What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2023-08-11 compared with 2023-05-12 · 216 added, 142 removed, 794 unchanged (31% of the section changed)

1 unchanged sentence

CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

(Unaudited) March 31,

(Unaudited) June 30,

2023 December 31,

1 unchanged sentence

Cash and Due From Banks:

Interest Bearing $ 85,533 $ 82,957

Non-Interest Bearing 18,012 20,743

Interest-Earning $ 60,287 $ 82,957

Noninterest-Earning 17,806 20,743

Total Cash and Due From Banks 78,093 103,700

2 unchanged sentences

Total Securities 181,427 190,058

Loans, Net of Allowance for Credit Losses of $ 10,270 and $ 12,819 at March 31, 2023 and December 31, 2022, Respectively

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

6 unchanged sentences

$ 1,432,733 $ 1,408,938

Non-Interest Bearing Demand Deposit Accounts $ 350,911 $ 390,405

NOW Accounts 359,051 311,825

Noninterest-Bearing Demand Accounts $ 316,098 $ 390,405

Interest-Bearing Demand Accounts 374,654 311,825

Money Market Accounts 185,814 209,125

12 unchanged sentences

Common Stock, $ 0.4167 Par Value;

35,000,000 Shares Authorized, 5,730,908 Shares Issued and 5,116,830 Shares Outstanding at March 31, 2023, with 5,708,433 and 5,100,189 Shares Issued and Outstanding at December 31, 2022.

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.

Capital Surplus

2 unchanged sentences

70,314 63,861

Treasury Stock, at Cost ( 614,078 and 608,244 Shares at March 31, 2023 and December 31, 2022, Respectively)

Treasury Stock, at Cost ( 621,730 and 608,244 Shares at June 30, 2023 and December 31, 2022, Respectively)

( 14,100 ) ( 13,797 )

7 unchanged sentences

Three Months Ended

June 30, Six Months Ended

2023 2022 2023 2022

(Dollars in thousands, except share and per share data)

14 unchanged sentences

Provision For Credit Losses - Loans 492 3,784 572 3,784

Provision For Credit Losses - Unfunded Commitments — —

NET INTEREST AND DIVIDEND INCOME AFTER PROVISION FOR CREDIT LOSSES 11,503 9,893

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

2 unchanged sentences

Other Commissions 224 179 368 268

Net Gain on Sales of Loans 2 —

Net Loss on Sales of Loans ( 5 ) — ( 3 ) —

Net Loss on Securities ( 100 ) ( 199 ) ( 332 ) ( 206 )

19 unchanged sentences

TOTAL NONINTEREST EXPENSE 9,501 8,410 18,530 17,066

Income Before Income Tax Expense

Income Tax Expense 1,129 803

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

8 unchanged sentences

Three Months Ended

June 30, Six Months Ended

2023 2022 2023 2022

(Dollars in thousands)

Net Income $ 2,757 $ 118 $ 6,915 $ 3,165

Other Comprehensive Income (Loss):

Change in Unrealized Gain (Loss) on Investment Securities Available-for-Sale 2,580 ( 12,351 )

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 Income (Loss), Net of Income Tax Effect 2,023 ( 9,691 )

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 )

1 unchanged sentence

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (UNAUDITED)

Three Months Ended March 31, 2023 Shares Issued Common Stock Capital Surplus Retained Earnings Treasury Stock Accumulated Other Comprehensive Loss Total Stockholders' Equity

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

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 as of January 1, 2023, adjusted 5,708,433 $ 2,379 $ 83,953 $ 65,953 $ ( 13,797 ) $ ( 26,241 ) $ 112,247

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 Income — — — — — 2,023 2,023

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)

2 unchanged sentences

— — — ( 2,554 ) — — ( 2,554 )

March 31, 2023 5,730,908 $ 2,388 $ 84,118 $ 68,834 $ ( 13,927 ) $ ( 24,218 ) $ 117,195

Three Months Ended March 31, 2022 Shares Issued Common Stock Capital Surplus Retained Earnings Treasury Stock Accumulated Other Comprehensive Loss Total Stockholders' Equity

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)

11 unchanged sentences

— — — ( 2,474 ) — — ( 2,474 )

March 31, 2022 5,701,758 $ 2,376 $ 83,422 $ 59,343 $ ( 12,367 ) $ ( 10,618 ) $ 122,156

