What changed in this filing

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Item 1. Financial Statements

2023-11-13 compared with 2023-08-11 · 134 added, 111 removed, 899 unchanged (21% of the section changed)

1 unchanged sentence

CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

(Unaudited) June 30,

(Unaudited) September 30,

2023 December 31,

7 unchanged sentences

Total Securities 172,904 190,058

Loans, Net of Allowance for Credit Losses of $ 10,666 and $ 12,819 at June 30, 2023 and December 31, 2022, Respectively

Loans, Net of Allowance for Credit Losses of $ 10,848 and $ 12,819 at September 30, 2023 and December 31, 2022, Respectively

1,091,666 1,037,054

22 unchanged sentences

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.

35,000,000 Shares Authorized, 5,742,408 Shares Issued and 5,120,678 Shares Outstanding at September 30, 2023, with 5,708,433 and 5,100,189 Shares Issued and Outstanding at December 31, 2022.

Capital Surplus

2 unchanged sentences

71,707 63,861

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

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

( 14,100 ) ( 13,797 )

7 unchanged sentences

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

2023 2022 2023 2022

15 unchanged sentences

Provision For Credit Losses - Loans 291 — 863 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

Provision For Credit Losses - Unfunded Commitments 115 — 54 —

NET INTEREST AND DIVIDEND INCOME AFTER PROVISION FOR CREDIT LOSSES 10,311 11,015 32,502 27,285

NONINTEREST INCOME

5 unchanged sentences

Net Gain on Purchased Tax Credits 7 14 22 43

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

Net Gain on Disposal of Fixed Assets — 439 11 431

Income from Bank-Owned Life Insurance 145 140 425 418

16 unchanged sentences

TOTAL NONINTEREST EXPENSE 9,487 8,827 28,017 25,893

Income Before Income Tax Expense (Benefit)

Income Before Income Tax Expense

3,236 4,927 11,978 8,851

Income Tax Expense (Benefit) 699 ( 44 ) 1,827 759

Income Tax Expense 564 998 2,392 1,757

NET INCOME $ 2,672 $ 3,929 $ 9,586 $ 7,094

6 unchanged sentences

The accompanying notes are an integral part of these consolidated financial statements

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (UNAUDITED)

CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME (UNAUDITED)

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

2023 2022 2023 2022

5 unchanged sentences

Other Comprehensive Loss, Net of Income Tax Effect ( 3,332 ) ( 9,220 ) ( 3,430 ) ( 25,721 )

Total Comprehensive Income (Loss) $ 636 $ ( 6,692 ) $ 6,817 $ ( 13,336 )

Total Comprehensive (Loss) Income

$ ( 660 ) $ ( 5,291 ) $ 6,156 $ ( 18,627 )

The accompanying notes are an integral part of these consolidated financial statements

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

Three Months Ended September 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:

June 30, 2023 5,733,408 $ 2,389 $ 84,325 $ 70,314 $ ( 14,100 ) $ ( 26,339 ) $ 116,589

Comprehensive Loss:

Net Income — — — 2,672 — — 2,672

1 unchanged sentence

Restricted Stock Awards Granted 9,000 4 ( 4 ) — — — —

Restricted Stock Awards Forfeited — — 21 — ( 21 ) — —

Stock-Based Compensation Expense — — 196 — — — 196

Exercise of Stock Options — — — — 45 — 45

Treasury stock purchased, at cost ( 8,792 shares)

— — — — ( 197 ) — ( 197 )

Dividends Paid ($ 0.25 Per Share)

— — — ( 1,279 ) — — ( 1,279 )

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

September 30, 2023 5,742,408 $ 2,393 $ 84,517 $ 71,707 $ ( 14,100 ) $ ( 29,671 ) $ 114,846

Three Months Ended September 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

June 30, 2022 5,702,433 $ 2,376 $ 83,614 $ 58,225 $ ( 13,015 ) $ ( 17,428 ) $ 113,772

Comprehensive Loss:

