CNB FINANCIAL CORP/PA 10-K

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA Report of Independent Registered Public Accounting Firm To the Shareholders, Board of Directors, and Audit Committee CNB Financial Corporation Clearfield, Pennsylvania Opinion on the Consolidated Financial Statements We have audited the accompanying consolidated balance sheet of CNB Financial Corporation (the "Corporation") as of December 31, 2022, the related consolidated statement of income and comprehensive income, changes in shareholders’ equity, and cash flows for the year ended December 31, 2022 and the related notes (collectively referred to as the "financial statements"). In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Corporation as of December 31, 2022, and the results of its operations and its cash flows for the year ended December 31, 2022, in conformity with accounting principles generally accepted in the United States of America. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) ("PCAOB"), the Corporation’s internal control over financial reporting as of December 31, 2022 based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated March 3, 2023, expressed an unqualified opinion thereon. Basis for Opinion These financial statements are the responsibility of the Corporation’s management. Our responsibility is to express an opinion on the Corporation’s financial statements based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Corporation in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures include examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audit provide a reasonable basis for our opinion. Change in Accounting Principle As discussed in Note 1 to the financial statements, the Corporation has changed its method of accounting for credit losses effective January 1, 2020 due to the adoption of ASU 2016-13 Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. The Corporation adopted the new credit losses standard using the modified retrospective method such that prior period amounts are not adjusted and continue to be reported in accordance with previously applicable generally accepted accounting principles. 52 Table of Contents Critical Audit Matter The critical audit matter communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate. Allowance for Credit Losses on Loans As described in Notes 1 and 4 to the financial statements, the Corporation establishes an allowance representing the estimate of expected credit losses over the estimated life of the existing portfolio of loans. The Corporation measures expected credit losses based on a pooled loan basis when similar risk characteristics exist by primarily applying a discounted cash flow ("DCF") model. The DCF model discounts instrument-level contractual cash flows, adjusting for prepayments and curtailments, and incorporates loss expectations based on past events, current conditions, and forecasted macroeconomic indicators using reasonable and supportable forecasts. The quantitative estimated losses provided by the DCF model are supplemented by qualitative factors that include changes related to relevant data, such as differences in underwriting standards, changes in environmental conditions, delinquency levels, segment growth rates and changes in duration within new markets, or other relevant factors not considered in the DCF model. We identified the allowance for credit losses on loans as a critical audit matter. Auditing management’s estimate of the allowance involved a high degree of subjectivity due to the significant judgment required in determining the (1) significant assumptions within the DCF model and (2) measurement of the qualitative factors applied to the loan portfolio. The primary procedures performed to address the critical audit matter included: • Obtained an understanding, evaluated the design, and tested the operating effectiveness of the Corporation’s internal controls over the allowance for credit losses process, including controls over both the DCF and qualitative elements of the allowance. This included controls over the review of the relevance and reliability of data used to determine the estimates and the review of the appropriateness of the key assumptions and judgments used in the determination of the qualitative factors. • Evaluated the completeness and accuracy of data used in the DCF model and the reasonableness of management’s judgments and the relevance of data used in applying the qualitative factors. • We involved FORVIS’ valuation specialists to assist in evaluating the appropriateness of model inputs and assumptions and testing the design of the model calculation through a re-performance of the discounted cash flow. Other Matter The 2021 and 2020 financial statements were audited by other auditors whose unqualified reports on those statements thereon, dated March 3, 2022, included an emphasis paragraph that described the change in accounting principle discussed in Note 1. /s/ FORVIS, LLP (Formerly, BKD, LLP) We have served as the Corporation’s auditor since 2022. Indianapolis, Indiana March 3, 2023 53 Table of Contents Report of Independent Registered Public Accounting Firm To the Shareholders, Board of Directors, and Audit Committee CNB Financial Corporation Clearfield, Pennsylvania Opinion on the Internal Control over Financial Reporting We have audited CNB Financial Corporation’s (the "Corporation") internal control over financial reporting as of December 31, 2022, based on criteria established in Internal Control – Integrated Framework: (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). In our opinion, the Corporation maintained, in all material respects, effective internal control over financial reporting as of December 31, 2022, based on criteria established in Internal Control – Integrated Framework: (2013) issued by COSO. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) ("PCAOB"), the consolidated balance sheet of the Company as of December 31, 2022, and the related consolidated statement of income and comprehensive income, changes in shareholders’ equity and cash flows for each of the year ended December 31, 2022, and our report dated March 3, 2023, expressed an unqualified opinion on those financial statements. Basis for Opinion The Corporation’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Corporation’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Corporation in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. Definitions and Limitations of Internal Control over Financial Reporting A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of reliable financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. 54 Table of Contents Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions or that the degree of compliance with the policies or procedures may deteriorate. /s/ FORVIS, LLP (Formerly, BKD, LLP) Indianapolis, Indiana March 3, 2023 55 Table of Contents Report of Independent Registered Public Accounting Firm Shareholders and the Board of Directors of CNB Financial Corporation Clearfield, Pennsylvania Opinion on the Financial Statements We have audited the accompanying consolidated balance sheet of CNB Financial Corporation (the "Corporation") as of December 31, 2021, the related consolidated statements of income, comprehensive income, changes in shareholders’ equity, and cash flows for each of the two years in the period ended December 31, 2021, and the related notes (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Corporation as of December 31, 2021, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2021 in conformity with accounting principles generally accepted in the United States of America. Basis for Opinion These financial statements are the responsibility of the Corporation’s management. Our responsibility is to express an opinion on the Corporation’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Corporation in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. /s/ Crowe LLP We served as the Corporation's auditor from 2000 through March 3, 2022. Columbus, Ohio March 3, 2022 56 Table of Contents CONSOLIDATED BALANCE SHEETS Dollars in thousands, except share data December 31, December 31, 2022 2021 ASSETS Cash and due from banks $ 58,884 $ 42,440 Interest-bearing deposits with Federal Reserve 43,401 684,306 Interest-bearing deposits with other financial institutions 4,000 5,452 Total cash and cash equivalents 106,285 732,198 Debt securities available-for-sale, at fair value (amortized cost of $ 432,992 as of December 31, 2022 and $ 698,085 as of December 31, 2021) 371,409 697,191 Debt securities held-to-maturity, at amortized cost (fair value $ 367,388 as of December 31, 2022 and $ — , as of December 31, 2021) 404,765 — Equity securities 9,615 10,366 Loans held for sale 231 849 Loans receivable PPP loans, net of deferred processing fees 159 45,203 Syndicated loans 156,649 125,761 Loans 4,118,370 3,463,828 Total loans receivable 4,275,178 3,634,792 Less: allowance for credit losses ( 43,436 ) ( 37,588 ) Net loans receivable 4,231,742 3,597,204 FHLB and other restricted stock holdings and investments 30,715 23,276 Premises and equipment, net 68,535 61,659 Operating lease right-of-use assets 32,307 19,928 Bank owned life insurance 111,523 99,719 Mortgage servicing rights 1,804 1,664 Goodwill 43,749 43,749 Core deposit intangible 364 460 Accrued interest receivable and other assets 62,135 40,676 Total Assets $ 5,475,179 $ 5,328,939 LIABILITIES AND SHAREHOLDERS’ EQUITY Noninterest-bearing demand deposits $ 898,437 $ 792,086 Interest-bearing demand deposits 1,007,202 1,079,336 Savings 2,270,337 2,457,745 Certificates of deposit 446,461 386,452 Total deposits 4,622,437 4,715,619 Short-term borrowings 132,396 — Subordinated debentures 20,620 20,620 Subordinated notes, net of unamortized issuance costs 83,964 83,661 Operating lease liabilities 33,726 21,159 Accrued interest payable and other liabilities 51,274 45,033 Total liabilities 4,944,417 4,886,092 Commitments and contingent liabilities Preferred stock, Series A non-cumulative perpetual, No par value; $ 1,000 liquidation preference; shares authorized 60,375 ; Shares issued 60,375 at December 31, 2022 and 60,375 at December 31, 2021 57,785 57,785 Common stock, no par value; 50,000,000 shares authorized; Shares issued 21,121,346 shares at December 31, 2022 and 16,978,057 at December 31, 2021 — — Additional paid in capital 221,553 127,351 Retained earnings 306,911 260,582 Treasury stock, at cost ( 114,157 shares at December 31, 2022 and 122,995 shares at December 31, 2021) ( 2,967 ) ( 2,477 ) Accumulated other comprehensive loss ( 52,520 ) ( 394 ) Total shareholders’ equity 530,762 442,847 Total Liabilities and Shareholders’ Equity $ 5,475,179 $ 5,328,939 See Notes to Consolidated Financial Statements 57 Table of Contents CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME Dollars in thousands, except per share data Year ended December 31, 2022 2021 2020 INTEREST AND DIVIDEND INCOME: Loans including fees Interest and fees on loans $ 194,149 $ 157,799 $ 147,547 Processing fees on PPP loans 1,889 8,737 5,140 Securities and cash and cash equivalents: Taxable 16,672 11,680 12,362 Tax-exempt 871 1,125 1,441 Dividends 157 259 677 Total interest and dividend income 213,738 179,600 167,167 INTEREST EXPENSE: Deposits 19,833 15,062 24,142 Borrowed funds and finance lease liabilities 389 23 4,534 Subordinated debentures (includes $ 127 , $ 276 , and $ 224 accumulated other comprehensive income reclassification for change in fair value of interest rate swap agreements, respectively) 3,857 4,735 3,780 Total interest expense 24,079 19,820 32,456 NET INTEREST INCOME 189,659 159,780 134,711 PROVISION FOR CREDIT LOSS EXPENSE 8,589 6,003 15,354 NET INTEREST INCOME AFTER PROVISION FOR CREDIT LOSS EXPENSE 181,070 153,777 119,357 NON-INTEREST INCOME: Service charges on deposit accounts 7,206 6,195 5,095 Other service charges and fees 3,196 2,436 2,548 Wealth and asset management fees 7,172 6,740 5,497 Net realized gains on available-for-sale securities (includes $ 651 , $ 783 , and $ 2,190 accumulated other comprehensive income reclassifications for net realized gains on available-for-sale securities, respectively) 651 783 2,190 Net realized gains on equity securities — — 75 Net unrealized gains on equity securities ( 1,149 ) 790 253 Mortgage banking 1,237 3,147 3,354 Bank owned life insurance 3,433 2,638 1,747 Card processing and interchange income 7,797 7,796 5,727 Other non-interest income 5,223 2,909 1,573 Total non-interest income 34,766 33,434 28,059 NON-INTEREST EXPENSES: Compensation and benefits (includes $( 113 ), $( 43 ), and $ — accumulated other comprehensive income reclassifications for net amortization of actuarial (gains) losses, respectively) 71,460 61,175 48,723 Net occupancy expense 13,298 12,381 12,333 Technology expense 17,041 11,723 7,153 State and local taxes 4,078 4,057 3,340 Legal, professional and examination fees 4,173 3,517 2,990 Advertising 2,887 2,081 1,993 FDIC insurance 2,796 2,509 2,414 Card processing and interchange expenses 4,801 3,836 3,135 Other non-interest expenses 17,088 15,154 12,603 Merger costs, prepayment penalties and branch closure costs — — 12,642 Total non-interest expenses 137,622 116,433 107,326 INCOME BEFORE INCOME TAXES 78,214 70,778 40,090 INCOME TAX EXPENSE (includes $ 134 , $ 116 , and $ 413 income tax expense reclassification items, respectively) 15,026 13,071 7,347 NET INCOME 63,188 57,707 32,743 PREFERRED STOCK DIVIDENDS 4,302 4,302 1,147 NET INCOME AVAILABLE TO COMMON STOCKHOLDERS $ 58,886 $ 53,405 $ 31,596 PER COMMON SHARE DATA: Basic Earnings Per Common Share $ 3.26 $ 3.16 $ 1.97 Diluted Earnings Per Common Share $ 3.26 $ 3.16 $ 1.97 Cash Dividends Declared $ 0.700 $ 0.685 $ 0.680 NET INCOME $ 63,188 $ 57,707 $ 32,743 OTHER COMPREHENSIVE INCOME (LOSS): Net change in unrealized gains (losses) on available-for-sale securities, net of reclassification and tax $ ( 53,576 ) $ ( 16,044 ) $ 8,140 Amortization of unrealized gains from held-to-maturity securities, net of tax 875 — — Change in actuarial gain, for post-employment health care plan, net of amortization and tax 150 275 219 Change in fair value of interest rate swap agreements designated as a cash flow hedge, net of interest and tax 425 301 ( 224 ) Total other comprehensive income (loss) ( 52,126 ) ( 15,468 ) 8,135 COMPREHENSIVE INCOME $ 11,062 $ 42,239 $ 40,878 See Notes to Consolidated Financial Statements 58 Table of Contents CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY FOR THE YEARS ENDED DECEMBER 31, 2022, 2021, AND 2020 Dollars in thousands, except share and per share data Preferred Stock Additional Paid-In Capital Retained Earnings Treasury Stock Accumulated Other Comprehensive Income (Loss) Total Share- holders’ Equity Balance, January 1, 2020 $ — $ 99,335 $ 201,503 $ ( 2,811 ) $ 6,939 $ 304,966 Cumulative-effect adjustment due to the adoption of ASU No. 2016-13 — — ( 3,391 ) — — ( 3,391 ) Net income — — 32,743 — — 32,743 Other comprehensive income — — — — 8,135 8,135 Restricted stock award grants ( 36,968 shares) — ( 934 ) — 934 — — Performance based restricted stock award grants ( 8,351 shares) — ( 217 ) — 217 — — Stock-based compensation expense — 1,410 — — — 1,410 Issuance of common stock, net of issuance costs ( 115,790 shares) — 3,257 — — — 3,257 Purchase of treasury stock ( 66,600 shares) — — — ( 981 ) — ( 981 ) Purchase of treasury stock for the purpose of tax withholding related to restricted stock award vesting ( 7,349 shares) — — — ( 213 ) — ( 213 ) Purchase of treasury stock for the purpose of tax withholding related to performance based restricted stock award vesting ( 3,458 shares) — — — ( 113 ) — ( 113 ) Issuance of preferred equity, net of issuance costs 57,785 — — — — 57,785 Acquisition of Bank of Akron — 24,667 — — — 24,667 Preferred cash dividend declared — — ( 1,147 ) — — ( 1,147 ) Cash dividends declared ($ 0.68 per share) — — ( 10,981 ) — — ( 10,981 ) Balance, December 31, 2020 57,785 127,518 218,727 ( 2,967 ) 15,074 416,137 Net income — — 57,707 — — 57,707 Other comprehensive income — — — — ( 15,468 ) ( 15,468 ) Forfeiture of restricted stock award grants ( 2,669 shares) — 64 — ( 64 ) — — Restricted stock award grants ( 55,218 shares) — ( 1,374 ) — 1,374 — — Performance based restricted stock award grants ( 10,587 shares) — ( 262 ) — 262 — — Stock-based compensation expense — 1,411 — — 1,411 Contribution of treasury stock ( 3,000 shares) — ( 81 ) — 81 — — Stock-based contribution expense — 75 — — 75 Purchase of treasury stock ( 36,359 shares) — — — ( 1,000 ) — ( 1,000 ) Purchase of treasury stock for the purpose of tax withholding related to restricted stock award vesting ( 6,782 shares) — — — ( 143 ) — ( 143 ) Purchase of treasury stock for the purpose of tax withholding related to performance based restricted stock award vesting ( 941 shares) — — — ( 20 ) — ( 20 ) Preferred cash dividend declared — — ( 4,302 ) — — ( 4,302 ) Common cash dividends declared ($ 0.685 per share) — — ( 11,550 ) — — ( 11,550 ) Balance, December 31, 2021 57,785 127,351 260,582 ( 2,477 ) ( 394 ) 442,847 See Notes to Consolidated Financial Statements 59 Table of Contents CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY (continued) FOR THE YEARS ENDED DECEMBER 31, 2022, 2021, AND 2020 Dollars in thousands, except share and per share data Preferred Stock Additional Paid-In Capital Retained Earnings Treasury Stock Accumulated Other Comprehensive Income (Loss) Total Share- holders’ Equity Net income — — 63,188 — — 63,188 Other comprehensive loss — — — — ( 52,126 ) ( 52,126 ) Forfeiture of restricted stock award grants ( 1,440 shares) — 36 — ( 36 ) — — Restricted stock award grants ( 57,823 shares) — ( 1,000 ) — 1,000 — — Performance based restricted stock award grants ( 11,895 shares) — ( 173 ) — 173 — — Stock-based compensation expense — 1,248 — — — 1,248 Contribution of treasury stock ( 3,000 shares) — ( 44 ) — 44 — — Stock-based contribution expense — 84 — — — 84 Issuance of common stock, net of issuance costs ( 4,257,446 shares) — 94,051 — — — 94,051 Purchase of treasury stock ( 50,166 shares) — — — ( 1,342 ) — ( 1,342 ) Purchase of treasury stock for the purpose of tax withholding related to restricted stock award vesting ( 7,568 shares) — — — ( 203 ) — ( 203 ) Purchase of treasury stock for the purpose of tax withholding related to performance based restricted stock award vesting ( 4,706 shares) — — ( 126 ) — ( 126 ) Preferred cash dividend declared — — ( 4,302 ) — — ( 4,302 ) Cash dividends declared ($ 0.70 per common share) — — ( 12,557 ) — — ( 12,557 ) Balance, December 31, 2022 $ 57,785 $ 221,553 $ 306,911 $ ( 2,967 ) $ ( 52,520 ) $ 530,762 See Notes to Consolidated Financial Statements 60 Table of Contents CONSOLIDATED STATEMENTS OF CASH FLOWS Dollars in thousands Year ended December 31, 2022 2021 2020 CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 63,188 $ 57,707 $ 32,743 Adjustments to reconcile net income to net cash provided by operations: Provision for credit loss expense 8,589 6,003 15,354 Depreciation and amortization of premises and equipment, operating leases assets, core deposit intangible, and mortgage servicing rights 6,573 6,241 6,082 Accretion of securities, deferred loan fees and costs, net yield and credit mark on acquired loans, and unearned income ( 3,316 ) ( 2,127 ) ( 1,955 ) Net amortization of deferred costs on borrowings 303 177 — Accretion of deferred PPP processing fees ( 1,889 ) ( 8,737 ) ( 5,140 ) Deferred tax (benefit) expense ( 1,814 ) ( 1,691 ) 1,390 Net realized gains on sales of available-for-sale securities ( 651 ) ( 783 ) ( 2,190 ) Net realized and unrealized losses (gains) on equity securities 1,149 ( 790 ) ( 328 ) Gain on sale of loans held for sale ( 1,285 ) ( 2,737 ) ( 2,961 ) Net (gains) losses on dispositions of premises and equipment and foreclosed assets ( 170 ) 230 1,097 Proceeds from sale of loans receivable 29,151 95,258 82,619 Origination of loans held for sale ( 34,181 ) ( 95,411 ) ( 87,528 ) Income on bank owned life insurance ( 2,550 ) ( 2,184 ) ( 1,747 ) Gain on bank owned life insurance (death benefit proceeds in excess of cash surrender value) ( 883 ) ( 454 ) — Restricted stock compensation expense 1,248 1,411 1,410 Stock-based contribution expense 84 75 — Changes in: Accrued interest receivable and other assets ( 19,065 ) ( 1,056 ) ( 6,242 ) Accrued interest payable, lease liabilities, and other liabilities 19,572 7,788 ( 3,846 ) NET CASH PROVIDED BY OPERATING ACTIVITIES 64,053 58,920 28,758 CASH FLOWS FROM INVESTING ACTIVITIES: Proceeds from maturities, prepayments and calls of available-for-sale securities 70,033 170,962 164,488 Proceeds from sales of available-for-sale securities 22,164 33,553 57,185 Proceeds from sale of equity securities — — 5,935 Purchase of available-for-sale securities ( 48,433 ) ( 341,140 ) ( 224,080 ) Proceeds from maturities, prepayments and calls of held-to-maturity securities 23,995 — — Purchases of held-to-maturity securities ( 213,853 ) — — Purchase of equity securities ( 398 ) ( 407 ) ( 2,447 ) Proceeds from loans held for sale previously classified as portfolio loans — 1,921 — Net increase in loans receivable ( 630,605 ) ( 246,043 ) ( 244,903 ) Purchase of bank owned life insurance ( 11,644 ) ( 22,000 ) — Proceeds from death benefit of bank owned life insurance policies 3,273 1,390 — Net cash from business combinations — — 72,852 Redemption (purchase) of FHLB, other equity, and restricted equity interests ( 7,439 ) ( 2,258 ) 7,268 Purchase of premises and equipment ( 12,290 ) ( 6,484 ) ( 5,644 ) Proceeds from the sale of premises and equipment and foreclosed assets 496 746 666 NET CASH USED BY INVESTING ACTIVITIES ( 804,701 ) ( 409,760 ) ( 168,680 ) CASH FLOWS FROM FINANCING ACTIVITIES: Net (decrease) increase in checking, money market and savings accounts ( 153,191 ) 623,967 702,452 Net increase (decrease) in certificates of deposit 60,009 ( 90,092 ) ( 42,510 ) Purchase of treasury stock ( 1,671 ) ( 1,163 ) ( 1,307 ) Proceeds from common stock offering, net of issuance costs 94,051 — 3,257 Proceeds from preferred stock offering, net of issuance costs — — 57,785 Cash dividends paid, common stock ( 12,557 ) ( 11,550 ) ( 10,981 ) Cash dividends paid, preferred stock ( 4,302 ) ( 4,302 ) ( 1,147 ) Proceeds from issuance of subordinated notes, net of issuance costs — 83,484 — Proceeds from long-term borrowings — — 231,985 Repayments on long-term borrowings — ( 50,000 ) ( 459,892 ) Net change in short-term borrowings 132,396 — — NET CASH PROVIDED BY FINANCING ACTIVITIES 114,735 550,344 479,642 NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS ( 625,913 ) 199,504 339,720 CASH AND CASH EQUIVALENTS, Beginning 732,198 532,694 192,974 CASH AND CASH EQUIVALENTS, Ending $ 106,285 $ 732,198 $ 532,694 See Notes to Consolidated Financial Statements 61 Table of Contents CONSOLIDATED STATEMENTS OF CASH FLOWS (continued) Dollars in thousands Year ended December 31, 2022 2021 2020 SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Cash paid during the period for: Interest $ 26,804 $ 20,030 $ 32,957 Income taxes 17,423 11,788 9,524 SUPPLEMENTAL NONCASH DISCLOSURES: Transfers to other real estate owned $ 785 $ 1,470 $ 241 Transfers from loans held for sale to loans held for investment 6,448 9,965 — Transfers from loans held for investment to loans held for sale — 1,921 — Transfer of securities from available-for-sale to held-to-maturity 220,757 — — Grant of restricted stock awards from treasury stock 1,000 1,374 934 Grant of performance based restricted stock awards from treasury stock 173 262 217 Restricted stock forfeiture 36 64 — Contribution of stock from treasury stock 44 81 — Lease liabilities arising from obtaining right-of-use assets 13,371 2,643 1,386 See Notes to Consolidated Financial Statements 62 Table of Contents Notes to Consolidated Financial Statements 1. Summary of Significant Accounting Policies Unless otherwise indicated, dollar amounts in tables are stated in thousands, except for per share amounts. Business and Organization CNB Financial Corporation (the "Corporation") is headquartered in Clearfield, Pennsylvania, and provides a full range of banking and related services through its wholly owned subsidiary, CNB Bank (the "Bank"). In addition, the Bank provides wealth and asset management services, including the administration of trusts and estates, retirement plans, and other employee benefit plans as well as a full range of wealth management services. The Bank serves individual and corporate customers and is subject to competition from other financial institutions and intermediaries with respect to these services. In addition to the Bank, the Corporation also operates a consumer discount loan and finance business through its wholly owned subsidiary, Holiday Financial Services Corporation ("Holiday"). The Corporation and its other subsidiaries are subject to examination by federal and state regulators. The Corporation’s market area is primarily concentrated in the Central and Northwest regions of the Commonwealth of Pennsylvania, the Central and Northeast regions of the state of Ohio, Western New York, and Southwest Virginia. Basis of Financial Presentation The financial statements are consolidated to include the accounts of the Corporation, the Bank, CNB Securities Corporation, Holiday, CNB Risk Management, Inc. and CNB Insurance Agency. All significant intercompany accounts and transactions have been eliminated in the consolidated financial statements. Use of Estimates To prepare financial statements in conformity with U.S. generally accepted accounting principles ("GAAP"), management makes estimates and assumptions based on available information. These estimates and assumptions affect the amounts reported in the financial statements and the disclosures provided, and actual results could differ. The allowance for credit losses on loans receivable and off-balance-sheet credit exposures, the fair values of financial instruments, goodwill and the status of contingencies are particularly subject to change. Operating Segments While the Corporation's chief operating decision makers monitor the revenue streams of the various products and services, operations are managed and financial performance is evaluated on a Corporation-wide basis, and operating divisions are aggregated into one as operating results for all divisions are similar. Accordingly, all of the financial service operations are considered to be aggregated in one reportable operating segment. Cash and Cash Equivalents For purposes of the consolidated statement of cash flows, the Corporation defines cash and cash equivalents as cash and due from banks and interest bearing deposits with the Federal Reserve and other financial institutions. Net cash flows are reported for customer loan and deposit transactions, interest bearing time deposits with other financial institutions and borrowings with original maturities of 90 days or less. Interest-Bearing Deposits in Other Financial Institutions Interest-bearing deposits in other financial institutions are carried at cost. Restrictions on Cash Note 19, "Interest Rate Swaps," to the consolidated financial statements discloses the cash collateral balances required to be maintained in connection with the Corporation’s interest rate swaps. 