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

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

Three Months Ended March 31, 2023 2022

Six Months Ended June 30, 2023 2022

(Dollars in thousands)

4 unchanged sentences

Depreciation and Amortization 1,420 1,282

Provision for Credit Losses 80 —

Provision for Credit Losses - Loans 572 3,784

Recovery for Credit Losses - Unfunded Commitments ( 60 ) —

Loss on Securities 332 206

3 unchanged sentences

Originations of Mortgage Loans for Sale ( 266 ) —

Gain on Sale of Loans ( 2 ) —

Loss on Sale of Loans 3 —

Gain on Sale of Other Real Estate Owned and Repossessed Assets — ( 1 )

2 unchanged sentences

Net (Gain) Loss on Disposal of Fixed Assets ( 11 ) 8

Increase in Taxes Payable 1,129 956

Increase in Accrued Interest Payable 109 60

Decrease in Taxes Payable ( 839 ) ( 2,462 )

Increase (Decrease) in Accrued Interest Payable 963 ( 42 )

Other, Net ( 308 ) ( 725 )

4 unchanged sentences

Purchases of Securities — ( 26,826 )

Net (Increase) Decrease in Loans ( 15,865 ) 223

Net Increase in Loans ( 45,113 ) ( 9,576 )

Purchase of Premises and Equipment ( 1,345 ) ( 262 )

5 unchanged sentences

FINANCING ACTIVITIES

Net Increase in Deposits 13,017 23,700

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 )

1 unchanged sentence

Exercise of Stock Options 45 167

NET CASH PROVIDED BY FINANCING ACTIVITIES 3,673 19,199

(DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS ( 155 ) 3,914

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

2 unchanged sentences

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

Three Months Ended March 31, 2023 2022

Six Months Ended June 30, 2023 2022

(Dollars in thousands)

6 unchanged sentences

Other Real Estate Acquired in Settlement of Loans 166 —

Syndicated Loans Purchased not Settled 8,943 —

Syndicated Loans Purchased and Sold not Settled, net 6,976 —

Right of Use Asset Recognized — 1,284

13 unchanged sentences

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 losses on loans, the valuation of real estate acquired in connection with foreclosures or in satisfaction of loans, other-than-temporary impairment evaluations of securities, goodwill and intangible assets impairment, and the valuation of deferred tax assets.

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.

2 unchanged sentences

Interim results are not necessarily indicative of results for a full year.

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.

Nature of Operations

6 unchanged sentences

Use of Critical Accounting Estimates

The disclosures below supplements 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 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):

4 unchanged sentences

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 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 allowance for credit losses represents the estimated amount considered necessary to cover lifetime expected credit losses inherent in financial assets at the balance sheet date.

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 credit.

It also applies to off-balance sheet credit exposures such as loan commitments and unused lines of

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 allowance for credit losses.

The allowance for credit losses is reported separately as a contra-asset on the consolidated statement of financial condition.

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.

Allowance for Credit Losses on Loans Receivable

The allowance for credit losses on loans is deducted from the amortized cost basis of the loan to present the net amount expected to be collected.

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.

3 unchanged sentences

The Company evaluates the pooling methodology at least annually.

Loans are charged off against the allowance for credit losses when the Company believes the balances to be uncollectible.

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.

3 unchanged sentences

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 allowance for credit losses 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 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.

2 unchanged sentences

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 restructurings 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 allowance for credit losses 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.

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.

3 unchanged sentences

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 costs to sell at the reporting date and the amortized cost basis of the loan.

Allowance for Credit Losses on Off-Balance Sheet Commitments

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.

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.

1 unchanged sentence

To determine the expected funding rate, the Company uses a historical utilization rate for each segment.

As noted above, the allowance for credit losses 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.

Allowance for Credit Losses on Available for Sale Securities

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.

3 unchanged sentences

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 allowance for credit losses 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 allowance for credit losses is recognized in other comprehensive income (loss), net of tax.

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.

2 unchanged sentences

government, are highly rated by major agencies and have a long history of no credit losses.

Changes in the allowance for credit losses are recorded as provision for, or reversal of, credit loss expense.

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.

1 unchanged sentence

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 $ 3.5 million at March 31, 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 March 31, 2023 and is excluded from the estimate of credit losses.

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

10 unchanged sentences

For all entities, the amendments in ASU 2022-06 are effective upon issuance.

