UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)


			☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~September 30, 2021~~March 31, 2022


			☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from __________ to __________

Commission file number: 001-36706


			CB FINANCIAL SERVICES, INC.
			(Exact name of registrant as specified in its charter)


Pennsylvania						51-0534721
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification No.)


100 N. Market Street, Carmichaels, PA						15320
(Address of principal executive offices)						(Zip Code)


			(724) 966-5041
			(Registrant’s telephone number, including area code)


			N/A
			(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

Common stock, par value $0.4167 per share

CBFV

The Nasdaq Stock Market, LLC

(Title of each class)

(Trading symbol)

(Name of each exchange on which registered)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


			Large accelerated filer ☐						Accelerated filer ☐
			Non-accelerated filer ☒						Smaller reporting company ☒
			Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of ~~November 5, 2021,~~May 9, 2022, the number of shares outstanding of the Registrant’s Common Stock was ~~5,296,539.~~5,152,409.

Table of Contents

FORM 10-Q

INDEX


			Page
PART I – FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)			1
Consolidated Statements of Financial Condition			1
Consolidated Statements of Income ~~(Loss)~~			2
Consolidated Statements of Comprehensive (Loss ) Income ~~(Loss)~~			3
Consolidated Statements of Changes In Stockholders’ Equity			4
Consolidated Statements of Cash Flows			65
Notes to the Consolidated Financial Statements (Unaudited)			87
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.			3628
Item 3. Quantitative and Qualitative Disclosure about Market Risk.			5238
Item 4. Controls and Procedures.			5439
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.			5440
Item 1A. Risk Factors.			5440
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.			5440
Item 3. Defaults Upon Senior Securities.			5540
Item 4. Mine Safety Disclosures.			5540
Item 5. Other Information.			5540
Item 6. Exhibits			5540
SIGNATURES			5641

Table of Contents

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements.

CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION


		(Unaudited) September 30, 2021		December 31, 2020			(Unaudited) March 31, 2022		December 31, 2021
(Dollars in thousands, except per share and share data)	(Dollars in thousands, except per share and share data)					(Dollars in thousands, except per share and share data)

ASSETS	ASSETS					ASSETS
Cash and Due From Banks:	Cash and Due From Banks:					Cash and Due From Banks:
Interest Bearing	Interest Bearing	$	131,835	$	145,636	Interest Bearing	$	55,233	$	63,968
Non-Interest Bearing	Non-Interest Bearing	41,688		15,275		Non-Interest Bearing	68,355		55,706
Total Cash and Due From Banks	Total Cash and Due From Banks	173,523		160,911		Total Cash and Due From Banks	123,588		119,674

Securities:	Securities:					Securities:
Available-for-Sale Debt Securities, at Fair Value	Available-for-Sale Debt Securities, at Fair Value	218,529		142,897		Available-for-Sale Debt Securities, at Fair Value	228,238		222,108
Equity Securities, at Fair Value	Equity Securities, at Fair Value	2,822		2,503		Equity Securities, at Fair Value	2,859		2,866
Total Securities	Total Securities	221,351		145,400		Total Securities	231,097		224,974
Loans Held for Sale		17,407		—
Loans, Net of Allowance for Loan Losses of $11,581 and $12,771 at September 30, 2021 and December 31, 2020, Respectively		990,018		1,031,982
Premises and Equipment Held for Sale		795		—

Loans, Net of Allowance for Loan Losses of $11,595 and $11,582 at March 31, 2022 and December 31, 2021, Respectively						Loans, Net of Allowance for Loan Losses of $11,595 and $11,582 at March 31, 2022 and December 31, 2021, Respectively	1,009,047		1,009,214

Premises and Equipment, Net	Premises and Equipment, Net	18,502		20,302		Premises and Equipment, Net	18,349		18,399
Bank-Owned Life Insurance	Bank-Owned Life Insurance	25,190		24,779		Bank-Owned Life Insurance	25,468		25,332
Goodwill	Goodwill	9,732		9,732		Goodwill	9,732		9,732
Intangible Assets, Net	Intangible Assets, Net	5,740		8,399		Intangible Assets, Net	4,850		5,295
Accrued Interest Receivable and Other Assets	Accrued Interest Receivable and Other Assets	12,560		15,215		Accrued Interest Receivable and Other Assets	16,539		12,859
TOTAL ASSETS	TOTAL ASSETS	$	1,474,818	$	1,416,720	TOTAL ASSETS	$	1,438,670	$	1,425,479

LIABILITIES	LIABILITIES					LIABILITIES
Deposits Held for Sale		$	102,647	$	—

Deposits:	Deposits:					Deposits:
Non-Interest Bearing Demand Deposits	Non-Interest Bearing Demand Deposits	373,320		340,569		Non-Interest Bearing Demand Deposits	400,105		385,775
NOW Accounts	NOW Accounts	244,004		259,870		NOW Accounts	280,455		272,518
Money Market Accounts	Money Market Accounts	190,426		199,029		Money Market Accounts	192,929		192,125
Savings Accounts	Savings Accounts	232,679		235,088		Savings Accounts	247,589		239,482
Time Deposits	Time Deposits	144,727		190,013		Time Deposits	129,235		136,713
Total Deposits	Total Deposits	1,185,156		1,224,569		Total Deposits	1,250,313		1,226,613

Short-Term Borrowings	Short-Term Borrowings	42,623		41,055		Short-Term Borrowings	39,219		39,266
Other Borrowings	Other Borrowings	6,000		8,000		Other Borrowings	17,607		17,601
Accrued Interest Payable and Other Liabilities	Accrued Interest Payable and Other Liabilities	7,405		8,566		Accrued Interest Payable and Other Liabilities	9,375		8,875
TOTAL LIABILITIES	TOTAL LIABILITIES	1,343,831		1,282,190		TOTAL LIABILITIES	1,316,514		1,292,355

STOCKHOLDERS' EQUITY	STOCKHOLDERS' EQUITY					STOCKHOLDERS' EQUITY
Preferred Stock, No Par Value; 5,000,000 Shares Authorized	Preferred Stock, No Par Value; 5,000,000 Shares Authorized	—		—		Preferred Stock, No Par Value; 5,000,000 Shares Authorized	—		—
Common Stock, $0.4167 Par Value; 35,000,000 Shares Authorized, 5,680,993 Shares Issued and 5,330,401 and 5,434,374 Shares Outstanding at September 30, 2021 and December 31, 2020, Respectively		2,367		2,367
Common Stock, $0.4167 Par Value; 35,000,000 Shares Authorized, 5,701,758 Shares Issued and 5,156,897 and 5,260,672 Shares Outstanding at March 31, 2022 and December 31, 2021, Respectively						Common Stock, $0.4167 Par Value; 35,000,000 Shares Authorized, 5,701,758 Shares Issued and 5,156,897 and 5,260,672 Shares Outstanding at March 31, 2022 and December 31, 2021, Respectively	2,376		2,367
Capital Surplus	Capital Surplus	83,130		82,723		Capital Surplus	83,422		83,294
Retained Earnings	Retained Earnings	51,839		51,132		Retained Earnings	59,343		57,534
Treasury Stock, at Cost (350,592 and 246,619 Shares at September 30, 2021 and December 31, 2020, Respectively)		(7,483)		(5,094)
Accumulated Other Comprehensive Income		1,134		3,402
Treasury Stock, at Cost (544,861 and 420,321 Shares at March 31, 2022 and December 31, 2021, Respectively)						Treasury Stock, at Cost (544,861 and 420,321 Shares at March 31, 2022 and December 31, 2021, Respectively)	(12,367)		(9,144)
Accumulated Other Comprehensive Loss						Accumulated Other Comprehensive Loss	(10,618)		(927)
TOTAL STOCKHOLDERS' EQUITY	TOTAL STOCKHOLDERS' EQUITY	130,987		134,530		TOTAL STOCKHOLDERS' EQUITY	122,156		133,124
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	1,474,818	$	1,416,720	TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	1,438,670	$	1,425,479

The accompanying notes are an integral part of these consolidated financial statements

Table of Contents

CONSOLIDATED STATEMENTS OF INCOME ~~(LOSS)~~ (UNAUDITED)


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended March 31,
		2021		2020		2021		2020			2022		2021
(Dollars in thousands, except share and per share data)	(Dollars in thousands, except share and per share data)									(Dollars in thousands, except share and per share data)

INTEREST AND DIVIDEND INCOME	INTEREST AND DIVIDEND INCOME									INTEREST AND DIVIDEND INCOME
Loans, Including Fees	Loans, Including Fees	$	9,718	$	10,709	$	29,800	$	32,050	Loans, Including Fees	$	9,551	$	10,146
Investment Securities:	Investment Securities:									Investment Securities:
Taxable	Taxable	843		753		2,124		2,894		Taxable	905		646
Tax-Exempt	Tax-Exempt	71		79		223		291		Tax-Exempt	66		78
Dividends	Dividends	19		19		63		59		Dividends	22		20
Other Interest and Dividend Income	Other Interest and Dividend Income	135		96		384		418		Other Interest and Dividend Income	72		98
TOTAL INTEREST AND DIVIDEND INCOME	TOTAL INTEREST AND DIVIDEND INCOME	10,786		11,656		32,594		35,712		TOTAL INTEREST AND DIVIDEND INCOME	10,616		10,988
INTEREST EXPENSE	INTEREST EXPENSE									INTEREST EXPENSE
Deposits	Deposits	715		1,150		2,489		4,136		Deposits	530		947
Short-Term Borrowings	Short-Term Borrowings	25		28		72		112		Short-Term Borrowings	19		23
Other Borrowings	Other Borrowings	36		62		112		194		Other Borrowings	174		41
TOTAL INTEREST EXPENSE	TOTAL INTEREST EXPENSE	776		1,240		2,673		4,442		TOTAL INTEREST EXPENSE	723		1,011
NET INTEREST AND DIVIDEND INCOME	NET INTEREST AND DIVIDEND INCOME	10,010		10,416		29,921		31,270		NET INTEREST AND DIVIDEND INCOME	9,893		9,977
Provision (Recovery) For Loan Losses		—		1,200		(1,200)		4,000
NET INTEREST INCOME AFTER PROVISION (RECOVERY) FOR LOAN LOSSES		10,010		9,216		31,121		27,270
Provision For Loan Losses										Provision For Loan Losses	—		—
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES										NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES	9,893		9,977
NONINTEREST INCOME	NONINTEREST INCOME									NONINTEREST INCOME
Service Fees	Service Fees	602		554		1,762		1,646		Service Fees	526		546
Insurance Commissions	Insurance Commissions	1,194		1,079		3,998		3,475		Insurance Commissions	1,798		1,595
Other Commissions	Other Commissions	93		76		431		374		Other Commissions	89		165
Net Gain on Sales of Loans	Net Gain on Sales of Loans	49		435		166		1,003		Net Gain on Sales of Loans	—		86
Net Gain (Loss) on Securities		24		(59)		482		20
Net (Loss) Gain on Securities										Net (Loss) Gain on Securities	(7)		447
Net Gain on Purchased Tax Credits	Net Gain on Purchased Tax Credits	18		15		53		46		Net Gain on Purchased Tax Credits	14		18

Net Loss on Disposal of Fixed Assets	Net Loss on Disposal of Fixed Assets	—		(65)		(3)		(48)		Net Loss on Disposal of Fixed Assets	(8)		—
Income from Bank-Owned Life Insurance	Income from Bank-Owned Life Insurance	138		140		411		417		Income from Bank-Owned Life Insurance	136		137
Other Income (Loss)		80		(2)		291		(240)
Other Income										Other Income	65		180
TOTAL NONINTEREST INCOME	TOTAL NONINTEREST INCOME	2,198		2,173		7,591		6,693		TOTAL NONINTEREST INCOME	2,613		3,174
NONINTEREST EXPENSE	NONINTEREST EXPENSE									NONINTEREST EXPENSE
Salaries and Employee Benefits	Salaries and Employee Benefits	4,787		5,124		14,757		14,683		Salaries and Employee Benefits	4,565		4,894
Occupancy	Occupancy	615		759		2,349		2,191		Occupancy	686		710
Equipment	Equipment	205		220		782		701		Equipment	210		266
Data Processing	Data Processing	541		482		1,666		1,367		Data Processing	485		518
FDIC Assessment	FDIC Assessment	293		172		792		493		FDIC Assessment	209		250
PA Shares Tax	PA Shares Tax	224		355		714		963		PA Shares Tax	240		265
Contracted Services	Contracted Services	1,441		531		2,878		1,471		Contracted Services	587		687
Legal and Professional Fees	Legal and Professional Fees	180		161		788		567		Legal and Professional Fees	152		189
Advertising	Advertising	225		148		558		486		Advertising	116		140
Other Real Estate Owned Income		(89)		(12)		(153)		(30)
Other Real Estate Owned (Income)										Other Real Estate Owned (Income)	(38)		(38)
Amortization of Intangible Assets	Amortization of Intangible Assets	446		532		1,481		1,596		Amortization of Intangible Assets	445		532
Intangible Assets Impairment		—		18,693		1,178		18,693
Writedown of Fixed Assets		2		884		2,270		884

Other Expense	Other Expense	903		919		2,830		2,977		Other Expense	999		982
TOTAL NONINTEREST EXPENSE	TOTAL NONINTEREST EXPENSE	9,773		28,968		32,890		47,042		TOTAL NONINTEREST EXPENSE	8,656		9,395
Income (Loss) Before Income Tax Expense (Benefit)		2,435		(17,579)		5,822		(13,079)
Income Tax Expense (Benefit)		452		(184)		1,217		640
NET INCOME (LOSS)		$	1,983	$	(17,395)	$	4,605	$	(13,719)
Income Before Income Tax Expense										Income Before Income Tax Expense	3,850		3,756
Income Tax Expense										Income Tax Expense	803		911
NET INCOME										NET INCOME	$	3,047	$	2,845

EARNINGS (LOSS) PER SHARE
EARNINGS PER SHARE										EARNINGS PER SHARE
Basic	Basic	$	0.37	$	(3.22)	$	0.85	$	(2.54)	Basic	$	0.59	$	0.52
Diluted	Diluted	0.37		(3.22)		0.85		(2.54)		Diluted	0.58		0.52
WEIGHTED AVERAGE SHARES OUTSTANDING	WEIGHTED AVERAGE SHARES OUTSTANDING									WEIGHTED AVERAGE SHARES OUTSTANDING
Basic	Basic	5,373,032		5,395,342		5,412,989		5,406,710		Basic	5,198,194		5,434,374
Diluted	Diluted	5,390,128		5,395,342		5,420,792		5,406,710		Diluted	5,220,887		5,436,881

The accompanying notes are an integral part of these consolidated financial statements

Table of Contents

CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME ~~(LOSS)~~ (UNAUDITED)


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended March 31,
		2021		2020		2021		2020			2022		2021
(Dollars in thousands)	(Dollars in thousands)									(Dollars in thousands)

Net Income (Loss)		$	1,983	$	(17,395)	$	4,605	$	(13,719)
Net Income										Net Income	$	3,047	$	2,845

Other Comprehensive (Loss) Income:	Other Comprehensive (Loss) Income:									Other Comprehensive (Loss) Income:
Change in Unrealized Gain (Loss) on Investment Securities Available-for-Sale		(733)		(653)		(2,662)		2,292
Change in Unrealized (Loss) on Investment Securities Available-for-Sale										Change in Unrealized (Loss) on Investment Securities Available-for-Sale	(12,351)		(2,851)
Income Tax Effect	Income Tax Effect	158		137		571		(481)		Income Tax Effect	2,660		612

Reclassification Adjustment for Gain on Sale of Debt Securities Included in Net Income (1)	Reclassification Adjustment for Gain on Sale of Debt Securities Included in Net Income (1)	—		—		(225)		(489)		Reclassification Adjustment for Gain on Sale of Debt Securities Included in Net Income (1)	—		(225)
Income Tax Effect (2)	Income Tax Effect (2)	—		—		48		103		Income Tax Effect (2)	—		48
Other Comprehensive (Loss) Income, Net of Income Tax Effect		(575)		(516)		(2,268)		1,425
Total Comprehensive Income (Loss)		$	1,408	$	(17,911)	$	2,337	$	(12,294)
Other Comprehensive (Loss), Net of Income Tax Effect										Other Comprehensive (Loss), Net of Income Tax Effect	(9,691)		(2,416)
Total Comprehensive (Loss) Income										Total Comprehensive (Loss) Income	$	(6,644)	$	429

(1) Reported in Net (Loss) Gain ~~(Loss)~~ on Securities on the Consolidated Statements of ~~Income (Loss).~~Income.

(2) Reported in Income Tax Expense ~~(Benefit)~~ on the Consolidated Statements of ~~Income (Loss).~~Income.

The accompanying notes are an integral part of these consolidated financial statements

Table of Contents

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (UNAUDITED)


Three Months Ended September 30, 2021		Shares Issued	Common Stock		Capital Surplus		Retained Earnings		Treasury Stock		Accumulated Other Comprehensive Income		Total Stockholders' Equity
Three Months Ended March 31, 2022															Three Months Ended March 31, 2022	Shares Issued	Common Stock		Capital Surplus		Retained Earnings		Treasury Stock		Accumulated Other Comprehensive Loss		Total Stockholders' Equity
(Dollars in thousands, except share and per share data)	(Dollars in thousands, except share and per share data)														(Dollars in thousands, except share and per share data)

June 30, 2021		5,680,993	$	2,367	$	82,969	$	51,146	$	(5,655)	$	1,709	$	132,536
Comprehensive Income:
December 31, 2021															December 31, 2021	5,680,993	$	2,367	$	83,294	$	57,534	$	(9,144)	$	(927)	$	133,124
Comprehensive Loss:															Comprehensive Loss:
Net Income	Net Income	—	—		—		1,983		—		—		1,983		Net Income	—	—		—		3,047		—		—		3,047
Other Comprehensive Loss	Other Comprehensive Loss	—	—		—		—		—		(575)		(575)		Other Comprehensive Loss	—	—		—		—		—		(9,691)		(9,691)

Restricted Stock Awards Granted															Restricted Stock Awards Granted	20,765	9		(9)		—		—		—		—
Restricted Stock Awards Forfeited															Restricted Stock Awards Forfeited	—	—		4		—		(4)		—		—
Stock-Based Compensation Expense	Stock-Based Compensation Expense	—	—		169		—		—		—		169		Stock-Based Compensation Expense	—	—		130		—		—		—		130
Exercise of Stock Options	Exercise of Stock Options	—	—		(8)		—		62		—		54		Exercise of Stock Options	—	—		3		—		164		—		167
Treasury stock purchased, at cost (81,676 shares)		—	—		—		—		(1,890)		—		(1,890)
Treasury stock purchased, at cost (131,840 shares)															Treasury stock purchased, at cost (131,840 shares)	—	—		—		—		(3,383)		—		(3,383)
Dividends Paid ($0.24 Per Share)	Dividends Paid ($0.24 Per Share)	—	—		—		(1,290)		—		—		(1,290)		Dividends Paid ($0.24 Per Share)	—	—		—		(1,238)		—		—		(1,238)
September 30, 2021		5,680,993	$	2,367	$	83,130	$	51,839	$	(7,483)	$	1,134	$	130,987
March 31, 2022															March 31, 2022	5,701,758	$	2,376	$	83,422	$	59,343	$	(12,367)	$	(10,618)	$	122,156

Three Months Ended September 30, 2020 Shares Issued Common Stock Capital Surplus Retained Earnings Treasury Stock Accumulated Other Comprehensive Income Total Stockholders' Equity
(Dollars in thousands, except share and per share data)
June 30, 2020 5,680,993 $ 2,367 $ 83,327 $ 68,039 $ (5,928) $ 4,587 $ 152,392
Comprehensive Loss:
Net Loss — — — (17,395) — — (17,395)
Other Comprehensive Loss — — — — — (516) (516)
Restricted Stock Awards Granted — — (103) — 103 — —
Stock-Based Compensation Expense — — 114 — — — 114
Dividends Paid ($0.24 Per Share) — — — (1,296) — — (1,296)
September 30, 2020 5,680,993 $ 2,367 $ 83,338 $ 49,348 $ (5,825) $ 4,071 $ 133,299


Three Months Ended March 31, 2021	Shares Issued	Common Stock		Capital Surplus		Retained Earnings		Treasury Stock		Accumulated Other Comprehensive Income		Total Stockholders' Equity
(Dollars in thousands, except share and per share data)

December 31, 2020	5,680,993	$	2,367	$	82,723	$	51,132	$	(5,094)	$	3,402	$	134,530
Comprehensive Income:
Net Income	—	—		—		2,845		—		—		2,845
Other Comprehensive Loss	—	—		—		—		—		(2,416)		(2,416)


Stock-Based Compensation Expense	—	—		121		—		—		—		121


Dividends Paid ($0.24 Per Share)	—	—		—		(1,304)		—		—		(1,304)
March 31, 2021	5,680,993	$	2,367	$	82,844	$	52,673	$	(5,094)	$	986	$	133,776

The accompanying notes are an integral part of these consolidated financial statements

Table of Contents

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

Nine Months Ended September 30, 2021 Shares Issued Common Stock Capital Surplus Retained Earnings Treasury Stock Accumulated Other Comprehensive Income Total Stockholders' Equity
(Dollars in thousands, except share and per share data)
December 31, 2020 5,680,993 $ 2,367 $ 82,723 $ 51,132 $ (5,094) $ 3,402 $ 134,530
Comprehensive Income:
Net Income — — — 4,605 — — 4,605
Other Comprehensive Loss — — — — — (2,268) (2,268)
Stock-Based Compensation Expense — — 415 — — — 415
Exercise of Stock Options — — (8) — 62 — 54
Treasury stock purchased, at cost (106,973 shares) — — — — (2,451) — (2,451)
Dividends Paid ($0.72 Per Share) — — — (3,898) — — (3,898)
September 30, 2021 5,680,993 $ 2,367 $ 83,130 $ 51,839 $ (7,483) $ 1,134 $ 130,987

Nine Months Ended September 30, 2020 Shares Issued Common Stock Capital Surplus Retained Earnings Treasury Stock Accumulated Other Comprehensive Income Total Stockholders' Equity
(Dollars in thousands, except share and per share data)
December 31, 2019 5,680,993 $ 2,367 $ 82,971 $ 66,955 $ (3,842) $ 2,646 $ 151,097
Comprehensive Loss:
Net Loss — — — (13,719) — — (13,719)
Other Comprehensive Income — — — — — 1,425 1,425
Restricted Stock Awards Forfeited — — 96 — (96) — —
Restricted Stock Awards Granted — — (103) — 103 — —
Stock-Based Compensation Expense — — 370 — — — 370
Exercise of Stock Options — — 4 — (82) — (78)
Treasury Stock Purchased, at cost (67,816 shares) — — — — (1,908) — (1,908)
Dividends Paid ($0.72 Per Share) — — — (3,888) — — (3,888)
September 30, 2020 5,680,993 $ 2,367 $ 83,338 $ 49,348 $ (5,825) $ 4,071 $ 133,299


Three Months Ended March 31,	2022		2021
(Dollars in thousands)

OPERATING ACTIVITIES
Net Income	$	3,047	$	2,845
Adjustments to Reconcile Net Income to Net Cash Provided By Operating Activities
Net Amortization on Securities	17		31
Depreciation and Amortization	637		562





Loss (Gain) on Securities	7		(447)
Gain on Purchased Tax Credits	(14)		(18)
Income from Bank-Owned Life Insurance	(136)		(137)
Proceeds From Mortgage Loans Sold	—		2,251
Originations of Mortgage Loans for Sale	—		(2,165)
Gain on Sale of Loans	—		(86)
Gain on Sale of Other Real Estate Owned and Repossessed Assets	(1)		—
Noncash Expense for Stock-Based Compensation	130		121
Decrease in Accrued Interest Receivable	94		134
Net Loss on Disposal of Fixed Assets	8		—
Increase in Taxes Payable	956		893
Payments on Operating Leases	—		(88)
Decrease in Accrued Interest Payable	60		(141)

Other, Net	(1,640)		714
NET CASH PROVIDED BY OPERATING ACTIVITIES	3,165		4,469
INVESTING ACTIVITIES
Investment Securities Available for Sale:
Proceeds From Principal Repayments and Maturities	8,328		10,953
Purchases of Securities	(26,826)		(22,299)
Proceeds from Sale of Securities	—		11,930
Net Decrease in Loans	223		3,148
Purchase of Premises and Equipment	(186)		(199)


Proceeds From Sale of Other Real Estate Owned	37		—
(Increase) Decrease in Restricted Equity Securities	(26)		200

NET CASH (USED) PROVIDED BY INVESTING ACTIVITIES	(18,450)		3,733
FINANCING ACTIVITIES
Net Increase in Deposits	23,700		59,894
Net (Decrease) Increase in Short-Term Borrowings	(47)		4,297

Principal Payments on Other Borrowed Funds	—		(2,000)
Cash Dividends Paid	(1,238)		(1,304)
Treasury Stock, Purchases at Cost	(3,383)		—
Exercise of Stock Options	167		—
NET CASH PROVIDED BY FINANCING ACTIVITIES	19,199		60,887
INCREASE IN CASH AND CASH EQUIVALENTS	3,914		69,089
CASH AND DUE FROM BANKS AT BEGINNING OF YEAR	119,674		160,911
CASH AND DUE FROM BANKS AT END OF PERIOD	$	123,588	$	230,000

The accompanying notes are an integral part of these consolidated financial statements

~~Table of Contents~~

~~CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)~~

Nine Months Ended September 30, 2021 2020
(Dollars in thousands)
OPERATING ACTIVITIES
Net Income (Loss) $ 4,605 $ (13,719)
Adjustments to Reconcile Net Income (Loss) to Net Cash Provided By Operating Activities
Amortization (Accretion) on Securities 38 (9)
Depreciation and Amortization 1,810 2,578
(Recovery) Provision for Loan Losses (1,200) 4,000
Intangible Asset Impairment 1,178 —
Goodwill Impairment — 18,693
Writedown on Fixed Assets 2,270 884
Lease Impairment 227 —
Gain on Securities (482) (20)
Gain on Purchased Tax Credits (53) (46)
Income from Bank-Owned Life Insurance (411) (417)
Proceeds From Mortgage Loans Sold 8,182 24,317
Originations of Mortgage Loans for Sale (15,289) (23,314)
Gain on Sale of Loans (166) (1,003)
(Gain) Loss on Sale of Other Real Estate Owned and Repossessed Assets (76) 26
Noncash Expense for Stock-Based Compensation 415 370
Decrease (Increase) in Accrued Interest Receivable 517 (944)
Net Loss on Disposal of Fixed Assets 3 48
Increase (Decrease) in Taxes Payable 295 (253)
Payments on Operating Leases (251) (412)
Decrease in Accrued Interest Payable (277) (252)
Refund of Federal and State Income Taxes 1,311 —
Other, Net (68) (1,329)
NET CASH PROVIDED BY OPERATING ACTIVITIES 2,578 9,198
INVESTING ACTIVITIES
Investment Securities Available for Sale:
Proceeds From Principal Repayments and Maturities 29,563 91,219
Purchases of Securities (119,924) (68,851)
Proceeds from Sale of Securities 11,967 17,893
Net Decrease (Increase) in Loans 33,378 (100,436)
Purchase of Premises and Equipment (2,275) (184)
Proceeds from Disposal of Premises and Equipment — 26
Proceeds From Sale of Other Real Estate Owned 285 99
Decrease (Increase) in Restricted Equity Securities 533 (305)
NET CASH USED IN INVESTING ACTIVITIES (46,473) (60,539)
FINANCING ACTIVITIES
Net Increase in Deposits 52,542 80,677
Net Increase in Short-Term Borrowings 12,260 11,490
Principal Payments on Other Borrowed Funds (2,000) (3,000)
Cash Dividends Paid (3,898) (3,888)
Treasury Stock, Purchases at Cost (2,451) (1,908)
Exercise of Stock Options 54 (78)
NET CASH PROVIDED BY FINANCING ACTIVITIES 56,507 83,293
INCREASE IN CASH AND CASH EQUIVALENTS 12,612 31,952
CASH AND DUE FROM BANKS AT BEGINNING OF YEAR 160,911 80,217
CASH AND DUE FROM BANKS AT END OF PERIOD $ 173,523 $ 112,169

~~The accompanying notes are an integral part of these consolidated financial statements~~

Table of Contents

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

Nine Months Ended September 30, 2021 2021 2020
(Dollars in thousands)
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash Paid For:
Interest on Deposits and Borrowings (Including Interest Credited to Deposits of $2,761 and $4,382, Respectively) $ 2,951 $ 4,694
Income Taxes 1,524 1,785
SUPPLEMENTAL NONCASH DISCLOSURE:
Transfer of Loans to Loans Held for Sale 10,056 —
Transfer of Premises and Equipment to Premises and Equipment Held for Sale and Other Assets 1,075 —
Transfer of Deposits to Deposits Held for Sale 102,647 —
Other Real Estate Acquired in Settlement of Loans 37 115
Right of Use Asset Recognized — 329
Lease Liability Recognized — 329


Three Months Ended March 31, 2022	2022		2021
(Dollars in thousands)

SUPPLEMENTAL CASH FLOW INFORMATION:
Cash Paid For:
Interest on Deposits and Borrowings (Including Interest Credited to Deposits of $450 and $1,084, Respectively)	$	486	$	1,153

SUPPLEMENTAL NONCASH DISCLOSURE:







Right of Use Asset Recognized	1,175		—
Lease Liability Recognized	1,175		—

The accompanying notes are an integral part of these consolidated financial statements

Table of Contents

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Note 1. Summary of Significant Accounting Policies

Principles of Consolidation and Basis of Presentation

The accompanying consolidated financial statements include the accounts of CB Financial Services, Inc. (“CB Financial”) and its wholly owned subsidiary, Community Bank (the “Bank”), and the Bank’s wholly-owned subsidiary, Exchange Underwriters, Inc. (“Exchange Underwriters”). CB Financial, the Bank and Exchange Underwriters are collectively referred to as the “Company”. All intercompany transactions and balances have been eliminated in consolidation.

