What changed in this filing

/stocks — the workspaceLOADING

Item 8. Financial Statements and Supplementary Data

2024-03-07 compared with 2023-03-03 · 391 added, 501 removed, 2029 unchanged (31% of the section changed)

5 unchanged sentences

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").

We have audited the accompanying consolidated balance sheets of CNB Financial Corporation (the “Corporation”) as of December 31, 2023, the related consolidated statements of income and comprehensive income, changes in shareholders’ equity, and cash flows for the years ended December 31, 2023 and 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, 2023, and the results of its operations and its cash flows for the year ended December 31, 2023, in conformity with accounting principles generally accepted in the United States of America.

2 unchanged sentences

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.

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 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.

We conducted our audits in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audits 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 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.

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:

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.

Critical Audit Matters

The critical audit matters 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.

8 unchanged sentences

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.

• We 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 the 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.

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 evaluated the completeness and accuracy of data used in the development of qualitative factors and the reasonableness of management’s judgments and the relevance of data used in applying the qualitative factors .

• We evaluated the current and expected qualitative adjustments, including assessing the basis for the adjustments and the reasonableness of the significant assumptions.

• We tested of the loan review function and the accuracy of loan grades determined.

Specifically, utilizing internal professionals to assist us in evaluating the appropriateness of loan grades.

Goodwill Impairment Assessment

The Corporation has recorded goodwill of $43.7 million as of December 31, 2023.

The determination of the annual goodwill impairment assessment has been identified by the Corporation as a critical accounting policy.

As further described in Notes 1 and 8 to the consolidated financial statements, goodwill is tested for impairment at least annually, occurring as of November 30, or more frequently if events or circumstances warrant.

At November 30, 2023, the Corporation elected to perform a quantitative assessment to determine if it was more likely than not that the fair value exceeded its carrying value, including goodwill.

The Corporation engaged a third-party valuation firm to assist in performing the quantitative analysis using multiple approaches that were weighted by management.

Based upon the valuation prepared, the quantitative assessment indicated that it was more likely than not that the fair value exceeded its carrying value, resulting in no impairment.

We identified the Corporation’s quantitative goodwill impairment assessment, as of November 30, as a critical audit matter.

The principal considerations for that determination were the degree of subjectivity and judgment required to audit management’s goodwill impairment assessment.

Specifically, evaluating the valuation approaches selected and key assumptions used by management in performing its assessment, such as the selection of comparable publicly-traded companies and control premium utilized in the valuation approaches.

The primary procedures we performed to address this critical audit matter included the following :

• We evaluated the design and tested the operating effectiveness of controls related to management’s goodwill impairment assessment, including controls over management’s review of the quantitative analysis performed, including the key assumptions used to determine the fair value of the reporting unit.

• We tested key financial data used within the valuation approaches by agreeing key inputs to internal and external sources.

• We evaluated, with the assistance of our internal valuation specialists, appropriateness of valuation approaches selected by management, the selection of a control premium and of comparable publicly-traded companies, and the overall reasonableness of the estimated fair value of the reporting unit.

The 2021 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

We have served as the Corporation’s auditor since 2022.

10 unchanged sentences

(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.

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 Corporation as of December 31, 2023, 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, 2023, and our report dated March 7, 2024, 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.

7 unchanged sentences

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.

A corporation’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 corporation’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 corporation;

(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 corporation are being made only in accordance with authorizations of management and directors of the corporation;

and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the corporation’s assets that could have a material effect on the financial statements.

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)

/s/ FORVIS, LLP

Indianapolis, Indiana

4 unchanged sentences

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.

We have audited the accompanying consolidated statements of income and comprehensive income, changes in shareholders’ equity, and cash flows of CNB Financial Corporation (the "Corporation") for the year 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 results of its operations and its cash flows of the Corporation for the year 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.

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 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.

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.

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.

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 provides a reasonable basis for our opinion.

/s/ Crowe LLP

12 unchanged sentences

Debt securities held-to-maturity, at amortized cost (fair value $ 360,570 as of December 31, 2023 and $ 367,388 , as of December 31, 2022)

388,968 404,765

Equity securities 9,301 9,615

12 unchanged sentences

Mortgage servicing rights 1,554 1,804

Goodwill 43,749 43,749

Goodwill and other intangible assets 43,874 43,749

Core deposit intangible 280 364

61 unchanged sentences

on available-for-sale securities, respectively)

651 783 2,190

Net realized gains on equity securities 22 — —

Net unrealized gains on equity securities ( 1,149 ) 790 253

Net unrealized gains (losses) on equity securities ( 409 ) ( 1,149 ) 790

Mortgage banking 676 1,237 3,147

15 unchanged sentences

Other non-interest expenses 18,992 17,088 15,154

Merger costs, prepayment penalties and branch closure costs — — 12,642

Total non-interest expenses 145,342 137,622 116,433

14 unchanged sentences

Amortization of unrealized gains from held-to-maturity securities, net of tax 591 875 —

Change in actuarial gain, for post-employment health care plan, net of amortization and tax 150 275 219

Change in actuarial gains (losses), for post-employment health care plan, net of amortization and tax ( 139 ) 150 275

Change in fair value of interest rate swap agreements designated as a cash flow hedge, net of interest and tax ( 119 ) 425 301

12 unchanged sentences

Balance, January 1, 2021 $ 57,785 $ 127,518 $ 218,727 $ ( 2,967 ) $ 15,074 $ 416,137

Cumulative-effect adjustment due to the adoption of ASU No.

2016-13 — — ( 3,391 ) — — ( 3,391 )

Net income — — 57,707 — — 57,707

Other comprehensive income — — — — 8,135 8,135

Other comprehensive loss — — — — ( 15,468 ) ( 15,468 )

Forfeiture of restricted stock award grants ( 2,669 shares)

— 64 — ( 64 ) — —

Restricted stock award grants ( 55,218 shares)

3 unchanged sentences

Stock-based compensation expense — 1,411 — — — 1,411

Issuance of common stock, net of issuance costs ( 115,790 shares)

Contribution of treasury stock ( 3,000 shares)

— ( 81 ) — 81 — —

Stock-based contribution expense — 75 — — — 75

Purchase of treasury stock ( 36,359 shares)

4 unchanged sentences

— — — ( 20 ) — ( 20 )

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 — — ( 4,302 ) — — ( 4,302 )

3 unchanged sentences

Net income — — 63,188 — — 63,188

Other comprehensive income — — — — ( 15,468 ) ( 15,468 )

Other comprehensive loss — — — — ( 52,126 ) ( 52,126 )

Forfeiture of restricted stock award grants ( 1,440 shares)

8 unchanged sentences

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)

19 unchanged sentences

Net income — — 58,020 — — 58,020

Other comprehensive loss — — — — ( 52,126 ) ( 52,126 )

Other comprehensive income — — — — 6,442 6,442

Forfeiture of restricted stock award grants ( 6,391 shares)

8 unchanged sentences

Stock-based contribution expense — 55 — — — 55

Issuance of common stock, net of issuance costs ( 4,257,446 shares)

— 94,051 — — — 94,051

Purchase of treasury stock ( 326,459 shares)

27 unchanged sentences

Gain on sale of loans held for sale ( 447 ) ( 1,285 ) ( 2,737 )

Net (gains) losses on dispositions of premises and equipment and foreclosed assets ( 170 ) 230 1,097

Net losses (gains) on dispositions of premises and equipment and foreclosed assets 27 ( 170 ) 230

Proceeds from sale of loans receivable 16,263 29,151 95,258

19 unchanged sentences

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 704 ( 7,439 ) ( 2,258 )

1 unchanged sentence

Proceeds from the sale of premises and equipment and foreclosed assets 52 496 746

Purchase of other intangibles ( 125 ) — —

NET CASH USED BY INVESTING ACTIVITIES ( 149,459 ) ( 804,701 ) ( 409,760 )

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 checking, money market and savings accounts 316,280 ( 153,191 ) 623,967

Net increase (decrease) in certificates of deposit 60,033 60,009 ( 90,092 )

1 unchanged sentence

Proceeds from common stock offering, net of issuance costs — 94,051 —

Proceeds from preferred stock offering, net of issuance costs — — 57,785

Cash dividends paid, common stock ( 14,694 ) ( 12,557 ) ( 11,550 )

1 unchanged sentence

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 )

33 unchanged sentences

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.

