What changed in this filing

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Item 2. Management’s Discussion and Analysis

2025-05-09 compared with 2024-11-08 · 87 added, 227 removed, 265 unchanged (54% of the section changed)

9 unchanged sentences

• 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;

19 unchanged sentences

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 September 30, 2024, compared to the consolidated financial condition as of December 31, 2023 and the consolidated results of operations for the three and nine months ended September 30, 2024 compared to the three and nine months ended September 30, 2023.

The detailed discussion focuses on our consolidated financial condition as of March 31, 2025, compared to the consolidated financial condition as of December 31, 2024 and the consolidated results of operations for the three months ended March 31, 2025 compared to the three months ended March 31, 2024.

Our results of operations depend primarily on our net interest income.

5 unchanged sentences

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.

Our operations and lending are principally concentrated in the southwestern Pennsylvania and Ohio Valley market areas.

Explanation of Use of Non-GAAP Financial Measures

4 unchanged sentences

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.

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.

3 unchanged sentences

Three Months Ended

Nine Months Ended

September 30, September 30,

2024 2023 2024 2023

(Dollars in thousands)

1 unchanged sentence

Adjustment to FTE Basis

42 43 118 111

Interest Income (FTE) (Non-GAAP)

6 unchanged sentences

Adjustment to FTE Basis

0.02 0.01 0.02 0.01

Net Interest Rate Spread (FTE) (Non-GAAP)

3 unchanged sentences

Adjustment to FTE Basis

0.01 0.01 0.01 0.01

Net Interest Margin (FTE) (Non-GAAP)

2 unchanged sentences

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.

September 30,

2025 December 31, 2024

7 unchanged sentences

Consolidated Statements of Financial Condition Analysis

Total assets increased $105.7 million, or 7.3%, to $1.6 billion at September 30, 2024 compared to $1.5 billion at December 31, 2023.

Total assets increased $1.9 million, or 0.1%, to $1.483 billion at March 31, 2025 compared to $1.482 billion at December 31, 2024.

Cash and Securities

• Cash and due from banks increased $79.1 million, or 115.9%, to $147.3 million at September 30, 2024, compared to $68.2 million at December 31, 2023.

• Securities increased $63.8 million, or 30.8%, to $270.9 million at September 30, 2024, compared to $207.1 million at December 31, 2023.

The securities balance was primarily impacted by the purchase of $69.8 million of collateralized loan obligation securities, partially offset by $10.7 million of repayments on amortizing securities .

• Cash and due from banks increased $11.7 million, or 23.6%, to $61.3 million at March 31, 2025, compared to $49.6 million at December 31, 2024.

• Securities decreased $3.5 million, or 1.3%, to $258.7 million at March 31, 2025, compared to $262.2 million at December 31, 2024.

The securities balance was primarily impacted by principal repayments on amortizing securities and the sale of equity securities, partially offset by an increase in the market value of the portfolio.

Loans, Allowance for Credit Losses (ACL) and Credit Quality

• Total loans decreased $44.6 million, or 4.0%, to $1.07 billion at September 30, 2024 compared to $1.11 billion at December 31, 2023.

This was driven by decreases in consumer, residential real estate, commercial real estate and commercial and industrial loans of $31.6 million, $8.9 million, $2.8 million and $2.7 million, respectively, partially offset by increases in other loans and construction loans of $1.0 million and $399,000, respectively.

The decrease in consumer loans resulted from a reduction in indirect automobile loan production due to rising market interest rates and the discontinuation of this product offering as of June 30, 2023.

• Total loans decreased $4.1 million, or 0.4%, to $1.088 billion at March 31, 2025 compared to $1.093 billion at December 31, 2024.

This was driven by decreases in consumer, commercial and industrial and residential real estate loans of $8.7 million, $4.6 million and $3.2 million, respectively, partially offset by increases in commercial real estate and other loans of $11.8 million and $701,000, respectively.

The decrease in consumer loans resulted from a reduction in indirect automobile loan production due to the discontinuation of this product offering as of June 30, 2023.

This portfolio is expected to continue to decline as resources are allocated and production efforts are focused on more profitable commercial products.

In total, $95.5 million of loans have paid off since December 31, 2023 .

• The allowance for credit losses (ACL) was $9.5 million at September 30, 2024 and $9.7 million at December 31, 2023.

As a result, the ACL to total loans was 0.89% at September 30, 2024 and 0.87% at December 31, 2023.

The provision for credit losses recorded for the nine months ended September 30, 2024 was a net recovery of $114,000 and was primarily impacted by the decrease in loan balances.

• Net charge-offs for the nine months ended September 30, 2024 were $123,000.

Net recoveries for the nine months ended September 30, 2023 were $551,000, or 0.07% of average loans on an annualized basis primarily due to recoveries totaling $750,000 related to a prior year $2.7 million charged-off commercial and industrial loan.