63 Table of Contents Debt Securities Debt securities are classified as held-to-maturity ("HTM") and carried at amortized cost when management has the positive intent and ability to hold them to maturity. Debt securities are classified as available-for-sale ("AFS") when they might be sold before maturity. Securities AFS are carried at fair value, with unrealized holding gains and losses reported in other comprehensive income, net of tax. Interest income includes amortization of purchase premium or discount. Premiums and discounts on securities are amortized on the level-yield method without anticipating prepayments, except for mortgage backed securities where prepayments are anticipated. Premiums on callable debt securities are amortized to their earliest call date. Gains and losses on sales are recorded on the trade date and determined using the specific identification method. The Corporation has made a policy election to exclude accrued interest from the amortized cost basis of debt securities and report accrued interest separately in accrued interest receivable and other assets in the consolidated balance sheets. A debt security is placed on nonaccrual status at the time any principal or interest payments become more than 90 days delinquent or if full collection of interest or principal becomes uncertain. Accrued interest for a security placed on nonaccrual is reversed against interest income. There was no accrued interest related to debt securities reversed against interest income for the years ended December 31, 2022 and 2021, respectively. Allowance for Credit Losses (Debt Securities AFS) For AFS debt securities in an unrealized loss position, the Corporation first assesses whether it intends to sell, or it is more likely than not that it will be required to sell the security before recovery of its amortized cost basis. If either of the criteria regarding intent or requirement to sell is met, the security's amortized cost basis is written down to fair value through income. For debt securities AFS that do not meet the aforementioned criteria, the Corporation evaluates whether the decline in fair value has resulted from credit losses or other factors. In making this assessment, management considers the extent to which fair value is less than amortized cost, any changes to the rating of the security by a rating agency, and adverse conditions specifically related to the security, among other factors. If this assessment indicates that a credit loss exists, the present value of cash flows expected to be collected from the security are compared to the amortized cost basis of the security. If the present value of cash flows expected to be collected is less than the amortized cost basis, a credit loss exists and an allowance for credit losses is recorded for the credit loss, limited by the amount that the fair value is less than the amortized cost basis. Any impairment that has not been recorded through an allowance for credit losses is recognized in other comprehensive income. Changes in the allowance for credit losses are recorded as provision for (or reversal of) credit loss expense. Losses are charged against the allowance when management confirms that an AFS security is uncollectable or when either of the criteria regarding intent or requirement to sell is met. As of December 31, 2022 and December 31, 2021, the Corporation determined that the unrealized loss positions in AFS debt securities were not the result of credit losses, and therefore, an allowance for credit losses was not recorded. See Note 3, "Debt Securities," and Note 6, "Fair Value Measurements," for more information about AFS debt securities. Accrued interest receivable on AFS debt securities totaled $ 1.5 million and $ 2.2 million at December 31, 2022 and December 31, 2021, respectively, and was reported in accrued interest receivable and other assets on the consolidated balance sheets. Allowance for Credit Losses (Debt Securities HTM) Management measures expected credit losses on HTM debt securities on a collective basis by major security type. Accrued interest receivable on HTM debt securities totaled $ 1.3 million and zero at December 31, 2022 and 2021, respectively, and was reported in accrued interest receivable and other assets on the consolidated balance sheets and is excluded from the estimate of credit losses. Management classifies the HTM portfolio into the following major security types: U.S. government sponsored entities and residential & multi-family mortgages. All of the residential & multi-family mortgages held by the Corporation are issued by U.S. government entities and agencies. These securities are either explicitly or implicitly guaranteed by the U.S. government, are highly rated by major rating agencies and have a long history of no credit losses. 64 Table of Contents Equity Securities Equity securities are carried at fair value, with changes in fair value reported in net income. Equity securities without readily determinable fair values are carried at cost, minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar investment. Loans Held for Sale Loans originated and intended for sale in the secondary market are carried at the lower of aggregate cost or fair value, as determined by outstanding commitments from investors. Net unrealized losses, if any, are recorded as a valuation allowance and charged to earnings. Mortgage loans held for sale are generally sold with servicing rights retained. The carrying value of the mortgage loan sold is reduced by the amount allocated to the servicing right. Gains and losses on sales of mortgage loans are based on the difference between the selling price and the carrying value of the related loan sold. Loans Loans that management has the intent and ability to hold for the foreseeable future or until maturity or payoff are reported at amortized cost. Amortized cost is the principal balance outstanding, net of purchase premiums and discounts, deferred loan fees and costs. Accrued interest receivable totaled $ 17.3 million and $ 13.3 million at December 31, 2022 and December 31, 2021, respectively, and was reported in accrued interest receivable and other assets on the consolidated balance sheets and is excluded from the estimate of credit losses. Interest income is accrued on the unpaid principal balance. Loan origination fees, net of certain direct origination costs, are deferred and recognized in interest income using the level-yield method without anticipating prepayments. Interest income on mortgage, consumer and commercial loans is discontinued and placed on nonaccrual status at the time the loan is 90 days delinquent unless the loan is well secured and in process of collection. Past-due status is based on the contractual terms of the loan. Loans, including loans modified in a troubled debt restructuring, are placed on nonaccrual or recorded as charge-offs at an earlier date if collection of principal or interest is considered doubtful. All interest accrued but not received on loans placed on nonaccrual is reversed against interest income. Interest received on such loans is accounted for on the cash-basis or cost-recovery method, until qualifying for return to accrual. Under the cost-recovery method, interest income is not recognized until the loan balance is reduced to zero. Under the cash-basis method, interest income is recorded when the payment is received in cash. For all portfolio segments, loans are returned to accrual status when all the principal and interest amounts contractually due are brought current and future payments are reasonably assured. Purchased Credit Deteriorated ("PCD") Loans The Corporation has purchased loans, some of which have experienced more than insignificant credit deterioration since origination. PCD loans are recorded at the amount paid. An allowance for credit losses is determined using the same methodology as other loans held for investment. The initial allowance for credit losses determined on a collective basis is allocated to individual loans. The sum of the loan's purchase price and allowance for credit losses becomes its initial amortized cost basis. The difference between the initial amortized cost basis and the par value of the loan is a noncredit discount or premium, which is amortized into interest income over the life of the loan. Subsequent changes to the allowance for credit losses are recorded through provision expense. 65 Table of Contents Troubled Debt Restructurings ("TDRs") Loans are classified as TDRs when a borrower is experiencing financial difficulty and the Corporation has granted a concession that would not have otherwise been made for a borrower with similar credit characteristics. Prior to granting a modification, the borrower's ability to repay the loan is evaluated, including: current income levels and debt to income ratio, credit score, payment history and an evaluation of secondary repayment sources, if any is updated. The Corporation's policy is to modify loans typically through a payment reduction or through an interest rate reduction for a specified period of time, usually six to twelve months . Interest-only payments may also be approved during the modification period. Principal forgiveness is generally not an option for modification. The allowance for credit loss on a TDR is measured using the same method as all other loans held for investment, except the original interest rate is used to discount the expected cash flows, not the rate specified within the restructuring. When there is a reasonable expectation, at the reporting date, that a TDR will be executed with a borrower the estimated life of the TDR reflects the extension or renewal. The Corporation also modifies some loans that are not classified as TDRs as the modification is due to a restructuring where the effective interest rate on the debt is reduced to reflect a decrease in market interest rates. Concentration of Credit Risk Most of the Corporation’s business activity is with customers located within the Commonwealth of Pennsylvania and the states of Ohio, New York and Virginia. Therefore, the Corporation’s exposure to credit risk is significantly affected by changes in the economies of Pennsylvania, Ohio, New York and Virginia. At December 31, 2022 no industry concentration existed which exceeded 10% of the total loan portfolio. Allowance for Credit Losses - Loans The allowance for credit losses on loans represents management’s estimate of expected credit losses over the estimated life of our existing portfolio of loans. The allowance for credit losses is a valuation account that is deducted from the loan's amortized cost basis to present the net amount expected to be collected on the loans. The expense for credit loss recorded through earnings is the amount necessary to maintain the allowance for credit losses on loans at the amount of expected credit losses inherent within the loan portfolio. Loans are recorded as charge-offs against the allowance when management confirms a loan balance is uncollectable. Expected recoveries do not exceed the aggregate of amounts previously charged-off and expected to be charged-off. Management estimates the allowance balance using relevant available information, from internal and external sources, relating to past events, current conditions, and reasonable and supportable forecasts, and other significant qualitative and quantitative factors. Historical credit loss experience provides the basis for the estimation of expected credit losses. Adjustments to historical loss information are made for differences in current loan-specific risk characteristics such as differences in underwriting standards, changes in environmental conditions, delinquency level, segment growth rates and changes in duration within new markets, or other relevant factors. For further information on the allowance for credit losses on loans, see Note 4, "Loans," for additional detail. The allowance for credit losses is measured on a collective (pool) basis when similar risk characteristics exist. The Corporation has segregated its portfolio segments based on federal call report codes which classify loans based on the primary collateral supporting the loan. The following are the Corporation's segmented portfolios: 1-4 Family Construction : The Bank originates construction loans to finance 1-4 family residential buildings. Construction loans include not only construction of new structures, but also additions or alterations to existing structures and the demolition of existing structures to make way for new structures. Construction loans are generally secured by real estate. The primary risk characteristics are specific to the uncertainty on whether the construction will be completed according to the specifications and schedules. Factors that may influence the completion of construction may be customer specific, or related to changes in general economic conditions. Other construction loans and all land development and other land loans : The Bank originates construction loans to finance land development preparatory to erecting new structures or the on-site construction of industrial, commercial, or multi-family buildings. Construction loans include not only construction of new structures, but also additions or alterations to existing structures and the demolition of existing structures to make way for new structures. Construction loans are generally secured by real estate. The primary risk characteristics are specific to the uncertainty on whether the construction will be completed according to the specifications and schedules. Factors that may influence the completion of construction may be customer specific, such as the quality and depth of property management, or related to changes in general economic conditions. 66 Table of Contents Farmland (including farm residential and other improvements) : The Bank originates loans secured by farmland and improvements thereon, secured by mortgages. Farmland includes all land known to be used or usable for agricultural purposes, such as crop and livestock production. Farmland also includes grazing or pasture land, whether tillable or not and whether wooded or not. The primary risk characteristics are specific to the uncertainty on production, market, financial, environmental and human resources. Home equity lines of credit : The primary risk characteristics associated with home equity lines of credit typically involve changes to the borrower, including unemployment or other loss of income; unexpected significant expenses, such as major medical expenses, catastrophic events, divorce and death. Home equity lines of credit are typically originated with variable or floating interest rates, which could expose the borrower to higher payments in a rising interest rate environment. Real estate values could decrease and cause the value of the underlying property to fall below the loan amount, creating additional potential loss exposure for the Bank. Residential Mortgages secured by first liens : The Bank originates one-to-four family residential mortgage loans primarily within central and northwest Pennsylvania, central and northeast Ohio, western New York and the Roanoke, Virginia market. These loans are secured by first liens on a primary residence or investment property. The primary risk characteristics associated with residential mortgage loans typically involve major changes to the borrower, including unemployment or other loss of income; unexpected significant expenses, such as major medical expenses, catastrophic events, divorce or death. Residential mortgage loans that have adjustable rates could expose the borrower to higher payments in a rising interest rate environment. Real estate values could decrease and cause the value of the underlying property to fall below the loan amount, creating additional potential loss exposure for the Bank. Residential Mortgages secured by junior liens : The Bank originates loans secured by junior liens against one to four family properties primarily within central and northwest Pennsylvania, central and northeast Ohio, western New York and the Roanoke, Virginia market. Loans secured by junior liens are primarily in the form of an amortizing home equity loan. These loans are subordinate to a first mortgage which may be from another lending institution. The primary risk characteristics associated with loans secured by junior liens typically involve major changes to the borrower, including unemployment or other loss of income, unexpected significant expenses, such as for major medical expenses, catastrophic events, divorce or death. Real estate values could decrease and cause the value of the property to fall below the loan amount, creating additional potential loss exposure for the Bank. Multifamily (5 or more) residential properties : The Bank originates mortgage loans for multifamily properties primarily within central and northwest Pennsylvania, central and northeast Ohio, western New York and the Roanoke, Virginia market. Multifamily loans are expected to be repaid from the cash flows of the underlying property so the collective amount of rents must be sufficient to cover all operating expenses, property management and maintenance, taxes and debt service. Increases in vacancy rates, interest rates or other changes in general economic conditions can have an impact on the borrower and its ability to repay the loan. Owner-occupied, nonfarm nonresidential properties : The Bank originates mortgage loans to operating companies primarily within central and northwest Pennsylvania, central and northeast Ohio, western New York and the Roanoke, Virginia market. Owner-occupied real estate properties primarily include retail buildings, medical buildings and industrial/warehouse space. Owner-occupied loans are typically repaid first by the cash flows generated by the borrower’s business operations. The primary risk characteristics are specific to the underlying business and its ability to generate sustainable profitability and positive cash flow. Factors that may influence a borrower's ability to repay their loan include demand for the business’ products or services, the quality and depth of management, the degree of competition, regulatory changes, and general economic conditions. Non-owner occupied, nonfarm nonresidential properties : The Bank originates mortgage loans for commercial real estate that is managed as an investment property primarily within central and northwest Pennsylvania, central and northeast Ohio, western New York and the Roanoke, Virginia market. Commercial real estate properties primarily include retail buildings/shopping centers, hotels, office/medical buildings and industrial/warehouse space. Increases in vacancy rates, interest rates or other changes in general economic conditions can have an impact on the borrower and its ability to repay the loan. Commercial real estate loans are generally considered to have a higher degree of credit risk as they may be dependent on the ongoing success and operating viability of a fewer number of tenants who are occupying the property and who may have a greater degree of exposure to economic conditions. 67 Table of Contents Agricultural production and other loans to farmers : The Bank originates loans secured or unsecured to farm owners and operators (including tenants) or to nonfarmers for the purpose of financing agricultural production, including the growing and storing of crops, the marketing or carrying of agricultural products by the growers thereof, and the breeding, raising, fattening, or marketing of livestock, and for purchases of farm machinery, equipment, and implements. The primary risk characteristics are specific to the uncertainty on production, market, financial, environmental and human resources. Commercial and Industrial : The Bank originates lines of credit and term loans to operating companies for business purposes. The loans are generally secured by business assets such as accounts receivable, inventory, business vehicles and equipment as well as the stock of a company, if privately held. Commercial and Industrial loans are typically repaid first by the cash flows generated by the borrower’s business operations. The primary risk characteristics are specific to the underlying business and its ability to generate sustainable profitability and positive cash flow. Factors that may influence a borrower's ability to repay their loan include demand for the business’ products or services, the quality and depth of management, the degree of competition, regulatory changes, and general economic conditions. The ability of the Bank to foreclose and realize sufficient value from business assets securing these loans is often uncertain. To mitigate the risk characteristics of commercial and industrial loans, commercial real estate may be included as a secondary source of collateral. The Bank will often require more frequent reporting requirements from the borrower in order to better monitor its business performance. Credit cards : The Bank originates credit cards offered to individuals and businesses for household, family, other personal and business expenditures. Credit cards generally are floating rate loans and include both unsecured and secured lines. Credit card loans generally do not have stated maturities and are unconditionally cancellable. The primary risk characteristics associated with credit cards typically involve major changes to the borrower, including unemployment or other loss of income, unexpected significant expenses, such as for major medical expenses, catastrophic events, divorce or death. Other revolving credit plans : The Bank originates lines of credit to individuals for household, family, and other personal expenditures. Consumer loans generally have higher interest rates and shorter terms than residential loans but tend to have higher credit risk due to the type of collateral securing the loan or in some cases the absence of collateral. The primary risk characteristics associated with other revolving loans typically involve major changes to the borrower, including unemployment or other loss of income, unexpected significant expenses, such as for major medical expenses, catastrophic events, divorce or death. Automobile : The Bank originates consumer loans extended for the purpose of purchasing new and used passenger cars and other vehicles such as minivans, vans, sport-utility vehicles, pickup trucks, and similar light trucks for personal use. The primary risk characteristics associated with automobile loans typically involve major changes to the borrower, including unemployment or other loss of income, unexpected significant expenses, such as for major medical expenses, catastrophic events, divorce or death. Other consumer : The Bank originates loans to individuals for household, family, and other personal expenditures. This also represents all other loans that cannot be categorized in any of the previous mentioned consumer loan segments. Consumer loans generally have higher interest rates and shorter terms than residential loans but tend to have higher credit risk due to the type of collateral securing the loan or in some cases the absence of collateral. The primary risk characteristics associated with other consumer loans typically involve major changes to the borrower, including unemployment or other loss of income, unexpected significant expenses, such as for major medical expenses, catastrophic events, divorce or death. Obligations (other than securities and leases) of states and political subdivisions : The Bank originates various types of loans made directly to municipalities. These loans are repaid through general cash flows or through specific revenue streams, such as water and sewer fees. The primary risk characteristics associated with municipal loans are the municipality's ability to manage cash flow, balance the fiscal budget, fixed asset and infrastructure requirements. Additional risks include changes in demographics, as well as social and political conditions. Other loans : The Bank originates other loans, such as loans to nonprofit organizations, including churches, hospitals, educational and charitable institutions, clubs, and similar associations. The primary risk characteristics associated with these types of loans are repayment, demographic, social, political and reputation risks. Overdrafts : The Bank reports overdrawn customer deposit balances as loans. 