CB Financial Services, Inc. 10-Q

cbfv-20230630 Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2023 OR ☐ 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: 001-36706 CB FINANCIAL SERVICES, INC. (Exact name of registrant as specified in its charter) Pennsylvania 51-0534721 (State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.) 100 N. Market Street , Carmichaels , PA 15320 (Address of principal executive offices) (Zip Code) ( 724 ) 966-5041 (Registrant’s telephone number, including area code) N/A (Former name, former address and former fiscal year, if changed since last report) Securities registered pursuant to Section 12(b) of the Act: Common stock, par value $0.4167 per share CBFV The Nasdaq Stock Market, LLC (Title of each class) (Trading symbol) (Name of each exchange on which registered) 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 (§232.405 of this chapter) 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, smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. Large accelerated filer ☐ Accelerated filer ☐ 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 the Exchange Act. ☐ Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒ As of August 9, 2023, the number of shares outstanding of the Registrant’s Common Stock was 5,115,678 . Table of Contents FORM 10-Q INDEX Page PART I – FINANCIAL INFORMATION Item 1. Financial Statements (Unaudited) 1 Consolidated Statements of Financial Condition 1 Consolidated Statements of Income 2 Consolidated Statements of Comprehensive Income (Loss ) 3 Consolidated Statements of Changes In Stockholders’ Equity 4 Consolidated Statements of Cash Flows 6 Notes to the Consolidated Financial Statements (Unaudited) 8 Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations. 32 Item 3. Quantitative and Qualitative Disclosure about Market Risk. 44 Item 4. Controls and Procedures. 45 PART II - OTHER INFORMATION Item 1. Legal Proceedings. 46 Item 1A. Risk Factors. 46 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds. 46 Item 3. Defaults Upon Senior Securities. 46 Item 4. Mine Safety Disclosures. 46 Item 5. Other Information. 46 Item 6. Exhibits 47 SIGNATURES 48 Table of Contents PART I – FINANCIAL INFORMATION Item 1. Financial Statements. CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION (Unaudited) June 30, 2023 December 31, 2022 (Dollars in thousands, except per share and share data) ASSETS Cash and Due From Banks: Interest-Earning $ 60,287 $ 82,957 Noninterest-Earning 17,806 20,743 Total Cash and Due From Banks 78,093 103,700 Securities: Available-for-Sale Debt Securities, at Fair Value 179,061 187,360 Equity Securities, at Fair Value 2,366 2,698 Total Securities 181,427 190,058 Loans, Net of Allowance for Credit Losses of $ 10,666 and $ 12,819 at June 30, 2023 and December 31, 2022, Respectively 1,090,488 1,037,054 Premises and Equipment, Net 18,582 17,844 Bank-Owned Life Insurance 25,082 25,893 Goodwill 9,732 9,732 Intangible Assets, Net 2,622 3,513 Accrued Interest Receivable and Other Assets 26,707 21,144 TOTAL ASSETS $ 1,432,733 $ 1,408,938 LIABILITIES Deposits: Noninterest-Bearing Demand Accounts $ 316,098 $ 390,405 Interest-Bearing Demand Accounts 374,654 311,825 Money Market Accounts 185,814 209,125 Savings Accounts 217,267 248,022 Time Deposits 169,482 109,126 Total Deposits 1,263,315 1,268,503 Short-Term Borrowings — 8,060 Other Borrowings 34,658 14,638 Accrued Interest Payable and Other Liabilities 18,171 7,582 TOTAL LIABILITIES 1,316,144 1,298,783 STOCKHOLDERS' EQUITY Preferred Stock, No Par Value; 5,000,000 Shares Authorized — — Common Stock, $ 0.4167 Par Value; 35,000,000 Shares Authorized, 5,733,408 Shares Issued and 5,111,678 Shares Outstanding at June 30, 2023, with 5,708,433 and 5,100,189 Shares Issued and Outstanding at December 31, 2022. 2,389 2,379 Capital Surplus 84,325 83,953 Retained Earnings 70,314 63,861 Treasury Stock, at Cost ( 621,730 and 608,244 Shares at June 30, 2023 and December 31, 2022, Respectively) ( 14,100 ) ( 13,797 ) Accumulated Other Comprehensive Loss ( 26,339 ) ( 26,241 ) TOTAL STOCKHOLDERS' EQUITY 116,589 110,155 TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 1,432,733 $ 1,408,938 The accompanying notes are an integral part of these consolidated financial statements 1 Table of Contents CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED) Three Months Ended June 30, Six Months Ended June 30, 2023 2022 2023 2022 (Dollars in thousands, except share and per share data) INTEREST AND DIVIDEND INCOME Loans, Including Fees $ 13,426 $ 9,733 $ 25,797 $ 19,284 Investment Securities: Taxable 950 988 1,914 1,893 Tax-Exempt 42 57 83 123 Dividends 25 20 49 42 Other Interest and Dividend Income 760 160 1,605 232 TOTAL INTEREST AND DIVIDEND INCOME 15,203 10,958 29,448 21,574 INTEREST EXPENSE Deposits 3,842 604 6,346 1,134 Short-Term Borrowings 3 18 5 37 Other Borrowings 238 173 393 347 TOTAL INTEREST EXPENSE 4,083 795 6,744 1,518 NET INTEREST AND DIVIDEND INCOME 11,120 10,163 22,704 20,056 Provision For Credit Losses - Loans 492 3,784 572 3,784 Recovery For Credit Losses - Unfunded Commitments ( 60 ) — ( 60 ) — NET INTEREST AND DIVIDEND INCOME AFTER PROVISION (RECOVERY) FOR CREDIT LOSSES 10,688 6,379 22,192 16,272 NONINTEREST INCOME Service Fees 448 559 892 1,085 Insurance Commissions 1,511 1,369 3,434 3,167 Other Commissions 224 179 368 268 Net Loss on Sales of Loans ( 5 ) — ( 3 ) — Net Loss on Securities ( 100 ) ( 199 ) ( 332 ) ( 206 ) Net Gain on Purchased Tax Credits 7 14 14 28 Net Gain (Loss) on Disposal of Fixed Assets — — 11 ( 8 ) Income from Bank-Owned Life Insurance 139 142 280 278 Net Gain on Bank-Owned Life Insurance Claims 1 — 303 — Other Income 44 41 113 106 TOTAL NONINTEREST INCOME 2,269 2,105 5,080 4,718 NONINTEREST EXPENSE Salaries and Employee Benefits 5,231 4,539 10,310 9,104 Occupancy 789 776 1,490 1,462 Equipment 283 182 501 392 Data Processing 718 446 1,575 931 FDIC Assessment 224 128 376 337 PA Shares Tax 195 240 455 480 Contracted Services 434 348 581 935 Legal and Professional Fees 246 389 428 541 Advertising 75 115 154 231 Other Real Estate Owned (Income) ( 35 ) ( 37 ) ( 72 ) ( 75 ) Amortization of Intangible Assets 446 446 891 891 Other Expense 895 838 1,841 1,837 TOTAL NONINTEREST EXPENSE 9,501 8,410 18,530 17,066 Income Before Income Tax Expense (Benefit) 3,456 74 8,742 3,924 Income Tax Expense (Benefit) 699 ( 44 ) 1,827 759 NET INCOME $ 2,757 $ 118 $ 6,915 $ 3,165 EARNINGS PER SHARE Basic $ 0.54 $ 0.02 $ 1.35 $ 0.61 Diluted 0.54 0.02 1.35 0.61 WEIGHTED AVERAGE SHARES OUTSTANDING Basic 5,111,987 5,147,846 5,110,799 5,172,881 Diluted 5,116,134 5,156,975 5,118,396 5,189,144 The accompanying notes are an integral part of these consolidated financial statements 2 Table of Contents CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (UNAUDITED) Three Months Ended June 30, Six Months Ended June 30, 2023 2022 2023 2022 (Dollars in thousands) Net Income $ 2,757 $ 118 $ 6,915 $ 3,165 Other Comprehensive Loss: Change in Unrealized Loss on Investment Securities Available-for-Sale ( 2,704 ) ( 8,680 ) ( 124 ) ( 21,032 ) Income Tax Effect 583 1,870 26 4,531 Other Comprehensive Loss, Net of Income Tax Effect ( 2,121 ) ( 6,810 ) ( 98 ) ( 16,501 ) Total Comprehensive Income (Loss) $ 636 $ ( 6,692 ) $ 6,817 $ ( 13,336 ) The accompanying notes are an integral part of these consolidated financial statements 3 Table of Contents CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (UNAUDITED) Three Months Ended June 30, 2023 Shares Issued Common Stock Capital Surplus Retained Earnings Treasury Stock Accumulated Other Comprehensive Loss Total Stockholders' Equity (Dollars in thousands, except share and per share data) March 31, 2023 5,730,908 $ 2,388 $ 84,118 $ 68,834 $ ( 13,927 ) $ ( 24,218 ) $ 117,195 Comprehensive Income: Net Income — — — 2,757 — — 2,757 Other Comprehensive Loss — — — — — ( 2,121 ) ( 2,121 ) Restricted Stock Awards Granted 2,500 1 ( 1 ) — — — — Restricted Stock Awards Forfeited — — 21 — ( 21 ) — — Stock-Based Compensation Expense — — 187 — — — 187 Exercise of Stock Options — — — — 45 — 45 Treasury stock purchased, at cost ( 8,792 shares) — — — — ( 197 ) — ( 197 ) Dividends Paid ($ 0.25 Per Share) — — — ( 1,277 ) — — ( 1,277 ) June 30, 2023 5,733,408 $ 2,389 $ 84,325 $ 70,314 $ ( 14,100 ) $ ( 26,339 ) $ 116,589 Three Months Ended June 30, 2022 Shares Issued Common Stock Capital Surplus Retained Earnings Treasury Stock Accumulated Other Comprehensive Loss Total Stockholders' Equity (Dollars in thousands, except share and per share data) March 31, 2022 5,701,758 $ 2,376 $ 83,422 $ 59,343 $ ( 12,367 ) $ ( 10,618 ) $ 122,156 Comprehensive Loss: Net Income — — — 118 — — 118 Other Comprehensive Loss — — — — — ( 6,810 ) ( 6,810 ) Restricted Stock Awards Forfeited ( 325 ) — 43 — ( 43 ) — — Restricted Stock Awards Granted 1,000 — — — — — — Stock-Based Compensation Expense — — 149 — — — 149 Treasury Stock Purchased, at cost ( 27,439 shares) — — — — ( 605 ) — ( 605 ) Dividends Paid ($ 0.24 Per Share) — — — ( 1,236 ) — — ( 1,236 ) June 30, 2022 5,702,433 $ 2,376 $ 83,614 $ 58,225 $ ( 13,015 ) $ ( 17,428 ) $ 113,772 The accompanying notes are an integral part of these consolidated financial statements 4 Table of Contents Six Months Ended June 30, 2023 Shares Issued Common Stock Capital Surplus Retained Earnings Treasury Stock Accumulated Other Comprehensive Loss Total Stockholders' Equity (Dollars in thousands, except share and per share data) December 31, 2022 5,708,433 $ 2,379 $ 83,953 $ 63,861 $ ( 13,797 ) $ ( 26,241 ) $ 110,155 Adoption of Accounting Standard ASU 2016-13 — — — 2,092 — — 2,092 Balance at January 1, 2023, adjusted 5,708,433 $ 2,379 $ 83,953 $ 65,953 $ ( 13,797 ) $ ( 26,241 ) $ 112,247 Comprehensive Income: Net Income — — — 6,915 — — 6,915 Other Comprehensive Loss — — — — — ( 98 ) ( 98 ) Restricted Stock Awards Granted 24,975 10 ( 10 ) — — — — Restricted Stock Awards Forfeited — — 21 — ( 21 ) — — Stock-Based Compensation Expense — — 361 — — — 361 Exercise of Stock Options — — — — 45 — 45 Treasury stock purchased, at cost ( 14,478 shares) — — — — ( 327 ) — ( 327 ) Dividends Paid ($ 0.50 Per Share) — — — ( 2,554 ) — — ( 2,554 ) June 30, 2023 5,733,408 $ 2,389 $ 84,325 $ 70,314 $ ( 14,100 ) $ ( 26,339 ) $ 116,589 Six Months Ended June 30, 2022 Shares Issued Common Stock Capital Surplus Retained Earnings Treasury Stock Accumulated Other Comprehensive Loss Total Stockholders' Equity (Dollars in thousands, except share and per share data) December 31, 2021 5,680,993 $ 2,367 $ 83,294 $ 57,534 $ ( 9,144 ) $ ( 927 ) $ 133,124 Comprehensive Loss: Net Income — — — 3,165 — — 3,165 Other Comprehensive Loss — — — — — ( 16,501 ) ( 16,501 ) Restricted Stock Awards Forfeited ( 325 ) — 47 — ( 47 ) — — Restricted Stock Awards Granted 21,765 9 ( 9 ) — — — — Stock-Based Compensation Expense — — 279 — — — 279 Exercise of Stock Options — — 3 — 164 — 167 Treasury Stock Purchased, at cost ( 159,279 shares) — — — — ( 3,988 ) — ( 3,988 ) Dividends Paid ($ 0.48 Per Share) — — — ( 2,474 ) — — ( 2,474 ) June 30, 2022 5,702,433 $ 2,376 $ 83,614 $ 58,225 $ ( 13,015 ) $ ( 17,428 ) $ 113,772 The accompanying notes are an integral part of these consolidated financial statements 5 Table of Contents CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) Six Months Ended June 30, 2023 2022 (Dollars in thousands) OPERATING ACTIVITIES Net Income $ 6,915 $ 3,165 Adjustments to Reconcile Net Income to Net Cash Provided By Operating Activities Net Amortization on Securities 40 36 Depreciation and Amortization 1,420 1,282 Provision for Credit Losses - Loans 572 3,784 Recovery for Credit Losses - Unfunded Commitments ( 60 ) — Loss on Securities 332 206 Gain on Purchased Tax Credits ( 14 ) ( 28 ) Income from Bank-Owned Life Insurance ( 280 ) ( 278 ) Proceeds From Mortgage Loans Sold 269 — Originations of Mortgage Loans for Sale ( 266 ) — Loss on Sale of Loans 3 — Gain on Sale of Other Real Estate Owned and Repossessed Assets — ( 1 ) Noncash Expense for Stock-Based Compensation 361 279 (Increase) Decrease in Accrued Interest Receivable ( 561 ) 36 Net (Gain) Loss on Disposal of Fixed Assets ( 11 ) 8 Decrease in Taxes Payable ( 839 ) ( 2,462 ) Increase (Decrease) in Accrued Interest Payable 963 ( 42 ) Other, Net ( 308 ) ( 725 ) NET CASH PROVIDED BY OPERATING ACTIVITIES 8,536 5,260 INVESTING ACTIVITIES Investment Securities Available for Sale: Proceeds From Principal Repayments and Maturities 8,135 17,021 Purchases of Securities — ( 26,826 ) Net Increase in Loans ( 45,113 ) ( 9,576 ) Purchase of Premises and Equipment ( 1,345 ) ( 262 ) Proceeds from Disposal of Premises and Equipment 36 — Proceeds From a Claim on Bank-Owned Life Insurance 731 — Proceeds From Sale of Other Real Estate Owned — 37 (Increase) Decrease in Restricted Equity Securities ( 503 ) 599 NET CASH USED IN INVESTING ACTIVITIES ( 38,059 ) ( 19,007 ) FINANCING ACTIVITIES Net Decrease in Deposits ( 5,188 ) ( 11,423 ) Net Decrease in Short-Term Borrowings ( 8,060 ) ( 7,088 ) Proceeds From Other Borrowed Funds 20,000 — Cash Dividends Paid ( 2,554 ) ( 2,474 ) Treasury Stock, Purchases at Cost ( 327 ) ( 3,988 ) Exercise of Stock Options 45 167 NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES 3,916 ( 24,806 ) DECREASE IN CASH AND CASH EQUIVALENTS ( 25,607 ) ( 38,553 ) CASH AND DUE FROM BANKS AT BEGINNING OF YEAR 103,700 119,674 CASH AND DUE FROM BANKS AT END OF PERIOD $ 78,093 $ 81,121 The accompanying notes are an integral part of these consolidated financial statements 6 Table of Contents CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) Six Months Ended June 30, 2023 2022 (Dollars in thousands) SUPPLEMENTAL CASH FLOW INFORMATION: Cash Paid For: Interest on Deposits and Borrowings (Including Interest Credited to Deposits of $ 5,462 and $ 1,166 , Respectively) $ 5,781 $ 1,560 SUPPLEMENTAL NONCASH DISCLOSURE: Proceeds receivable from claims on bank-owned life insurance 664 — Other Real Estate Acquired in Settlement of Loans 166 — Syndicated Loans Purchased and Sold not Settled, net 6,976 — Right of Use Asset Recognized — 1,284 Lease Liability Recognized — 1,284 The accompanying notes are an integral part of these consolidated financial statements 7 Table of Contents NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) Note 1. Summary of Significant Accounting Policies Principles of Consolidation and Basis of Presentation The accompanying consolidated financial statements include the accounts of CB Financial Services, Inc. (“CB Financial”) and its wholly owned subsidiary, Community Bank (the “Bank”), and the Bank’s wholly-owned subsidiary, Exchange Underwriters, Inc. (“Exchange Underwriters”). CB Financial, the Bank and Exchange Underwriters are collectively referred to as the “Company”. All intercompany transactions and balances have been eliminated in consolidation. The accompanying unaudited interim financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) and in conformity with accounting principles generally accepted in the United States of America (“GAAP”) and with general practice within the banking industry. Certain information and note disclosures normally included in annual financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to those rules and regulations, although the Company believes that the disclosures made are adequate to make the information not misleading in any material respect. In preparing financial statements in conformity with GAAP, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the Consolidated Statements of Financial Condition and income and expenses for the reporting period. Actual results could differ significantly from those estimates. Material estimates that are particularly susceptible to significant change in the near term relate to determination of the allowance for credit losses on loans, the valuation of real estate acquired in connection with foreclosures or in satisfaction of loans, impairment evaluations of securities, goodwill and intangible assets impairment, and the valuation of deferred tax assets. In the opinion of management, the accompanying unaudited interim financial statements include all adjustments considered necessary for a fair presentation of the Company’s financial position and results of operations at the dates and for the periods presented. All these adjustments are of a normal, recurring nature, and they are the only adjustments included in the accompanying unaudited interim financial statements. These interim consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022. Interim results are not necessarily indicative of results for a full year. Nature of Operations The Company derives substantially all its income from banking and bank-related services