• Nonperforming loans, which include nonaccrual loans and accruing loans past due 90 days or more, were $2.0 million at September 30, 2024 and $2.2 million at December 31, 2023.

Nonperforming loans to total loans ratio was 0.19% at September 30, 2024 and 0.20% at December 31, 2023.

Excluding the $8.3 million decrease in indirect automobile loans, total loans increased $4.2 million, or 0.4%.

Loan production totaled $28.6 million while $15.6 million of loans paid off since December 31, 2024.

• The allowance for credit losses (ACL) was $9.82 million at March 31, 2025 and $9.81 million at December 31, 2024.

As a result, the ACL to total loans was 0.90% at both March 31, 2025 and December 31, 2024.

The provision for credit losses recorded for the three months ended March 31, 2025 was a net recovery of $40,000 and was primarily impacted by a decrease in unfunded commitments and funding rates.

• Net charge-offs for the three months ended March 31, 2025 were $54,000, or 0.02% of average loans on an annualized basis.

Net recoveries for the three months ended March 31, 2024 were $18,000, or 0.01% of average loans on an annualized basis.

• Nonperforming loans, which include nonaccrual loans and accruing loans past due 90 days or more, were $2.4 million at March 31, 2025 and $1.8 million at December 31, 2024.

The increase resulted from a $1.1 million residential real estate loan collateralized by mortgages on nine rental real estate properties moving to nonaccrual status during the quarter as a result of past due payments and failure to provide updated financial information.

At March 31, 2025, the loan was current.

Nonperforming loans to total loans ratio was 0.22% at March 31, 2025 and 0.16% at December 31, 2024.

Accrued Interest Receivable and Other Assets

• Accrued interest and other assets increased $7.8 million or 32.1%, to $32.1 million at September 30, 2024, compared to $24.3 million at December 31, 2023 due primarily to a $6.0 million investment in a low income housing tax credit project.

Total liabilities increased $96.3 million, or 7.3%, to $1.4 billion at September 30, 2024 compared to $1.3 billion at December 31, 2023.

• Total deposits increased $86.7 million to $1.4 billion as of September 30, 2024 compared to $1.3 billion at December 31, 2023.

Time deposits increased $136.5 million and money market deposits increased $19.7 million while interest-bearing demand, savings and non interest-bearing demand deposits decreased $36.5 million, $22.3 million and $10.7 million, respectively.

The changes were primarily the result of the current interest rate environment causing a shift in products to higher priced money market and time deposits.

Additionally, the Bank added $70.6 million of brokered certificates of deposit during the period.

Brokered certificates totaled $99.6 million as of September 30, 2024 compared to $29.0 million at December 31, 2023, all of which mature within three months and were used to fund the purchase of floating rate CLO securities which reprice quarterly.

At September 30, 2024, FDIC insured deposits totaled approximately 62.4% of total deposits while an additional 15.9% of total deposits were collateralized with investment securities.

• Accrued interest and other assets decreased $1.4 million or 4.4%, to $30.1 million at March 31, 2025, compared to $24.8 million at December 31, 2024 due primarily to a $6.0 million investment in a low income housing tax credit project.

Total liabilities increased $1.0 million, or 0.1%, to $1.34 billion at March 31, 2025 compared to $1.33 billion at December 31, 2024.

• Total deposits decreased $2.4 million to $1.281 billion as of March 31, 2025 compared to $1.284 billion at December 31, 2024.

Time deposits decreased $29.1 million and money market deposits decreased $3.5 million while interest-bearing demand, savings and non interest-bearing demand deposits increased $24.4 million, $6.2 million and $504,000, respectively.

This favorable change in the deposit mix was the result of an increased focus on building core banking relationships while strategically reducing time deposit only relationships.

Brokered time deposits totaled $39.0 million as of March 31, 2025 and December 31, 2024, all of which mature within three months and were utilized to fund the purchase of floating rate CLO securities.

At March 31, 2025, FDIC insured deposits totaled approximately 62.3% of total deposits while an additional 15.2% of total deposits were collateralized with investment securities.

Accrued Interest Payable and Other Liabilities

• Accrued interest payable and other liabilities increased $9.7 million, or 67.3%, to $24.1 million at September 30, 2024, compared to $14.4 million at December 31, 2023 primarily due to the purchase of $6.0 million of syndicated loans not yet settled and a $5.4 million unfunded commitment related to a low-income housing tax credit project.

• Accrued interest payable and other liabilities increased $3.4 million, or 21.3%, to $19.3 million at March 31, 2025, compared to $16.0 million at December 31, 2024 primarily due to the purchase of $3.0 million of syndicated loans not yet settled.

Stockholders’ Equity

Stockholders’ equity increased $9.3 million, or 6.7%, to $149.1 million at September 30, 2024, compared to $139.8 million at December 31, 2023.

The key factors increasing stockholders’ equity were $10.1 million of net income for the current period and a $2.8 million decrease in accumulated other comprehensive loss, which were partially offset by the payment of $3.9 million in dividends since December 31, 2023.

