What changed in this filing

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Item 1. Business

2021-03-04 compared with 2020-03-05 · 43 added, 15 removed, 218 unchanged (21% of the section changed)

6 unchanged sentences

In July 2016, the Corporation acquired Lake National Bank.

In December 2019, the Corporation entered into an agreement to acquire the Bank of Akron.

This transaction is expected to close in the third quarter of 2020.

On July 17, 2020, the Corporation completed its previously announced acquisition of Bank of Akron, pursuant to that certain Agreement and Plan of Merger, dated as of December 18, 2019 (the "Merger Agreement"), by and among the Corporation, CNB Bank and Bank of Akron.

Under the terms of the Merger Agreement, Bank of Akron merged with and into CNB Bank (the "Merger"), with CNB Bank continuing as the surviving entity.

Banking offices of Bank of Akron operate under the trade name BankOnBuffalo, a division of CNB Bank.

Pursuant to the Merger Agreement, for each share of Bank of Akron common stock, Bank of Akron shareholders were entitled to elect to receive either (x) $215.00 in cash or (y) 6.6729 shares of the Corporation's common stock and received cash in lieu of fractional shares.

Elections were subject to proration procedures whereby at least 75% of the shares of Bank of Akron common stock were exchanged for shares of the Corporation's common stock.

Based on the elections and proration procedures, the total consideration payable to Bank of Akron shareholders was approximately $40.8 million, comprised of approximately $16.1 million in cash and 1,501,321 shares of the Corporation's common stock, net of fractional shares, valued at approximately $24.7 million based on the July 17, 2020 closing price of $16.43 per share of the Corporation's common stock.

In addition to the Bank, the Corporation has four other subsidiaries.

5 unchanged sentences

The Bank was originally chartered as a national bank in 1934 and is now a Pennsylvania-chartered bank.

In February 2017, the Bank completed construction of a full-service branch location in Duncansville, Pennsylvania and concurrently closed its loan production office in Hollidaysburg, Pennsylvania.

The full-service branch is being operated as part of the CNB Bank franchise.

The CNB Bank franchise operates 18 full-service branch locations in Pennsylvania.

ERIEBANK, a division of the Bank, began operations in 2005.

In July 2016, the Corporation acquired Lake National Bank, which operated two full-service branches in Mentor, Ohio, approximately 20 miles east of Cleveland, Ohio.

The Bank is continuing to operate these two branch locations within its ERIEBANK franchise.

In February 2017, the Corporation completed construction of a full-service branch location in Ashtabula, Ohio, which is also operating within the ERIEBANK franchise.

The Bank is continues to operate one of these branch locations within its ERIEBANK franchise, with the other location ceasing operations in August 2020.

In January 2020, the Corporation established a loan production office ("LPO") in Cleveland, Ohio.

This LPO will operate within the ERIEBANK division.

This LPO operates within the ERIEBANK division.

The Bank currently operates ten full-service branch locations and one LPO as ERIEBANK, a division of the Bank, with its headquarters in Erie, Pennsylvania.

In October 2013, the Corporation acquired FC Banc Corp.

and its subsidiary, Farmers Citizens Bank.

In 2017, the Bank sold its Mount Hope branch of FCBank to First Federal Community Bank of Dover, Ohio.

The Bank currently operates seven branch locations as FCBank, a division of the Bank, with its headquarters in Worthington, Ohio.

The Bank currently operates seven full-service branch locations as FCBank, a division of the Bank, with its headquarters in Worthington, Ohio.

In 2016, the Bank received regulatory approval to conduct business in the state of New York as BankOnBuffalo, a division of the Bank.

The Bank opened a loan production office in Buffalo, New York in May 2016, which was closed in February 2017 concurrent opening of a full-service location in downtown Buffalo in February 2017.

The Bank opened full-service locations in Williamsville, New York and Orchard Park, New York in the fourth quarter of 2017, and a full-service location in Niagara Falls, New York in the third quarter of 2018.

In July 2020, the Corporation acquired Bank of Akron, with its branch locations operating with BankOnBuffalo.

The Bank currently operates nine branch locations and one drive-up office as BankOnBuffalo, a division of the Bank, with its headquarters in Buffalo, New York.

The Bank has 44 full-service branch offices located in various communities in its market area.

11 unchanged sentences

Holiday currently has nine offices within the Corporation’s market area.

2020 Cybersecurity Incident

In the fourth quarter of 2020, we experienced a cybersecurity incident following the receipt by one employee of a malicious "phishing" email.

Once the activity was identified as potential unauthorized access, the Corporation acted to stop the intrusion and deployed its Information Security team to conduct an investigation and determine the scope of the unauthorized access, including the specific information impacted.

Based on our investigation, the unauthorized access occurred from the end of November 2020 through the beginning of December 2020.

The Corporation’s core systems were unaffected, as the unauthorized access was limited to the employee’s email.

The Corporation engaged a third-party cybersecurity response firm to review the compromised emails for personally identifiable information ("PII"), and to determine which of our customers were impacted by this cybersecurity incident.