The accompanying unaudited interim financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) and in conformity with accounting principles generally accepted in the United States of America (“GAAP”) and with general practice within the banking industry. Certain information and note disclosures normally included in annual financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to those rules and regulations, although the Company believes that the disclosures made are adequate to make the information not misleading in any material respect. In preparing financial statements in conformity with GAAP, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the Consolidated Statements of Financial Condition and income and expenses for the reporting period. Actual results could differ significantly from those estimates. Material estimates that are particularly susceptible to significant change in the near term relate to determination of the allowance for losses on loans, the valuation of real estate acquired in connection with foreclosures or in satisfaction of loans, other-than-temporary impairment evaluations of securities, goodwill and intangible assets impairment, and the valuation of deferred tax assets.

In the opinion of management, the accompanying unaudited interim financial statements include all adjustments considered necessary for a fair presentation of the Company’s financial position and results of operations at the dates and for the periods presented. All these adjustments are of a normal, recurring nature, and they are the only adjustments included in the accompanying unaudited interim financial statements. These interim consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto in the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2020.~~2021. Interim results are not necessarily indicative of results for a full year.

The Company evaluated subsequent events through the date the consolidated financial statements were filed with the SEC and incorporated into the consolidated financial statements the effect of all material known events determined by Accounting Standards Codification ("ASC") 855, Subsequent Events, to be recognizable events.

Nature of Operations

The Company derives substantially all its income from banking and bank-related services which include interest ~~earnings~~income on commercial, commercial mortgage, residential real estate and consumer loan financing, as well as interest ~~earnings~~and dividend income on ~~investment~~ securities, insurance commissions, and fees generated from deposit services to its customers. The Company provides banking services through its subsidiary, Community Bank, a Pennsylvania-chartered commercial ~~bank. The Bank operates 11 branches~~bank headquartered in ~~Greene, Allegheny, Washington, Fayette and Westmoreland Counties in southwestern Pennsylvania, and 5 branches in Marshall, Ohio, Upshur and Wetzel Counties in West Virginia.~~Carmichaels, Pennsylvania. The Bank is a community-oriented institution offering residential and commercial real estate loans, commercial and industrial loans, and consumer loans as well as a variety of deposit products for individuals and businesses in its market area. After the consolidation of 6 branches and the sale of 2 branches in 2021 and the consolidation of 2 branches in 2020, the Bank operates 11 branches in Greene, Allegheny, Washington, Fayette and Westmoreland Counties in southwestern Pennsylvania, and 3 branches in Marshall and Ohio Counties in West Virginia. Property and casualty, commercial liability, surety and other insurance products are offered through Exchange Underwriters, a full-service, independent insurance agency.

~~Reclassifications~~

~~Certain comparative amounts~~

Critical Accounting Policies; Use of Critical Accounting Estimates

There were no material changes in our critical accounting policies during the three months ended March 31, 2022. See Note 1 to the consolidated financial statements included in our Annual Report on Form 10-K for the ~~prior~~ year ~~have been reclassified to conform to the current year presentation. Such reclassifications did not affect net income or stockholders’ equity.~~

~~Assets and Liabilities Held for Sale~~

~~Assets and liabilities (disposal groups) are classified~~ended December 31, 2021, as ~~held for sale when their carrying amounts will be recovered principally through sale when all of the following criteria are met:~~

•~~management, having the authority to approve the action, commits to a plan to sell the disposal group;~~

•~~the disposal group is available for immediate sale in its present condition subject only to terms that are usual and customary for sales of such disposal groups;~~

•~~an active program to locate a buyer and other actions required to complete the plan to sell the disposal group have been initiated;~~

~~Table of Contents~~

•the sale of the disposal group is probable, and transfer of the disposal group is expected to qualify as a completed sale within one year, except if events or circumstances beyond the Company’s control extend the period of time required to sell the disposal group beyond one year;

•~~the disposal group is being actively marketed for sale at a price that is reasonable in relation to its current fair value; and~~

•~~actions required to complete the plan indicate that it is unlikely that significant changes to the plan will be made or that the plan will be withdrawn.~~

Assets and liabilities held for sale are measured at the lower of carrying amount and fair value, less estimated costs to sell, and are presented separately on the Consolidated Statements of Financial Condition. Any loss resulting from this measurement is recognized in the period in which the held for sale criteria are met. Gains are not recognized on the sale of a disposal group until the date of sale. The Company assesses the fair value of a disposal group, less any estimated costs to sell, each reporting period it remains classified as held for sale and reports any subsequent losses as an adjustment to the carrying value of the disposal group. Assets classified as held for sale are no longer depreciated or amortized.

Loans held for sale may consist of residential real estate loans originated and intended for sale in the secondary market. These loans are generally sold with loan servicing rights retained. Net unrealized losses, if any, are recognized through a valuation allowance charged to income. Gains and losses on residential real estate loans held for sale are included in noninterest income.

~~Impairment of Long-Lived Assets~~

The Company routinely performs assessments of the recoverability of long-lived assets when events or changes in circumstances indicate that their carrying values may not be recoverable and are in excess of their fair value, less estimated costs to sell. If estimated recoverable amounts are lower than carrying values, assets are considered impaired and reduced to their recoverable amountsfiled with the ~~recognized impairment charges recorded in noninterest expense in the Consolidated Statements of (Loss) Income.~~

~~Long-lived assets are tested~~SEC, for ~~impairment individually or as part of an asset group. An asset group is the unit of~~additional information regarding our critical accounting ~~for long-lived assets to be held and used, which represents the lowest level for which identifiable cash flows are largely independent of the cash flows of other groups of assets and liabilities.~~policies.

~~The Company follows ASC 360,~~
~~Property, Plant and Equipment,~~ ~~which requires three steps to identify, recognize and measure the impairment of a long-lived asset (asset group) to be held and used:~~

~~Step 1 – Consider whether Indicators of Impairment are Present.~~

~~The following are examples of such events or changes in circumstances.~~

•~~A significant decrease in the market price of a long-lived asset (asset group).~~

•~~A significant adverse change in the extent or manner in which a long-lived asset (asset group) is being used or in its physical condition.~~

•~~A significant adverse change in legal factors or in the business climate that could affect the value of a long-lived asset (asset group), including an adverse action or assessment by a regulator.~~

•~~An accumulation of costs significantly in excess of the amount originally expected for the acquisition or construction of a long-lived asset (asset group).~~

•A current-period operating or cash flow loss combined with a history of operating or cash flow losses or a projection or forecast that demonstrates continuing losses associated with the use of a long-lived asset (asset group).

•A current expectation that, more likely than not, a long-lived asset (asset group) will be sold or otherwise disposed of significantly before the end of its previously estimated useful life. The term more likely than not refers to a level of likelihood that is more than 50 percent.

~~Step 2—Test for Recoverability~~

If indicators of impairment are present, the Company performs a recoverability test comparing the sum of the estimated undiscounted cash flows attributable to the long-lived asset or asset group in question to the carrying amount of the long-lived asset or asset group.

~~Step 3—Measurement of an Impairment Loss~~

If the undiscounted cash flows used in the recoverability test are less than the carrying amount of the long-lived asset (asset group), the Company estimates the fair value of the long-lived asset or asset group and recognizes an impairment loss when the carrying amount of the long-lived asset or asset group exceeds the estimated fair value.

An impairment loss is allocated to the long-lived assets of the group on a pro rata basis using the relative carrying amounts of those assets, except that the loss allocated to an individual long-lived asset of the group must not reduce the carrying amount of

~~Table of Contents~~

~~that asset below its fair value whenever the fair value is determinable without undue cost and effort. ASC 360 prohibits the subsequent reversal of an impairment loss for an asset held and used.~~

Recent Accounting Standards

~~In August 2021, the Financial Accounting Standard Board (“FASB”) issued Accounting Standards Update ("ASU") 2021-06,~~ Presentation of Financial Statements (Topic 205), Financial Services—Depository and Lending (Topic 942), and Financial Services—Investment Companies (Topic 946): Amendments to SEC Paragraphs Pursuant to SEC Final Rule Releases No. 33-10786, Amendments to Financial Disclosures about Acquired and Disposed Businesses, and No. 33-10835, Update of Statistical Disclosures for Bank and Savings and Loan Registrants. This ASU incorporates recent SEC rule changes into the FASB Codification, including SEC Final Rule Releases No. 33-10786, Amendments to Financial Disclosures about Acquired and Disposed Businesses, and No. 33-10835, Update of Statistical Disclosures for Bank and Savings and Loan Registrants. The SEC rule changes update and expand the statistical disclosures that bank and savings and loan registrants provide to investors, in light of changes in this sector over the past 30 years. The rules also eliminate certain disclosure items that are duplicative of other SEC rules and requirements of U.S. GAAP. The rules replace Industry Guide 3, Statistical Disclosure by Bank Holding Companies, with updated disclosure requirements in a new subpart of Regulation S-K. The rules are intended to help ensure that investors have access to more meaningful, relevant information to facilitate their investment and voting decisions. The amendments are effective prospectively for fiscal years beginning after December 15, 2021, and interim periods within fiscal years beginning after December 15, 2022. The Company does not expect the adoption of this ASU will have a material impact on the Company's consolidated statements of financial condition or results of operation.

~~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.~~ This ASU provides temporary optional guidance to ease the potential burden in accounting for reference rate reform. The new guidance provides optional expedients and exceptions for applying GAAP to contract modifications and hedging relationships, subject to meeting certain criteria, that reference the London Inter-bank Offered Rate (“LIBOR”) or another reference rate expected to be discontinued. The elective guidance in the ASU applies to modifications of contract terms that will directly replace, or have the potential to replace, an affected rate with another interest rate index, as well as certain contemporaneous modifications of other contract terms related to the replacement of an affected rate. The ASU notes that changes in contract terms that are made to effect the reference rate reform transition are considered related to the replacement of a reference rate if they are not the result of a business decision that is separate from or in addition to changes to the terms of a contract to effect that transition. The optional expedient allows companies to account for the modification as if it was not substantial (i.e., do not treat as an extinguishment of debt). The ASU is intended to help stakeholders during the global market-wide reference rate transition period. ASU 2020-04 is effective for all entities as of March 12, 2020 through December 31, 2022. While the LIBOR reform may require extensive changes to the contracts that govern LIBOR based products, as well as our systems and processes, we cannot yet determine whether the Company will be able to use the optional expedient for the changes to contract terms that may be required by LIBOR reform and therefore, the Company cannot yet determine the magnitude of the impact or the overall impact of the new guidance on the Company’s consolidated financial condition or results of operation.

~~In December 2019, FASB issued ASU 2019-12,~~ ~~Income taxes (Topic 740); Simplifying the Accounting for Income Taxes~~. ASU 2019-12 provides amendments intended to reduce the cost and complexity in accounting for income taxes while maintaining or improving the usefulness of the information provided to users of financial statements. ASU 2019-12 removes the following exceptions from ASC 740, Income Taxes: (i) exceptions to the incremental approach for intraperiod tax allocation; (ii) exceptions to accounting for basis differences when a foreign subsidiary becomes an equity method investment or a foreign equity method investment become a subsidiary; and (iii) exception in interim period income tax accounting for year-to-date losses that exceed anticipated losses. ASU 2019-12 provides the following amendments that simplify and improve guidance with Topic 740: (i) franchise taxes that are based partially on income; (ii) transactions that result in a step up in the tax basis of goodwill; (iii) separate financial statements of legal entities that are not subject to tax; (iv) enacted changes in tax laws in interim periods; and (v) employee stock ownership plans and investments in qualified affordable housing projects accounted for using the equity method. For public business entities, the amendments in ASU 2019-12 are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020. The adoption of this ASU did not have a material impact on the Company's consolidated statements of financial condition or results of operation.

In September 2016, the FASB issued ASU 2016-13,Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. ASU 2016-13 amends guidance on reporting credit losses for assets held at amortized cost basis and available for sale debt securities. For assets held at amortized cost basis, ASU 2016-13 eliminates the probable initial recognition threshold in current GAAP; and instead requires an entity to reflect its current estimate of all expected credit losses. The allowance for credit losses is a valuation account that is deducted from the amortized cost basis of the financial assets to present the net amount expected to be collected. For available-for-sale debt securities, credit losses should be measured in a manner similar to current ~~GAAP,~~GAAP; however, this ASU requires that credit losses be presented as an allowance rather than as a write-down. ASU 2016-13 affects companies holding financial assets and net investment in leases that are not accounted for at ~~fair value through net income. The ASU 2016-13 amendments affect loans, debt securities, trade receivables, net investments in~~

107

Table of Contents

fair value through net income. The ASU 2016-13 amendments affect loans, debt securities, trade receivables, net investments in leases, off balance-sheet credit exposures, reinsurance receivables, and any other financial assets not excluded from the scope that have the contractual right to receive cash. ASU 2016-13 was originally effective for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years, with early adoption permitted. In November 2019, the FASB approved a delay of the required implementation date of ASU 2016-13 for smaller reporting companies, including the Company, resulting in a required implementation date for the Company of January 1, 2023. Early adoption will continue to be permitted. ~~The Company is evaluating~~In preparation for the ~~impact~~implementation of this ASU, the Company has formed a cross-functional team, contracted with a third-party software provider, and is consulting with a third-party professional advisory service to assist in the model development. The Company plans to assess the overall impact by running the existing and new allowance models in parallel prior to the period of implementation. The Company expects to recognize a one-time adjustment to the allowance for loan losses upon adoption, but we cannot yet determine the magnitude of the one-time adjustment or the overall impact of the new guidance on the Company’s consolidated financial condition or results of operation.

Note 2. ~~Impairment of Long-Lived Assets and Assets and Liabilities of Branches Held for Sale~~

~~Branch Optimization and Operational Efficiency Initiatives~~

As previously disclosed by the Company on February 23, 2021, May 27, 2021 and June 10, 2021, the Company announced the implementation of branch optimization and operational efficiency strategic initiatives to improve the Bank’s financial performance and operations in order to position the Bank for continued profitable growth. The Bank intends to optimize its current branch network while expanding technology and infrastructure investments in its remaining locations. The decision was the result of a comprehensive internal study that measured branch performance by comparing financial and non-financial indicators to growth opportunities, while evolving changes in consumer preferences, largely driven by the global pandemic, led to an acceleration of branch optimization efforts. The Bank also completed a comprehensive review of its branch network and operating environment to identify solutions to improve operating performance. This review prioritized profitability, efficiency, infrastructure and client experience improvements, automation in operations, and digital marketing and technology investments.

The Bank continues to make progress related to these initiatives through the consolidation of 6 branches that was completed on June 30, 2021, reducing the Bank's branch network to 16 branches. The Bank is also in the process of implementing operational efficiencies related to individualized processes within its branch network and operating environment. In addition, on June 10, 2021, CB Financial, Community Bank, and Citizens Bank of West Virginia, Inc. (“Citizens Bank”) executed a Purchase and Assumption Agreement (the “Agreement”) pursuant to which Citizens Bank has agreed to purchase certain loans and other assets, and assume certain deposits and other liabilities, of the branch offices of Community Bank located in Buckhannon, West Virginia, and in New Martinsville, West Virginia. The Agreement provides for a 5.0% premium to be paid on assumed deposits, which will be recognized as income upon the expected close of the transaction in the fourth quarter of 2021, subject to regulatory approval and other closing conditions. As of September 30, 2021, all requisite regulatory approvals had been received.

As a result of the events and changes in circumstances associated with the branch optimization initiatives whereby 6 branches were consolidated and 2 others are to be divested, the Company performed assessments of the recoverability of long-lived assets to determine whether their carrying values may not be recoverable. Utilizing guidance in ASC 360, the Company performed the three step process to identify, recognize and measure the impairment of the long-lived assets.

•Earnings Pe~~For the 6 locations that were consolidated:~~r Share

◦~~NaN locations were written down to the fair value of the land based on the appraised value due to plans to raze the buildings.~~

◦~~NaN locations are being marketed for sale and were written down to fair value based on appraised value.~~

◦~~NaN location is leased. Refer to Note 11 for further discussion of the impairment of the right of use asset associated with the operating lease.~~

•For the 2 branches to be divested, fair value of the premises and equipment was determined based on the contractual terms of the Agreement, which provide that the premises and equipment will be purchased at the Company's net book value, net of a $338,000 contractual discount at the acquisition date.

In total, the Company recognized $2,000 and $2.3 million in charges on the premises and equipment for the three and nine months ended September 30, 2021, respectively, as Writedown on Fixed Assets in the Consolidated Statements of (Loss) Income.

The branch optimization and operational efficiency initiatives resulted in $1.3 million and $6.3 million of restructuring-related and other expenses for the three and nine months ended September 30, 2021, respectively. The expenses include the aforementioned $2.3 million writedown on fixed assets, a $1.2 million impairment of intangible assets associated with the branch sales (refer to Note 14 for further information) for the nine months ended September 30, 2021, as well as $1.3 million and $2.9 million of expenses related to contracted services, employee severance costs, branch lease impairment (refer to Note 11 for further information), professional fees, data processing fees, legal and other expenses for the three and nine months ended September 30, 2021, respectively.

~~Table of Contents~~

~~Assets and Liabilities of Branches Held for Sale~~

At September 30, 2021, the Company reclassified the deposits to be assumed to deposits held for sale, loans to be purchased to loans held for sale and premises and equipment to be purchased to premises and equipment held for sale on the Consolidated Statements of Financial Condition.

~~The assets and liabilities classified as held for sale of the disposal group related to the branch sales are as follows at September 30, 2021.~~


	September 30, 2021
~~(Dollars in thousands)~~

~~Loans Held for Sale~~
~~Real Estate:~~
~~Residential~~	$	~~2,290~~
~~Commercial~~	~~2,911~~

~~Commercial and Industrial~~	~~592~~
~~Consumer~~	~~252~~
~~Other~~	~~453~~
~~Total Loans Held for Sale~~	$	~~6,498~~

~~Premises and Equipment Held for Sale~~	~~795~~

~~Deposits Held for Sale~~
~~Non-Interest Bearing Demand Deposits~~	$	~~15,070~~
~~Interest Bearing Demand Deposits~~	~~31,502~~
~~Money Market Accounts~~	~~17,578~~
~~Savings Accounts~~	~~20,803~~
~~Time Deposits~~	~~17,694~~
~~Total Deposits Held for Sale~~	$	~~102,647~~

~~Note 3. Earnings (Loss) Per Share~~

There are no convertible securities which would affect the numerator in calculating basic and diluted earnings ~~(loss)~~ per share; therefore, net income ~~(loss)~~ as presented on the Consolidated Statements of Income ~~(Loss)~~ is used as the numerator.

The following table sets forth the composition of the weighted-average common shares (denominator) used in the basic and diluted earnings per share computation.

Three Months Ended
September 30, Nine Months Ended
September 30,
2021 2020 2021 2020
(Dollars in thousands, except share and per share data)
Net Income (Loss) $ 1,983 $ (17,395) $ 4,605 $ (13,719)
Weighted-Average Basic Common Shares Outstanding 5,373,032 5,395,342 5,412,989 5,406,710
Dilutive Effect of Common Stock Equivalents (Stock Options and Restricted Stock) 17,096 — 7,803 —
Weighted-Average Diluted Common Shares and Common Stock Equivalents Outstanding 5,390,128 5,395,342 5,420,792 5,406,710
Earnings (Loss) Per Share:
Basic $ 0.37 $ (3.22) $ 0.85 $ (2.54)
Diluted 0.37 (3.22) 0.85 (2.54)

~~Table of Contents~~


	Three Months Ended March 31,
	2022		2021
(Dollars in thousands, except share and per share data)

Net Income	$	3,047	$	2,845

Weighted-Average Basic Common Shares Outstanding	5,198,194		5,434,374
Dilutive Effect of Common Stock Equivalents (Stock Options and Restricted Stock)	22,693		2,507
Weighted-Average Diluted Common Shares and Common Stock Equivalents Outstanding	5,220,887		5,436,881

Earnings Per Share:
Basic	$	0.59	$	0.52
Diluted	0.58		0.52

The dilutive effect on weighted average diluted common shares outstanding is the result of outstanding stock options and nonvested restricted stock. The following table presents for the periods indicated (a) options to purchase shares of common stock that were outstanding but not included in the computation of earnings per share because the options’ exercise price was greater than the average market price of the common shares for the period, and (b) shares of restricted stock awards that were not included in the computation of diluted earnings per share because the hypothetical repurchase of shares under the treasury stock method exceeded the weighted average nonvested restricted awards, therefore the effects would be anti-dilutive.