2 unchanged sentences

Restricted Stock Awards Forfeited — — 34 — ( 34 ) — —

Restricted Stock Awards Granted 1,000 — — — — — —

Stock-Based Compensation Expense — — 145 — — — 145

Exercise of Stock Options — — — — ( 2 ) — ( 2 )

Treasury Stock Purchased, at cost ( 30,271 shares)

2 unchanged sentences

— — — ( 1,224 ) — — ( 1,224 )

June 30, 2022 5,702,433 $ 2,376 $ 83,614 $ 58,225 $ ( 13,015 ) $ ( 17,428 ) $ 113,772

September 30, 2022 5,702,433 $ 2,376 $ 83,793 $ 60,930 $ ( 13,745 ) $ ( 26,648 ) $ 106,706

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

Nine Months Ended September 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)

13 unchanged sentences

— — — ( 3,832 ) — — ( 3,832 )

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

September 30, 2023 5,742,408 $ 2,393 $ 84,517 $ 71,707 $ ( 14,100 ) $ ( 29,671 ) $ 114,846

Nine Months Ended September 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

— — — ( 3,698 ) — — ( 3,698 )

June 30, 2022 5,702,433 $ 2,376 $ 83,614 $ 58,225 $ ( 13,015 ) $ ( 17,428 ) $ 113,772

September 30, 2022 5,702,433 $ 2,376 $ 83,793 $ 60,930 $ ( 13,745 ) $ ( 26,648 ) $ 106,706

The accompanying notes are an integral part of these consolidated financial statements

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

Six Months Ended June 30, 2023 2022

Nine Months Ended September 30, 2023 2022

(Dollars in thousands)

5 unchanged sentences

Provision for Credit Losses - Loans 863 3,784

Recovery for Credit Losses - Unfunded Commitments ( 60 ) —

Provision for Credit Losses - Unfunded Commitments 54 —

Loss on Securities 369 252

6 unchanged sentences

Noncash Expense for Stock-Based Compensation 557 424

(Increase) Decrease in Accrued Interest Receivable ( 561 ) 36

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

Increase in Accrued Interest Receivable ( 600 ) ( 59 )

Valuation adjustment on real estate owned 119 —

Gain on Disposal of Fixed Assets ( 11 ) ( 431 )

Decrease in Taxes Payable ( 632 ) ( 947 )

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

Increase in Accrued Interest Payable 1,390 29

Other, Net 4,236 ( 2,679 )

12 unchanged sentences

FINANCING ACTIVITIES

Net Decrease in Deposits ( 5,188 ) ( 11,423 )

Net (Decrease) Increase in Deposits

( 32,214 ) 49,221

Net Decrease in Short-Term Borrowings ( 8,060 ) ( 21,158 )

3 unchanged sentences

Exercise of Stock Options 45 165

NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES 3,916 ( 24,806 )

DECREASE IN CASH AND CASH EQUIVALENTS ( 25,607 ) ( 38,553 )

NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES ( 24,388 ) 19,848

(DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS ( 51,103 ) 3,127

CASH AND DUE FROM BANKS AT BEGINNING OF YEAR 103,700 119,674

2 unchanged sentences

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

Six Months Ended June 30, 2023 2022

Nine Months Ended September 30, 2023 2022

(Dollars in thousands)

3 unchanged sentences

$ 10,511 $ 2,764

Income Taxes 2,570 3,247

SUPPLEMENTAL NONCASH DISCLOSURE:

Proceeds receivable from claims on bank-owned life insurance 664 —

Other Real Estate Acquired in Settlement of Loans 248 —

91 unchanged sentences

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.

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 September 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 September 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 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.

As of September 30, 2023, the Company has identified one $ 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

September 30, Nine Months Ended

September 30,

2023 2022 2023 2022

13 unchanged sentences

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

2023 2022 2023 2022

2 unchanged sentences

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

June 30, 2023

September 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:

June 30, 2023

September 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 June 30, 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 September 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.

The unrealized losses on securities at September 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 $ 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.