As of March 31, 2023, the Company has identified approximately $ 126.0 million in outstanding loan balances and a $ 5.0 million corporate debt security tied to the LIBOR reference rate.

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.

5 unchanged sentences

Three Months Ended

June 30, Six Months Ended

2023 2022 2023 2022

(Dollars in thousands, except share and per share data)

3 unchanged sentences

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

2 unchanged sentences

$ 0.54 $ 0.02 $ 1.35 $ 0.61

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.

1 unchanged sentence

Three Months Ended

June 30, Six Months Ended

2023 2022 2023 2022

Stock Options 339,123 156,118 339,123 156,118

1 unchanged sentence

The following table presents the amortized cost and fair value of securities available-for-sale at the dates indicated:

March 31, 2023

June 30, 2023

(Dollars in thousands)

28 unchanged sentences

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:

March 31, 2023

June 30, 2023

Less than 12 months

23 unchanged sentences

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 March 31, 2023 or December 31, 2022, represents a credit related impairment.

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 Company’s management considers the length of time and the extent to which the fair value has been less than cost, and the financial condition of the issuer.

The unrealized losses on securities

at March 31, 2023 and December 31, 2022 relate principally to changes in market interest rates subsequent to the acquisition of the specific securities.

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.

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 $ 179.1 million at March 31, 2023 and $ 179.0 million at December 31, 2022 of which securities with a fair value of $ 172.9 million and $ 175.6 million at March 31, 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.

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:

March 31, 2023

June 30, 2023

(Dollars in thousands)

8 unchanged sentences

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.

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

2023 2022 2023 2022

(Dollars in thousands)

17 unchanged sentences

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 phase, which is usually 12 to 18 months.

Construction loans generally provide for the payment of interest only during the construction

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.

4 unchanged sentences

The following table presents the classifications of loans as of the dates indicated.

March 31, 2023 December 31, 2022

June 30, 2023 December 31, 2022

(Dollars in thousands)

9 unchanged sentences

$ 1,090,488 $ 1,037,054

Included in total loans above are unamortized net deferred loan fees of $ 1.3 million and $ 1.2 million at March 31, 2023 and December 31, 2022, respectively.

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.

5 unchanged sentences

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 March 31, 2023.

There were no loans in the criticized category of loss.

Classified Loans by Origination Year (as of March 31, 2023)

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

38 unchanged sentences

Gross Charge Offs $ — $ 92 $ 21 $ — $ — $ 105 $ 16 $ 234

$ — $ 22 $ 7 $ — $ — $ 8 $ 16 $ 53

(1) Gross charge-offs for the three months ended March 31, 2023, were related to consumer loans.

There were no other charge-offs for the other loan categories in the current period.

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:

10 unchanged sentences

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.

March 31, 2023

June 30, 2023

(Dollars in Thousands)

17 unchanged sentences

$ 1,041,404 $ 4,371 $ 100 $ — $ 4,471 $ 3,998 $ 1,049,873

Additional interest income that would have been recorded if the loans that were nonaccrual at March 31, 2023 were current was $ 33,000 for the three months ended March 31, 2023, and $ 79,000 for the three months ended March 31, 2022.

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.

March 31, 2023

Nonaccrual With No ACL Nonaccrual With ACL Loans Past Due 90 Days Still Accruing Total Nonperforming Loans

June 30, 2023

Nonaccrual With No ACL Nonaccrual With ACL Loans Past Due 90 Days Still Accruing Total Nonperforming Assets

(Dollars in Thousands)

8 unchanged sentences

Total Nonperforming Assets

No interest income on nonaccrual loans was recognized during the three months ended March 31, 2023.

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.

4 unchanged sentences

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 months ended March 31, 2023, there were no new loan modifications to borrowers experiencing financial difficulty in the past 12 months under the current guidance.

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.

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.

13 unchanged sentences

Total Nonperforming Assets

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 $ 855 ,000 and $ 1.4 million at March 31, 2023 and December 31, 2022, respectively.