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 region of the State of New York and the Southwest region of the Commonwealth of Virginia.

Basis of Financial Presentation

2 unchanged sentences

All significant intercompany accounts and transactions have been eliminated in the consolidated financial statements.

Subsequent Events

The Corporation has evaluated subsequent events for recognition and disclosure through the date these consolidated financial statements were issued.

Use of Estimates

4 unchanged sentences

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.

While the Corporation's Chief Operating Decision Maker ("CODM") monitors 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 by management to be aggregated in one reportable operating segment.

Cash and Cash Equivalents

4 unchanged sentences

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.

Note 17, "Derivative Instruments," to the consolidated financial statements discloses the cash collateral balances required to be maintained in connection with the Corporation’s interest rate swaps.

Debt Securities

1 unchanged sentence

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.

AFS debt securities 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.

6 unchanged sentences

There was no accrued interest related to debt securities reversed against interest income for the years ended December 31, 2023 and 2022, respectively.

Allowance for Credit Losses (Debt Securities AFS)

Allowance for Credit Losses (AFS Debt Securities)

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.

For AFS debt securities 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.

5 unchanged sentences

As of December 31, 2023 and December 31, 2022, 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.

See Note 2, "Securities," and Note 4, "Fair Value," for more information about AFS debt securities.

Accrued interest receivable on AFS debt securities totaled $ 1.4 million and $ 1.5 million at December 31, 2023 and December 31, 2022, respectively, and was reported in accrued interest receivable and other assets on the consolidated balance sheets.

Allowance for Credit Losses (Debt Securities HTM)

Allowance for Credit Losses (HTM Debt Securities)

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.

Accrued interest receivable on HTM debt securities totaled $ 1.3 million and $ 1.3 million at December 31, 2023 and 2022, 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:

34 unchanged sentences

Subsequent changes to the allowance for credit losses are recorded through provision expense.

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

11 unchanged sentences

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.

For further information on the allowance for credit losses on loans, see Note 3, "Loans Receivable and Allowance for Credit Losses," for additional detail.

The allowance for credit losses is measured on a collective (pool) basis when similar risk characteristics exist.

24 unchanged sentences

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.

The Bank originates one-to-four family residential mortgage loans primarily within Central and Northwest Pennsylvania, Central and Northeast Ohio, Western New York, and Southwest Virginia market.

These loans are secured by first liens on a primary residence or investment property.

4 unchanged sentences

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.

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 Southwest Virginia market.

Loans secured by junior liens are primarily in the form of an amortizing home equity loan.

3 unchanged sentences

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.

The Bank originates mortgage loans for multifamily properties primarily within Central and Northwest Pennsylvania, Central and Northeast Ohio, Western New York, and Southwest 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.

1 unchanged sentence

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.

The Bank originates mortgage loans to operating companies primarily within Central and Northwest Pennsylvania, Central and Northeast Ohio, Western New York, and Southwest Virginia market.

Owner-occupied real estate properties primarily include retail buildings, medical buildings and industrial/warehouse space.

3 unchanged sentences

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.

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 Southwest Virginia market.

Commercial real estate properties primarily include retail buildings/shopping centers, hotels, office/medical buildings and industrial/warehouse space.

46 unchanged sentences

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.

In building the current expected credit loss 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.

19 unchanged sentences

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.

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 borrowers experiencing financial difficulty.

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.

6 unchanged sentences

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 .

The estimate of credit losses on OBS credit exposures is $ 759 thousand and $ 603 thousand at December 31, 2023 and 2022, respectively, and was reported in accrued interest payable and other liabilities on the consolidated balance sheets .

Mortgage Servicing Rights

16 unchanged sentences

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.

Control over transferred assets is deemed to be surrendered when the assets have been isolated from the Corporation, 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 Corporation does not maintain effective control over the transferred assets.

Foreclosed Assets

57 unchanged sentences

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.

During the fourth quarter of 2023, the Corporation elected to change the timing of its annual goodwill impairment test from December 31 to November 30.

The selection of November 30 as the annual testing date for the impairment of goodwill is intended to move the testing to a time period outside of the Corporation's annual financial reporting process to allow the Corporation additional time to complete the analysis.

The Corporation believes that this change is preferable under the circumstances, and that this change does not accelerate, delay or avoid an impairment charge.

The Corporation has also determined that a change in the annual testing date did not result in adjustments to the consolidated financial statements when applied retrospectively.

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.

Goodwill is an 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 Bank of Akron in 2020 and naming rights associated with the formation of Ridge View Bank, a division of the Bank in 2023.

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.

The naming rights have an indefinite useful life.

Loan Commitments and Related Financial Instruments

49 unchanged sentences

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.

Other comprehensive income and loss consists of unrealized holding gains and losses on the AFS debt securities portfolio, amortization of AFS debt 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

5 unchanged sentences

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.

Dividend Restriction

Banking regulations require maintaining certain capital levels and may limit the dividends paid by the bank to the holding company or by the holding company to shareholders.

Fair Value of Financial Instruments

2 unchanged sentences

Changes in assumptions or in market conditions could significantly affect the estimates.

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.

Revenue Recognition

The Corporation recognizes revenues when earned based upon (i) contractual terms as transactions occur, or (ii) as related services are provided and collectability is reasonably assured.

The largest source of revenue for the Corporation is interest income, which is primarily recognized on an accrual basis according to a written contract, such as loan and lease agreements or investment securities contracts.

The Corporation earns non-interest income through a variety of financial and transactional services such as 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 and are discussed in greater detail below:

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.

The Corporation does not exercise significant judgements in the recognition of income, as typically income is not recognized until the performance obligation has been satisfied.

The Corporation has not recognized any assets from the costs to obtain or fulfill a contract with customers for revenue streams that fall within the guidance of Topic 606.

Adoption of New Accounting Standards

Accounting Standards Adopted in 2021

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.

The following tables illustrates the impact of ASC 326.