68 Table of Contents Methods utilized by management to estimate expected credit losses include a discounted cash flow ("DCF") model that discounts instrument-level contractual cash flows, adjusted for prepayments and curtailments, incorporating loss expectations, and a weighted average remaining maturity ("WARM") model which contemplates expected losses at a pool-level, utilizing historic loss information. Under both models, management estimates the allowance for credit losses on loans using relevant available information, from internal and external sources, relating to past events, current conditions, and reasonable and supportable forecasts. After the end of the reasonable and supportable forecast period, the loss rates revert to the mean loss rate over a period of eight quarters. Historical credit loss experience, including examination of loss experience at representative peer institutions when the Corporation’s loss history does not result in estimations that are meaningful to users of the Corporation’s Consolidated Financial Statements, provides the basis for the estimation of expected credit losses. Adjustments to historical loss information are made for differences in current loan-specific risk characteristics such as differences in underwriting standards, changes in environmental conditions, delinquency level, segment growth rates and changes in duration within new markets, or other relevant factors. The DCF model uses inputs of current and forecasted macroeconomic indicators to predict future loss rates. The current macroeconomic indicator utilized by the Corporation is the Federal unemployment rate and the S&P/Case-Shiller U.S. National Home Price Index for select collective residential related pools. In building the CECL methodology utilized in the DCF model, a correlation between this indicator and historic loss levels was developed, enabling a prediction of future loss rates related to future Federal unemployment rates and S&P/Case-Shiller U.S. National Home Price Index. The portfolio segments utilizing the DCF methodology comprised 86.0 % and 88.4 % of the amortized cost of loans as of December 31, 2022 and December 31, 2021, respectively, and included: • Farmland • Home equity lines of credit • Residential Mortgages secured by first liens • Residential Mortgages secured by junior liens • Multifamily (5 or more) residential properties • Owner-occupied, nonfarm nonresidential properties • Non-owner occupied, nonfarm nonresidential properties • Agricultural production and other loans to farmers • Commercial and Industrial • Automobile • Obligations (other than securities and leases) of states and political subdivisions • Other loans The WARM model uses combined historic loss rates for the Corporation and peer institutions, if necessary, gathered from call report filings. The selected period for which historic loss rates are used is dependent on management's evaluation of current conditions and expectations of future loss conditions. The portfolio segments utilizing the WARM methodology comprised 14.0 % and 11.6 % of the amortized cost of loans as of December 31, 2022 and December 31, 2021, respectively, and included: • 1-4 Family Construction • Other construction loans and all land development and other land loans • Credit cards • Other revolving credit plans • Other consumer 69 Table of Contents Loans that do not share risk characteristics are evaluated on an individual basis. Loans evaluated individually are not also included in the collective evaluation and typically represent collateral dependent loans but may also include other nonperforming loans or TDRs. The Corporation uses the practical expedient to measure individually evaluated loans as collateral dependent and/or when repayment is expected to be provided substantially through the operation or sale of the collateral. Expected credit losses are based on the fair value at the reporting date, adjusted for selling costs as appropriate. For collateral dependent loans, credit loss is measured as the difference between the amortized cost basis in the loan and the fair value of the underlying collateral. The fair value of the collateral is adjusted for the estimated cost to sell if repayment or satisfaction of a loan is dependent on the sale (rather than only on the operation) of the collateral. Allowance for Credit Losses on Off-Balance Sheet Credit Exposures Management estimates expected credit losses over the contractual period in which the Corporation is exposed to credit risk via a contractual obligation to extend credit, unless that obligation is unconditionally cancellable by the Corporation. The estimate includes consideration of the likelihood that funding will occur and an estimate of expected credit losses on commitments expected to be funded over its estimated life. Management estimates the amount of expected losses by calculating a commitment usage factor over the contractual period for exposures that are not unconditionally cancellable by the Bank and applying the loss factors used in the allowance for credit losses on loans methodology to the results of the usage calculation to estimate the liability for credit losses related to unfunded commitments for each loan segment. The estimate of credit losses on OBS credit exposures is $ 603 thousand and zero at December 31, 2022 and 2021, respectively, and was reported in accrued interest payable and other liabilities on the consolidated balance sheets . Mortgage Servicing Rights When mortgage loans are sold with servicing retained, servicing rights are initially recorded at fair value with the income statement effect recorded in mortgage banking income. Fair value is based on market prices for comparable mortgage servicing contracts, when available, or alternatively, is based on a valuation model that calculates the present value of estimated future net servicing income. The valuation model incorporates assumptions that market participants would use in estimating future net servicing income, such as the cost to service, the discount rate, the custodial earnings rate, an inflation rate, ancillary income, prepayment speeds and default rates and losses. The Corporation compares the valuation model inputs and results to published industry data in order to validate the model results and assumptions. All classes of servicing assets are subsequently measured using the amortization method which requires servicing rights to be amortized into non-interest income in proportion to, and over the period of, the estimated future net servicing income of the underlying loans. Servicing rights are evaluated for impairment based upon the fair value of the rights as compared to carrying amount. Impairment is determined by stratifying rights into groupings based on predominant risk characteristics, such as interest rate, loan type and investor type. Impairment is recognized through a valuation allowance, to the extent that fair value is less than the carrying amount. If the Corporation later determines that all or a portion of the impairment no longer exists, a reduction of the allowance may be recorded as an increase to income. Changes in valuation allowances are reported with mortgage banking income on the income statement. The fair values of servicing rights are subject to significant fluctuations as a result of changes in estimated and actual prepayment speeds and default rates and losses. Servicing fee income, which is reported on the income statement as mortgage banking income, is recorded for fees earned for servicing loans. The fees are based on a contractual percentage of the outstanding principal or a fixed amount per loan and are recorded as income when earned. The amortization of mortgage servicing rights is netted against loan servicing fee income. Late fees and ancillary fees related to loan servicing are not material. Transfers of Financial Assets Transfers of financial assets are accounted for as sales when control over the assets has been relinquished. Control over transferred assets is deemed to be surrendered when the assets have been isolated from the Company, the transferee obtains the right (free of conditions that constrain it from taking advantage of that right) to pledge or exchange the transferred assets, and the Company does not maintain effective control over the transferred assets. 70 Table of Contents Foreclosed Assets Foreclosed assets are initially recorded at fair value less costs to sell when acquired, establishing a new cost basis. Physical possession of residential real estate property collateralizing a consumer mortgage loan occurs when legal title is obtained upon completion of foreclosure or when the borrower conveys all interest in the property to satisfy the loan through completion of a deed in lieu of foreclosure or through a similar legal agreement. These assets are subsequently accounted for at lower of cost or fair value less estimated costs to sell. If fair value declines subsequent to foreclosure, a valuation allowance is recorded through expense. Operating costs after acquisition are expensed. Premises and Equipment Land is carried at cost. Premises and equipment are stated at cost less accumulated depreciation. Depreciation of premises and equipment is computed principally by the straight line method. In general, useful lives range from 3 to 39 years with lives for furniture, fixtures and equipment ranging from 3 to 10 years and lives of buildings and building improvements ranging from 15 to 39 years. Amortization of leasehold improvements is computed using the straight-line method over useful lives of the leasehold improvements or the term of the lease, whichever is shorter. Maintenance, repairs and minor renewals are charged to expense as incurred. Leases The Corporation leases real estate property for branches and certain equipment. The Corporation determines if an arrangement is a lease at inception and if the lease is an operating lease or a finance lease. Operating lease right-of-use assets represent the Corporation's right to use an underlying asset during the lease term and operating lease liabilities represent the Corporation's obligation to make lease payments arising from the lease. The period over which the right-of-use asset is amortized is generally the lesser of the expected remaining term or the remaining useful life of the leased asset. The lease liability is decreased as periodic lease payments are made. The Corporation performs impairment assessments for right-of-use assets when events or changes in circumstances indicate that their carrying values may not be recoverable. The calculated amounts of the right-of-use assets and lease liabilities are impacted by the length of the lease term and the discount rate used to calculate the present value of the minimum remaining lease payments. The Corporation's lease agreements often include one or more options to renew at the Corporation's discretion. If, at lease inception, the Corporation considers the exercising of a renewal option to be reasonably certain, the Corporation includes the extended term in the calculation of the right-of-use asset and lease liability. Generally, the Corporation cannot practically determine the interest rate implicit in the lease so the Corporation's incremental borrowing rate is used as the discount rate for the lease. The Corporation uses Federal Home Loan Bank ("FHLB") of Pittsburgh advance interest rates, which have been deemed as the Corporation's incremental borrowing rate, at lease inception based upon the term of the lease. The Corporation's lease agreements do not contain any material residual value guarantees or material restrictive covenants. Lease expense, variable lease expense and short-term lease expense are included in occupancy expense in the Corporation's consolidated statements of income. For facility-related leases, the Corporation elected, by lease class, to not separate lease and non-lease components. Lease expense is recognized on a straight-line basis over the lease term. Variable lease expense primarily represents payments such as common area maintenance, real estate taxes, and utilities and are recognized as expense in the period when those payments are incurred. Short-term lease expense relates to leases with an initial term of 12 months or less. The Corporation has elected to not record a right-of-use asset or lease liability for short-term leases. Federal Home Loan Bank Stock As a member of the FHLB of Pittsburgh, the Corporation is required to purchase and hold stock in the FHLB to satisfy membership and borrowing requirements. This stock is restricted in that it can only be sold to the FHLB or to another member institution, and all sales of FHLB stock must be at par. As a result of these restrictions, FHLB stock is unlike other investment securities insofar as there is no trading market for FHLB stock and the transfer price is determined by FHLB membership rules and not by market participants. 71 Table of Contents FHLB stock is held as a long-term investment, is valued at its cost basis and is analyzed for impairment based on the ultimate recoverability of the par value. The Corporation evaluates impairment quarterly. The decision of whether impairment exists is a matter of judgment that reflects our view of the FHLB’s long-term performance, which includes factors such as the following: • its operating performance; • the severity and duration of declines in the fair value of its net assets related to its capital stock amount; • its commitment to make payments required by law or regulation and the level of such payments in relation to its operating performance; • the impact of legislative and regulatory changes on the FHLB, and accordingly, on the members of FHLB; and • its liquidity and funding position. Both cash and stock dividends are reported as income. Qualified Affordable Housing Project Investments The Corporation has investments in various real estate limited partnerships that acquire, develop, own and operate low and moderate-income housing. These investments are made directly in Low Income Housing Tax Credit ("LIHTC") partnerships formed by third parties. As a limited partner in these operating partnerships, the Corporation receives tax credits and tax deductions for losses incurred by the underlying properties. The Corporation accounts for its ownership interest in LIHTC partnerships in accordance with Accounting Standards Update ("ASU") 2014-01, "Investments – Equity Method and Joint Ventures (Topic 323): Accounting for Investments in Qualified Affordable Housing Projects." The standard permits an entity to amortize the initial cost of the investment in proportion to the amount of the tax credits and other tax benefits received and recognize the net investment performance in the income statement as a component of income tax expense. There were no impairment losses during the year resulting from the forfeiture or ineligibility of tax credits related to qualified affordable housing project investments. Bank Owned Life Insurance The Corporation has purchased life insurance policies on certain key employees. Bank-owned life insurance is recorded at the amount that can be realized under the insurance contract at the balance sheet date, which is the cash surrender value adjusted for other charges or other amounts due that are probable at settlement. Goodwill and Other Intangible Assets Goodwill resulting from business combinations prior to January 1, 2009 represents the excess of the purchase price over the fair value of the net assets of businesses acquired. Goodwill resulting from business combinations after January 1, 2009 is generally determined as the excess of the fair value of the consideration transferred, plus the fair value of any noncontrolling interest in the acquiree, over the fair value of the net assets acquired and liabilities assumed as of the acquisition date. Goodwill and intangible assets acquired in a purchase business combination and determined to have an indefinite useful life are not amortized, but tested for impairment at least annually or more frequently if events and circumstances exists that indicate that a goodwill impairment test should be performed. The Corporation has no intangible assets with an indefinite useful life. The Corporation has selected December 31 as the date to perform the annual impairment test. Intangible assets with definite useful lives are amortized over their estimated useful lives to their estimated residual values. Goodwill is the only intangible asset with an indefinite life on the Corporation’s balance sheet. Other intangible assets consist of core deposit intangible assets arising from the acquisition of FC Banc Corp. in 2013, Lake National Bank in 2016 and Bank of Akron in 2020. The core deposit intangible assets from these acquisitions are amortized using an accelerated method over their estimated useful lives, which range from four years to ten years , respectively. Loan Commitments and Related Financial Instruments Financial instruments include off-balance sheet credit instruments, such as commitments to make loans and commercial letters of credit, issued to meet customer financing needs. The face amount for these items represents the exposure to loss, before considering customer collateral or ability to repay. Such financial instruments are recorded when they are funded. 72 Table of Contents Derivatives Derivative financial instruments are recognized as assets or liabilities at fair value. The Corporation has interest rate swap agreements which are used as part of its asset liability management to help manage interest rate risk. The Corporation does not use derivatives for trading purposes. At the inception of a derivative contract, the Corporation designates the derivative as one of three types based on the Corporation's intentions and belief as to likely effectiveness as a hedge. These three types are (1) a hedge of the fair value of a recognized asset or liability or of an unrecognized firm commitment ("fair value hedge"), (2) a hedge of a forecasted transaction or the variability of cash flows to be received or paid related to a recognized asset or liability ("cash flow hedge"), or (3) an instrument with no hedging designation ("stand-alone derivative"). For a fair value hedge, the gain or loss on the derivative, as well as the offsetting loss or gain on the hedged item attributable to the hedged risk, are recognized in current earnings as fair values change. For a cash flow hedge, the gain or loss on the derivative is reported in other comprehensive income (loss) and is reclassified into earnings in the same periods during which the hedged transaction affects earnings. Changes in the fair value of derivatives that do not qualify for hedge accounting are reported currently in earnings, as non-interest income. Accrued settlements on derivatives that qualify for hedge accounting are recorded in interest income or interest expense, based on the item being hedged. Accrued settlements on derivatives not designated or that do not qualify for hedge accounting are reported in non-interest income. Cash flows on hedges are classified in the cash flow statement the same as the cash flows of the items being hedged. The Corporation formally documents the relationship between derivatives and hedged items, as well as the risk-management objective and the strategy for undertaking hedge transactions, at the inception of the hedging relationship. This documentation includes linking fair value or cash flow hedges to specific assets and liabilities on the balance sheet or to specific firm commitments or forecasted transactions. The Corporation also formally assesses, both at the hedge’s inception and on an ongoing basis, whether the derivative instruments that are used are highly effective in offsetting changes in fair values or cash flows of the hedged items. The Corporation discontinues hedge accounting when it determines that the derivative is no longer effective in offsetting changes in the fair value or cash flows of the hedged item, the derivative is settled or terminates, a hedged forecasted transaction is no longer probable, a hedged firm commitment is no longer firm, or treatment of the derivative as a hedge is no longer appropriate or intended. When hedge accounting is discontinued, subsequent changes in fair value of the derivative are recorded as non-interest income. When a fair value hedge is discontinued, the hedged asset or liability is no longer adjusted for changes in fair value and the existing basis adjustment is amortized or accreted over the remaining life of the asset or liability. When a cash flow hedge is discontinued but the hedged cash flows or forecasted transactions are still expected to occur, gains or losses that were accumulated in other comprehensive income are amortized into earnings over the same periods which the hedged transactions will affect earnings. The Corporation is exposed to losses if a counterparty fails to make its payments under a contract in which the Corporation is in the net receiving position. The Corporation anticipates that the counterparties will be able to fully satisfy their obligations under the agreements. All the contracts to which the Corporation is a party settle monthly or quarterly. In addition, the Corporation obtains collateral above certain thresholds of the fair value of its hedges for each counterparty based upon their credit standing and the Corporation has netting agreements with the dealers with which it does business. Stock-Based Compensation Compensation cost is recognized for restricted stock awards issued to employees, based on the fair value of these awards at the date of grant. The market price of the Corporation’s common stock at the date of grant is used for restricted stock awards. Compensation cost is recognized over the required service period, generally defined as the vesting period. For awards with graded vesting, compensation cost is recognized on a straight-line basis over the requisite service period for the entire award. Certain of the restricted stock awards are performance based and costs are recognized based upon certain performance conditions. The Corporation's accounting policy is to recognize forfeitures as they occur 73 Table of Contents Income Taxes Income tax expense is the total of the current year income tax due or refundable and the change in deferred tax assets and liabilities. Deferred tax assets and liabilities are the expected future tax amounts for the temporary differences between carrying amounts and tax bases of assets and liabilities, computed using enacted tax rates. A valuation allowance, if needed, reduces deferred tax assets to the amount expected to be realized. A tax position is recognized as a benefit only if it is "more likely than not" that the tax position would be sustained in a tax examination, with a tax examination being presumed to occur. The amount recognized is the largest amount of tax benefit that is greater than 50% likely of being realized on examination. For tax positions not meeting the "more likely than not" test, no tax benefit is recorded. The Corporation recognizes interest and/or penalties, if any, related to income tax matters in income tax expense. Retirement Plans Post retirement obligation expense is the net of service and interest cost, return on plan assets and amortization of gains and losses not immediately recognized. The Corporation’s expense associated with its 401(k) plan is determined under the provisions of the plan document and includes both matching and profit sharing components. Deferred compensation and supplemental retirement plan expenses allocate the benefits over years of service. Earnings Per Common Share Basic earnings per common share is computed by dividing net income available to common shareholders by the weighted average number of common shares outstanding during the applicable period, excluding outstanding participating securities. Diluted earnings per common share is computed using the weighted average number of common shares determined for the basic computation plus the dilutive effect of potential common shares issuable under certain stock compensation plans. Unvested share-based payment awards that contain nonforfeitable rights to dividends or dividend equivalents (whether paid or unpaid) are participating securities and are included in the computation of earnings per share pursuant to the two-class method. The Corporation has determined that its outstanding non-vested time-based restricted stock awards are participating securities. Comprehensive Income The Corporation presents comprehensive income as part of the Consolidated Statements of Income and Comprehensive Income. Other comprehensive income and loss consists of unrealized holding gains and losses on the AFS securities portfolio, amortization of AFS securities transferred to HTM, changes in the unrecognized actuarial gain and transition obligation related to the Corporation’s post retirement benefits plans, and changes in the fair value of the Corporation’s interest rate swaps, net of tax. Loss Contingencies Loss contingencies, including claims and legal actions arising in the ordinary course of business, are recorded as liabilities when the likelihood of loss is probable and an amount or range of loss can be reasonably estimated. Management does not believe there now are such matters that will have a material effect on the financial statements. Treasury Stock The purchase of the Corporation’s common stock is recorded at cost. Purchases of the stock are made in the open market based on market prices. At the date of subsequent reissue, the treasury stock account is reduced by the cost of such stock on a first-in-first-out basis. Fair Value of Financial Instruments Fair values of financial instruments are estimated using relevant market information and other assumptions, as more fully disclosed in a separate note. Fair value estimates involve uncertainties and matters of significant judgment regarding interest rates, credit risk, prepayments, and other factors, especially in the absence of broad markets for particular items. Changes in assumptions or in market conditions could significantly affect the estimates. 74 Table of Contents Reclassifications Certain amounts appearing in the financial statements and notes thereto for prior periods have been reclassified to conform with the current presentation. The reclassifications had no effect on net income or shareholders’ equity as previously reported. Adoption of New Accounting Standards Accounting Standards Adopted in 2020 On January 1, 2020, the Corporation adopted ASU 2016-13 Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments , which replaces the incurred loss methodology with an expected loss methodology that is referred to as the CECL methodology. The measurement of expected credit losses under the CECL methodology is applicable to financial assets measured at amortized cost, including loan receivables and HTM debt securities. It also applies to off-balance sheet credit exposures not accounted for as insurance (loan commitments. standby letters of credit, financial guarantees, and other similar instruments) and net investments in leases recognized by a lessor in accordance with Topic 842 on leases. In addition, ASC 326 made changes to the accounting for AFS debt securities. One such change is to require credit losses to be presented as an allowance rather than as a write-down on AFS debt securities management does not intend to sell or believes that it is more likely than not they will be required to sell. The Corporation adopted ASC 326 using the modified retrospective approach method for all financial assets measured at amortized cost and OBS credit exposures. Results for reporting periods beginning after January 1, 2020 are presented under ASC 326 while prior period amounts continue to be reported in accordance with previously applicable GAAP. In conjunction with the adoption of CECL, the Corporation has revised its segmentation to align with the methodology applied in determining the ACL for loans under CECL, which is based on federal call report codes which classify loans based on the primary collateral supporting the loan. Segmentation prior to the adoption of CECL was based on product type or purpose. Upon adoption, the Corporation's total allowance for credit losses increased by $ 5.0 million, or 25.5 %. The increase in the total allowance for credit losses resulted in a $ 3.4 million decrease to retained earnings, net of deferred taxes. The overall change in total allowance for credit losses upon adoption was primarily due to the move to a life of loan reserve estimate as well as methodology changes required under CECL. The Corporation adopted ASC 326 using the prospective transition approach for financial assets purchased with credit deterioration that were previously classified as purchased credit impaired ("PCI") and accounted for under ASC 310-30. In accordance with the standard, management did not reassess whether PCI assets met the criteria of PCD assets as of the date of adoption. On January 1, 2020, the amortized cost basis of the PCD assets were adjusted to reflect the addition of $ 670 thousand of the allowance for credit losses. The remaining noncredit discount (based on the adjusted amortized cost basis) will be accreted into interest income at the effective interest rate as of January 1, 2020. 