which include interest income on commercial, commercial mortgage, residential real estate and consumer loan financing, as well as interest and dividend income on securities, insurance commissions, and fees generated from deposit services to its customers. The Company provides banking services through its subsidiary, Community Bank, a Pennsylvania-chartered commercial bank headquartered in Carmichaels, Pennsylvania. The Bank is a community-oriented institution offering residential and commercial real estate loans, commercial and industrial loans, and consumer loans as well as a variety of deposit products for individuals and businesses in its market area. The Bank operates 10 branches in Greene, Allegheny, Washington, Fayette and Westmoreland Counties in southwestern Pennsylvania, and three branches in Marshall and Ohio Counties in West Virginia. Property and casualty, commercial liability, surety and other insurance products are offered through Exchange Underwriters, a full-service, independent insurance agency. Critical Accounting Policies; Use of Critical Accounting Estimates The disclosures below supplement the accounting policies previously disclosed in Note 1 to the consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2022, as filed with the SEC. The updates reflect the adoption of Financial Accounting Standard Board ("FASB") ASU 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments , referred to as ASC 326 or, more commonly, referred to as Current Expected Credit Losses (CECL). Allowance for Credit Losses (ACL) On January 1, 2023, the Company adopted ASU 2016-13, which replaces the incurred loss methodology with an expected loss methodology that is referred to as the current expected credit loss methodology. The Company adopted ASU 2016-13 using a modified retrospective approach. Results for reporting periods beginning after January 1, 2023 are presented under Topic 326, while prior period amounts continue to be reported in accordance with previously applicable GAAP. The adoption resulted in a decrease of $ 3.4 million to the Company’s ACL related to loans receivable (ACL - Loans) and an increase of $ 718,000 in ACL for unfunded commitments (ACL - Unfunded Commitments). The net impact resulted in a $ 2.1 million increase to retained earnings, net of deferred taxes. The ACL represents the estimated amount considered necessary to cover lifetime expected credit losses inherent in financial assets at the balance sheet date. The measurement of expected credit losses is applicable to loans receivable and securities measured at amortized cost. It also applies to off-balance sheet credit exposures such as loan commitments and unused lines of 8 Table of Contents credit. The allowance is established through a provision for credit losses that is charged against income. The methodology for determining the allowance for credit losses is considered a critical accounting policy by management because of the high degree of judgment involved, the subjectivity of the assumptions used, and the potential for changes in the forecasted economic environment that could result in changes to the amount of the recorded ACL. The ACL is reported separately as a contra-asset on the consolidated statement of financial condition. The expected credit loss for unfunded loan commitments is reported on the Consolidated Statement of Financial Condition in other liabilities while the provision for credit losses related to unfunded commitments is reported in provision for credit losses - unfunded commitments in the Consolidated Statements of Income. ACL on Loans Receivable The ACL on loans is deducted from the amortized cost basis of the loan to present the net amount expected to be collected. Expected losses are evaluated and calculated on a collective, or pooled, basis for those loans which share similar risk characteristics. At each reporting period, the Company evaluates whether loans within a pool continue to exhibit similar risk characteristics. If the risk characteristics of a loan change, such that they are no longer similar to other loans in the pool, the Company will evaluate the loan with a different pool of loans that share similar risk characteristics. If the loan does not share risk characteristics with other loans, the Company will evaluate the loan on an individual basis. The Company evaluates the pooling methodology at least annually. Loans are charged off against the ACL when the Company believes the balances to be uncollectible. Expected recoveries do not exceed the aggregate of amounts previously charged off or expected to be charged off. The Company has chosen to segment its portfolio consistent with the manner in which it manages credit risk. Such segments include residential mortgage, commercial real estate mortgages, construction, commercial business, consumer and other. For most segments, the Company calculates estimated credit losses using a probability of default and loss given default methodology, the results of which are applied to the aggregated discounted cash flow of each individual loan within the segment. The point in time probability of default and loss given default are then conditioned by macroeconomic scenarios to incorporate reasonable and supportable forecasts that affect the collectability of the reported amount. The Company estimates the ACL on loans via a quantitative analysis which considers relevant available information from internal and external sources related to past events and current conditions, as well as the incorporation of reasonable and supportable forecasts. The Company evaluates a variety of factors including third party economic forecasts, industry trends and other available published economic information in arriving at its forecasts. After the reasonable and supportable forecast period, the Company reverts, on a straight-line basis, to average historical losses. Expected credit losses are estimated over the contractual term of the loans, 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 restructuring will be executed with an individual borrower or the renewal option is included in the original or modified contract at the reporting date and are not unconditionally cancellable by the Company. Also included in the ACL on loans are qualitative reserves to cover losses that are expected but, in the Company’s assessment, may not be adequately represented in the quantitative analysis or the forecasts described above. Factors that the Company considers include changes in lending policies and procedures, business conditions, the nature and size of the portfolio, portfolio concentrations, the volume and severity of past due loans and non-accrual loans, and the effect of external factors such as competition, legal and regulatory requirements, among others. Furthermore, the Company considers the inherent uncertainty in quantitative models that are built upon historical data. Individually Evaluated Loans On a case-by-case basis, the Company may conclude that a loan should be evaluated on an individual basis based on its disparate risk characteristics. When the Company determines that a loan no longer shares similar risk characteristics with other loans in the portfolio, the allowance will be determined on an individual basis using the present value of expected cash flows or, for collateral-dependent loans, the fair value of the collateral as of the reporting date, less estimated selling costs, as applicable. If the fair value of the collateral is less than the amortized cost basis of the loan, the Company will charge off the difference between the fair value of the collateral, less estimated costs to sell at the reporting date, and the amortized cost basis of the loan. 9 Table of Contents ACL on Off-Balance Sheet Commitments The Company is required to include unfunded commitments that are expected to be funded in the future within the allowance calculation, other than those that are unconditionally cancellable. To arrive at that reserve, the reserve percentage for each applicable segment is applied to the unused portion of the expected commitment balance and is multiplied by the expected funding rate. To determine the expected funding rate, the Company uses a historical utilization rate for each segment. As noted above, the ACL on unfunded loan commitments is included in other liabilities on the Consolidated Statement of Financial Condition and the related credit expense is recorded in provision for credit losses - unfunded commitments in the Consolidated Statements of Income. ACL on Available for Sale Securities For available for sale securities in an unrealized loss position, the Company first assesses whether it intends to sell, or it is more likely than not that it will be required to sell the security before recovery of its amortized cost basis. If either of the criteria regarding intent or requirement to sell is met, the security’s amortized cost basis is written down to fair value through income. For securities available for sale that do not meet the above criteria, the Company evaluates whether the decline in fair value has resulted from credit losses or other factors. In making this assessment, the Company considers the extent to which fair value is less than amortized cost, any changes to the rating by a rating agency, and adverse conditions related to the security, among other factors. If this assessment indicates that a credit loss exists, the present value of cash flows expected to be collected from the security are compared to the amortized cost basis of the security. If the present value of the cash flows expected to be collected is less than the amortized cost basis, a credit loss exists and an ACL is recorded for the credit loss, limited by the amount that the fair value is less than the amortized cost. Any impairment that has not been recorded through an ACL is recognized in other comprehensive income (loss), net of tax. The Company elected the practical expedient of zero loss estimates for securities issued by U.S. government entities and agencies. These securities are either explicitly or implicitly guaranteed by the U.S. government, are highly rated by major agencies and have a long history of no credit losses. Changes in the ACL are recorded as provision for, or reversal of, credit loss expense. Losses are charged against the allowance when management believes the uncollectibility of an available for sale security is confirmed or when either of the criteria regarding intent or requirement to sell is met. Accrued Interest Receivable The Company made an accounting policy election to exclude accrued interest receivable from the amortized cost basis of loans and available for sale securities. Accrued interest receivable on loans is reported as a component of accrued interest receivable and other assets on the Consolidated Statement of Financial Condition, totaled $ 4.0 million at June 30, 2023 and is excluded from the estimate of credit losses. Accrued interest receivable on available of sale securities, also a component of accrued interest receivable and other assets on the Consolidated Statement of Financial Condition, totaled $ 534,000 , at June 30, 2023 and is excluded from the estimate of credit losses. Recent Accounting Standards In December 2022, the FASB issued ASU 2022-06, Reference Rate Reform (Topic 848): Deferral of the Sunset Date of Topic 848 that extends the period of time preparers can utilize the reference rate reform relief guidance. In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting, as amended. This ASU provides temporary optional guidance to ease the potential burden in accounting for reference rate reform. The new guidance provides optional expedients and exceptions for applying GAAP to contract modifications and hedging relationships, subject to meeting certain criteria, that reference the London Inter-bank Offered Rate (“LIBOR”) or another reference rate expected to be discontinued. The elective guidance in the ASU applies to modifications of contract terms that will directly replace, or have the potential to replace, an affected rate with another interest rate index, as well as certain contemporaneous modifications of other contract terms related to the replacement of an affected rate. The ASU notes that changes in contract terms that are made to effect the reference rate reform transition are considered related to the replacement of a reference rate if they are not the result of a business decision that is separate from or in addition to changes to the terms of a contract to effect that transition. The optional expedient allows companies to account for the modification as if it was not substantial (i.e., do not treat as an extinguishment of debt). To ensure the relief in Topic 848 covers the period of time during which a significant number of modifications may take place, ASU 2022-06 defers the sunset date of Topic 848 from December 31, 2022 to December 31, 2024, after which entities will no longer be permitted to apply the relief in Topic 848. For all entities, the amendments in ASU 2022-06 are effective upon issuance. As of June 30, 2023, the Company has identified approximately $ 16.2 million in outstanding loan balances and a $ 5.0 million corporate debt security tied to the LIBOR reference rate. The Company has not yet made any contract modifications. The Company is currently evaluating the potential impact of this guidance on its consolidated statements of financial statements and results of operations. 10 Table of Contents Note 2. Earnings Pe r Share There are no convertible securities which would affect the numerator in calculating basic and diluted earnings per share; therefore, net income as presented on the Consolidated Statements of Income is used as the numerator. The following table sets forth the composition of the weighted-average common shares (denominator) used in the basic and diluted earnings per share computation. Three Months Ended June 30, Six Months Ended June 30, 2023 2022 2023 2022 (Dollars in thousands, except share and per share data) Net Income $ 2,757 $ 118 $ 6,915 $ 3,165 Weighted-Average Basic Common Shares Outstanding 5,111,987 5,147,846 5,110,799 5,172,881 Dilutive Effect of Common Stock Equivalents (Stock Options and Restricted Stock) 4,147 9,129 7,597 16,263 Weighted-Average Diluted Common Shares and Common Stock Equivalents Outstanding 5,116,134 5,156,975 5,118,396 5,189,144 Earnings Per Share: Basic $ 0.54 $ 0.02 $ 1.35 $ 0.61 Diluted 0.54 0.02 1.35 0.61 The dilutive effect on weighted average diluted common shares outstanding is the result of outstanding stock options and nonvested restricted stock. The following table presents for the periods indicated (a) options to purchase shares of common stock that were outstanding but not included in the computation of earnings per share because the options’ exercise price was greater than the average market price of the common shares for the period, and (b) shares of restricted stock awards that were not included in the computation of diluted earnings per share because the hypothetical repurchase of shares under the treasury stock method exceeded the weighted average nonvested restricted awards, therefore the effects would be anti-dilutive. Three Months Ended June 30, Six Months Ended June 30, 2023 2022 2023 2022 Stock Options 339,123 156,118 339,123 156,118 Restricted Stock 58,527 37,940 51,727 37,940 11 Table of Contents Note 3. Securities The following table presents the amortized cost and fair value of securities available-for-sale at the dates indicated: June 30, 2023 Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Fair Value (Dollars in thousands) Available-for-Sale Debt Securities: U.S. Government Agencies $ 53,994 $ — $ ( 8,612 ) $ 45,382 Obligations of States and Political Subdivisions 13,810 — ( 598 ) 13,212 Mortgage-Backed Securities - Government-Sponsored Enterprises 43,226 — ( 4,818 ) 38,408 Collateralized Mortgage Obligations - Government Sponsored Enterprises 92,117 — ( 17,418 ) 74,699 Corporate Debt 9,486 — ( 2,126 ) 7,360 Total Available-for-Sale Debt Securities 212,633 — ( 33,572 ) 179,061 Equity Securities: Mutual Funds 875 Other 1,491 Total Equity Securities 2,366 Total Securities $ 181,427 December 31, 2022 Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Fair Value (Dollars in thousands) Available-for-Sale Debt Securities: U.S. Government Agencies $ 53,993 $ — $ ( 9,359 ) $ 44,634 Obligations of States and Political Subdivisions 14,053 — ( 711 ) 13,342 Mortgage-Backed Securities - Government-Sponsored Enterprises 46,345 — ( 4,918 ) 41,427 Collateralized Mortgage Obligations - Government Sponsored Enterprises 