		Three Months Ended September 30,		Nine Months Ended September 30,			Three Months Ended March 31,
		2021	2020	2021	2020		2022	2021
Stock Options	Stock Options	71,741	220,271	199,641	220,271	Stock Options	155,138	201,662
Restricted Stock	Restricted Stock	23,000	49,130	32,360	49,130	Restricted Stock	37,865	33,610

~~When there is a net loss for the period, the exercise or conversion~~

Table of any potential shares increases the number of shares in the denominator and results in a lower loss per share. In that situation, the potential shares are antidilutive and not included in the Company's loss per share calculation. Therefore, if there is a net loss, diluted loss per share is the same as basic loss per share.Contents

Note 4.3. Securities

The following table presents the amortized cost and fair value of securities available-for-sale at the dates indicated:


		September 30, 2021									March 31, 2022
		Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value			Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
(Dollars in thousands)	(Dollars in thousands)									(Dollars in thousands)

Available-for-Sale Debt Securities:	Available-for-Sale Debt Securities:									Available-for-Sale Debt Securities:
U.S. Government Agencies	U.S. Government Agencies	$	50,992	$	—	$	(1,054)	$	49,938	U.S. Government Agencies	$	53,992	$	—	$	(4,781)	$	49,211
Obligations of States and Political Subdivisions	Obligations of States and Political Subdivisions	18,356		1,064		—		19,420		Obligations of States and Political Subdivisions	17,946		448		(1)		18,393
Mortgage-Backed Securities - Government-Sponsored Enterprises	Mortgage-Backed Securities - Government-Sponsored Enterprises	140,255		2,205		(770)		141,690		Mortgage-Backed Securities - Government-Sponsored Enterprises	52,505		177		(2,063)		50,619
Collateralized Mortgage Obligations - Government Sponsored Enterprises										Collateralized Mortgage Obligations - Government Sponsored Enterprises	107,848		2		(7,042)		100,808
Corporate Debt	Corporate Debt	7,482		—		(1)		7,481		Corporate Debt	9,480		—		(273)		9,207
Total Available-for-Sale Debt Securities	Total Available-for-Sale Debt Securities	217,085		3,269		(1,825)		218,529		Total Available-for-Sale Debt Securities	241,771		627		(14,160)		228,238

Equity Securities:	Equity Securities:									Equity Securities:
Mutual Funds	Mutual Funds							999		Mutual Funds							944
Other	Other							1,823		Other							1,915
Total Equity Securities	Total Equity Securities							2,822		Total Equity Securities							2,859
Total Securities	Total Securities							$	221,351	Total Securities							$	231,097


	December 31, 2021
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
(Dollars in thousands)

Available-for-Sale Debt Securities:
U.S. Government Agencies	$	53,992	$	2	$	(1,433)	$	52,561
Obligations of States and Political Subdivisions	17,951		1,004		—		18,955
Mortgage-Backed Securities - Government-Sponsored Enterprises	55,373		1,468		(282)		56,559
Collateralized Mortgage Obligations - Government Sponsored Enterprises	88,493		164		(2,074)		86,583
Corporate Debt	7,481		—		(31)		7,450
Total Available-for-Sale Debt Securities	223,290		2,638		(3,820)		222,108

Equity Securities:
Mutual Funds							990
Other							1,876
Total Equity Securities							2,866
Total Securities							$	224,974

139

Table of Contents

December 31, 2020
Amortized
Cost
Gross
Unrealized
Gains
Gross
Unrealized
Losses
Fair
Value
(Dollars in thousands)
Available-for-Sale Debt Securities:
U.S. Government Agencies $ 41,994 $ 12 $ (595) $ 41,411
Obligations of States and Political Subdivisions 20,672 1,321 — 21,993
Mortgage-Backed Securities - Government-Sponsored Enterprises 75,900 3,593 — 79,493
Total Available-for-Sale Debt Securities 138,566 4,926 (595) 142,897
Equity Securities:
Mutual Funds 1,019
Other 1,484
Total Equity Securities 2,503
Total Securities $ 145,400

The following tables show the Company’s gross unrealized losses and fair value, aggregated by investment category and length of time that the individual securities have been in a continuous unrealized loss position, at the dates indicated:


		September 30, 2021																March 31, 2022
		Less than 12 months					12 Months or Greater					Total						Less than 12 months					12 Months or Greater					Total
		Number of Securities	Fair Value		Gross Unrealized Losses		Number of Securities	Fair Value		Gross Unrealized Losses		Number of Securities	Fair Value		Gross Unrealized Losses			Number of Securities	Fair Value		Gross Unrealized Losses		Number of Securities	Fair Value		Gross Unrealized Losses		Number of Securities	Fair Value		Gross Unrealized Losses
(Dollars in thousands)	(Dollars in thousands)																(Dollars in thousands)

U.S. Government Agencies	U.S. Government Agencies	7	$	25,759	$	(239)	5	$	24,179	$	(815)	12	$	49,938	$	(1,054)	U.S. Government Agencies	3	$	11,226	$	(771)	10	$	37,985	$	(4,010)	13	$	49,211	$	(4,781)

Obligations of States and Political Subdivisions																	Obligations of States and Political Subdivisions	2	1,070		(1)		—	—		—		2	1,070		(1)
Mortgage Backed Securities- Government Sponsored Enterprises	Mortgage Backed Securities- Government Sponsored Enterprises	10	64,133		(770)		—	—		—		10	64,133		(770)		Mortgage Backed Securities- Government Sponsored Enterprises	17	29,175		(1,745)		1	3,395		(318)		18	32,570		(2,063)
Collateralized Mortgage Obligations - Government Sponsored Enterprises																	Collateralized Mortgage Obligations - Government Sponsored Enterprises	20	100,559		(7,042)		—	—		—		20	100,559		(7,042)
Corporate Debt	Corporate Debt	1	4,950		(1)		—	—		—		1	4,950		(1)		Corporate Debt	3	9,208		(273)		—	—		—		3	9,208		(273)
Total	Total	18	$	94,842	$	(1,010)	5	$	24,179	$	(815)	23	$	119,021	$	(1,825)	Total	45	$	151,238	$	(9,832)	11	$	41,380	$	(4,328)	56	$	192,618	$	(14,160)


		December 31, 2020																December 31, 2021
		Less than 12 months					12 Months or Greater					Total						Less than 12 months					12 Months or Greater					Total
		Number of Securities	Fair Value		Gross Unrealized Losses		Number of Securities	Fair Value		Gross Unrealized Losses		Number of Securities	Fair Value		Gross Unrealized Losses			Number of Securities	Fair Value		Gross Unrealized Losses		Number of Securities	Fair Value		Gross Unrealized Losses		Number of Securities	Fair Value		Gross Unrealized Losses
(Dollars in thousands)	(Dollars in thousands)																(Dollars in thousands)

U.S. Government Agencies	U.S. Government Agencies	7	$	32,399	$	(595)	—	$	—	$	—	7	$	32,399	$	(595)	U.S. Government Agencies	5	$	17,729	$	(269)	7	$	31,830	$	(1,164)	12	$	49,559	$	(1,433)

Obligations of States and Political Subdivisions																	Obligations of States and Political Subdivisions	—	—		—		—	—		—		—	—		—
Mortgage Backed Securities- Government Sponsored Enterprises																	Mortgage Backed Securities- Government Sponsored Enterprises	8	28,772		(282)		—	—		—		8	28,772		(282)
Collateralized Mortgage Obligations - Government Sponsored Enterprises																	Collateralized Mortgage Obligations - Government Sponsored Enterprises	10	77,560		(2,074)		—	—		—		10	77,560		(2,074)
Corporate Debt																	Corporate Debt	2	7,450		(31)		—	—		—		2	7,450		(31)
Total	Total	7	$	32,399	$	(595)	—	$	—	$	—	7	$	32,399	$	(595)	Total	25	$	131,511	$	(2,656)	7	$	31,830	$	(1,164)	32	$	163,341	$	(3,820)

For debt securities, the Company does not believe that any individual unrealized loss as of ~~September 30, 2021~~March 31, 2022 or December 31, ~~2020,~~2021, represents an other-than-temporary impairment. The Company performs a review of the entire securities portfolio on a quarterly basis to identify securities that may indicate an other-than-temporary impairment. The Company’s management considers the length of time and the extent to which the fair value has been less than cost, and the financial condition of the issuer. The

Table of Contents

securities that are temporarily impaired at ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020~~2021 relate principally to changes in market interest rates subsequent to the acquisition of the specific securities. The Company does not intend to sell, and it is not more likely than not that it will be required to sell any of the securities in an unrealized loss position before recovery of its amortized cost or maturity of the security.

~~Table of Contents~~

Securities available-for-sale with a fair value of ~~$184.4~~$147.4 million and ~~$119.7~~$121.0 million at ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020,~~2021, respectively, are pledged to secure public deposits, short-term borrowings and for other purposes as required or permitted by law.

The following table presents the scheduled maturities of debt securities as of the date indicated:


		September 30, 2021					March 31, 2022
		Amortized Cost		Fair Value			Amortized Cost		Fair Value
(Dollars in thousands)	(Dollars in thousands)					(Dollars in thousands)

Due in One Year or Less	Due in One Year or Less	$	2,583	$	2,620	Due in One Year or Less	$	2,576	$	2,584
Due after One Year through Five Years	Due after One Year through Five Years	4,394		4,404		Due after One Year through Five Years	4,900		4,690
Due after Five Years through Ten Years	Due after Five Years through Ten Years	70,946		71,437		Due after Five Years through Ten Years	78,948		74,332
Due after Ten Years	Due after Ten Years	139,162		140,068		Due after Ten Years	155,347		146,632
Total	Total	$	217,085	$	218,529	Total	$	241,771	$	228,238

The following table presents the gross realized gain and loss on sales of debt securities, as well as gain and loss on equity securities from both sales and market adjustments for the periods indicated. All gains and losses presented in the table below are reported in ~~net gain~~Net (Loss) Gain on ~~securities~~Securities on the Consolidated Statements of ~~Income (Loss).~~Income.


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended March 31,
		2021		2020		2021		2020			2022		2021
(Dollars in thousands)	(Dollars in thousands)									(Dollars in thousands)

Debt Securities	Debt Securities									Debt Securities
Gross Realized Gain	Gross Realized Gain	$	—	$	—	$	225	$	489	Gross Realized Gain	$	—	$	225
Gross Realized Loss	Gross Realized Loss	—		—		—		—		Gross Realized Loss	—		—
Net Gain on Debt Securities	Net Gain on Debt Securities	$	—	$	—	$	225	$	489	Net Gain on Debt Securities	$	—	$	225

Equity Securities	Equity Securities									Equity Securities
Net Unrealized Gain (Loss) Recognized on Securities Held		$	18	$	(59)	$	251	$	(469)
Net Unrealized (Loss) Gain Recognized on Securities Held										Net Unrealized (Loss) Gain Recognized on Securities Held	$	(7)	$	222
Net Realized Gain Recognized on Securities Sold	Net Realized Gain Recognized on Securities Sold	6		—		6		—		Net Realized Gain Recognized on Securities Sold	—		—
Net Gain (Loss) on Equity Securities		$	24	$	(59)	$	257	$	(469)
Net Gain (Loss) on Securities		$	24	$	(59)	$	482	$	20
Net (Loss) Gain on Equity Securities										Net (Loss) Gain on Equity Securities	$	(7)	$	222
Net (Loss) Gain on Securities										Net (Loss) Gain on Securities	$	(7)	$	447

As of March 31, 2022 and December 31, 2021, securities available to be pledged have a fair value of $219.0 million and $214.7 million, respectively,and are inclusive of collateral currently pledged for public funds and sweep deposits.

Note 5.4. Loans and Allowance for Loan Losses

The Company’s loan portfolio is segmented to enable management to monitor risk and performance. Real estate loans are further segregated into three classes. Residential mortgages include those secured by residential properties and include home equity loans,~~. Commercial~~ while commercial mortgages consist of loans to commercial borrowers secured by commercial real estate. Construction loans typically consist of loans to build commercial buildings and acquire and develop residential real estate. The commercial and industrial segment consists of loans to finance the activities of commercial customers. The consumer segment consists primarily of indirect auto loans as well as personal installment loans and personal or overdraft lines of credit.

Residential mortgage loans are typically longer-term loans and, therefore, generally present greater interest rate risk than the consumer and commercial loans. Under certain economic conditions, housing values may decline, which may increase the risk that the collateral values are not sufficient.

Commercial real estate loans generally present a higher level of credit risk than loans secured by residences. This greater risk is due to several factors, including the concentration of principal in a limited number of loans and borrowers, the effect of general

Table of Contents

economic conditions on income-producing properties, and the increased difficulty in evaluating and monitoring these types of loans. Furthermore, the repayment of commercial real estate loans is typically dependent upon the successful operation of the related real estate project. If the cash flow from the project is reduced (for example, if leases are not obtained or renewed, a bankruptcy court modifies a lease term, or a major tenant is unable to fulfill its lease obligations), the borrower’s ability to repay the loan may be impaired.

~~Table of Contents~~

Construction loans are originated to individuals to finance the construction of residential dwellings and are also originated for the construction of commercial properties, including hotels, apartment buildings, housing developments, and owner-occupied properties used for businesses. Construction loans generally provide for the payment of interest only during the construction phase, which is usually 12 to 18 months. At the end of the construction phase, the loan generally converts to a permanent residential or commercial mortgage loan. Construction loan risks include overfunding in comparison to the plans, untimely completion of work, and leasing and stabilization after project completion.

Commercial and industrial loans are generally secured by business assets, inventories, accounts receivable, etc., which present collateral risk.

Consumer loans generally have higher interest rates and shorter terms than residential mortgage loans; however, they have additional credit risk due to the type of collateral securing the loan.

The following table presents the classifications of loans as of the dates indicated.


		September 30, 2021				December 31, 2020					March 31, 2022				December 31, 2021
		Amount		Percent		Amount		Percent			Amount		Percent		Amount		Percent
(Dollars in thousands)	(Dollars in thousands)									(Dollars in thousands)

Real Estate:	Real Estate:									Real Estate:
Residential	Residential	$	317,373	31.7	%	$	344,142	32.9	%	Residential	$	317,254	31.1	%	$	320,798	31.4	%
Commercial	Commercial	379,621		37.9		373,555		35.9		Commercial	427,227		41.9		392,124		38.5
Construction	Construction	78,075		7.8		72,600		6.9		Construction	54,227		5.3		85,028		8.3
Commercial and Industrial	Commercial and Industrial	102,360		10.2		126,813		12.1		Commercial and Industrial	67,843		6.6		89,010		8.7
Consumer	Consumer	112,087		11.2		113,854		10.9		Consumer	143,422		14.1		122,152		12.0
Other	Other	12,083		1.2		13,789		1.3		Other	10,669		1.0		11,684		1.1
Total Loans	Total Loans	1,001,599		100.0	%	1,044,753		100.0	%	Total Loans	1,020,642		100.0	%	1,020,796		100.0	%
Allowance for Loan Losses	Allowance for Loan Losses	(11,581)				(12,771)				Allowance for Loan Losses	(11,595)				(11,582)
Loans, Net	Loans, Net	$	990,018			$	1,031,982			Loans, Net	$	1,009,047			$	1,009,214

The Small Business Administration reopened the Payroll Protection Program ("PPP") the week of January 11, 2021 accepting applications for both First Draw and Second Draw PPP Loans. ~~As of September 30, 2021, as part of this round of PPP, the Bank funded 218 PPP loans totaling $34.6 million with net deferred origination fees of $1.3 million.~~

PPP loans decreased ~~$22.4~~$16.3 million to ~~$32.7~~$8.2 million at ~~September 30, 2021~~March 31, 2022 compared to ~~$55.1~~$24.5 million at December 31, 2020. At September 30, 2021, the largest sectors of PPP loans were $9.3 million for construction and specialty-trade contractors, $5.9 million in loans for health care and social assistance, $4.7 million for professional and technical services, $2.5 million for manufacturing, $3.5 million for restaurant and food services, and $1.8 million for wholesale trade.2021.

Net unamortized PPP loan origination fees as of ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020~~2021 were ~~$1.0 million~~$274,000 and ~~$1.1 million,~~$678,000 , respectively. Net PPP loan origination fees earned were ~~$380,000~~$404,000 and ~~$1.4 million for~~$535,000for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2022 and March 31, 2021, respectively. All PPP loans are classified as commercial and industrial loans held for investment. No allowance for loan loss was allocated to the PPP loan portfolio due to the Bank complying with the lender obligations that ensure SBA guarantee.

Total unamortized net deferred loan fees were ~~$2.1~~$1.6 million and ~~$2.0~~$1.9 million at ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020,~~2021, respectively.

The following table presents classification of loans held for sale as of September 30, 2021. Loans held for sale includes $6.5 million related to the Agreement executed with Citizens Bank and $7.4 million of residential real estate loans originated and intended for sale in the secondary market. In addition, a $3.6 million nonaccrual and substandard-rated commercial real estate loan secured by a hotel that was transferred into the held for sale portfolio at September 30, 2021 was sold in October 2021 and

~~Table of Contents~~

will result in the recognition of an $897,000 gain on sale of loans in the fourth quarter of 2021. This loan previously incurred a $931,000 charge-off in the prior year. There were no loans held for sale at December 31, 2020.


	September 30 2021
~~(Dollars in thousands)~~

~~Real Estate:~~
~~Residential~~	$	~~9,640~~
~~Commercial~~	~~6,470~~
~~Construction~~	—
~~Commercial and Industrial~~	~~592~~
~~Consumer~~	~~252~~
~~Other~~	~~453~~
~~Total Loans Held for Sale~~	$	~~17,407~~

The Company uses an eight-point internal risk rating system to monitor the credit quality of the overall loan portfolio. The first four categories are not considered criticized and are aggregated as “pass” rated. The criticized rating categories used by management generally follow bank regulatory definitions. The special mention category includes assets that are currently protected but are below average quality, resulting in an undue credit risk, but not to the point of justifying a substandard classification. Loans in the substandard category have well-defined weaknesses that jeopardize the liquidation of the debt and have a distinct possibility that some loss will be sustained if the weaknesses are not corrected. Loans classified as doubtful have all the weaknesses inherent in loans classified as substandard with the added characteristic that collection or liquidation in full, on the basis of current conditions and facts, is highly improbable. Loans classified as loss are considered ~~uncollectable~~uncollectible and of such little value that continuance as an asset is not warranted.

Table of Contents

The following table presents loans summarized by the aggregate Pass and the criticized categories of Special Mention, Substandard and Doubtful within the internal risk rating system as of the dates indicated. At ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020,~~2021, there were no loans in the criticized category of Loss within the internal risk rating system.


		September 30, 2021											March 31, 2022
		Pass		Special Mention		Substandard		Doubtful		Total			Pass		Special Mention		Substandard		Doubtful		Total
(Dollars in Thousands)	(Dollars in Thousands)											(Dollars in Thousands)

Real Estate:	Real Estate:											Real Estate:
Residential	Residential	$	314,266	$	869	$	2,238	$	—	$	317,373	Residential	$	314,174	$	839	$	2,241	$	—	$	317,254
Commercial	Commercial	339,193		28,018		12,410		—		379,621		Commercial	390,395		28,217		8,615		—		427,227
Construction	Construction	66,649		10,785		641		—		78,075		Construction	38,724		12,971		2,532		—		54,227
Commercial and Industrial	Commercial and Industrial	87,901		12,410		1,513		536		102,360		Commercial and Industrial	54,085		11,774		1,400		584		67,843
Consumer	Consumer	112,017		—		70		—		112,087		Consumer	143,326		—		96		—		143,422
Other	Other	12,012		71		—		—		12,083		Other	10,603		66		—		—		10,669
Total Loans	Total Loans	$	932,038	$	52,153	$	16,872	$	536	$	1,001,599	Total Loans	$	951,307	$	53,867	$	14,884	$	584	$	1,020,642

~~Table of Contents~~


		December 31, 2020											December 31, 2021
		Pass		Special Mention		Substandard		Doubtful		Total			Pass		Special Mention		Substandard		Doubtful		Total
(Dollars in Thousands)	(Dollars in Thousands)											(Dollars in Thousands)

Real Estate:	Real Estate:											Real Estate:
Residential	Residential	$	340,573	$	1,115	$	2,454	$	—	$	344,142	Residential	$	317,964	$	845	$	1,989	$	—	$	320,798
Commercial	Commercial	320,358		37,482		15,715		—		373,555		Commercial	355,895		27,168		9,061		—		392,124
Construction	Construction	68,343		53		4,204		—		72,600		Construction	69,441		13,035		2,552		—		85,028
Commercial and Industrial	Commercial and Industrial	113,797		7,787		4,620		609		126,813		Commercial and Industrial	72,584		14,463		1,451		512		89,010
Consumer	Consumer	113,805		—		49		—		113,854		Consumer	122,136		—		16		—		122,152
Other	Other	13,711		78		—		—		13,789		Other	11,616		68		—		—		11,684
Total Loans	Total Loans	$	970,587	$	46,515	$	27,042	$	609	$	1,044,753	Total Loans	$	949,636	$	55,579	$	15,069	$	512	$	1,020,796

The following table presents the classes of the loan portfolio summarized by the aging categories of performing loans and nonaccrual loans as of the dates indicated.


		September 30, 2021															March 31, 2022
		Loans Current		30-59 Days Past Due		60-89 Days Past Due		90 Days Or More Past Due		Total Past Due		Non- Accrual		Total Loans			Loans Current		30-59 Days Past Due		60-89 Days Past Due		90 Days Or More Past Due		Total Past Due		Non- Accrual		Total Loans
(Dollars in Thousands)	(Dollars in Thousands)															(Dollars in Thousands)

Real Estate:	Real Estate:															Real Estate:
Residential	Residential	$	315,124	$	613	$	—	$	—	$	613	$	1,636	$	317,373	Residential	$	313,306	$	2,106	$	191	$	—	$	2,297	$	1,651	$	317,254
Commercial	Commercial	374,315		—		—		—		—		5,306		379,621		Commercial	425,202		—		—		—		—		2,025		427,227
Construction	Construction	78,075		—		—		—		—		—		78,075		Construction	54,227		—		—		—		—		—		54,227
Commercial and Industrial	Commercial and Industrial	100,817		—		—		—		—		1,543		102,360		Commercial and Industrial	66,202		101		—		—		101		1,540		67,843
Consumer	Consumer	111,515		484		18		—		502		70		112,087		Consumer	142,931		338		57		—		395		96		143,422
Other	Other	12,083		—		—		—		—		—		12,083		Other	10,669		—		—		—		—		—		10,669
Total Loans	Total Loans	$	991,929	$	1,097	$	18	$	—	$	1,115	$	8,555	$	1,001,599	Total Loans	$	1,012,537	$	2,545	$	248	$	—	$	2,793	$	5,312	$	1,020,642

December 31, 2020
Loans
Current
30-59
Days
Past Due
60-89
Days
Past Due
90 Days
Or More
Past Due
Total
Past Due
Non-
Accrual
Total
Loans
(Dollars in Thousands)
Real Estate:
Residential $ 339,067 $ 2,919 $ 315 $ — $ 3,234 $ 1,841 $ 344,142
Commercial 365,712 1 740 — 741 7,102 373,555
Construction 72,600 — — — — — 72,600
Commercial and Industrial 124,916 — — — — 1,897 126,813
Consumer 112,952 784 61 8 853 49 113,854
Other 13,789 — — — — — 13,789
Total Loans $ 1,029,036 $ 3,704 $ 1,116 $ 8 $ 4,828 $ 10,889 $ 1,044,753

Table of Contents

The decrease in nonaccrual loans at September 30, 2021 compared to December 31, 2020 is primarily related to a $3.6 million commercial real estate loan secured by a hotel that was transferred to loans held-for-sale as previously noted, partially offset by a $2.0 million commercial real estate loan secured by a hotel that was moved to nonaccrual status in the current period.


	December 31, 2021
	Loans Current		30-59 Days Past Due		60-89 Days Past Due		90 Days Or More Past Due		Total Past Due		Non- Accrual		Total Loans
(Dollars in Thousands)

Real Estate:
Residential	$	317,583	$	1,805	$	17	$	—	$	1,822	$	1,393	$	320,798
Commercial	389,522		544		—		—		544		2,058		392,124
Construction	85,028		—		—		—		—		—		85,028
Commercial and Industrial	87,407		107		—		—		107		1,496		89,010
Consumer	121,636		419		81		—		500		16		122,152
Other	11,684		—		—		—		—		—		11,684
Total Loans	$	1,012,860	$	2,875	$	98	$	—	$	2,973	$	4,963	$	1,020,796

Additional interest income that would have been recorded if the loans that were nonaccrual at ~~September 30, 2021~~March 31, 2022 were current was ~~$33,000 and $136,000~~$79,000 for the three ~~and nine~~ months ended ~~September 30, 2021, respectively,~~March 31, 2022, and ~~$20,000 and $59,000~~$61,000 for the three ~~and nine~~ months ended ~~September 30, 2020, respectively.~~March 31, 2021.

1814

Table of Contents

The following table sets forth the amounts and categories of nonperforming assets at the dates indicated. Included in nonperforming loans and assets are troubled debt restructurings (“TDRs”), which are loans whose contractual terms have been restructured in a manner which grants a concession to a borrower experiencing financial difficulties. Nonaccrual TDRs are included in their specific loan category in the nonaccrual loans section. Nonperforming loans do not include loans modified under Section 4013 of the CARES Act and interagency guidance as further explained below.


		September 30, 2021			December 31, 2020				March 31, 2022			December 31, 2021
(Dollars in Thousands)	(Dollars in Thousands)							(Dollars in Thousands)

Nonaccrual Loans:	Nonaccrual Loans:							Nonaccrual Loans:
Real Estate:	Real Estate:							Real Estate:
Residential	Residential	$	1,636		$	1,841		Residential	$	1,651		$	1,393
Commercial	Commercial	5,306			7,102			Commercial	2,025			2,058
Construction	Construction	—			—			Construction	—			—
Commercial and Industrial	Commercial and Industrial	1,543			1,897			Commercial and Industrial	1,540			1,496
Consumer	Consumer	70			49			Consumer	96			16
Total Nonaccrual Loans	Total Nonaccrual Loans	8,555			10,889			Total Nonaccrual Loans	5,312			4,963

Accruing Loans Past Due 90 Days or More:	Accruing Loans Past Due 90 Days or More:							Accruing Loans Past Due 90 Days or More:

Consumer	Consumer	—			8			Consumer	—			—
Total Accruing Loans Past Due 90 Days or More	Total Accruing Loans Past Due 90 Days or More	—			8			Total Accruing Loans Past Due 90 Days or More	—			—
Total Nonaccrual Loans and Accruing Loans Past Due 90 Days or More	Total Nonaccrual Loans and Accruing Loans Past Due 90 Days or More	8,555			10,897			Total Nonaccrual Loans and Accruing Loans Past Due 90 Days or More	5,312			4,963

Troubled Debt Restructurings, Accruing:	Troubled Debt Restructurings, Accruing:							Troubled Debt Restructurings, Accruing:
Real Estate	Real Estate							Real Estate
Residential	Residential	622			650			Residential	603			613
Commercial	Commercial	1,713			2,861			Commercial	1,371			1,674
Commercial and Industrial	Commercial and Industrial	17			80			Commercial and Industrial	12			16
Total Troubled Debt Restructurings, Accruing	Total Troubled Debt Restructurings, Accruing	2,352			3,591			Total Troubled Debt Restructurings, Accruing	1,986			2,303

Total Nonperforming Loans	Total Nonperforming Loans	10,907			14,488			Total Nonperforming Loans	7,298			7,266

Other Real Estate Owned:	Other Real Estate Owned:							Other Real Estate Owned:
Residential	Residential	36			—			Residential	—			36
Commercial	Commercial	—			208			Commercial	—			—
Total Other Real Estate Owned	Total Other Real Estate Owned	36			208			Total Other Real Estate Owned	—			36

Total Nonperforming Assets	Total Nonperforming Assets	$	10,943		$	14,696		Total Nonperforming Assets	$	7,298		$	7,302

Nonperforming Loans to Total Loans	Nonperforming Loans to Total Loans	1.09		%	1.39		%	Nonperforming Loans to Total Loans	0.72		%	0.71		%
Nonperforming Assets to Total Assets	Nonperforming Assets to Total Assets	0.74			1.04			Nonperforming Assets to Total Assets	0.51			0.51

The recorded investment of residential real estate loans for which formal foreclosure proceedings were in process according to applicable requirements of the local jurisdiction was ~~$775,000~~$945,000 and ~~$806,000~~$571,000 at ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020,~~2021, respectively.