75 Table of Contents The following tables illustrates the impact of ASC 326. January 1, 2020 Pre-CECL Adoption Reclassification to CECL Portfolio Segmentation Pre-CECL Adoption Portfolio Segmentation Post-CECL Adoption Portfolio Segmentation Impact of CECL Adoption Assets: Loans: Commercial, industrial and agricultural $ 1,046,665 $ ( 1,046,665 ) $ — $ — $ — Farmland — 27,199 27,199 27,199 — Owner-occupied, nonfarm nonresidential properties — 333,117 333,117 333,117 — Agricultural production and other loans to farmers — 3,407 3,407 3,407 — Commercial and Industrial — 474,614 474,614 474,614 — Obligations (other than securities and leases) of states and political subdivisions — 139,052 139,052 139,052 — Other loans — 5,740 5,740 5,740 — Commercial mortgages 814,002 ( 814,002 ) — — — Other construction loans and all land development and other land loans — 277,412 277,412 277,412 — Multifamily (5 or more) residential properties — 124,390 124,390 124,390 — Non-owner occupied, nonfarm nonresidential properties — 467,852 467,852 468,522 670 Residential real estate 814,030 ( 814,030 ) — — — 1-4 Family Construction — 22,427 22,427 22,427 — Home equity lines of credit — 95,089 95,089 95,089 — Residential Mortgages secured by first liens — 646,199 646,199 646,199 — Residential Mortgages secured by junior liens — 57,965 57,965 57,965 — Consumer, net of unearned discount 119,623 ( 119,623 ) — — — Other revolving credit plans — 52,353 52,353 52,353 — Automobile — 27,807 27,807 27,807 — Other consumer — 39,697 39,697 39,697 — Credit cards 7,569 — 7,569 7,569 — Overdrafts 2,146 — 2,146 2,146 — Total loans $ 2,804,035 $ — $ 2,804,035 $ 2,804,705 $ 670 76 Table of Contents January 1, 2020 Pre-CECL Adoption Reclassification to CECL Portfolio Segmentation Pre-CECL Adoption Portfolio Segmentation Post-CECL Adoption Portfolio Segmentation Impact of CECL Adoption Assets: Allowance for credit losses on loans: Commercial, industrial and agricultural $ 8,287 $ ( 8,287 ) $ — $ — $ — Farmland — 190 190 251 61 Owner-occupied, nonfarm nonresidential properties — 2,390 2,390 1,636 ( 754 ) Agricultural production and other loans to farmers — 25 25 30 5 Commercial and Industrial — 4,105 4,105 3,474 ( 631 ) Obligations (other than securities and leases) of states and political subdivisions — 1,022 1,022 791 ( 231 ) Other loans — 41 41 49 8 Commercial mortgages 6,952 ( 6,952 ) — — — Other construction loans and all land development and other land loans — 2,327 2,327 3,107 780 Multifamily (5 or more) residential properties — 1,087 1,087 1,399 312 Non-owner occupied, nonfarm nonresidential properties — 3,980 3,980 6,527 2,547 Residential real estate 1,499 ( 1,499 ) — — — 1-4 Family Construction — 56 56 21 ( 35 ) Home equity lines of credit — 180 180 601 421 Residential Mortgages secured by first liens — 1,220 1,220 2,320 1,100 Residential Mortgages secured by junior liens — 114 114 249 135 Consumer 2,411 ( 2,411 ) — — — Other revolving credit plans — 296 296 674 378 Automobile — 156 156 60 ( 96 ) Other consumer — 1,960 1,960 2,981 1,021 Credit cards 84 — 84 26 ( 58 ) Overdrafts 240 — 240 240 — Total allowance for credit losses on loans $ 19,473 $ — $ 19,473 $ 24,436 $ 4,963 Retained earnings: Total increase in allowance for credit losses on loans $ 4,963 Balance sheet reclassification ( 670 ) Total pre-tax impact 4,293 Tax effect ( 902 ) Decrease in retained earnings $ 3,391 In January 2017, the FASB issued ASU 2017-04, "Intangibles - Goodwill and Other (Topic 350) - Simplifying the Test for Goodwill Impairment" ("ASU 2017-04"). ASU 2017-04 simplifies the accounting for goodwill impairment for all entities by requiring impairment charges to be based on the first step in the previous two-step impairment test. Under the new guidance, if a reporting unit’s carrying amount exceeds its fair value, an entity will record an impairment charge based on that difference. The impairment charge will be limited to the amount of goodwill allocated to that reporting unit. The standard eliminates the prior requirement to calculate a goodwill impairment charge using Step 2, which requires an entity to calculate any impairment charge by comparing the implied fair value of goodwill with its carrying amount. ASU 2017-04 was effective for the Corporation on January 1, 2020 and did not have a material impact on the Corporation's financial statements and related disclosures. 77 Table of Contents In August 2018, the FASB issued ASU 2018-13, "Fair Value Measurement (Topic 820): Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement." ASU 2018-13 modifies disclosure requirements on fair value measurements based on the concepts in the Concepts Statement, including the consideration of costs and benefits. The amendments on changes in unrealized gains and losses, the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements, and the narrative description of measurement uncertainty should be applied prospectively for only the most recent interim or annual period presented in the initial fiscal year of adoption. All other amendments should be applied retrospectively to all periods presented upon their effective date. ASU 2018-13 was effective for the Corporation on January 1, 2020 and did not have a material impact on the Corporation's financial statements and related disclosures. In August 2018, the FASB issued ASU 2018-15, "Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40) - Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract" ("ASU 2018-15"). ASU 2018-15 aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internal use software license). The accounting for the service element of a hosting arrangement that is a service contract is not affected by these amendments. ASU 2018-15 was effective for the Corporation on January 1, 2020 and did not have a material impact on the Corporation's financial statements and related disclosures. In March 2020, the FASB issued ASU 2020-04, - Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting. ASU 2020-04 provides optional expedients and exceptions for accounting related to contracts, hedging relationships and other transactions affected by reference rate reform if certain criteria are met. ASU 2020-04 applies only to contracts, hedging relationships, and other transactions that reference LIBOR or another reference rate expected to be discontinued because of reference rate reform and do not apply to contract modifications made and hedging relationships entered into or evaluated after December 31, 2024, except for hedging relationships existing as of December 31, 2024, that an entity has elected certain optional expedients for and that are retained through the end of the hedging relationship. The amendments in this update are effective for all entities as of March 12, 2020, and based upon the amendments provided in ASU 2022-06 discussed below, can generally be applied through December 31, 2024. The adoption of ASU 2020-04 did not significantly impact the Corporation's financial statements and related disclosures. Accounting Standards Adopted in 2021 In August 2018, the FASB issued ASU 2018-14, "Disclosure Framework - Changes to the Disclosure Requirements for Defined Benefit Plans." ASU 2018-14 amends ASC 715-20, "Compensation - Retirement Benefits - Defined Benefit Plans - General." The amended guidance modifies the disclosure requirements for employers that sponsor defined benefit pension or other post-retirement plans by removing and adding certain disclosures for these plans. The eliminated disclosures include (a) the amounts in accumulated Other Comprehensive Income expected to be recognized in net periodic benefit costs over the next fiscal year, and (b) the effects of a one percentage point change in assumed health care cost trend rates on the net periodic benefit costs and the benefit obligation for post-retirement health care benefits. Additional disclosures include descriptions of significant gains and losses affecting the benefit obligation for the period. ASU 2018-14 was effective for the Corporation on January 1, 2021 and did not have a material impact on the Corporation's financial statements and related disclosures. In December 2019, the FASB issued ASU 2019-12 "Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes." These amendments remove specific exceptions to the general principles in Topic 740 in GAAP. It eliminates the need for an organization to analyze whether the following apply in a given period: exception to the incremental approach for intraperiod tax allocation; exceptions to accounting for basis differences where there are ownership changes in foreign investments; and exception in interim period income tax accounting for year-to-date losses that exceed anticipated losses. It also improves financial statement preparers' application of income tax- related guidance and simplifies GAAP for: franchise taxes that are partially based on income; transactions with a government that result in a step up in the tax basis of goodwill; separate financial statements of legal entities that are not subject to tax; and enacts changes in tax laws in interim periods. The guidance is effective for public business entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020. Early adoption is permitted. ASU 2019-12 was effective for the Corporation on January 1, 2021 and did not have a material impact on the Corporation's financial statements and related disclosures. 78 Table of Contents In January 2020, the FASB issued ASU 2020-01 - Investments - Equity Securities (Topic 321), Investments - Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815) - Clarifying the Interactions between Topic 321, Topic 323, and Topic 815. ASU 2020-01 represents changes to clarify certain interactions between the guidance to account for certain equity securities under Topic 321, the guidance to account for investments under the equity method of accounting in Topic 323, and the guidance in Topic 815. These amendments improve current U.S. GAAP by reducing diversity in practice and increasing comparability of the accounting for these transactions. ASU 2020-01 was effective for the Corporation on January 1, 2021 and did not have a material impact on the Corporation's financial statements and related disclosures. In October 2020, the FASB issued ASU 2020-08 - Codification Improvements to Subtopic 310-20, Receivables - Nonrefundable Fees and Other Costs. ASU 2020-08 clarifies that an entity should reevaluate whether a callable debt security is within the scope of paragraph 310-20-35-33 for each reporting period. ASU 2020-08 was effective for the Corporation on January 1, 2021 and did not have a material impact on the Corporation's financial statements and related disclosures. In January 2021, the FASB issued ASU 2021-01 - Reference Rate Reform (Topic 848). ASU 2021-01 expands and clarifies the scope of ASU No. 2020-04 to include derivatives affected by changes in interest rates used for margining, discounting, or contract price alignment, commonly referred to as the "discounting transaction." Derivatives impacted by the discounting transaction will be eligible for certain optional expedients and exceptions related to contract modifications and hedge accounting as defined in Topic 848. The amendments in this update are effective for all entities as of March 12, 2020, and based upon the amendments provided in ASU 2022-06 discussed below, can generally be applied through December 31, 2024. The adoption of ASU 2021-01 did not significantly impact the Corporation's financial statements and related disclosures. In August 2021, FASB issued ASU 2021-06 - Presentation of Financial Statements (Topic 205), Financial Services—Depository and Lending (Topic 942), and Financial Services—Investment Companies (Topic 946). ASU 2021-06 updates the codification to align with SEC Final Rule Releases No. 33-10786 and No. 33-10835. Specific to financial institutions, these SEC releases updated required annual statistical disclosures. The amendments in ASU 2021-06 were effective immediately. The updates to the statistical disclosures are reflected in the Corporation's Annual Report on Form 10-K for the fiscal year ending December 31, 2021, to align with this guidance. Effects of Newly Issued But Not Yet Effective Accounting Standards In March 2022, the FASB issued ASU 2022-01, "Derivatives and Hedging (Topic 815): Fair Value Hedging - Portfolio Layer Method." Under prior guidance, entities can apply the last-of-layer hedging method to hedge the exposure of a closed portfolio of prepayable financial assets to fair value changes due to changes in interest rates for a portion of the portfolio that is not expected to be affected by prepayments, defaults, and other events affecting the timing and amount of cash flows. ASU 2022-01 expands the last-of-layer method, which permits only one hedge layer, to allow multiple hedged layers of a single closed portfolio. To reflect that expansion, the last-of-layer method is renamed the portfolio layer method. ASU 2022-01 also (i) expands the scope of the portfolio layer method to include non-prepayable financial assets, (ii) specifies eligible hedging instruments in a single-layer hedge, (iii) provides additional guidance on the accounting for and disclosure of hedge basis adjustments under the portfolio layer method and (iv) specifies how hedge basis adjustments should be considered when determining credit losses for the assets included in the closed portfolio. ASU 2022-01 will be effective for the Corporation on January 1, 2023. The Corporation is evaluating the effect that ASU 2022-01 will have on its consolidated financial statements and related disclosures. In March 2022, the FASB issued ASU No. 2022-02, "Financial Instruments – Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures." This ASU eliminates the separate recognition and measurement guidance for TDRs by creditors. The elimination of the TDRs guidance may be adopted prospectively for loan modifications after adoption or on a modified retrospective basis, which would also apply to loans previously modified, resulting in a cumulative effect adjustment to retained earnings in the period of adoption for changes in the allowance for credit losses. This guidance is effective for the Corporation on January 1, 2023, with early adoption permitted. The Corporation is evaluating the effect that ASU 2022-02 will have on its consolidated financial statements and related disclosures. In June 2022, FASB issued ASU No. 2022-03, "Fair Value Measurement (Topic 820): Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions." In this ASU, a contractual restriction on the sale of an equity security is not considered in measuring the security's fair value. The ASU also requires certain disclosures for equity securities that are subject to contractual restrictions. This guidance is effective for the Corporation on January 1, 2024, with early adoption permitted. The Corporation is evaluating the effect that ASU 2022-03 will have on its consolidated financial statements and related disclosures. 79 Table of Contents In December 2022, FASB issued ASU No. 2022-06 - Reference Rate Reform (Topic 848). ASU 2022-06 extends the period of time preparers can utilize the reference rate reform relief guidance provided by ASU 2020-04 and ASU 2021-01, which are discussed above. ASU 2022-06, which was effective upon issuance, defers the sunset date of this prior guidance from December 31, 2022 to December 31, 2024, after which entities will no longer be permitted to apply the relief guidance in Topic 848. ASU 2022-06 did not have a material impact on the Corporation's financial statements and related disclosures. 2. Business Combinations On July 17, 2020, the Corporation completed its previously announced acquisition of Bank of Akron for either (x) $ 215.00 in cash or (y) 6.6729 shares of the Corporation's common stock and also received cash in lieu of fractional shares. 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. Bank of Akron's results of operations were included in the Corporation's results of operations beginning July 17, 2020. The Corporation incurred no merger-related expenses during the years ended December 31, 2022 and 2021, respectively, and $ 4.0 million of merger-related expenses during the year ended December 31, 2020, consisting largely of professional services of attorneys, accountants, investment bankers and other advisors. 3. Securities Securities AFS at December 31, 2022 and 2021 were as follows: December 31, 2022 Amortized Gross Unrealized Allowance For Fair Cost Gains Losses Credit Losses Value U.S. Gov’t sponsored entities $ 3,213 $ — $ ( 84 ) $ — $ 3,129 State & political subdivisions 112,734 24 ( 17,095 ) — 95,663 Residential & multi-family mortgage 256,111 — ( 38,564 ) — 217,547 Corporate notes & bonds 47,111 — ( 4,720 ) — 42,391 Pooled SBA 13,823 — ( 1,144 ) — 12,679 Total $ 432,992 $ 24 $ ( 61,607 ) $ — $ 371,409 December 31, 2021 Amortized Gross Unrealized Allowance For Fair Cost Gains Losses Credit Losses Value U.S. Gov’t sponsored entities $ 110,788 $ 2,728 $ ( 1,768 ) $ — $ 111,748 State & political subdivisions 103,232 2,162 ( 1,682 ) — 103,712 Residential & multi-family mortgage 437,021 4,127 ( 6,513 ) — 434,635 Corporate notes & bonds 28,257 250 ( 443 ) — 28,064 Pooled SBA 18,787 283 ( 38 ) — 19,032 Total $ 698,085 $ 9,550 $ ( 10,444 ) $ — $ 697,191 Debt securities HTM at December 31, 2022 and 2021 are as follows: December 31, 2022 Amortized Gross Unrealized Allowance For Fair Cost Gains Losses Credit Losses Value U.S. Gov’t sponsored entities $ 307,711 $ — $ ( 27,276 ) $ — $ 280,435 Residential & multi-family mortgage 97,054 — ( 10,101 ) — 86,953 Total $ 404,765 $ — $ ( 37,377 ) $ — $ 367,388 80 Table of Contents December 31, 2021 Amortized Gross Unrealized Allowance For Fair Cost Gains Losses Credit Losses Value U.S. Gov’t sponsored entities $ — $ — $ — $ — $ — Residential & multi-family mortgage — — — — — Total $ — $ — $ — $ — $ — The Corporation elected to transfer 23 AFS securities with an aggregate fair value of $ 101.1 million to a classification of HTM on January 1, 2022. In accordance with FASB ASC 320-10-55-24, the transfer from AFS to HTM must be recorded at the fair value of the AFS securities at the time of transfer. The net unrealized holding gain of $ 373 thousand, net of tax, at the date of transfer was retained in accumulated other comprehensive income (loss), with the associated pre-tax amount retained in the carrying value of the HTM securities. Such amounts will be amortized to comprehensive income over the remaining life of the securities. The Corporation elected to transfer 51 AFS securities with an aggregate fair value of $ 112.6 million to a classification of HTM on April 1, 2022. The net unrealized holding loss of $ 6.0 million, net of tax, at the date of transfer was retained in accumulated other comprehensive income (loss), with the associated pre-tax amount retained in the carrying value of the HTM securities. Such amounts will be amortized to comprehensive income over the remaining life of the securities. Information pertaining to security sales is as follows: Year ended December 31 Proceeds Gross Gains Gross Losses 2022 $ 22,164 $ 651 $ — 2021 33,553 783 — 2020 57,185 2,257 67 The tax provision related to these net realized gains at December 31, 2022, 2021 and 2020 were $ 137 thousand, $ 164 thousand, and $ 460 thousand, respectively. The following is a schedule of the contractual maturity of securities AFS and HTM, excluding equity securities, at December 31, 2022: Available-for-sale Held-to-maturity Amortized Cost Fair Value Amortized Cost Fair Value 1 year or less $ 4,693 $ 4,661 $ 5,058 $ 4,966 1 year – 5 years 43,759 41,340 242,927 225,060 5 years – 10 years 90,489 77,501 59,726 50,409 After 10 years 24,117 17,681 — — 163,058 141,183 307,711 280,435 Residential and multi-family mortgage 256,111 217,547 97,054 86,953 Pooled SBA 13,823 12,679 — — Total debt securities $ 432,992 $ 371,409 $ 404,765 $ 367,388 Mortgage securities and pooled SBA securities are not due at a single date; periodic payments are received based on the payment patterns of the underlying collateral. On December 31, 2022 and 2021, securities carried at $ 561.8 million and $ 461.5 million, respectively, were pledged to secure public deposits and for other purposes as provided by law. At December 31, 2022 and 2021, there were no holdings of securities by any one issuer, other than U.S. Government sponsored entities, in an amount greater than 10 % of shareholders’ equity. 81 Table of Contents AFS debt securities with unrealized losses at December 31, 2022 and 2021, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position, were as follows: December 31, 2022 Less than 12 Months 12 Months or More Total Description of Securities Fair Value Unrealized Loss Fair Value Unrealized Loss Fair Value Unrealized Loss U.S. Gov’t sponsored entities $ 3,129 $ ( 84 ) $ — $ — $ 3,129 $ ( 84 ) State & political subdivisions 34,667 ( 1,887 ) 54,546 ( 15,208 ) 89,213 ( 17,095 ) Residential & multi-family mortgage 48,996 ( 3,122 ) 168,551 ( 35,442 ) 217,547 ( 38,564 ) Corporate notes & bonds 31,730 ( 3,403 ) 10,661 ( 1,317 ) 42,391 ( 4,720 ) Pooled SBA 5,107 ( 314 ) 7,572 ( 830 ) 12,679 ( 1,144 ) Total $ 123,629 $ ( 8,810 ) $ 241,330 $ ( 52,797 ) $ 364,959 $ ( 61,607 ) December 31, 2021 Less than 12 Months 12 Months or More Total Description of Securities Fair Value Unrealized Loss Fair Value Unrealized Loss Fair Value Unrealized Loss U.S. Gov’t sponsored entities $ 23,733 $ ( 553 ) $ 37,911 $ ( 1,215 ) $ 61,644 $ ( 1,768 ) State & political subdivisions 55,636 ( 1,399 ) 5,026 ( 283 ) 60,662 ( 1,682 ) Residential and multi-family mortgage 248,690 ( 4,837 ) 45,185 ( 1,676 ) 293,875 ( 6,513 ) Corporate notes & bonds 6,466 ( 249 ) 3,806 ( 194 ) 10,272 ( 443 ) Pooled SBA 4,394 ( 37 ) 127 ( 1 ) 4,521 ( 38 ) Total $ 338,919 $ ( 7,075 ) $ 92,055 $ ( 3,369 ) $ 430,974 $ ( 10,444 ) HTM debt securities with unrealized losses at December 31, 2022 and 2021, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position, were as follows: December 31, 2022 Less than 12 Months 12 Months or More Total Description of Securities Fair Value Unrealized Loss Fair Value Unrealized Loss Fair Value Unrealized Loss U.S. Gov’t sponsored entities $ 143,556 $ ( 10,063 ) $ 136,879 $ ( 17,213 ) $ 280,435 $ ( 27,276 ) Residential & multi-family mortgage 24,132 ( 2,253 ) 62,821 ( 7,848 ) 86,953 ( 10,101 ) Total $ 167,688 $ ( 12,316 ) $ 199,700 $ ( 25,061 ) $ 367,388 $ ( 37,377 ) December 31, 2021 Less than 12 Months 12 Months or More Total Description of Securities Fair Value Unrealized Loss Fair Value Unrealized Loss Fair Value Unrealized Loss U.S. Gov’t sponsored entities $ — $ — $ — $ — $ — $ — State & political subdivisions — — — — — — Total $ — $ — $ — $ — $ — $ — The Corporation evaluates securities for possible credit allowance on a quarterly basis, or more frequently when economic or market conditions warrant such an evaluation. As of December 31, 2022 and 2021, management performed an assessment for allowance for credit losses on the Corporation’s AFS debt securities in an unrealized loss position and as of December 31, 2022 management performed an assessment for allowance for credit losses on the Corporation's HTM debt securities. 82 Table of Contents First an assessment was performed to determine if the Corporation intends to sell, or it is more likely than not that it will be required to sell the security before recovery of its amortized cost. Management determined it does not intend to sell and will not be required to sell any of the securities before recovery of its amortized cost. Next, management performed an evaluation relying on information obtained from various sources, including publicly available financial data, ratings by external agencies, brokers and other sources. For the securities that comprise corporate notes and bonds and the securities that are issued by state and political subdivisions, management monitors publicly available financial information, such as filings with the Securities and Exchange Commission, in order to evaluate the securities credit quality and ability to repay its debt obligations. For financial institution issuers, management monitors information from quarterly "call" report filings that are used to generate Uniform Bank Performance Reports. All other securities that were in an unrealized loss position at the balance sheet date were reviewed by management, and issuer-specific documents were reviewed as appropriate given the following considerations; the financial condition and near-term prospects of the issuer and whether downgrades by bond rating agencies have occurred. Based on the results of the assessment, management believes the decline in fair value is not the result of credit losses. As a result no credit allowance is required as of December 31, 2022. As of December 31, 2022 and 2021 management concluded that the securities described in the previous paragraph did not decline in fair value due to credit factors for the following reasons: • There is no indication of any significant deterioration of the creditworthiness of the institutions that issued the securities. • All contractual interest payments on the securities have been received as scheduled, and no information has come to management’s attention through the processes previously described which would lead to a conclusion that future contractual payments will not be timely received. In addition, the rise in interest rates is the primary driver of the decline in fair value as of December 31, 2022. Equity securities at December 31, 2022 and 2021 were as follows: December 31, 2022 December 31, 2021 Corporate equity securities $ 6,973 $ 6,715 Mutual funds 1,406 2,566 Money market 479 506 Corporate notes 757 579 Total $ 9,615 $ 10,366 During the year ended December 31, 2022, 2021, and 2020, the proceeds from sold equity securities were zero in December 31, 2022, zero in December 31, 2021 and $ 5.9 million in December 31, 2020, resulting in net realized gains of zero in December 31, 2022, zero in December 31, 2021, and $ 75 thousand in December 31, 2020. 83 Table of Contents 4. Loans Receivable and Allowance for Credit Losses Total net loans receivable at December 31, 2022 and 2021 are summarized as follows: 2022 Percentage of Total 2021 Percentage of Total Farmland $ 32,168 0.8 % $ 23,768 0.7 % Owner-occupied, nonfarm nonresidential properties 468,493 11.0 434,672 12.0 Agricultural production and other loans to farmers 1,198 — 1,379 — Commercial and Industrial 1 791,911 18.5 708,989 19.5 Obligations (other than securities and leases) of states and political subdivisions 145,345 3.4 140,887 3.9 Other loans 24,710 0.6 13,979 0.4 Other construction loans and all land development and other land loans 446,685 10.5 298,869 8.2 Multifamily (5 or more) residential properties 257,696 6.0 216,143 5.9 Non-owner occupied, nonfarm nonresidential properties 795,315 18.6 663,062 18.2 1-4 Family Construction 51,171 1.2 37,822 1.0 Home equity lines of credit 124,892 2.9 104,517 2.9 Residential Mortgages secured by first liens 942,531 22.0 826,729 22.7 Residential Mortgages secured by junior liens 74,638 1.7 56,689 1.6 Other revolving credit plans 36,372 0.9 26,536 0.7 Automobile 21,806 0.5 20,862 0.6 Other consumer 49,144 1.1 49,676 1.4 Credit cards 10,825 0.3 9,935 0.3 Overdrafts 278 — 278 — Total loans $ 4,275,178 100.0 % $ 3,634,792 100.0 % Less: Allowance for credit losses ( 43,436 ) ( 37,588 ) Loans, net $ 4,231,742 $ 3,597,204 Net deferred loan origination fees (costs) included in the above loan table $ 4,463 $ 5,667 1 PPP loans, net of deferred PPP processing fees, both those disbursed in 2020 and those disbursed in 2021, are included in the Commercial and Industrial classification. The Corporation’s outstanding loans receivable and related unfunded commitments are primarily concentrated within Central and Northwest Pennsylvania, Central and Northeast Ohio, Western New York and Southwest Virginia. The Bank attempts to limit concentrations within specific industries by utilizing dollar limitations to single industries or customers, and by entering into participation agreements with third parties. Collateral requirements are established based on management’s assessment of the customer. The Corporation maintains lending policies to control the quality of the loan portfolio. These policies delegate the authority to extend loans under specific guidelines and underwriting standards. These policies are prepared by the Corporation’s management and reviewed and approved annually by the Corporation’s Board of Directors. During the second quarter of 2020, the Corporation began originating loans to qualified small businesses under the Paycheck Protection Program ("PPP") administered by the Small Business Administration ("SBA") under the provisions of the Coronavirus Aid, Relief, and Economic Security Act. PPP loans, both those disbursed in 2020 and those disbursed in 2021, are included in the commercial and industrial classification and, as the PPP loans are fully guaranteed by the Small Business Administration, no required allowance for credit losses was recorded against the PPP loans, net of deferred PPP processing fees, outstanding of $ 159 thousand and $ 45.2 million as of December 31, 2022 and 2021, respectively. Syndicated loans, net of deferred fees and costs, are included in the commercial and industrial classification and totaled $ 156.6 million and $ 125.8 million as of December 31, 2022 and 2021, respectively. 