96,930 — ( 17,288 ) 79,642 Corporate Debt 9,487 — ( 1,172 ) 8,315 Total Available-for-Sale Debt Securities 220,808 — ( 33,448 ) 187,360 Equity Securities: Mutual Funds 875 Other 1,823 Total Equity Securities 2,698 Total Securities $ 190,058 12 Table of Contents The following tables show the Company’s gross unrealized losses and fair value, aggregated by investment category and length of time that the individual securities have been in a continuous unrealized loss position, at the dates indicated: June 30, 2023 Less than 12 months 12 Months or Greater Total Number of Securities Fair Value Gross Unrealized Losses Number of Securities Fair Value Gross Unrealized Losses Number of Securities Fair Value Gross Unrealized Losses (Dollars in thousands) U.S. Government Agencies — $ — $ — 13 $ 45,382 $ ( 8,612 ) 13 $ 45,382 $ ( 8,612 ) Obligations of States and Political Subdivisions 23 9,343 ( 413 ) 10 3,869 ( 185 ) 33 13,212 ( 598 ) Mortgage Backed Securities- Government Sponsored Enterprises 24 13,333 ( 781 ) 18 25,075 ( 4,037 ) 42 38,408 ( 4,818 ) Collateralized Mortgage Obligations - Government Sponsored Enterprises 1 59 ( 1 ) 20 74,640 ( 17,417 ) 21 74,699 ( 17,418 ) Corporate Debt — — — 3 7,360 ( 2,126 ) 3 7,360 ( 2,126 ) Total 48 $ 22,735 $ ( 1,195 ) 64 $ 156,326 $ ( 32,377 ) 112 $ 179,061 $ ( 33,572 ) December 31, 2022 Less than 12 months 12 Months or Greater Total Number of Securities Fair Value Gross Unrealized Losses Number of Securities Fair Value Gross Unrealized Losses Number of Securities Fair Value Gross Unrealized Losses (Dollars in thousands) U.S. Government Agencies 1 $ 2,600 $ ( 400 ) 12 $ 42,034 $ ( 8,959 ) 13 $ 44,634 $ ( 9,359 ) Obligations of States and Political Subdivisions 34 13,342 ( 711 ) — — — 34 13,342 ( 711 ) Mortgage Backed Securities- Government Sponsored Enterprises 34 19,433 ( 1,018 ) 8 21,994 ( 3,900 ) 42 41,427 ( 4,918 ) Collateralized Mortgage Obligations - Government Sponsored Enterprises 12 25,395 ( 3,393 ) 10 54,247 ( 13,895 ) 22 79,642 ( 17,288 ) Corporate Debt 1 1,665 ( 335 ) 2 6,650 ( 837 ) 3 8,315 ( 1,172 ) Total 82 $ 62,435 $ ( 5,857 ) 32 $ 124,925 $ ( 27,591 ) 114 $ 187,360 $ ( 33,448 ) For debt securities, the Company does not believe that any individual unrealized loss as of June 30, 2023 or December 31, 2022, represents a credit related impairment. The Company performs a review of the entire securities portfolio on a quarterly basis to identify securities that may indicate a credit related impairment. The unrealized losses on securities at June 30, 2023 and December 31, 2022 relate principally to changes in market interest rates subsequent to the acquisition of the specific securities. 13 Table of Contents The Company does not intend to sell, and it is more likely than not that it will be required to sell any of the securities in an unrealized loss position before recovery of its amortized cost or maturity of the security. Total securities available to be pledged have a fair value of $ 171.7 million at June 30, 2023 and $ 179.0 million at December 31, 2022 of which securities with a fair value of $ 171.4 million and $ 175.6 million at June 30, 2023 and December 31, 2022, respectively, were pledged to secure uninsured public deposits, short-term borrowings and for other purposes as required or permitted by law. The following table presents the scheduled maturities of debt securities as of the date indicated: June 30, 2023 Amortized Cost Fair Value (Dollars in thousands) Due in One Year or Less $ — $ — Due after One Year through Five Years 26,527 23,478 Due after Five Years through Ten Years 57,391 49,177 Due after Ten Years 128,715 106,406 Total $ 212,633 $ 179,061 The following table presents the gain and loss on equity securities from both realized sales and unrealized market adjustments for the periods indicated. There were no realized gain or loss on sales of debt securities for the periods indicated. All gains and losses presented in the table below are reported in Net Loss on Securities on the Consolidated Statements of Income. Three Months Ended June 30, Six Months Ended June 30, 2023 2022 2023 2022 (Dollars in thousands) Equity Securities Net Unrealized Loss Recognized on Securities Held $ ( 100 ) $ ( 199 ) $ ( 332 ) $ ( 206 ) Net Realized Gain Recognized on Securities Sold — — — — Net Loss on Equity Securities $ ( 100 ) $ ( 199 ) $ ( 332 ) $ ( 206 ) Net Loss on Securities $ ( 100 ) $ ( 199 ) $ ( 332 ) $ ( 206 ) Note 4. Loans and Allowance for Credit Losses The Company’s loan portfolio is segmented to enable management to monitor risk and performance. Real estate loans are further segregated into three classes. Residential mortgages include those secured by residential properties and include home equity loans, while commercial mortgages consist of loans to commercial borrowers secured by commercial real estate. Construction loans typically consist of loans to build commercial buildings and acquire and develop residential real estate. The commercial and industrial segment consists of loans to finance the activities of commercial customers. The consumer segment consists primarily of indirect auto loans as well as personal installment loans and personal or overdraft lines of credit. Residential mortgage loans are typically longer-term loans and, therefore, generally present greater interest rate risk than the consumer and commercial loans. Under certain economic conditions, housing values may decline, which may increase the risk that the collateral values are not sufficient. Commercial real estate loans generally present a higher level of credit risk than loans secured by residences. This greater risk is due to several factors, including the concentration of principal in a limited number of loans and borrowers, the effect of general economic conditions on income-producing properties, and the increased difficulty in evaluating and monitoring these types of loans. Furthermore, the repayment of commercial real estate loans is typically dependent upon the successful operation of the related real estate project. If the cash flow from the project is reduced (for example, if leases are not obtained or renewed, a bankruptcy court modifies a lease term, or a major tenant is unable to fulfill its lease obligations), the borrower’s ability to repay the loan may be impaired. Construction loans are originated to individuals to finance the construction of residential dwellings and are also originated for the construction of commercial properties, including hotels, apartment buildings, housing developments, and owner-occupied properties used for businesses. Construction loans generally provide for the payment of interest only during the construction 14 Table of Contents phase, which is usually 12 to 18 months. At the end of the construction phase, the loan generally converts to a permanent residential or commercial mortgage loan. Construction loan risks include overfunding in comparison to the plans, untimely completion of work, and leasing and stabilization after project completion. Commercial and industrial loans are generally secured by inventories, accounts receivable, and other business assets, which present collateral risk. Consumer loans generally have higher interest rates and shorter terms than residential mortgage loans; however, they have additional credit risk due to the type of collateral securing the loan. The following table presents the classifications of loans as of the dates indicated. June 30, 2023 December 31, 2022 (Dollars in thousands) Real Estate: Residential $ 338,493 $ 330,725 Commercial 458,614 436,805 Construction 44,523 44,923 Commercial and Industrial 102,266 70,044 Consumer 134,788 146,927 Other 22,470 20,449 Total Loans 1,101,154 1,049,873 Allowance for Credit Losses ( 10,666 ) ( 12,819 ) Loans, Net $ 1,090,488 $ 1,037,054 Net unamortized PPP loan origination fees as of June 30, 2023 and December 31, 2022 were $ 1,000 and $ 5,000 , respectively. Additionally, $ 1,000 and $ 4,000 of net PPP loan origination fees were earned for the three and six months ended June 30, 2023, respectively, compared to $ 130,000 and $ 534,000 for the three and six months ended June 30, 2022, respectively. All PPP loans are classified as commercial and industrial loans held for investment. No allowance for credit loss was allocated to the PPP loan portfolio due to the Bank complying with the lender obligations that ensure SBA guarantee. Total unamortized net deferred loan fees were $ 1.1 million and $ 1.2 million at June 30, 2023 and December 31, 2022, respectively. The Company uses an eight-point internal risk rating system to monitor the credit quality of the overall loan portfolio. The first four categories are not considered criticized and are aggregated as “pass” rated. The criticized rating categories used by management generally follow bank regulatory definitions. The special mention category includes assets that are currently protected but are below average quality, resulting in an undue credit risk, but not to the point of justifying a substandard classification. Loans in the substandard category have well-defined weaknesses that jeopardize the liquidation of the debt and have a distinct possibility that some loss will be sustained if the weaknesses are not corrected. Loans classified as doubtful have all the weaknesses inherent in loans classified as substandard with the added characteristic that collection or liquidation in full, on the basis of current conditions and facts, is highly improbable. Loans classified as Loss are considered uncollectible and of such little value that continuance as an asset is not warranted. The following table presents the Company’s loans by year of origination, loan segmentation and risk indicator summarized by the aggregate Pass and the criticized categories of Special Mention, Substandard and Doubtful within the internal risk rating system as of June 30, 2023. There were no loans in the criticized category of loss. 15 Table of Contents Classified Loans by Origination Year (as of June 30, 2023) (dollars in thousands) 2023 2022 2021 2020 2019 Prior Revolving Loans Amortized Cost Basis Total Real Estate: Residential Pass $ 18,613 $ 45,643 $ 43,464 $ 60,025 $ 40,379 $ 113,249 $ 14,213 $ 335,586 Special Mention — — 514 — — 411 — 925 Substandard — — 154 — — 1,828 — 1,982 Doubtful — — — — — — — — Loss — — — — — — — — Total 18,613 45,643 44,132 60,025 40,379 115,488 14,213 338,493 Commercial Pass 33,675 76,166 92,455 50,075 49,195 116,799 1,732 420,097 Special Mention — — 1,496 2,970 5,576 15,509 — 25,551 Substandard — — — — 4,521 8,445 — 12,966 Doubtful — — — — — — — — Loss — — — — — — — — Total 33,675 76,166 93,951 53,045 59,292 140,753 1,732 458,614 Construction Pass 7,694 15,531 10,184 7,784 — — 937 42,130 Special Mention — 1,249 850 — — 1 — 2,100 Substandard — — — — — 293 — 293 Doubtful — — — — — — — — Loss — — — — — — — — Total 7,694 16,780 11,034 7,784 — 294 937 44,523 Commercial and Industrial Pass 22,732 17,719 9,665 6,188 3,756 930 30,027 91,017 Special Mention — — — 18 5 3,314 3,533 6,870 Substandard — — — — — 4,012 — 4,012 Doubtful — — — — — 367 — 367 Loss — — — — — — — — Total 22,732 17,719 9,665 6,206 3,761 8,623 33,560 102,266 Consumer Pass 14,617 57,770 31,372 13,857 5,940 6,939 4,091 134,586 Special Mention — — — — — — — — Substandard — 77 20 2 — 103 — 202 Doubtful — — — — — — — — Loss — — — — — — — — Total 14,617 57,847 31,392 13,859 5,940 7,042 4,091 134,788 Other Pass — 15,312 47 685 1,337 4,189 851 22,421 Special Mention — — — — — 49 — 49 Substandard — — — — — — — — Doubtful — — — — — — — — Loss — — — — — — — — Total — 15,312 47 685 1,337 4,238 851 22,470 Total Loans $ 97,331 $ 229,467 $ 190,221 $ 141,604 $ 110,709 $ 276,438 $ 55,384 $ 1,101,154 Gross Charge Offs $ — $ 92 $ 21 $ — $ — $ 105 $ 16 $ 234 16 Table of Contents The following table presents the Company’s loan segmentation and risk indicator summarized by the aggregate Pass and the criticized categories of Special Mention, Substandard and Doubtful within the internal risk rating system as of December 31, 2022, prior to the adoption of ASU 2016-13: December 31, 2022 Pass Special Mention Substandard Doubtful Total (Dollars in Thousands) Real Estate: Residential $ 327,531 $ 1,180 $ 2,014 $ — $ 330,725 Commercial 395,168 29,680 11,957 — 436,805 Construction 42,693 1,912 318 — 44,923 Commercial and Industrial 58,562 10,977 90 415 70,044 Consumer 146,807 — 120 — 146,927 Other 20,394 55 — — 20,449 Total Loans $ 991,155 $ 43,804 $ 14,499 $ 415 $ 1,049,873 The following table presents the classes of the loan portfolio summarized by the aging categories of performing loans and nonaccrual loans as of the dates indicated. June 30, 2023 Loans Current 30-59 Days Past Due 60-89 Days Past Due 90 Days Or More Past Due Total Past Due Non- Accrual Total Loans (Dollars in Thousands) Real Estate: Residential $ 334,719 $ 2,155 $ 144 $ — $ 2,299 $ 1,475 $ 338,493 Commercial 456,563 — — — — 2,051 458,614 Construction 44,105 418 — — 418 — 44,523 Commercial and Industrial 101,899 — — — — 367 102,266 Consumer 133,915 590 81 — 671 202 134,788 Other 22,470 — — — — — 22,470 Total Loans $ 1,093,671 $ 3,163 $ 225 $ — $ 3,388 $ 4,095 $ 1,101,154 December 31, 2022 Loans Current 30-59 Days Past Due 60-89 Days Past Due 90 Days Or More Past Due Total Past Due Non- Accrual Total Loans (Dollars in Thousands) Real Estate: Residential $ 325,591 $ 3,451 $ 34 $ — $ 3,485 $ 1,649 $ 330,725 Commercial 434,933 58 — — 58 1,814 436,805 Construction 44,923 — — — — — 44,923 Commercial and Industrial 69,621 8 — — 8 415 70,044 Consumer 145,887 854 66 — 920 120 146,927 Other 20,449 — — — — — 20,449 Total Loans $ 1,041,404 $ 4,371 $ 100 $ — $ 4,471 $ 3,998 $ 1,049,873 17 Table of Contents Additional interest income that would have been recorded if the loans that were nonaccrual at June 30, 2023 were current was $ 61,000 and $ 86,000 for the three and six months ended June 30, 2023, respectively, and $ 43,000 and $ 94,000 for the three and six months ended June 30, 2022, respectively. The following table sets forth the amounts for amortized cost basis of loans on nonaccrual status, loans past due 90 days still accruing, and categories of nonperforming assets at the date indicated. June 30, 2023 Nonaccrual With No ACL Nonaccrual With ACL Loans Past Due 90 Days Still Accruing Total Nonperforming Assets (Dollars in Thousands) Nonaccrual Loans: Real Estate: Residential $ 1,475 $ — $ — $ 1,475 Commercial 2,051 — — 2,051 Commercial and Industrial 367 — — 367 Consumer 202 — — 202 Total Nonaccrual Loans $ 4,095 $ — $ — 4,095 Other Real Estate Owned: Residential 129 Commercial 37 Total Other Real Estate Owned 166 Total Nonperforming Assets $ 4,261 No interest income on nonaccrual loans was recognized during the three and six months ended June 30, 2023. In conjunction with the adoption of ASU 2016-13, ASU 2022-02 was adopted and eliminates the troubled debt restructurings ("TDR") recognition and measurement. With the elimination of TDRs, ASU 2022-02 requires that all modifications and refinancing, including those with borrowers that are experiencing financial difficulty are subject to the modification guidance in ASC 310-20. Loan modifications could meet the definition of a new loan if certain terms of the loan are modified to the benefit of the lender and the modification to the terms of the loan are more than minor. Both of these criteria have to be met to define the modification as a new loan. If a loan modification meets the criteria of new loan, then the new loan should include the remaining net investment in the original loan, additional funds advanced, fees received, and direct loan origination costs with the refinancing or restructuring. Additionally, the effective interest rate should be recalculated based on the amortized cost basis of the new loan and reassess contractual cash flow. For the three and six months ended June 30, 2023, there were no new loan modifications to borrowers experiencing financial difficulty in the past 12 months under the current guidance. 