The activity in the ACL - Loans is summarized below by primary segments as of March 31, 2023 :

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:

(Dollars in thousands)

March 31, 2023 $ 2,156 $ 3,056 $ 805 $ 1,997 $ 2,098 $ 158 $ — $ 10,270

( 97 ) — — — ( 51 ) — — ( 148 )

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

(Dollars in thousands)

December 31, 2022 $ 2,074 $ 5,810 $ 502 $ 2,313 $ 1,517 $ — $ 603 $ 12,819

2 unchanged sentences

14 23 — 766 58 — — 861

(Recovery) Provision for Credit Losses - Loans ( 68 ) 490 ( 185 ) ( 17 ) ( 178 ) 38 — 80

March 31, 2023 $ 2,156 $ 3,056 $ 805 $ 1,997 $ 2,098 $ 158 $ — $ 10,270

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.

1 unchanged sentence

(in thousands) Allowance for Credit Losses

Balance at March 31, 2023

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

Provision for credit losses —

Balance at March 31, 2023 $ 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 value of the collateral and the amortized cost basis of the asset as of the measurement date.

During the three months ended March 31, 2023, there were no loans that required a credit loss to be individually assigned.

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.

6 unchanged sentences

(Dollars in thousands)

March 31, 2022 $ 1,472 $ 6,326 $ 704 $ 1,130 $ 1,292 $ — $ 671 $ 11,595

( 15 ) — — ( 2,712 ) ( 20 ) — — ( 2,747 )

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

(Dollars in thousands)

December 31, 2021 $ 1,420 $ 5,960 $ 1,249 $ 1,151 $ 1,050 $ — $ 752 $ 11,582

2 unchanged sentences

Provision (Recovery) 138 63 ( 778 ) 3,842 437 — 82 3,784

March 31, 2022 $ 1,472 $ 6,326 $ 704 $ 1,130 $ 1,292 $ — $ 671 $ 11,595

March 31, 2022

June 30, 2022 $ 1,654 $ 6,023 $ 471 $ 2,349 $ 1,502 $ — $ 834 $ 12,833

June 30, 2022

(Dollars in thousands)

4 unchanged sentences

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.

At December 31, 2022, commercial and industrial loans include $ 126,000 of PPP loans collectively evaluated for potential impairment.

No allowance for loan loss was allocated to the PPP loan portfolio due to the Bank complying with the lender obligations that ensure SBA guarantee.

December 31, 2022

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Accretable Yield

March 31, 2023 $ 426

June 30, 2023 $ 365

Pre Adoption of ASC 326 – Impaired Loans

25 unchanged sentences

$ 15,089 $ 24 $ 15,523 $ 15,187 $ 770

The recorded investment of loans evaluated for impairment decreased $ 1.4 million at March 31, 2023 compared to December 31, 2022 and was primarily related to commercial real estate loans.

Short-Term Borrowings

Borrowings with original maturities of one year or less are classified as short-term and may consist of borrowings with the Federal Home Loan Bank ("FHLB"), securities sold under agreements to repurchase or borrowings on revolving lines of credit with the Federal Reserve Bank or other correspondent banks.

Securities sold under repurchase agreements are comprised of customer repurchase agreements, which are overnight sweep accounts with next-day maturities utilized by commercial customers to earn interest on their funds.

Securities are pledged as collateral under these agreements in an amount at least equal to the outstanding balance and the collateral pledging requirements are monitored on a daily basis.

The following table sets forth the components of short-term borrowings as of the dates indicated.

March 31, 2023 December 31, 2022

Amount Weighted

Rate Amount Weighted

(Dollars in thousands)

Federal Funds Purchased:

Average Balance Outstanding During the Period $ 2 5.40 % $ — — %

Maximum Amount Outstanding at any Month End — —

Securities Sold Under Agreements to Repurchase:

Balance at Period End $ 121 0.10 % $ 8,060 0.19 %

Average Balance Outstanding During the Period 1,342 0.60 27,381 0.23

Maximum Amount Outstanding at any Month End 121 39,219

Securities Collaterizing the Agreements at Period-End:

Carrying Value 10,935 10,947

Market Value 9,587 9,396

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.

Fair Value Disclosure

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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 three months ended March 31, 2023 or year ended December 31, 2022.

March 31, 2023 December 31, 2022

There were no transfers into or out of Level 3 during the six months ended June 30, 2023 or year ended December 31, 2022.

June 30, 2023 December 31, 2022

(Dollars in thousands)

17 unchanged sentences

The table also presents the significant unobservable inputs used in the fair value measurements.

Financial Asset Fair Value Hierarchy March 31,

Financial Asset Fair Value Hierarchy June 30,

2023 Valuation

16 unchanged sentences

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 March 31, 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 consists of the loan balances of $ 1.6 million less their specific valuation allowances of $ 24,000 .