The Corporation will notify all customers with potentially compromised PII.

The Corporation has taken actions to provide individuals with tools to protect their PII.

The Company has devoted substantial resources to notify impacted individuals of the incident and to provide free services to assist these individuals in monitoring their identity information.

Although the Corporation’s core systems were not compromised, the Corporation continues to enhance its data security systems, technology platforms, employee education and risk management processes, in an effort to underpin its business strategy.

The financial services industry in the Corporation’s service area continues to be extremely competitive, both among commercial banks and with other financial service providers such as consumer finance companies, thrifts, investment firms, mutual funds and credit unions.

14 unchanged sentences

A change in applicable statutes, regulations or regulatory policy may have a material effect on our business.

In addition to the summary below, as a result of the COVID-19 pandemic, the U.S.

bank regulators issued several letters and other guidance during the course of 2020 to bank holding companies and banks regarding expectations for supporting the community and certain related temporary regulatory changes or accommodations, including, for example, temporary relief for banks that may exceed certain regulatory asset thresholds due in large part to their participation in government programs established in response to the COVID-19 pandemic.

The Corporation continues to monitor guidance and developments related to COVID-19.

Bank Holding Company Regulation

40 unchanged sentences

In July 2019, the Office of the Comptroller of the Currency, the Federal Reserve Board and the FDIC adopted a final rule intended to simply the Capital Rules described above for non-advanced approaches institutions.

Institutions may implement the simplification rule beginning on January 1, 2020 and must implement them by April 1, 2020.

The transition provisions to the Capital Rules issued by these agencies in November 2017 will cease to apply to an institution in the quarter in which it adopts the simplification rule.

Institutions could implement the simplification rule beginning on January 1, 2020 and were required to implement them by April 1, 2020.

The transition provisions to the Capital Rules issued by these agencies in November 2017 will cease to apply to an institution in the quarter in which it adopted the simplification rule.

In September 2019, the Office of the Comptroller of the Currency, the Federal Reserve Board and the FDIC adopted a final rule that is intended to further simply the Capital Rules for depository institutions and their holding companies that have less than $10 billion in total consolidated assets, such as us, if such institutions meet certain qualifying criteria.

This final rule became effective on January 1, 2020.

Under this final rule, if we meet the qualifying criteria, including having a leverage ratio (equal to tier 1 capital divided by average total consolidated assets) of greater than 9 percent, we will be eligible to opt into the community bank leverage ratio framework.

Under this final rule, if we meet the qualifying criteria, including having a leverage ratio (equal to tier 1 capital divided by average total consolidated assets) of f a certain size ( greater than 8 percent through 2020, 8.5 percent through 2021 and 9 percent thereafter), we will be eligible to opt into the community bank leverage ratio framework.

If we opt into this framework, we will be considered to have satisfied the generally applicable risk-based and leverage capital requirements in the Capital Rules (as modified pursuant to the simplification rule) and will be considered to have met the well-capitalized ratio requirements for PCA purposes.

To date, we have not opted in to this community bank leverage ratio framework.

Dividend Restrictions

46 unchanged sentences

Assessment rates are calculated using formulas that take into account the risk of the institution being assessed.

FDIC deposit insurance expense also includes deposit insurance assessments and FICO assessments related to outstanding FICO bonds.

The FDIC adopted a final rule effective June 26, 2020, and applied as of April 1, 2020, to mitigate the effect on deposit insurance assessments of a bank’s participation in the Paycheck Protection Program, the Paycheck Protection Program Liquidity Facility and the Money Market Mutual Fund Liquidity Facility in connection with the COVID-19 pandemic.

Financial Privacy and Data Security

65 unchanged sentences

It is not possible to predict whether any such proposals will be enacted into law or, even if enacted, what effect such action may have on our business and earnings.

Human Capital

As of December 31, 2020, the Corporation had a total of 651 employees, of which 601 were full time and 50 were part time.

The Corporation respects, values, and invites diversity in our employees, customers and communities.

We seek to recognize the unique contribution each individual brings to our Corporation, and we are fully committed to supporting a diverse workplace that understands, accepts and values the similarities and differences between individuals.

The Corporation’s key human capital management objectives are to attract, recruit, hire, develop and promote a deep and diverse bench of talent that translates into a strong and successful workforce.

To support these objectives, the Corporation’s Employee Experience programs are designed to develop talent to prepare them for critical roles and leadership positions for the future;

reward and support employees through competitive pay and benefit programs;

enhance the Corporation’s culture through efforts to foster, promote, and preserve a culture of diversity and inclusion;

and evolve and invest in technology, tools, and resources to better support employees at work.

The Corporation's employees actively participate in their communities through volunteer activities in education, economic development, human and health services, and community reinvestment.

During 2020, employees donated 3,800 hours in support of more than 310 organizations.

Even through a pandemic, the Corporation's employees found creative ways to give back to their communities.

Employee volunteers are recognized for their efforts by public recognition on social media and reward points to be redeemed for gift cards, company branded gifts and prizes.

Available Information

7 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-K

Item 1. Business