18 Table of Contents The following table sets forth the amounts and categories of nonperforming assets at the dates indicated as of December 31, 2022, prior to the adoption of ASU 2016-13. Included in nonperforming loans and assets are TDRs, which are loans whose contractual terms have been restructured in a manner which grants a concession to a borrower experiencing financial difficulties. Nonaccrual TDRs are included in their specific loan category in the nonaccrual loans section. December 31, 2022 (Dollars in Thousands) Nonaccrual Loans: Real Estate: Residential $ 1,649 Commercial 1,814 Commercial and Industrial 415 Consumer 120 Total Nonaccrual Loans 3,998 Accruing Loans Past Due 90 Days or More: Total Accruing Loans Past Due 90 Days or More — Total Nonaccrual Loans and Accruing Loans Past Due 90 Days or More 3,998 Troubled Debt Restructurings, Accruing: Real Estate Residential 534 Commercial 1,260 Commercial and Industrial 7 Total Troubled Debt Restructurings, Accruing 1,801 Total Nonperforming Loans 5,799 Total Nonperforming Assets $ 5,799 The recorded investment of residential real estate loans for which formal foreclosure proceedings were in process according to applicable requirements of the local jurisdiction was $ 756 ,000 and $ 1.4 million at June 30, 2023 and December 31, 2022, respectively. The activity in the ACL - Loans is summarized below by primary segments for the periods indicated: Real Estate Residential Real Estate Commercial Real Estate Construction Commercial and Industrial Consumer Other Unallocated Total (Dollars in thousands) March 31, 2023 $ 2,156 $ 3,056 $ 805 $ 1,997 $ 2,098 $ 158 $ — $ 10,270 Charge-offs ( 97 ) — — — ( 51 ) — — ( 148 ) Recoveries 1 23 — 8 20 — — 52 Provision (Recovery) for Credit Losses - Loans 296 137 133 135 ( 219 ) 10 — 492 June 30, 2023 $ 2,356 $ 3,216 $ 938 $ 2,140 $ 1,848 $ 168 $ — $ 10,666 19 Table of Contents Real Estate Residential Real Estate Commercial Real Estate Construction Commercial and Industrial Consumer Other Unallocated Total (Dollars in thousands) December 31, 2022 $ 2,074 $ 5,810 $ 502 $ 2,313 $ 1,517 $ — $ 603 $ 12,819 Impact of ASC 326 - Loans 137 ( 3,244 ) 488 ( 1,057 ) 774 120 ( 603 ) ( 3,385 ) Charge-offs ( 97 ) — — — ( 104 ) — — ( 201 ) Recoveries 14 23 — 766 58 — — 861 Provision (Recovery) for Credit Losses - Loans 228 627 ( 52 ) 118 ( 397 ) 48 — 572 June 30, 2023 $ 2,356 $ 3,216 $ 938 $ 2,140 $ 1,848 $ 168 $ — $ 10,666 The Company’s allowance for credit losses on unfunded commitments is recognized as a liability (accrued interest payable and other liabilities on the Consolidated Statement of Financial Condition), with adjustments to the reserve recognized in provision for credit losses - unfunded commitments on the Consolidated Statement of Income. The Company’s activity in the allowance for credit losses on unfunded commitments for the periods ended was as follows: (in thousands) Allowance for Credit Losses Balance at March 31, 2023 $ 718 Impact of CECL adoption — Recovery for credit losses - unfunded commitments ( 60 ) Balance at June 30, 2023 $ 658 (in thousands) Allowance for Credit Losses Balance at December 31, 2022 $ — Impact of CECL adoption 718 Recovery for credit losses - unfunded commitments ( 60 ) Balance at June 30, 2023 $ 658 Loans that do not share risk characteristics are evaluated on an individual basis. For loans that are individually evaluated and collateral dependent, financial loans where the Company has determined that foreclosure of the collateral is probable, or where the borrower is experiencing financial difficulty and the Company expects repayment of the financial asset to be provided substantially through the operation or sale of the collateral, the ACL - Loans is measured based on the difference between the fair 20 Table of Contents value of the collateral and the amortized cost basis of the asset as of the measurement date. During the three and six months ended June 30, 2023, there were no loans that required a credit loss to be individually assigned. The following tables present the activity in the allowance for credit losses summarized by primary segments and segregated into the amount required for loans individually evaluated for impairment and the amount required for loans collectively evaluated for potential impairment at the dates and for the periods indicated, prior to the adoption of ASU 2016-13. December 31, 2022 Real Estate Residential Real Estate Commercial Real Estate Construction Commercial and Industrial Consumer Other Unallocated Total (Dollars in thousands) Individually Evaluated for Impairment $ — $ 21 $ — $ 3 $ — $ — $ — $ 24 Collectively Evaluated for Potential Impairment $ 2,074 $ 5,789 $ 502 $ 2,310 $ 1,517 $ — $ 603 $ 12,795 Real Estate Residential Real Estate Commercial Real Estate Construction Commercial and Industrial Consumer Other Unallocated Total (Dollars in thousands) March 31, 2022 $ 1,472 $ 6,326 $ 704 $ 1,130 $ 1,292 $ — $ 671 $ 11,595 Charge-offs ( 15 ) — — ( 2,712 ) ( 20 ) — — ( 2,747 ) Recoveries 126 — — 57 18 — — 201 Provision (Recovery) 71 ( 303 ) ( 233 ) 3,874 212 — 163 3,784 June 30, 2022 $ 1,654 $ 6,023 $ 471 $ 2,349 $ 1,502 $ — $ 834 $ 12,833 Real Estate Residential Real Estate Commercial Real Estate Construction Commercial and Industrial Consumer Other Unallocated Total (Dollars in thousands) December 31, 2021 $ 1,420 $ 5,960 $ 1,249 $ 1,151 $ 1,050 $ — $ 752 $ 11,582 Charge-offs ( 32 ) — — ( 2,712 ) ( 40 ) — — ( 2,784 ) Recoveries 128 — — 68 55 — — 251 Provision (Recovery) 138 63 ( 778 ) 3,842 437 — 82 3,784 June 30, 2022 $ 1,654 $ 6,023 $ 471 $ 2,349 $ 1,502 $ — $ 834 $ 12,833 21 Table of Contents June 30, 2022 Real Estate Residential Real Estate Commercial Real Estate Construction Commercial and Industrial Consumer Other Unallocated Total (Dollars in thousands) Individually Evaluated for Impairment $ — $ 86 $ — $ 244 $ — $ — $ — $ 330 Collectively Evaluated for Potential Impairment $ 1,654 $ 5,937 $ 471 $ 2,105 $ 1,502 $ — $ 834 $ 12,503 The following table presents the major classifications of loans summarized by individually evaluated for impairment and collectively evaluated for potential impairment as of the dates indicated, prior to the adoption of ASU 2016-13. December 31, 2022 Real Estate Residential Real Estate Commercial Real Estate Construction Commercial and Industrial Consumer Other Total (Dollars in thousands) Individually Evaluated for Impairment $ 1,042 $ 13,217 $ 318 $ 512 $ — $ — $ 15,089 Collectively Evaluated for Potential Impairment 329,683 423,588 44,605 69,532 146,927 20,449 1,034,784 Total Loans $ 330,725 $ 436,805 $ 44,923 $ 70,044 $ 146,927 $ 20,449 $ 1,049,873 The following table presents changes in the accretable discount on the loans acquired at fair value at the dates indicated. Accretable Discount (Dollars in Thousands) December 31, 2022 $ 487 Accretable Yield ( 122 ) June 30, 2023 $ 365 Pre Adoption of ASC 326 – Impaired Loans 22 Table of Contents For periods prior to the adoption of CECL, loans were considered impaired when, based on current information and events, it was probable the Company would be unable to collect all amounts due in accordance with the original contractual terms of the loan agreement, including scheduled principal and interest payments. The following table presents a summary of the loans considered to be impaired as of the date indicated. December 31, 2022 Recorded Investment Related Allowance Unpaid Principal Balance Average Recorded Investment Interest Income Recognized (Dollars in thousands) With No Related Allowance Recorded: Real Estate: Residential $ 1,042 $ — $ 1,047 $ 1,085 $ 51 Commercial 11,609 — 11,766 10,928 549 Construction 318 — 318 403 19 Commercial and Industrial 505 — 777 734 35 Total With No Related Allowance Recorded $ 13,474 $ — $ 13,908 $ 13,150 $ 654 With A Related Allowance Recorded: Real Estate: Commercial $ 1,608 $ 21 $ 1,608 $ 954 $ 79 Construction — — — 830 36 Commercial and Industrial 7 3 7 253 1 Total With A Related Allowance Recorded $ 1,615 $ 24 $ 1,615 $ 2,037 $ 116 Total Impaired Loans Real Estate: Residential $ 1,042 $ — $ 1,047 $ 1,085 $ 51 Commercial 13,217 21 13,374 11,882 628 Construction 318 — 318 1,233 55 Commercial and Industrial 512 3 784 987 36 Total Impaired Loans $ 15,089 $ 24 $ 15,523 $ 15,187 $ 770 The recorded investment of loans evaluated for impairment decreased $ 15.1 million at June 30, 2023 compared to December 31, 2022 and was primarily related to commercial real estate loans. Note 5. Fair Value Disclosure FASB ASC 820 “Fair Value Measurement” defines fair value and provides the framework for measuring fair value and required disclosures about fair value measurements. Fair value is defined as the price that would be received for an asset or paid to transfer a liability in an orderly transaction between market participants in the principal or most advantageous market for the asset or liability at the transaction date. ASC 820 establishes a fair value hierarchy that prioritizes the inputs used in valuation methods to determine fair value. The three levels of fair value hierarchy are as follows: Level 1 – Fair value is based on unadjusted quoted prices in active markets that are accessible to the Company for identical assets. These generally provide the most reliable evidence and are used to measure fair value whenever available. Level 2 – Fair value is based on significant inputs, other than Level 1 inputs, that are observable either directly or indirectly for substantially the full term of the asset through corroboration with observable market data. Level 2 inputs include quoted market prices in active markets for similar assets, quoted market prices in markets that are not active for identical or similar assets, and other observable inputs. 23 Table of Contents Level 3 – Fair value is based on significant unobservable inputs. Examples of valuation methodologies that would result in Level 3 classification include option pricing models, discounted cash flows, and other similar techniques. This hierarchy requires the use of observable market data when available. The level in the fair value hierarchy within which the fair value measurement falls is determined based on the lowest level input that is significant to the fair value measurement. The following table presents the financial assets measured at fair value on a recurring basis and reported on the Consolidated Statements of Financial Condition as of the dates indicated, by level within the fair value hierarchy. The majority of the Company’s securities are included in Level 2 of the fair value hierarchy. Fair values for Level 2 securities were primarily determined by a third-party pricing service using both quoted prices for similar assets, when available, and model-based valuation techniques that derive fair value based on market-corroborated data, such as instruments with similar prepayment speeds and default interest rates. The standard inputs that are normally used include benchmark yields of like securities, reportable trades, broker/dealer quotes, issuer spreads, two-sided markets, benchmark securities, bids, offers, and reference data including market research publications. There were no transfers into or out of Level 3 during the six months ended June 30, 2023 or year ended December 31, 2022. Fair Value Hierarchy June 30, 2023 December 31, 2022 (Dollars in thousands) Securities: Available-for-Sale Debt Securities U.S. Government Agencies Level 2 $ 45,382 $ 44,634 Obligations of States and Political Subdivisions Level 2 13,212 13,342 Mortgage-Backed Securities - Government-Sponsored Enterprises Level 2 38,408 41,427 Collateralized Mortgage Obligations - Government Sponsored Enterprises Level 2 74,699 79,642 Corporate Debt Level 2 7,360 8,315 Total Available-for-Sale Debt Securities 179,061 187,360 Equity Securities Mutual Funds Level 1 875 875 Other Level 1 1,491 1,823 Total Equity Securities 2,366 2,698 Total Securities $ 181,427 $ 190,058 The following table presents the financial assets on the Consolidated Statements of Financial Condition measured at fair value on a nonrecurring basis as of the dates indicated by level within the fair value hierarchy for only those nonrecurring assets that had a fair value below the carrying amount. The table also presents the significant unobservable inputs used in the fair value measurements. Financial Asset Fair Value Hierarchy June 30, 2023 Valuation Techniques Significant Unobservable Inputs Range Weighted Average (Dollars in thousands) OREO Level 3 $ 122 Appraisal of Collateral (1) Liquidation Expenses (2) 10 % to 50 % 36.6 % Financial Asset Fair Value Hierarchy December 31, 2022 Valuation Techniques Significant Unobservable Inputs Range Weighted Average (Dollars in thousands) Individually Evaluated Loans Level 3 $ 1,591 Appraisal of Collateral (1) Appraisal Adjustments (2) 0 % to 8 % 7.2 % (1) Fair value is generally determined through independent appraisals of the underlying collateral, which may include various Level 3 inputs, which are not identifiable. (2) Appraisals may be adjusted by management for qualitative factors such as economic conditions and estimated liquidation expenses. The range and weighted average of appraisal adjustments and liquidation expense are presented as a percent of the appraisal. 24 Table of Contents Expected credit losses on individually evaluated loans deemed to be collateral dependent are valued based upon the lower of amortized cost or fair value of the underlying collateral less costs to sell. Fair value is measured based on the value of the collateral securing these loans and is classified as Level 3 in the fair value hierarchy. At June 30, 2023, the Company did not have any loans that would be required to be remeasured. At December 31, 2022, the fair value of individually evaluated loans consisted of loan balances of $ 1.6 million less their specific valuation allowances of $ 24,000 . The fair value of mortgage servicing rights ("MSRs") is determined by calculating the present value of estimated future net servicing cash flows, considering expected mortgage loan prepayment rates, discount rates, servicing costs and other economic factors, which are determined based on current market conditions. The expected rate of mortgage loan prepayments is the most significant factor driving the value of MSRs. MSRs are considered impaired if the carrying value exceeds fair value. Since the valuation model includes significant unobservable inputs as listed above, MSRs are classified as Level 3. MSRs are reported in Other Assets in the Consolidated Statements of Financial Condition and are amortized into mortgage servicing income in Other Income in the Consolidated Statements of Income. At June 30, 2023 and December 31, 2022, the Company did not have any MSRs that would be required to be remeasured. OREO properties are evaluated at the time of acquisition and recorded at fair value, less estimated selling costs. After acquisition, OREO is recorded at the lower of cost or fair value, less estimated selling costs. The fair value of an OREO property is determined from a qualified independent appraisal and is classified as Level 3 in the fair value hierarchy. Financial instruments are defined as cash, evidence of an ownership in an entity, or a contract which creates an obligation or right to receive or deliver cash or another financial instrument from/to a second entity on potentially favorable or unfavorable terms. Fair value 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. If no readily available market exists, the fair value estimates for financial instruments should be based upon management’s judgment regarding current economic conditions, interest rate risk, expected cash flows, future estimated losses and other factors, as determined through various option pricing formulas or simulation modeling. As many of these assumptions result from judgments made by management based upon estimates which are inherently uncertain, the resulting estimated fair values may not be indicative of the amount realizable in the sale of a particular financial instrument. In addition, changes in the assumptions on which the estimated fair values are based may have significant impact on the resulting estimated fair values. As certain assets such as deferred tax assets and premises and equipment are not considered financial instruments, the estimated fair value of financial instruments would not represent the full value of the Company. The following table presents the estimated fair values of the Company’s financial instruments at the dates indicated. June 30, 2023 December 31, 2022 Fair Value Hierarchy Carrying Value Fair Value Carrying Value Fair Value (Dollars in thousands) Financial Assets: Cash and Due From Banks: Interest-Earning Level 1 $ 60,287 $ 60,287 $ 82,957 $ 82,957 Noninterest-Earning Level 1 17,806 17,806 20,743 20,743 Securities See Above 181,427 181,427 190,058 190,058 Loans, Net Level 3 1,090,488 1,051,815 1,037,054 1,011,098 Restricted Stock Level 2 3,252 3,252 2,749 2,749 Mortgage Servicing Rights Level 3 585 998 633 1,000 Accrued Interest Receivable Level 2 4,544 4,544 3,983 3,983 Financial Liabilities: Deposits Level 2 1,263,315 1,259,640 1,268,503 1,264,846 Short-Term Borrowings Level 2 — — 8,060 8,060 Other Borrowed Funds FHLB Borrowings Level 2 20,000 19,922 — — Subordinated Debt Level 2 14,658 12,355 14,638 13,490 Accrued Interest Payable Level 2 1,318 1,318 355 355 25 Table of Contents Note 6. Commitments and Contingent Liabilities The Company is a party to financial instruments with off-balance-sheet risk in the normal course of business primarily to meet the financing needs of its customers. These financial instruments include commitments to extend credit and standby and performance letters of credit. Those instruments involve, to varying degrees, elements of credit and interest rate risk in excess of the amount recognized in the Consolidated Statements of Financial Condition. The contract amounts of those instruments reflect the extent of involvement the Company has in particular classes of financial instruments. 