Total securities available to be pledged have a fair value of $ 163.1 million at September 30, 2023 and $ 179.0 million at December 31, 2022 of which securities with a fair value of $ 152.1 million and $ 175.6 million at September 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

September 30, 2023

(Dollars in thousands)

11 unchanged sentences

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

2023 2022 2023 2022

27 unchanged sentences

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

June 30, 2023 December 31, 2022

September 30, 2023 December 31, 2022

(Dollars in thousands)

9 unchanged sentences

$ 1,091,666 $ 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.

There were $ 5,000 of net PPP loan origination fees earned for the nine months ended September 30, 2023, compared to $ 651,000 for the nine months ended September 30, 2022.

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.

Total unamortized net deferred loan fees were $ 1.1 million and $ 1.2 million at September 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 June 30, 2023.

There were no loans in the criticized category of loss.

Classified Loans by Origination Year (as of June 30, 2023)

Classified Loans by Origination Year (as of September 30, 2023)

(dollars in thousands) 2023 2022 2021 2020 2019 Prior Revolving Loans Amortized Cost Basis Total

50 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.

June 30, 2023

September 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 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.

Additional interest income that would have been recorded if the loans that were nonaccrual at September 30, 2023 were current was $ 41,000 and $ 127,000 for the three and nine months ended September 30, 2023, respectively, and $ 56,000 and $ 142,000 for the three and nine months ended September 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

September 30, 2023

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

9 unchanged sentences

Total Nonperforming Assets

No interest income on nonaccrual loans was recognized during the three and six months ended June 30, 2023.

No interest income on nonaccrual loans was recognized during the three and nine months ended September 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 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.

For the three and nine months ended September 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 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.

12 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 $ 756 ,000 and $ 1.4 million at June 30, 2023 and December 31, 2022, respectively.

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 $ 900 ,000 and $ 1.4 million at September 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

June 30, 2023 $ 2,356 $ 3,216 $ 938 $ 2,140 $ 1,848 $ 168 $ 10,666

( 109 ) — — — ( 168 ) — ( 277 )

1 unchanged sentence

Provision (Recovery) for Credit Losses - Loans 625 104 102 ( 317 ) ( 272 ) 49 291

June 30, 2023 $ 2,356 $ 3,216 $ 938 $ 2,140 $ 1,848 $ 168 $ — $ 10,666

September 30, 2023 $ 2,899 $ 3,329 $ 1,040 $ 1,919 $ 1,444 $ 217 $ 10,848

(Dollars in thousands)

4 unchanged sentences

Provision (Recovery) for Credit Losses - Loans 853 731 50 ( 199 ) ( 669 ) 97 — 863

June 30, 2023 $ 2,356 $ 3,216 $ 938 $ 2,140 $ 1,848 $ 168 $ — $ 10,666

September 30, 2023 $ 2,899 $ 3,329 $ 1,040 $ 1,919 $ 1,444 $ 217 $ — $ 10,848

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

Impact of CECL adoption —

Provision for credit losses - unfunded commitments 115

Balance at September 30, 2023 $ 773

(in thousands) Allowance for Credit Losses

1 unchanged sentence

Impact of CECL adoption 719

Recovery for credit losses - unfunded commitments ( 60 )

Balance at June 30, 2023 $ 658

Provision for credit losses - unfunded commitments 54

Balance at September 30, 2023 $ 773

Loans that do not share risk characteristics are evaluated on an individual basis.

1 unchanged sentence

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.

During the three and nine months ended September 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

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

— — — — ( 46 ) — — ( 46 )

1 unchanged sentence

Provision (Recovery) 148 ( 24 ) 94 ( 211 ) 89 — ( 96 ) —

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

September 30, 2022 $ 1,818 $ 5,999 $ 565 $ 2,176 $ 1,558 $ — $ 738 $ 12,854

(Dollars in thousands)

3 unchanged sentences

Provision (Recovery) 288 39 ( 684 ) 3,631 524 — ( 14 ) 3,784

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

June 30, 2022

September 30, 2022 $ 1,818 $ 5,999 $ 565 $ 2,176 $ 1,558 $ — $ 738 $ 12,854

September 30, 2022

(Dollars in thousands)

16 unchanged sentences

Accretable Yield

June 30, 2023 $ 365

September 30, 2023 $ 304

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 $ 15.1 million at June 30, 2023 compared to December 31, 2022 and was primarily related to commercial real estate loans.