84 Table of Contents Transactions in the allowance for credit losses for the year ended December 31, 2022 were as follows: Beginning Allowance (Charge-offs) Recoveries Provision (Benefit) for Credit Losses on Loans Receivable (1) Ending Allowance Farmland $ 151 $ — $ — $ 8 $ 159 Owner-occupied, nonfarm nonresidential properties 3,339 ( 21 ) 15 ( 428 ) 2,905 Agricultural production and other loans to farmers 9 — — ( 3 ) 6 Commercial and Industrial 8,837 ( 175 ) 139 965 9,766 Obligations (other than securities and leases) of states and political subdivisions 1,649 — — 214 1,863 Other loans 149 — — 307 456 Other construction loans and all land development and other land loans 2,198 — — 1,055 3,253 Multifamily (5 or more) residential properties 2,289 — — 64 2,353 Non-owner occupied, nonfarm nonresidential properties 6,481 ( 335 ) 336 1,171 7,653 1-4 Family Construction 158 — — 169 327 Home equity lines of credit 1,169 — 12 ( 8 ) 1,173 Residential Mortgages secured by first liens 6,943 ( 51 ) 28 1,564 8,484 Residential Mortgages secured by junior liens 546 — — 489 1,035 Other revolving credit plans 528 ( 92 ) 50 236 722 Automobile 263 ( 28 ) 2 34 271 Other consumer 2,546 ( 1,623 ) 89 1,653 2,665 Credit cards 92 ( 99 ) 38 36 67 Overdrafts 241 ( 561 ) 138 460 278 Total loans $ 37,588 $ ( 2,985 ) $ 847 $ 7,986 $ 43,436 (1) Excludes provision for credit losses related to unfunded commitments. Note 20, "Off-Balance Sheet Commitments and Contingencies," in the consolidated financial statements provides more detail concerning the provision for credit losses related to unfunded commitments of the Corporation. The Corporation's allowance for credit losses is influenced by loan volumes, risk rating migration, delinquency status and other conditions influencing loss expectations, such as reasonable and supportable forecasts of economic conditions. For the year ended December 31, 2022, the allowance for credit losses increased due to the growth in the Corporation's loan portfolio, including growth in new market areas. This was partially offset by improvements in the Corporation's historical loss rates, as well as the impact of net charge-offs. There is still a significant amount of uncertainty related to the domestic and global economy, continued supply chain challenges, persistent inflation and the COVID-19 pandemic. Management will continue to proactively evaluate its estimate of expected credit losses as new information becomes available. 85 Table of Contents Transactions in the allowance for credit losses for the year ended December 31, 2021 were as follows: Beginning Allowance (Charge-offs) Recoveries Provision (Benefit) for Credit Losses on Loans Receivable (1) Ending Allowance Farmland $ 221 $ — $ — $ ( 70 ) $ 151 Owner-occupied, nonfarm nonresidential properties 3,700 ( 584 ) 10 213 3,339 Agricultural production and other loans to farmers 24 — — ( 15 ) 9 Commercial and Industrial 6,233 ( 163 ) 203 2,564 8,837 Obligations (other than securities and leases) of states and political subdivisions 998 ( 407 ) 30 1,028 1,649 Other loans 68 — — 81 149 Other construction loans and all land development and other land loans 1,956 ( 282 ) — 524 2,198 Multifamily (5 or more) residential properties 2,724 — — ( 435 ) 2,289 Non-owner occupied, nonfarm nonresidential properties 8,658 ( 49 ) — ( 2,128 ) 6,481 1-4 Family Construction 82 — — 76 158 Home equity lines of credit 985 ( 7 ) 5 186 1,169 Residential Mortgages secured by first liens 4,539 ( 79 ) 47 2,436 6,943 Residential Mortgages secured by junior liens 241 ( 3 ) — 308 546 Other revolving credit plans 507 ( 41 ) 13 49 528 Automobile 132 ( 26 ) 3 154 263 Other consumer 2,962 ( 1,193 ) 140 637 2,546 Credit cards 66 ( 112 ) 18 120 92 Overdrafts 244 ( 438 ) 160 275 241 Total loans $ 34,340 $ ( 3,384 ) $ 629 $ 6,003 $ 37,588 (1) Excludes provision for credit losses related to unfunded commitments. Note 20, "Off-Balance Sheet Commitments and Contingencies," in the consolidated financial statements provides more detail concerning the provision for credit losses related to unfunded commitments of the Corporation. Transactions in the allowance for credit losses for the year ended December 31, 2020 were as follows: Beginning Allowance (Before ASC 326 Adoption) Impact of ASC 326 Adoption Initial Allowance on Loans Purchased with Credit Deterioration (Charge-offs) Recoveries Provision (Benefit) for Credit Losses on Loans Receivable (1) Ending Allowance (After ASC 326 Adoption) Farmland $ 190 $ 61 $ — $ — $ — $ ( 30 ) $ 221 Owner-occupied, nonfarm nonresidential properties 2,390 ( 754 ) 82 ( 61 ) 12 2,031 3,700 Agricultural production and other loans to farmers 25 5 — — — ( 6 ) 24 Commercial and Industrial 4,105 ( 631 ) 216 ( 2,779 ) 39 5,283 6,233 Obligations (other than securities and leases) of states and political subdivisions 1,022 ( 231 ) — — — 207 998 Other loans 41 8 — — — 19 68 Other construction loans and all land development and other land loans 2,327 780 228 — 125 ( 1,504 ) 1,956 Multifamily (5 or more) residential properties 1,087 312 24 — — 1,301 2,724 Non-owner occupied, nonfarm nonresidential properties 3,980 2,547 335 ( 1,522 ) 52 3,266 8,658 1-4 Family Construction 56 ( 35 ) — — — 61 82 Home equity lines of credit 180 421 22 ( 6 ) 1 367 985 Residential Mortgages secured by first liens 1,220 1,100 73 ( 285 ) 65 2,366 4,539 Residential Mortgages secured by junior liens 114 135 — ( 158 ) 2 148 241 Other revolving credit plans 296 378 — ( 137 ) 21 ( 51 ) 507 Automobile 156 ( 96 ) — ( 29 ) 2 99 132 Other consumer 1,960 1,021 — ( 1,513 ) 130 1,364 2,962 Credit cards 84 ( 58 ) — ( 153 ) 14 179 66 Overdrafts 240 — — ( 435 ) 185 254 244 Total loans $ 19,473 $ 4,963 $ 980 $ ( 7,078 ) $ 648 $ 15,354 $ 34,340 (1) Excludes provision for credit losses related to unfunded commitments. Note 20, "Off-Balance Sheet Commitments and Contingencies," in the consolidated financial statements provides more detail concerning the provision for credit losses related to unfunded commitments of the Corporation. 86 Table of Contents The following tables present the amortized cost basis of loans on nonaccrual status and loans past due over 89 days still accruing as of December 31, 2022 and 2021, respectively: December 31, 2022 Nonaccrual Nonaccrual With No Allowance for Credit Loss Loans Past Due over 89 Days Still Accruing Farmland $ 1,011 $ 1,011 $ 994 Owner-occupied, nonfarm nonresidential properties 2,055 1,987 — Commercial and Industrial 5,485 2,366 71 Other construction loans and all land development and other land loans 567 567 — Multifamily (5 or more) residential properties 1,066 423 — Non-owner occupied, nonfarm nonresidential properties 5,081 2,665 — Home equity lines of credit 475 475 — Residential Mortgages secured by first liens 4,329 3,882 48 Residential Mortgages secured by junior liens 91 91 — Other revolving credit plans 26 26 — Automobile 19 19 — Other consumer 781 781 — Credit cards — — 8 Total loans $ 20,986 $ 14,293 $ 1,121 December 31, 2021 Nonaccrual Nonaccrual With No Allowance for Credit Loss Loans Past Due over 89 Days Still Accruing Farmland $ 965 $ 965 $ — Owner-occupied, nonfarm nonresidential properties 850 762 — Commercial and Industrial 7,060 1,653 8 Other construction loans and all land development and other land loans 516 77 — Multifamily (5 or more) residential properties 1,270 5 — Non-owner occupied, nonfarm nonresidential properties 3,771 2,143 — Home equity lines of credit 824 824 — Residential Mortgages secured by first liens 3,410 3,410 137 Residential Mortgages secured by junior liens 147 147 — Other revolving credit plans 13 13 — Automobile 36 36 — Other consumer 558 558 — Credit cards — — 23 Total loans $ 19,420 $ 10,593 $ 168 All payments received while on nonaccrual status are applied against the principal balance of the loan. The Corporation does not recognize interest income while loans are on nonaccrual status. 87 Table of Contents The following tables present the amortized cost basis of loans receivable that are individually evaluated and collateral-dependent by class of loans as of December 31, 2022 and 2021, respectively: December 31, 2022 Real Estate Collateral Non-Real Estate Collateral Farmland $ 829 $ — Owner-occupied, nonfarm nonresidential properties 1,296 4 Commercial and Industrial — 1,904 Other construction loans and all land development and other land loans 501 — Multifamily (5 or more) residential properties 1,066 — Non-owner occupied, nonfarm nonresidential properties 5,874 — Home equity lines of credit 335 — Residential Mortgages secured by first liens 1,150 — Total loans $ 11,051 $ 1,908 December 31, 2021 Real Estate Collateral Non-Real Estate Collateral Farmland $ 920 $ — Owner-occupied, nonfarm nonresidential properties 194 9 Commercial and Industrial 1,488 2,351 Other construction loans and all land development and other land loans 438 — Multifamily (5 or more) residential properties 1,265 — Non-owner occupied, nonfarm nonresidential properties 3,378 — Residential Mortgages secured by first liens 435 — Total loans $ 8,118 $ 2,360 88 Table of Contents The following table presents the aging of the amortized cost basis in past-due loans as of December 31, 2022 by class of loans: 30 - 59 Days Past Due 60 - 89 Days Past Due Greater Than 89 Days Past Due Total Past Due Loans Not Past Due Total Farmland $ — $ — $ 1,136 $ 1,136 $ 31,032 $ 32,168 Owner-occupied, nonfarm nonresidential properties 185 27 734 946 467,547 468,493 Agricultural production and other loans to farmers — — — — 1,198 1,198 Commercial and Industrial 246 93 611 950 790,961 791,911 Obligations (other than securities and leases) of states and political subdivisions — — — — 145,345 145,345 Other loans — — — — 24,710 24,710 Other construction loans and all land development and other land loans 1,522 — 501 2,023 444,662 446,685 Multifamily (5 or more) residential properties 706 — 90 796 256,900 257,696 Non-owner occupied, nonfarm nonresidential properties 113 60 879 1,052 794,263 795,315 1-4 Family Construction — — — — 51,171 51,171 Home equity lines of credit 203 10 49 262 124,630 124,892 Residential Mortgages secured by first liens 1,302 538 1,775 3,615 938,916 942,531 Residential Mortgages secured by junior liens 5 — 51 56 74,582 74,638 Other revolving credit plans 65 27 — 92 36,280 36,372 Automobile 36 — — 36 21,770 21,806 Other consumer 361 188 473 1,022 48,122 49,144 Credit cards 196 18 8 222 10,603 10,825 Overdrafts — — — — 278 278 Total loans $ 4,940 $ 961 $ 6,307 $ 12,208 $ 4,262,970 $ 4,275,178 89 Table of Contents The following table presents the aging of the amortized cost basis in past-due loans as of December 31, 2021 by class of loans. 30 - 59 Days Past Due 60 - 89 Days Past Due Greater Than 89 Days Past Due Total Past Due Loans Not Past Due Total Farmland $ 348 $ — $ — $ 348 $ 23,420 $ 23,768 Owner-occupied, nonfarm nonresidential properties 278 18 414 710 433,962 434,672 Agricultural production and other loans to farmers — — — — 1,379 1,379 Commercial and Industrial 377 13 333 723 708,266 708,989 Obligations (other than securities and leases) of states and political subdivisions — — — — 140,887 140,887 Other loans — — — — 13,979 13,979 Other construction loans and all land development and other land loans — — 77 77 298,792 298,869 Multifamily (5 or more) residential properties — 10 209 219 215,924 216,143 Non-owner occupied, nonfarm nonresidential properties — — 1,792 1,792 661,270 663,062 1-4 Family Construction — — — — 37,822 37,822 Home equity lines of credit 506 50 172 728 103,789 104,517 Residential Mortgages secured by first liens 1,286 1,145 1,647 4,078 822,651 826,729 Residential Mortgages secured by junior liens 32 24 1 57 56,632 56,689 Other revolving credit plans 56 17 4 77 26,459 26,536 Automobile 45 3 23 71 20,791 20,862 Other consumer 283 158 295 736 48,940 49,676 Credit cards 26 12 23 61 9,874 9,935 Overdrafts — — — — 278 278 Total loans $ 3,237 $ 1,450 $ 4,990 $ 9,677 $ 3,625,115 $ 3,634,792 Troubled Debt Restructurings In order to determine whether a borrower is experiencing financial difficulty, an evaluation is performed of the probability that the borrower will be in payment default on any of its debt in the foreseeable future without a loan modification. This evaluation is performed using the Corporation’s internal underwriting policies. The Corporation has no further loan commitments to customers whose loan receivables are classified as a TDR. During the years ended December 31, 2022 and 2021, the terms of certain loans were modified as TDRs. The modification of the terms of such loans included either or both of the following: a reduction of the stated interest rate of the loan; or an extension of the maturity date at a stated rate of interest lower than the current market rate for new debt with similar risk. The Corporation had an amortized cost in troubled debt restructurings of $ 12.4 million and $ 16.6 million as of December 31, 2022 and 2021, respectively. The Corporation has allocated $ 2.2 million and $ 2.6 million of allowance for those loans as of December 31, 2022 and 2021, respectively. The following table presents loans by class modified as troubled debt restructurings that occurred during the years ended December 31, 2022, 2021, and 2020: Year Ended December 31, 2022 Number of Loans Pre-Modification Outstanding Recorded Investment Post-Modification Outstanding Recorded Investment Type of Modification Commercial and Industrial 1 $ 96 $ 96 Extend Amortization Non-owner occupied, nonfarm nonresidential properties 1 1,784 1,784 Modify Rate and Extend Amortization Total loans 2 $ 1,880 $ 1,880 90 Table of Contents Year Ended December 31, 2021 Number of Loans Pre-Modification Outstanding Recorded Investment Post-Modification Outstanding Recorded Investment Type of Modification Commercial and Industrial 2 $ 3,336 $ 3,336 Modify Payment Multifamily (5 or more) residential properties 1 717 717 Modify Payment Non-owner occupied, nonfarm nonresidential properties 1 1,604 1,604 Modify Payment Total loans 4 $ 5,657 $ 5,657 Year Ended December 31, 2020 Number of Loans Pre-Modification Outstanding Recorded Investment Post-Modification Outstanding Recorded Investment Type of Modification Owner-occupied, nonfarm nonresidential properties 1 $ 260 $ 260 Modify Payment Commercial and Industrial 6 1,140 1,140 Modify Payment Other construction loans and all land development and other land loans 1 46 46 Modify Rate and Extend Amortization Non-owner occupied, nonfarm nonresidential properties 1 3,684 3,684 Modify Rate and Modify Payment Residential Mortgages secured by first liens 2 309 309 Modify Payment Total loans 11 $ 5,439 $ 5,439 The TDRs described above increased the allowance for credit losses by immaterial amounts for the years ended December 31, 2022, 2021, and 2020, respectively. A loan receivable is considered to be in payment default once it is 90 days contractually past due under the modified terms. There were no loans receivable modified as TDRs for which there was a payment default within twelve months following the modification during the years ended December 31, 2022, 2021 and 2020, respectively, and no principal balances were forgiven in connection with the loan receivable restructurings. In order to determine whether a borrower is experiencing financial difficulty, an evaluation is performed of the probability that the borrower will be in payment default on any of its debt in the foreseeable future without a loan modification. This evaluation is performed using the Corporation’s internal underwriting policies. The Corporation has no further loan commitments to customers whose loans are classified as a troubled debt restructuring. Generally, nonperforming TDRs are restored to accrual status when the obligation is brought current, has performed in accordance with the contractual terms for a reasonable period of time (generally six months ) and the ultimate collectability of the total contractual principal and interest is no longer in doubt. Credit Quality Indicators The Corporation categorizes loans receivable into risk categories based on relevant information about the ability of borrowers to service their debt such as: current financial information, historical payment experience, credit documentation, public information, and current economic trends, among other factors. The Corporation analyzes loans individually to classify the loans as to credit risk. The Corporation uses the following definitions for risk ratings: Special Mention: A loan classified as special mention has a potential weakness that deserves management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or of the Corporation’s credit position at some future date. Substandard: A loan classified as substandard is inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any. The loan has a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. A substandard loan is characterized by the distinct possibility that the Corporation will sustain some loss if the deficiencies are not corrected. 91 Table of Contents Doubtful: A loan classified as doubtful has all the weaknesses inherent in those classified as substandard, with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable. The following tables represent the Corporation's commercial credit risk profile by risk rating as of December 31, 2022 and 2021, respectively. Loans receivable not rated as special mention, substandard, or doubtful are considered to be pass rated loans. December 31, 2022 Non-Pass Rated Pass Special Mention Substandard Doubtful Total Non-Pass Total Farmland $ 29,706 $ 1,450 $ 1,012 $ — $ 2,462 $ 32,168 Owner-occupied, nonfarm nonresidential properties 433,467 27,796 7,230 — 35,026 468,493 Agricultural production and other loans to farmers 1,198 — — — — 1,198 Commercial and Industrial 765,821 14,740 10,037 1,313 26,090 791,911 Obligations (other than securities and leases) of states and political subdivisions 145,345 — — — — 145,345 Other loans 24,710 — — — — 24,710 Other construction loans and all land development and other land loans 443,300 1,296 2,089 — 3,385 446,685 Multifamily (5 or more) residential properties 256,120 510 1,066 — 1,576 257,696 Non-owner occupied, nonfarm nonresidential properties 772,450 2,791 20,074 — 22,865 795,315 Total loans $ 2,872,117 $ 48,583 $ 41,508 $ 1,313 $ 91,404 $ 2,963,521 December 31, 2021 Non-Pass Rated Pass Special Mention Substandard Doubtful Total Non-Pass Total Farmland $ 21,286 $ 1,514 $ 968 $ — $ 2,482 $ 23,768 Owner-occupied, nonfarm nonresidential properties 419,368 6,723 8,581 — 15,304 434,672 Agricultural production and other loans to farmers 1,379 — — — — 1,379 Commercial and Industrial 687,010 7,946 12,654 1,379 21,979 708,989 Obligations (other than securities and leases) of states and political subdivisions 140,887 — — — — 140,887 Other loans 13,979 — — — — 13,979 Other construction loans and all land development and other land loans 294,103 4,221 545 — 4,766 298,869 Multifamily (5 or more) residential properties 214,772 100 1,271 — 1,371 216,143 Non-owner occupied, nonfarm nonresidential properties 631,534 9,628 21,900 — 31,528 663,062 Total loans $ 2,424,318 $ 30,132 $ 45,919 $ 1,379 $ 77,430 $ 2,501,748 92 Table of Contents The following tables detail the amortized cost of loans receivable, by year of origination (for term loans) and by risk grade within each portfolio segment as of December 31, 2022. The current period originations may include modifications, extensions and renewals. Term Loans Amortized Cost Basis by Origination Year 2022 2021 2020 2019 2018 Prior Revolving Loans Amortized Cost Basis Revolving Loans Converted to Term Total Farmland Risk rating Pass $ 12,321 $ 7,635 $ 1,536 $ 871 $ 3,277 $ 3,523 $ 543 $ — $ 29,706 Special mention — — — — — 1,450 — — 1,450 Substandard — 347 — — 142 523 — — 1,012 Doubtful — — — — — — — — — Total $ 12,321 $ 7,982 $ 1,536 $ 871 $ 3,419 $ 5,496 $ 543 $ — $ 32,168 Owner-occupied, nonfarm nonresidential properties Risk rating Pass $ 116,701 $ 113,575 $ 50,226 $ 55,040 $ 25,327 $ 60,810 $ 11,788 $ — $ 433,467 Special mention 3,402 — 15,613 872 4,097 814 2,998 — 27,796 Substandard — — 355 1,864 862 4,149 — — 7,230 Doubtful — — — — — — — — — Total $ 120,103 $ 113,575 $ 66,194 $ 57,776 $ 30,286 $ 65,773 $ 14,786 $ — $ 468,493 Agricultural production and other loans to farmers Risk rating Pass $ 105 $ 140 $ 80 $ 42 $ 179 $ — $ 652 $ — $ 1,198 Special mention — — — — — — — — — Substandard — — — — — — — — — Doubtful — — — — — — — — — Total $ 105 $ 140 $ 80 $ 42 $ 179 $ — $ 652 $ — $ 1,198 Commercial and Industrial Risk rating Pass $ 195,955 $ 213,433 $ 51,695 $ 16,730 $ 9,051 $ 19,116 $ 259,841 $ — $ 765,821 Special mention 241 — 6,691 273 81 45 7,409 — 14,740 Substandard 299 1,809 689 379 324 913 5,624 — 10,037 Doubtful (1) — 1,313 — — — — — — 1,313 Total $ 196,495 $ 216,555 $ 59,075 $ 17,382 $ 9,456 $ 20,074 $ 272,874 $ — $ 791,911 Obligations (other than securities and leases) of states and political subdivisions Risk rating Pass $ 20,840 $ 37,527 $ 13,868 $ 4,584 $ 13,518 $ 50,050 $ 4,958 $ — $ 145,345 Special mention — — — — — — — — — Substandard — — — — — — — — — Doubtful — — — — — — — — — Total $ 20,840 $ 37,527 $ 13,868 $ 4,584 $ 13,518 $ 50,050 $ 4,958 $ — $ 145,345 Other loans Risk rating Pass $ 14,248 $ 5,358 $ 2,278 $ 363 $ — $ — $ 2,463 $ — $ 24,710 Special mention — — — — — — — — — Substandard — — — — — — — — — Doubtful — — — — — — — — — Total $ 14,248 $ 5,358 $ 2,278 $ 363 $ — $ — $ 2,463 $ — $ 24,710 (1) Consists of one loan relationship that was originated in 2015 and modified in 2021. The modification met the requirements to disclose the loan relationship as a new loan during the current period. 93 Table of Contents Term Loans Amortized Cost Basis by Origination Year 2022 2021 2020 2019 2018 Prior Revolving Loans Amortized Cost Basis Revolving Loans Converted to Term Total Other construction loans and all land development and other land loans Risk rating Pass $ 272,118 $ 86,894 $ 56,782 $ 6,918 $ 8,644 $ 916 $ 11,028 $ — $ 443,300 Special mention 1,296 0 — — — — — — 1,296 Substandard — 2,023 — — — — 66 — 2,089 Doubtful — — — — — — — — — Total $ 273,414 $ 88,917 $ 56,782 $ 6,918 $ 8,644 $ 916 $ 11,094 $ — $ 446,685 Multifamily (5 or more) residential properties Risk rating Pass $ 114,454 $ 49,794 $ 46,784 $ 11,854 $ 6,764 $ 23,841 $ 2,629 $ — $ 256,120 Special mention — — — — — 510 — — 510 Substandard 643 — — — 333 90 — — 1,066 Doubtful — — — — — — — — — Total $ 115,097 $ 49,794 $ 46,784 $ 11,854 $ 7,097 $ 24,441 $ 2,629 $ — $ 257,696 Non-owner occupied, nonfarm nonresidential properties Risk rating Pass $ 339,151 $ 153,613 $ 51,709 $ 66,592 $ 45,211 $ 107,988 $ 8,186 $ — $ 772,450 Special mention — 488 — 273 498 1,068 464 — 2,791 Substandard 2,227 800 — 4,090 1,314 9,587 2,056 — 20,074 Doubtful — — — — — — — — — Total $ 341,378 $ 154,901 $ 51,709 $ 70,955 $ 47,023 $ 118,643 $ 10,706 $ — $ 795,315 94 Table of Contents The following tables detail the amortized cost of loans receivable, by year of origination (for term loans) and by risk grade within each portfolio segment as of December 31, 2021. The current period originations may include modifications, extensions and renewals. Term Loans Amortized Cost Basis by Origination Year 2021 2020 2019 2018 2017 Prior Revolving Loans Amortized Cost Basis Revolving Loans Converted to Term Total Farmland Risk rating Pass $ 8,203 $ 1,690 $ 3,276 $ 3,547 $ 564 $ 3,545 $ 461 $ — $ 21,286 Special mention — — — — 394 1,120 — — 1,514 Substandard 388 — — — 48 532 — — 968 Doubtful — — — — — — — — — Total $ 8,591 $ 1,690 $ 3,276 $ 3,547 $ 1,006 $ 5,197 $ 461 $ — $ 23,768 Owner-occupied, nonfarm nonresidential properties Risk rating Pass $ 135,095 $ 78,068 $ 78,621 $ 29,100 $ 40,677 $ 50,079 $ 7,728 $ — $ 419,368 Special mention 243 — 903 4,287 135 1,145 10 — 6,723 Substandard 687 416 2,190 868 250 4,152 18 — 8,581 Doubtful — — — — — — — — — Total $ 136,025 $ 78,484 $ 81,714 $ 34,255 $ 41,062 $ 55,376 $ 7,756 $ — $ 434,672 Agricultural production and other loans to farmers Risk rating Pass $ 211 $ 103 $ 76 $ 198 $ — $ — $ 791 $ — $ 1,379 Special mention — — — — — — — — — Substandard — — — — — — — — — Doubtful (1) — — — — — — — — — Total $ 211 $ 103 $ 76 $ 198 $ — $ — $ 791 $ — $ 1,379 Commercial and Industrial Risk rating Pass $ 313,983 $ 84,815 $ 31,375 $ 16,577 $ 12,389 $ 6,777 $ 221,094 $ — $ 687,010 Special mention — 363 793 381 82 844 5,483 — 7,946 Substandard 1,991 800 1,862 452 29 2,016 5,504 — 12,654 Doubtful 1,379 — — — — — — — 1,379 Total $ 317,353 $ 85,978 $ 34,030 $ 17,410 $ 12,500 $ 9,637 $ 232,081 $ — $ 708,989 Obligations (other than securities and leases) of states and political subdivisions Risk rating Pass $ 36,853 $ 16,688 $ 8,774 $ 16,957 $ 20,071 $ 36,764 $ 4,780 $ — $ 140,887 Special mention — — — — — — — — — Substandard — — — — — — — — — Doubtful — — — — — — — — — Total $ 36,853 $ 16,688 $ 8,774 $ 16,957 $ 20,071 $ 36,764 $ 4,780 $ — $ 140,887 Other loans Risk rating Pass $ 5,851 $ 5,305 $ 552 $ 3 $ — $ — $ 2,268 $ — $ 13,979 Special mention — — — — — — — — — Substandard — — — — — — — — — Doubtful — — — — — — — — — Total $ 5,851 $ 5,305 $ 552 $ 3 $ — $ — $ 2,268 $ — $ 13,979 (1) Consists of one loan relationship that was originated in 2015 and modified in 2021. The modification met the requirements to disclose the loan relationship as a new loan during the current period. 