and Fair Lending Laws.

All insured institutions have a responsibility under the Community Reinvestment Act and related regulations to help meet the credit needs of their communities, including low- and moderate-income borrowers.

All insured institutions have a responsibility under the Community Reinvestment Act and related regulations to help meet the credit needs of their communities, including low- and moderate-

income borrowers.

The FDIC is required to assess the Bank’s record of compliance with the Community Reinvestment Act.

11 unchanged sentences

Finally, transactions with affiliates must be consistent with safe and sound banking practices, not involve the purchase of low-quality assets and be on terms that are as favorable to the institution as comparable transactions with non-affiliates.

The Bank’s authority to extend credit to its directors, executive officers and 10% shareholders, as well as to entities controlled by such persons, is currently governed by the requirements of Sections 22(g) and 22(h) of the Federal Reserve Act and Regulation O of the Federal Reserve.

The Bank’s authority to extend credit to its directors, executive officers and 10% stockholders, as well as to entities controlled by such persons, is currently governed by the requirements of Sections 22(g) and 22(h) of the Federal Reserve Act and Regulation O of the Federal Reserve.

Among other things, these provisions generally require that extensions of credit to insiders be made on terms that are substantially the same as, and follow credit underwriting procedures that are not less stringent than, those prevailing for comparable transactions with unaffiliated persons and that do not involve more than the normal risk of repayment or present other unfavorable features;

22 unchanged sentences

It also has the power to appoint a conservator or receiver for a bank upon insolvency, imminent insolvency, unsafe or unsound condition or certain other situations.

The FDIC has primary federal enforcement responsibility over non-Federal Reserve Bank (“FRB”)-member state banks and has authority to bring actions against the institution and all institution-affiliated parties, including shareholders, and any attorneys, appraisers and accountants who knowingly or recklessly participate in wrongful actions likely to have an adverse effect on the bank.

The FDIC has primary federal enforcement responsibility over non-Federal Reserve Bank (“FRB”)-member state banks and has authority to bring actions against the institution and all institution-affiliated parties, including stockholders, and any attorneys, appraisers and accountants who knowingly or recklessly participate in wrongful actions likely to have an adverse effect on the bank.

Formal enforcement action may range from the issuance of a capital directive or cease and desist order to removal of officers and/or directors.

9 unchanged sentences

The FDIC has exercised that discretion by establishing a long-range fund ratio of 2%.

The FDIC announced that the ratio had declined to 1.30% at September 30, 2020 due largely to consequences of the COVID-19 pandemic.

The FDIC adopted a plan to restore the fund to the 1.35% ratio within eight years but did not change its assessment schedule.

The FDIC adopted a plan to restore the fund to the 1.35% ratio by September 30, 2028.

The FDIC has authority to increase insurance assessments.

11 unchanged sentences

Federal Reserve System.

The FRB regulations require banks to maintain reserves against their transaction accounts (primarily Negotiable Order of Withdrawal, or NOW and regular checking accounts).

The FRB regulations historically required banks to maintain reserves against their transaction accounts (primarily Negotiable Order of Withdrawal, or NOW and regular checking accounts).

The regulations generally provide that reserves be maintained against aggregate transaction accounts as follows for 2022:

3 unchanged sentences

The Bank complies with the foregoing requirements.

The amounts are adjusted annually and, for 2022, establish a 3% reserve ratio for aggregate transaction accounts up to $640.6 million, a 10% ratio above $640.6 million, and an exemption of $32.4 million.

However, effective March 26, 2020, the FRB reduced reserve requirement ratios on all net transaction accounts to 0%, eliminating reserve requirements for all depository institutions, in response to the COVID-19 pandemic.

14 unchanged sentences

• The USA PATRIOT Act, which requires banks operating to, among other things, establish broadened anti-money laundering compliance programs, due diligence policies and controls to ensure the detection and reporting of money laundering.

Such required compliance programs are intended to supplement existing compliance requirements, also

applicable to financial institutions, under the Bank Secrecy Act and the Office of Foreign Assets Control regulations;

Such required compliance programs are intended to supplement existing compliance requirements, also applicable to financial institutions, under the Bank Secrecy Act and the Office of Foreign Assets Control regulations;

• The Gramm-Leach-Bliley Act, which places limitations on the sharing of consumer financial information by financial institutions with unaffiliated third parties.

15 unchanged sentences

Under the Change in Bank Control Act, a federal statute, a notice must be submitted to the Federal Reserve if any person (including a company), or group acting in concert, seeks to acquire direct or indirect “control” of a bank holding company.

Under certain circumstances, a change of control may occur, and prior notice is required, upon the acquisition of 10% or more of the company’s outstanding voting stock, unless the Federal Reserve has found that the acquisition will not result in control of the company.

Under certain circumstances, a change of control may occur, and prior notice is required, upon the acquisition of 10%

or more of the company’s outstanding voting stock, unless the Federal Reserve has found that the acquisition will not result in control of the company.

A change in control definitively occurs upon the acquisition of 25% or more of the company’s outstanding voting stock.

24 unchanged sentences

The State of Ohio imposes an equity-based tax similar to the PA Shares Tax called Financial Institutions Tax (“FIT”) at a minimum tax of $1,000 or a rate of 0.8% for the first $200 million of Ohio based-equity, and then a declining rate thereafter.

All state taxation is apportioned to states where nexus exists based on different metrics of the Company's Consolidated Statements of Financial Condition and Consolidated Statements of Income (Loss).

All state taxation is apportioned to states where nexus exists based on different metrics of the Company's Consolidated Statements of Financial Condition and Consolidated Statements of Income.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1. Business