Book value per common share (GAAP) was $29.07 at September 30, 2024 compared to $27.32 at December 31, 2023, an increase of $1.75.

Stockholders’ equity increased $911,000, or 0.6%, to $148.3 million at March 31, 2025, compared to $147.4 million at December 31, 2024.

The key factors increasing stockholders’ equity were $1.9 million of net income for the current period and a $1.9 million decrease in accumulated other comprehensive loss, which were partially offset by $2.4 million of treasury shares purchased under the stock repurchase program and the payment of $1.3 million in dividends since December 31, 2024.

Book value per common share (GAAP) was $29.08 at March 31, 2025 compared to $28.71 at December 31, 2024, an increase of $0.37.

Tangible book value per common share (Non-GAAP) increased $0.35, or 1.3%, to $27.17 compared to $26.82 at December 31, 2024.

Consolidated Results of Operations for the Three Months Ended September 30, 2024 and 2023

Net income was $3.2 million for the three months ended September 30, 2024, an increase of $547,000 compared to net income of $2.7 million for the three months ended September 30, 2023.

Consolidated Results of Operations for the Three Months Ended March 31, 2025 and 2024

Net income was $1.9 million for the three months ended March 31, 2025, a decrease of $2.3 million compared to net income of $4.2 million for the three months ended March 31, 2024.

Net Interest and Dividend Income.

Net interest and dividend income increased $757,000, or 7.1%, to $11.5 million for the three months ended September 30, 2024 compared to $10.7 million for the three months ended September 30, 2023.

Net interest margin (GAAP) decreased to 3.11% for the three months ended September 30, 2024 compared to 3.13% for the three months ended September 30, 2023.

Fully Tax Equivalent (FTE) net interest margin (Non-GAAP) decreased 2 basis points (bps) to 3.12% for the three months ended September 30, 2024 compared to 3.14% for the three months ended September 30, 2023.

Net interest and dividend income decreased $280,000, or 2.4%, to $11.3 million for the three months ended March 31, 2025 compared to $11.6 million for the three months ended March 31, 2024.

Net interest margin (GAAP) decreased to 3.27% for the three months ended March 31, 2025 compared to 3.36% for the three months ended March 31, 2024.

Fully Tax Equivalent (FTE) net interest margin (Non-GAAP) decreased 9 basis points (bps) to 3.28% for the three months ended March 31, 2025 compared to 3.37% for the three months ended March 31, 2024.

Interest and Dividend Income

• Interest and dividend income increased $3.9 million, or 24.6%, to $19.8 million for the three months ended September 30, 2024 compared to $15.9 million the three months ended September 30, 2023.

◦ Interest income on loans increased $896,000, or 6.4%, to $14.9 million for the three months ended September 30, 2024 compared to $14.0 million for the three months ended September 30, 2023.

The average yield on loans increased 47 bps to 5.60% compared to 5.13% resulting in a $1.3 million increase in interest income on loans.

• Interest and dividend income decreased $139,000, or 0.8%, to $17.8 million for the three months ended March 31, 2025 compared to $18.0 million the three months ended March 31, 2024.

◦ Interest income on loans decreased $310,000, or 2.1%, to $14.5 million for the three months ended March 31, 2025 compared to $14.8 million for the three months ended March 31, 2024.

The average balance of loans decreased $12.8 million to $1.08 billion from $1.09 billion, causing a $293,000 decrease in interest income on loans.

The increase in loan yield has been driven by a reduction in lower yielding consumer loans due to the discontinuation of the indirect automobile loan product with the redeployment of those funds into higher yielding commercial loan products.

◦ Interest income on taxable investment securities increased $2.3 million, or 249.9%, to $3.3 million for the three months ended September 30, 2024 compared to $940,000 for the three months ended September 30, 2023 driven by a 272 bp increase in average yield coupled with a $83.4 million increase in average balances.

The increase in the average yield was the result of the Bank implementing a balance sheet repositioning strategy of its portfolio of available-for-sale securities during the fourth quarter of 2023.

The Company sold $69.3 million in market value of its lower yielding U.S.

government agency, mortgage-backed and municipal securities with an average yield of 1.89% and purchased $69.3 million of higher yielding mortgage-backed and collateralized mortgage obligation securities with an average yield of 5.49%.

The increase in volume was driven by a $99.9 million increase in the average balance of collateralized loan obligation (“CLO”) securities as the Bank executed a leverage strategy to purchase these assets funded with brokered certificates of deposits.

◦ Interest income on interest-earning deposits at banks increased $698,000, to $1.4 million for the three months ended September 30, 2024 compared to $750,000 for the three months ended September 30, 2023 due to a $58.7 million increase in average balances, partially offset by a 51 bp decrease in the average yield.

The volume increase was due in part to $30.5 million in cash received from the December 2023 sale of Exchange Underwriters ("EU").