~~TDRs typically are~~As of March 31, 2022 , the ~~result of loss mitigation activities whereby concessions are granted~~Company had 1 TDR loan in forbearance that totaled $128,000. There were no modifications to ~~minimize loss and avoid foreclosure or repossession of collateral. For a loan modification to be considered a TDR,~~troubled debt restructurings during the borrower must be experiencing financial difficulty and a concession must be granted, except for an insignificant delay in payment. Section 4013 of the CARES Act and regulatory guidance promulgated by federal banking regulators provide temporary relief from accounting and financial reporting requirements for TDRs regarding certain short-term loan modifications related to COVID-19. Specifically, the CARES Act provides that the Bank may elect to suspend the requirements under GAAP for certain loan modifications that would otherwise be categorized as a TDR and suspend any determination that such loan modifications would be considered a TDR, including the related impairment for accounting purposes. Any modification involving a loan that was not more than 30 days past due asthree months ended March 31, 2022. As of December 31, 2019 and that occurs beginning on March 1, 2020 and ends on the earlier of January 1, 2022 (as extended by the Consolidated Appropriations Act, 2021) or the date that is 60 days after the termination date of the national emergency related to2021, there were no loans in forbearance.

1915

Table of Contents

the COVID-19 outbreak qualify for this exception, including a forbearance arrangement, interest rate modification, repayment plan or any other similar arrangement that defers or delays the payment of principal or interest.

Bank regulatory agencies released an interagency statement that offers practical expedients for modifications that occur in response to the COVID-19 pandemic, but it differs with the CARES Act in certain areas. The expedients require a lender to conclude that a borrower is not experiencing financial difficulty if either short-term (e.g., six months or less) modifications are made, such as payment deferrals, fee waivers, extensions of repayment terms, or other delays in payment that are insignificant related to loans in which the borrower is less than 30 days past due on its contractual payments at the time a modification program is implemented or the modification or deferral program is mandated by the federal government or a state government. The bank regulatory agencies have subsequently confirmed that their guidance could be applicable for loans that do not qualify for favorable accounting treatment under Section 4013 of the CARES Act. Both Section 4013 of the CARES Act and the interagency statement can be applied to a second modification that occurs after the first modification provided that the second modification does not qualify as a TDR under Section 4013 of the CARES Act or the interagency statement.

~~The Bank offered forbearance options for borrowers impacted by COVID-19 that provide a short-term delay in payment by primarily allowing: (a) deferral of~~ ~~three~~ to six months of payments; or (b) for consumer loans not secured by a real estate mortgage, three months of interest-only payments that also extends the maturity date of the loan by three months. During the forbearance period, the borrower is not considered delinquent for credit bureau reporting purposes. The Company has elected the practical expedients related to TDRs that are available in the CARES Act and interagency guidance as an entity-wide accounting policy and does not consider any of the forbearance agreements TDRs, delinquent, or nonaccrual.

~~The following table provides details of loans in forbearance as of the dates indicated.~~

September 30, 2021 December 31, 2020
Number
of
Loans Amount % of Portfolio Number
of
Loans Amount % of Portfolio
(Dollars in thousands)
Real Estate:
Residential — $ — — % 4 $ 749 0.2 %
Commercial — — — % 8 19,818 5.3 %
Construction — — — % 1 1,958 2.7 %
Commercial and Industrial — — — % 5 1,219 1.0 %
Consumer — — — % 13 356 0.3 %
Total Loans in Forbearance — $ — — % 31 $ 24,100 2.3 %

The concessions granted for the TDRs in the portfolio primarily consist of, but are not limited to, modification of payment or other terms, temporary rate modification and extension of maturity date. Loans classified as TDRs consisted of 14 loans totaling $2.9 million at September 30, 2021 and 17 loans totaling $4.2 million at December 31, 2020, respectively.

The following table presents information at the time of modification related to loans modified in a TDR during the periods indicated. During the three and nine months ended September 30, 2021, there were no loans that were modified that were considered a TDR.

Three Months Ended September 30, 2020
Number of Contracts Pre- Modification Outstanding Recorded Investment Post- Modification Outstanding Recorded Investment Related Allowance
(Dollars in thousands)
Real Estate:
Commercial 1 $ 504 $ 519 $ —
Commercial and Industrial 1 38 38 —
Total 2 $ 542 557 $ —

~~Table of Contents~~

Nine Months Ended September 30, 2020
Number
of
Contracts
Pre-
Modification
Outstanding
Recorded
Investment
Post-
Modification
Outstanding
Recorded
Investment
Related
Allowance
(Dollars in thousands)
Real Estate:
Residential 1 $ 234 $ 234 $ —
Commercial 1 504 519 —
Commercial and Industrial 1 38 38 —
Total 3 $ 776 $ 791 $ —

During the three months ended September 30, 2021, no loans that were previously modified in a TDR paid off in full. During the nine months ended September 30, 2021, 1 residential real estate loan totaling $3,000, 1 commercial real estate loan totaling $698,000 and 1 commercial and industrial loan totaling $8,000 previously modified in a TDR paid off in full. During the three months ended September 30, 2020, no loans previously modified in a TDR paid off in full. During the nine months ended September 30, 2020, 1 residential real estate loan totaling $60,000 previously modified in a TDR paid off in full

~~No TDRs subsequently defaulted during the three and nine months ended September 30, 2021 and 2020, respectively.~~

The following table presents a summary of the loans considered to be impaired as of the dates indicated.


		September 30, 2021											March 31, 2022
		Recorded Investment		Related Allowance		Unpaid Principal Balance		Average Recorded Investment		Interest Income Recognized			Recorded Investment		Related Allowance		Unpaid Principal Balance		Average Recorded Investment		Interest Income Recognized
(Dollars in thousands)	(Dollars in thousands)											(Dollars in thousands)

With No Related Allowance Recorded:	With No Related Allowance Recorded:											With No Related Allowance Recorded:
Real Estate:	Real Estate:											Real Estate:
Residential	Residential	$	1,146	$	—	$	1,150	$	1,165	$	35	Residential	$	1,118			$	1,123	$	1,124	$	11
Commercial	Commercial	13,100		—		13,315		13,361		235		Commercial	9,525				9,609		9,626		73
Construction	Construction	641		—		641		641		16		Construction	540				540		540		4
Commercial and Industrial	Commercial and Industrial	2,066		—		2,351		2,922		24		Commercial and Industrial	1,900				2,227		1,942		5
Total With No Related Allowance Recorded	Total With No Related Allowance Recorded	$	16,953	$	—	$	17,457	$	18,089	$	310	Total With No Related Allowance Recorded	$	13,083	$	—	$	13,499	$	13,232	$	93

With A Related Allowance Recorded:	With A Related Allowance Recorded:											With A Related Allowance Recorded:
Real Estate:	Real Estate:											Real Estate:
Residential	Residential	$	—	$	—	$	—	$	—	$	—	Residential	$	—	$	—	$	—	$	—	$	—
Commercial	Commercial	272		199		272		473		16		Commercial	—		—		—		—		—
Construction	Construction	—		—		—		—		—		Construction	1,992		84		1,992		2,001		22
Commercial and Industrial	Commercial and Industrial	—		—		—		—		—		Commercial and Industrial	96		96		96		146		2
Total With A Related Allowance Recorded	Total With A Related Allowance Recorded	$	272	$	199	$	272	$	473	$	16	Total With A Related Allowance Recorded	$	2,088	$	180	$	2,088	$	2,147	$	24

Total Impaired Loans:	Total Impaired Loans:											Total Impaired Loans:
Real Estate:	Real Estate:											Real Estate:
Residential	Residential	$	1,146	$	—	$	1,150	$	1,165	$	35	Residential	$	1,118	$	—	$	1,123	$	1,124	$	11
Commercial	Commercial	13,372		199		13,587		13,834		251		Commercial	9,525		—		9,609		9,626		73
Construction	Construction	641		—		641		641		16		Construction	2,532		84		2,532		2,541		26
Commercial and Industrial	Commercial and Industrial	2,066		—		2,351		2,922		24		Commercial and Industrial	1,996		96		2,323		2,088		7
Total Impaired Loans	Total Impaired Loans	$	17,225	$	199	$	17,729	$	18,562	$	326	Total Impaired Loans	$	15,171	$	180	$	15,587	$	15,379	$	117

2116

Table of Contents


		December 31, 2020											December 31, 2021
		Recorded Investment		Related Allowance		Unpaid Principal Balance		Average Recorded Investment		Interest Income Recognized			Recorded Investment		Related Allowance		Unpaid Principal Balance		Average Recorded Investment		Interest Income Recognized
(Dollars in thousands)	(Dollars in thousands)											(Dollars in thousands)

With No Related Allowance Recorded:	With No Related Allowance Recorded:											With No Related Allowance Recorded:
Real Estate:	Real Estate:											Real Estate:
Residential	Residential	$	1,183	$	—	$	1,187	$	1,194	$	46	Residential	$	1,133			$	1,137	$	1,158	$	46
Commercial	Commercial	31,865		—		32,887		37,443		1,418		Commercial	9,733				9,787		27,207		927
Construction	Construction	4,204		—		4,204		4,013		159		Construction	540				540		887		34
Commercial and Industrial	Commercial and Industrial	3,296		—		3,506		3,426		89		Commercial and Industrial	1,979				2,286		3,230		49
Total With No Related Allowance Recorded	Total With No Related Allowance Recorded	$	40,548	$	—	$	41,784	$	46,076	$	1,712	Total With No Related Allowance Recorded	$	13,385	$	—	$	13,750	$	32,482	$	1,056

With A Related Allowance Recorded:	With A Related Allowance Recorded:											With A Related Allowance Recorded:
Real Estate:	Real Estate:											Real Estate:
Residential	Residential	$	—	$	—	$	—	$	—	$	—	Residential	$	—	$	—	$	—	$	—	$	—
Commercial	Commercial	1,524		293		1,524		1,585		72		Commercial	266		195		266		421		19
Construction	Construction	—		—		—		—		—		Construction	2,013		104		2,013		169		7
Commercial and Industrial	Commercial and Industrial	2,069		356		2,069		2,114		57		Commercial and Industrial	—		—		—		1,316		29
Total With A Related Allowance Recorded	Total With A Related Allowance Recorded	$	3,593	$	649	$	3,593	$	3,699	$	129	Total With A Related Allowance Recorded	$	2,279	$	299	$	2,279	$	1,906	$	55

Total Impaired Loans	Total Impaired Loans											Total Impaired Loans
Real Estate:	Real Estate:											Real Estate:
Residential	Residential	$	1,183	$	—	$	1,187	$	1,194	$	46	Residential	$	1,133	$	—	$	1,137	$	1,158	$	46
Commercial	Commercial	33,389		293		34,411		39,028		1,490		Commercial	9,999		195		10,053		27,628		946
Construction	Construction	4,204		—		4,204		4,013		159		Construction	2,553		104		2,553		1,056		41
Commercial and Industrial	Commercial and Industrial	5,365		356		5,575		5,540		146		Commercial and Industrial	1,979		—		2,286		4,546		78
Total Impaired Loans	Total Impaired Loans	$	44,141	$	649	$	45,377	$	49,775	$	1,841	Total Impaired Loans	$	15,664	$	299	$	16,029	$	34,388	$	1,111

The recorded investment of loans evaluated for impairment decreased ~~$26.9 million~~$493,000 at ~~September 30, 2021~~March 31, 2022 compared to December 31, ~~2020~~2021 and was primarily related to commercial real estate loans. This is primarily the result of no longer evaluating separately for impairment certain commercial real estate loans secured by hotels that have manageable loan-to-value ratios and have exhibited an ability to cash flow during the COVID-19 pandemic, with the expectation that hotel operations strengthen further as occupancy rates increase due to the economy reopening and resumption of travel. In addition, as previously noted, a $3.6 million commercial real estate loan was transferred into loans held for sale and was no longer evaluated for impairment at September 30, 2021. The loan was subsequently sold in October 2021.

The following tables present the activity in the allowance for loan losses summarized by primary segments and segregated into the amount required for loans individually evaluated for impairment and the amount required for loans collectively evaluated for potential impairment at the dates and for the periods indicated.


		Real Estate Residential		Real Estate Commercial		Real Estate Construction		Commercial and Industrial		Consumer		Other		Unallocated		Total			Real Estate Residential		Real Estate Commercial		Real Estate Construction		Commercial and Industrial		Consumer		Other		Unallocated		Total
(Dollars in thousands)	(Dollars in thousands)																	(Dollars in thousands)

June 30, 2021		$	1,588	$	5,582	$	1,136	$	1,152	$	941	$	—	$	1,145	$	11,544
December 31, 2021																		December 31, 2021	$	1,420	$	5,960	$	1,249	$	1,151	$	1,050	$	—	$	752	$	11,582
Charge-offs	Charge-offs	—		—		—		—		(19)		—		—		(19)		Charge-offs	(17)		—		—		—		(20)		—		—		(37)
Recoveries	Recoveries	2		—		—		11		43		—		—		56		Recoveries	2		—		—		11		37		—		—		50
Provision (Recovery)	Provision (Recovery)	(98)		347		(71)		(21)		(12)		—		(145)		—		Provision (Recovery)	(20)		(5,449)		(448)		3,406		921		—		1,590		—
September 30, 2021		$	1,492	$	5,929	$	1,065	$	1,142	$	953	$	—	$	1,000	$	11,581
March 31, 2022																		March 31, 2022	$	1,385	$	511	$	801	$	4,568	$	1,988	$	—	$	2,342	$	11,595

2217

Table of Contents

Real
Estate
Residential
Real
Estate
Commercial
Real
Estate
Construction
Commercial
and
Industrial
Consumer Other Unallocated Total
(Dollars in thousands)
December 31, 2020 $ 2,249 $ 6,010 $ 889 $ 1,423 $ 1,283 $ — $ 917 $ 12,771
Charge-offs — — — — (139) — — (139)
Recoveries 15 — — 33 101 — — 149
Provision (Recovery) (772) (81) 176 (314) (292) — 83 (1,200)
September 30, 2021 $ 1,492 $ 5,929 $ 1,065 $ 1,142 $ 953 $ — $ 1,000 $ 11,581
September 30, 2021
Real
Estate
Residential
Real
Estate
Commercial
Real
Estate
Construction
Commercial
and
Industrial
Consumer Other Unallocated Total
(Dollars in thousands)
Individually Evaluated for Impairment $ — $ 199 $ — $ — $ — $ — $ — $ 199
Collectively Evaluated for Potential Impairment $ 1,492 $ 5,730 $ 1,065 $ 1,142 $ 953 $ — $ 1,000 $ 11,382


	March 31, 2022
	Real Estate Residential		Real Estate Commercial		Real Estate Construction		Commercial and Industrial		Consumer		Other		Unallocated		Total
(Dollars in thousands)

Individually Evaluated for Impairment	$	—	$	—	$	84	$	96	$	—	$	—	$	—	$	180
Collectively Evaluated for Potential Impairment	$	1,385	$	511	$	717	$	4,472	$	1,988	$	—	$	2,342	$	11,415


		December 31, 2020																	December 31, 2021
		Real Estate Residential		Real Estate Commercial		Real Estate Construction		Commercial and Industrial		Consumer		Other		Unallocated		Total			Real Estate Residential		Real Estate Commercial		Real Estate Construction		Commercial and Industrial		Consumer		Other		Unallocated		Total
(Dollars in thousands)	(Dollars in thousands)																	(Dollars in thousands)

Individually Evaluated for Impairment	Individually Evaluated for Impairment	$	—	$	293	$	—	$	356	$	—	$	—	$	—	$	649	Individually Evaluated for Impairment	$	—	$	195	$	104	$	—	$	—	$	—	$	—	$	299
Collectively Evaluated for Potential Impairment	Collectively Evaluated for Potential Impairment	$	2,249	$	5,717	$	889	$	1,067	$	1,283	$	—	$	917	$	12,122	Collectively Evaluated for Potential Impairment	$	1,420	$	5,765	$	1,145	$	1,151	$	1,050	$	—	$	752	$	11,283


		Real Estate Residential		Real Estate Commercial		Real Estate Construction		Commercial and Industrial		Consumer		Other		Unallocated		Total			Real Estate Residential		Real Estate Commercial		Real Estate Construction		Commercial and Industrial		Consumer		Other		Unallocated		Total
(Dollars in thousands)	(Dollars in thousands)																	(Dollars in thousands)

June 30, 2020		$	2,688	$	5,160	$	820	$	1,566	$	1,714	$	—	$	700	$	12,648
December 31, 2020																		December 31, 2020	$	2,249	$	6,010	$	889	$	1,423	$	1,283	$	—	$	917	$	12,771
Charge-offs	Charge-offs	(11)		—		—		—		(103)		—		—		(114)		Charge-offs	—		—		—		—		(95)		—		—		(95)
Recoveries	Recoveries	1		1		—		6		38		—		—		46		Recoveries	9		—		—		12		28		—		—		49
Provision (Recovery)	Provision (Recovery)	(506)		1,711		71		170		(290)		—		44		1,200		Provision (Recovery)	(283)		(93)		50		108		(113)		—		331		—
September 30, 2020		$	2,172	$	6,872	$	891	$	1,742	$	1,359	$	—	$	744	$	13,780
March 31, 2021																		March 31, 2021	$	1,975	$	5,917	$	939	$	1,543	$	1,103	$	—	$	1,248	$	12,725

~~Table of Contents~~


	March 31, 2021
	Real Estate Residential		Real Estate Commercial		Real Estate Construction		Commercial and Industrial		Consumer		Other		Unallocated		Total
(Dollars in thousands)

Individually Evaluated for Impairment	$	—	$	269	$	—	$	502	$	—	$	—	$	—	$	771
Collectively Evaluated for Potential Impairment	$	1,975	$	5,648	$	939	$	1,041	$	1,103	$	—	$	1,248	$	11,954

Real
Estate
Residential
Real
Estate
Commercial
Real
Estate
Construction
Commercial
and
Industrial
Consumer Other Unallocated Total
(Dollars in thousands)
December 31, 2019 $ 2,023 $ 3,210 $ 285 $ 2,412 $ 1,417 $ — $ 520 $ 9,867
Charge-offs (36) — — — (239) — — (275)
Recoveries 5 28 — 21 134 — — 188
Provision (Recovery) 180 3,634 606 (691) 47 — 224 4,000
September 30, 2020 $ 2,172 $ 6,872 $ 891 $ 1,742 $ 1,359 $ — $ 744 $ 13,780

September 30, 2020
Real
Estate
Residential
Real
Estate
Commercial
Real
Estate
Construction
Commercial
and
Industrial
Consumer Other Unallocated Total
(Dollars in thousands)
Individually Evaluated for Impairment $ — $ 2,248 $ — $ 607 $ — $ — $ — $ 2,855
Collectively Evaluated for Potential Impairment $ 2,172 $ 4,624 $ 891 $ 1,135 $ 1,359 $ — $ 744 $ 10,925

The allowance for loan losses was $11.6 million at September 30, 2021 compared to $12.8 million at December 31, 2020. There was a net recovery of $1.2 million of provision for loan losses for the nine months ended September 30, 2021. A $20.8 million decrease in net reservable loans in the current year, which excludes PPP loans and includes the reclassification of $17.4 million of loans to held for sale that do not require a reserve, as well as a decrease in specifically impaired loans and improving economic and industry conditions, contributed to the net recovery in the current period.

The following table presents the major classifications of loans summarized by individually evaluated for impairment and collectively evaluated for potential impairment as of the dates indicated. At ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020,~~2021, commercial and industrial loans include ~~$32.7~~$8.2 million and ~~$55.1~~$24.5 million, respectively, of PPP loans collectively evaluated for potential

Table of Contents

impairment. No allowance for loan loss was allocated to the PPP loan portfolio due to the Bank complying with the lender obligations that ensure SBA guarantee.


		September 30, 2021															March 31, 2022
		Real Estate Residential		Real Estate Commercial		Real Estate Construction		Commercial and Industrial		Consumer		Other		Total			Real Estate Residential		Real Estate Commercial		Real Estate Construction		Commercial and Industrial		Consumer		Other		Total
(Dollars in thousands)	(Dollars in thousands)															(Dollars in thousands)

Individually Evaluated for Impairment	Individually Evaluated for Impairment	$	1,146	$	13,372	$	641	$	2,066	$	—	$	—	$	17,225	Individually Evaluated for Impairment	$	1,118	$	9,525	$	2,532	$	1,996	$	—	$	—	$	15,171
Collectively Evaluated for Potential Impairment	Collectively Evaluated for Potential Impairment	316,227		366,249		77,434		100,294		112,087		12,083		984,374		Collectively Evaluated for Potential Impairment	316,136		417,702		51,695		65,847		143,422		10,669		1,005,471
Total Loans	Total Loans	$	317,373	$	379,621	$	78,075	$	102,360	$	112,087	$	12,083	$	1,001,599	Total Loans	$	317,254	$	427,227	$	54,227	$	67,843	$	143,422	$	10,669	$	1,020,642

~~Table of Contents~~


		December 31, 2020															December 31, 2021
		Real Estate Residential		Real Estate Commercial		Real Estate Construction		Commercial and Industrial		Consumer		Other		Total			Real Estate Residential		Real Estate Commercial		Real Estate Construction		Commercial and Industrial		Consumer		Other		Total
(Dollars in thousands)	(Dollars in thousands)															(Dollars in thousands)

Individually Evaluated for Impairment	Individually Evaluated for Impairment	$	1,183	$	33,389	$	4,204	$	5,365	$	—	$	—	$	44,141	Individually Evaluated for Impairment	$	1,133	$	9,999	$	2,553	$	1,979	$	—	$	—	$	15,664
Collectively Evaluated for Potential Impairment	Collectively Evaluated for Potential Impairment	342,959		340,166		68,396		121,448		113,854		13,789		1,000,612		Collectively Evaluated for Potential Impairment	319,665		382,125		82,475		87,031		122,152		11,684		1,005,132
Total Loans	Total Loans	$	344,142	$	373,555	$	72,600	$	126,813	$	113,854	$	13,789	$	1,044,753	Total Loans	$	320,798	$	392,124	$	85,028	$	89,010	$	122,152	$	11,684	$	1,020,796

The following table presents changes in the accretable discount on the loans acquired at fair value at the dates indicated.


	Accretable Discount
(Dollars in Thousands)

December 31, ~~2020~~2021	$	~~1,194~~726
Accretable Yield	~~(385)~~(56)
~~September 30, 2021~~March 31, 2022	$	~~809~~670

~~Note 6. Time Deposits~~

~~The following table shows the maturities of time deposits for the next five years and beyond at the date indicated.~~

September 30, 2021 Time Deposits Time Deposits Held for Sale Time Deposits,
Net
(Dollars in thousands)
One Year or Less $ 68,228 $ 8,560 $ 59,668
Over One Through Two Years 58,693 4,346 54,347
Over Two Through Three Years 10,758 1,034 9,724
Over Three Through Four Years 11,362 2,415 8,947
Over Four Through Five Years 9,645 1,143 8,502
Over Five Years 3,735 196 3,539
Total $ 162,421 $ 17,694 $ 144,727

The balance in time deposits, including time deposits held for sale, that meet or exceed the FDIC insurance limit of $250,000 totaled $49.1 million and $59.2 million as of September 30, 2021 and December 31, 2020, respectively.

The aggregate amount of demand deposits, including demand deposits held for sale, that are overdrawn and have been reclassified as loans was $176,000 and $231,000 as of September 30, 2021 and December 31, 2020, respectively.

Note 7.5. Short-Term Borrowings

Borrowings with original maturities of one year or less are classified as short-term and may consist of borrowings with the Federal Home Loan Bank ("FHLB"), securities sold under agreements to repurchase or borrowings on revolving lines of credit with the Federal Reserve Bank or other correspondent banks. Securities sold under repurchase agreements are comprised of customer repurchase agreements, which are overnight sweep accounts with next-day maturities utilized by commercial customers to earn interest on their funds. Securities are pledged as collateral under these agreements in an amount at least equal to the outstanding balance and the collateral pledging requirements are monitored on a daily basis. $10.7 million of securities sold under agreements to repurchase are reported as deposits held for sale at September 30, 2021 because the associated deposits will be sold as part of the Agreement with Citizens Bank. See Note 2 for further information.

2519

Table of Contents

The following table sets forth the components of short-term borrowings as of the dates indicated.


		September 30, 2021				December 31, 2020					March 31, 2022				December 31, 2021
		Amount		Weighted Average Rate		Amount		Weighted Average Rate			Amount		Weighted Average Rate		Amount		Weighted Average Rate
(Dollars in thousands)	(Dollars in thousands)									(Dollars in thousands)

Securities Sold Under Agreements to Repurchase:	Securities Sold Under Agreements to Repurchase:									Securities Sold Under Agreements to Repurchase:
Balance at Period End	Balance at Period End	$	42,623	0.16	%	$	41,055	0.21	%	Balance at Period End	$	39,219	0.17	%	$	39,266	0.17	%
Average Balance Outstanding During the Period	Average Balance Outstanding During the Period	43,745		0.22		37,819		0.36		Average Balance Outstanding During the Period	37,884		0.20		43,988		0.22
Maximum Amount Outstanding at any Month End	Maximum Amount Outstanding at any Month End	52,777				46,123				Maximum Amount Outstanding at any Month End	39,219				52,777

Securities Collaterizing the Agreements at Period-End:	Securities Collaterizing the Agreements at Period-End:									Securities Collaterizing the Agreements at Period-End:
Carrying Value	Carrying Value	56,351				46,312				Carrying Value	58,757				59,867
Market Value	Market Value	56,412				47,283				Market Value	54,703				59,339

~~Note 8. Other Borrowed Funds~~

~~Other borrowed funds consist of fixed rate advances from the FHLB. The following table sets forth the scheduled maturities of other borrowed funds at the dates indicated.~~

September 30, 2021 December 31, 2020
Amount
Weighted
Average
Rate
Amount
Weighted
Average
Rate
(Dollars in thousands)
Due in One Year $ 3,000 2.23 % $ 2,000 2.12 %
Due After One Year to Two Years 3,000 2.41 3,000 2.23
Due After Two Years to Three Years — — 3,000 2.41
Total $ 6,000 2.32 % $ 8,000 2.27 %

As of September 30, 2021, the Bank maintained a credit arrangement with a maximum borrowing limit of approximately $420.4 million with the FHLB and available borrowing capacity of $351.3 million. This arrangement is subject to annual renewal, incurs no service charge, and is secured by a blanket security agreement on $564.1 million of residential and commercial mortgage loans and the Bank’s investment in FHLB stock. Under this arrangement, the Bank had available a variable rate Line of Credit in the amount of $150.0 million as of September 30, 2021, of which there was no outstanding balance.