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 and standby and performance letters of credit written is represented by the contractual amount of those instruments. The Company uses the same credit policies in making commitments and conditional obligations as it does for on-balance-sheet instruments. The following table presents the unused and available credit balances of financial instruments whose contracts represent credit risk at the dates indicated. June 30, 2023 December 31, 2022 (Dollars in thousands) Standby Letters of Credit $ 110 $ 110 Performance Letters of Credit 838 1,064 Construction Mortgages 43,464 45,722 Personal Lines of Credit 7,355 6,824 Overdraft Protection Lines 4,947 5,241 Home Equity Lines of Credit 23,459 22,784 Commercial Lines of Credit 65,250 74,921 Total Commitments $ 145,423 $ 156,666 Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee by the customer. Because many of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. The Company evaluates each customer’s creditworthiness 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 of the counterparty. Collateral held varies, but may include accounts receivable, inventory, property, plant and equipment, and income-producing commercial properties. Performance letters of credit represent conditional commitments issued by the Company to guarantee the performance of a customer to a third party. These instruments are issued primarily to support bid or performance-related contracts. The coverage period for these instruments is typically a one-year period with an annual renewal option subject to prior approval by management. Fees earned from the issuance of these letters are recognized upon expiration of the letter. For secured letters of credit, the collateral is typically Company deposit instruments or customer business assets. 26 Table of Contents Note 7. Leases The Company evaluates contracts at commencement to determine if a lease is present. The Company’s lease contracts are all classified as operating leases and create operating right-of-use (“ROU”) assets and corresponding lease liabilities on the Consolidated Statements of Financial Condition. The leases are primarily ROU assets of land and building for branch and loan production locations. ROU assets are reported in Accrued Interest Receivable and Other Assets and the related lease liabilities in Accrued Interest Payable and Other Liabilities on the Consolidated Statements of Financial Condition. The following tables present the lease expense, ROU assets, weighted average term, discount rate and maturity analysis of lease liabilities for operating leases for the periods and dates indicated. Three Months Ended June 30, Six Months Ended June 30, 2023 2022 2023 2022 (Dollars in thousands) Operating Lease Expense $ 77 $ 89 $ 154 $ 171 Short-Term Lease Expense — 1 — 1 Variable Lease Expense 8 7 15 14 Total Lease Expense $ 85 $ 97 $ 169 $ 186 June 30, 2023 December 31, 2022 (Dollars in thousands) Operating Leases: ROU Assets $ 1,801 $ 1,926 Weighted Average Lease Term in Years 7.80 8.13 Weighted Average Discount Rate 2.87 % 2.87 % June 30, 2023 (Dollars in thousands) Maturity Analysis: Due in One Year $ 360 Due After One Year to Two Years 331 Due After Two Years to Three Years 233 Due After Three Years to Four Years 236 Due After Four to Five Years 225 Due After Five Years 776 Total $ 2,161 Less: Present Value Discount 223 Lease Liabilities $ 1,938 There were no new lease agreements entered into during the six months ended June 30, 2023. During the six months ended June 30, 2022, the Company entered into a new lease agreement for the McMurray, PA branch, for a 10-year term ending March 31, 2032, as well as a new lease agreement for the Waynesburg branch, for a 5-year term ending July 31, 2027. 27 Table of Contents Note 8. Other Noninterest Expense The details of other noninterest expense for the Company’s Consolidated Statements of Income for the periods indicated are as follows: Three Months Ended June 30, Six Months Ended June 30, 2023 2022 2023 2022 (Dollars in thousands) Non-Employee Compensation $ 151 $ 139 $ 302 $ 270 Printing and Supplies 70 46 124 127 Postage 59 33 162 137 Telephone 124 119 268 258 Charitable Contributions 24 39 58 80 Dues and Subscriptions 43 39 121 97 Loan Expenses 90 124 147 250 Meals and Entertainment 27 38 41 68 Travel 52 34 106 73 Training 17 13 51 31 Bank Assessment 46 47 98 94 Insurance 83 69 156 131 Miscellaneous 109 98 207 221 Total Other Noninterest Expense $ 895 $ 838 $ 1,841 $ 1,837 28 Table of Contents Note 9. Segment and Related Information At June 30, 2023, the Company’s business activities were comprised of two operating segments, which are community banking and insurance brokerage services. CB Financial is the parent company of the Bank and Exchange Underwriters, a wholly owned subsidiary of the Bank. Exchange Underwriters has an independent board of directors from the Company and is managed separately from the banking and related financial services that the Company offers. Exchange Underwriters is an independent insurance agency that offers property, casualty, commercial liability, surety and other insurance products. The following is a table of selected financial data for the Company’s subsidiaries and consolidated results at the dates and for the periods indicated. Community Bank Exchange Underwriters, Inc. CB Financial Services, Inc. Net Eliminations Consolidated (Dollars in thousands) June 30, 2023 Assets $ 1,432,181 $ 5,576 $ 131,258 $ ( 136,282 ) $ 1,432,733 Liabilities 1,317,617 2,337 14,669 ( 18,479 ) 1,316,144 Stockholders' Equity 114,564 3,239 116,589 ( 117,803 ) 116,589 December 31, 2022 Assets $ 1,409,510 $ 5,585 $ 124,879 $ ( 131,036 ) $ 1,408,938 Liabilities 1,301,783 1,996 14,724 ( 19,720 ) 1,298,783 Stockholders' Equity 107,727 3,589 110,155 ( 111,316 ) 110,155 Three Months Ended June 30, 2023 Interest and Dividend Income $ 15,182 $ 2 $ 1,297 $ ( 1,278 ) $ 15,203 Interest Expense 3,926 — 157 — 4,083 Net Interest and Dividend Income 11,256 2 1,140 ( 1,278 ) 11,120 Provision for Credit Losses - Loans 492 — — — 492 Recovery for Credit Losses - Unfunded Commitments ( 60 ) — — — ( 60 ) Net Interest and Dividend Income After Provision for Credit Losses 10,824 2 1,140 ( 1,278 ) 10,688 Noninterest Income (Loss) 810 1,545 ( 86 ) — 2,269 Noninterest Expense 8,457 1,044 — — 9,501 Undistributed Net Income of Subsidiary 357 — 1,656 ( 2,013 ) — Income Before Income Tax Expense (Benefit) 3,534 503 2,710 ( 3,291 ) 3,456 Income Tax Expense (Benefit) 600 146 ( 47 ) — 699 Net Income $ 2,934 $ 357 $ 2,757 $ ( 3,291 ) $ 2,757 Six Months Ended June 30, 2023 Interest and Dividend Income $ 29,405 $ 3 $ 2,593 $ ( 2,553 ) $ 29,448 Interest Expense 6,433 — 311 — 6,744 Net Interest and Dividend Income 22,972 3 2,282 ( 2,553 ) 22,704 Provision for Credit Losses - Loans 572 — — — 572 Recovery for Credit Losses - Unfunded Commitments ( 60 ) — — — ( 60 ) Net Interest and Dividend Income After Provision for Credit Losses 22,460 3 2,282 ( 2,553 ) 22,192 Noninterest Income (Loss) 1,911 3,501 ( 332 ) — 5,080 Noninterest Expense 16,382 2,143 5 — 18,530 Undistributed Net Income of Subsidiary 965 — 4,842 ( 5,807 ) — Income Before Income Tax Expense (Benefit) 8,954 1,361 6,787 ( 8,360 ) 8,742 Income Tax Expense (Benefit) 1,559 396 ( 128 ) — 1,827 Net Income $ 7,395 $ 965 $ 6,915 $ ( 8,360 ) $ 6,915 29 Table of Contents Community Bank Exchange Underwriters, Inc. CB Financial Services, Inc. Net Eliminations Consolidated (Dollars in thousands) Three Months Ended June 30, 2022 Interest and Dividend Income $ 10,940 $ 2 $ 1,255 $ ( 1,239 ) $ 10,958 Interest Expense 640 — 155 — 795 Net Interest and Dividend Income 10,300 2 1,100 ( 1,239 ) 10,163 Provision for Credit Losses 3,784 — — — 3,784 Net Interest and Dividend Income After Provision for Credit Losses 6,516 2 1,100 ( 1,239 ) 6,379 Noninterest Income (Loss) 903 1,369 ( 167 ) — 2,105 Noninterest Expense 7,420 985 5 — 8,410 Undistributed Net Income (Loss) of Subsidiary 273 — ( 897 ) 624 — Income Before Income Tax (Benefit) Expense 272 386 31 ( 615 ) 74 Income Tax (Benefit) Expense ( 70 ) 113 ( 87 ) — ( 44 ) Net Income $ 342 $ 273 $ 118 $ ( 615 ) $ 118 Six Months Ended June 30, 2022 Interest and Dividend Income $ 21,535 $ 3 $ 2,534 $ ( 2,498 ) $ 21,574 Interest Expense 1,208 — 310 — 1,518 Net Interest and Dividend Income 20,327 3 2,224 ( 2,498 ) 20,056 Provision for Loan Losses 3,784 — — — 3,784 Net Interest and Dividend Income After Provision for Loan Losses 16,543 3 2,224 ( 2,498 ) 16,272 Noninterest Income 1,680 3,166 ( 128 ) — 4,718 Noninterest Expense 15,065 1,992 9 — 17,066 Undistributed Net Income of Subsidiary 834 — 955 ( 1,789 ) — Income Before Income Tax Expense (Benefit) 3,992 1,177 3,042 ( 4,287 ) 3,924 Income Tax Expense (Benefit) 540 343 ( 124 ) — 759 Net Income $ 3,452 $ 834 $ 3,166 $ ( 4,287 ) $ 3,165 30 Table of Contents Note 10. Stock Based Compensation The following table presents stock option information for the period indicated. Number of Shares Weighted Average Exercise Price Weighted Average Remaining Contractual Life in Years Outstanding Options at December 31, 2022 283,748 $ 24.52 5.6 Granted 68,975 21.63 Exercised ( 2,000 ) 22.25 Forfeited ( 2,600 ) 25.25 Outstanding Options at June 30, 2023 348,123 $ 23.95 6.0 Exercisable Options at June 30, 2023 189,549 $ 24.54 3.5 Number of Shares Weighted Average Exercise Price Weighted Average Remaining Service Period in Years Nonvested Options at June 30, 2023 158,574 $ 23.25 9.1 Summary of Significant Assumptions for Newly Issued Stock Options Expected Term in Years 6.5 Expected Volatility 29.5 % Expected Dividends $ 1.00 Risk Free Rate of Return 3.63 % Weighted Average Grant Date Fair Value (per share) $ 4.37 The following table presents restricted stock award information for the period indicated Number of Shares Weighted Average Grant Date Fair Value Price Weighted Average Remaining Service Period in Years Nonvested Restricted Stock at December 31, 2022 64,125 $ 24.32 4.3 Granted 24,975 21.66 Vested ( 4,408 ) 26.00 Forfeited ( 860 ) 24.36 Nonvested Restricted Stock at June 30, 2023 83,832 $ 23.44 4.1 The Company recognizes expense over a five-year vesting period for the restricted stock awards and stock options. Stock-based compensation expense related to restricted stock awards and stock options was $ 187,000 and $ 149,000 for the three months ended June 30, 2023 and 2022. Stock based compensation was $ 361,000 and $ 279,000 for the six months ended June 30, 2023 and 2022. As of June 30, 2023 and December 31, 2022, total unrecognized compensation expense was $ 650,000 and $ 430,000 , respectively, related to stock options, and $ 1.7 million and $ 1.4 million, respectively, related to restricted stock awards. Intrinsic value represents the amount by which the fair value of the underlying stock at June 30, 2023 and December 31, 2022 exceeds the exercise price of the stock options. The intrinsic value of stock options was $ 35,000 and $ 25,000 at June 30, 2023 and December 31, 2022, respectively. At June 30, 2023 and December 31, 2022, respectively, there were 203,775 and 333,335 shares available under the Plan to be issued in connection with the exercise of stock options, and 81,510 and 133,334 shares that may be issued as restricted stock awards or units. Restricted stock awards or units may be issued above this amount provided that the number of shares reserved for stock options is reduced by two and one-half shares for each restricted stock award or unit share granted. 31 Table of Contents Note 11. Subsequent Events The Company evaluated subsequent events through the date the consolidated financial statements were filed with the SEC and incorporated into the consolidated financial statements the effect of all material known events determined by Accounting Standards Codification ("ASC") 855, Subsequent Events , to be recognizable events . Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations. This discussion should be read in conjunction with the unaudited consolidated financial statements, notes and tables included in this report. For further information, refer to the audited consolidated financial statements and notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022. Forward-Looking Statements This report contains certain “forward-looking statements” within the meaning of the federal securities laws. These statements are not historical facts, but rather statements based on the Company’s current expectations regarding its business strategies, intended results and future performance. Forward-looking statements are preceded by terms such as “expects,” “believes,” “anticipates,” “intends” and similar expressions. Management’s ability to predict results or the effect of future plans or strategies is inherently uncertain. Factors which could affect actual results include, but are not limited to, the following: • General and local economic conditions; • Our ability to realize the expected cost savings and other efficiencies related to our branch optimization and operational efficiency initiatives; • Changes in market interest rates, deposit flows, demand for loans, real estate values and competition; • Competitive products and pricing; • The ability of our customers to make scheduled loan payments; • Loan delinquency rates and trends; • Our ability to manage the risks involved in our business; • Our ability to integrate the operations of businesses we acquire; • Our ability to control costs and expenses; • Inflation, market and monetary fluctuations; • Changes in federal and state legislation and regulation applicable to our business; • Actions by our competitors; and • Other factors disclosed in the Company’s periodic reports as filed with the Securities and Exchange Commission. These risks and uncertainties should be considered in evaluating forward-looking statements and undue reliance should not be placed on such statements. The Company assumes no obligation to update any forward-looking statements except as may be required by applicable law or regulation. General CB Financial Services is a bank holding company established in 2006 and headquartered in Carmichaels, Pennsylvania. CB Financial’s business activity is conducted primarily through its wholly owned bank subsidiary, Community Bank. The Bank is a Pennsylvania-chartered commercial bank headquartered in Carmichaels, Pennsylvania. The Bank operates from 10 branches 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 a loan production office in Allegheny County, a corporate center in Washington County and an operations center in Greene County, all of which are in Pennsylvania. The Bank is a community-oriented institution offering residential and commercial real estate loans, commercial and industrial loans, and consumer loans as well as a variety of deposit products for individuals and businesses in its market area. Property and casualty, commercial liability, surety and other insurance products are offered through Exchange Underwriters, Inc., the Bank’s wholly owned subsidiary that is a full-service, independent insurance agency located in Washington County. Overview The following discussion and analysis is presented to assist in the understanding and evaluation of our consolidated financial condition and results of operations. It is intended to complement the unaudited consolidated financial statements and notes thereto appearing elsewhere in this Form 10-Q and should be read in conjunction therewith. The detailed discussion focuses on our consolidated financial condition as of June 30, 2023, compared to the consolidated financial condition as of December 31, 2022 and the consolidated results of operations for the three and six months ended June 30, 2023 compared to the three and six months ended June 30, 2022. 