The average yield on loans remained stable at 5.50% for both periods despite a 100 bp reduction in the federal funds rate since September 2024.

While this led to the downward repricing of variable and adjustable rate loans, the impact was negated by a reduction in lower yielding consumer loans due to the discontinuation of the indirect automobile loan product with the redeployment of those funds into higher yielding commercial loan products.

◦ Interest income on taxable investment securities increased $474,000, or 20.6%, to $2.8 million for the three months ended March 31, 2025 compared to $2.3 million for the three months ended March 31, 2024 driven by a $42.6 million increase in average balances coupled with an 8 bp increase in average yield.

The increase in volume was driven by a $56.2 million increase in the average balance of collateralized loan obligation (“CLO”) securities as the Bank executed a leverage strategy during 2024 to purchase these assets funded with cash reserves and brokered certificates of deposits.

◦ Interest income on interest-earning deposits at other banks decreased $274,000 to $459,000 for the three months ended March 31, 2025 compared to $733,000 for the three months ended March 31, 2024 driven by a 91 bp decrease in the average yield and a $13.8 million decrease in average balances.

The decrease in the yield was primarily related to the Federal Reserve’s recent reductions in the federal funds rate.

Interest Expense

• Interest expense increased $3.1 million, or 60.9%, to $8.3 million for the three months ended September 30, 2024 compared to $5.2 million for the three months ended September 30, 2023.

◦ Interest expense on deposits increased $3.1 million, or 66.1%, to $7.9 million for the three months ended September 30, 2024 compared to $4.8 million for the three months ended September 30, 2023.

Rising market interest rates led to the repricing of interest-bearing demand and money market deposits and a shift in deposits from noninterest-bearing and interest-bearing demand and savings deposits into money market and time deposits which resulted in a 93 bp, or 46.3%, increase in the average cost of interest-bearing deposits compared to the three months ended September 30, 2023.

This accounted for a $2.4 million increase in interest expense.

Additionally, interest-bearing deposit balances increased $130.0 million, or 13.9%, to $1.1 billion as of September 30, 2024 compared to $937.8 million as of September 30, 2023, accounting for a $716,000 increase in interest expense.

• Interest expense increased $141,000, or 2.2%, to $6.5 million for the three months ended March 31, 2025 compared to $6.4 million for the three months ended March 31, 2024.

◦ Interest expense on deposits increased $120,000, or 2.0%, to $6.1 million for the three months ended March 31, 2025 compared to $6.0 million for the three months ended March 31, 2024.

Interest-bearing deposit balances increased $27.5 million, or 2.8%, to $1.0 billion as of March 31, 2025 compared to $978.3 million as of March 31, 2024, accounting for a $120,000 increase in interest expense.

◦ While interest expense increased compared to the same quarter in the prior year, it decreased $1.4 million, or 17.3%, to $6.5 million for the three months ended March 31, 2025 compared to $7.9 million for the three months ended December 31, 2024.

Interest-bearing deposits decreased $62.2 million as the Bank strategically reduced brokered deposits and time deposit only relationships.

Additionally, the cost of interest-bearing deposits declined from 2.79% for the three months ended December 31, 2024 compared to 2.46% for the three months ended March 31, 2025 due to the change in the deposit mix and the recent Federal Reserve federal funds rate decreases.

Average Balances and Yields .

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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 September 30,

Three Months Ended March 31,

Balance Interest

8 unchanged sentences

Taxable 278,362 2,777 3.99 235,800 2,303 3.91

Exempt From Federal Tax — — — 6,013 52 3.46

Equity Securities 2,674 28 4.19 2,693 27 4.01

11 unchanged sentences

Total Interest-Bearing Deposits 1,005,848 6,111 2.46 978,309 5,991 2.46

Other Borrowings 34,702 407 4.67 34,662 407 4.66

Total Interest-Bearing Liabilities 1,102,402 8,299 2.99 972,412 5,157 2.10

Noninterest-Bearing Demand Deposits 263,650 312,016

Total Funding and Cost of Funds 1,366,052 2.42 1,284,428 1.59

Other Liabilities 15,043 9,025

Total Liabilities 1,381,095 1,293,453

Stockholders' Equity 145,593 117,435

Total Liabilities and Stockholders' Equity $ 1,526,688 $ 1,410,888

Net Interest Income (FTE) (Non-GAAP) (3)

$ 11,516 $ 10,760

Net Interest-Earning Assets (4)

$ 366,684 $ 385,591

Net Interest Rate Spread (FTE) (Non-GAAP) (3)(5)

2.38 % 2.55 %

Net Interest Margin (GAAP) (6)

Net Interest Margin (FTE) (Non-GAAP) (3)(6)

Return on Average Assets (1)

Return on Average Equity (1)

Average Equity to Average Assets 9.54 8.32

Average Interest-Earning Assets to Average Interest-Bearing Liabilities 133.26 139.65

(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.