January 1, 2020

Pre-CECL Adoption Reclassification to CECL

Portfolio Segmentation Pre-CECL

Portfolio Segmentation Post-CECL

Portfolio Segmentation Impact of

Commercial, industrial and agricultural $ 1,046,665 $ ( 1,046,665 ) $ — $ — $ —

— 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 —

— 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

January 1, 2020

Pre-CECL Adoption Reclassification to CECL

Portfolio Segmentation Pre-CECL

Portfolio Segmentation Post-CECL

Portfolio Segmentation Impact of

Allowance for credit losses on loans:

Commercial, industrial and agricultural $ 8,287 $ ( 8,287 ) $ — $ — $ —

— 190 190 251 61

Owner-occupied, nonfarm nonresidential properties

— 2,390 2,390 1,636 ( 754 )

Agricultural production and other loans to farmers

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 )

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.

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.

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.

22 unchanged sentences

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.

ASU 2021-01 expands and clarifies the scope of ASU 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.

6 unchanged sentences

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

Accounting Standards Adopted in 2022

In December 2022, FASB issued ASU 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.

Accounting Standards Adopted in 2023

In October 2021, the FASB issued ASU 2021-08, "Business Combinations (Topic 805), Accounting for Contract Assets and Contract Liabilities from Contracts with Customers." This ASU requires that an acquirer recognize and measure contract assets and contract liabilities acquired in a business combination in accordance with Topic 606, "Revenue from Contracts with Customers." ASU 2021-08 was effective for the Corporation on January 1, 2023 and did not have a material impact on its consolidated financial statements and related disclosures.

In March 2022, the FASB issued ASU 2022-01, "Derivatives and Hedging (Topic 815):

3 unchanged sentences

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.

ASU 2022-01 was effective for the Corporation on January 1, 2023 and did not have a material impact on its consolidated financial statements and related disclosures.

In March 2022, the FASB issued ASU 2022-02, "Financial Instruments – Credit Losses (Topic 326):

Troubled Debt Restructurings and Vintage Disclosures." This ASU eliminates the separate recognition and measurement guidance for Troubled Debt Restructurings ("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):

ASU 2022-02 was effective for the Corporation on January 1, 2023 and did not have a material impact on its consolidated financial statements and related disclosures.

In July 2023, FASB issued ASU 2023-03, "Presentation of Financial Statements (Topic 205), Income Statement - Reporting Comprehensive Income (Topic 220), Distinguishing Liabilities from Equity (Topic 480), Equity (Topic 505), and Compensation - Stock Compensation (Topic 718):

Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No.

120, SEC Staff Announcement at the March 24, 2022 Emerging Issues Task Force ("EITF") Meeting, and Staff Accounting Bulletin Topic 6.B, Accounting Series Release 280 - General Revision of Regulation S-X:

Income or Loss Applicable to Common Stock." This ASU amends the FASB Accounting Standards Codification for SEC updates pursuant to SEC Staff Accounting Bulletin No.

SEC Staff Announcement at the March 24, 2022 EITF Meeting;

and Staff Accounting Bulletin Topic 6.B, Accounting Series Release 280 - General Revision of Regulation S-X:

Income or Loss Applicable to Common Stock.

The updates were effective immediately.

These updates did not have a material impact on the Corporation's consolidated financial statements and related disclosures.

Effects of Newly Issued But Not Yet Effective Accounting Standards

In June 2022, FASB issued ASU 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.

2 unchanged sentences

The Corporation is evaluating the effect that ASU 2022-03 will have on its consolidated financial statements and related disclosures.

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 did not have a material impact on the Corporation's financial statements and related disclosures.

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.

Securities AFS at December 31, 2022 and 2021 were as follows:

In March 2023, FASB issued ASU 2023-01, "Leases (Topic 842):

Common Control Arrangements." This ASU requires the Corporation to amortize leasehold improvements associated with common control leases over the useful life to the common control group.

This guidance is effective for the Corporation on January 1, 2024 with early adoption permitted.

The Corporation is evaluating the effect that ASU 2023-01 will have on its consolidated financial statements and related disclosures.

In March 2023, FASB issued ASU 2023-02, "Investments—Equity Method and Joint Ventures (Topic 323):

Accounting for Investments in Tax Credit Structures Using the Proportional Amortization Method." In this ASU, these amendments allow the Corporation to elect to account for qualifying tax equity investments using the proportional amortization method, regardless of the program giving rise to the related income tax credits.

This guidance is effective for the Corporation on January 1, 2024 with early adoption permitted.

The Corporation is evaluating the effect that ASU 2023-02 will have on its consolidated financial statements and related disclosures.

In August 2023, FASB issued ASU 2023-05, "Business Combinations - Joint Venture Formations (Subtopic 805-60):

Recognition and Initial Measurement." ASU 2023-05 requires certain joint ventures to apply a new basis of accounting upon formation by recognizing and initially measuring most of their assets and liabilities at fair value.

The objectives of the amendments are to provide decision-useful information to investors and other allocators of capital in a joint venture’s financial statements and also to reduce diversity in practice.

ASU 2023-05 should be applied prospectively and is effective for all newly formed joint venture entities with a formation date on or after January 1, 2025.

Early adoption is permitted, and joint ventures formed prior to the adoption date may elect to apply the new guidance retrospectively back to their original formation date.

The Corporation is evaluating the effect that ASU 2023-05 will have on its consolidated financial statements and related disclosures.

In October 2023, FASB issued ASU 2023-06, "Disclosure Improvements:

Codification Amendments in Response to the SEC’s Disclosure Update and Simplification Initiative." The ASU amends the ASC to incorporate certain disclosure requirements from SEC Release No.

33-10532 - Disclosure Update and Simplification that was issued in 2018.

The effective date for each amendment will be the date on which the SEC’s removal of that related disclosure from Regulation S-X or Regulation S-K becomes effective, with early adoption prohibited.

The Corporation is evaluating the effect that ASU 2023-06 will have on its consolidated financial statements and related disclosures.

In November 2023, FASB issued ASU 2023-07, "Improvements to Reportable Segment Disclosures (Topic 280)." This ASU updates reportable segment disclosure requirements by requiring disclosures of significant reportable segment expenses that are regularly provided to the CODM and included within each reported measure of a segment's profit or loss.

This ASU also requires disclosure of the title and position of the individual identified as the CODM and an explanation of how the CODM uses the reported measures of a segment’s profit or loss in assessing segment performance and deciding how to allocate resources.

The ASU is effective for annual periods beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024.

Adoption of the ASU should be applied retrospectively to all prior periods presented in the financial statements.

Early adoption is also permitted.

The Corporation is evaluating the effect that ASU 2023-07 will have on its consolidated financial statements and related disclosures.

In December 2023, the FASB issued ASU 2023-09, "Improvements to Income Tax Disclosures (Topic 740)." The ASU requires disaggregated information about a reporting entity’s effective tax rate reconciliation as well as additional information on income taxes paid.

The ASU is effective on a prospective basis for annual periods beginning after December 15, 2024.

Early adoption is also permitted for annual financial statements that have not yet been issued or made available for issuance.

The Corporation is evaluating the effect that ASU 2023-09 will have on its consolidated financial statements and related disclosures.

AFS debt securities at December 31, 2023 and 2022 were as follows:

December 31, 2023

16 unchanged sentences

Total $ 432,992 $ 24 $ ( 61,607 ) $ — $ 371,409

Debt securities HTM at December 31, 2022 and 2021 are as follows:

HTM debt securities at December 31, 2023 and 2022 are as follows:

December 31, 2023

10 unchanged sentences

Total $ 404,765 $ — $ ( 37,377 ) $ — $ 367,388

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.