32 Table of Contents Our results of operations depend primarily on our net interest income. Net interest income is the difference between the interest income we earn on our interest-earning assets and the interest we pay on our interest-bearing liabilities. Our results of operations also are affected by our provisions for loan losses, noninterest income and noninterest expense. Noninterest income consists primarily of fees and service charges on deposit accounts, insurance commissions, income from bank-owned life insurance and other income. Noninterest expense consists primarily of expenses related to salaries and employee benefits, occupancy and equipment, data processing, contracted services, legal and professional fees, advertising, deposit and general insurance and other expenses. Financial institutions like us, 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, competition among lenders, interest rate conditions, and funds availability. Our operations and lending are principally concentrated in southwestern Pennsylvania and Ohio Valley market areas. Explanation of Use of Non-GAAP Financial Measures In addition to financial measures presented in accordance with U.S. GAAP, we present certain non-GAAP financial measures. We believe these non-GAAP financial measures provide useful information in understanding our underlying results of operations or financial position and our business and performance trends as they facilitate comparisons with the performance of other companies in the financial services industry. Non-GAAP adjusted items impacting the Company's financial performance are identified to assist investors in providing a complete understanding of factors and trends affecting the Company’s business and in analyzing the Company’s operating results on the same basis as that applied by management. Although we believe that these non-GAAP financial measures enhance the understanding of our business and performance, they should not be considered an alternative to GAAP or considered to be more important than financial results determined in accordance with GAAP, nor are they necessarily comparable with similar non-GAAP measures which may be presented by other companies. Where non-GAAP financial measures are used, the comparable GAAP financial measure, as well as the reconciliation to the comparable GAAP financial measure, can be found herein. The interest income on interest-earning assets, net interest rate spread and net interest margin are presented on a fully tax-equivalent (“FTE”) basis. The FTE basis adjusts for the tax benefit of income on certain tax-exempt loans and securities using the federal statutory income tax rate of 21.0%. We believe the presentation of net interest income on a FTE basis ensures comparability of net interest income arising from both taxable and tax-exempt sources and is consistent with industry practice. The following table reconciles net interest income, net interest spread and net interest margin on a FTE basis for the periods indicated: Three Months Ended Six Months Ended June 30, June 30, 2023 2022 2023 2022 (Dollars in thousands) Interest Income (GAAP) $ 15,203 $ 10,958 $ 29,448 $ 21,574 Adjustment to FTE Basis 35 34 65 71 Interest Income (FTE) (Non-GAAP) 15,238 10,992 29,513 21,645 Interest Expense (GAAP) 4,083 795 6,744 1,518 Net Interest Income (FTE) (Non-GAAP) $ 11,155 $ 10,197 $ 22,769 $ 20,127 Net Interest Rate Spread (GAAP) 2.78 % 3.00 % 2.95 % 3.00 % Adjustment to FTE Basis 0.01 0.01 0.01 0.01 Net Interest Rate Spread (FTE) (Non-GAAP) 2.79 3.01 2.96 3.01 Net Interest Margin (GAAP) 3.29 % 3.12 % 3.40 % 3.10 % Adjustment to FTE Basis 0.01 0.01 0.01 0.01 Net Interest Margin (FTE) (Non-GAAP) 3.30 3.13 3.41 3.11 33 Table of Contents Tangible book value per common share is a non-GAAP measure calculated based on tangible common equity divided by period-end common shares outstanding. We believe this non-GAAP measure serves as a useful tool to help evaluate the strength and discipline of the Company's capital management strategies and as an additional, conservative measure of the Company’s total value. June 30, 2023 December 31, 2022 (Dollars in thousands, except share and per share data) Stockholders' Equity (GAAP) $ 116,589 $ 110,155 Goodwill and Other Intangible Assets, Net (12,354) (13,245) Tangible Common Equity or Tangible Book Value (Non-GAAP) (Numerator) $ 104,235 $ 96,910 Common Shares Outstanding (Denominator) 5,111,678 5,100,189 Book Value per Common Share (GAAP) $ 22.81 $ 21.60 Tangible Book Value per Common Share (Non-GAAP) $ 20.39 $ 19.00 34 Table of Contents Consolidated Statements of Financial Condition Analysis Assets Total assets increased $23.8 million, or 1.7%, to $1.43 billion at June 30, 2023 compared to $1.41 billion at December 31, 2022. Cash and Securities • Cash and due from banks decreased $25.6 million, or 24.7%, to $78.1 million at June 30, 2023, compared to $103.7 million at December 31, 2022, due to loan growth. • Securities decreased $8.6 million, or 4.5%, to $181.4 million at June 30, 2023, compared to $190.1 million at December 31, 2022. The securities balance was primarily impacted by $8.1 million of repayments on mortgage-backed and collateralized mortgage obligation securities and a $332,000 decrease in the market val ue in the equity securities portfolio, which is primarily comprised of bank stocks. Loans, Allowance for Credit Losses (ACL) and Credit Quality • Total loans increased $51.3 million, or 4.9%, to $1.10 billion at June 30, 2023 compared to $1.05 billion at December 31, 2022. Loan growth was driven by increases in commercial and industrial loans, commercial real estate and residential mortgages of $32.2 million, $21.8 million, and $7.8 million, respectively, partially offset by a decrease in consumer loans of $12.1 million. Growth in commercial and industrial loans included the purchase of $8.9 million of syndicated loans. • The ACL - Loans was $10.7 million at June 30, 2023 and $12.8 million at December 31, 2022. As a result, the ACL - Loans to total loans was 0.97% at June 30, 2023 compared to 1.22% at December 31, 2022. The change in the ACL -Loans was primarily due to the Company's adoption of CECL. At adoption, the Company decreased its ACL - Loans by $3.4 million. Contributing to the change in ACL - Loans was a prior year charge-off of $2.7 million and qualitative factors that significantly impacted the incurred loss model driven by historical activity compared to the newly adopted CECL methodology that is centered around using a forecast approach. • Net charge-offs for the three months ended June 30, 2023 were $96,000, or 0.04% of average loans on an annualized basis. Net charge-offs for the three months ended June 30, 2022 were $2.5 million, or 1.01% of average loans on an annualized basis primarily due to the aforementioned $2.7 million charge-off of a commercial and industrial loan. Net recoveries for the six months ended June 30, 2023 were $660,000 primarily due to recoveries totaling $750,000 related to the prior year charged-off loan. Net charge-offs for the six months ended June 30, 2022 were $2.5 million. • Nonperforming loans, which includes nonaccrual loans and accruing loans past due 90 days or more, were $4.1 million at June 30, 2023 compared to $5.8 million at December 31, 2022. The decrease of $1.7 million was due to ten loans totaling $1.7 million being moved from nonaccrual to accrual status during the current period. Nonperforming loans to total loans ratio was 0.37% at June 30, 2023 compared to 0.55% at December 31, 2022. Other • Intangible assets decreased $891,000, or 25.6%, to $2.6 million at June 30, 2023 compared to $3.5 million at December 31, 2022 primarily due to amortization expense recognized during the period. • Accrued interest and other assets increased $5.6 million, or 26.8%, to $26.7 million at June 30, 2023, compared to $21.1 million at December 31, 2022 due to the sale of a $2.0 million syndicated loan which was sold but not yet settled at the end of the period, and increases in accounts receivable for Exchange Underwriters, income taxes receivable and BOLI death benefit claims receivable $853,000, $761,000 and $664,000. Liabilities Total liabilities increased $17.4 million, or 1.3%, to $1.32 billion at June 30, 2023 compared to $1.30 billion at December 31, 2022. Deposits • Total deposits decreased $5.2 million to $1.26 billion as of June 30, 2023 compared to $1.27 billion at December 31, 2022. Interest-bearing demand deposits increased $62.8 million and time deposits increased $60.4 million, while non interest-bearing demand deposits decreased $74.3 million, money market deposits decreased $23.3 million and savings deposits decreased $30.8 million. The increase in interest-bearing demand deposits is primarily the result of higher interest rates attracting more customers and/or additional deposits from existing customers while higher time deposits resulted from the offering of a higher-rate certificate of deposit product. FDIC insured deposits totaled approximately 61.1% of total deposits while an additional 16.5% of deposits were collateralized with investment securities at June 30, 2023. 35 Table of Contents Borrowings • Long-term borrowings increased $20.0 million, or 136.6%, to $34.7 million at June 30, 2023, compared to $14.6 million at December 31, 2022. During the second quarter, the Bank entered into $20.0 million of FHLB advances for a term of 24 months at 4.92%, the proceeds of which were utilized to match fund originations within the Bank's commercial and industrial loan portfolio. • Short-term borrowings decreased $8.1 million, or 100.0%, as there were no short-term borrowings at June 30, 2023, compared to $8.1 million at December 31, 2022. At December 31, 2022, short-term borrowings were comprised entirely of securities sold under agreements to repurchase. These accounts were transitioned into other deposit products and account for a portion of the interest-bearing demand deposit increase. Accrued Interest Payable and Other Liabilities • Accrued interest payable and other liabilities increased $10.6 million, or 139.8%, to $18.2 million at June 30, 2023, compared to $7.6 million at December 31, 2022 primarily due to the purchase of $8.9 million of syndicated loans which were unfunded at the end of the period. Stockholders’ Equity Stockholders’ equity increased $6.4 million, or 5.8%, to $116.6 million at June 30, 2023, compared to $110.2 million at December 31, 2022. • Net income was $6.9 million for the six months ended June 30, 2023. • The Company declared and paid $2.6 million in dividends to common stockholders in the current period. • The Company's January 1, 2023 adoption of CECL resulted in a $2.1 million positive adjustment to stockholders' equity, net of tax. • On April 21, 2022, a $10.0 million repurchase program was authorized, with the Company repurchasing 74,656 shares at an average price of $22.38 per share since the inception of the plan. In total, the Company repurchased $274,000 of common stock since December 31, 2022. The plan expired May 1, 2023. • Book value per share (GAAP) was $22.81 at June 30, 2023 compared to $21.60 at December 31, 2022, an increase of $1.21. Tangible book value per share (Non-GAAP) increased $1.39, or 7.3%, to $20.39 compared to $19.00 at December 31, 2022. Refer to Explanation of Use of Non-GAAP Financial Measures in this Report. 36 Table of Contents Consolidated Results of Operations for the Three Months Ended June 30, 2023 and 2022 Overview. Net income was $2.8 million for the three months ended June 30, 2023, an increase of $2.6 million compared to net income of $118,000 for the three months ended June 30, 2022. Net Interest and Dividend Income. Net interest and dividend income increased $1.0 million, or 9.4%, to $11.1 million for the three months ended June 30, 2023 compared to $10.2 million for the three months ended June 30, 2022. Net interest margin (GAAP) increased to 3.29% for the three months ended June 30, 2023 compared to 3.12% for the three months ended June 30, 2022. Fully Tax Equivalent (FTE) net interest margin (Non-GAAP) increased 17 basis points (bps) to 3.30% for the three months ended June 30, 2023 compared to 3.13% for the three months ended June 30, 2022. Interest and Dividend Income • Interest and dividend income increased $4.2 million, or 38.7%, to $15.2 million for the three months ended June 30, 2023 compared to $11.0 million the three months ended June 30, 2022. ◦ Interest income on loans increased $3.7 million, or 37.9%, to $13.4 million for the three months ended June 30, 2023 compared to $9.7 million for the three months ended June 30, 2022. The average balance of loans increased $71.5 million to $1.08 billion from $1.01 billion, generating $724,000 of additional interest income on loans, and the average yield increased 112 bps to 5.00% compared to 3.88% causing a $3.0 million increase in interest income on loans. ◦ Interest income on interest-earning deposits at other banks increased $599,000, to $721,000 for the three months ended June 30, 2023 compared to $122,000 for the three months ended June 30, 2022 as the average yield increased 443 bps, partially offset by a decrease of $1.9 million in average balances. The increase in the average yield was the result of the Federal Reserve Board's interest rate increases. Interest Expense • Interest expense increased $3.3 million, or 413.6%, to $4.1 million for the three months ended June 30, 2023 compared to $795,000 for the three months ended June 30, 2022. ◦ Interest expense on deposits increased $3.2 million, or 536.1%, to $3.8 million for the three months ended June 30, 2023 compared to $604,000 for the three months ended June 30, 2022. Rising market interest rates led to the repricing of interest-bearing demand and money market deposits and a shift in deposits from non interest-bearing to interest-bearing demand and time deposits and resulted in a 137 bps, or 466.9%, increase in the average cost of interest-bearing deposits compared to the three months ended June 30, 2022. This accounted for a $3.2 million increase in interest expense. Additionally, interest-bearing deposit balances increased $104.5 million, or 12.7%, to $930.1 million as of June 30, 2023 compared to $825.6 million as of June 30, 2022, accounting for a $70,000 increase in interest expense. 37 Table of Contents Average Balances and Yields . The following table presents information regarding average balances of assets and liabilities, the total dollar amounts of interest income and dividends from average interest-earning assets, the total dollar amounts of interest expense on average interest-bearing liabilities, and the resulting average yields and costs. Average balances are derived from daily balances over the periods indicated. The yields set forth below include the effect of deferred fees, discounts, and premiums that are amortized or accreted to interest income or interest expense. FTE yield adjustments have been made for tax exempt loan and securities interest income utilizing a marginal federal income tax rate of 21.0% for the periods presented. As such, amounts will not agree to income as reported in the consolidated financial statements. The yields and costs for the periods indicated are derived by dividing annualized income or expense by the average balances of assets or liabilities, respectively, for the periods presented. Three Months Ended June 30, 2023 2022 Average Balance Interest and Dividends Yield/ Cost (1) Average Balance Interest and Dividends Yield/ Cost (1) (Dollars in thousands) (Unaudited) Assets: Interest-Earning Assets: Loans, Net (2) $ 1,079,399 $ 13,450 5.00 % $ 1,007,874 $ 9,751 3.88 % Debt Securities Taxable 209,292 950 1.82 228,315 988 1.73 Exempt From Federal Tax 6,180 53 3.43 9,109 73 3.21 Equity Securities 2,693 25 3.71 2,693 20 2.97 Interest-Earning Deposits at Banks 54,466 721 5.30 56,379 122 0.87 Other Interest-Earning Assets 2,783 39 5.62 3,235 38 4.71 Total Interest-Earning Assets 1,354,813 15,238 4.51 1,307,605 10,992 3.37 Noninterest-Earning Assets 51,928 84,323 Total Assets $ 1,406,741 $ 1,391,928 Liabilities and Stockholders' Equity: Interest-Bearing Liabilities: Interest-Bearing Demand Deposits $ 354,497 1,582 1.79 % $ 260,655 111 0.17 % Savings Accounts 225,175 53 0.09 248,356 20 0.03 Money Market Accounts 194,565 1,033 2.13 188,804 61 0.13 Time Deposits 155,867 1,174 3.02 127,832 412 1.29 Total Interest-Bearing Deposits 930,104 3,842 1.66 825,647 604 0.29 Short-Term Borrowings 480 3 2.51 34,135 18 0.21 Other Borrowings 21,026 238 4.54 17,611 173 3.94 Total Interest-Bearing Liabilities 951,610 4,083 1.72 877,393 795 0.36 Noninterest-Bearing Demand Deposits 326,262 391,975 Other Liabilities 10,920 4,415 Total Liabilities 1,288,792 1,273,783 Stockholders' Equity 117,949 118,145 Total Liabilities and Stockholders' Equity $ 1,406,741 $ 1,391,928 Net Interest Income (FTE) (Non-GAAP) (3) $ 11,155 $ 10,197 Net Interest Rate Spread (FTE) (Non-GAAP) (3)(5) 2.79 % 3.01 % Net Interest-Earning Assets (4) $ 403,203 $ 430,212 Net Interest Margin (GAAP) (6)) 3.29 3.12 Net Interest Margin (FTE) (Non-GAAP) (3)(6) 3.30 3.13 Return on Average Assets (1) 0.79 0.03 Return on Average Equity (1) 9.38 0.40 Average Equity to Average Assets 8.38 8.49 Average Interest-Earning Assets to Average Interest-Bearing Liabilities 142.37 149.03 PPP Loans $ 38 $ 1 10.56 $ 5,546 $ 144 10.41 (1) Annualized based on three months ended results. (2) Net of the allowance for credit losses and includes nonaccrual loans with a zero yield and Loans Held for Sale if applicable. (3) Refer to Explanation and Use of Non-GAAP Financial Measures in this filing for the calculation of the measure and reconciliation to the most comparable GAAP measure. (4) Net interest-earning assets represent total interest-earning assets less total interest-bearing liabilities. (5) Net interest rate spread represents the difference between the weighted average yield on interest-earning assets and the weighted average cost of interest-bearing liabilities. (6) Net interest margin represents annualized net interest income divided by average total interest-earning assets. 