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 September 30, 2024

Three Months Ended September 30, 2023

Increase (Decrease) Due to

Volume Rate Total

(Dollars in thousands) (Unaudited)

Interest and Dividend Income:

Loans, net $ (357) $ 1,263 $ 906

Debt Securities:

Taxable 511 1,838 2,349

Exempt From Federal Tax (26) (26) (52)

Equity Securities — 3 3

Cash at Other Banks 771 (73) 698

Other Interest-Earning Assets (4) (2) (6)

Total Interest-Earning Assets 895 3,003 3,898

Interest Expense:

Deposits 716 2,426 3,142

Other Borrowings (1) 1 —

Total Interest-Bearing Liabilities 715 2,427 3,142

Change in Net Interest and Dividend Income $ 180 $ 576 $ 756

Provision for Credit Losses.

The provision for credit losses recorded for the three months ended September 30, 2024 was a net recovery of $41,000.

The provision for credit losses - loans was $25,000 and was primarily due to changes in qualitative factors partially offset by changes in loan portfolio concentrations and an improvement in loss rates.

The provision for credit losses - unfunded commitments was a recovery of $66,000 and was due to a decrease in the unfunded commitments and the loss rate on construction loans.

This compared to a $406,000 provision for credit losses recorded for the three months ended September 30, 2023 which was required primarily due to loan growth coupled with a modeled slowdown in loan prepayment speeds.

Noninterest Income .

Noninterest income decreased $1.2 million, or 48.9%, to $1,233,000 for the three months ended September 30, 2024, compared to $2.4 million for the three months ended September 30, 2023.

This decrease resulted primarily from a $1.4 million decrease in insurance commissions as no income was recognized for the three months ended September 30, 2024 due to the December 2023 sale of EU, compared to a full quarter of income recognized for the three months ended September 30, 2023.

Partially offsetting this decrease, the Company recognized a $138,000 gain on the sale of subsidiary following the final payment of remaining funds which were held in reserve to satisfy any liabilities recognized subsequent to the sale of EU.

Noninterest Expense.

Noninterest expense decreased $705,000, or 7.4%, to $8.8 million for the three months ended September 30, 2024 compared to $9.5 million for the three months ended September 30, 2023.

Salaries and benefits decreased $808,000, or 15.0%, to $4.6 million primarily due to no expense related to EU recognized for the three months ended September 30, 2024 due to the December 2023 sale, compared to $878,000 of expense recognized for the three months ended September 30, 2023, partially offset by merit increases and revenue producing staff additions.

Intangible amortization decreased $181,000 as a portion of the Bank’s core deposit intangible was fully amortized in February 2024 and EU intangible amortization of $47,000 was realized during the three months ended September 30, 2023.

Data processing expense increased $58,000 costs associated with the implementation of a new loan origination system and financial dashboard platform.

Occupancy expense increased $57,000 due to $130,000 of environmental remediation costs related to a construction project on one of the Bank’s office locations, partially offset by $44,000 of EU occupancy expense realized during the three months ended September 30, 2023.

Pennsylvania shares tax expense increased $48,000 due to a higher taxable base due to the increase in equity resulting from the sale of EU.

Income Taxes.

Income tax expense was $747,000 for the three months ended September 30, 2024 compared to $564,000 for the three months ended September 30, 2023.

This change was primarily driven by an increase in pre-tax income to $4.0 million for the three months ended September 30, 2024 compared to $3.2 million for the three months ended September 30, 2023.

Results of Operations for the Nine Months Ended September 30, 2024 and 2023

Net income was $10.1 million for the nine months ended September 30, 2024, an increase of $479,000 compared to $9.6 million for the nine months ended September 30, 2023.

Net Interest and Dividend Income.

Net interest and dividend income increased $1.1 million, or 3.3%, to $34.5 million for the nine months ended September 30, 2024 compared to $33.4 million for the nine months ended September 30, 2023.

Net interest margin (GAAP) decreased to 3.21% for the nine months ended September 30, 2024 compared to 3.31% for the nine months ended September 30, 2023.

Net interest margin (FTE) (Non-GAAP) decreased 10 bps to 3.22% for the nine months ended September 30, 2024 compared to 3.32% the nine months ended September 30, 2023.

Interest and Dividend Income

• Interest and dividend income increased $11.4 million, or 25.1%, to $56.7 million for the nine months ended September 30, 2024 compared to $45.3 million for the nine months ended September 30, 2023.

◦ Interest income on loans increased $4.6 million, or 11.6%, to $44.5 million during the nine months ended September 30, 2024 compared to $39.8 million for the nine months ended September 30, 2023.

The average yield on loans increased 54 bps to 5.53% for the nine months ended September 30, 2024 compared to 4.99% for the nine months ended September 30, 2023 resulting in a $4.4 million increase in interest income on loans.