As an alternative to pledging securities, the FHLB periodically provides standby letters of credit on behalf of the Bank to secure certain public deposits in excess of the level insured by the FDIC. If the FHLB is required to make payment for a beneficiary’s draw, the payment amount is converted into a collateralized advance to the Bank. Standby letters of credit issued on our behalf by the FHLB to secure public deposits were $60.6 million and $90.3 million as of September 30, 2021 and December 31, 2020, respectively.

At September 30, 2021, the Bank maintained a Borrower-In-Custody of Collateral line of credit agreement with the Federal Reserve Bank (“FRB”) for $82.8 million that requires monthly certification of collateral, is subject to annual renewal, incurs no service charge and is secured by $124.9 million of commercial and industrial and consumer indirect auto loans. In addition, the Bank also maintains multiple line of credit arrangements with various unaffiliated banks totaling $50.0 million of which no draws had been taken.

~~At September 30, 2021 and December 31, 2020, CB Financial did not maintain any credit facilities.~~

Note 9.6. Fair Value Disclosure

FASB ASC 820 “Fair Value Measurement” defines fair value and provides the framework for measuring fair value and required disclosures about fair value measurements. Fair value is defined as the price that would be received for an asset or paid to transfer a liability in an orderly transaction between market participants in the principal or most advantageous market for the asset or liability at the transaction date. ASC 820 establishes a fair value hierarchy that prioritizes the inputs used in valuation methods to determine fair value.

~~Table of Contents~~

The three levels of fair value hierarchy are as follows:

Level 1 – Fair value is based on unadjusted quoted prices in active markets that are accessible to the Company for identical assets. These generally provide the most reliable evidence and are used to measure fair value whenever available.

Level 2 – Fair value is based on significant inputs, other than Level 1 inputs, that are observable either directly or indirectly for substantially the full term of the asset through corroboration with observable market data. Level 2 inputs include quoted market prices in active markets for similar assets, quoted market prices in markets that are not active for identical or similar assets, and other observable inputs.

Level 3 – Fair value is based on significant unobservable inputs. Examples of valuation methodologies that would result in Level 3 classification include option pricing models, discounted cash flows, and other similar techniques.

This hierarchy requires the use of observable market data when available. The level in the fair value hierarchy within which the fair value measurement falls is determined based on the lowest level input that is significant to the fair value measurement.

The following table presents the financial assets measured at fair value on a recurring basis and reported on the Consolidated Statements of Financial Condition as of the dates indicated, by level within the fair value hierarchy. The majority of the Company’s securities are included in Level 2 of the fair value hierarchy. Fair values for Level 2 securities were primarily determined by a third-party pricing service using both quoted prices for similar assets, when available, and model-based valuation techniques that derive fair value based on market-corroborated data, such as instruments with similar prepayment speeds and default interest rates. The standard inputs that are normally used include benchmark yields of like securities, reportable trades, broker/dealer quotes, issuer spreads, two-sided markets, benchmark securities, bids, offers, and reference data including market research publications. There were no transfers into or out of Level 3 during the ~~nine~~three months ended ~~September 30, 2021~~March 31, 2022 or year ended December 31, ~~2020.~~

Fair Value
Hierarchy
September 30
2021 December 31
2020
(Dollars in thousands)
Securities:
Available-for-Sale Debt Securities
U.S. Government Agencies Level 2 $ 49,938 $ 41,411
Obligations of States and Political Subdivisions Level 2 19,420 21,993
Mortgage-Backed Securities - Government-Sponsored Enterprises Level 2 141,690 79,493
Corporate Debt Level 2 7,481 —
Total Available-for-Sale Debt Securities 218,529 142,897
Equity Securities
Mutual Funds Level 1 999 1,019
Other Level 1 1,823 1,484
Total Equity Securities 2,822 2,503
Total Securities $ 221,351 $ 145,400
2021.

2720

Table of Contents


	Fair Value Hierarchy	March 31 2022		December 31 2021
(Dollars in thousands)

Securities:
Available-for-Sale Debt Securities
U.S. Government Agencies	Level 2	$	49,211	$	52,561
Obligations of States and Political Subdivisions	Level 2	18,393		18,955
Mortgage-Backed Securities - Government-Sponsored Enterprises	Level 2	50,619		56,559
Collateralized Mortgage Obligations - Government Sponsored Enterprises	Level 2	100,808		86,583
Corporate Debt	Level 2	9,207		7,450
Total Available-for-Sale Debt Securities		228,238		222,108

Equity Securities
Mutual Funds	Level 1	944		990
Other	Level 1	1,915		1,876
Total Equity Securities		2,859		2,866
Total Securities		$	231,097	$	224,974

The following table presents the financial assets on the Consolidated Statements of Financial Condition measured at fair value on a nonrecurring basis as of the dates indicated by level within the fair value hierarchy for only those nonrecurring assets that had a fair value below the carrying amount. The table also presents the significant unobservable inputs used in the fair value measurements.


Financial Asset	Financial Asset	Fair Value Hierarchy	September 30, 2021		Valuation Techniques	Significant Unobservable Inputs	Range					Weighted Average	Financial Asset	Fair Value Hierarchy	March 31, 2022		Valuation Techniques	Significant Unobservable Inputs	Range					Weighted Average
(Dollars in thousands)	(Dollars in thousands)												(Dollars in thousands)

Impaired Loans Individually Assessed	Impaired Loans Individually Assessed	Level 3	$	73	Appraisal of Collateral (1)	Appraisal Adjustments (2)	0	%	to	50	%	50.0%	Impaired Loans Individually Assessed	Level 3	$	1,908	Appraisal of Collateral (1)	Appraisal Adjustments (2)	0	%	to	50	%	15.8%

Mortgage Servicing Rights	Mortgage Servicing Rights	Level 3	733		Discounted Cash Flow	Discount Rate	9	%	to	11	%	10.1%	Mortgage Servicing Rights	Level 3	178		Discounted Cash Flow	Discount Rate	9	%	to	11	%	10.3%
						Prepayment Speed	10	%	to	29	%	19.9%						Prepayment Speed	9	%	to	16	%	10.8%


Financial Asset	Financial Asset	Fair Value Hierarchy	December 31, 2020		Valuation Techniques	Significant Unobservable Inputs	Range					Weighted Average	Financial Asset	Fair Value Hierarchy	December 31, 2021		Valuation Techniques	Significant Unobservable Inputs	Range					Weighted Average
(Dollars in thousands)	(Dollars in thousands)												(Dollars in thousands)

Impaired Loans Individually Assessed	Impaired Loans Individually Assessed	Level 3	$	2,944	Appraisal of Collateral (1)	Appraisal Adjustments (2)	0	%	to	50	%	—	Impaired Loans Individually Assessed	Level 3	$	1,980	Appraisal of Collateral (1)	Appraisal Adjustments (2)	0	%	to	50	%	15.8%

Mortgage Servicing Rights	Mortgage Servicing Rights	Level 3	656		Discounted Cash Flow	Discount Rate	9	%	to	11	%	10.0%	Mortgage Servicing Rights	Level 3	141		Discounted Cash Flow	Discount Rate	9	%	to	11	%	10.2%
						Prepayment Speed	12	%	to	27	%	18.7%						Prepayment Speed	12	%	to	27	%	16.0%
OREO	OREO	Level 3	34		Appraisal of Collateral (1)	Liquidation Expenses (2)	10	%	to	30	%	—	OREO	Level 3	36		Appraisal of Collateral (1)	Liquidation Expenses (2)	10	%	to	30	%	26.6%

(1)Fair value is generally determined through independent appraisals of the underlying collateral, which may include various Level 3 inputs, which are not identifiable.

(2)Appraisals may be adjusted by management for qualitative factors such as economic conditions and estimated liquidation expenses. The range and weighted average of appraisal adjustments and liquidation expense are presented as a percent of the appraisal.

Impaired loans are evaluated when a loan is identified as impaired and valued at the lower of cost or fair value at that time. Impaired loans that are collateral dependent are written down to fair value through the establishment of specific reserves. Fair value is measured based on the value of the collateral securing these loans and is classified as Level 3 in the fair value hierarchy. At ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020,~~2021, the fair value of impaired loans consists of the loan balances of ~~$272,000~~$2.1 and ~~$3.6~~$2.3 million, respectively, less their specific valuation allowances of ~~$199,000~~$180,000 and ~~$649,000,~~$299,000, respectively.

The fair value of mortgage servicing rights ("MSRs") is determined by calculating the present value of estimated future net servicing cash flows, considering expected mortgage loan prepayment rates, discount rates, servicing costs and other economic

Table of Contents

factors, which are determined based on current market conditions. The expected rate of mortgage loan prepayments is the most significant factor driving the value of MSRs. MSRs are considered impaired if the carrying value exceeds fair value. Since the valuation model includes significant unobservable inputs as listed above, MSRs are classified as Level 3. MSRs are reported in Other Assets in the Consolidated Statements of Financial Condition and are amortized into mortgage servicing income in Other Income in the Consolidated Statements of ~~(Loss)~~ Income.

OREO properties are evaluated at the time of acquisition and recorded at fair value, less estimated selling costs. After acquisition, OREO is recorded at the lower of cost or fair value, less estimated selling costs. The fair value of an OREO property is determined from a qualified independent appraisal and is classified as Level 3 in the fair value hierarchy.

Financial instruments are defined as cash, evidence of an ownership in an entity, or a contract which creates an obligation or right to receive or deliver cash or another financial instrument from/to a second entity on potentially favorable or unfavorable terms.

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. If no readily available market exists, the fair value estimates for financial instruments should be based upon management’s judgment regarding current economic conditions, interest rate risk, expected cash flows, future estimated losses and other factors, as determined through various option pricing formulas or simulation modeling. As many of these assumptions result from judgments made by management based upon estimates which are inherently uncertain, the resulting estimated fair values may not be indicative of the amount realizable in the sale of a particular financial instrument. In addition, changes in the assumptions on which the estimated fair values are based may have significant impact on the resulting estimated fair values.

~~Table of Contents~~

As certain assets such as deferred tax assets and premises and equipment are not considered financial instruments, the estimated fair value of financial instruments would not represent the full value of the Company.

The following table presents the estimated fair values of the Company’s financial instruments at the dates indicated.


			September 30, 2021				December 31, 2020						March 31, 2022				December 31, 2021
		Fair Value Hierarchy	Carrying Value		Fair Value		Carrying Value		Fair Value			Fair Value Hierarchy	Carrying Value		Fair Value		Carrying Value		Fair Value
(Dollars in thousands)	(Dollars in thousands)										(Dollars in thousands)

Financial Assets:	Financial Assets:										Financial Assets:
Cash and Due From Banks:	Cash and Due From Banks:										Cash and Due From Banks:
Interest Bearing	Interest Bearing	Level 1	$	131,835	$	131,835	$	145,636	$	145,636	Interest Bearing	Level 1	$	55,233	$	55,233	$	63,968	$	63,968
Non-Interest Bearing	Non-Interest Bearing	Level 1	41,688		41,688		15,275		15,275		Non-Interest Bearing	Level 1	68,355		68,355		55,706		55,706
Securities	Securities	See Above	221,351		221,351		145,400		145,400		Securities	See Above	231,097		231,097		224,974		224,974
Loans Held for Sale		Level 2	17,407		18,304		—		—

Loans, Net	Loans, Net	Level 3	990,018		1,022,160		1,031,982		1,073,633		Loans, Net	Level 3	1,009,047		1,014,050		1,009,214		1,039,980
Property and Equipment Held for Sale		Level 2	795		795		—		—

Restricted Stock	Restricted Stock	Level 2	3,451		3,451		3,984		3,984		Restricted Stock	Level 2	3,428		3,428		3,403		3,403
Mortgage Servicing Rights	Mortgage Servicing Rights	Level 3	733		733		656		656		Mortgage Servicing Rights	Level 3	716		892		730		773
Accrued Interest Receivable	Accrued Interest Receivable	Level 2	3,355		3,355		3,872		3,872		Accrued Interest Receivable	Level 2	3,256		3,256		3,350		3,350
Financial Liabilities:											Financial Liabilities:

Financial Liabilities:
Deposits Held for Sale		Level 2	102,647		107,779		—		—
Deposits	Deposits	Level 2	1,185,156		1,186,603		1,224,569		1,231,606		Deposits	Level 2	1,250,313		1,249,804		1,226,613		1,227,653
Short-Term Borrowings	Short-Term Borrowings	Level 2	42,623		42,623		41,055		41,055		Short-Term Borrowings	Level 2	39,219		39,219		39,266		39,266
Other Borrowed Funds	Other Borrowed Funds	Level 2	6,000		6,058		8,000		8,067		Other Borrowed Funds
FHLB Borrowings											FHLB Borrowings	Level 2	3,000		3,000		3,000		3,000
Subordinated Debt											Subordinated Debt	Level 2	14,607		14,749		14,601		15,000
Accrued Interest Payable	Accrued Interest Payable	Level 2	490		490		767		767		Accrued Interest Payable	Level 2	546		546		486		486

Note ~~10.~~7. Commitments and Contingent Liabilities

The Company is a party to financial instruments with off-balance-sheet risk in the normal course of business primarily to meet the financing needs of its customers. These financial instruments include commitments to extend credit and standby and performance 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 Statements of Financial Condition. The contract amounts of those instruments reflect the extent of involvement the Company has in particular classes of financial instruments.

The Company’s exposure to credit loss in the event of nonperformance by the other party to the financial instrument for commitments to extend credit and standby and performance letters of credit written is represented by the contractual amount of

Table of Contents

those instruments. The Company uses the same credit policies in making commitments and conditional obligations as it does for on-balance-sheet instruments.

Commitments and conditional obligations are evaluated the same as on-balance-sheet instruments but do not have a corresponding reserve recorded. The Company’s opinion on not implementing a corresponding reserve for off-balance-sheet instruments is supported by historical factors of no losses recorded due to these items. The Company is continually evaluating these items for credit quality and any future need for the corresponding reserve.

~~Table of Contents~~

The following table presents the unused and available credit balances of financial instruments whose contracts represent credit risk at the dates indicated.


		September 30, 2021		December 31, 2020			March 31, 2022		December 31, 2021
(Dollars in thousands)	(Dollars in thousands)					(Dollars in thousands)

Standby Letters of Credit	Standby Letters of Credit	$	110	$	120	Standby Letters of Credit	$	110	$	110
Performance Letters of Credit	Performance Letters of Credit	2,764		2,947		Performance Letters of Credit	1,918		2,873
Construction Mortgages	Construction Mortgages	56,809		60,312		Construction Mortgages	49,823		55,597
Personal Lines of Credit	Personal Lines of Credit	7,132		6,930		Personal Lines of Credit	7,090		7,055
Overdraft Protection Lines	Overdraft Protection Lines	5,895		6,287		Overdraft Protection Lines	5,596		5,709
Home Equity Lines of Credit	Home Equity Lines of Credit	22,797		22,110		Home Equity Lines of Credit	22,171		21,187
Commercial Lines of Credit	Commercial Lines of Credit	74,127		69,738		Commercial Lines of Credit	74,665		83,316
Total Commitments	Total Commitments	$	169,634	$	168,444	Total Commitments	$	161,373	$	175,847

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 by the customer. Because many of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. The Company evaluates each customer’s creditworthiness on a case-by-case basis. The amount of collateral obtained, if deemed necessary by the Company upon extension of credit, is based on management’s credit evaluation of the counterparty. Collateral held varies, but may include accounts receivable, inventory, property, plant and equipment, and income-producing commercial properties.

Performance letters of credit represent conditional commitments issued by the Company to guarantee the performance of a customer to a third party. These instruments are issued primarily to support bid or performance-related contracts. The coverage period for these instruments is typically a one-year period with an annual renewal option subject to prior approval by management. Fees earned from the issuance of these letters are recognized upon expiration of the letter. For secured letters of credit, the collateral is typically Company deposit instruments or customer business assets.

Note ~~11.~~8. Leases

The Company evaluates contracts at commencement to determine if a lease is present. The Company’s lease contracts are all classified as operating leases and create operating right-of-use (“ROU”) assets and corresponding lease liabilities on the Consolidated Statements of Financial Condition. The leases are primarily ROU assets of land and building for branch and loan production locations. ROU assets are reported in Accrued Interest Receivable and Other Assets and the related lease liabilities in Accrued Interest Payable and Other Liabilities on the Consolidated Statements of Financial Condition.

The following tables present the lease expense, ROU assets, weighted average term, discount rate and maturity analysis of lease liabilities for operating leases for the periods and dates indicated.


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended March 31,
		2021		2020		2021		2020			2022		2021
(Dollars in thousands)	(Dollars in thousands)									(Dollars in thousands)

Operating Lease Expense	Operating Lease Expense	$	74	$	118	$	257	$	353	Operating Lease Expense	$	82	$	95
Short-Term Lease Expense	Short-Term Lease Expense	8		—		25		—		Short-Term Lease Expense	—		8
Variable Lease Expense	Variable Lease Expense	8		10		24		28		Variable Lease Expense	7		8
Total Lease Expense	Total Lease Expense	$	90	$	128	$	306	$	381	Total Lease Expense	$	89	$	111

September 30,
2021 December 31,
2020
(Dollars in thousands)
Operating Leases:
ROU Assets $ 741 $ 1,206
Weighted Average Lease Term in Years 7.16 6.95
Weighted Average Discount Rate 2.47 % 2.39 %

3023

Table of Contents


	March 31, 2022			December 31, 2021
(Dollars in thousands)

Operating Leases:
ROU Assets	$	1,776		$	674
Weighted Average Lease Term in Years	9.02			7.33
Weighted Average Discount Rate	2.47		%	2.51		%


	~~September 30,~~March 31, ~~2021~~2022
(Dollars in thousands)

Maturity Analysis:
Due in One Year	$	~~309~~325
Due After One Year to Two Years	~~178~~268
Due After Two Years to Three Years	~~113~~228
Due After Three Years to Four Years	90201
Due After Four to Five Years	45169
Due After Five Years	~~330~~1,050
Total	$	~~1,065~~2,241
Less: Present Value Discount	~~106~~265
Lease Liabilities	$	~~959~~1,976

~~Impairment of ROU Assets~~

~~ROU assets from operating leases are subject~~During the three months ended March 31, 2022, the Company entered into a new lease agreement for the McMurray, PA branch, for a 10-year term ending March 31, 2032. The increase to the ~~impairment guidance in ASC 360,~~ ~~Property, Plant,~~operating Right of Use Asset and ~~Equipment,~~ and are reviewed for impairment when indicators of impairment are present. ASC 360 requires three steps to identify, recognize and measure impairment. If indicators of impairment are present (Step 1), the Company performs a recoverability test (Step 2) comparing the sum of the estimated undiscounted cash flows attributable to the ROU asset in question to the carrying amount. If the undiscounted cash flows used in the recoverability test are less than the carrying amount, the Company estimates the fair value of the ROU asset and recognizes an impairment loss when the carrying amount exceeds the estimated fair value (Step 3).corresponding lease liability is approximately $1.17 million.

At June 30, 2021, the Company consolidated 6 branches as part of its branch optimization initiative. NaN of the branches was leased and the Company performed the three-step evaluation as outlined above to determine whether the operating lease was impaired. As part of the recoverability test, the Company elected to exclude operating lease liabilities from the carrying amount of the asset group. The undiscounted future cash flows used in the recoverability test were based on assumptions made by the Company rather than market participant assumptions. Since an election was made to exclude operating lease liabilities from the asset or asset group, all future cash lease payments for the lease were also excluded. In addition, the Company elected to exclude operating lease liabilities from the estimated fair value, consistent with the recoverability test When determining the fair value of the ROU asset, the Company estimated what market participants would pay to lease the asset. The ROU asset was valued assuming its highest and best use in its current form.

Based on the analysis, the Company concluded that the ROU asset for this branch was fully impaired as of June 30, 2021, resulting in a remaining ROU carrying value of zero and the recognition of a $227,000 impairment for the nine months ended September 30, 2021. The impairment was recognized in Occupancy expense on the Consolidated Statements of Income (Loss).

3124

Table of Contents

Note ~~12.~~9. Other Noninterest Expense

The details of other noninterest expense for the Company’s Consolidated Statements of (Loss) Income for the periods indicated are as follows:


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended March 31,
		2021		2020		2021		2020			2022		2021
(Dollars in thousands)	(Dollars in thousands)									(Dollars in thousands)

Non-Employee Compensation	Non-Employee Compensation	$	184	$	155	$	473	$	449	Non-Employee Compensation	$	131	$	148
Printing and Supplies	Printing and Supplies	55		125		218		365		Printing and Supplies	80		99
Postage	Postage	86		61		265		176		Postage	103		63
Telephone	Telephone	145		108		472		408		Telephone	139		188
Charitable Contributions	Charitable Contributions	45		32		80		98		Charitable Contributions	42		15
Dues and Subscriptions	Dues and Subscriptions	33		36		121		153		Dues and Subscriptions	58		50
Loan Expenses	Loan Expenses	86		149		288		420		Loan Expenses	127		92
Meals and Entertainment	Meals and Entertainment	31		—		91		74		Meals and Entertainment	30		34
Travel	Travel	27		13		77		87		Travel	39		22
Training	Training	5		10		29		24		Training	18		17
Bank Assessment	Bank Assessment	46		44		134		132		Bank Assessment	47		44
Insurance	Insurance	54		59		173		173		Insurance	62		60
Miscellaneous	Miscellaneous	106		127		409		418		Miscellaneous	123		150
Total Other Noninterest Expense	Total Other Noninterest Expense	$	903	$	919	$	2,830	$	2,977	Total Other Noninterest Expense	$	999	$	982

Note ~~13.~~10. Segment and Related Information

At ~~September 30, 2021,~~March 31, 2022, the Company’s business activities were comprised of 2 operating segments, which are community banking and insurance brokerage services. CB Financial is the parent company of the Bank and Exchange Underwriters, a wholly owned subsidiary of the Bank. Exchange Underwriters has an independent board of directors from the Company and is managed separately from the banking and related financial services that the Company offers. Exchange Underwriters is an independent insurance agency that offers property, casualty, commercial liability, surety and other insurance products.

Table of Contents

The following is a table of selected financial data for the Company’s subsidiaries and consolidated results at the dates and for the periods indicated.


		Community Bank		Exchange Underwriters, Inc.		CB Financial Services, Inc.		Net Eliminations		Consolidated			Community Bank		Exchange Underwriters, Inc.		CB Financial Services, Inc.		Net Eliminations		Consolidated
(Dollars in thousands)	(Dollars in thousands)											(Dollars in thousands)

September 30, 2021
March 31, 2022												March 31, 2022
Assets	Assets	$	1,474,626	$	4,656	$	130,994	$	(135,458)	$	1,474,818	Assets	$	1,439,251	$	5,584	$	136,994	$	(143,159)	$	1,438,670
Liabilities	Liabilities	1,352,005		1,672		7		(9,853)		1,343,831		Liabilities	1,320,826		1,645		14,838		(20,795)		1,316,514
Stockholders' Equity	Stockholders' Equity	122,621		2,984		130,987		(125,605)		130,987		Stockholders' Equity	118,425		3,939		122,156		(122,364)		122,156

December 31, 2020
December 31, 2021												December 31, 2021
Assets	Assets	$	1,416,132	$	5,379	$	134,546	$	(139,337)	$	1,416,720	Assets	$	1,425,588	$	5,110	$	147,829	$	(153,048)	$	1,425,479
Liabilities	Liabilities	1,287,148		2,325		16		(7,299)		1,282,190		Liabilities	1,299,325		1,731		14,705		(23,406)		1,292,355
Stockholders' Equity	Stockholders' Equity	128,984		3,054		134,530		(132,038)		134,530		Stockholders' Equity	126,263		3,379		133,124		(129,642)		133,124

Three Months Ended September 30, 2021
Three Months Ended March 31, 2022												Three Months Ended March 31, 2022
Interest and Dividend Income	Interest and Dividend Income	$	10,768	$	1	$	1,311	$	(1,294)	$	10,786	Interest and Dividend Income	$	10,596	$	1	$	1,279	$	(1,260)	$	10,616
Interest Expense	Interest Expense	776		—		—		—		776		Interest Expense	567		—		156		—		723
Net Interest and Dividend Income	Net Interest and Dividend Income	9,992		1		1,311		(1,294)		10,010		Net Interest and Dividend Income	10,029		1		1,123		(1,260)		9,893
Provision for Loan Losses	Provision for Loan Losses	—		—		—		—		—		Provision for Loan Losses	—		—		—		—		—
Net Interest and Dividend Income After Provision for Loan Losses	Net Interest and Dividend Income After Provision for Loan Losses	9,992		1		1,311		(1,294)		10,010		Net Interest and Dividend Income After Provision for Loan Losses	10,029		1		1,123		(1,260)		9,893
Noninterest Income	Noninterest Income	975		1,195		28		—		2,198		Noninterest Income	777		1,797		39		—		2,613
Noninterest Expense	Noninterest Expense	8,750		1,020		3		—		9,773		Noninterest Expense	7,645		1,007		4		—		8,656
Undistributed Net Income of Subsidiary	Undistributed Net Income of Subsidiary	124		—		654		(778)		—		Undistributed Net Income of Subsidiary	561		—		1,852		(2,413)		—
Income Before Income Tax Expense		2,341		176		1,990		(2,072)		2,435
Income Tax Expense		393		52		7		—		452
Income Before Income Tax Expense (Benefit)												Income Before Income Tax Expense (Benefit)	3,722		791		3,010		(3,673)		3,850
Income Tax Expense (Benefit)												Income Tax Expense (Benefit)	610		230		(37)		—		803
Net Income	Net Income	$	1,948	$	124	$	1,983	$	(2,072)	$	1,983	Net Income	$	3,112	$	561	$	3,047	$	(3,673)	$	3,047

Nine Months Ended September 30, 2021
Interest and Dividend Income		$	32,536	$	4	$	8,456	$	(8,402)	$	32,594
Interest Expense		2,673		—		—		—		2,673
Net Interest and Dividend Income		29,863		4		8,456		(8,402)		29,921
(Recovery) Provision for Loan Losses		(1,200)		—		—		—		(1,200)
Net Interest and Dividend Income After (Recovery) Provision for Loan Losses		31,063		4		8,456		(8,402)		31,121
Noninterest Income		3,319		3,995		277		—		7,591
Noninterest Expense		29,898		2,983		9		—		32,890
Undistributed Net Income (Loss) of Subsidiary		710		—		(4,096)		3,386		—
Income Before Income Tax Expense		5,194		1,016		4,628		(5,016)		5,822
Income Tax Expense		888		306		23		—		1,217
Net Income		$	4,306	$	710	$	4,605	$	(5,016)	$	4,605





Three Months Ended March 31, 2021
Interest and Dividend Income	$	10,971	$	1	$	1,320	$	(1,304)	$	10,988
Interest Expense	1,011		—		—		—		1,011
Net Interest and Dividend Income	9,960		1		1,320		(1,304)		9,977
Provision for Loan Losses	—		—		—		—		—
Net Interest and Dividend Income After Provision for Loan Losses	9,960		1		1,320		(1,304)		9,977
Noninterest Income	1,343		1,591		240		—		3,174
Noninterest Expense	8,390		1,001		4		—		9,395
Undistributed Net Income of Subsidiary	407		—		1,301		(1,708)		—
Income Before Income Tax Expense	3,320		591		2,857		(3,012)		3,756
Income Tax Expense	715		184		12		—		911
Net Income	$	2,605	$	407	$	2,845	$	(3,012)	$	2,845

~~Table of Contents~~

Community Bank Exchange Underwriters, Inc. CB Financial Services, Inc. Net Eliminations Consolidated
(Dollars in thousands)
Three Months Ended September 30, 2020
Interest and Dividend Income $ 11,639 $ 1 $ 1,310 $ (1,294) $ 11,656
Interest Expense 1,240 — — — 1,240
Net Interest and Dividend Income 10,399 1 1,310 (1,294) 10,416
Provision for Loan Losses 1,200 — — — 1,200
Net Interest and Dividend Income After Provision for Loan Losses 9,199 1 1,310 (1,294) 9,216
Noninterest Income 1,208 1,024 (59) — 2,173
Noninterest Expense 28,046 919 3 — 28,968
Undistributed Net Income (Loss) of Subsidiary 73 — (18,694) 18,621 —
(Loss) Income Before Income Tax (Benefit) Expense (17,566) 106 (17,446) 17,327 (17,579)
Income Tax (Benefit) Expense (166) 33 (51) — (184)
Net (Loss) Income $ (17,400) $ 73 $ (17,395) $ 17,327 $ (17,395)
Nine Months Ended September 30, 2020
Interest and Dividend Income $ 35,664 $ 3 $ 2,634 $ (2,589) $ 35,712
Interest Expense 4,442 — — — 4,442
Net Interest and Dividend Income 31,222 3 2,634 (2,589) 31,270
Provision for Loan Losses 4,000 — — — 4,000
Net Interest and Dividend Income After Provision for Loan Losses 27,222 3 2,634 (2,589) 27,270
Noninterest Income (Loss) 3,760 3,426 (493) — 6,693
Noninterest Expense 44,227 2,806 9 — 47,042
Undistributed Net Income (Loss) of Subsidiary 433 — (15,991) 15,558 —
(Loss) Income Before Income Tax Expense (Benefit) (12,812) 623 (13,859) 12,969 (13,079)
Income Tax Expense (Benefit) 590 190 (140) — 640
Net (Loss) Income $ (13,402) $ 433 $ (13,719) $ 12,969 $ (13,719)

3426

Table of Contents

Note ~~14. Intangible Assets~~11. Stock Based Compensation

The following table presents ~~a summary of intangible assets subject to amortization at~~stock option information for the ~~dates~~periods indicated.