95 Table of Contents Term Loans Amortized Cost Basis by Origination Year 2021 2020 2019 2018 2017 Prior Revolving Loans Amortized Cost Basis Revolving Loans Converted to Term Total Other construction loans and all land development and other land loans Risk rating Pass $ 98,406 $ 168,372 $ 8,752 $ 11,141 $ 853 $ 898 $ 5,681 $ — $ 294,103 Special mention 1,500 — 650 — 2,071 — — — 4,221 Substandard — — — 29 439 — 77 — 545 Doubtful — — — — — — — — — Total $ 99,906 $ 168,372 $ 9,402 $ 11,170 $ 3,363 $ 898 $ 5,758 $ — $ 298,869 Multifamily (5 or more) residential properties Risk rating Pass $ 74,687 $ 55,663 $ 33,436 $ 7,937 $ 27,729 $ 12,882 $ 2,438 $ — $ 214,772 Special mention — — — — — 100 — — 100 Substandard — 6 682 379 204 — — — 1,271 Doubtful — — — — — — — — — Total $ 74,687 $ 55,669 $ 34,118 $ 8,316 $ 27,933 $ 12,982 $ 2,438 $ — $ 216,143 Non-owner occupied, nonfarm nonresidential properties Risk rating Pass $ 194,800 $ 125,039 $ 84,943 $ 52,233 $ 42,714 $ 123,021 $ 8,784 $ — $ 631,534 Special mention — — 428 1,004 189 5,556 2,451 — 9,628 Substandard 826 — 2,305 1,662 4,638 12,134 335 — 21,900 Doubtful — — — — — — — — — Total $ 195,626 $ 125,039 $ 87,676 $ 54,899 $ 47,541 $ 140,711 $ 11,570 $ — $ 663,062 The Corporation considers the performance of the loan portfolio and its impact on the allowance for credit losses. For 1-4 family construction, home equity lines of credit, residential mortgages secured by first liens, residential mortgages secured by junior liens, automobile, credit cards, other revolving credit plans and other consumer segments, the Corporation evaluates credit quality based on the performance status of the loan, which was previously presented, and by payment activity. Nonperforming loans include loans receivable on nonaccrual status and loans receivable past due over 89 days and still accruing interest. December 31, 2022 December 31, 2021 Performing Nonperforming Total Performing Nonperforming Total 1-4 Family Construction $ 51,171 $ — $ 51,171 $ 37,822 $ — $ 37,822 Home equity lines of credit 124,417 475 124,892 103,693 824 104,517 Residential Mortgages secured by first liens 938,154 4,377 942,531 823,182 3,547 826,729 Residential Mortgages secured by junior liens 74,547 91 74,638 56,542 147 56,689 Other revolving credit plans 36,346 26 36,372 26,523 13 26,536 Automobile 21,787 19 21,806 20,826 36 20,862 Other consumer 48,363 781 49,144 49,118 558 49,676 Total loans $ 1,294,785 $ 5,769 $ 1,300,554 $ 1,117,706 $ 5,125 $ 1,122,831 96 Table of Contents The following tables detail the amortized cost of loans receivable, by year of origination (for term loans) and by payment activity within each portfolio segment as of December 31, 2022. The current period originations may include modifications, extensions and renewals. Term Loans Amortized Cost Basis by Origination Year 2022 2021 2020 2019 2018 Prior Revolving Loans Amortized Cost Basis Revolving Loans Converted to Term Total 1-4 Family Construction Payment performance Performing $ 30,451 $ 16,360 $ 2,577 $ 752 $ 62 $ — $ 969 $ — $ 51,171 Nonperforming — — — — — — — — — Total $ 30,451 $ 16,360 $ 2,577 $ 752 $ 62 $ — $ 969 $ — $ 51,171 Home equity lines of credit Payment performance Performing $ 34,738 $ 13,654 $ 12,903 $ 8,587 $ 7,924 $ 38,127 $ 8,484 $ — $ 124,417 Nonperforming — — — 10 — 465 — — 475 Total $ 34,738 $ 13,654 $ 12,903 $ 8,597 $ 7,924 $ 38,592 $ 8,484 $ — $ 124,892 Residential mortgages secured by first lien Payment performance Performing $ 229,842 $ 222,522 $ 159,651 $ 91,238 $ 49,587 $ 181,939 $ 3,375 $ — $ 938,154 Nonperforming — 771 273 581 416 2,150 186 — 4,377 Total $ 229,842 $ 223,293 $ 159,924 $ 91,819 $ 50,003 $ 184,089 $ 3,561 $ — $ 942,531 Residential mortgages secured by junior liens Payment performance Performing $ 31,837 $ 17,163 $ 8,326 $ 4,956 $ 3,073 $ 8,395 $ 797 $ — $ 74,547 Nonperforming — — — — — 47 44 — 91 Total $ 31,837 $ 17,163 $ 8,326 $ 4,956 $ 3,073 $ 8,442 $ 841 $ — $ 74,638 Other revolving credit plans Payment performance Performing $ 10,778 $ 2,820 $ 7,911 $ 2,264 $ 2,265 $ 10,308 $ — $ — $ 36,346 Nonperforming — — — 4 14 8 — — 26 Total $ 10,778 $ 2,820 $ 7,911 $ 2,268 $ 2,279 $ 10,316 $ — $ — $ 36,372 Automobile Payment performance Performing $ 10,146 $ 4,637 $ 2,945 $ 2,349 $ 1,117 $ 593 $ — $ — $ 21,787 Nonperforming — — 10 7 2 — — — 19 Total $ 10,146 $ 4,637 $ 2,955 $ 2,356 $ 1,119 $ 593 $ — $ — $ 21,806 Other consumer Payment performance Performing $ 26,699 $ 12,120 $ 5,333 $ 2,176 $ 776 $ 1,259 $ — $ — $ 48,363 Nonperforming 403 220 85 22 6 45 — — 781 Total $ 27,102 $ 12,340 $ 5,418 $ 2,198 $ 782 $ 1,304 $ — $ — $ 49,144 97 Table of Contents The following tables detail the amortized cost of loans receivable, by year of origination (for term loans) and by payment activity within each portfolio segment as of December 31, 2021. The current period originations may include modifications, extensions and renewals. Term Loans Amortized Cost Basis by Origination Year 2021 2020 2019 2018 2017 Prior Revolving Loans Amortized Cost Basis Revolving Loans Converted to Term Total 1-4 Family Construction Payment performance Performing $ 27,539 $ 9,137 $ 857 $ 66 $ — $ — $ 223 $ — $ 37,822 Nonperforming — — — — — — — — — Total $ 27,539 $ 9,137 $ 857 $ 66 $ — $ — $ 223 $ — $ 37,822 Home equity lines of credit Payment performance Performing $ 14,383 $ 14,621 $ 9,564 $ 10,584 $ 6,863 $ 39,527 $ 8,151 $ — $ 103,693 Nonperforming — — 9 10 377 428 — — 824 Total $ 14,383 $ 14,621 $ 9,573 $ 10,594 $ 7,240 $ 39,955 $ 8,151 $ — $ 104,517 Residential mortgages secured by first lien Payment performance Performing $ 232,606 $ 178,380 $ 111,333 $ 62,850 $ 74,136 $ 160,402 $ 3,475 $ — $ 823,182 Nonperforming 79 259 227 151 258 2,379 194 — 3,547 Total $ 232,685 $ 178,639 $ 111,560 $ 63,001 $ 74,394 $ 162,781 $ 3,669 $ — $ 826,729 Residential mortgages secured by junior liens Payment performance Performing $ 20,617 $ 11,256 $ 7,239 $ 4,407 $ 3,508 $ 9,095 $ 420 $ — $ 56,542 Nonperforming — — — — 84 63 — — 147 Total $ 20,617 $ 11,256 $ 7,239 $ 4,407 $ 3,592 $ 9,158 $ 420 $ — $ 56,689 Other revolving credit plans Payment performance Performing $ 5,313 $ 3,596 $ 3,090 $ 2,592 $ 2,977 $ 8,955 $ — $ — $ 26,523 Nonperforming — — 4 4 — 5 — — 13 Total $ 5,313 $ 3,596 $ 3,094 $ 2,596 $ 2,977 $ 8,960 $ — $ — $ 26,536 Automobile Payment performance Performing $ 7,047 $ 5,448 $ 4,668 $ 2,457 $ 682 $ 524 $ — $ — $ 20,826 Nonperforming 11 13 12 — — — — — 36 Total $ 7,058 $ 5,461 $ 4,680 $ 2,457 $ 682 $ 524 $ — $ — $ 20,862 Other consumer Payment performance Performing $ 30,423 $ 11,017 $ 4,537 $ 1,451 $ 316 $ 1,374 $ — $ — $ 49,118 Nonperforming 204 170 96 25 3 60 — — 558 Total $ 30,627 $ 11,187 $ 4,633 $ 1,476 $ 319 $ 1,434 $ — $ — $ 49,676 December 31, 2022 December 31, 2021 Credit card Payment performance Performing $ 10,817 $ 9,912 Nonperforming 8 23 Total $ 10,825 $ 9,935 98 Table of Contents Purchased Credit Deteriorated Loans The Corporation has purchased loans for which there was, at acquisition, evidence of more than insignificant deterioration of credit quality since origination. The carrying amount of those loans is as follows: July 17, 2020 Purchase price of loans at acquisition $ 21,768 Allowance for credit losses at acquisition 980 Non-credit discount / (premium) at acquisition 1,063 Par value of acquired loans at acquisition $ 23,811 Holiday’s loan portfolio, included in other consumer loans above, is summarized as follows at December 31, 2022 and 2021: December 31, 2022 December 31, 2021 Gross consumer loans $ 31,821 $ 29,227 Less: unearned discounts ( 5,972 ) ( 5,716 ) Total consumer loans, net of unearned discounts $ 25,849 $ 23,511 5. Real Estate Owned Real estate owned is reported net of a valuation allowance and included in accrued interest receivable and other assets in the accompanying consolidated balance sheets. Activity for the years ended December 31, 2022, 2021, and 2020 were as follows: December 31, 2022 December 31, 2021 December 31, 2020 Balance, beginning of year $ 707 $ 862 $ 1,633 Loans transferred to real estate owned 785 1,470 241 Sales of real estate owned (at carrying value) ( 53 ) ( 1,625 ) ( 1,012 ) Balance, end of year $ 1,439 $ 707 $ 862 Expenses related to foreclosed real estate include: December 31, 2022 December 31, 2021 December 31, 2020 Net loss (gain) on sales $ ( 45 ) $ 32 $ 346 Operating expenses, net of rental income 104 85 240 Total $ 59 $ 117 $ 586 6. Fair Value Fair Value Measurement Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. The following three levels of inputs are used to measure fair value: Level 1: Quoted prices (unadjusted) for identical assets or liabilities in active markets that the entity has the ability to access as of the measurement date. Level 2: Significant other observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data. Level 3: Significant unobservable inputs that reflect a company’s own assumptions about the assumptions that market participants would use in pricing an asset or liability. 99 Table of Contents The Corporation used the following methods and significant assumptions to estimate fair value: Investment Securities : The fair values for investment securities are determined by quoted market prices, if available (Level 1). For securities where quoted prices are not available, fair values are calculated based on market prices of similar securities (Level 2), using matrix pricing. Matrix pricing is a mathematical technique commonly used to price debt securities that are not actively traded, values debt securities without relying exclusively on quoted prices for the specific securities but rather by relying on the securities’ relationship to other benchmark quoted securities (Level 2 inputs). For securities where quoted prices or market prices of similar securities are not available, fair values are calculated using discounted cash flows or other market indicators (Level 3). Loans Held for Sale : Loans held for sale are carried at the lower of cost or fair value, which is evaluated on a loan-level basis. The fair value of loans held for sale is determined using quoted prices for similar assets, adjusted for specific attributes of that loan or other observable market data, such as outstanding commitments from third party investors (Level 2). Derivatives : The fair values of derivatives are based on valuation models using observable market data as of the measurement date (Level 2). The Corporation's derivatives are traded in an over-the-counter market where quoted market prices are not always available. Therefore, the fair values of derivatives are determined using quantitative models that utilize multiple market inputs. The inputs will vary based on the type of derivative, but could include interest rates, prices and indices to generate continuous yield or pricing curves, prepayment rates, and volatility factors to value the position. The majority of market inputs are actively quoted and can be validated through external sources, including brokers, market transactions and third-party pricing services. Individually Evaluated Loans : The fair value of individually evaluated loans with specific allocations of the allowance for credit losses is generally based on recent real estate appraisals prepared by third-parties. These appraisals may utilize a single valuation approach or a combination of approaches including comparable sales and the income approach. Adjustments are routinely made in the appraisal process by the appraisers to adjust for differences between the comparable sales and income data available. Management also adjusts appraised values based on the length of time that has passed since the appraisal date and other factors. Such adjustments are usually significant and typically result in a Level 3 classification of the inputs for determining fair value. Non-real estate collateral may be valued using an appraisal, net book value per the borrower's financial statements, or aging reports, adjusted or discounted based on management's historical knowledge, changes in market conditions from the time of the valuation, and management's expertise and knowledge of the client and client's business, resulting in a Level 3 fair value classification. Individually evaluated loans are evaluated on a quarterly basis for additional impairment and adjusted in accordance with the allowance policy. Assets and liabilities measured at fair value on a recurring basis were as follows at December 31, 2022 and 2021: Fair Value Measurements at December 31, 2022 Using Description Total Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) Assets: Securities Available-For-Sale: U.S. Government sponsored entities $ 3,129 $ — $ 3,129 $ — States and political subdivisions 95,663 — 95,663 — Residential and multi-family mortgage 217,547 — 217,547 — Corporate notes and bonds 42,391 — 42,391 — Pooled SBA 12,679 — 12,679 — Total Securities Available-For-Sale $ 371,409 $ — $ 371,409 $ — Interest rate swaps $ 1,850 $ — $ 1,850 $ — Equity Securities: Corporate equity securities $ 6,973 $ 6,973 $ — $ — Mutual funds 1,406 1,406 — — Money market 479 479 — — Corporate notes and bonds 757 757 — — Total Equity Securities $ 9,615 $ 9,615 $ — $ — Liabilities Interest rate swaps $ ( 1,700 ) $ — $ ( 1,700 ) $ — 100 Table of Contents Fair Value Measurements at December 31, 2021 Using Description Total Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) Assets: Securities Available-For-Sale: U.S. Government sponsored entities $ 111,748 $ — $ 111,748 $ — States and political subdivisions 103,712 — 103,712 — Residential and multi-family mortgage 434,635 4,995 429,640 — Corporate notes and bonds 28,064 — 28,064 — Pooled SBA 19,032 — 19,032 — Total Securities Available-For-Sale $ 697,191 $ 4,995 $ 692,196 $ — Interest rate swaps $ 2,124 $ — $ 2,124 $ — Equity Securities: Corporate equity securities $ 6,715 $ 6,715 $ — $ — Mutual funds 2,566 2,566 — — Money market 506 506 — — Corporate notes and bonds 579 579 — — Total Equity Securities $ 10,366 $ 10,366 $ — $ — Liabilities Interest rate swaps $ ( 2,512 ) $ — $ ( 2,512 ) $ — The table below presents a reconciliation of the fair value of securities AFS measured on a recurring basis using significant unobservable inputs (Level 3) for the year ended December 31, 2021: States and Political Subdivisions Corporate Notes and Bonds Balance, January 1, 2021 $ 64 $ — Purchases — 8,250 Total gains or (losses): Included in other comprehensive income (loss) — — Settlements ( 64 ) — Transfers out of Level 3 — ( 8,250 ) Balance, December 31, 2021 $ — $ — The Corporation's corporate notes and bonds with a fair value of $ 8.3 million for the year ended December 31, 2021 were transferred out of Level 3 and into Level 2 because of available observable market data for these investments. The table below presents a reconciliation of the fair value of securities AFS measured on a recurring basis using significant unobservable inputs (Level 3) for the year ended December 31, 2020: States and Political Subdivisions Residential & Multi-Family Mortgage Balance, January 1, 2020 $ — $ 2,795 Purchases 422 — Total gains or (losses): Included in other comprehensive income (loss) — — Transfers out of Level 3 ( 358 ) $ ( 2,795 ) Balance, December 31, 2020 $ 64 $ — The Corporation's states and political subdivisions with a fair value of $ 358 thousand and residential and multi-family mortgage of $ 2.8 million for the year ended December 31, 2020 were transferred out of Level 3 and into Level 2 because of available observable market data for these investments. 101 Table of Contents Assets and liabilities measured at fair value on a non-recurring basis are as follows at December 31, 2022 and 2021: Fair Value Measurements at December 31, 2022 Using Description Total Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) Assets: Collateral-dependent loans: Farmland $ 829 $ — $ — $ 829 Owner-occupied, nonfarm nonresidential properties 1,071 — — 1,071 Commercial and industrial 1,631 — — 1,631 Other construction loans and all land development loans and other land loans 501 — — 501 Multifamily (5 or more) residential properties 613 — — 613 Non-owner occupied, nonfarm nonresidential 3,867 — — 3,867 Home equity lines of credit 335 — — 335 Residential mortgages secured by first liens 944 — — 944 Fair Value Measurements at December 31, 2021 Using Description Total Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) Assets: Collateral-dependent loans: Farmland $ 920 $ — $ — $ 920 Owner-occupied, nonfarm nonresidential properties 194 — — 194 Commercial and industrial 3,102 — — 3,102 Other construction loans and all land development loans and other land loans 248 — — 248 Multifamily (5 or more) residential properties 627 — — 627 Non-owner occupied, nonfarm nonresidential 2,889 — — 2,889 A loan is considered to be a collateral dependent loan when, based on current information and events, the Corporation expects repayment of the financial assets to be provided substantially through the operation or sale of the collateral and the Corporation has determined that the borrower is experiencing financial difficulty as of the measurement date. The allowance for credit losses is measured by estimating the fair value of the loan based on the present value of expected cash flows, the market price of the loan, or the underlying fair value of the loan’s collateral. For real estate loans, fair value of the loan’s collateral is determined by third-party appraisals, which are then adjusted for the estimated selling and closing costs related to liquidation of the collateral. For this asset class, the actual valuation methods (income, sales comparable, or cost) vary based on the status of the project or property. For example, land is generally based on the sales comparable method while construction is based on the income and/or sales comparable methods. The unobservable inputs may vary depending on the individual assets with no one of the three methods being the predominant approach. The Corporation reviews the third-party appraisal for appropriateness and may adjust the value downward to consider selling and closing costs. For non-real estate loans, fair value of the loan’s collateral may be determined using an appraisal, net book value per the borrower’s financial statements, or aging reports, adjusted or discounted based on management’s historical knowledge, changes in market conditions from the time of the valuation, and management’s expertise and knowledge of the client and client’s business. 102 Table of Contents The following table presents quantitative information about Level 3 fair value measurements for financial instruments measured at fair value on a non-recurring basis at December 31, 2022: Fair value Valuation Technique Unobservable Inputs Range (Weighted Average) Collateral-dependent loans receivable: Farmland $ 829 Valuation of third party appraisal on underlying collateral Loss severity rates 20 % ( 20 %) Owner-occupied, nonfarm nonresidential properties 1,071 Valuation of third party appraisal on underlying collateral Loss severity rates 25 %- 100 % ( 29 %) Commercial and industrial 1,631 Valuation of third party appraisal on underlying collateral Loss severity rates 3 %- 49 % ( 23 %) Other construction loans and all land development loans and other land loans 501 Valuation of third party appraisal on underlying collateral Loss severity rates 33 % ( 33 %) Multifamily (5 or more) residential properties 613 Valuation of third party appraisal on underlying collateral Loss severity rates 19 %- 25 % ( 23 %) Non-owner occupied, nonfarm nonresidential 3,867 Valuation of third party appraisal on underlying collateral Loss severity rates 15 %- 53 % ( 35 %) Home equity lines of credit 335 Valuation of third party appraisal on underlying collateral Loss severity rates 15 % ( 15 %) Residential mortgages secured by first liens 944 Valuation of third party appraisal on underlying collateral Loss severity rates 15 %- 27 % ( 21 %) The following table presents quantitative information about Level 3 fair value measurements for financial instruments measured at fair value on a non-recurring basis at December 31, 2021: Fair value Valuation Technique Unobservable Inputs Range (Weighted Average) Collateral-dependent loans receivable: Farmland $ 920 Valuation of third party appraisal on underlying collateral Loss severity rates 60 % ( 60 %) Owner-occupied, nonfarm nonresidential properties 194 Valuation of third party appraisal on underlying collateral Loss severity rates 0 %- 60 % ( 57 %) Commercial and industrial 3,102 Valuation of third party appraisal on underlying collateral Loss severity rates 0 %- 59 % ( 42 %) Other construction loans and all land development loans and other land loans 248 Valuation of third party appraisal on underlying collateral Loss severity rates 25 % ( 25 %) Multifamily (5 or more) residential properties 627 Valuation of third party appraisal on underlying collateral Loss severity rates 0 %- 57 % ( 26 %) Non-owner occupied, nonfarm nonresidential 2,889 Valuation of third party appraisal on underlying collateral Loss severity rates 25 %- 60 % ( 34 %) 103 Table of Contents Fair Value of Financial Instruments The following table presents the carrying amount and fair value of financial instruments at December 31, 2022: Carrying Amount Fair Value Measurement Using: Total Fair Value Level 1 Level 2 Level 3 ASSETS Cash and cash equivalents $ 106,285 $ 106,285 $ — $ — $ 106,285 Debt securities available-for-sale 371,409 — 371,409 — 371,409 Debt securities held-to-maturity 404,765 — 367,388 — 367,388 Equity securities 9,615 9,615 — — 9,615 Loans held for sale 231 — 231 — 231 Net loans receivable 4,231,742 — — 4,157,843 4,157,843 FHLB and other restricted stock holdings and investments 30,715 n/a n/a n/a n/a Interest rate swaps 1,850 — 1,850 — 1,850 Accrued interest receivable 20,194 — 2,867 17,327 20,194 LIABILITIES Deposits $ ( 4,622,437 ) $ ( 4,175,976 ) $ ( 445,788 ) $ — $ ( 4,621,764 ) Short-term borrowings ( 132,396 ) — ( 132,396 ) — ( 132,396 ) Subordinated debentures ( 104,584 ) — ( 117,378 ) — ( 117,378 ) Interest rate swaps ( 1,700 ) — ( 1,700 ) — ( 1,700 ) Accrued interest payable ( 1,839 ) — ( 1,839 ) — ( 1,839 ) The following table presents the carrying amount and fair value of financial instruments at December 31, 2021: Carrying Amount Fair Value Measurement Using: Total Fair Value Level 1 Level 2 Level 3 ASSETS Cash and cash equivalents $ 732,198 $ 732,198 $ — $ — $ 732,198 Securities available-for-sale 697,191 4,995 692,196 — 697,191 Equity securities 10,366 10,366 — — 10,366 Loans held for sale 849 — 858 — 858 Net loans 3,597,204 — — 3,613,452 3,613,452 FHLB and other equity interests 23,276 n/a n/a n/a n/a Interest rate swaps 2,124 — 2,124 — 2,124 Accrued interest receivable 15,516 16 2,171 13,329 15,516 LIABILITIES Deposits $ ( 4,715,619 ) $ ( 4,329,167 ) $ ( 391,850 ) $ — $ ( 4,721,017 ) Subordinated debentures ( 104,281 ) — ( 92,675 ) — ( 92,675 ) Interest rate swaps ( 2,512 ) — ( 2,512 ) — ( 2,512 ) Accrued interest payable ( 886 ) — ( 886 ) — ( 886 ) While estimates of fair value are based on management’s judgment of the most appropriate factors as of the balance sheet dates, there is no assurance that the estimated fair values would have been realized if the assets had been disposed of or the liabilities settled at that date, since market values may differ depending on various circumstances. The estimated fair values would also not apply to subsequent dates. The fair value of other equity interests is based on the net asset values provided by the underlying investment partnership. ASU 2015-7 removes the requirement to categorize within the fair value hierarchy all investments measured using the net asset value per share practical expedient and related disclosures. In addition, other assets and liabilities that are not financial instruments, such as premises and equipment, are not included in the disclosures. Also, non-financial assets such as, among other things, the estimated earnings power of core deposits, the earnings potential of trust accounts, the trained workforce, and customer goodwill, which typically are not recognized on the balance sheet, may have value but are not included in the fair value disclosures. 7. Secondary Market Mortgage Activities Total loans serviced for others were $ 264.5 million and $ 264.2 million for the years ended December 31, 2022 and 2021, respectively. 104 Table of Contents The following summarizes secondary market mortgage activities for the years ended December 31, 2022, 2021, and 2020: December 31, 2022 December 31, 2021 December 31, 2020 Loans originated for resale $ 34,181 $ 95,411 $ 87,528 Proceeds from sales of loans held for sale 29,151 97,179 82,619 Net gains on sales of loans held for sale 1,285 2,737 2,961 Loan servicing fees 781 720 726 The following summarizes activity for capitalized mortgage servicing rights for the years ended December 31, 2022, 2021, and 2020: December 31, 2022 December 31, 2021 December 31, 2020 Balance, beginning of year $ 1,664 $ 1,527 $ 1,573 Additions 232 514 540 Servicing rights acquired — — — Amortization ( 92 ) ( 377 ) ( 586 ) Balance, end of year $ 1,804 $ 1,664 $ 1,527 The fair value of mortgage servicing rights is based on market prices for comparable mortgage servicing contracts, when available, or alternatively based on a valuation model that calculates the present value of estimated future net servicing income. The fair value of mortgage servicing rights was not materially different than amortized cost at December 31, 2022 and 2021, respectively. No valuation allowance was deemed necessary at December 31, 2022, 2021, and 2020. The fair value of interest rate lock commitments and forward commitments to sell loans were not material at December 31, 2022 or 2021. 8. Premises and Equipment The following summarizes premises and equipment at December 31, 2022 and 2021: December 31, 2022 December 31, 2021 Land $ 8,534 $ 8,798 Premises and leasehold improvements 74,873 70,212 Furniture and equipment 42,513 39,851 Construction in process 7,582 2,589 133,502 121,450 Less: accumulated depreciation 64,967 59,791 Premises and equipment, net $ 68,535 $ 61,659 Depreciation on premises and equipment amounted to $ 5.3 million in 2022, $ 5.3 million in 2021 and $ 4.6 million in 2020. 9. Leases Operating lease assets represent the Corporation's right to use an underlying asset during the lease term and operating lease liabilities represent the Corporation's obligation to make lease payments arising from the lease. Operating lease assets and liabilities are recognized at lease commencement based on the present value of the remaining lease payments using a discount rate that represents the Corporation's incremental borrowing rate at the lease commencement date. Operating lease cost, which is comprised of amortization of the operating lease asset and the implicit interest accreted on the operating lease liability, is recognized on a straight-line basis over the lease term, and is recorded in net occupancy expense in the consolidated statements of income. The Corporation leases certain full-service branch offices, land and equipment. Leases with an initial term of twelve months or less are not recorded on the balance sheet. Most leases include one or more options to renew and the exercise of the lease renewal options are at the Corporation's sole discretion. The Corporation includes lease extension and termination options in the lease term if, after considering relevant economic factors, it is reasonably certain the Corporation will exercise the option. Certain lease agreements of the Corporation include rental payments adjusted periodically for changes in the consumer price index. 