The average balance of loans increased $6.3 million to $1.08 billion for the nine months ended September 30, 2024 compared to $1.07 billion for the nine months ended September 30, 2023 resulting in a $297,000 increase in interest income on loans.

◦ Interest income on taxable investment securities increased $5.6 million, or 195.7%, to $8.4 million during the nine months ended September 30, 2024 compared to $2.9 million for the nine months ended September 30, 2023 driven by a 245 bp increase in the average yield coupled with a $54.4 million increase in average balances.

The increase in the average yield resulted in a $4.7 million increase in interest income on taxable securities and was the result of the Company implementing a balance sheet repositioning strategy of its portfolio of available-for-sale securities during the fourth quarter of 2023.

The Bank sold $69.3 million in market value of its lower yielding U.S.

The increase in volume was driven by a $71.8 million increase in the average balance of CLO securities as the Company executed a leverage strategy to purchase these assets funded with brokered certificates of deposits.

◦ Interest income on interest-earning deposits at other banks increased $1.2 million, to $3.5 million for the nine months ended September 30, 2024 compared to $2.3 million for the nine months ended September 30, 2023 as average balances increased $30.0 million and the average yield increased 13 bps.

The volume increase was due in part to $30.5 million in cash received from the December 2023 sale of EU.

Interest Expense

• Interest expense increased $10.3 million, or 86.2%, to $22.2 million for the nine months ended September 30, 2024 compared to $11.9 million for the nine months ended September 30, 2023.

◦ Interest expense on deposits increased $9.9 million, or 88.8%, to $20.9 million for the nine months ended September 30, 2024 compared to $11.1 million for the nine months ended September 30, 2023.

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 and interest-bearing demand and savings deposits to money market and time deposits and resulted in a 112 bp increase in the average cost of interest-bearing deposits compared to the nine months ended September 30, 2023.

This accounted for a $8.5 million increase in interest expense.

Additionally, average interest-bearing deposits increased $106.5 million, or 11.6%, accounting for a $1.4 million increase in interest expense.

◦ Interest expense on borrowed funds increased $410,000, or 50.9%, to $1.2 million for the nine months ended September 30, 2024 compared to $805,000 for the nine months ended September 30, 2023.

The average balance of borrowed funds increased $10.6 million due to $20.0 million of FHLB long-term advances added during the second quarter of 2023.

The increase in the average balance accounted for a $388,000 increase in interest expense.

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.

Nine Months Ended September 30,

Balance Interest

Dividends Yield/

Balance Interest

Dividends Yield/

(Dollars in thousands) (Unaudited)

Interest-Earning Assets:

Loans, Net (2)

$ 1,076,052 $ 44,571 5.53 % $ 1,069,729 $ 39,924 4.99 %

Debt Securities

Taxable 263,433 8,437 4.27 209,069 2,853 1.82

Tax Exempt — — — 6,154 157 3.40

Equity Securities 2,693 82 4.06 2,693 74 3.66

Interest-Earning Deposits at Banks 90,507 3,493 5.15 60,474 2,276 5.02

Other Interest-Earning Assets 3,166 234 9.87 2,905 148 6.81

Total Interest-Earning Assets 1,435,851 56,817 5.29 1,351,024 45,432 4.50

Noninterest-Earning Assets 55,366 51,018

Total Assets $ 1,491,217 $ 1,402,042

Liabilities and Stockholders' Equity:

Interest-Bearing Liabilities:

Interest-Bearing Demand Deposits $ 325,383 5,576 2.29 % $ 351,379 4,776 1.82 %

Savings Accounts 184,017 157 0.11 226,686 145 0.09

Money Market Accounts 211,921 4,885 3.08 198,243 3,113 2.10

Time Deposits 305,386 10,330 4.52 143,881 3,063 2.85

Total Interest-Bearing Deposits 1,026,707 20,948 2.73 920,189 11,097 1.61

Short-Term Borrowings 1,985 23 4.70 — — —

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Average Interest-Earning Assets to Average Interest-Bearing Liabilities 134.70 137.07

(1) Annualized based on nine months ended results.

(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.

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The total column represents the sum of the prior columns.

Nine Months Ended September 30, 2024

Nine Months Ended September 30, 2023

Three Months Ended March 31, 2025

Three Months Ended March 31, 2024

Increase (Decrease) Due to

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Taxable 426 48 474

Exempt From Federal Tax (79) (78) (157)

Equity Securities — 1 1

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Provision for Credit Losses.

The provision for credit losses was a recovery of $114,000 for the nine months ended September 30, 2024 due to a decrease in loan balances.

This compared to a provision for credit losses of $917,000 for the nine months ended September 30, 2023 which was required primarily due to loan growth coupled with a modeled slowdown in loan prepayment speeds.

The provision for credit losses recorded for the three months ended March 31, 2025 was a net recovery of $40,000.

The provision for credit losses - loans was $68,000 and was primarily due to an increase in specific reserves required on individually evaluated loans and qualitative adjustments on economic factors.