38 Table of Contents Rate/Volume Analysis . The following table presents the effects of changing rates and volumes on our net interest income for the periods indicated. FTE yield adjustments have been made for tax exempt loan and securities income utilizing a marginal federal income tax rate of 21.0%. The volume column shows the effects attributable to changes in volume (changes in volume multiplied by prior rate). The rate column shows the effects attributable to changes in rate (changes in rate multiplied by prior volume). For purposes of this table, changes attributable to both rate and volume, which cannot be segregated, have been allocated proportionately based on the changes due to rate and the changes due to volume. The total column represents the sum of the prior columns. Three Months Ended June 30, 2023 Compared to Three Months Ended June 30, 2022 Increase (Decrease) Due to Volume Rate Total (Dollars in thousands) (Unaudited) Interest and Dividend Income: Loans, net $ 724 $ 2,975 $ 3,699 Debt Securities: Taxable (87) 49 (38) Exempt From Federal Tax (25) 5 (20) Equity Securities — 5 5 Cash at Other Banks (3) 602 599 Other Interest-Earning Assets (5) 6 1 Total Interest-Earning Assets 604 3,642 4,246 Interest Expense: Deposits 70 3,168 3,238 Short-Term Borrowings (34) 19 (15) Other Borrowings 37 28 65 Total Interest-Bearing Liabilities 73 3,215 3,288 Change in Net Interest and Dividend Income $ 531 $ 427 $ 958 Provision for Credit Losses. Effective January 1, 2023, the Company adopted ASU 2016-13, “Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments”, which replaced the incurred loss methodology with an expected loss methodology that is referred to as the current expected credit loss (CECL) methodology. The provision for credit losses recorded for the three months ended June 30, 2023 was $432,000 and was required primarily due to loan growth coupled with a modeled slowdown in loan prepayment speeds. This compared to $3.8 million in provision for credit losses recorded for the three months ended June 30, 2022, primarily due to the charge-off of a $2.7 million commercial and industrial loan to a borrower that ceased operations. Noninterest Income . Noninterest income increased $164,000, or 7.8%, to $2.3 million for the three months ended June 30, 2023, compared to $2.1 million for the three months ended June 30, 2022. This increase was primarily related to a $142,000 increase in commercial and personal insurance commissions and a decrease in net losses on securities of $99,000. Noninterest Expense. Noninterest expense increased $1.1 million, or 13.0%, to $9.5 million for the three months ended June 30, 2023 compared to $8.4 million for the three months ended June 30, 2022. Salaries and benefits increased $692,000, or 15.2%, to $5.2 million primarily due to merit increases, revenue producing staff additions and associated $160,000 of recruiting costs, and $80,000 of severance costs related to the discontinuation of indirect automobile lending. Data processing expense increased $272,000, or 61.0%, to $718,000, due to increased ongoing costs related to the fourth quarter 2022 core conversion and equipment expense increased $101,000 or 55.5%, to $283,000, due to costs associated with the implementation of new interactive teller machines. Income Taxes. Income tax expense was $699,000 for the three months ended June 30, 2023 compared to and income tax benefit of $44,000 for the three months ended June 30, 2022. This change was primarily driven by an increase in pre-tax income to $3.5 million for the three months ended June 30, 2023 compared to $74,000 for the three months ended June 30, 2022. 39 Table of Contents Results of Operations for the Six Months Ended June 30, 2023 and 2022 Overview. Net income was $6.9 million for the six months ended June 30, 2023, an increase of $3.8 million compared to $3.2 million for the six months ended June 30, 2022. Net Interest and Dividend Income. Net interest and dividend income increased $2.6 million, or 13.2% to $22.7 million for the six months ended June 30, 2023 compared to $20.1 million for the six months ended June 30, 2022. Net interest margin (GAAP) increased to 3.40% for the six months ended June 30, 2023 compared to 3.10% for the six months ended June 30, 2022. Net interest margin (Non-GAAP FTE) increased 30 bps to 3.41% for the six months ended June 30, 2023 compared to 3.11% the six months ended June 30, 2022. Interest and Dividend Income • Interest and dividend income increased $7.9 million, or 36.5%, to $29.4 million for the six months ended June 30, 2023 compared to $21.6 million for the six months ended June 30, 2022. ◦ Interest income on loans increased $6.5 million or 33.8% to $25.8 million during the six months ended June 30, 2023 compared to $19.3 million for the six months ended June 30, 2022. Average loans increased $51.6 million, while the loan yield for the six months ended June 30, 2023 increased 106 bps to 4.92% compared to 3.86% for the six months ended June 30, 2022. ◦ Interest income on interest-earning deposits at other banks increased $1.4 million, to $1.5 million for the six months ended June 30, 2023 compared to $156,000 for the six months ended June 30, 2022 as the average yield increased 420 bps, and average balances increased $6.6 million. The increase in the average yield was the result of the Federal Reserve Board's interest rate increases. Interest Expense • Interest expense increased $5.2 million, or 344.3%, to $6.7 million for the six months ended June 30, 2023 compared to $1.5 million for the six months ended June 30, 2022. ◦ Interest expense on deposits increased $5.2 million, or 459.6%, to $6.3 million for the six months ended June 30, 2023 compared to $1.1 million for the six months ended June 30, 2022. Rising market interest rates led to the repricing of interest-bearing demand and money market deposits and a shift in deposits from non interest-bearing to interest-bearing demand and time deposits and resulted in a 113 bps increase in average cost of interest-bearing deposits compared to the six months ended June 30, 2022. This accounted for a $5.1 million increase in interest expense. Additionally, interest-bearing deposits increased $76.1 million, or 9.1%, accounting for a $115,000 increase in interest expense. 40 Table of Contents Average Balances and Yields. The following table presents information regarding average balances of assets and liabilities, the total dollar amounts of interest income and dividends from average interest-earning assets, the total dollar amounts of interest expense on average interest-bearing liabilities, and the resulting average yields and costs. Average balances are derived from daily balances over the periods indicated. The yields set forth below include the effect of deferred fees, discounts, and premiums that are amortized or accreted to interest income or interest expense. FTE yield adjustments have been made for tax exempt loan and securities interest income utilizing a marginal federal income tax rate of 21% for the periods presented. As such, amounts will not agree to income as reported in the consolidated financial statements. The yields and costs for the periods indicated are derived by dividing annualized income or expense by the average balances of assets or liabilities, respectively, for the periods presented. Six Months Ended June 30, 2023 2022 Average Balance Interest and Dividends Yield/ Cost (1) Average Balance Interest and Dividends Yield/ Cost (1) (Dollars in thousands) (Unaudited) Assets: Interest-Earning Assets: Loans, Net (2) $ 1,060,092 $ 25,840 4.92 % $ 1,008,539 $ 19,322 3.86 % Debt Securities Taxable 211,213 1,914 1.81 222,144 1,893 1.70 Tax Exempt 6,225 105 3.37 9,649 156 3.23 Equity Securities 2,693 49 3.64 2,693 42 3.12 Interest-Earning Deposits at Banks 64,455 1,526 4.74 57,829 156 0.54 Other Interest-Earning Assets 2,709 79 5.88 3,358 76 4.56 Total Interest-Earning Assets 1,347,387 29,513 4.42 1,304,212 21,645 3.35 Noninterest-Earning Assets 50,159 103,201 Total Assets $ 1,397,546 $ 1,407,413 Liabilities and Stockholders' Equity: Interest-Bearing Liabilities: Interest-Bearing Demand Deposits $ 344,965 2,773 1.62 % $ 268,585 160 0.12 % Savings Accounts 233,689 90 0.08 246,084 38 0.03 Money Market Accounts 203,952 1,972 1.95 190,605 102 0.11 Time Deposits 128,659 1,511 2.37 129,914 834 1.29 Total Interest-Bearing Deposits 911,265 6,346 1.40 835,188 1,134 0.27 Short-Term Borrowings 910 5 1.11 36,000 37 0.21 Other Borrowings 17,850 393 4.44 17,608 347 3.97 Total Interest-Bearing Liabilities 930,025 6,744 1.46 888,796 1,518 0.34 Noninterest-Bearing Demand Deposits 344,203 388,103 Other Liabilities 6,959 6,468 Total Liabilities 1,281,187 1,283,367 Stockholders' Equity 116,359 124,046 Total Liabilities and Stockholders' Equity $ 1,397,546 $ 1,407,413 Net Interest Income (FTE) (Non-GAAP) (3) $ 22,769 $ 20,127 Net Interest Rate Spread (FTE) (Non-GAAP) (3)(5) 2.96 % 3.01 % Net Interest-Earning Assets (4) $ 417,362 $ 415,416 Net Interest Margin (GAAP) (6) 3.40 3.10 Net Interest Margin (FTE) (Non-GAAP) (3)(6) 3.41 3.11 Return on Average Assets (1) 1.00 0.45 Return on Average Equity (1) 11.98 5.15 Average Equity to Average Assets 8.33 8.81 Average Interest-Earning Assets to Average Interest-Bearing Liabilities 144.88 146.74 PPP Loans $ 69 $ 4 11.69 $ 10,085 $ 589 11.78 (1) Annualized based on six months ended results. (2) Net of the allowance for credit losses and includes nonaccrual loans with a zero yield and Loans Held for Sale if applicable. (3) Refer to Explanation and Use of Non-GAAP Financial Measures in this filing for the calculation of the measure and reconciliation to the most comparable GAAP measure. (4) Net interest-earning assets represent total interest-earning assets less total interest-bearing liabilities. (5) Net interest rate spread represents the difference between the weighted average yield on interest-earning assets and the weighted average cost of interest-bearing liabilities. (6) Net interest margin represents annualized net interest income divided by average total interest-earning assets. 41 Table of Contents Rate Volume Analysis. The following table presents the effects of changing rates and volumes on our net interest income for the periods indicated. FTE yield adjustments have been made for tax exempt loan and securities income utilizing a marginal federal income tax rate of 21%. The volume column shows the effects attributable to changes in volume (changes in volume multiplied by prior rate). The rate column shows the effects attributable to changes in rate (changes in rate multiplied by prior volume). For purposes of this table, changes attributable to both rate and volume, which cannot be segregated, have been allocated proportionately based on the changes due to rate and the changes due to volume. The total column represents the sum of the prior columns. Six Months Ended June 30, 2023 Compared to Six Months Ended June 30, 2022 Increase (Decrease) Due to Volume Rate Total (Dollars in thousands) (Unaudited) Interest and Dividend Income: Loans, net $ 989 $ 5,529 $ 6,518 Debt Securities: Taxable (98) 119 21 Exempt From Federal Tax (58) 7 (51) Equity Securities — 7 7 Cash at Other Banks 19 1,351 1,370 Other Interest-Earning Assets (17) 20 3 Total Interest-Earning Assets 835 7,033 7,868 Interest Expense: Deposits 115 5,097 5,212 Short-Term Borrowings (65) 33 (32) Other Borrowings 4 42 46 Total Interest-Bearing Liabilities 54 5,172 5,226 Change in Net Interest and Dividend Income $ 781 $ 1,861 $ 2,642 Provision for Credit Losses. The provision for credit losses was $572,000 for the six months ended June 30, 2023, and $3.8 million for the six months ended June 30, 2022.The increased provision for credit losses for the six months ended June 30, 2022 was primarily due to a provision for a single loan charge-of f of $2.7 million with respect to a commercial and industrial loan to a borrower who ceased operations. Noninterest Income. Noninterest income increased $362,000, or 7.7%, to $5.1 million for the six months ended June 30, 2023, compared to $4.7 million for the six months ended June 30, 2022. This increase was primarily related to a $303,000 increase in net gains of bank-owned life insurance claims resulting from two death claims and an increase of $267,000, or 8.4%, in insurance commissions to $3.4 million for the six months ended June 30, 2023, compared to $3.2 million for the six months ended June 30, 2022 due to higher lock-in amounts received and core business including commercial and personal insurance lines. Conversely, service fees decreased $193,000, or 17.8%, to $892,000 for six months ended June 30, 2023, compared to $1.1 million for the six months ended June 30, 2022 and the net loss on equity securities increased to $332,000 for the six months ended June 30, 2023 compared to $206,000 for the six months ended June 30, 2022, which was due to a decline of $126,000 in the market value of equity securities, comprised mainly of bank stocks. Noninterest Expense. Noninterest expense increased $1.5 million, or 8.6%, to $18.5 million for the six months ended June 30, 2023 compared to $17.1 million for the six months ended June 30, 2022. Salaries and benefits increased $1.2 million primarily due to revenue producing staffing additions, recruiting costs and severance related to the discontinuation of indirect automobile lending. Data processing expense increased $644,000 due to increased ongoing costs related to the fourth quarter 2022 core conversion and equipment expense increased $109,000 due to costs associated with the implementation of new interactive teller machines. Conversely, contracted services decreased $354,000 due primarily to costs associated with project management of strategic initiatives during 2022. 