September 30, 2021 December 31, 2020
Gross Carrying Amount Accumulated Amortization Impairment Net Carrying Value Gross Carrying Amount Accumulated Amortization Net Carrying Value
(Dollars in thousands)
Core Deposit Intangible $ 14,103 $ (8,386) $ (1,178) $ 4,539 $ 14,103 $ (7,047) $ 7,056
Customer List 1,800 (599) — 1,201 1,800 (457) 1,343
Total Intangible Assets $ 15,903 $ (8,985) $ (1,178) $ 5,740 $ 15,903 $ (7,504) $ 8,399


	Number of Shares	Weighted Average Exercise Price		Weighted Average Remaining Contractual Life in Years
Outstanding Options at December 31, 2021	207,641	$	24.01	4.8
Granted	85,465	25.95
Exercised	(7,500)	22.25
Forfeited	(68)	30.75
Outstanding Options at March 31, 2022	285,538	$	24.64	6.1

Exercisable Options at March 31, 2022	179,515	$	24.25	4.2

	Number of Shares	Weighted Average Exercise Price		Weighted Average Remaining Service Period in Years
Nonvested Options March 31, 2022	106,023	$	25.30	9.4

Summary of Significant Assumptions for Newly Issued Stock Options
Expected Term in Years				6.5
Expected Volatility				28.7		%
Expected Dividends				$	0.96
Risk Free Rate of Return				1.57		%
Weighted Average Grant Date Fair Value (per share)				$	4.90

~~On June 10,~~The following table presents restricted stock award information for the periods indicated


	Number of Shares	Weighted Average Grant Date Fair Value Price		Weighted Average Remaining Service Period in Years
Nonvested Restricted Stock at December 31, 2021	56,140	$	23.90	5.3
Granted	20,765	26.25
Vested	—	—
Forfeited	(200)	20.38
Nonvested Restricted Stock at March 31, 2022	76,705	$	24.55	5.0

The Company recognizes expense over a five-year vesting period for the restricted stock awards and stock options. Stock-based compensation expense related to restricted stock awards and stock options was $130,000 and $121,000 for the three months ended March 31, 2022 and 2021, respectively.

As of March 31, 2022 and December 31, 2021, total unrecognized compensation expense was $456,000 and $65,000, respectively, related to stock options, and $1.7 million and $1.3 million, respectively, related to restricted stock awards.

Intrinsic value represents the ~~Agreement was executed with Citizens Bank pursuant to~~amount by which ~~Citizens Bank has agreed to assume certain deposits~~the fair value of the ~~branch offices of Community Bank located in Buckhannon, West Virginia,~~underlying stock at March 31, 2022 and ~~in New Martinsville, West Virginia. In 2018,~~December 31, 2021 exceeds the ~~Company recorded a core deposit intangible asset related to the acquisition of these two branches as part~~exercise price of the ~~merger with First West Virginia Bancorp, Inc. As a result~~stock options. The intrinsic value of ~~signing~~stock options was $273,000 and $296,000 at March 31, 2022 and December 31, 2021, respectively.

At March 31, 2022 and December 31, 2021, respectively, there were 362,622 and 500,000 shares available under the ~~Agreement and the expected sale of a portion of the deposits associated~~Plan to be issued in connection with the ~~remaining core deposit intangible,~~exercise of stock options, and 145,049 and 200,000 shares that may be issued as restricted stock awards or units. Restricted stock awards or units may be issued above this amount provided that the ~~Company performed an interim evaluation to determine whether the core deposit intangible was impaired. As a result~~number of ~~the evaluation, the Company determined the carrying amount of the core deposit intangible was impaired $1.2 million. The Company recorded the impairment in Intangible Asset~~shares reserved for stock options is reduced by two and ~~Goodwill Impairment on the Consolidated Statements of Income (Loss).~~

The estimated amortization expense of intangible assets assumes no activities, such as acquisitions, which would result in additional amortizable intangible assets. Estimated amortization expense of intangible assets in subsequent fiscal years is as follows as of September 30, 2021.

Amount
(Dollars in thousands)
Remaining in 2021 $ 445
2022 1,782
2023 1,782
2024 1,147
2025 189
2026 and Thereafter 395
Total Estimated Intangible Asset Amortization Expense $ 5,740
one-half shares for each restricted stock award or unit share granted.

3527

Table of Contents

Note ~~15. Mortgage Servicing Rights~~12. Subsequent Events

~~The following table presents MSR activity and net carrying values for~~

Stock Repurchase Program

On April 21, 2022, the ~~periods indicated.~~

Three Months Ended
September 30, Nine Months Ended
September 30,
2021 2020 2021 2020
(Dollars in thousands)
Mortgage Servicing Rights:
Balance, Beginning of Period $ 902 $ 1,032 $ 1,029 $ 1,001
Additions 32 73 64 210
Amortization (70) (71) (229) (177)
Balance, End of Period $ 864 $ 1,034 $ 864 $ 1,034
Valuation Allowance:
Balance, Beginning of Period $ (213) $ (340) $ (373) $ (71)
Valuation Allowance Adjustment 82 — 242 (269)
Balance, End of Period $ (131) $ (340) $ (131) $ (340)
Mortgage Servicing Rights, Net Carrying Value $ 733 $ 694 $ 733 $ 694

~~Amortization~~Company announced a program to repurchase up to $10 million of ~~MSRs and~~ the ~~period change in the valuation allowance are reported in Other Income~~Company’s outstanding shares of common stock. Based on the ~~Consolidated Statements of Income (Loss).~~Company’s closing stock price on April 19, 2022, the repurchase program, if fully completed, would encompass 433,463 shares, or approximately 8.4% the shares currently outstanding.

Real estate loans serviced for others, which are not included in the Consolidated Statements of Financial Condition, totaled $96.6 million and $105.8 million at September 30, 2021 and December 31, 2020, respectively.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

This discussion should be read in conjunction with the unaudited consolidated financial statements, notes and tables included in this report. For further information, refer to the audited consolidated financial statements and notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2020.~~2021.

Forward-Looking Statements

This report contains certain “forward-looking statements” within the meaning of the federal securities laws. These statements are not historical facts, but rather statements based on the Company’s current expectations regarding its business strategies, intended results and future performance. Forward-looking statements are preceded by terms such as “expects,” “believes,” “anticipates,” “intends” and similar expressions. Management’s ability to predict results or the effect of future plans or strategies is inherently uncertain. Factors which could affect actual results include, but are not limited to, the following:

•General and local economic conditions;

•The scope and duration of economic contraction as a result of the COVID-19 pandemic and its effects on the Company’s business and that of the Company’s customers;

•Government action in response to the COVID-19 pandemic and its effects on the Company's business and that of the Company's customers;

•Our ability to realize the expected cost savings and other efficiencies related to our branch optimization and operational efficiency initiatives;

•Changes in market interest rates, deposit flows, demand for loans, real estate values and competition;

•Competitive products and pricing;

•The ability of our customers to make scheduled loan payments;

•Loan delinquency rates and trends;

•Our ability to manage the risks involved in our business;

•Our ability to integrate the operations of businesses we acquire;

•Our ability to control costs and expenses;

•Inflation, market and monetary fluctuations;

•Changes in federal and state legislation and regulation applicable to our business;

•Actions by our competitors; and

~~Table of Contents~~

•Other factors disclosed in the Company’s periodic reports as filed with the Securities and Exchange Commission.

Many of these risks and uncertainties have been elevated by and may continue to be elevated by the COVID-19 pandemic. The ability to predict the impact of the ongoing COVID-19 pandemic on the Company’s future operating results with any precision is difficult and depends on many factors beyond our control.

These risks and uncertainties should be considered in evaluating forward-looking statements and undue reliance should not be placed on such statements. The Company assumes no obligation to update any forward-looking statements except as may be required by applicable law or regulation.

General

CB Financial Services is a bank holding company established in 2006 and headquartered in Carmichaels, Pennsylvania. CB Financial’s business activity is conducted primarily through its wholly owned bank subsidiary, Community Bank.

The Bank is a Pennsylvania-chartered commercial bank headquartered in Carmichaels, Pennsylvania. The Bank operates from 11 branches in Greene, Allegheny, Washington, Fayette and Westmoreland Counties in southwestern Pennsylvania and ~~five branches~~three offices in Marshall ~~Ohio, Upshur~~ and ~~Wetzel~~Ohio Counties in West Virginia. The Bank also has a loan production office in Allegheny County, a corporate center in Washington County and an operations center in Greene County, all of which are in Pennsylvania. The Bank is a

Table of Contents

community-oriented institution offering residential and commercial real estate loans, commercial and industrial loans, and consumer loans as well as a variety of deposit products for individuals and businesses in its market area. Property and casualty, commercial liability, surety and other insurance products are offered through Exchange Underwriters, Inc., the Bank’s wholly owned subsidiary that is a full-service, independent insurance agency located in Washington County.

Overview

The following discussion and analysis is presented to assist in the understanding and evaluation of our consolidated financial condition and results of operations. It is intended to complement the unaudited consolidated financial statements and notes thereto appearing elsewhere in this Form 10-Q and should be read in conjunction therewith. The detailed discussion focuses on our consolidated financial condition as of ~~September 30, 2021,~~March 31, 2022, compared to the financial condition as of December 31, ~~2020~~2021 and the consolidated results of operations for the three ~~and nine~~ months ended ~~September 30, 2021~~March 31, 2022 compared to the three ~~and nine~~ months ended ~~September 30, 2020.~~March 31, 2021.

Our results of operations depend primarily on our net interest income. Net interest income is the difference between the interest income we earn on our interest-earning assets and the interest we pay on our interest-bearing liabilities. Our results of operations also are affected by our provisions for loan losses, noninterest income and noninterest expense. Noninterest income consists primarily of fees and service charges on deposit accounts, insurance commissions, income from bank-owned life insurance and other income. Noninterest expense consists primarily of expenses related to salaries and employee benefits, occupancy and equipment, data processing, contracted services, legal and professional fees, advertising, deposit and general insurance and other expenses.

Financial institutions like us, in general, are significantly affected by economic conditions, competition, and the monetary and fiscal policies of the federal government. Lending activities are influenced by the demand for and supply of housing, competition among lenders, interest rate conditions, and funds availability. Our operations and lending are principally concentrated in southwestern Pennsylvania and Ohio Valley market areas.

~~Branch Optimization and Operational Efficiency Update~~

The Bank continues to make progress related to these initiatives through the consolidation of six branches that was completed on June 30, 2021, reducing the Bank's branch network to 16 branches. The Bank is also in the process of implementing operational efficiencies related to over 185 individualized processes within its branch network and operating environment. In addition, on June 10, 2021, CB Financial, Community Bank, and Citizens Bank of West Virginia, Inc. (“Citizens Bank”) executed a Purchase and Assumption Agreement (the “Agreement”) pursuant to which Citizens Bank has agreed to purchase certain loans and other assets, and assume certain deposits and other liabilities, of the branch offices of Community Bank located in Buckhannon, West

~~Table of Contents~~

Virginia, and in New Martinsville, West Virginia. The Agreement provides for a 5.0% premium to be paid on assumed deposits, which will be recognized as income upon the expected close of the transaction in the fourth quarter of 2021, subject to regulatory approval and other closing conditions. As of September 30, 2021, all requisite regulatory approvals had been received.

~~The Company presently~~ expects to incur $7.9 million of non-recurring expenses in 2021 and, as of September 30, 2021, has incurred $6.3 million of expenses related to these items. The expenses include a $2.3 million writedown on fixed assets and a $1.2 million impairment of intangible assets associated with the branch consolidations in the second quarter and the pending branch sales expected to be finalized in the fourth quarter. In addition, as part of the Company's branch optimization and operational efficiency initiatives, the Company incurred $2.9 million of expenses related to contracted services, employee severance costs, branch lease impairment, professional fees, data processing fees, legal and other expenses.

The majority of the remaining expenses to be recognized in 2021 are related to approximately $600,000 in contracted services aimed at improving the operational and revenue efficiency at the bank in the long-term. The Company anticipates cost savings from this initiative ranging from approximately $2.5 million to $3.5 million in 2022~~, as well as expected enhanced revenue and fee generating capacity in future years.~~

~~In addition, the Company expects an annual reduction in pre-tax operating expenses in 2021~~ ~~of approximately $1.0 million, alo~~ng with $3.0 million of ongoing pre-tax cost savings as a result of the branch optimization initiatives. The Company expects these estimated cost savings to be incremental to net income beginning in 2022. These estimated cost savings exclude the favorable impact of the expected premium from sale of branches expected to be recognized in the fourth quarter of 2021 and currently estimated to be $5.1 million.

Explanation of Use of Non-GAAP Financial Measures

In addition to financial measures presented in accordance with U.S. GAAP, we present certain non-GAAP financial measures. We believe these non-GAAP financial measures provide useful information in understanding our underlying results of operations or financial position and our business and performance trends as they facilitate comparisons with the performance of other companies in the financial services industry. Non-GAAP adjusted items impacting the Company's financial performance are identified to assist investors in providing a complete understanding of factors and trends affecting the Company’s business and in analyzing the Company’s operating results on the same basis as that applied by management. Although we believe that these non-GAAP financial measures enhance the understanding of our business and performance, they should not be considered an alternative to GAAP or considered to be more important than financial results determined in accordance with GAAP, nor are they necessarily comparable with non-GAAP measures which may be presented by other companies. Where non-GAAP financial measures are used, the comparable GAAP financial measure, as well as the reconciliation to the comparable GAAP financial measure, can be found herein.

The interest income on interest-earning assets, net interest rate spread and net interest margin are presented on a fully tax-equivalent (“FTE”) basis. The FTE basis adjusts for the tax benefit of income on certain tax-exempt loans and securities using the federal statutory income tax rate of 21.0%. We believe the presentation of net interest income on a FTE basis ensures comparability of net interest income arising from both taxable and tax-exempt sources and is consistent with industry practice.

3829

Table of Contents

The following table reconciles net interest income, net interest spread and net interest margin on a FTE basis for the periods indicated:


		Three Months Ended						Nine Months Ended							Three Months Ended
		September 30,													March 31,
		2021			2020			2021			2020				2022			2021
(Dollars in thousands)	(Dollars in thousands)													(Dollars in thousands)

Interest Income (GAAP)	Interest Income (GAAP)	$	10,786		$	11,656		$	32,594		$	35,712		Interest Income (GAAP)	$	10,616		$	10,988
Adjustment to FTE Basis	Adjustment to FTE Basis	41			53			131			165			Adjustment to FTE Basis	40			40
Interest Income (FTE) (Non-GAAP)	Interest Income (FTE) (Non-GAAP)	10,827			11,709			32,725			35,877			Interest Income (FTE) (Non-GAAP)	10,656			11,028
Interest Expense (GAAP)	Interest Expense (GAAP)	776			1,240			2,673			4,442			Interest Expense (GAAP)	723			1,011
Net Interest Income (FTE) (Non-GAAP)	Net Interest Income (FTE) (Non-GAAP)	$	10,051		$	10,469		$	30,052		$	31,435		Net Interest Income (FTE) (Non-GAAP)	$	9,933		$	10,017

Net Interest Rate Spread (GAAP)	Net Interest Rate Spread (GAAP)	2.77		%	3.03		%	2.80		%	3.15		%	Net Interest Rate Spread (GAAP)	2.98		%	2.91		%
Adjustment to FTE Basis	Adjustment to FTE Basis	0.01			0.02			0.01			0.02			Adjustment to FTE Basis	0.01			0.01
Net Interest Rate Spread (FTE) (Non-GAAP)	Net Interest Rate Spread (FTE) (Non-GAAP)	2.78			3.05			2.81			3.17			Net Interest Rate Spread (FTE) (Non-GAAP)	2.99			2.92

Net Interest Margin (GAAP)	Net Interest Margin (GAAP)	2.88		%	3.19		%	2.92		%	3.34		%	Net Interest Margin (GAAP)	3.08		%	3.04		%
Adjustment to FTE Basis	Adjustment to FTE Basis	0.01			0.02			0.01			0.01			Adjustment to FTE Basis	0.02			0.01
Net Interest Margin (FTE) (Non-GAAP)	Net Interest Margin (FTE) (Non-GAAP)	2.89			3.21			2.93			3.35			Net Interest Margin (FTE) (Non-GAAP)	3.10			3.05

Allowance for loan losses to total loans, excluding PPP loans, is a non-GAAP measure that serves as a useful measurement to evaluate the allowance for loan losses without the impact of SBA guaranteed loans.


		September 30, 2021			December 31, 2020				March 31, 2022			December 31, 2021
(Dollars in thousands)	(Dollars in thousands)							(Dollars in thousands)

Allowance for Loan Losses (Numerator)	Allowance for Loan Losses (Numerator)	$	11,581		$	12,771		Allowance for Loan Losses (Numerator)	$	11,595		$	11,582

Total Loans	Total Loans	1,001,599			$	1,044,753		Total Loans	1,020,642			$	1,020,796
PPP Loans	PPP Loans	(32,703)			(55,096)			PPP Loans	(8,242)			(24,523)
Total Loans, Excluding PPP Loans (Non-GAAP) (Denominator)	Total Loans, Excluding PPP Loans (Non-GAAP) (Denominator)	$	968,896		$	989,657		Total Loans, Excluding PPP Loans (Non-GAAP) (Denominator)	$	1,012,400		$	996,273

Allowance for Loan Losses to Total Loans (GAAP)	Allowance for Loan Losses to Total Loans (GAAP)	1.16		%	1.22		%	Allowance for Loan Losses to Total Loans (GAAP)	1.14		%	1.13		%

Allowance for Loan Losses to Total Loans, Excluding PPP Loans (Non-GAAP)	Allowance for Loan Losses to Total Loans, Excluding PPP Loans (Non-GAAP)	1.20		%	1.29		%	Allowance for Loan Losses to Total Loans, Excluding PPP Loans (Non-GAAP)	1.15		%	1.16		%

Tangible book value per common share is a non-GAAP measure calculated based on tangible common equity divided by period-end common shares outstanding. We believe this non-GAAP measure serves as a useful tool to help evaluate the strength and discipline of the Company's capital management strategies and as an additional, conservative measure of the Company’s total value.


		September 30, 2021		December 31, 2020			March 31, 2022		December 31, 2021
(Dollars in thousands, except share and per share data)	(Dollars in thousands, except share and per share data)					(Dollars in thousands, except share and per share data)

Stockholders' Equity (GAAP)	Stockholders' Equity (GAAP)	$	130,987	$	134,530	Stockholders' Equity (GAAP)	$	122,156	$	133,124
Goodwill and Other Intangible Assets, Net	Goodwill and Other Intangible Assets, Net	(15,472)		(18,131)		Goodwill and Other Intangible Assets, Net	(14,582)		(15,027)
Tangible Common Equity or Tangible Book Value (Non-GAAP) (Numerator)	Tangible Common Equity or Tangible Book Value (Non-GAAP) (Numerator)	$	115,515	$	116,399	Tangible Common Equity or Tangible Book Value (Non-GAAP) (Numerator)	$	107,574	$	118,097

Common Shares Outstanding (Denominator)	Common Shares Outstanding (Denominator)	5,330,401		5,434,374		Common Shares Outstanding (Denominator)	5,156,897		5,260,672

Book Value per Common Share (GAAP)	Book Value per Common Share (GAAP)	$	24.57	$	24.76	Book Value per Common Share (GAAP)	$	23.69	$	25.31

Tangible Book Value per Common Share (Non-GAAP)	Tangible Book Value per Common Share (Non-GAAP)	$	21.67	$	21.42	Tangible Book Value per Common Share (Non-GAAP)	$	20.86	$	22.45

3930

Table of Contents

Consolidated Statements of Financial Condition Analysis

Assets. Total assets increased ~~$58.1~~$13.2 million, or ~~4.1%~~0.9%, to ~~$1.47~~$1.44 billion at ~~September 30, 2021,~~March 31, 2022, compared to ~~$1.42~~$1.43 billion at December 31, ~~2020.~~2021. The change is primarily due to increases in cash and due from banks and in securities.

Cash and Securities

•Cash and due from banks increased ~~$12.6~~$3.9 million, or ~~7.8%~~3.3%, to ~~$173.5~~$123.6 million at ~~September 30, 2021,~~March 31, 2022, compared to ~~$160.9~~$119.7 million at December 31, ~~2020.~~2021. The change is primarily due to an increase in deposits as further described below in the Liabilities section. The increase was partially offset by purchases of securities detailed in the below Securities section.

•Securities increased ~~$76.0~~$6.1 million, or ~~52.3%~~2.7%, to ~~$221.4~~$231.1 million at ~~September 30, 2021,~~March 31, 2022, compared to ~~$145.4~~$225.0 million at December 31, ~~2020.~~2021. Current period activity included ~~$119.9~~$26.8 million of purchases ~~$29.6~~and $8.3 million of ~~paydowns, and $12.0 million of sales, primarily of mortgage-backed securities, which resulted in the recognition of a $231,000 gain.~~paydowns. The purchases were made to earn a higher yield on excess cash. ~~The sales recognized gains on higher-interest securities with faster prepayment speeds.~~ In addition, there was a ~~$2.9~~$12.4 million decrease in the market value of the debt securities portfolio due primarily to increases in market interest rates and a ~~$251,000 gain~~$7,000 loss in market value in the equity securities portfolio, which is primarily comprised of bank stocks.

Payroll Protection Program (“PPP”) Update

•PPP loans decreased ~~$22.4~~$16.3 million to ~~$32.7~~$8.2 million at ~~September 30, 2021~~March 31, 2022 compared to ~~$55.1~~$24.5 million at December 31, ~~2020, which includes $34.6 million in originations in the current period offset by loan forgiveness.~~

•~~$1.1 million~~2021. $274,000 of net PPP loan origination fees were unearned at March 31, 2022 compared to $678,000 at December 31, ~~2020. Due to activity in the current period, $1.0 million of net PPP loan origination fees were unearned at September 30,~~ 2021. ~~$1.4 million~~$404,000 of net PPP loan origination fees were recognized for the ~~nine~~three months ended ~~September 30, 2021, including $380,000~~March 31, 2022 compared to $321,000 for the three months ended ~~September 30, 2021 compared to $489,000 for the three months ended June 30,~~December 31, 2021.

Loans, Allowance for Loan Losses and Credit Quality

•Total loans held for investment decreased ~~$43.2 million~~$154,000 or 0.02%, to ~~$1.00~~$1.02 billion at ~~September 30,~~March 31, 2022 compared to $1.02 billion at December 31, 2021. ~~This includes the impact of reclassifying $17.4 million of loans to held for sale.~~ Excluding the net decline of ~~$22.4~~$16.3 million in PPP loans in the current period, ~~and including $17.4 million of held for sale loans, loans declined $3.4 million. Compared to June 30, 2021, total loans, including loans held for sale and excluding PPP~~ loans increased ~~$17.0 million, primarily from $23.1 million in commercial real estate loan growth.~~$16.1 million. Average loans for the three months ended ~~September 30, 2021 decreased $12.4~~March 31, 2022 increased $4.4 million compared to the three months ended ~~June 30,~~December 31, 2021. An increase in consumer loans was the primary driver in the average balance change, offset by increased payoffs in residential and commercial and industrial loans.