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.

3 unchanged sentences

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 March 31, 2023 and December 31, 2022, the Company did not have any MSRs that would be required to be remeasured.

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.

8 unchanged sentences

The following table presents the estimated fair values of the Company’s financial instruments at the dates indicated.

March 31, 2023 December 31, 2022

June 30, 2023 December 31, 2022

(Dollars in thousands)

1 unchanged sentence

Cash and Due From Banks:

Interest Bearing

Interest-Earning Level 1

$ 60,287 $ 60,287 $ 82,957 $ 82,957

Non-Interest Bearing

Noninterest-Earning Level 1

17,806 17,806 20,743 20,743

55 unchanged sentences

Three Months Ended

June 30, Six Months Ended

2023 2022 2023 2022

(Dollars in thousands)

20 unchanged sentences

Lease Liabilities $ 1,938

There were no new lease agreements entered into during the three months ended March 31, 2023.

During the three months ended March 31, 2022, the Company entered into a new lease agreement for the McMurray, PA branch, for a 10-year term ending March 31, 2032.

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.

Other Noninterest Expense

1 unchanged sentence

Three Months Ended

June 30, Six Months Ended

2023 2022 2023 2022

(Dollars in thousands)

7 unchanged sentences

Meals and Entertainment 27 38 41 68

Travel 52 34 106 73

Training 17 13 51 31

4 unchanged sentences

Segment and Related Information

At March 31, 2023, the Company’s business activities were comprised of two operating segments, which are community banking and insurance brokerage services.

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.

6 unchanged sentences

(Dollars in thousands)

March 31, 2023

June 30, 2023

Assets $ 1,432,181 $ 5,576 $ 131,258 $ ( 136,282 ) $ 1,432,733

5 unchanged sentences

Stockholders' Equity 107,727 3,589 110,155 ( 111,316 ) 110,155

Three Months Ended March 31, 2023

Three Months Ended June 30, 2023

Interest and Dividend Income $ 15,182 $ 2 $ 1,297 $ ( 1,278 ) $ 15,203

1 unchanged sentence

Net Interest and Dividend Income 11,256 2 1,140 ( 1,278 ) 11,120

Provision for Credit Losses 80 — — — 80

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

5 unchanged sentences

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

Community Bank Exchange Underwriters, Inc.

2 unchanged sentences

(Dollars in thousands)

Three Months Ended March 31, 2022

Three Months Ended June 30, 2022

Interest and Dividend Income $ 10,940 $ 2 $ 1,255 $ ( 1,239 ) $ 10,958

3 unchanged sentences

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

3 unchanged sentences

Income Tax Expense (Benefit) 540 343 ( 124 ) — 759

Net Income (Loss) $ 3,112 $ 561 $ 3,047 $ ( 3,673 ) $ 3,047

Net Income $ 3,452 $ 834 $ 3,166 $ ( 4,287 ) $ 3,165

Stock Based Compensation

6 unchanged sentences

Forfeited ( 2,600 ) 25.25

Outstanding Options at March 31, 2023 344,476 $ 24.06 6.2

Exercisable Options at March 31, 2023 189,749 $ 24.53 3.7

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 March 31, 2023 154,727 $ 23.49 9.3

Nonvested Options at June 30, 2023 158,574 $ 23.25 9.1

Summary of Significant Assumptions for Newly Issued Stock Options

10 unchanged sentences

Forfeited ( 860 ) 24.36

Nonvested Restricted Stock at March 31, 2023 82,512 $ 23.60 4.3

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 $ 174,000 and $ 130,000 for the three months ended March 31, 2023 and 2022.

As of March 31, 2023 and December 31, 2022, total unrecognized compensation expense was $ 673,000 and $ 430,000 , respectively, related to stock options, and $ 1.8 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 March 31, 2023 and December 31, 2022 exceeds the exercise price of the stock options.

The intrinsic value of stock options was $ 28,000 and $ 25,000 at March 31, 2023 and December 31, 2022, respectively.

At March 31, 2023 and December 31, 2022, respectively, there were 215,672 and 333,335 shares available under the Plan to be issued in connection with the exercise of stock options, and 86,269 and 133,334 shares that may be issued as restricted stock awards or units.

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.

2 unchanged sentences

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

What changed 10-Q

Item 1. Financial Statements