The recorded investment of loans evaluated for impairment decreased $ 15.1 million at September 30, 2023 compared to December 31, 2022 and was primarily related to commercial real estate loans.

Fair Value Disclosure

15 unchanged sentences

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.

June 30, 2023 December 31, 2022

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

September 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 June 30,

Financial Asset Fair Value Hierarchy September 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 June 30, 2023, the Company did not have any loans that would be required to be remeasured.

At September 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 .

4 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 June 30, 2023 and December 31, 2022, the Company did not have any MSRs that would be required to be remeasured.

At September 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.

1 unchanged sentence

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.

As of September 30, 2023, OREO measured at fair value less costs to sell had no net carrying value, which consisted of the outstanding balance of $ 37,000 less write-downs of $ 37,000 .

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.

5 unchanged sentences

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

June 30, 2023 December 31, 2022

September 30, 2023 December 31, 2022

(Dollars in thousands)

30 unchanged sentences

The following table presents the unused and available credit balances of financial instruments whose contracts represent credit risk at the dates indicated.

September 30,

2023 December 31,

29 unchanged sentences

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

2023 2022 2023 2022

4 unchanged sentences

Total Lease Expense $ 84 $ 96 $ 253 $ 282

September 30,

2023 December 31,

4 unchanged sentences

Weighted Average Discount Rate 2.87 % 2.87 %

September 30,

(Dollars in thousands)

9 unchanged sentences

Lease Liabilities $ 1,862

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.

There were no new lease agreements entered into during the nine months ended September 30, 2023.

During the nine months ended September 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

September 30, Nine Months Ended

September 30,

2023 2022 2023 2022

15 unchanged sentences

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.

At September 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)

June 30, 2023

September 30, 2023

Assets $ 1,399,834 $ 5,395 $ 129,649 $ ( 135,386 ) $ 1,399,492

5 unchanged sentences

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

Three Months Ended June 30, 2023

Three Months Ended September 30, 2023

Interest and Dividend Income $ 15,853 $ 1 $ 1,298 $ ( 1,278 ) $ 15,874

2 unchanged sentences

Provision for Credit Losses - Loans 291 — — — 291

Recovery for Credit Losses - Unfunded Commitments ( 60 ) — — — ( 60 )

Provision for Credit Losses - Unfunded Commitments 115 — — — 115

Net Interest and Dividend Income After Provision for Credit Losses 10,445 1 1,143 ( 1,278 ) 10,311

5 unchanged sentences

Net Income $ 2,807 $ 214 $ 2,672 $ ( 3,021 ) $ 2,672

Six Months Ended June 30, 2023

Nine Months Ended September 30, 2023

Interest and Dividend Income $ 45,257 $ 5 $ 3,889 $ ( 3,830 ) $ 45,321

2 unchanged sentences

Provision for Credit Losses - Loans 863 — — — 863

Recovery for Credit Losses - Unfunded Commitments ( 60 ) — — — ( 60 )

Provision for Credit Losses - Unfunded Commitments 54 — — — 54

Net Interest and Dividend Income After Provision for Credit Losses 32,904 5 3,423 ( 3,830 ) 32,502

9 unchanged sentences

(Dollars in thousands)