The Corporation elected to transfer 74 AFS debt securities with an aggregate fair value of $ 213.7 million to a classification of HTM during the year ended December 31, 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 debt securities at the time of transfer.

The net unrealized holding loss of $ 5.6 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 debt securities.

Such amounts will be amortized to comprehensive income over the remaining life of the securities.

5 unchanged sentences

The tax provision related to these net realized gains at December 31, 2023, 2022 and 2021 were $ 11 thousand, $ 137 thousand, and $ 164 thousand, respectively.

The following is a schedule of the contractual maturity of securities AFS and HTM, excluding equity securities, at December 31, 2022:

The following is a schedule of the contractual maturity of AFS and HTM debt securities, excluding equity securities, at December 31, 2023:

Available-for-sale Held-to-maturity

67 unchanged sentences

• 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.

In addition, the rise in interest rates is the primary driver of the decline in fair value below amortized cost as of December 31, 2023.

Equity securities at December 31, 2023 and 2022 were as follows:

5 unchanged sentences

Total $ 9,301 $ 9,615

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.

During the year ended December 31, 2023, 2022, and 2021, the proceeds from sold equity securities were $ 296 thousand in December 31, 2023, zero in December 31, 2022 and zero in December 31, 2021, resulting in net realized gains of $ 22 thousand in December 31, 2023, zero in December 31, 2022, and zero in December 31, 2021.

Loans Receivable and Allowance for Credit Losses

37 unchanged sentences

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 $ 108.7 million and $ 156.6 million as of December 31, 2023 and 2022, respectively.

6 unchanged sentences

Agricultural production and other loans to farmers

9 — — ( 3 ) 6

Commercial and Industrial

21 unchanged sentences

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.

Transactions in the allowance for credit losses for the year ended December 31, 2022 were as follows:

29 unchanged sentences

Transactions in the allowance for credit losses for the year ended December 31, 2021 were as follows:

(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)

Allowance (Charge-offs) Recoveries Provision (Benefit) for Credit Losses on Loans Receivable (1)

Ending Allowance

$ 221 $ — $ — $ ( 70 ) $ 151

25 unchanged sentences

Note 18, "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.

For the year ended December 31, 2023, the allowance for credit losses increased primarily 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.

The year-over-year increase in reserves experienced in 2022 was primarily due to loan growth, the impact of net charge-offs, and the provision for credit losses recorded in 2022.

There is still a significant amount of uncertainty related to the domestic and global economy, tightening credit conditions, persistent inflation, and higher interest rates.

Management will continue to proactively evaluate its estimate of expected credit losses as new information becomes available.

Provision for credit losses was $ 6.0 million for the year ended December 31, 2023, compared to $ 8.6 million and $ 6.0 million for the years ended December 31, 2022 and 2021, respectively.

Included in the provision for credit losses for the year ended December 31, 2023 was $ 156 thousand related to the allowance for unfunded commitments compared to $ 603 thousand and zero provision towards the allowance for unfunded commitments for the years ended December 31, 2022 and 2021, respectively.

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, 2023 and 2022, respectively:

22 unchanged sentences

Owner-occupied, nonfarm nonresidential properties

2,055 1,987 —

Commercial and Industrial

32 unchanged sentences

Non-owner occupied, nonfarm nonresidential properties

Home equity lines of credit 335 —

Residential Mortgages secured by first liens 1,150 —

58 unchanged sentences

Total loans $ 4,940 $ 961 $ 6,307 $ 12,208 $ 4,262,970 $ 4,275,178

Troubled Debt Restructurings

Loan Modifications

The Corporation adopted ASU 2022-02, Financial Instruments - Credit Losses (Topic 326) Troubled Debt Restructurings and Vintage Disclosures effective January 1, 2023.

The amendments in ASU 2022-02 eliminated the recognition and measure of troubled debt restructurings and enhanced disclosures for loan modifications to borrowers experiencing financial difficulty.

Occasionally, the Corporation modifies loans to borrowers in financial distress by providing principal forgiveness, term extension, an other-than-insignificant payment delay or interest rate reduction.

When principal forgiveness is provided, the amount of forgiveness is charged-off against the allowance for credit losses.

In some cases, the Corporation provides multiple types of concessions on one loan.

Typically, one type of concession, such as a term extension, is granted initially.

If the borrower continues to experience financial difficulty, another concession, such as principal forgiveness, may be granted.

For the loans included in the “combination” columns below, multiple types of modifications have been made on the same loan within the current reporting period.

The combination is at least two of the following:

a term extension, principal forgiveness, an other-than-insignificant payment delay and/or an interest rate reduction.

The following table presents the amortized cost basis of loans at December 31, 2023 that were both experiencing financial difficulty and modified during the year ended December 31, 2023, by class and by type of modification.

The percentage of the amortized cost basis of loans that were modified to borrowers in financial distress as compared to the amortized cost basis of each class of financing receivable is also presented below:

Principal Forgiveness Payment Delay Term Extension Interest Rate Reduction Combination Payment Delay and Term Extension Total Class of Financing Receivable

Owner-occupied, nonfarm nonresidential properties

$ — $ 5,934 $ — $ — $ — 1.2 %

Commercial and Industrial

— 7,794 524 320 — 1.2

Non-owner occupied, nonfarm nonresidential properties — 5,911 — — 785 0.7

Residential Mortgages secured by first liens — — 414 — — —

Residential Mortgages secured by junior liens — — 29 — — —

Total $ — $ 19,639 $ 967 $ 320 $ 785 0.5 %

The Corporation has zero in unfunded available credit to customers whose loan receivables are included in the previous table.

The Corporation closely monitors the performance of loans that are modified to borrowers experiencing financial difficulty to understand the effectiveness of its modification efforts.

The following table presents the performance of such loans that have been modified during the year ended December 31, 2023:

Current 30 - 59

Days Past Due 60 - 89

Days Past Due Greater Than 89

Days Past Due Total Past Due

Owner-occupied, nonfarm nonresidential properties

$ 5,934 $ — $ — $ — $ —

Commercial and Industrial

8,638 — — — —

Non-owner occupied, nonfarm nonresidential properties 6,696 — — — —

Residential Mortgages secured by first liens 414 — — — —

Residential Mortgages secured by junior liens 29 — — — —

Total $ 21,711 $ — $ — $ — $ —

The following table presents the financial effect of the loan modifications presented above to borrowers experiencing financial difficulty for the year ended December 31, 2023:

Principal Forgiveness Weighted Average

Term Extension

(in years) Weighted Average

Interest Rate Reduction

Commercial and Industrial

$ — 1.00 0.5 %

Non-owner occupied, nonfarm nonresidential properties — 0.75 —

Residential Mortgages secured by first liens — 0.50 —

Residential Mortgages secured by junior liens — 0.50 —

Total $ — 0.76 0.5 %

The following table presents the amortized cost basis of loans that had a payment default during the year ended December 31, 2023 and were modified in the twelve months prior to that default to borrowers experiencing financial difficulty:

Principal Forgiveness Payment Delay Term Extension Interest Rate Reduction Combination Payment Delay and Term Extension

Other construction loans and all land development and other land loans $ — $ 1,549 $ — $ — $ —

Non-owner occupied, nonfarm nonresidential properties — — 1,523 — —

Total $ — $ 1,549 $ 1,523 $ — $ —

If the Corporation determines that a modified loan (or portion of a loan) has subsequently been deemed uncollectible, the loan (or a portion of the loan) is written off and the amortized cost basis of the loan is reduced by the uncollectible amount and the allowance for credit losses is adjusted by the same amount.