•The allowance for loan losses was $11.6 million at ~~September 30, 2021 compared to $12.8 million at~~both March 31, 2022 and December 31, 2020. There was a net recovery of $1.2 million of provision for loan losses in the current year. A $20.8 million decrease in net reservable loans in the current period, which excludes PPP loans and includes the reclassification of $17.4 million of loans to held for sale that do not require a reserve, as well as a decrease in specifically impaired loans and improving economic and industry conditions contributed to the net recovery in the current period.2021. As a result, the allowance for loan losses to total loans was ~~1.16%~~1.14% at ~~September 30, 2021~~March 31, 2022 compared to ~~1.22%~~1.13% at December 31, ~~2020.~~2021. The allowance for loan losses to total loans, excluding PPP loans, was ~~1.20%~~1.15% at ~~September 30, 2021~~March 31, 2022 compared to ~~1.29%~~1.16% at December 31, ~~2020.~~2021. The lack of change in the allowance for loan losses was primarily due to consistent loan balances between the periods and no significant changes in qualitative factors.

•Net recoveries for the three months ended ~~September 30, 2021~~March 31, 2022 were ~~$37,000,~~$13,000, or ~~(0.01)%~~0.01% of average loans on an annualized basis. Net charge-offs for the three months ended ~~September 30, 2020~~March 31, 2021 were ~~$68,000,~~$46,000, or ~~0.03%~~0.02% of average loans on an annualized basis. Net recoveries for the nine months ended September 30, 2021 were $10,000, or 0.00% of average loans on an annualized basis. Net charge-offs for the nine months ended September 30, 2020 were $87,000, or 0.01% of average loans on an annualized basis. Net charge-offs were primarily driven by indirect automobile loans in the consumer loan category in the prior period.

•Nonperforming loans, which includes nonaccrual loans, accruing loans past due 90 days or more, and accruing loans that are considered troubled debt restructurings, ~~within the loans held for investment portfolio,~~ were ~~$10.9~~$7.3 million at ~~September 30, 2021~~March 31, 2022 compared to ~~$14.5~~$7.3 million at December 31, ~~2020.~~2021. Nonperforming loans to total loans ratio was ~~1.09%~~0.72% at ~~September 30, 2021~~March 31, 2022 compared to ~~1.39%~~0.71% at December 31, ~~2020. A $3.6~~2021.

Other

•Intangible Assets decreased $445,000 to $4.9 million ~~nonaccrual commercial real estate loan under agreement~~at March 31, 2022 compared to ~~sell and transferred into~~$5.3 million at December 31, 2021 due to amortization expense of $445,000 recognized during the held for sale portfolio at September 30, 2021 was sold in October 2021 and will result in the recognition of an $897,000 gain on sale of loans in the fourth quarter of 2021. This loan previously incurred a $931,000 charge-off in the prior year.period.

•~~The Bank provided borrower support~~Accrued Interest Receivable and ~~relief through short-term~~Other Assets increased $3.7 million, or 28.8% to $16.5 million at March 31, 2022, compared to $12.9 million at December 31, 2021 This change is primarily driven by deferred taxes as a result of the increase in market interest rates and the resulting decrease in the market value of the portfolio.

•There was one loan in forbearance ~~options by primarily allowing: (a) deferral~~at March 31, 2022 totaling $128,000, compared to no loans in forbearance at December 31, 2021.

Liabilities. Total liabilities increased $24.2 million, or 1.9%, to $1.32 billion at March 31, 2022 compared to $1.29 billion at December 31, 2021.

Deposits

•Total deposits increased $23.7 million to $1.25 billion as of ~~three~~March 31, 2022 compared to ~~six months of payments; or (b) for consumer loans not secured~~$1.23 billion at December 31, 2021. Noninterest bearing demand deposits, NOW accounts and savings accounts increased $14.3 million, $7.9 million and $8.1 million, respectively, partially offset by a ~~real estate mortgage, three~~decrease of $7.5 million in time deposits. Annualized deposit growth

4031

Table of Contents

~~months of interest-only payments that also extends the maturity date of the loan by three months. In certain circumstances, a second three-month deferral period was granted.~~

~~The following table provides details of loans in forbearance at the dates indicated.~~

September 30, 2021 June 30, 2021 December 31, 2020
Number
of
Loans Amount % of Portfolio Number
of
Loans Amount % of Portfolio Number
of
Loans Amount % of Portfolio
(Dollars in thousands)
Real Estate:
Residential — — — % — — — % 4 749 0.2 %
Commercial — — — % 4 6,544 1.8 % 8 19,818 5.3 %
Construction — — — % — — — % 1 1,958 2.7 %
Commercial and Industrial — — — % 5 1,221 1.0 % 5 1,219 1.0 %
Consumer — — — % — — — % 13 356 0.3 %
Total Loans in Forbearance — $ — — % 9 $ 7,765 0.8 % 31 $ 24,100 2.3 %

~~Other~~

•Premises and equipment decreased $1.8 million to $18.5 million at September 30, 2021 compared to $20.3 million at December 31, 2020. The Company recognized a $2.3 million writedown on fixed assets related to the branch optimization initiative. In addition, $795,000 of premises and equipment was transferred to held for sale related to the signing of the Agreement with Citizens Bank and the impending sale of the two related branches. The Company also recognized $727,000 of depreciation expense and $280,000 was transferred to Other Assets due to a branch closure and marketing of the property for sale. This was offset by $2.3 million of purchases, primarily related to the operational efficiency initiative.

•Intangible Assets decreased $2.7 million to $5.7 million at September 30, 2021 compared to $8.4 million at December 31, 2020 primarily due to an impairment of $1.2 million and amortization expense of $1.5 million. As a result of signing the Agreement with Citizens Bank and the expected sale of a portion of the deposits associated with the remaining core deposit intangible asset, the Company performed an interim evaluation to determine whether the core deposit intangible was impaired. As a result of the evaluation, the Company determined the carrying amount of the core deposit intangible was impaired $1.2 million.

•Accrued Interest Receivable and Other Assets decreased $2.7 million, or 17.7% to $12.6 million at September 30, 2021, compared to $15.2 million at December 31, 2020 primarily related to the receipt of a $1.3 million federal income tax refund, decrease in prepaid expenses which are mainly paid in advance near the beginning of the year, decrease in restricted stock due to a decline in standby letters of credit usage with the FHLB, and decrease in accrued interest receivable due to customer's first repaying unpaid interest when their forbearance periods ended.

~~Liabilities.~~ ~~Total liabilities increased $61.6 million, or 4.8%, to $1.34 billion at September 30, 2021 compared to $1.28 billion at December 31, 2020.~~

~~Deposits~~

•Total deposits, including deposits held for sale, increased $63.2 million to $1.29 billion as of September 30, 2021 compared to $1.22 billion at December 31, 2020. Noninterest bearing demand deposits, NOW accounts and savings accounts increased $47.8 million, $15.6 million and $18.4 million, respectively, partially offset by a decrease of $27.6 million in time deposits. IRS and stimulus-related payments totaled $29.9 million in the first quarter and the impact of the PPP loans that were originated in the current year and the proceeds of which were initially deposited at the Bank was approximately $28.7 million. Annualized deposit growth rate was ~~6.9%~~7.7%. Average total deposits decreased ~~$5.7~~$54.6 million, primarily in time deposits, for the three months ended ~~September 30, 2021~~March 31, 2022 compared to the three months ended ~~June 30,~~December 31, 2021.

Borrowed Funds

•Short-term borrowings ~~increased $1.6 million,~~decreased $47,000, or ~~3.9%~~0.12%, to ~~$42.6~~$39.2 million at ~~September 30, 2021,~~March 31, 2022, compared to ~~$41.1~~$39.3 million at December 31, ~~2020.~~2021. At ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020,~~2021, short-term borrowings were comprised entirely of securities sold under agreements to repurchase, which are related to business deposit customers whose funds, above designated target balances, are transferred into an overnight interest-earning investment account by purchasing

~~Table of Contents~~

securities from the Bank’s investment portfolio under an agreement to repurchase. ~~$10.7 million was excluded from short-term borrowings at September 30, 2021 and reported as deposits held for sale.~~

•~~Other borrowed funds decreased $2.0 million to $6.0 million at September 30, 2021 due to a Federal Home Loan Bank borrowing that matured in the current period.~~

Stockholders’ Equity. Stockholders’ equity decreased ~~$3.5~~$11.0 million, or ~~2.6%~~8.3%, to ~~$131.0~~$122.2 million at ~~September 30, 2021,~~March 31, 2022, compared to ~~$134.5~~$133.1 million at December 31, ~~2020.~~2021.

•Net income was ~~$4.6~~$3.0 million for the ~~nine~~three months ended ~~September 30, 2021.~~March 31, 2022.

•Accumulated other comprehensive income decreased ~~$2.3~~$9.7 million primarily due to the effect of market interest rate ~~conditions~~increases on the Company’s debt securities.

•The Company declared and paid ~~$3.9~~$1.2 million in dividends to common stockholders in the current period.

•The Company repurchased ~~$2.5~~$3.4 million of its common stock as part of its stock repurchase ~~program.~~program that was completed on February 15, 2022

•Book value per share (GAAP) was ~~$24.57~~$23.69 at ~~September 30, 2021~~March 31, 2022 compared to ~~$24.76~~$25.31 at December 31, ~~2020,~~2021, a decrease of ~~$0.19.~~$1.62. Tangible book value per share (Non-GAAP) ~~increased $0.25,~~decreased $1.59, or ~~1.2%~~7.1%, to ~~$21.67~~$20.86 compared to ~~$21.42~~$22.45 at December 31, ~~2020.~~2021. Refer to Explanation of Use of Non-GAAP Financial Measures in this Report.

Consolidated Results of Operations for the Three Months Ended ~~September 30,~~March 31, 2022 and 2021 ~~and 2020~~

Overview. Net income was ~~$2.0~~$3.0 million for the three months ended ~~September 30, 2021,~~March 31, 2022, an increase of ~~$19.4 million~~$202,000 compared to a net ~~loss~~income of ~~$17.4~~$2.8 million for the three months ended ~~September 30, 2020. Prior year results were impacted by the following:~~

•The Company conducted a goodwill impairment analysis and, due to the macroeconomic impacts of the pandemic and the overall industry-wide decline in value of stocks and earnings expectations in the banking sector at that time, including the Company's stock, the Company determined its goodwill was no longer supported by its estimate of the Company’s fair value. Therefore, $18.7 million of goodwill was deemed impaired and written off. This non-cash expense was deemed non-core and had no impact on tangible equity, cash flows, liquidity or regulatory capital.

•The Company incurred a non-cash impairment of fixed assets of $884,000 as a result of the Monessen branch closure whereby the property was written down to fair value. The impairment charge primarily related to the write off of the unamortized purchase accounting adjustment associated with the branch, which was the former headquarters of FedFirst Financial Corporation acquired through merger in 2014.March 31, 2021.

Net Interest and Dividend Income. Net interest and dividend income decreased ~~$406,000,~~$84,000, or ~~3.9%~~0.8%, to $9.9 million for the three months ended March 31, 2022 compared to $10.0 million for the three months ended ~~September 30, 2021 compared~~March 31, 2021. Net interest margin (FTE) (Non-GAAP) increased 5 basis points (“bps”) to ~~$10.4 million~~3.10% for the three months ended ~~September 30, 2020.~~March 31, 2022 compared to 3.05% the three months ended March 31, 2021. Net interest margin ~~(FTE) (Non-GAAP) decreased 32 basis points (“bps”)~~(GAAP) increased to ~~2.89%~~3.08% for the three months ended ~~September 30, 2021~~March 31, 2022 compared to ~~3.21% the three months ended September 30, 2020. Net interest margin (GAAP) decreased to 2.88%~~3.04% for the three months ended September 30, 2021 compared to 3.19% for the three months ended September 30, 2020. While the Company has further controlled its deposit cost structure as deposit balances increased and benefited from nonrenewal or repricing of higher cost time deposits, the net interest margin has decreased primarily due to the low interest rate environment decreasing yields on loans and securities.March 31, 2021.

Interest and Dividend Income

•Interest and dividend income decreased ~~$870,000,~~$372,000, or ~~7.5%~~3.4%, to ~~$10.8~~$10.6 million for the three months ended ~~September 30, 2021~~March 31, 2022 compared to ~~$11.7~~$11.0 million the three months ended ~~September 30, 2020.~~March 31, 2021.

◦Interest income on loans decreased ~~$991,000,~~$595,000, or ~~9.3%~~5.9%, to ~~$9.7~~$9.6 million for the three months ended ~~September 30, 2021~~March 31, 2022 compared to ~~$10.7~~$10.1 million for the three months ended ~~September 30, 2020.~~March 31, 2021. The average balance of loans decreased ~~$31.0~~$22.6 million and the average yield decreased 2815 bps to 3.85% compared to the three months ended ~~September 30, 2020.~~March 31, 2021.

◦��Interest and fee income on PPP loans was ~~$484,000~~$445,000 for the three months ended ~~September 30, 2021~~March 31, 2022 and contributed 413 bps to loan yield, compared to ~~$454,000~~$676,000 for the three months ended ~~September 30, 2020,~~March 31, 2021, which ~~decreased~~contributed 5 bps to loan ~~yield 11 bps.~~yield.

◦The impact of the accretion of the credit mark on acquired loan portfolios was ~~$94,000~~$56,000 for the three months ended ~~September 30, 2021~~March 31, 2022 compared to ~~$127,000~~$138,000 for the three months ended ~~September 30, 2020,~~March 31, 2021, or 42 bps in the current period compared to 56 bps in the prior period.

◦Interest income on taxable investment securities increased ~~$90,000,~~$259,000, or ~~12.0%~~40.1%, to ~~$843,000~~$905,000 for the three months ended ~~September 30, 2021~~March 31, 2022 compared to ~~$753,000~~$646,000 for the three months ended ~~September 30, 2020~~March 31, 2021 driven by a ~~$74.4~~$93.0 million increase in average investment securities balances and 7342 bps decrease in average yield. ~~The Federal~~

Interest Expense

•Interest expense decreased $288,000, or 28.5%, to $723,000 for the three months ended March 31, 2022 compared to $1.0 million for the three months ended March 31, 2021.

◦Interest expense on deposits decreased $417,000, or 44.0%, to $530,000 for the three months ended March 31, 2022 compared to $947,000 for the three months ended March 31, 2021. While average interest-earning deposits decreased $38.6 million compared to the three months ended March 31, 2021, controlling the deposit cost structure as deposit balances decreased combined with non-renewal or repricing of higher-cost time deposit resulted in an 18

4232

Table of Contents

Reserve’s pandemic-driven decision to drop the benchmark interest rate in March 2020 resulted in significant calls of U.S. government agency securities and paydowns on mortgage-backed securities in the declining interest rate environment, which were replaced with lower-yielding securities or maintained in cash.

◦Other interest and dividend income, which primarily consists of interest-bearing cash, increased $39,000, or 40.6% to $135,000 for the three months ended September 30, 2021 compared to $96,000 for the three months ended September 30, 2020. While the average yield remained comparable to the three months ended September 30, 2020, the average other interest-earning assets increased $41.3 million compared to the three months ended September 30, 2020 primarily from buildup of cash as a result of securities activity, PPP loan funds and government stimulus payments deposited with the Bank.

~~Interest Expense~~

•~~Interest expense decreased $464,000, or 37.4%, to $776,000 for the three months ended September 30, 2021 compared to $1.2 million for the three months ended September 30, 2020.~~

◦Interest expense on deposits decreased $435,000, or 37.8%, to $715,000 for the three months ended September 30, 2021 compared to $1.2 million for the three months ended September 30, 2020. While average interest-earning deposits increased $33.7 million compared to the three months ended September 30, 2020, interest rate declines for all products driven by pandemic-related interest rate cuts resulted in a 21 bp, or ~~39.5%~~41.4%, decrease in average cost compared to the three months ended ~~September 30, 2020.~~March 31, 2021. In addition, average time deposits and the related average cost decreased ~~$29.5~~$55.1 million and 3730 bps, respectively.

◦Interest expense on other borrowed funds decreased $26,000, or 41.9%, to $36,000 for the three months ended September 30, 2021 primarily due to FHLB long-term borrowings that matured and were paid off throughout the last year that resulted in a $5.0 million decrease in average balance.

4333

Table of Contents

Average Balances and Yields. The following tables present information regarding average balances of assets and liabilities, the total dollar amounts of interest income and dividends from average interest-earning assets, the total dollar amounts of interest expense on average interest-bearing liabilities, and the resulting average yields and costs. Average balances are derived from daily balances over the periods indicated. The yields set forth below include the effect of deferred fees, discounts, and premiums that are amortized or accreted to interest income or interest expense. FTE yield adjustments have been made for tax exempt loan and securities interest income utilizing a marginal federal income tax rate of 21.0% for the periods presented. As such, amounts will not agree to income as reported in the consolidated financial statements. The yields and costs for the periods indicated are derived by dividing annualized income or expense by the average balances of assets or liabilities, respectively, for the periods presented.


		Three Months Ended September 30,													Three Months Ended March 31,
		2021						2020							2022						2021
		Average Balance		Interest and Dividends		Yield/ Cost (1)		Average Balance		Interest and Dividends		Yield/ Cost (1)			Average Balance		Interest and Dividends		Yield/ Cost (1)		Average Balance		Interest and Dividends		Yield/ Cost (1)
(Dollars in thousands) (Unaudited)	(Dollars in thousands) (Unaudited)													(Dollars in thousands) (Unaudited)

Assets:	Assets:													Assets:
Interest-Earning Assets:	Interest-Earning Assets:													Interest-Earning Assets:
Loans, Net (2)	Loans, Net (2)	$	1,004,474	$	9,740	3.85	%	$	1,035,426	$	10,744	4.13	%	Loans, Net (2)	$	1,009,210	$	9,573	3.85	%	$	1,031,853	$	10,168	4.00	%
Debt Securities	Debt Securities													Debt Securities
Taxable	Taxable	197,763		843		1.71		123,332		753		2.44		Taxable	215,906		905		1.68		122,883		646		2.10
Tax Exempt	Tax Exempt	11,647		90		3.09		13,054		97		2.97		Tax Exempt	10,195		84		3.30		12,943		96		2.97
Marketable Equity Securities	Marketable Equity Securities	2,655		19		2.86		2,580		19		2.95		Marketable Equity Securities	2,693		22		3.27		2,632		20		3.04
Interest Bearing Deposits at Other Banks														Interest Bearing Deposits at Other Banks	59,296		22		0.15		157,962		36		0.09
Other Interest-Earning Assets	Other Interest-Earning Assets	164,447		135		0.33		123,171		96		0.31		Other Interest-Earning Assets	3,483		50		5.82		3,909		62		6.43
Total Interest-Earning Assets	Total Interest-Earning Assets	1,380,986		10,827		3.11		1,297,563		11,709		3.59		Total Interest-Earning Assets	1,300,783		10,656		3.32		1,332,182		11,028		3.36
Noninterest-Earning Assets	Noninterest-Earning Assets	88,291						115,567						Noninterest-Earning Assets	122,288						92,550
Total Assets	Total Assets	$	1,469,277					$	1,413,130					Total Assets	$	1,423,071					$	1,424,732

Liabilities and Stockholders' Equity:	Liabilities and Stockholders' Equity:													Liabilities and Stockholders' Equity:
Interest-Bearing Liabilities:	Interest-Bearing Liabilities:													Interest-Bearing Liabilities:
Interest-Bearing Demand Deposits (3)		$	275,411	48		0.07	%	$	245,977	99		0.16	%
Savings (3)		251,801		21		0.03		230,567		32		0.06
Money Market (3)		198,167		55		0.11		185,644		140		0.30
Time Deposits (3)		168,654		591		1.39		198,184		879		1.76
Total Interest-Bearing Deposits (3)		894,033		715		0.32		860,372		1,150		0.53
Interest-Bearing Demand Deposits														Interest-Bearing Demand Deposits	$	276,603	48		0.07	%	$	259,065	77		0.12	%
Savings														Savings	243,786		19		0.03		239,850		32		0.05
Money Market														Money Market	192,425		41		0.09		197,395		98		0.20
Time Deposits														Time Deposits	132,015		422		1.30		187,114		740		1.60
Total Interest-Bearing Deposits														Total Interest-Bearing Deposits	844,829		530		0.25		883,424		947		0.43
Short-Term Borrowings	Short-Term Borrowings													Short-Term Borrowings
Securities Sold Under Agreements to Repurchase	Securities Sold Under Agreements to Repurchase	40,818		25		0.24		42,512		28		0.26		Securities Sold Under Agreements to Repurchase	37,884		19		0.20		41,094		23		0.23
Other Borrowings	Other Borrowings	6,000		36		2.38		11,000		62		2.24		Other Borrowings	17,604		174		4.01		7,200		41		2.31
Total Interest-Bearing Liabilities	Total Interest-Bearing Liabilities	940,851		776		0.33		913,884		1,240		0.54		Total Interest-Bearing Liabilities	900,317		723		0.33		931,718		1,011		0.44
Noninterest-Bearing Demand Deposits	Noninterest-Bearing Demand Deposits	387,746						337,441						Noninterest-Bearing Demand Deposits	384,188						349,108
Other Liabilities	Other Liabilities	8,019						8,477						Other Liabilities	8,554						8,869
Total Liabilities	Total Liabilities	1,336,616						1,259,802						Total Liabilities	1,293,059						1,289,695
Stockholders' Equity	Stockholders' Equity	132,661						153,328						Stockholders' Equity	130,012						135,037
Total Liabilities and Stockholders' Equity	Total Liabilities and Stockholders' Equity	$	1,469,277					$	1,413,130					Total Liabilities and Stockholders' Equity	$	1,423,071					$	1,424,732
Net Interest Income (FTE) (Non-GAAP) (4)				$	10,051					$	10,469
Net Interest Rate Spread (FTE) (Non-GAAP) (4)(5)						2.78	%					3.05	%
Net Interest-Earning Assets (6)		$	440,135					$	383,679
Net Interest Margin (GAAP) (7)						2.88						3.19
Net Interest Margin (FTE) (Non-GAAP) (4)(7)						2.89						3.21
Net Interest Income (FTE) (Non-GAAP) (3)														Net Interest Income (FTE) (Non-GAAP) (3)			$	9,933					$	10,017
Net Interest Rate Spread (FTE) (Non-GAAP) (3)(4)														Net Interest Rate Spread (FTE) (Non-GAAP) (3)(4)					2.99	%					2.92	%
Net Interest-Earning Assets (5)														Net Interest-Earning Assets (5)	$	400,466					$	400,464
Net Interest Margin (GAAP) (6)														Net Interest Margin (GAAP) (6)					3.08						3.04
Net Interest Margin (FTE) (Non-GAAP) (3)(6)														Net Interest Margin (FTE) (Non-GAAP) (3)(6)					3.10						3.05
Return on Average Assets (1)	Return on Average Assets (1)					0.54						(4.90)		Return on Average Assets (1)					0.87						0.81
Return on Average Equity (1)	Return on Average Equity (1)					5.93						(45.13)		Return on Average Equity (1)					9.50						8.54
Average Equity to Average Assets	Average Equity to Average Assets					9.03						10.85		Average Equity to Average Assets					9.14						9.48
Average Interest-Earning Assets to Average Interest-Bearing Liabilities	Average Interest-Earning Assets to Average Interest-Bearing Liabilities					146.78						141.98		Average Interest-Earning Assets to Average Interest-Bearing Liabilities					144.48						142.98
PPP Loans	PPP Loans	$	40,313	$	484	4.76		$	70,571	$	454	2.56		PPP Loans	$	14,673	$	445	12.30		$	56,945	$	676	4.81

(1)Annualized based on three months ended results.

(2)Net of the allowance for loan losses, and includes nonaccrual loans with a zero yield ~~and loans held for sale.~~

(3)~~Includes Deposits Held for Sale~~

~~(4)~~See section entitled "Explanation of Use of Non-GAAP Financial Measures" appearing earlier in this quarterly report.

~~(5)~~(4)Net interest rate spread represents the difference between the weighted average yield on interest-earning assets and the weighted average cost of interest-bearing liabilities.

~~(6)~~(5)Net interest-earning assets represent total interest-earning assets less total interest-bearing liabilities.

~~(7)~~(6)Net interest margin represents annualized net interest income divided by average total interest-earning assets.

4434

Table of Contents

Rate/Volume Analysis. The following table presents the effects of changing rates and volumes on our net interest income for the periods indicated. FTE yield adjustments have been made for tax exempt loan and securities income utilizing a marginal federal income tax rate of 21.0%. The volume column shows the effects attributable to changes in volume (changes in volume multiplied by prior rate). The rate column shows the effects attributable to changes in rate (changes in rate multiplied by prior volume). For purposes of this table, changes attributable to both rate and volume, which cannot be segregated, have been allocated proportionately based on the changes due to rate and the changes due to volume. The total column represents the sum of the prior columns.