The provision for credit losses - unfunded commitments was a recovery of $108,000 and was due to decreases in unfunded commitments and funding rates.

This compared to a net recovery of $37,000 recorded for the three months ended March 31, 2024 as the provision for credit losses - loans was a recovery of $143,000 and was primarily due to a decrease in loan balances while the provision for credit losses - unfunded commitments was $106,000 and was due to an increase in qualitative factors.

Noninterest Income .

Noninterest income decreased $3.7 million, or 48.8%, to $3.8 million for the nine months ended September 30, 2024, compared to $7.5 million for the nine months ended September 30, 2023.

This decrease was primarily related to a $4.9 million, or 99.9%, decrease in insurance commissions to $4,000 for the nine months ended September 30, 2024, compared to $4.9 million for the nine months ended September 30, 2023 due to the sale of EU.

Additionally, service fees decreased $139,000, or 10.2%, to $1.2 million for nine months ended September 30, 2024, compared to $1.4 million for the nine months ended September 30, 2023.

Partially offsetting these decreases, net gain on bank-owned life insurance claims increased $612,000 to $915,000 for the nine months ended September 30, 2024 compared to $303,000 for the nine months ended September 30, 2023 and net gain on disposal of premises and equipment increased $263,000 to $274,000 for the nine months ended September 30, 2024 compared to $11,000 for the nine months ended September 30, 2023.

The gain on the disposal of premises and equipment for the nine months ended September 30, 2024 resulted from the sale of one branch office location.

Additionally, the net gain (loss) on equity securities decreased $418,000 to a gain of $49,000 for the nine months ended September 30, 2024 compared to a $369,000 loss for the nine months ended September 30, 2023 which was due to an increase in the market value of equity securities, comprised mainly of bank stocks.

Also during the nine months ended September 30, 2023, the Company recognized a $138,000 gain on the sale of EU following the final payment of remaining funds which were held in reserve to satisfy any liabilities recognized subsequent to the sale.

Noninterest income decreased $1.1 million, or 58.9%, to $787,000 for the three months ended March 31, 2025, compared to $1.9 million for the three months ended March 31, 2024.

This decrease resulted primarily as prior period results included a $915,000 gain on bank owned life insurance resulting from one death claim and a $274,000 gain on the disposal of premises and equipment from the sale of one branch office building.

Noninterest Expense.

Noninterest expense decreased $1.8 million, or 6.5%, to $26.2 million for the nine months ended September 30, 2024 compared to $28.0 million for the nine months ended September 30, 2023.

Salaries and benefits decreased $2.1 million primarily due to no expense related to EU recognized for the nine months ended September 30, 2024 due to the December 2023 sale, compared to $2.6 million of expense recognized for the nine months ended September 30, 2023, partially offset by merit increases and revenue producing staff additions.

Amortization of intangible assets decreased $466,000 as a component of the Bank’s core deposit intangible was fully amortized in February 2024 and there was no expense related to EU recognized for the nine months ended September 30, 2024 compared to $142,000 of expense recognized for the nine months ended September 30, 2023.

Partially offsetting these decreases, occupancy expense increased $256,000 due to $323,000 of environmental remediation costs related to a construction project on one of the Bank’s office location, contracted services increased $234,000 due to costs associated with information security and cybersecurity support services and website management, Pennsylvania shares tax expense increased $188,000 due to a higher taxable base due to the increase in equity resulting from the sale of EU and data processing expense increased $187,000 costs associated with the implementation of a new loan origination system and financial dashboard platform.

Noninterest expense increased $1.4 million, or 16.3%, to $9.8 million for the three months ended March 31, 2025 compared to $8.4 million for the three months ended March 31, 2024.

Salaries and benefits increased $1.5 million, or 31.9%, to $6.0 million primarily due to $1.0 million of one-time non-recurring expenses recognized for the three months ended March 31, 2025 associated with the previously announced reduction in force, merit increases, revenue producing staff additions and higher insurance benefit costs.

Data processing expense increased $105,000 due to costs associated with a new loan origination system and financial dashboard platform implemented during mid-2024.

Equipment expense increased $66,000 due to higher depreciation expense associated with interactive teller machines, security system upgrades and other equipment placed into service in 2024.

Legal and professional fees increased $50,000 primarily due to timing differences related to external audit and tax services.

Contracted services increased $29,000 due to costs associated with website administration and equity compensation management added during mid-2024 and treasury product consulting services started in the current year.

These increases were partly offset as intangible amortization decreased $341,000 as the Bank’s core deposit intangibles were fully amortized in 2024.

Income Taxes.

Income tax expense decreased $165,000 to $2.2 million for the nine months ended September 30, 2024 compared to $2.4 million for the nine months ended September 30, 2023.

The change between the periods was driven by a decrease in state income tax expense due to the sale of EU in December 2023 and an increase in non-taxable income higher bank-owned life insurance related income.

