What changed in this filing

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Item 1. Business

2022-03-03 compared with 2021-03-04 · 78 added, 47 removed, 214 unchanged (37% of the section changed)

2 unchanged sentences

On April 26, 1984, the Corporation acquired all of the outstanding capital stock of County National Bank, a national banking chartered institution.

In December 2006, County National Bank changed its name to CNB Bank (the "Bank"), and became a state bank chartered in Pennsylvania and subject to regulation by the Pennsylvania Department of Banking and the Federal Deposit Insurance Corporation.

In December 2006, County National Bank changed its name to CNB Bank (the "Bank") and became a state bank chartered in Pennsylvania and subject to regulation by the Pennsylvania Department of Banking and Securities (the “Pennsylvania Department of Banking”) and the Federal Deposit Insurance Corporation.

In October 2013, the Corporation acquired FC Banc Corp.

and its subsidiary, The Farmers Citizens Bank.

In July 2016, the Corporation acquired Lake National Bank.

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 July 2016, the Corporation acquired Lake National Bank, and in July 2020, the Corporation acquired Bank of Akron.

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

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is a Delaware-based captive insurance company which insures against certain risks unique to the operations of the Corporation and its subsidiaries and for which insurance may not be currently available or economically feasible in today's insurance marketplace.

Holiday Financial Services Corporation, incorporated in Pennsylvania, offers small balance unsecured loans and secured loans, primarily collateralized by automobiles and equipment, to borrowers with higher risk characteristics.

Holiday Financial Services Corporation ("Holiday"), incorporated in Pennsylvania, offers small balance unsecured loans and secured loans, primarily collateralized by automobiles and equipment, to borrowers with higher risk characteristics.

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

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

The Bank 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 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.

This LPO operated within the ERIEBANK division as of December 31, 2021 and has subsequently closed.

In conjunction with the closing of the LPO, the Corporation opened a full-service branch in Cleveland, Ohio.

The Bank currently operates eleven full-service branch locations, 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.

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

The Bank currently operates six 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.

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.

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

In 2021, the Bank received regulatory approval to conduct business in the state of Virginia as Ridge View Bank, a division of the Bank.

The Bank currently operates two LPOs in Roanoke, Virginia.

The Bank had 44 full-service branch offices located in various communities in its market area at December 31, 2021, and as noted previously has subsequently opened one additional full service branch.

The Bank’s primary market area includes the Pennsylvania counties of Blair, Cambria, Cameron, Centre, Clearfield, Crawford, Elk, Indiana, Jefferson, and McKean.

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FCBank, a division of the Bank, operates in the Ohio counties of Crawford, Richland, Ashland, Wayne, Marion, Morrow, Knox, Delaware, and Franklin.

BankOnBuffalo, a division of the Bank, operates in Erie and Niagara counties, New York.

BankOnBuffalo, a division of the Bank, operates in the New York counties of Erie and Niagara.

Ridge View Bank, a division of the Bank, operates in Roanoke, Virginia.

The Bank is a full-service bank engaging in a full range of banking activities and services for individual, business, governmental and institutional customers.

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Holiday Financial Services Corporation

In 2005, the Corporation entered the consumer discount loan and finance business, which is conducted through a wholly-owned subsidiary, Holiday Financial Services Corporation ("Holiday").

In 2005, the Corporation entered the consumer discount loan and finance business, which is conducted through a wholly-owned subsidiary, Holiday.

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.

Cybersecurity

Following a cybersecurity incident in the fourth quarter of 2020 that resulted in potential unauthorized access to personally identifiable information, the Corporation has continued to enhance its data security systems, technology platforms, employee education and risk management processes in an effort to underpin its business strategy.

Although the Corporation’s core systems were not compromised and the Corporation has not experienced any material losses, the Corporation is committed to implementing strategies to prevent and/or mitigate future cyber attacks.

Federal regulators issued two statements regarding cybersecurity:

(i) a statement indicating that financial institutions should design multiple layers of security controls to establish lines of defense and to ensure that their risk management processes also address the risk posed by compromised customer credentials, including security measures to reliably authenticate customers accessing internet-based services of the financial institutions;

and (ii) a statement indicating the expectation of a financial institution's management to maintain a sufficient business continuity planning process to ensure rapid recovery, resumption and maintenance of the financial institution's operations after a cyber-attack involving destructive malware.

A financial institution is also expected to develop appropriate processes to:

(a) enable recovery of data and business operations, (b) address rebuilding network capabilities, and (c) restore data if the financial institution or any of its critical service providers fall victim to this type of cyber-attack.

If the Company does not comply with this regulatory guidance, it could be subject to various regulatory sanctions, as well as financial penalties.