Troubled Debt Restructurings Prior to the Adoption of ASU 2022-02

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.

1 unchanged sentence

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.

As of December 31, 2022, the terms of certain loans were modified as TDRs.

The modification of the terms of such loans included either or both of the following:

1 unchanged sentence

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 had an amortized cost in TDRs 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:

The following tables presents loans by class modified as troubled debt restructurings that occurred during the years ended December 31, 2022, and 2021:

Year Ended December 31, 2022

22 unchanged sentences

Total loans 4 $ 5,657 $ 5,657

Year Ended December 31, 2020

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, and 2021, respectively.

1 unchanged sentence

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 and 2021, respectively, and no principal balances were forgiven in connection with the loan receivable restructurings.

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.

As discussed above, effective for January 1, 2023, the Corporation adopted prospectively Accounting Standard Update 2022-02, which eliminated the separate recognition and measurement guidance for TDRs by creditors.

Credit Quality Indicators

6 unchanged sentences

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.

21 unchanged sentences

Non-owner occupied, nonfarm nonresidential properties 869,264 3,008 23,771 — 26,779 896,043

772,450 2,791 20,074 — 22,865 795,315

Total loans $ 2,918,577 $ 95,055 $ 59,027 $ — $ 154,082 $ 3,072,659

19 unchanged sentences

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, 2023.

The current period originations may include modifications, extensions and renewals.

Current period originations may include modifications.

Term Loans Amortized Cost Basis by Origination Year

3 unchanged sentences

Substandard — — 306 — — 777 — — 1,083

Doubtful — — — — — — — — —

Total $ 3,153 $ 11,393 $ 7,151 $ 1,465 $ 815 $ 7,590 $ 302 $ — $ 31,869

Current period gross write offs $ — $ — $ — $ — $ — $ — $ — $ — $ —

Owner-occupied, nonfarm nonresidential properties

2 unchanged sentences

Substandard 848 — 696 292 6,738 2,593 166 — 11,333

Doubtful — — — — — — — — —

Total $ 63,697 $ 123,026 $ 105,574 $ 58,201 $ 52,894 $ 76,452 $ 13,220 $ — $ 493,064

Current period gross write offs $ — $ — $ — $ — $ — $ 26 $ — $ — $ 26

Agricultural production and other loans to farmers

2 unchanged sentences

Substandard — — — — — — — — —

Doubtful — — — — — — — — —

Total $ 703 $ 34 $ 89 $ 60 $ 5 $ 159 $ 602 $ — $ 1,652

Current period gross write offs $ — $ — $ — $ — $ — $ — $ — $ — $ —

Commercial and Industrial

2 unchanged sentences

Substandard — 385 4,281 396 3,476 1,655 10,238 — 20,431

— 1,313 — — — — — — 1,313

Total $ 86,043 $ 148,366 $ 148,515 $ 33,936 $ 10,277 $ 16,385 $ 282,920 $ — $ 726,442

Current period gross write offs $ 50 $ — $ — $ 191 $ — $ — $ 151 $ — $ 392

Obligations (other than securities and leases) of states and political subdivisions

2 unchanged sentences

Substandard — — — — — — — — —

Doubtful — — — — — — — — —

Total $ 24,964 $ 16,791 $ 31,768 $ 12,399 $ 4,190 $ 58,518 $ 3,571 $ — $ 152,201

Current period gross write offs $ — $ — $ — $ — $ — $ — $ — $ — $ —

Pass $ 3,649 $ 12,211 $ 5,289 $ 1,809 $ 288 $ — $ 2,261 $ — $ 25,507

1 unchanged sentence

Substandard — — — — — — — — —

Doubtful — — — — — — — — —

Total $ 3,649 $ 12,211 $ 5,289 $ 1,809 $ 288 $ — $ 2,261 $ — $ 25,507

(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.

Current period gross write offs $ — $ — $ — $ — $ — $ — $ — $ — $ —

Term Loans Amortized Cost Basis by Origination Year

4 unchanged sentences

Substandard — — — — 1,549 — 63 — 1,612

Doubtful — — — — — — — — —

Total $ 111,843 $ 274,838 $ 69,470 $ 19,028 $ 7,635 $ 1,262 $ 7,463 $ — $ 491,539

Current period gross write offs $ — $ — $ — $ — $ — $ — $ — $ — $ —

Multifamily (5 or more) residential properties

2 unchanged sentences

Substandard 797 — — — — — — — 797

Doubtful — — — — — — — — —

Total $ 39,509 $ 95,635 $ 63,203 $ 24,527 $ 10,928 $ 19,786 $ 754 $ — $ 254,342

Current period gross write offs $ — $ — $ — $ — $ — $ 65 $ — $ — $ 65

Non-owner occupied, nonfarm nonresidential properties

2 unchanged sentences

Substandard 778 1,134 488 5,911 3,266 10,484 1,710 — 23,771

Doubtful — — — — — — — — —

Total $ 193,604 $ 298,528 $ 151,853 $ 47,383 $ 57,654 $ 136,704 $ 10,317 $ — $ 896,043

Current period gross write offs $ — $ 358 $ — $ — $ 88 $ — $ 248 $ — $ 694

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.

Current period originations may include modifications.

Term Loans Amortized Cost Basis by Origination Year

3 unchanged sentences

Substandard — 347 — — 142 523 — — 1,012

Doubtful — — — — — — — — —

Total $ 12,321 $ 7,982 $ 1,536 $ 871 $ 3,419 $ 5,496 $ 543 $ — $ 32,168

3 unchanged sentences

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

3 unchanged sentences

Substandard — — — — — — — — —

— — — — — — — — —

Total $ 105 $ 140 $ 80 $ 42 $ 179 $ — $ 652 $ — $ 1,198

3 unchanged sentences

Substandard 299 1,809 689 379 324 913 5,624 — 10,037

Doubtful 1,379 — — — — — — — 1,379

— 1,313 — — — — — — 1,313

Total $ 196,495 $ 216,555 $ 59,075 $ 17,382 $ 9,456 $ 20,074 $ 272,874 $ — $ 791,911

3 unchanged sentences

Substandard — — — — — — — — —

Doubtful — — — — — — — — —

Total $ 20,840 $ 37,527 $ 13,868 $ 4,584 $ 13,518 $ 50,050 $ 4,958 $ — $ 145,345

2 unchanged sentences

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.

(1) Consists of one loan relationship originated in 2015 and modified in 2021.

The modification met the requirements to disclose the loan relationship as a new loan during 2021.