Income tax expense was $427,000 for the three months ended March 31, 2025 compared to $920,000 for the three months ended March 31, 2024.

This change was primarily driven by a decrease in pre-tax income to $2.3 million for the three months ended March 31, 2025 compared to $5.1 million for the three months ended March 31, 2024.

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 7 in the Notes to Consolidated Financial Statements of this report for a summary of commitments outstanding as of September 30, 2024 and December 31, 2023.

Refer to Note 7 in the Notes to Consolidated Financial Statements of this report for a summary of commitments outstanding as of March 31, 2025 and December 31, 2024.

Liquidity and Capital Management

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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 September 30, 2024 to satisfy its short- and long-term liquidity needs.

The Company’s most liquid assets are cash and due from banks, which totaled $147.3 million at September 30, 2024.

The Company believes that it had sufficient liquidity at March 31, 2025 to satisfy its short- and long-term liquidity needs.

The Company’s most liquid assets are cash and due from banks, which totaled $61.3 million at March 31, 2025.

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 $95.8 million at September 30, 2024.

In addition, at September 30, 2024, the Company had the ability to borrow up to $486.3 million from the FHLB of Pittsburgh, of which $464.4 million was available.

The Company also has the ability to borrow up to $88.7 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 September 30, 2024 and December 31, 2023, currently these credit arrangements have remained unused.

At September 30, 2024, $335.7 million, or 91.4% of total time deposits mature within one year.

Unpledged securities, which provide an additional source of liquidity, totaled $95.6 million at March 31, 2025.

In addition, at March 31, 2025, the Company had the ability to borrow up to $508.3 million from the FHLB of Pittsburgh, of which $486.4 million was available.

The Company also has the ability to borrow up to $75.2 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 March 31, 2025 and December 31, 2024, currently these credit arrangements have remained unused.

At March 31, 2025, $237.3 million, or 88.6% 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.

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The Company has the ability to attract and retain deposits by adjusting the interest rates offered.

At September 30, 2024, the Bank's current deposit portfolio is 62.4% insured by the FDIC, and with additional coverage of 15.9% from the Bank's investment securities;

At March 31, 2025, the Bank's current deposit portfolio is 62.3% insured by the FDIC, and with additional coverage of 15.2% from the Bank's investment securities;

of the total deposits held at the Bank only 22.5% are uninsured.

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The Bank’s ability to pay dividends to CB Financial is subject to regulatory limitations.

At September 30, 2024, CB Financial (on an unconsolidated, stand-alone basis) had liquid assets of $16.4 million.

At March 31, 2025, CB Financial (on an unconsolidated, stand-alone basis) had liquid assets of $15.1 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.

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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 September 30, 2024 and December 31, 2023, the Bank was categorized as “well capitalized” under the regulatory framework for prompt corrective action.

At March 31, 2025 and December 31, 2024, the Bank was categorized as “well capitalized” under the regulatory framework for prompt corrective action.

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.

September 30, 2024 December 31, 2023

March 31, 2025 December 31, 2024

Amount Ratio Amount Ratio

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Refer to the "Lending Activities" section of the Company's Annual Report on Form 10-K for the year ended December 31, 2024 for a description of each loan portfolio segment.

At September 30, 2024 the Company's loans totaled $1.07 billion, representing a $44.6 million, or 4.0%, decrease compared to $1.11 billion at December 31, 2023.

At March 31, 2025, the Company's loans totaled $1.088 billion, representing a $4.1 million, or 0.4%, decrease compared to $1.093 billion at December 31, 2024.

The table below provides the composition of the loan portfolio:

September 30, 2024 December 31, 2023

March 31, 2025 December 31, 2024

(Dollars in thousands)

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Our concentration management policy is approved by the Company's Board of Directors and is used to ensure a high-quality, well diversified portfolio that is consistent with our overall objective of maintaining an acceptable level of risk.

The Company's CRE portfolio totaled $464.4 million at September 30, 2024, a decrease of $2.8 million, or 0.6%, compared to December 31, 2023.

The Company's CRE portfolio totaled $497.3 million at March 31, 2025, a increase of $11.8 million, or 2.4%, compared to December 31, 2024.

CRE loans are concentrated in the Pittsburgh metropolitan area.

The tables below provides further detail of the composition of the CRE portfolio as of September 30, 2024:

The tables below provides further detail of the composition of the CRE portfolio as of March 31, 2025:

(Dollars in thousands) CRE Nonowner Occupied Loans

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Medical Facilities 8,965 8.14 % 690 76.12 %

Senior Housing 6,080 4.84 % 1,520 28.01 %

Manufacturing 3,395 3.08 % 309 56.67 %

Oil & Gas 670 0.61 % 45 33.88 %

Hotels 5,918 5.38 % 1,973 27.21 %

Other 32,952 29.93 % 428 56.08 %

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 2. Management’s Discussion and Analysis