Three Months Ended June 30, 2022

Three Months Ended September 30, 2022

Interest and Dividend Income $ 12,267 $ 1 $ 1,246 $ ( 1,227 ) $ 12,287

5 unchanged sentences

Noninterest Expense 7,741 1,082 4 — 8,827

Undistributed Net Income (Loss) of Subsidiary 273 — ( 897 ) 624 —

Undistributed Net Income of Subsidiary 230 — 2,807 ( 3,037 ) —

Income Before Income Tax (Benefit) Expense 4,982 325 3,884 ( 4,264 ) 4,927

1 unchanged sentence

Net Income $ 4,034 $ 230 $ 3,929 $ ( 4,264 ) $ 3,929

Six Months Ended June 30, 2022

Nine Months Ended September 30, 2022

Interest and Dividend Income $ 33,802 $ 4 $ 3,779 $ ( 3,724 ) $ 33,861

1 unchanged sentence

Net Interest and Dividend Income 31,477 4 3,312 ( 3,724 ) 31,069

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

Provision for Credit Losses 3,784 — — — 3,784

Net Interest and Dividend Income After Provision for Credit Losses 27,693 4 3,312 ( 3,724 ) 27,285

Noninterest Income (Loss) 3,023 4,572 ( 136 ) — 7,459

Noninterest Expense 22,806 3,074 13 — 25,893

11 unchanged sentences

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

Outstanding Options at September 30, 2023 348,123 $ 23.95 5.8

Exercisable Options at September 30, 2023 192,549 $ 24.45 3.3

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

Nonvested Options at September 30, 2023 155,574 $ 23.34 8.8

Summary of Significant Assumptions for Newly Issued Stock Options

10 unchanged sentences

Forfeited ( 860 ) 24.36

Nonvested Restricted Stock at June 30, 2023 83,832 $ 23.44 4.1

Nonvested Restricted Stock at September 30, 2023 91,832 $ 23.36 3.9

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.

Stock-based compensation expense related to restricted stock awards and stock options was $ 196,000 and $ 145,000 for the three months ended September 30, 2023 and 2022.

Stock based compensation was $ 557,000 and $ 424,000 for the nine months ended September 30, 2023 and 2022.

As of September 30, 2023 and December 31, 2022, total unrecognized compensation expense was $ 609,000 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 September 30, 2023 and December 31, 2022 exceeds the exercise price of the stock options.

The intrinsic value of stock options was $ 47,000 and $ 25,000 at September 30, 2023 and December 31, 2022, respectively.

At September 30, 2023 and December 31, 2022, respectively, there were 181,275 and 333,335 shares available under the Plan to be issued in connection with the exercise of stock options, and 72,510 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.

1 unchanged sentence

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.

The following item was deemed to be a subsequent event by the Company.

On October 12, 2023, the Bank received email notification from one of its third-party vendors (the "Vendor") that the Vendor used MOVEit Transfer ("MOVEit"), a managed file transfer software developed and maintained by Progress Software Corporation ("PSC"), to transfer information in connection with processing of Bank customer accounts and item processing of Bank customer accounts, including check images, deposit slips, remote deposit capture files, and reports.

The Vendor informed the Bank that its review indicates that the affected files included the following data elements for some or all of the affected Bank customers and accounts:

name, business name, address, state, telephone number, date of birth, full social security number, tax ID number, account number, and routing number.

The Bank estimates that approximately 33 % of its customers and approximately 26 % of customer accounts are affected by the Vendor incident.

The Bank has notified the affected customers in writing about the Vendor incident.

PSC recently disclosed a zero-day vulnerability, a previously unknown flaw, in MOVEit that could enable malicious actors to gain unauthorized access to sensitive files and information.

MOVEit is the subject of a widely reported cybersecurity event impacting numerous private organizations and governmental agencies.

The Vendor, and not the Bank itself, uses MOVEit, and the Vendor has informed the Bank that it has rectified the vulnerability that allowed the incident to occur.

The Bank, along with numerous other financial institutions, uses the Vendor for certain regulatory compliance and operational support services, including account hosting and transaction processing.

The Vendor has notified law enforcement and its regulators about the Vendor incident.

The Bank has notified its primary banking regulators about the Vendor incident, and will continue to keep them informed.

The Company has incurred certain expenses relating to the Vendor incident, and may incur additional expenses.

While the Company continues to evaluate the full scope and impact of the Vendor incident, the Company does not currently believe the Vendor incident will have a material adverse effect on the Bank's business and operations or the Company's consolidated financial statements.

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