Term Loans Amortized Cost Basis by Origination Year

4 unchanged sentences

Substandard — 2,023 — — — — 66 — 2,089

Doubtful — — — — — — — — —

Total $ 273,414 $ 88,917 $ 56,782 $ 6,918 $ 8,644 $ 916 $ 11,094 $ — $ 446,685

3 unchanged sentences

Substandard 643 — — — 333 90 — — 1,066

Doubtful — — — — — — — — —

Total $ 115,097 $ 49,794 $ 46,784 $ 11,854 $ 7,097 $ 24,441 $ 2,629 $ — $ 257,696

3 unchanged sentences

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

21 unchanged sentences

Total $ 23,465 $ 14,915 $ 10,079 $ 1,206 $ 685 $ 58 $ 799 $ — $ 51,207

Current period gross write offs $ — $ — $ — $ — $ — $ — $ — $ — $ —

Home equity lines of credit

3 unchanged sentences

Total $ 27,110 $ 32,027 $ 11,437 $ 9,844 $ 6,781 $ 30,481 $ 7,479 $ 5,541 $ 130,700

Current period gross write offs $ — $ — $ — $ — $ 10 $ — $ — $ — $ 10

Residential mortgages secured by first lien

3 unchanged sentences

Total $ 135,019 $ 233,520 $ 200,784 $ 143,933 $ 77,785 $ 196,746 $ 3,199 $ — $ 990,986

Current period gross write offs $ — $ — $ — $ — $ — $ 22 $ 95 $ — $ 117

Residential mortgages secured by junior liens

3 unchanged sentences

Total $ 28,685 $ 27,070 $ 14,027 $ 7,102 $ 3,888 $ 8,875 $ 1,416 $ — $ 91,063

Current period gross write offs $ — $ — $ — $ — $ — $ — $ — $ — $ —

Other revolving credit plans

3 unchanged sentences

Total $ 8,684 $ 8,056 $ 2,737 $ 11,274 $ 1,634 $ 10,492 $ — $ — $ 42,877

Current period gross write offs $ — $ — $ 50 $ 4 $ 16 $ 49 $ — $ — $ 119

Payment performance

2 unchanged sentences

Total $ 12,561 $ 6,851 $ 2,597 $ 1,479 $ 1,030 $ 797 $ — $ — $ 25,315

Current period gross write offs $ 18 $ 23 $ — $ 8 $ 7 $ — $ — $ — $ 56

Other consumer

3 unchanged sentences

Total $ 27,485 $ 12,591 $ 5,371 $ 3,119 $ 1,477 $ 1,549 $ — $ — $ 51,592

Current period gross write offs $ 210 $ 1,164 $ 467 $ 96 $ 33 $ 12 $ — $ — $ 1,982

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.

41 unchanged sentences

Total $ 11,785 $ 10,825

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

Current period gross write offs $ 189

Holiday’s loan portfolio, included in other consumer loans above, is summarized as follows at December 31, 2023 and 2022:

3 unchanged sentences

Total consumer loans, net of unearned discounts $ 25,546 $ 25,849

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

Fair Value Measurement

38 unchanged sentences

Government sponsored entities (1)

$ 4,988 $ 4,988 $ — $ —

States and political subdivisions 91,809 — 91,809 —

8 unchanged sentences

Money market 1,103 1,103 — —

Corporate notes and bonds 757 757 — —

Corporate notes 634 — 634 —

Total Equity Securities $ 9,301 $ 8,667 $ 634 $ —

Interest rate swaps $ ( 1,013 ) $ — $ ( 1,013 ) $ —

(1) In 2023, the Corporation transitioned to a new pricing provider, leading to the reclassification of United States Treasury investments as Level 1 pricing instruments.

Fair Value Measurements at December 31, 2022 Using

16 unchanged sentences

Money market 479 479 — —

Corporate notes and bonds 579 579 — —

Corporate notes 757 757 — —

Total Equity Securities $ 9,615 $ 9,615 $ — $ —

Interest rate swaps $ ( 1,700 ) $ — $ ( 1,700 ) $ —

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.

Assets and liabilities measured at fair value on a non-recurring basis are as follows at December 31, 2023 and 2022:

29 unchanged sentences

Non-owner occupied, nonfarm nonresidential 3,867 — — 3,867

Home equity lines of credit 335 — — 335

Residential mortgages secured by first liens 944 — — 944

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.

28 unchanged sentences

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 17 %- 42 % ( 31 %)

Fair Value of Financial Instruments

4 unchanged sentences

Debt securities available-for-sale (1)

341,955 4,988 336,967 — 341,955

Debt securities held-to-maturity (1)

388,968 104,141 256,429 — 360,570

Equity securities 9,301 8,667 634 — 9,301

5 unchanged sentences

Deposits $ ( 4,998,750 ) $ ( 4,492,256 ) $ ( 508,181 ) $ — $ ( 5,000,437 )

Short-term borrowings ( 132,396 ) — ( 132,396 ) — ( 132,396 )

Subordinated debentures ( 104,887 ) — ( 134,298 ) — ( 134,298 )

1 unchanged sentence

Accrued interest payable ( 3,550 ) — ( 3,550 ) — ( 3,550 )

(1) In 2023, the Corporation transitioned to a new pricing provider, leading to the reclassification of United States Treasury investments as Level 1 pricing instruments.

The following table presents the carrying amount and fair value of financial instruments at December 31, 2022:

2 unchanged sentences

Cash and cash equivalents $ 106,285 $ 106,285 $ — $ — $ 106,285

Securities available-for-sale 697,191 4,995 692,196 — 697,191

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

5 unchanged sentences

Deposits $ ( 4,622,437 ) $ ( 4,175,976 ) $ ( 445,788 ) $ — $ ( 4,621,764 )

FHLB and other borrowings ( 132,396 ) — ( 132,396 ) — ( 132,396 )

Subordinated debentures ( 104,584 ) — ( 117,378 ) — ( 117,378 )

52 unchanged sentences

Total leased liabilities $ 37,944 $ 34,109

(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:

(1) Finance lease assets are recorded net of accumulated amortization of $ 1.0 million and $ 930 thousand as of December 31, 2023 and 2022, respectively.

The components of the Corporation's net lease expense for the years ended December 31, 2023, 2022, and 2021 were as follows:

Lease Cost Classification December 31, 2023 December 31, 2022 December 31, 2021

40 unchanged sentences

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.

The Corporation completed its annual goodwill impairment test as of December 31, 2022 and concluded that no impairment charges were required as of that date.

During the fourth quarter of 2023, the Corporation elected to change the timing of its annual goodwill impairment test from December 31 to November 30.

The Corporation believes that this change is preferable under the circumstances, and that this change does not accelerate, delay or avoid an impairment charge.

The Corporation has also determined that a change in the annual testing date did not result in adjustments to the consolidated financial statements when applied retrospectively.

At November 30, 2023, the Corporation elected to perform a quantitative assessment to determine if it was more likely than not that the fair value exceeded its carrying value, including goodwill.

The Corporation engaged a third party valuation firm to assist in performing the quantitative analysis using multiple approaches, reflecting assumptions that were provided and weighted by management.

The primary methodology used was the discounted cash flow approach while also considering a market approach of comparing the multiples of the Corporation to multiples of similar public companies and market price with control premiums.

In addition, the value relied upon projections and growth rates prepared by management.

Based upon the valuation prepared, the quantitative 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.

During the year ended December 31, 2023, 2022, and 2021, the Corporation recorded amortization expense of $ 84 thousand, $ 96 thousand, and $ 107 thousand, respectively.

The net carrying value at December 31, 2023 and 2022 was $ 280 thousand and $ 364 thousand, respectively.