42 Table of Contents Income Taxes. Income tax expense increased $1.1 million to $1.8 million for the six months ended June 30, 2023 compared to $759,000 for the six months ended June 30, 2022. The change between the periods is consistent with the change in pre-tax income, as pre-tax income was $8.7 million for the six months ended June 30, 2023 compared to pre-tax income of $3.9 million for the six months ended June 30, 2022. Off-Balance Sheet Arrangements. Other than loan commitments and standby and performance letters of credit, we do not have any off-balance sheet arrangements that have or are reasonably likely to have a significant current or future effect on our financial condition, revenues, expenses, results of operations, liquidity, capital expenditures, or capital resources that are material to investors. Refer to Note 6 in the Notes to Consolidated Financial Statements of this report for a summary of commitments outstanding as of June 30, 2023 and December 31, 2022. Liquidity and Capital Management Liquidity. Liquidity is the ability to meet current and future financial obligations of a short-term nature. The Company’s primary sources of funds consist of deposit inflows, loan repayments and maturities, calls and sales of securities. While maturities and scheduled amortization of loans and securities are typically predictable sources of funds, deposit flows and mortgage prepayments are greatly influenced by general interest rates, economic conditions and competition. The Company regularly adjusts its investments in liquid assets based upon its assessment of expected loan demand, expected deposit flows, yields available on interest-earning deposits and securities, and the objectives of its asset/liability management program. Excess liquid assets are invested generally in interest-earning deposits with other banks and short- and intermediate-term securities. The Company believes that it had sufficient liquidity at June 30, 2023 to satisfy its short- and long-term liquidity needs. The Company’s most liquid assets are cash and due from banks, which totaled $78.1 million at June 30, 2023. The levels of these assets depend on our operating, financing, lending and investing activities during any given period. Unpledged securities, which provide an additional source of liquidity, totaled $10.1 million at June 30, 2023. In addition, at June 30, 2023, the Company had the ability to borrow up to $466.1 million from the FHLB of Pittsburgh, of which $444.1 million is available. The Company also has the ability to borrow up to $115.9 million from the FRB through its Borrower-In-Custody line of credit agreement and the Company also maintains multiple line of credit arrangements with various unaffiliated banks totaling $50.0 million as of both June 30, 2023 and December 31, 2022, currently these credit arrangements have remained unused. At June 30, 2023, $79.1 million, or 46.7% of total time deposits mature within one year. If these time deposits do not remain with the Company, the Company will be required to seek other sources of funds. Depending on market conditions, the Company may be required to pay higher rates on such deposits or other borrowings than it currently pays on these time deposits. The Company believes, however, based on past experience that a significant portion of its time deposits will remain with it, either as time deposits or as other deposit products. The Company has the ability to attract and retain deposits by adjusting the interest rates offered. The Bank's current deposit portfolio is 61.1% insured by the FDIC, and with additional coverage of 16.5% from the Bank's investment securities; of the total deposits held at the Bank only 22.4% are uninsured. We are committed to maintaining a strong liquidity position; therefore, we monitor our liquidity position on a daily basis. We anticipate that we will have sufficient funds to meet our current funding commitments. The marginal cost of new funding, however, whether from deposits or borrowings from the FHLB, will be carefully considered as we monitor our liquidity needs. Therefore, in order to minimize our cost of funds, we may consider additional borrowings from the FHLB in the future. CB Financial is a separate legal entity from the Bank and must provide for its own liquidity to pay any dividends to its shareholders and for other corporate purposes. Its primary source of liquidity is dividend payments it receives from the Bank. The Bank’s ability to pay dividends to CB Financial is subject to regulatory limitations. At June 30, 2023, CB Financial (on an unconsolidated, stand-alone basis) had liquid assets of $16.0 million. The ability to pay future dividends or conduct stock repurchases may be limited under applicable banking regulations and regulatory policies due to expected losses for future periods and/or the inability to upstream funds from the Bank to the Company as a result of lower income or regulatory capital levels. Capital Management. The Bank is subject to various regulatory capital requirements administered by the federal banking agencies. Failure to meet minimum capital requirements can result in certain mandatory and possibly 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, each must meet specific capital guidelines that involve quantitative measures of their assets, liabilities, and certain off-balance-sheet items as calculated under regulatory accounting practices. The capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings and other factors. 43 Table of Contents Under the Regulatory Capital Rules, in order to avoid limitations on capital distributions (including dividend payments and certain discretionary bonus payments to executive officers), a banking organization must hold a capital conservation buffer comprised of common equity Tier I capital above its minimum risk-based capital requirements in an amount greater than 2.5% of total risk-weighted assets. At June 30, 2023 and December 31, 2022, the Bank was categorized as “well capitalized” under the regulatory framework for prompt corrective action. At June 30, 2023. The following table presents the Bank’s regulatory capital amounts and ratios, as well as the minimum amounts and ratios required to be well capitalized as of the dates indicated. June 30, 2023 December 31, 2022 Amount Ratio Amount Ratio (Dollars in thousands) Common Equity Tier 1 (to risk weighted assets) Actual $ 129,044 12.54 % $ 121,188 12.33 % For Capital Adequacy Purposes 46,307 4.50 44,221 4.50 To Be Well Capitalized 66,888 6.50 63,875 6.50 Tier 1 Capital (to risk weighted assets) Actual 129,044 12.54 121,188 12.33 For Capital Adequacy Purposes 61,742 6.00 58,961 6.00 To Be Well Capitalized 82,323 8.00 78,615 8.00 Total Capital (to risk weighted assets) Actual 140,368 13.64 133,478 13.58 For Capital Adequacy Purposes 82,323 8.00 78,615 8.00 To Be Well Capitalized 102,904 10.00 98,269 10.00 Tier 1 Leverage (to adjusted total assets) Actual 129,044 9.26 121,188 8.66 For Capital Adequacy Purposes 55,732 4.00 55,969 4.00 To Be Well Capitalized 69,665 5.00 69,962 5.00 Item 3. Quantitative and Qualitative Disclosure about Market Risk. Management of Interest Rate Risk. The majority of the Company’s assets and liabilities are monetary in nature. Consequently, the Company’s most significant form of market risk is interest rate risk and a principal part of its business strategy is to manage interest rate risk by reducing the exposure of net interest income to changes in market interest rates. Accordingly, the Company’s Board has established an Asset/Liability Management Committee, which is responsible for evaluating the interest rate risk inherent in the Company’s assets and liabilities, for determining the level of risk that is appropriate given the Company’s business strategy, operating environment, capital, liquidity and performance objectives; and for managing this risk consistent with the guidelines approved by the Board. Senior management monitors the level of interest rate risk and the Asset/Liability Management Committee meets on a quarterly basis to review its asset/liability policies and position and interest rate risk position, and to discuss and implement interest rate risk strategies. The Company monitors interest rate risk through the use of a simulation model. The quarterly reports developed in the simulation model assist the Company in identifying, measuring, monitoring and controlling interest rate risk to ensure compliance within the Company’s policy guidelines. This quantitative analysis measures interest rate risk from both a capital and earnings perspective. With regard to earnings, movements in interest rates and the shape of the yield curve significantly influence the amount of net interest income that is recognized. Movements in market interest rates significantly influence the spread between the interest earned on our interest-earning assets and the interest paid on our interest-bearing liabilities. Our internal interest rate risk analysis calculates the sensitivity of our projected net interest income over a one year period utilizing a static balance sheet assumption through which incoming and outgoing asset and liability cash flows are reinvested into similar instruments. Product pricing and earning asset prepayment speeds are adjusted for each rate scenario. With regard to capital, our internal interest rate risk analysis calculates the sensitivity of our economic value of equity (“EVE”) ratio to movements in interest rates. EVE represents the present value of the expected cash flows from our assets less the present 44 Table of Contents value of the expected cash flows arising from our liabilities. EVE attempts to quantify our economic value using a discounted cash flow methodology while the EVE ratio reflects that value as a form of capital ratio. The degree to which the EVE ratio changes for any hypothetical interest rate scenario from its base case measurement is a reflection of an institution’s sensitivity to interest rate risk. For both net interest income and capital at risk, our interest rate risk analysis calculates a base case scenario that assumes no change in interest rates. The model then measures changes throughout a series of interest rate scenarios representing immediate and permanent, parallel shifts in the yield curve up and down 100, 200, 300 and 400 basis points with additional scenarios modeled where appropriate. The model requires that interest rates remain positive for all points along the yield curve for each rate scenario which may preclude the modeling of certain falling rate scenarios. The table below sets forth, as of June 30, 2023, the estimated changes in EVE and net interest income at risk that would result from the designated instantaneous changes in market interest rates. Computations of prospective effects of hypothetical interest rate changes are based on numerous assumptions, including relative levels of market interest rates, loan prepayments and deposit decay, and should not be relied upon as indicative of actual results. EVE EVE as a Percent of Portfolio Value of Assets Net Interest Earnings at Risk Change in Interest Rates in Basis Points Dollar Amount Dollar Change Percent Change NPV Ratio Basis Point Change Dollar Amount Dollar Change Percent Change (Dollars in thousands) +400 $ 127,446 $ (51,985) (29.0) % 10.59 % (272) $ 46,003 $ (1,253) (2.7) % +300 138,247 (41,184) (23.0) 11.19 (212) 46,270 (986) (2.1) +200 151,447 (27,984) (15.6) 11.92 (139) 46,610 (646) (1.4) +100 165,781 (13,650) (7.6) 12.67 (64) 46,948 (308) (0.7) Flat 179,431 — — 13.31 — 47,256 — — (100) 190,722 11,291 6.3 13.73 42 46,696 (560) (1.2) (200) 197,755 18,324 10.2 13.84 53 45,613 (1,643) (3.5) (300) 201,794 22,363 12.5 13.73 42 44,012 (3,244) (6.9) (400) 198,716 19,285 10.7 13.20 (11) 42,811 (4,445) (9.4) Certain shortcomings are inherent in the methodology used in the above interest rate risk measurement. Modeling changes in EVE and net interest income require making certain assumptions that may or may not reflect the manner in which actual yields and costs respond to changes in market interest rates. In this regard, the table presented assumes that the composition of the Company’s interest-sensitive assets and liabilities existing at the beginning of a period remains constant over the period being measured, and assumes that a particular change in interest rates is reflected uniformly across the yield curve regardless of the duration or repricing of specific assets and liabilities. Accordingly, although the table provides an indication of the Company’s interest rate risk exposure at a particular point in time, such measurements are not intended to and do not provide a precise forecast of the effect of changes in market interest rates on EVE and net interest income and will differ from actual results. EVE calculations also may not reflect the fair values of financial instruments. For example, changes in market interest rates can increase the fair values of the Company’s loans, deposits and borrowings. Item 4. Controls and Procedures. (a) Evaluation of Disclosure Controls and Procedures Our management, with the participation of our Chief Executive Officer and our Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures as of June 30, 2023. The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company’s management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure. Management recognizes that any controls and procedures, no matter how 45 Table of Contents well designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost benefit relationship of possible controls and procedures. Based upon their evaluation, the principal executive officer and principal financial officer concluded that, as of the end of the period covered by this report, our disclosure controls and procedures were effective for the purpose of ensuring that the information required to be disclosed in the reports that the Company files or submits under the Exchange Act with the SEC (1) is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and (2) is accumulated and communicated to our management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosures. (b) Changes in Internal Control Over Financial Reporting There have been no changes in our internal control over financial reporting during the quarter ended June 30, 2023, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. PART II - OTHER INFORMATION Item 1. Legal Proceedings. Periodically, there have been various claims and lawsuits against us, such as claims to enforce liens, claims seeking damages for improper collection procedures or misrepresentations, condemnation proceedings on properties in which we hold security interests, claims involving the making and servicing of real property loans and other issues incident to our business. We are not a party to any other pending legal proceedings that we believe would have a material adverse effect on our consolidated financial condition, results of operations or cash flows. Item 1A. Risk Factors. In addition to the other information set forth in this report, you should carefully consider the factors discussed in “Part I, Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2022, which could materially affect our business, financial condition or future results. The risks described in such Annual Report on Form 10-K are not the only risks that we face. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially affect our business, financial condition and/or operating results. Item 2. Unregistered Sales of Equity Securities and Use of Proceeds. The Company made the following purchases of its common stock during the three months ended June 30, 2023. Period Total Number of Shares Purchased (1) Average Price Paid per Share Total Number of Shares Purchased as Part of the Publicly Announced Program Approximate Dollar Value of Shares That May Yet Be Purchased Under the Program April 1-30, 2023 6,792 $ 21.63 6,792 $ 8,329,501 May 1-31, 2023 — — — — June 1-30, 2023 — — — — Total 6,792 $ 21.63 6,792 $ — (1) On April 21, 2022, the Company announced that the Board had approved a program commencing on May 2, 2022 to repurchase up to $10.0 million of the Company's outstanding common stock. This repurchase program expired on May 1, 2023. In connection with the program, the Company purchased a total of 74,656 shares of the Company's common stock at an average price of $22.38 per share. Item 3. Defaults Upon Senior Securities. Not applicable. Item 4. Mine Safety Disclosures. Not applicable. Item 5. Other Information. None. 46 Table of Contents Item 6. Exhibits 3.1 Amended and Restated Articles of Incorporation (incorporated by reference to Exhibit 3.1 to Registration Statement on Form S-4 filed on June 13, 2014 (File No. 333-196749)) 3.2 Bylaws, as amended (incorporated herein by reference to Exhibit 3.2 to the Company's Current Report on Form 8-K filed on May 20, 2020) 31.1 Rule 13a-14(a) / 15d-14(a) Certification (Chief Executive Officer) 31.2 Rule 13a-14(a) / 15d-14(a) Certification (Chief Financial Officer) 32.1 Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 101 The following materials for the quarter ended June 30, 2023, formatted in XBRL (Extensible Business Reporting Language); the (i) Consolidated Statements of Financial Condition, (ii) Consolidated Statements of Income, (iii) Consolidated Statements of Comprehensive Income (Loss), (iv) Consolidated Statements of Stockholders’ Equity, (v) Consolidated Statements of Cash Flows and (vi) Notes to the Consolidated Financial Statements (Unaudited) 104 Cover Page Interactive Data File (Embedded within Inline XBRL contained in Exhibit 101) 47 Table of Contents SIGNATURES Pursuant to the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. CB FINANCIAL SERVICES, INC. (Registrant) Date: August 11, 2023 /s/ John H. Montgomery John H. Montgomery President and Chief Executive Officer Date: August 11, 2023 /s/ Jamie L. Prah Jamie L. Prah Executive Vice President and Chief Financial Officer (Principal Financial Officer and Chief Accounting Officer) 48