105 Table of Contents Leases Classification December 31, 2022 December 31, 2021 Assets: Operating lease assets Operating lease right-of-use assets $ 32,307 $ 19,928 Finance lease assets Premises and equipment, net (1) 286 358 Total leased assets $ 32,593 $ 20,286 Liabilities: Operating lease liabilities Operating lease liabilities $ 33,726 $ 21,159 Finance lease liabilities Accrued interest payable and other liabilities 383 469 Total leased liabilities $ 34,109 $ 21,628 (1) Finance lease assets are recorded net of accumulated amortization of $ 930 thousand and $ 858 thousand as of December 31, 2022 and 2021, respectively. The components of the Corporation's net lease expense for the year ended December 31, 2022, 2021 and 2020 were as follows: Lease Cost Classification December 31, 2022 December 31, 2021 December 31, 2020 Operating lease cost Net occupancy expense $ 2,264 $ 1,801 $ 1,785 Variable lease cost Net occupancy expense 59 55 87 Finance lease cost: Amortization of leased assets Net occupancy expense 72 72 72 Interest on lease liabilities Interest expense - borrowed funds 19 23 27 Sublease income (1) Net occupancy expense ( 79 ) ( 71 ) ( 86 ) Net lease cost $ 2,335 $ 1,880 $ 1,885 (1) Sublease income excludes rental income from owned properties. The following table sets forth future minimum rental payments under noncancelable leases with terms in excess of one year as of December 31, 2022: Maturity of Lease Liabilities as of December 31, 2022 Operating Leases (1) Finance Leases Total 2023 $ 2,367 $ 105 $ 2,472 2024 2,298 105 2,403 2025 2,293 105 2,398 2026 2,277 105 2,382 2027 2,220 — 2,220 After 2027 42,626 — 42,626 Total lease payments 54,081 420 54,501 Less: Interest 20,355 37 20,392 Present value of lease liabilities $ 33,726 $ 383 $ 34,109 (1) Operating lease payments include payments related to options to extend lease terms that are reasonably certain of being exercised and exclude $ 3.6 million of legally binding minimum lease payments for leases signed, but not yet commenced. Other information related to the Corporation's lease liabilities as of December 31, 2022 and 2021 was as follows: Lease Term and Discount Rate December 31, 2022 December 31, 2021 Weighted-average remaining lease term (years) Operating leases 23.9 18.8 Finance leases 4 5 Weighted-average discount rate Operating leases 3.83 % 3.42 % Finance leases 4.49 % 4.49 % 106 Table of Contents Other information related to the Corporation's lease liabilities as of December 31, 2022 and 2021 was as follows: Other Information December 31, 2022 December 31, 2021 Cash paid for amounts included in the measurement of lease liabilities Operating cash flows used by operating leases $ 1,183 $ 964 10. Goodwill and Intangible Assets Goodwill The change in the carrying amount of goodwill for the years ended December 31, 2022 and 2021 was as follows: December 31, 2022 December 31, 2021 Balance, beginning of year $ 43,749 $ 43,749 Acquired during the year — — Balance, end of year $ 43,749 $ 43,749 Impairment exists when the carrying value of goodwill exceeds its fair value. Goodwill is evaluated for impairment on an annual basis as of December 31 of each year, or whenever events or changes in circumstances indicate that the fair value of a reporting unit may be below its carrying value. At December 31, 2022, the Corporation elected to perform a qualitative assessment to determine if it was more likely than not that the fair value exceeded its carrying value, including goodwill. The qualitative assessment indicated that it was more likely than not that the fair value exceeded its carrying value, resulting in no impairment. Intangible Assets In connection with its acquisition of FC Banc Corp. in 2013, the Corporation recorded a core deposit intangible asset of $ 4.8 million. During the years ended December 31, 2022, 2021, and 2020, the Corporation recorded amortization expense of zero , zero and $ 94 thousand, respectively. The net carrying values at December 31, 2022 and 2021 was zero , respectively. No other intangible assets were required to be recorded in connection with the acquisition of FC Banc Corp. In connection with its acquisition of Lake National Bank in 2016, the Corporation recorded a core deposit intangible asset of $ 1.6 million. During the year ended December 31, 2022, 2021, and 2020, the Corporation recorded amortization expense of zero , zero , and $ 66 thousand, respectively. The net carrying values at December 31, 2022 and 2021 was zero , respectively. No other intangible assets were required to be recorded in connection with the acquisition of Lake National Bank. In connection with its acquisition of Bank of Akron in 2020, the Corporation recorded a core deposit intangible asset of $ 613 thousand. During the year ended December 31, 2022, 2021 and 2020, the Corporation recorded amortization expense of $ 96 thousand, $ 107 thousand, $ 46 thousand, respectively. The net carrying value at December 31, 2022 and 2021 was $ 364 thousand and $ 460 thousand, respectively. No other intangible assets were required to be recorded in connection with the acquisition of Bank of Akron. Estimated amortization expense of core deposit intangible assets for each of the next five years is as follows: 2023 $ 85 2024 73 2025 62 2026 51 2027 40 Thereafter 53 Total $ 364 107 Table of Contents 11. Deposits The following table reflects time certificates of deposit accounts included in total deposits and their remaining maturities at December 31, 2022: Time deposits maturing: 2023 $ 262,954 2024 122,314 2025 40,319 2026 9,632 2027 7,547 Thereafter 3,695 Total $ 446,461 Certificates of deposit of $250 thousand or more totaled $ 135.4 million and $ 116.6 million at December 31, 2022 and 2021, respectively. 12. Borrowings At December 31, 2022 and 2021, the Corporation had available one $ 10 million unsecured line of credit with an unaffiliated institution. Borrowings under the line of credit bear interest at a variable rate equal to SOFR plus 2.85 %. There were no borrowings on the line of credit at December 31, 2022 and 2021. FHLB Borrowings The Bank has the ability to borrow funds from the FHLB. The Bank maintains a $ 250.0 million line-of-credit (Open Repo Plus) with the FHLB which is a revolving term commitment available on an overnight basis. The term of this commitment may not exceed 364 days and it reprices daily at market rates. Under terms of a blanket collateral agreement with the FHLB, the line-of-credit and long term advances are secured by FHLB stock and the Bank pledges its single-family residential mortgage loan portfolio, certain commercial real estate loans, and certain agriculture real estate loans as security for any advances. Total loans pledged to the FHLB at December 31, 2022, and 2021, were $ 1.6 billion and $ 1.3 billion, respectively. The Bank could obtain advances of up to approximately $ 757.8 million from the FHLB at December 31, 2022 and $ 932.7 million at December 31, 2021. At December 31, 2022 and December 31, 2021, outstanding advances from the FHLB are as follows: 2022 2021 Open Repo borrowing at an interest rate of 4.45 % at December 31, 2022. The maximum amount of the Open Repo borrowing available is $ 250,000 . $ 132,396 $ — Total $ 132,396 $ — At December 31, 2022 and 2021, municipal deposit letters of credit issued by the FHLB on behalf of the Bank naming applicable municipalities as beneficiaries were $ 75.5 million and $ 10.4 million, respectively. The letters of credit were utilized in place of securities pledged to the municipalities for their deposits maintained at the Bank. Other Borrowings At December 31, 2022 and 2021, the Bank had no outstanding borrowings from unaffiliated institutions under overnight borrowing agreements. 108 Table of Contents Subordinated Debentures In 2007, the Corporation issued two $ 10.0 million floating rate trust preferred securities as part of a pooled offering of such securities. The interest rate on each offering is determined quarterly and floats based on the 3 month LIBOR plus 1.55 %. The all-in rate was 6.32 % at December 31, 2022 and 1.75 % at December 31, 2021. The Corporation issued subordinated debentures to the trusts in exchange for the proceeds of the offerings, which debentures represent the sole assets of the trusts. The subordinated debentures must be redeemed no later than 2037. The Corporation may redeem the debentures, in whole or in part, at face value at any time. The Corporation has the option to defer interest payments from time to time for a period not to exceed five consecutive years. Although the trusts are variable interest entities, the Corporation is not the primary beneficiary. As a result, because the trusts are not consolidated with the Corporation, the Corporation does not report the securities issued by the trusts as liabilities. Instead, the Corporation reports as liabilities the subordinated debentures issued by the Corporation and held by the trusts, since the liabilities are not eliminated in consolidation. The trust preferred securities were designated to qualify as Tier 1 capital under the Federal Reserve’s capital guidelines. Subordinated Notes In September 2016, the Corporation completed a private placement of $ 50.0 million in aggregate principal amount of fixed-to-floating rate subordinated notes (the "2026 Notes"). The notes will mature in October 2026, and will initially bear interest at a fixed rate of 5.75 % per annum, payable semi-annually in arrears, to, but excluding, October 15, 2021, and thereafter to, but excluding, the maturity date or earlier redemption, the interest rate shall reset quarterly to an interest rate per annum equal to the then current three-month LIBOR rate plus 4.55 %. These subordinated notes were designed to qualify as Tier 2 capital under the Federal Reserve's capital guidelines and were given an investment grade rating of BBB- by Kroll Bond Rating Agency. On October 15, 2021, the Corporation completed its redemption of the 2026 Notes, representing all of the outstanding 2026 Notes. The 2026 Notes were redeemed pursuant to their terms at a price equal to 100 % of the principal amount plus accrued and unpaid interest up to, but excluding, October 15, 2021. The total aggregate redemption price was $ 50.7 million, which amount included an accrued interest payment of $ 719 thousand. The Corporation financed the redemption with cash on hand, including the net proceeds from the issuance and sale of $ 85.0 million aggregate principal amount of the Corporation's 3.25 % Fixed-to-Floating Rate Subordinated Notes due 2031. In June 2021, the Corporation sold $ 85.0 million aggregate principal amount of its fixed-to-floating rate subordinated notes to eligible purchasers in a private offering in reliance on the exemption from the registration requirements of Section 4(a)(2) of the Securities Act and the provisions of Rule 506 of Regulation D thereunder. The notes will mature in June 2031, and initially bear interest at a fixed rate of 3.25 % per annum, payable semi-annually in arrears, to, but excluding, June 15, 2026, and thereafter to, but excluding, the maturity date or earlier redemption, the interest rate will reset quarterly to an interest rate per annum equal to the then current three-month average Secured Overnight Financing Rate ("SOFR") plus 2.58 %. The net proceeds from the sale were approximately $ 83.5 million, after deducting offering expenses. These subordinated notes were designed to qualify as Tier 2 capital under the Federal Reserve’s capital guidelines and were given an investment grade rating of BBB- by Kroll Bond Rating Agency. The unamortized debt issuance costs were $ 1.0 million and $ 1.3 million as of December 31, 2022 and December 31, 2021, respectively. 13. Employee Benefit Plans The Corporation sponsors a contributory defined contribution Section 401(k) plan. The plan permits eligible employees to make pre-tax and Roth contributions up to 70 % of salary. Employees 21 years of age or over with a minimum of one-year with 1,000 hours of service are eligible for matching contributions by the Corporation at 100 % for every 1 % contributed up to 3 % then 50 % for every 1 % contributed up to the next 2 % in total of the employee’s compensation. The Corporation’s matching contribution and related expenses were $ 1.6 million, $ 1.2 million and $ 1.1 million for the years ended December 31, 2022, 2021, and 2020, respectively. A profit sharing discretionary non-contributory pension plan component is in place for employees 21 years of age or over with a minimum of one-year with 1,000 hours of service and allows employer contributions in an amount equal to a percentage of eligible compensation plus 5.7 % of the compensation in excess of $ 147 thousand, subject to a $ 305 thousand salary limit. The Corporation recognized profit sharing expense of $ 2.9 million, $ 2.0 million and $ 1.9 million for the year ended December 31, 2022, 2021, and 2019 respectively. 109 Table of Contents The Corporation has adopted a non-qualified supplemental executive retirement plan ("SERP") for certain executives to compensate those executive participants in the Corporation’s retirement plan whose benefits are limited by compensation limitations under current tax law. The SERP is considered an unfunded plan for tax and ERISA purposes and all obligations arising under the SERP are payable from the general assets of the Corporation. At December 31, 2022 and 2021, obligations of $ 9.7 million and $ 8.8 million, respectively, were included in other liabilities for this plan. Expenses related to this plan were $ 1.3 million for the year ended December 31, 2022, $ 2.1 million for the year ended December 31, 2021 and $ 992 thousand for the year ended December 31, 2020. The Corporation has established a Survivor Benefit Plan for the benefit of outside directors. The purpose of the plan is to provide life insurance benefits to beneficiaries of the Corporation’s directors who at the time of their death are participants in the plan. The plan is considered an unfunded plan for tax and ERISA purposes and all obligations arising under the plan are payable from the general assets of the Corporation. At December 31, 2022 and 2021, obligations of $ 1.6 million and $ 1.5 million, respectively, were included in other liabilities for this plan. Expenses (benefits) related to this plan were $ 81 thousand for the year ended December 31, 2022, $ 196 thousand for the year ended December 31, 2021 and $ 253 thousand for the year ended December 31, 2020. On December 31, 2021, the Corporation adopted a Defined Contribution Plan for several employees (the "Plan"), pursuant to which the Corporation will make certain annual contributions to the Plan on the employee's behalf, which will be paid to the employee following their termination of employment from the Corporation or, if earlier, upon the employee becoming disabled. The Plan became effective as of January 2, 2022. The Corporation has an unfunded post-retirement benefits plan which provides certain health care benefits for retired employees who have reached the age of 60 and retired with 30 years of service. The plan was amended in 2013 to include only employees hired prior to January 1, 2000. Benefits are provided for these retired employees and their qualifying dependents from the age of 60 through the age of 65 . The following table sets forth the change in the benefit obligation of the plan as of and for the years ended December 31, 2022 and 2021: December 31, 2022 December 31, 2021 Benefit obligation at beginning of year $ 1,487 $ 1,829 Interest cost 30 28 Service cost 42 52 Actual claims ( 50 ) ( 31 ) Actuarial gain ( 303 ) ( 391 ) Benefit obligation at end of year $ 1,206 $ 1,487 Amounts recognized in accumulated other comprehensive income at December 31, 2022 and 2021 consisted of: December 31, 2022 December 31, 2021 Net actuarial gain $ 972 $ 782 Tax effect ( 204 ) ( 165 ) Total $ 768 $ 617 The accumulated benefit obligation was $ 1.2 million and $ 1.5 million at December 31, 2022 and 2021, respectively. 110 Table of Contents The following table sets forth the components of net periodic benefit cost and other amounts recognized in other comprehensive income: December 31, 2022 December 31, 2021 December 31, 2020 Service cost $ 42 $ 52 $ 61 Interest cost 30 28 51 Net amortization of transition obligation and actuarial loss ( 113 ) ( 43 ) — Net periodic benefit cost ( 41 ) 37 112 Net gain ( 303 ) ( 391 ) ( 277 ) Amortization 113 43 — Total recognized in other comprehensive income ( 190 ) ( 348 ) ( 277 ) Total recognized in net periodic benefit cost and other comprehensive income $ ( 231 ) $ ( 311 ) $ ( 165 ) The estimated net gain that will be amortized from accumulated other comprehensive income into net periodic benefit cost over the next fiscal year is $( 174 ) thousand. The weighted average discount rate used to calculate net periodic benefit cost was 2.10 % for year ended December 31, 2022, 1.55 % for year ended December 31, 2021, and 2.59 % for year ended December 31, 2020. The weighted average rate used to calculate accrued benefit obligations was 4.72 % for year ended December 31, 2022, 2.10 % for year ended December 31, 2021, and 1.55 % for year ended December 31, 2020. The health care cost trend rate used to measure the expected costs of benefits is 5.0 % for 2023 and thereafter. 14. Deferred Compensation Plans Deferred compensation plans cover all directors and certain officers. Under the plans, the Corporation pays each participant, or their beneficiary, the value of the participant’s account over a maximum period of 10 years, beginning with the individual’s termination of service. A liability is accrued for the obligation under these plans. A summary of changes in the deferred compensation plan liability follows: December 31, 2022 December 31, 2021 December 31, 2020 Balance, beginning of year $ 3,675 $ 3,085 $ 3,234 Deferrals, dividends, and changes in fair value ( 2 ) 1,084 ( 70 ) Deferred compensation payments ( 23 ) ( 494 ) ( 79 ) Balance, end of year $ 3,650 $ 3,675 $ 3,085 15. Income Taxes The following is a summary of income tax expense for the years ended December 31, 2022, 2021, and 2020: December 31, 2022 December 31, 2021 December 31, 2020 Current – federal $ 15,494 $ 13,494 $ 8,681 Current – state 1,346 1,268 729 Deferred – federal ( 1,618 ) ( 1,025 ) ( 1,672 ) Deferred – state ( 196 ) ( 666 ) ( 391 ) Income tax expense $ 15,026 $ 13,071 $ 7,347 111 Table of Contents The reconciliation of income tax attributable to pre-tax income at the federal statutory tax rates to income tax expense is as follows: December 31, 2022 % December 31, 2021 % December 31, 2020 % Tax at statutory rate $ 16,425 21.0 % $ 14,863 21.0 % $ 8,419 21.0 % Tax exempt income, net ( 1,036 ) ( 1.3 ) ( 1,016 ) ( 1.4 ) ( 1,119 ) ( 2.8 ) Bank owned life insurance ( 721 ) ( 0.9 ) ( 554 ) ( 0.8 ) ( 367 ) ( 0.9 ) Tax credits, net of amortization ( 193 ) ( 0.3 ) ( 215 ) ( 0.3 ) ( 104 ) ( 0.3 ) Effect of state tax 908 1.2 476 0.7 576 1.4 Other ( 357 ) ( 0.5 ) ( 483 ) ( 0.7 ) ( 58 ) ( 0.1 ) Income tax expense $ 15,026 19.2 % $ 13,071 18.5 % $ 7,347 18.3 % The following table sets forth deferred taxes as of December 31, 2022 and 2021: December 31, 2022 December 31, 2021 Deferred tax assets: Allowance for credit losses $ 9,154 $ 7,606 Fair value adjustments – business combination 917 1,240 Deferred compensation 3,448 3,344 Net operating loss carryover 344 327 Post-retirement benefits 647 696 Unrealized loss on interest rate swap — 81 Nonaccrual loan interest 348 509 Accrued expenses 2,300 1,718 Deferred fees and costs 997 1,259 Unrealized loss on securities available-for-sale 12,914 188 Unrealized loss on securities held-to-maturity 1,265 — Operating lease liability 7,645 4,845 Other 671 383 40,650 22,196 Deferred tax liabilities: Premises and equipment 3,409 3,093 Unrealized gain on equity securities 119 292 Intangibles – section 197 2,492 2,494 Mortgage servicing rights 399 366 Unrealized gain on interest rate swap 32 — Operating lease asset 7,397 4,649 Other 68 220 13,916 11,114 Net deferred tax asset $ 26,734 $ 11,082 At December 31, 2022 and 2021, the Corporation had no unrecognized tax benefits. The Corporation does not expect the total amount of unrecognized tax benefits to significantly increase in the next twelve months. At December 31, 2022, the Corporation had state net operating loss carryforwards of approximately $ 15.5 million related to the acquisition of Bank of Akron, which expire at various dates from 2034 to 2039. The Corporation's ability to utilize carryforwards is limited to $ 363 thousand per year. Due to this limitation, management determined it is more likely than not that approximately $ 9.5 million of net operating loss carryforwards will expire unutilized. The Corporation recognizes interest and/or penalties related to income tax matters as part of income tax expense. At December 31, 2022, 2021 and 2020, there were no amounts accrued for interest and/or penalties and no amounts recorded as expense for the years ending December 31, 2022, 2021, and 2020. The Corporation and its subsidiaries are subject to U.S. federal income tax, as well as filing various state returns. The Corporation is no longer subject to U.S. federal income tax examinations by the taxing authorities for years prior to 2019. Tax years 2019 through 2022 are open to examination. 112 Table of Contents 16. Related Party Transactions Loans to principal officers, directors, and their affiliates during 2022 were as follows: Beginning balance $ 45,757 New loans and advances 6,224 Effect of changes in composition of related parties ( 494 ) Repayments ( 6,489 ) Ending balance $ 44,998 Deposits from principal officers, directors, and their affiliates were $ 13.7 million and $ 23.5 million at December 31, 2022 and 2021, respectively. 17. Stock-Based Compensation The Corporation has a stock incentive plan, which is administered by a committee of the Board of Directors and which permits the Corporation to provide various types of stock-based compensation to its key employees, directors, and/or consultants, including time-based and performance-based shares of restricted stock. The Corporation previously maintained the CNB Financial Corporation 2009 Stock Incentive Plan, which terminated in accordance with its terms on February 10, 2019, and currently maintains the CNB Financial Corporation 2019 Omnibus Incentive Plan (the "2019 Stock Incentive Plan"), which was approved by the Corporation’s shareholders and became effective on April 16, 2019. The 2019 Stock Incentive Plan provides for up to 507,671 shares of common stock to be awarded in the form of nonqualified options or restricted stock. For key employees, the vesting of time-based restricted stock is one-third, one-fourth, or one-fifth of the granted restricted shares per year, beginning one year after the grant date, with 100 % vesting on the third, fourth or fifth anniversary of the grant date, respectively. Prior to 2018, for non-employee directors, the vesting schedule was one-third of the granted restricted shares per year, beginning one year after the grant date, with 100 % vested on the third anniversary of the grant date. Beginning in 2018, stock compensation received by non-employee directors vests immediately. All stock-based compensation grants during the years ending December 31, 2022 , 2021 and 2020 and outstanding at December 31, 2022 , 2021 and 2020 were time-based and performance-based restricted stock. During the years ended December 31, 2022, 2021, and 2020, the Executive Compensation and Personnel Committee of the Corporation's Board of Directors granted a total of 57,823 , 55,218 and 36,968 shares, respectively, of time-based restricted common stock to certain key employees and all independent directors of the Corporation. Compensation expense for the restricted stock awards is recognized over the requisite service period based on the fair value of the shares at the date of grant on a straight-line basis. Non-vested restricted stock awards are recorded as a reduction of additional paid-in-capital in shareholders’ equity until earned. Compensation expense resulting from time-based, performance-based and director restricted stock awards was $ 1.2 million, $ 1.4 million and $ 1.4 million for the years ended December 31, 2022, 2021, and 2020, respectively. The total income tax benefit related to the recognized compensation cost of vested restricted stock awards was $ 262 thousand, $ 296 thousand and $ 296 thousand for the years ended December 31, 2022 , 2021 and 2020, respectively. A summary of changes in time-based unvested restricted stock awards follows: Shares Weighted-average Grant Date Fair Value Non-vested at January 1, 2022 69,643 $ 24.18 Granted 46,033 26.64 Forfeited ( 1,440 ) 25.04 Vested ( 44,490 ) 25.05 Non-vested at December 31, 2022 69,746 $ 25.21 113 Table of Contents The above table excludes 11,790 shares in restricted stock awards that were granted to the Corporation’s Board of Directors and certain employees at a weighted average fair value of $ 26.71 and immediately vested. As of December 31, 2022 and 2021, there was $ 1.2 million and $ 1.1 million, respectively, of total unrecognized compensation cost related to non-vested shares granted under the restricted stock award plan. The fair value of shares vesting during the year end December 31, 2022, 2021, and 2020 was $ 1.4 million, $ 835 thousand and $ 1.1 million, respectively. In addition to the time-based restricted stock disclosed above, the Corporation’s Board of Directors grants performance-based restricted stock awards ("PBRSAs") to key employees. The number of PBRSAs will depend on certain performance conditions earned over a three year period and are also subject to service-based vesting. In 2022, awards with a maximum of 13,761 shares in aggregate were granted to key employees. In 2021, awards with a maximum of 18,210 shares in aggregate were granted to key employees. In 2020, awards with a maximum of 18,100 shares in aggregate were granted to key employees. Total compensation expense related to the PBRSAs and included in the above compensation expense total was $ 91 thousand, $ 378 thousand and $ 384 thousand for 2022, 2021 and 2020. Estimated remaining unearned compensation related to PBRSAs at December 31, 2022 was $ 12 thousand. In 2021, the 2019 PBRSAs were fully earned and in 2022, 11,895 shares were fully distributed. The fair value of the shares distributed in 2022 was $ 318 thousand. In 2020, the 2018 PBRSAs were fully earned and in 2021, 10,587 shares were fully distributed. The fair value of the 10,587 shares distributed in 2021 was $ 223 thousand. The number of authorized stock-based awards still available for grant as of December 31, 2022 was 320,372 . 