2 unchanged sentences

Thereafter 25

In connection with the formation of Ridge View Bank, a division of the Bank, the Corporation recorded an intangible asset related to naming rights in 2023.

The naming rights have an indefinite useful life.

The Corporation does not amortize intangible assets with indefinite lives but assesses them for impairment annually or more frequently if events or changes in circumstances indicate potential impairment.

As of December 31, 2023, the carrying amount of naming rights intangible assets was $ 125 thousand and no impairment indicators were identified during the year ended December 31, 2023.

Management evaluates events or changes in circumstances that may impact the indefinite useful life assessment of the naming rights intangible asset.

If impairment indicators are identified, the Corporation will perform a qualitative or quantitative impairment test, as applicable.

The following table reflects time certificates of deposit accounts included in total deposits and their remaining maturities at December 31, 2023:

4 unchanged sentences

Certificates of deposit of $250 thousand or more totaled $ 100.2 million and $ 135.4 million at December 31, 2023 and 2022, respectively.

The Corporation had $ 208.3 million in brokered deposits as of December 31, 2023 compared to $ 24.1 million at December 31, 2022.

In addition, the Corporation had $ 739.3 million and $ 4.6 million in reciprocal deposits at December 31, 2023 and December 31, 2022, respectively.

At December 31, 2023 and 2022, 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 %.

Borrowings under the line of credit bear interest at a variable rate equal to the Secured Overnight Finance Rate ("SOFR") plus 2.85 %.

There were no borrowings on the line of credit at December 31, 2023 and 2022.

6 unchanged sentences

The Bank could obtain advances of up to approximately $ 993.8 million from the FHLB at December 31, 2023 and $ 757.8 million at December 31, 2022.

At December 31, 2022 and December 31, 2021, outstanding advances from the FHLB are as follows:

Open Repo borrowing at an interest rate of 4.45 % at December 31, 2022.

At December 31, 2023 and December 31, 2022, outstanding advances from the FHLB were as follows:

Open Repo borrowing at an interest rate of 5.68 % and 4.45 % at December 31, 2023 and December 31, 2022.

The maximum amount of the Open Repo borrowing available is $ 250,000 .

3 unchanged sentences

The letters of credit were utilized in place of securities pledged to the municipalities for their deposits maintained at the Bank.

Federal Reserve Borrowings

In June 2023, the Bank was approved by the Federal Reserve Bank of Philadelphia (the "Federal Reserve") for its Borrower-in-Custody ("BIC") program.

At December 31, 2023, the Bank had borrowing capacity through the Federal Reserve BIC program of $ 255.5 million.

Borrowings under the BIC program are overnight advances with interest chargeable at the discount window ("primary credit") borrowing rate.

At December 31, 2023, the Bank has pledged certain qualifying loans with an unpaid principal balance of $ 282.7 million and securities with a carrying value of $ 78.5 million as collateral.

Other Borrowings

2 unchanged sentences

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 interest rate on each offering was determined quarterly and floated based on the three-month LIBOR plus 1.55 %.

Effective September 15, 2023, the interest rate calculation method was revised.

The interest rate is now determined quarterly, and floats based on the three-month SOFR plus a credit spread adjustment of 0.26161 % plus 1.55 %.

This change reflects the transition from LIBOR to SOFR as the reference rate.

The all-in rate was 7.20 % at December 31, 2023 and 6.32 % at December 31, 2022.

8 unchanged sentences

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.

4 unchanged sentences

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.

Employees 21 years of age or over with a minimum of 90 days 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 $ 1.8 million, $ 1.6 million and $ 1.2 million for the years ended December 31, 2023, 2022, and 2021, respectively.

4 unchanged sentences

At December 31, 2023 and 2022, obligations of $ 10.0 million and $ 9.7 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.

Expenses related to this plan were $ 565 thousand for the year ended December 31, 2023, $ 1.3 million for the year ended December 31, 2022, and $ 2.1 million for the year ended December 31, 2021.

The Corporation has established a Survivor Benefit Plan for the benefit of outside directors.

5 unchanged sentences

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.

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.

Deferred Compensation Plans

32 unchanged sentences

Post-retirement benefits 605 647

Unrealized loss on interest rate swap — 81

Unrealized loss on equity securities 129 —

Nonaccrual loan interest 476 348

17 unchanged sentences

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.

At December 31, 2023, the Corporation had state net operating loss carryforwards of $ 15.2 million related to the acquisition of Bank of Akron, which will 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.

Due to this limitation, management has 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.

33 unchanged sentences

Non-vested at December 31, 2023 124,934 $ 24.09

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.

The above table excludes 14,510 shares in restricted stock awards that were granted to the Corporation’s Board of Directors at a weighted average fair value of $ 24.12 and immediately vested.

As of December 31, 2023 and 2022, there was $ 2.1 million and $ 1.2 million, respectively, of total unrecognized compensation cost related to non-vested shares granted under the 2019 Stock Incentive Plan.

The fair value of shares vesting during the year end December 31, 2023, 2022, and 2021 was $ 1.0 million, $ 1.4 million and $ 835 thousand, 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.

Awards with a maximum of 23,124 shares, 13,761 shares, and 18,210 shares in aggregate were granted to key employees in 2023, 2022, and 2021, respectively.

Total compensation expense related to the PBRSAs and included in the above compensation expense total was $ 235 thousand, $ 91 thousand and $ 378 thousand for 2023, 2022, and 2021.

10 unchanged sentences

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.

The net unrealized gain or loss on AFS debt securities is excluded from computing regulatory capital.

Management believes as of December 31, 2023 the Corporation and the Bank meet all capital adequacy requirements to which they are subject.

48 unchanged sentences

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).

The swap that expired on September 15, 2023 was not renewed.

As of December 31, 2023 and 2022, no derivatives were designated as fair value hedges or hedges of net investments in foreign operations.

16 unchanged sentences

(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.

As of December 31, 2023 and 2022, a cash collateral balance of zero and $ 200 thousand, 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.

5 unchanged sentences

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 pledged cash collateral to another financial institution with a balance $ 173 thousand as of December 31, 2023 and $ 173 thousand as of December 31, 2022.

This balance is included in cash and due from 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.

1 unchanged sentence

The Corporation may be required to post additional collateral to swap counterparties in the future in proportion to potential increases in unrealized loss positions.

Effective on September 30, 2023, the Corporation amended all of the back-to-back swap contracts to reference the 1-month SOFR plus a credit spread adjustment of 11.448 basis points "Fallback SOFR."

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, 2023 and 2022:

6 unchanged sentences

3 rd Party interest rate swaps

$ 31,417 4.9 4.12 % 1 month LIBOR + 1.68 %

Customer interest rate swaps ( 31,417 ) 4.9 4.12 % 1 month LIBOR + 1.68 %

$ 21,302 4.9 4.19 % 1 month Fallback SOFR + 1.79 %

Customer interest rate swaps ( 21,302 ) 4.9 4.19 % 1 month Fallback SOFR + 1.79 %

( 1,013 ) (b)

6 unchanged sentences

(b) Reported in accrued interest payable and other liabilities within the consolidated balance sheets

Risk Participation Agreements

The Corporation entered into Risk Participation Agreement ("RPA") swaps with other financial institution related to loans in which the Corporation is a participant.

The RPAs provide credit protection to the financial institutions should the borrower fail to perform on its interest rate derivative contracts with the financial institutions.