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.

The increased competition has resulted from changes in the legal and regulatory guidelines as well as from economic conditions.

The increased competition has resulted from changes in legal and regulatory guidelines as well as from economic conditions.

Mortgage banking firms, leasing companies, financial affiliates of industrial companies, brokerage firms, retirement fund management firms, and even government agencies provide additional competition for loans and other financial services.

Some of the financial service providers operating in the Corporation’s market area operate on a large-scale regional or national basis and possess resources greater than those of the Corporation.

Some of the financial service providers operating in the Corporation’s market area operate on a large-scale regional or national basis and possess greater resources than those of the Corporation.

The Corporation is generally competitive with all competing financial institutions in its service area with respect to interest rates paid on time and savings deposits, service charges on deposit accounts and interest rates charged on loans.

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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 regulators issued several letters and other guidance during the course of 2020 and 2021 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 the COVID-19 pandemic.

Bank Holding Company Regulation

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Pursuant to provisions of the BHC Act and regulations promulgated by the Federal Reserve Board thereunder, the Corporation may only engage in, or own companies that engage in, activities deemed by the Federal Reserve Board to be permissible for bank holding companies or financial holding companies.

Activities permissible for bank holding companies are those that are so closely related to the business of banking or managing or controlling banks as to be a proper incident thereto.

Permissible activities for financial holding companies include those "so closely related to banking as to be a proper incident thereto" as well as certain additional activities deemed "financial in nature or incidental to such financial activity" or complementary to a financial activity and that does not pose a substantial risk to the safety and soundness of the depository institution or the financial system.

Activities permissible for bank holding companies include those that are so closely related to banking or managing or controlling banks as to be a proper incident thereto." Activities for financial holding companies include those that are "so closely related to banking as to be a proper incident thereto" as well as certain additional activities deemed "financial in nature or incidental to such financial activity" or complementary to a financial activity and that does not pose a substantial risk to the safety and soundness of the depository institution or the financial system.

The Corporation must obtain permission from or provide notice to the Federal Reserve Board prior to engaging in most new business activities.

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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 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.

Institutions were required to implement the simplification rule by April 1, 2020.

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 simplify 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 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.

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 a certain size ( greater than 9% beginning January 1, 2022), 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.

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As of December 31, 2021, the Corporation had a total of 703 employees, of which 659 were full time and 44 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 respects, values and promotes the realization of an increasing diversity and inclusivity profile in our team of Board members and employees, and our customers, reflective of the communities we serve.

The Corporation emphasizes relevant governance and diversity and inclusion principles in strategic planning, human capital management and leadership development (which includes recruiting and retaining employees).

Strategic Planning and Related Training

The Corporation has established a formal Strategic Plan, and the framework of the Strategic Plan establishes that principles of inclusion and diversity encompass and integrate with the other objectives of the Strategic Plan, including exceptional experiences, demonstrated leadership, adaptable technology, and long-term growth.

In establishing these principles as the foundation upon which all other strategic objectives are anchored, the Corporation seeks to further develop and sustain a diverse, equitable, and inclusive culture, with sensitivity to the entirety of the Corporation’s footprint and environment in which it operates.

The differences among the Corporation’s Board and employees, and its customers and community members, are respected and embraced to drive innovative products, services, and solutions that effectively meet the variety of needs among the Corporation’s diverse group of stakeholders.

To ensure that the principles are understood, implemented, and demonstrated by the Corporation’s employee team on a sustained basis, the Corporation is developing comprehensive diversity, equity, and inclusion communication processes and a training curriculum – a comprehensive program to be delivered beginning in 2022 to all employees, including internal sessions delivered by a certified diversity and inclusion trainer, supplemented by relevant external training sources.

This effort will include establishing measurable goals of inclusion and diversity accountability, qualitative processes and actions for achievement of these goals, and regular quantitative assessments to measure the impact on the Corporation, its experiences, and its culture.

Inclusion and Diversity Committee

In support of its strategic diversity and inclusion efforts, and to ensure that the diverse perspectives of the entire Corporation’s employee team is considered when developing and implementing its service and operating profile, the Corporation established an Inclusion and Diversity Committee (the “Diversity Committee”) in 2018.

This Diversity Committee, which meets monthly, is comprised of over 10 employee members including underrepresented minorities, females, and those who identify as LGTBQ+, with the following committee responsibilities and goals:

• Encourage an inclusive and engaged workforce culture through communications and training;

• Demonstrate sustainability, commitment and accountability by tracking inclusion and diversity efforts bank wide;

• Bring awareness to the importance of inclusion and diversity internally and externally.