18. Regulatory Capital Matters Banks and financial holding companies are subject to regulatory capital requirements administered by federal banking agencies. Capital adequacy guidelines and, for the Bank, prompt corrective action ("PCA") regulations involve quantitative measures of assets, liabilities, and certain off-balance sheet items calculated under regulatory accounting practices. Capital amounts and classifications are also subject to qualitative judgments by regulators. Failure to meet capital requirements can result in regulatory enforcement actions. The net unrealized gain or loss on AFS securities is excluded from computing regulatory capital. Management believes as of December 31, 2022 the Corporation and the Bank meet all capital adequacy requirements to which they are subject. The PCA regulations provide five classifications: well capitalized, adequately capitalized, undercapitalized, significantly undercapitalized, and critically undercapitalized, although these terms alone do not represent overall financial condition. If adequately capitalized, regulatory approval is required to accept brokered deposits. If undercapitalized, capital distributions are limited, as is asset growth and expansion; brokered deposits may not be accepted, renewed or rolled over; and capital restoration plans are required. As of December 31, 2022 and 2021, the most recent regulatory notifications categorized the Bank as well capitalized under the PCA. There are no events or conditions since this notification that management believes have changed the Bank’s capital category. 114 Table of Contents Actual and required capital amounts and ratios are presented below as of December 31, 2022 and 2021. The capital adequacy ratio includes the capital conservation buffer. Actual For Capital Adequacy Purposes (1) To Be Well Capitalized Under Prompt Corrective Action Provisions Amount Ratio Amount Ratio Amount Ratio December 31, 2022 Total Capital to Risk Weighted Assets Consolidated $ 688,164 16.08 % $ 449,370 10.50 % N/A N/A Bank 525,048 12.32 447,436 10.50 $ 426,130 10.00 % Tier 1 (Core) Capital to Risk Weighted Assets Consolidated 566,454 13.24 363,776 8.50 N/A N/A Bank 489,374 11.48 362,210 8.50 340,904 8.00 Common equity Tier 1 to Risk Weighted Assets Consolidated 488,669 11.42 299,580 7.00 N/A N/A Bank 481,995 11.31 298,291 7.00 276,984 6.50 Tier 1 (Core) Capital to Average Assets Consolidated 566,454 10.74 210,988 4.00 N/A N/A Bank 489,374 9.22 212,283 4.00 265,354 5.00 December 31, 2021 Total Capital to Risk Weighted Assets Consolidated $ 541,651 14.92 % $ 381,093 10.50 % N/A N/A Bank 475,231 13.16 379,180 10.50 $ 361,123 10.00 % Tier 1 (Core) Capital to Risk Weighted Assets Consolidated 427,988 11.79 308,504 8.50 N/A N/A Bank 447,055 12.38 306,955 8.50 288,899 8.00 Common equity Tier 1 to Risk Weighted Assets Consolidated 350,203 9.65 254,062 7.00 N/A N/A Bank 439,676 12.18 252,786 7.00 234,730 6.50 Tier 1 (Core) Capital to Average Assets Consolidated 427,988 8.22 208,208 4.00 N/A N/A Bank 447,055 8.63 207,109 4.00 258,887 5.00 (1) The minimum amounts and ratios as of December 31, 2022 and 2021 include the full phase in of the capital conservation buffer of 2.5 percent required by the Basel III framework. Certain restrictions exist regarding the ability of the Bank to transfer funds to the Corporation in the form of cash dividends, loans or advances. During 2022, $ 248.2 million of accumulated net earnings of the Bank included in consolidated shareholders’ equity, plus any 2023 net profits retained to the date of the dividend declared, is available for distribution to the Corporation as dividends without prior regulatory approval, subject to regulatory capital requirements described above. 19. Derivative Instruments On September 7, 2018, the Corporation executed an interest rate swap agreement with a 5-year term and an effective date of September 15, 2018 in order to hedge cash flows associated with $ 10.0 million of a subordinated note that was issued by the Corporation during 2007 and elected cash flow hedge accounting for the agreement. The Corporation’s objective in using this derivative is to add stability to interest expense and to manage its exposure to interest rate risk. The interest rate swap involves the receipt of variable-rate amounts in exchange for fixed-rate payments from September 15, 2018 to September 15, 2023 without the exchange of the underlying notional amount. At December 31, 2022, the variable rate on the subordinated debt was 6.32 % (LIBOR plus 155 basis points) and the Corporation was paying 4.53 % ( 2.98 % fixed rate plus 155 basis points). As of December 31, 2022 and 2021, no derivatives were designated as fair value hedges or hedges of net investments in foreign operations. Additionally, the Corporation does not use derivatives for trading or speculative purposes and currently does not have any derivatives that are not designated as hedges. 115 Table of Contents The following tables provide information about the amounts and locations of activity related to the interest rate swaps designated as cash flow hedges within the Corporation’s consolidated balance sheet and statement of income as of December 31, 2022 and 2021 and for the years ended December 31, 2022, 2021, and 2020: Liability Derivative Balance Sheet Fair value Location December 31, 2022 December 31, 2021 Interest rate contract Accrued interest receivable (payable) and other assets (liabilities) $ 150 $( 388 ) For the Year Ended December 31, 2022 (a) (b) (c) (d) (e) Interest rate contract $ 425 Interest expense – subordinated debentures $( 127 ) Other income $ — For the Year Ended December 31, 2021 Interest rate contract 301 Interest expense – subordinated debentures ( 276 ) Other income — For the Year Ended December 31, 2020 Interest rate contract ( 224 ) Interest expense – subordinated debentures ( 224 ) Other income — (a) Amount of Gain or (Loss) Recognized in Other Comprehensive Loss on Derivative (Effective Portion), net of tax (b) Location of Gain or (Loss) Reclassified from Accumulated Other Comprehensive Loss into Income (Effective Portion) (c) Amount of Loss Reclassified from Accumulated Other Comprehensive Loss into Income (Effective Portion) (d) Location of Gain or (Loss) Recognized in Income on Derivative (Ineffective Portion and Amount Excluded from Effectiveness Testing) (e) Amount of Gain or (Loss) Recognized in Income on Derivative (Ineffective Portion and Amount Excluded from Effectiveness Testing) Amounts reported in accumulated other comprehensive loss related to the interest rate swap will be reclassified to interest expense as interest payments are made on the subordinated debentures. Such amounts reclassified from accumulated other comprehensive loss to interest expense in the next twelve months are expected to be a $ 179 thousand benefit. As of December 31, 2022 and 2021, a cash collateral balance of $ 200 thousand and $ 1.1 million, respectively, was maintained with the counterparty to the interest rate swaps. These balances are included in interest bearing deposits with other banks on the consolidated balance sheets. The Corporation entered into certain interest rate swap contracts that are not designated as hedging instruments. These derivative contracts relate to transactions in which the Corporation enters into an interest rate swap with a customer while at the same time entering into an offsetting interest rate swap with another financial institution. In connection with each swap transaction, the Corporation agrees to pay interest to the customer on a notional amount at a variable interest rate and receive interest from the customer on a similar notional amount at a fixed interest rate. Concurrently, the Corporation agrees to pay another financial institution the same fixed interest rate on the same notional amount and receive the same variable interest rate on the same notional amount. The transaction allows the Corporation’s customers to effectively convert a variable rate loan to a fixed rate. Because the Corporation acts as an intermediary for its customer, changes in the fair value of the underlying derivative contracts offset each other and do not impact the Corporation’s results of operations. The Corporation pledged cash collateral to another financial institution with a balance $ 173 thousand as of December 31, 2022 and $ 3.4 million as of December 31, 2021. This balance is included in interest bearing deposits with other banks on the consolidated balance sheets. The Corporation may require its customers to post cash or securities as collateral on its program of back-to-back swaps depending upon the specific facts and circumstances surrounding each loan and individual swap. In addition, certain language is included in the International Swaps and Derivatives Association agreement and loan documents where, in default situations, the Corporation is permitted to access collateral supporting the loan relationship to recover any losses suffered on the derivative asset or liability. The Corporation may be required to post additional collateral to swap counterparties in the future in proportion to potential increases in unrealized loss positions. 116 Table of Contents The following table provides information about the amounts and locations of activity related to the back-to-back interest rate swaps within the Corporation’s consolidated balance sheet as of December 31, 2022 and 2021: Current Notional Amount Average Maturity (in years) Weighted Average Fixed Rate Weighted Average Variable Rate Fair Value December 31, 2022 3 rd Party interest rate swaps $ 31,417 4.9 4.12 % 1 month LIBOR + 1.68 % $ 1,700 (a) Customer interest rate swaps ( 31,417 ) 4.9 4.12 % 1 month LIBOR + 1.68 % ( 1,700 ) (b) December 31, 2021 3 rd Party interest rate swaps $ 32,768 5.8 4.12 % 1 month LIBOR + 2.27 % $ 2,124 (a) Customer interest rate swaps ( 32,768 ) 5.8 4.12 % 1 month LIBOR + 2.27 % ( 2,124 ) (b) (a) Reported in accrued interest receivable and other assets within the consolidated balance sheets (b) Reported in accrued interest payable and other liabilities within the consolidated balance sheets 20. Off-Balance Sheet Commitments and Contingencies Financial Instruments with Off-Balance Sheet Risk Loan commitments are made to accommodate the financial needs of the Corporation’s customers commitments that result in market risk. Standby letters of credit commit the Corporation to make payments on behalf of customers when certain specified future events occur. They are primarily issued to facilitate customers’ trade transactions. Both arrangements have credit risk, essentially the same as that involved in extending loans to customers, and are subject to the Corporation’s normal credit policies. Collateral is obtained based on a credit assessment of the customer. The Corporation's maximum obligation to extend credit for loan commitments (unfunded loans and unused lines of credit) and standby letters of credit outstanding as of December 31, 2022 and 2021 were as follows: December 31, 2022 December 31, 2021 Fixed Rate Variable Rate Fixed Rate Variable Rate Commitments to make loans $ 126,594 $ 441,008 $ 94,924 $ 323,013 Unused lines of credit 7,444 725,277 13,265 663,903 Standby letters of credit 16,124 1,603 15,063 1,623 Commitments to make loans are generally made for periods of 60 days or less. Other Off-Balance Sheet Commitments The Corporation makes investments in limited partnerships, including certain small business investment corporations and low income housing partnerships. Capital contributions for investments in small business companies ("SBICs") and other limited partnerships, reported in FHLB and other restricted stock holdings and investments on the consolidated balance sheet, as of December 31, 2022 and 2021 were $ 17.0 million and $ 14.5 million, respectively. Unfunded capital commitments in investments in SBICs and other limited partnerships totaled $ 5.5 million and $ 8.0 million as of December 31, 2022 and 2021, respectively. These investments are accounted for either under the equity method of accounting. Qualified Affordable Housing Project Investments The carrying value of investments in the low income housing partnerships, reported in FHLB and other restricted stock holdings and investments on the consolidated balance sheet, as of December 31, 2022 and 2021 were $ 4.5 million and $ 5.3 million, respectively. The related amortization for the twelve months ended December 31, 2022, 2021 and 2020 were $ 803 thousand, $ 691 thousand and $ 634 thousand, respectively. Unfunded commitments, reported in accrued interest payable and other liabilities on the consolidated balance sheet, as of December 31, 2022 and 2021 were $ 1.0 million and $ 2.1 million, respectively. 117 Table of Contents Allowance for Credit Losses on Unfunded Loan Commitments The Corporation maintains an allowance for credit losses on unfunded commercial lending commitments and letters of credit to provide for the risk of loss inherent in these arrangements. The allowance is computed using a methodology similar to that used to determine the allowance for credit losses for loans receivable, modified to take into account the probability of a draw-down on the commitment. The provision for credit losses on unfunded loan commitments is included in the provision for credit losses on the Corporation's consolidated statements of income. The allowance for unfunded commitments is included in other liabilities in the consolidated balance sheets. Note 4, "Loans Receivable and Allowance for Credit Losses," in the consolidated financial statements provides more detail concerning the provision for credit losses related to the loan portfolio of the Corporation. The following table presents activity in the allowance for credit losses on unfunded loan commitments for the years ended December 31, 2022 and 2021, respectively: Year ended December 31, 2022 2021 2020 Beginning balance $ — $ — $ — Provision for credit losses on unfunded loan commitments (1) 603 — — Ending balance $ 603 $ — $ — (1) Excludes provision for credit losses related to the loan portfolio. Litigation The Corporation is subject to claims and lawsuits that arise primarily in the ordinary course of business. It is the opinion of management the disposition or ultimate resolution of such claims and lawsuits will not have a material adverse effect on the consolidated financial position, results of operations and cash flows of the Corporation. 21. Parent Company Only Financial Information CONDENSED BALANCE SHEETS December 31, 2022 2021 Assets Cash $ 142,832 $ 47,035 Equity securities 2,750 2,850 Investment in bank subsidiary 466,268 474,902 Investment in non-bank subsidiaries 21,566 20,327 Deferred assets and current receivables 1,782 1,798 Other assets 931 1,044 Total assets $ 636,129 $ 547,956 Liabilities Subordinated debentures $ 104,584 $ 104,281 Other liabilities 783 828 Total liabilities 105,367 105,109 Stockholders' equity 530,762 442,847 Total liabilities and stockholders' equity $ 636,129 $ 547,956 118 Table of Contents CONDENSED STATEMENTS OF INCOME Year Ended December 31, Income: 2022 2021 2020 Dividends from: Bank subsidiary $ 21,225 $ 22,165 $ 16,702 Non-bank subsidiaries 1,431 1,700 10,350 Other 198 210 216 Total income 22,854 24,075 27,268 Expenses ( 6,112 ) ( 6,657 ) ( 6,838 ) Income before income taxes and equity in undistributed net income of subsidiaries: 16,742 17,418 20,430 Change in net unrealized holdings gains (losses) on equity securities not held for trading ( 132 ) 121 ( 31 ) Income tax benefit 1,422 1,381 1,306 Equity in undistributed net income of bank subsidiary 43,846 37,178 18,197 Equity in undistributed (distributions in excess) of net income of non-bank subsidiaries 1,310 1,609 ( 7,159 ) Net income 63,188 57,707 32,743 Dividends on preferred stock ( 4,302 ) ( 4,302 ) ( 1,147 ) Net income available to common stockholders $ 58,886 $ 53,405 $ 31,596 Comprehensive income attributable to the parent $ 63,613 $ 58,008 $ 32,519 CONDENSED STATEMENTS OF CASH FLOWS Year Ended December 31, 2022 2021 2020 Net income Adjustments to reconcile net income to net cash provided by $ 63,188 $ 57,707 $ 32,743 Operating activities: Equity in undistributed net income of bank subsidiary ( 43,846 ) ( 37,178 ) ( 18,197 ) (Equity in undistributed) distributions in excess of net income of non–bank subsidiaries ( 1,310 ) ( 1,609 ) 7,159 Net unrealized (gains) losses on equity securities 132 ( 121 ) 31 Decrease in other assets 609 60 21 Increase in other liabilities 1,571 978 1,091 Net cash provided by operating activities 20,344 19,837 22,848 Cash flows from investing activities Purchase of equity securities ( 32 ) — ( 2,000 ) Outlays for business acquisition — — ( 16,126 ) Investment in bank subsidiaries — — ( 41,500 ) Net cash used in investing activities ( 32 ) — ( 59,626 ) Cash flows from financing activities: Dividends paid on common stock ( 12,557 ) ( 11,550 ) ( 10,981 ) Dividends paid on preferred stock ( 4,302 ) ( 4,302 ) ( 1,147 ) Proceeds from issuance of long term debt — 83,484 — Repayment of long term debt — ( 50,000 ) — Purchase of treasury stock ( 1,707 ) ( 1,163 ) ( 1,307 ) Net proceeds from the issuance of preferred stock — — 57,785 Net proceeds from issuance of common stock 94,051 — 3,257 Net advance to subsidiary — — ( 850 ) Net cash provided by financing activities 75,485 16,469 46,757 Net increase in cash 95,797 36,306 9,979 Cash beginning of year 47,035 10,729 750 Cash end of year $ 142,832 $ 47,035 $ 10,729 119 Table of Contents 22. Earnings Per Share The computation of basic and diluted earnings per common share is shown below. There were no anti-dilutive stock options for the years ended December 31, 2022, 2021, and 2020. Years Ended December 31, 2022 2021 2020 Basic earnings per common share computation Net income per consolidated statements of income $ 58,886 $ 53,405 $ 31,596 Net earnings allocated to participating securities ( 229 ) ( 183 ) ( 100 ) Net earnings allocated to common stock $ 58,657 $ 53,222 $ 31,496 Distributed earnings allocated to common stock $ 12,508 $ 11,514 $ 10,942 Undistributed earnings allocated to common stock 46,149 41,708 20,554 Net earnings allocated to common stock $ 58,657 $ 53,222 $ 31,496 Weighted average common shares outstanding, including shares considered participating securities 18,057 16,875 16,048 Less: Average participating securities ( 70 ) ( 55 ) ( 48 ) Weighted average shares 17,987 16,820 16,000 Basic earnings per common share $ 3.26 $ 3.16 $ 1.97 Diluted earnings per common share computation Net earnings allocated to common stock $ 58,657 $ 53,222 $ 31,496 Weighted average common shares outstanding for basic earnings per common share 17,987 16,820 16,000 Add: Dilutive effects of performance based-shares 33 — — Weighted average shares and dilutive potential common shares 18,020 16,820 16,000 Diluted earnings per common share $ 3.26 $ 3.16 $ 1.97 23. Other Comprehensive Income Other comprehensive income components and related tax effects were as follows for the years ended December 31, 2022, 2021, and 2020: December 31, 2022 December 31, 2021 December 31, 2020 Unrealized holding gains (losses) on available-for-sale securities $ ( 67,167 ) $ ( 19,526 ) $ 12,494 Less reclassification adjustment for gains recognized in earnings ( 651 ) ( 783 ) ( 2,190 ) Net unrealized gains (losses) ( 67,818 ) ( 20,309 ) 10,304 Tax effect 14,242 4,265 ( 2,164 ) Net-of-tax amount ( 53,576 ) ( 16,044 ) 8,140 Amortization of unrealized gains from held-to-maturity securities 1,107 — — Tax effect ( 232 ) — — Net-of-tax amount 875 — — Actuarial gain (loss) on postemployment health care plan 303 391 277 Net amortization of transition obligation and actuarial gain ( 113 ) ( 43 ) — Net unrealized gain (loss) on postemployment health care plan 190 348 277 Tax effect ( 40 ) ( 73 ) ( 58 ) Net-of-tax amount 150 275 219 Unrealized gain (loss) on interest rate swap 411 105 ( 508 ) Less reclassification adjustment for losses recognized in earnings 127 276 224 Net unrealized gain (loss) 538 381 ( 284 ) Tax effect ( 113 ) ( 80 ) 60 Net-of-tax amount 425 301 ( 224 ) Other comprehensive income (loss) $ ( 52,126 ) $ ( 15,468 ) $ 8,135 120 Table of Contents The following is a summary of the change in the accumulated other comprehensive income (loss) balance, net of tax, for the years ended December 31, 2022, 2021, and 2020. Balance 12/31/21 Comprehensive Income (Loss) Balance 12/31/22 Unrealized gains (losses) on securities available-for-sale $ ( 706 ) $ ( 53,576 ) $ ( 54,282 ) Amortization of unrealized gains from held-to-maturity securities — 875 875 Unrealized gain on postretirement benefits plan 618 150 768 Unrealized loss on interest rate swap ( 306 ) 425 119 Total $ ( 394 ) $ ( 52,126 ) $ ( 52,520 ) Balance 12/31/20 Comprehensive Income (Loss) Balance 12/31/21 Unrealized gains on securities available-for-sale $ 15,338 $ ( 16,044 ) $ ( 706 ) Unrealized gain on postretirement benefits plan 343 275 618 Unrealized loss on interest rate swap ( 607 ) 301 ( 306 ) Total $ 15,074 $ ( 15,468 ) $ ( 394 ) Balance 1/1/20 Comprehensive Income (Loss) Balance 12/31/20 Unrealized gains (losses) on securities available-for-sale $ 7,198 $ 8,140 $ 15,338 Unrealized gain (loss) on postretirement benefits plan 124 219 343 Unrealized loss on interest rate swap ( 383 ) ( 224 ) ( 607 ) Total $ 6,939 $ 8,135 $ 15,074 24. Revenue from Contracts with Customers All of the Corporation’s revenue from contracts with customers in the scope of ASC 606 is recognized within Non-Interest Income. The following table presents the Corporation's sources of Non-Interest Income for the years ended December 31, 2022, 2021 and 2020. Items outside the scope of ASC 606 are noted as such. December 31, 2022 December 31, 2021 December 31, 2020 Non-interest Income Service charges on deposit accounts $ 7,206 $ 6,195 $ 5,095 Wealth and asset management fees 7,172 6,740 5,497 Mortgage banking (1) 1,237 3,147 3,354 Card processing and interchange income 7,797 7,796 5,727 Net realized gains on available-for-sale securities (1) 651 783 2,190 Other income 10,703 8,773 6,196 Total non-interest income $ 34,766 $ 33,434 $ 28,059 (1) Not within scope of ASC 606 Management determined that the primary sources of revenue emanating from interest and dividend income on loans and investment securities along with non-interest revenue resulting from security gains, loan servicing, gains on the sale of loans, commitment fees, fees from financial guarantees, certain credit card fees, gains (losses) on sale of other real estate owned not financed by the Corporation, is not within the scope of ASU 2014-9. The types of non-interest income within the scope of the standard that are material to the consolidated financial statements are services charges on deposit accounts, wealth and asset management fee income, card processing and interchange income, and other income. 121 Table of Contents Service charges on deposit accounts : The Corporation earns fees from its deposit customers for transaction-based, account maintenance, and overdraft services. Transaction-based fees, which include services such as ATM use fees, stop payment charges, statement rendering, and ACH fees, are recognized at the time the transaction is executed, as that is the point in time the Corporation fulfills the customer’s request. Account maintenance fees, which relate primarily to monthly maintenance, are earned over the course of a month, representing the period over which the Corporation satisfies the performance obligation. Overdraft fees are recognized at the point in time that the overdraft occurs. Services charges on deposits are withdrawn from the customer’s account balance. Wealth and asset management fees : The Corporation earns wealth and asset management fees from its contracts with trust and brokerage customers to manage assets for investment, and/or to transact on their accounts. These fees are primarily earned over time as the Corporation provides the contracted monthly or quarterly services and are generally assessed based on a tiered scale of the market value of assets under management at month end. Fees for these services are billed to customers on a monthly or quarterly basis and are recorded as revenue at the end of the period for which the wealth and asset management services have been performed. Other performance obligations, such as the delivery of account statements to customers, are generally considered immaterial to the overall transaction price. Card processing and interchange income : The Corporation earns interchange fees from check card and credit card transactions conducted through the Visa payment network. Interchange fees from cardholder transactions represent a percentage of the underlying transaction value and are recognized daily, concurrently with the transaction processing services provided to the cardholder. Other income : The Corporation's other income includes sources such as bank owned life insurance, changes in fair value and realized gains on sales of equity securities, certain service fees, gains (losses) on sales of fixed assets, and gains (losses) on sale of other real estate owned. The service fees are recognized in the same manner as the service charges mentioned above. While gains (losses) on the sale of other real estate owned are within the scope of ASU 2014-9 if financed by the Corporation, the Corporation does not finance the sale of transactions. The revenue on the sale is recorded upon the transfer of control of the property to the buyer and the other real estate owned asset is derecognized. 25. Subsequent Events Subsequent to December 31, 2022, on February 17, 2023, the Corporation purchased 100,000 shares with an average price paid, including commissions, of $ 24.05 . 122 Table of Contents ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE On March 4, 2022, the Corporation’s Audit Committee dismissed Crowe LLP ("Crowe") as the Corporation’s independent registered public accounting firm for the fiscal year ending December 31, 2022, and all quarterly periods therein. The Corporation’s Audit Committee participated in and approved the decision to change its independent registered public accounting firm. The audit reports of Crowe on the consolidated financial statements of the Corporation and its subsidiaries as of and for the years ended December 31, 2021 and 2020 did not contain any adverse opinion or disclaimer of opinion, nor were they qualified or modified as to uncertainty, audit scope, or accounting principles. During the fiscal years ended December 31, 2021 and 2020 and the subsequent interim period through March 3, 2022, there were no: (1) disagreements (as that term is used in Item 304(a)(1)(iv) of Regulation S-K and the related instructions to Item 304 of Regulation S-K) with Crowe on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedures, which disagreements if not resolved to their satisfaction would have cause them to make reference to the subject matter of the disagreements in connection with their reports, or (2) reportable events (as described in Item 304(a)(1)(v) of Regulation S-K). Also, on March 4, 2022, the Corporation engaged FORVIS, LLP (formerly known as BKD, LLP) ("FORVIS") as the Corporation’s independent registered public accounting firm starting with the fiscal year ending December 31, 2022. The engagement was approved by the Corporation’s Audit Committee. During the fiscal years ended December 31, 2021 and 2020, and through March 3, 2022, the Corporation did not consult with FORVIS with respect to (1) the application of accounting principles to a specified transaction, either completed or proposed, or the type of audit opinion that might have been rendered on the Corporation’s consolidated financial statements, or (2) any matters that were either the subject of a disagreement (as that term is used in Item 304(a)(1)(iv) of Regulation S-K and the related instructions to Item 304 of Regulation S-K) or a reportable event (as described in Item 304(a)(1)(v) of Regulation S-K).