The notional amounts of these contingent agreements total $ 21.7 million as of December 31, 2023, and zero as of December 31, 2022.

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 is a party to financial instruments with off-balance sheet risk in the normal course of business to meet the financial needs of its customers.

These financial instruments include commitments to extend credit and standby letters of credit.

Those instruments involve, to varying degrees, elements of credit and interest rate risk in excess of the amount recognized in the consolidated balance sheets.

The Corporation's exposure to credit loss in the event of nonperformance by the other party of the financial instrument for commitments to extend credit and standby letters of credit is represented by the contract or notional amount of those instruments.

The Corporation uses the same credit policies for underwriting all loans, including these commitments and conditional obligations.

As of December 31, 2023 and 2022, the Corporation did not own or trade other financial instruments with significant off-balance sheet risk including derivatives such as futures, forwards, option contracts and the like, although such instruments may be appropriate to use in the future to manage interest rate risk.

See Note 17, “Derivative Instruments,” for a description of interest rate derivatives entered into by the Corporation.

Standby letters of credit are conditional commitments issued by the Corporation to guarantee the performance of a customer to a third party.

The contract or notional amount of these instruments reflects the maximum amount of future payments that the Corporation could be required to pay under the guarantees if there were a total default by the guaranteed parties, without consideration for possible recoveries under recourse provisions or from collateral held or pledged.

In addition, many of these commitments are expected to expire without being drawn upon;

therefore, the total commitment amounts do not necessarily represent future cash requirements.

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, 2023 and 2022 were as follows:

4 unchanged sentences

Standby letters of credit 18,649 2,480 16,124 1,603

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.

Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract.

Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee.

Since many of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements.

The Corporation evaluates each customer’s creditworthiness on a case-by-case basis.

The amount of collateral obtained, if deemed necessary by the Corporation upon extension of credit, is based on management’s credit evaluation of the counterparty.

Collateral that is held varies but may include securities, accounts receivable, inventory, property, plant and equipment, and residential and income-producing commercial properties.

Allowance for Credit Losses on Unfunded Loan Commitments

11 unchanged sentences

(1) Excludes provision for credit losses related to the loan portfolio.

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 ("SBIC") and other limited partnerships, reported in FHLB and other restricted stock holdings and investments on the consolidated balance sheet, as of December 31, 2023 and 2022, were $ 21.7 million and $ 17.0 million, respectively.

Unfunded capital commitments in investments in SBIC's and other limited partnerships totaled $ 6.8 million and $ 5.5 million as of December 31, 2023 and 2022, respectively.

These investments are accounted for 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, 2023 and 2022 were $ 3.8 million and $ 4.5 million, respectively.

The related amortization for the years ended December 31, 2023, 2022, and 2021 were $ 747 thousand, $ 803 thousand, and $ 691 thousand, respectively.

Unfunded commitments, reported in accrued interest payable and other liabilities on the consolidated balance sheet, as of December 31, 2023 and 2022, were $ 796 thousand and $ 1.0 million, respectively.

The Corporation is subject to claims and lawsuits that arise primarily in the ordinary course of business.

38 unchanged sentences

(Equity in undistributed) distributions in excess of net income of non–bank subsidiaries ( 1,658 ) ( 1,310 ) ( 1,609 )

Net unrealized (gains) losses on equity securities 132 ( 121 ) 31

Net realized and unrealized (gains) losses on equity securities 700 132 ( 121 )

Decrease in other assets ( 230 ) 609 60

3 unchanged sentences

Purchase of equity securities ( 41 ) ( 32 ) —

Outlays for business acquisition — — ( 16,126 )

Sales and maturities of equity securities with readily determinable fair value 296 — —

Investment in bank subsidiaries ( 37,000 ) — —

6 unchanged sentences

Purchase of treasury stock ( 6,858 ) ( 1,707 ) ( 1,163 )

Net proceeds from the issuance of preferred stock — — 57,785

Net proceeds from issuance of common stock — 94,051 —

Net advance to subsidiary — — ( 850 )

Net cash provided by financing activities ( 25,854 ) 75,485 16,469

Net increase in cash 95,797 36,306 9,979

Net (decrease) increase in cash ( 42,405 ) 95,797 36,306

Cash beginning of year 142,832 47,035 10,729

33 unchanged sentences

Net-of-tax amount 591 875 —

Actuarial gain (loss) on postemployment health care plan 303 391 277

Actuarial gains (losses) on postemployment health care plan ( 2 ) 303 391

Net amortization of transition obligation and actuarial gain ( 174 ) ( 113 ) ( 43 )

Net unrealized gain (loss) on postemployment health care plan 190 348 277

Net unrealized gains (losses) on postemployment health care plan ( 176 ) 190 348

Tax effect 37 ( 40 ) ( 73 )

Net-of-tax amount ( 139 ) 150 275

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 )

Unrealized gains on interest rate swap — 411 105

Less reclassification adjustment for gains (losses) recognized in earnings ( 151 ) 127 276

Net unrealized gains (losses) ( 151 ) 538 381

Tax effect 32 ( 113 ) ( 80 )

2 unchanged sentences

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, 2023, 2022, and 2021.

12/31/21 Comprehensive

December 31, 2022 Comprehensive

Income (Loss) Balance

Unrealized gains (losses) on securities available-for-sale $ ( 706 ) $ ( 53,576 ) $ ( 54,282 )

December 31, 2023

Unrealized gains on securities available-for-sale $ ( 54,282 ) $ 6,109 $ ( 48,173 )

Amortization of unrealized gains from held-to-maturity securities 875 591 1,466

Unrealized gain on postretirement benefits plan 618 150 768

Unrealized loss on interest rate swap ( 306 ) 425 119

Unrealized gains (losses) on postretirement benefits plan 768 ( 139 ) 629

Unrealized gains (losses) on interest rate swap 119 ( 119 ) —

Total $ ( 52,520 ) $ 6,442 $ ( 46,078 )

12/31/20 Comprehensive

December 31, 2021 Comprehensive

Income (Loss) Balance

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 )

December 31, 2022

Unrealized losses on securities available-for-sale $ ( 706 ) $ ( 53,576 ) $ ( 54,282 )

Amortization of unrealized gains from held-to-maturity securities — 875 875

Unrealized gains on postretirement benefits plan 618 150 768

Unrealized gains (losses) on interest rate swap ( 306 ) 425 119

Total $ ( 394 ) $ ( 52,126 ) $ ( 52,520 )

1/1/20 Comprehensive

January 1, 2021 Comprehensive

Income (Loss) Balance

December 31, 2021

Unrealized gains (losses) on securities available-for-sale $ 15,338 $ ( 16,044 ) $ ( 706 )

Unrealized gain (loss) on postretirement benefits plan 124 219 343

Unrealized loss on interest rate swap ( 383 ) ( 224 ) ( 607 )

Unrealized gains on postretirement benefits plan 343 275 618

Unrealized gains (losses) on interest rate swap ( 607 ) 301 ( 306 )

Total $ 15,074 $ ( 15,468 ) $ ( 394 )

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.

Service charges on deposit accounts :

The Corporation earns fees from its deposit customers for transaction-based, account maintenance, and overdraft services.

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.

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.

Other income :

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.

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 .

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).

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 8. Financial Statements and Supplementary Data