The Diversity Committee’s meeting minutes, activities and recommendations are provided regularly to the Corporation’s executive management team for consideration to promote the effective integration of diversity and inclusion principles into the respective facets of our business evaluated and addressed by the Diversity Committee.

Human Capital Management and Leadership Development

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

The Corporation’s key human capital management objectives are to recruit, hire, develop and promote a deeply experienced and diverse employee team, supplemented by similarly inclusive and diversity-focused third-party vendors, that collectively translate into a strong workforce committed to fostering, promoting, and preserving the entire spectrum of our communities and culture, while successfully executing our business strategies and demonstrating our corporate values.

To support these objectives, the Corporation’s Employee Experience processes and programs are designed and operated to:

• Attract and develop talented employees across the spectrum of professional experience, life experience, socio-economic background, gender, race, religion, skill set, and geographic representation;

• Prepare all members of our team for critical roles and leadership positions both now and the future, in serving as employees and valuable community members;

• Reward and support employees fairly and without discrimination based upon successful performance and through competitive pay and benefit programs;

• Enhance the Corporation’s culture through efforts to better understand, foster, promote, and preserve a culture of diversity and inclusion;

• Evolve and invest in technology, tools, and resources to better support employees of varying skills and backgrounds at work.

Among the means we use to monitor our performance in employee diversity and inclusion management, we take recurring management and employee demographic measurements and engagement surveys, and utilize the results to identify progress made, as well as areas in need of more attention, in improving the diversity, equity, and inclusion of our leadership and workforce profile, and personnel management practices.

A critical measure is realizing increasing diversity in our senior leadership positions, as those members of the Corporation’s management have greater ability to effectuate sustained change in the composition of our team and the expanded, relevant involvement of all groups within the spectrum of our workforce and communities.

The Corporation’s senior leadership team, which is comprised of individuals with the titles of Senior Vice President, Executive Vice President, Senior Executive Vice President, Regional President, President, and CEO, opened the Year 2021 with 33 individuals, including 11 members, or 33%, who were female or members of underrepresented minority groups.

As we began the Year 2022, our senior leadership team has expanded to 36 individuals, with females and members of underrepresented minority groups comprising 12, or 33%, of the team.

As a result of broadening our recruitment efforts to increase the diversity of our team, for the year ended December 31, 2021, the Corporation hired 48 individuals from groups designated as underrepresented minorities, out of 245 total hires for the entire Corporation in 2021.

While 2021 saw the most minority hires made in one year by the Corporation, allowing us to realize improvement in our overall ethnic diversity workforce profile, we recognize that our efforts must continue to remain diligent and be increasingly productive, as some of our regional bank’s workforce profiles do not yet more closely parallel the overall underrepresented minority demographics of their respective communities, particularly our predominantly urban markets including Cleveland, Columbus, Buffalo, and Erie.

As part of expanding our efforts and outlets to reach more qualified underrepresented minority candidates for new or open positions in 2022 and beyond, we are broadening our outreach to new sources for identifying and recruiting talented and qualified minority candidates.

This includes partnering with a local Buffalo, New York college to offer apprenticeship programs designed to provide meaningful on-the-job training, work experience and college credits towards certificates and banking degrees to minority students.

Additionally, our involvement in the Ohio Bankers League Summer Banking Institute allows us to offer internships to minority college students to increase awareness of career opportunities available in the banking industry in both the Cleveland and Columbus, Ohio markets.

We believe our participation in these programs will help us identify or develop similar programs and minority recruitment opportunities in other markets and communities within the Corporation’s footprint.

Community Involvement and Social Impacts

The Corporation serves as a cornerstone institution of both financial support and community service in the markets in which we serve.

We are committed to strengthening these communities through the active volunteering of our employees.

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.

Despite the continuing COVID-19 pandemic, the Corporation’s employees found innovative ways to give back to their communities.

During 2021, employees donated 7,835 hours in support of more than 456 organizations, with 58% of employees actively participating.

Additionally, there were approximately $700,000 in donations to community organizations and events within the communities we serve.

Notably, even during the COVID-19 pandemic, the Corporation’s Martin Luther King, Jr.

“Take the Day On” efforts resulted in the support of 32 community organizations and 206 volunteer hours.

Employees collected donations and delivered them to local organizations in need during this national day of service, which typically serves as a bank holiday.

Another example of the Corporation’s involvement in the community is a Financial Reality Fair for high school students, many of which are in low-to-moderate income households, held at the local career center.

The event benefited 400 high school students from six high schools, resulted in over 200 hours of volunteer time and partnerships with six community organizations.

Bank experts not only shared their real-life knowledge of budgeting, but also provided additional follow up financial education after the fair.

Available Information

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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