		Three Months Ended September 30, 2021 Compared to Three Months Ended September 30, 2020							Three Months Ended March 31, 2022 Compared to Three Months Ended March 31, 2021
		Increase (Decrease) Due to							Increase (Decrease) Due to
		Volume		Rate		Total			Volume		Rate		Total
(Dollars in thousands) (Unaudited)	(Dollars in thousands) (Unaudited)							(Dollars in thousands) (Unaudited)

Interest and Dividend Income:	Interest and Dividend Income:							Interest and Dividend Income:
Loans, net	Loans, net	$	(288)	$	(716)	$	(1,004)	Loans, net	$	(218)	$	(377)	$	(595)
Debt Securities:	Debt Securities:							Debt Securities:
Taxable	Taxable	360		(270)		90		Taxable	408		(149)		259
Exempt From Federal Tax	Exempt From Federal Tax	(11)		4		(7)		Exempt From Federal Tax	(22)		10		(12)
Marketable Equity Securities	Marketable Equity Securities	1		(1)		—		Marketable Equity Securities	1		1		2
Other Interest-Earning Assets	Other Interest-Earning Assets	33		6		39		Other Interest-Earning Assets	(6)		(6)		(12)
Total Interest-Earning Assets	Total Interest-Earning Assets	95		(977)		(882)		Total Interest-Earning Assets	134		(506)		(372)

Interest Expense:	Interest Expense:							Interest Expense:
Deposits	Deposits	36		(471)		(435)		Deposits	(40)		(377)		(417)
Short-Term Borrowings:	Short-Term Borrowings:							Short-Term Borrowings:
Securities Sold Under Agreements to Repurchase	Securities Sold Under Agreements to Repurchase	(1)		(2)		(3)		Securities Sold Under Agreements to Repurchase	(1)		(3)		(4)
Other Borrowings	Other Borrowings	(30)		4		(26)		Other Borrowings	88		45		133
Total Interest-Bearing Liabilities	Total Interest-Bearing Liabilities	5		(469)		(464)		Total Interest-Bearing Liabilities	47		(335)		(288)
Change in Net Interest and Dividend Income	Change in Net Interest and Dividend Income	$	90	$	(508)	$	(418)	Change in Net Interest and Dividend Income	$	87	$	(171)	$	(84)

Provision for Loan Losses. There was no provision for loan losses for either the three months ended ~~September 30, 2021 compared to $1.2 million for~~March 31, 2022 or the three months ended ~~September 30, 2020. Specific~~March 31, 2021. The provision for loan loss reserves on impaired loans decreased in the current quarter, but was partially offset by an increase in loan balances that require a loan loss reserve, which excludes PPP loans and loans held for sale. The $1.2 million provision in the prior periodlosses remaining constant was primarily due to ~~two commercial real estate loans secured by hotels that were impacted by~~consistent loan balances between the ~~COVID-19 pandemic~~periods and ~~were driving factors~~no significant changes in ~~a $2.3 million increase in specific reserves. This was partially offset by a reduction in the~~ qualitative ~~factors related to economic trends and industry conditions due to improving macroeconomic conditions after the second quarter 2020 pandemic-related shutdown.~~factors.

Noninterest Income. Noninterest income ~~increased $25,000,~~decreased $561,000, or ~~1.2%~~17.7%, to ~~$2.2~~$2.6 million for the three months ended ~~September 30, 2021, and remained consistent with $2.2~~March 31, 2022, compared to $3.2 million for the three months ended ~~September 30, 2020.~~March 31, 2021.

•Service fees increased $48,000 to $602,000 for the three months ended September 30, 2021, compared to $554,000 for the three months ended September 30, 2020 due to an increase in customer account usage compared to the prior year period.

•Insurance commissions increased ~~$115,000~~$203,000 to ~~$1.2~~$1.8 million for the three months ended ~~September 30, 2021~~March 31, 2022 compared to ~~$1.1~~$1.6 million for the three months ended ~~September 30, 2020 primarily due to an~~March 31, 2021. The increase in ~~commercial-related~~ insurance commissions was primarily driven by contingency fees of $114,000. Contingency fees are profit sharing commissions that are contingent upon several factors including, but not limited to, eligible written premiums, earned premiums, incurred losses, policy ~~revenue.~~cancellations and stop loss charges which resulted from the higher than lock-in amounts received.

•Net (loss) gain on securities decreased $454,000 to a $7,000 loss for the three months ended March 31, 2022 compared to a $447,000 gain for the three months ended March 31, 2021. The change was driven by a $229,000 decrease in fair market value of equity securities between the three months ended March 31, 2021 and three months ended March 31, 2022, in addition to a $225,000 net gain on sale of debt securities during the three months ended March 31, 2021, compared to no gain recognized in the three months ended March 31, 2022.

•Net gain on sale of loans ~~was $49,000~~decreased $86,000 as there were no loans sold for the three months ended ~~September 30, 2021 compared to $435,000~~March 31, 2022.

•Other income was $65,000 for the three months ended ~~September 30, 2020, primarily due~~March 31, 2022 compared to ~~increased~~$180,000 for the three months ended March 31, 2021, the Company recognized a recapture of a temporary impairment on mortgage ~~loan production from refinances in the prior year, which were sold to reduce interest rate risk on lower yielding, long-term assets. In addition,~~servicing rights in the current quarter of $59,000, compared to the ~~Bank sold a substandard commercial real estate loan, which resulted in a $78,000 loss on sale.~~prior period recapture of temporary impairment of $172,000.

4535

Table of Contents

•Other income was $80,000 for the three months ended September 30, 2021 compared to a $2,000 loss for the three months ended September 30, 2020 due to an $82,000 valuation allowance adjustment on mortgage servicing rights in the current period.

Noninterest Expense. Noninterest expense decreased ~~$19.2 million,~~$739,000, or ~~66.3%~~7.9%, to ~~$9.8~~$8.7 million for the three months ended September 30, 2021 compared to $29.0 million for the three months ended September 30, 2020. Excluding the impact of non-cash charges related to an $18.7 million goodwill impairment and $884,000 writedown on fixed assets in the prior year period, noninterest expense increased $380,000 to $9.8 million for the three months ended September 30, 2021March 31, 2022 compared to $9.4 million for the three months ended ~~September 30, 2020. The current period was impacted by $1.3 million~~March 31, 2021, primarily due to the implementation of ~~other~~ branch optimization ~~and operational efficiency strategic expenses.~~initiatives completed during 2021 which established a lower expense base. Partially offsetting the lower expense base in the first quarter were investment in executive leadership tasked with implementing growth initiatives.

•Salaries and employee benefits decreased ~~$337,000~~$329,000 to ~~$4.8~~$4.6 million for the three months ended ~~September 30, 2021~~March 31, 2022 compared to ~~$5.1~~$4.9 million for the three months ended ~~September 30, 2020.~~March 31, 2021. The decrease iswas primarily ~~due the~~related to prior year branch optimization, ~~initiative as well as $113,000~~including the consolidation of ~~one-time payments~~six branches in June 2021 and the ~~prior period related to~~divestiture of two branches in December 2021, partially offset by costs for new strategic executive team members hired during the ~~transition and retention of a permanent CEO.~~three months ended March 31, 2022.

•Occupancy expense decreased ~~$144,000~~$24,000 to ~~$615,000~~$686,000 for the three months ended ~~September 30, 2021~~March 31, 2022 compared to ~~$759,000~~$710,000 for the three months ended ~~September 30, 2020.~~March 31, 2021. The decrease is primarily due to ~~the~~ branch ~~optimization initiative~~consolidations and ~~the recognition~~divestitures in the prior year, ~~period of a one-time $84,000 early lease termination payment from~~reducing the ~~Bethlehem branch closure.~~Company's physical footprint, and partially offset by increased maintenance costs due to improvements at remaining locations.

•Contracted services ~~increased $910,000~~decreased $100,000 to ~~$1.4 million~~$587,000 for the three months ended ~~September 30, 2021~~March 31, 2022 compared to ~~$531,000~~$687,000 for the three months ended ~~September 30, 2020~~March 31, 2021. The ~~current period includes $1.2 million of~~decrease was primarily driven by a change in expense for occupancy management services, partially offset by increases in operational efficiency strategic expenses, ~~associated with the engagement of a third-party workflow optimization expert to assist in implementing robotic process automations~~Current Expected Credit Losses ("CECL") implementation expense and more effective sales management designed to improve operational efficiencies in the near and long-term and engagement of other third party specialists to assist in core platform improvements and efficiencies. The prior period included expenses related to the hiring of temporary employees to assist with PPP loan processing and consultants used to assist in infrastructure improvements.

•Data processing increased $59,000 to $541,000 for the three months ended September 30, 2021 compared to $482,000 for the three months ended September 30, 2020. This is primarily due to technology investments associated with the branch optimization and efficiency initiative.

•Federal Deposit Insurance Corporation (“FDIC”) assessment expense increased $121,000 to $293,000 for the three months ended September 30, 2021 compared to $172,000 for the three months ended September 30, 2020. The increase in assessment was due to an increase in deposits as well as a net loss recognized during the assessment period and the increase in nonperforming loans negatively impacting the assessment rate in the current period.

•Legal and professional fees increased $19,000 to $180,000 for the three months ended September 30, 2021 compared to $161,000 for the three months ended September 30, 2020 due to a legal fees associated with the branch optimization initiative in the current period surpassing fees in the prior period associated with the retention of a permanent CEO.

•Advertising increased $77,000 to $225,000 for the three months ended September 30, 2021 compared to $148,000 for the three months ended September 30, 2020 due to increased marketing initiatives in the current period associated with the Bank's 120th ~~anniversary.~~contracted recruiting spend.

•Amortization of intangible assets decreased ~~$86,000~~$87,000 to ~~$446,000~~$445,000 for the three months ended ~~September 30, 2021~~March 31, 2022 compared to $532,000 for the three months ended ~~September 30, 2020~~March 31, 2021 primarily due to ~~current year~~ impairment recognized in the later half of 2021 on the core deposit intangible asset from the announcement of the branch ~~sales,~~divestitures, and the corresponding sale of the related deposits, which reduced the remaining amount of intangible assets to amortize.

Income Taxes. Income tax expense was ~~$452,000~~$803,000 for the three months ended ~~September 30, 2021~~March 31, 2022 compared to income tax ~~benefit~~expense of ~~$184,000~~$911,000 for the three months ended ~~September 30, 2020.~~March 31, 2021. This change was primarily related to ~~pretax income in the current period. While the goodwill impairment charge in the~~a prior period ~~was non-tax deductible,~~ income tax ~~benefit for the three months ended September 30, 2020 was impacted by a $338,000 benefit related to the reversal of a deferred~~adjustment that resulted from amended tax ~~liability associated with goodwill. Due to goodwill being partially impaired, a proportional amount of the deferred tax liability was reversed.~~

~~Results of Operations for the Nine Months Ended September 30, 2021 and 2020~~

~~Overview.~~ Net income was $4.6 million for the nine months ended September 30, 2021, an increase of $18.3 million compared to net loss of $13.7 million for the nine months ended September 30, 2020. Prior year results were impacted by the following:

~~Table of Contents~~

including the Company's stock, the Company determined its goodwill was no longer supported by its estimate of the Company’s fair value. Therefore, $18.7 million of goodwill was deemed impaired and written off. This non-cash expense was deemed non-core and had no impact on tangible equity, cash flows, liquidity or regulatory capital.

•~~The Company incurred a non-cash impairment of fixed assets of $884,000~~returns as a result of the Monessen branch closure whereby the property was written down to fair value. The impairment charge primarily related to the write off of the unamortized purchase accounting adjustment associated with the branch, which was the former headquarters of FedFirst Financial Corporation acquired through merger in 2014.

~~Net Interest and Dividend Income.~~ Net interest and dividend income decreased $1.3 million, or 4.3% to $29.9 million for the nine months ended September 30, 2021 compared to $31.3 million for the nine months ended September 30, 2020. Net interest margin (Non-GAAP FTE) decreased 42 bps to 2.93% for the nine months ended September 30, 2021 compared to 3.35% the nine months ended September 30, 2020. Net interest margin (GAAP) decreased to 2.92% for the nine months ended September 30, 2021 compared to 3.34% for the nine months ended September 30, 2020. While the Company has further controlled its deposit cost structure as deposit balances increased and benefited from nonrenewal or repricing of higher cost time deposits, the net interest margin decreased primarily due to the low interest rate environment decreasing yields on loans and securities.

~~Interest and Dividend Income~~

•~~Interest and dividend income decreased $3.1 million, or 8.7%, to $32.6 million for the nine months ended September 30, 2021 compared to $35.7 million for the nine months ended September 30, 2020.~~

◦Interest income on loans decreased $2.3 million or 7.0% to $29.8 million during the nine months ended September 30, 2021 compared to $32.1 million for the nine months ended September 30, 2020. Although average loans increased $17.5 million, primarily driven by PPP loans, the loan yield for the nine months ended September 30, 2021 decreased 37 bps to 3.92% compared to the nine months ended September 30, 2020 due to the full year impact of the COVID-19 pandemic-related declines in market interest rates beginning in March 2020.

◦Interest and fee income on PPP loans was $1.8 million for the nine months ended September 30, 2021 and contributed 3 bps to loan yield, compared to $770,000 for the nine months ended September 30, 2020, which decreased loan yield 7 bps in the prior period.

◦The impact of the accretion of the credit mark on acquired loan portfolios was $385,000 for the nine months ended September 30, 2021 compared to $293,000 for the nine months ended September 30, 2020, or 5 bps in the current period compared to 4 bps in the prior period.

◦Interest income on taxable investment securities decreased $770,000, or 26.6%, to $2.1 million for the nine months ended September 30, 2021 compared to $2.9 million for the nine months ended September 30, 2020 driven by a $9.0 million increased in average taxable investment securities and an 86 bps decrease in average yield. The Federal Reserve pandemic-driven decision to drop the benchmark interest rate in March 2020 resulted in significant calls of U.S. government agency securities and paydowns on mortgage-backed securities in the declining rate environment, which were replaced by lower-yielding securities.

◦Interest from other interest-earning assets, which primarily consists of interest-earning cash, decreased $34,000, or 8.1% for the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020 even though average balances increased $95.9 million primarily related to funds received from deposit and loan activity. The impact on interest income was primarily due to pandemic-driven declines on market interest rates earned on deposits at other financial institutions, which resulted in a 32 bp decrease in yield.

~~Interest Expense~~

•~~Interest expense decreased $1.8 million, or 39.8%, to $2.7 million for the nine months ended September 30, 2021 compared to $4.4 million for the nine months ended September 30, 2020.~~

◦Interest expense on deposits decreased $1.6 million, or 39.8%, to $2.5 million for the nine months ended September 30, 2021 compared to $4.1 million for the nine months ended September 30, 2020. While average interest-bearing deposits increased $41.2 million, interest rate declines for all products driven by pandemic-related interest rate cuts, nonrenewal or repricing of higher cost time deposits, and overall efforts to control pricing resulted in a 28 bp decrease in average cost compared to the nine months ended September 30, 2020.

◦Interest expense on other borrowed funds decreased $82,000, or 42.3%, to $112,000 for the nine months ended September 30, 2021 compared to $194,000 for the nine months ended September 30, 2020 primarily due to FHLB long-term borrowings that matured and were paid off throughout the last year that resulted in a $5.2 million decrease in average balance.

~~Table of Contents~~

~~Average Balances and Yields.~~The following tables present information regarding average balances of assets and liabilities, the total dollar amounts of interest income and dividends from average interest-earning assets, the total dollar amounts of interest expense on average interest-bearing liabilities, and the resulting average yields and costs. Average balances are derived from daily balances over the periods indicated. The yields set forth below include the effect of deferred fees, discounts, and premiums that are amortized or accreted to interest income or interest expense. FTE yield adjustments have been made for tax exempt loan and securities interest income utilizing a marginal federal income tax rate of 21% for the periods presented. As such, amounts will not agree to income as reported in the consolidated financial statements. The yields and costs for the periods indicated are derived by dividing annualized income or expense by the average balances of assets or liabilities, respectively, for the periods presented.

Nine Months Ended September 30,
2021 2020
Average
Balance Interest
and
Dividends
Yield/
Cost (1)
Average
Balance Interest
and
Dividends
Yield/
Cost (1)
(Dollars in thousands) (Unaudited)
Assets:
Interest-Earning Assets:
Loans, Net (2)
$ 1,017,632 $ 29,872 3.92 % $ 1,000,157 $ 32,152 4.29 %
Debt Securities
Taxable 148,718 2,124 1.90 139,691 2,894 2.76
Tax Exempt 12,284 282 3.06 14,660 354 3.22
Marketable Equity Securities 2,645 63 3.18 2,575 59 3.06
Other Interest-Earning Assets 190,913 384 0.27 95,040 418 0.59
Total Interest-Earning Assets 1,372,192 32,725 3.19 1,252,123 35,877 3.83
Noninterest-Earning Assets 87,863 114,271
Total Assets $ 1,460,055 $ 1,366,394
Liabilities and Stockholders' Equity:
Interest-Bearing Liabilities:
Interest-Bearing Demand Deposits (3)
$ 270,136 181 0.09 % $ 236,293 506 0.29 %
Savings (3)
246,340 78 0.04 225,473 156 0.09
Money Market (3)
198,408 223 0.15 183,103 576 0.42
Time Deposits (3)
177,690 2,007 1.51 206,463 2,898 1.87
Total Interest-Bearing Deposits (3)
892,574 2,489 0.37 851,332 4,136 0.65
ST Borrowings
Securities Sold Under Agreements to Repurchase 43,745 72 0.22 35,923 112 0.42
Other Borrowings 6,396 112 2.34 11,591 194 2.24
Total Interest-Bearing Liabilities 942,715 2,673 0.38 898,846 4,442 0.66
Noninterest-Bearing Demand Deposits 374,865 305,677
Other Liabilities 8,293 9,025
Total Liabilities 1,325,873 1,213,548
Stockholders' Equity 134,182 152,846
Total Liabilities and Stockholders' Equity $ 1,460,055 $ 1,366,394
Net Interest Income (FTE) (Non-GAAP) (4)
$ 30,052 $ 31,435
Net Interest Rate Spread (FTE) (Non-GAAP) (4)(5)
2.81 % 3.17 %
Net Interest-Earning Assets (6)
$ 429,477 $ 353,277
Net Interest Margin (GAAP) (7)
2.92 3.34
Net Interest Margin (FTE) (Non-GAAP) (4)(7)
2.93 3.35
Return on Average Assets (1)
0.42 (1.34)
Return on Average Equity (1)
4.59 (11.99)
Average Equity to Average Assets 9.19 11.19
Average Interest-Earning Assets to Average Interest-Bearing Liabilities 145.56 139.30
PPP Loans $ 51,579 $ 1,797 4.66 $ 39,241 $ 770 2.62

~~(1)Annualized based on nine months ended results.~~

~~(2)Net of the allowance for loan losses, and includes nonaccrual loans with a zero yield and loans held for sale.~~

~~(3)Includes Deposits Held for Sale~~

~~(4)See section entitled "Explanation of Use of Non-GAAP Financial Measures" appearing earlier in this quarterly report.~~

~~(5)Net interest rate spread represents the difference between the weighted average yield on interest-earning assets and the weighted average cost of interest-bearing liabilities.~~

~~(6)Net interest-earning assets represent total interest-earning assets less total interest-bearing liabilities.~~

~~(7)Net interest margin represents annualized net interest income divided by average total interest-earning assets.~~

~~Table of Contents~~

~~Rate Volume Analysis.~~ The following table presents the effects of changing rates and volumes on our net interest income for the periods indicated. FTE yield adjustments have been made for tax exempt loan and securities income utilizing a marginal federal income tax rate of 21%. The volume column shows the effects attributable to changes in volume (changes in volume multiplied by prior rate). The rate column shows the effects attributable to changes in rate (changes in rate multiplied by prior volume). For purposes of this table, changes attributable to both rate and volume, which cannot be segregated, have been allocated proportionately based on the changes due to rate and the changes due to volume. The total column represents the sum of the prior columns.

Nine Months Ended September 30, 2021
Compared to
Nine Months Ended September 30, 2020
Increase (Decrease) Due to
Volume Rate Total
(Dollars in thousands) (Unaudited)
Interest and Dividend Income:
Loans, net $ 528 $ (2,808) $ (2,280)
Debt Securities:
Taxable 179 (949) (770)
Exempt From Federal Tax (55) (17) (72)
Marketable Equity Securities 2 2 4
Other Interest-Earning Assets 273 (307) (34)
Total Interest-Earning Assets 927 (4,079) (3,152)
Interest Expense:
Deposits 213 (1,860) (1,647)
Short-Term Borrowings:
Securities Sold Under Agreements to Repurchase 22 (62) (40)
Other Borrowings (91) 9 (82)
Total Interest-Bearing Liabilities 144 (1,913) (1,769)
Change in Net Interest and Dividend Income $ 783 $ (2,166) $ (1,383)

~~Provision for Loan Losses.~~ The provision for loan losses had a $1.2 million recovery for the nine months ended September 30, 2021, compared to a $4.0 million provision for the nine months ended September 30, 2020. The pandemic resulted in a dramatic increase in unemployment and recessionary economic conditions in the prior year. Based on evaluation of the macroeconomic conditions, the qualitative factors used in the allowance for loan loss analysis were increased at the onset of the pandemic, primarily related to economic trends and industry conditions, because of vulnerable industries such as hospitality, oil and gas, retail and restaurants and resulted in the prior year provision. The prior year also included the impacts from an increase in specific reserves primarily due to two commercial real estate loans secured by hotels that were impacted by the COVID-19 pandemic. Those qualitative factors were decreased as the economic impacts of the pandemic eased. In addition, a $11.0 million decrease in net reservable loans compared to September 30, 2020, which excludes PPP loan activity and loans held for sale, combined with a decrease in specific reserves on impaired loans and improving economic and industry condition contributed to the recovery of provision in the current period.

~~Noninterest Income.~~ ~~Noninterest income increased $898,000, or 13.4%, to $7.6 million for the nine months ended September 30, 2021, compared to $6.7 million for the nine months ended September 30, 2020.~~

•Service fees increased $116,000 to $1.8 million for the nine months ended September 30, 2021, compared to $1.6 million for the nine months ended September 30, 2020 due to an increase in customer account usage compared to the prior year period when shelter-in-place orders occurred at the onset of the COVID-19 pandemic.

•Insurance commissions increased $523,000, or 15.1%, to $4.0 million for the nine months ended September 30, 2021, compared to $3.5 million for the nine months ended September 30, 2020 due to an increase contingency fees as well as commercial-related insurance policy revenue. Contingency fees are profit sharing commissions that are contingent upon several factors including, but not limited to, eligible written premiums, incurred losses, policy cancellations and stop loss charges.

~~Table of Contents~~

•Net gain on sales of loans was $166,000 for the nine months ended September 30, 2021 compared to $1.0 million for the nine months ended September 30, 2020 primarily due to decreased mortgage loan production from refinances, which are sold to reduce interest rate risk on lower yielding, long-term assets. In addition, in the current year, the Bank sold a substandard commercial real estate loan, which resulted in a $78,000 loss on sale.

•Net gain on securities was $482,000 for the nine months ended September 30, 2021 compared to $20,000 for the nine months ended September 30, 2020. In the current period, the Company recognized a $231,000 net gain on sale of debt and equity securities primarily from sales of higher-interest securities with faster prepayment speeds combined with a $251,000 increase in fair value on the equity securities portfolio, primarily comprised of bank stocks, which experienced a recovery in fair value from pandemic related losses. In the prior year, there was a net gain of $489,000 on sales of investment securities from sales of higher-interest securities with faster prepayment speeds that was offset by a $469,000 decrease in fair value in the equity securities portfolio due to the COVID-19 impacts on the banking industry.

•Other Income was $291,000 for the nine months ended September 30, 2021 compared to Other Loss of $240,000 in the nine months ended September 30, 2020. In the current period there was a $242,000 reduction in the valuation allowance on mortgage servicing rights compared to a $269,000 valuation allowance adjustment from temporary impairment in the prior period caused by a decline in the interest rate environment that increased prepayment speeds and resulted in a decrease in fair value of the serviced mortgage portfolio. In addition, there was a $52,000 increase in amortization on mortgage servicing rights in the current period.

~~Noninterest Expense.~~ Noninterest expense decreased $14.2 million, or 30.1%, to $32.9 million for the nine months ended September 30, 2021 compared to $47.0 million for the nine months ended September 30, 2020. The current year was largely impacted by a $2.3 million writedown on fixed assets and $1.2 million intangible asset impairment as discussed previously whereas the prior year was impacted by $18.7 million goodwill impairment and an $884,000 writedown on fixed assets as previously noted. Excluding the impact of these non-cash charges, noninterest expense increased $2.0 million, or 7.2%, to $29.4 million for the nine months ended September 30, 2021 compared to $27.5 million the nine months ended September 30, 2020. The current period was also impacted by $2.9 million of other branch optimization and operational efficiency strategic expenses.

•Salaries and employee benefits increased $74,000 for the nine months ended September 30, 2021 compared to $14.7 million for the nine months ended September 30, 2020. The increase is primarily due to an increase in employee benefit expenses due to the prior period impact from a $407,000 one-time payment that offset employee benefits related to the transition from a self-funded to a fully insured health insurance plan. The current period was impacted by the recognition of $335,000 in severance related to the branch optimization initiative whereas in the prior period the Company incurred costs associated with the Community Bank Cares 10% premium pay during the pandemic and the recognition of approximately $388,000 of one-time payments related to the transition and retention of a permanent CEO.

•Occupancy expense increased $158,000 to $2.3 million for the nine months ended September 30, 2021 compared to $2.2 million for the nine months ended September 30, 2020. The increase is due to the recognition of a $227,000 lease impairment related to the consolidation of a branch as part of the branch optimization initiative in the current period compared to an $84,000 early lease termination payment from a branch closure in the prior period.

•Equipment expense increased $81,000 to $782,000 for the nine months ended September 30, 2021 compared to $701,000 for the nine months ended September 30, 2020 as the result of an increase in repairs and maintenance.

•Data processing increased $299,000 to $1.7 million for the nine months ended September 30, 2021 compared to $1.4 million for the nine months ended September 30, 2020 primarily due to $110,000 in deconversion costs associated with the branch sales as well as other technology investments associated with the branch optimization and efficiency initiative.

•Contracted services increased $1.4 million to $2.9 million for the nine months ended September 30, 2021 compared to $1.5 million for the nine months ended September 30, 2020, primarily due to $1.9 million of expenses associated with the engagement of a third-party workflow optimization expert to assist in implementing robotic process automations and more effective sales management designed to improve operational efficiencies in the near and long-term and engagement of other third party specialists to assist in core platform improvements and efficiencies. The prior period included expense related to the hiring of temporary employees to assist with PPP loan processing, consultants used to assist in infrastructure improvements, and $177,000 of consulting fees associated with the search for a permanent CEO.

•FDIC assessment expense increased $299,000 to $792,000 for the nine months ended September 30, 2021 compared to $493,000 for the nine months ended September 30, 2020.The increase in assessment was due to the net losses recognized during the assessment period and an increase in nonperforming loans negatively impacting the assessment rate in the current period.

~~Table of Contents~~

•Legal and professional fees increased $221,000 to $788,000 for the nine months ended September 30, 2021 compared to $567,000 for the nine months ended September 30, 2020 due to a $209,000 investment banker success-based fee and legal fees related to the Agreement with Citizens Bank for the branch sales. The prior period included fees associated with the retention of a permanent CEO.

•Other real estate owned income increased $123,000 to $153,000 for the nine months ended September 30, 2021 compared to $30,000 for the nine months ended September 30, 2020 primarily due to an $80,000 gain on sale of a property sold in the current period.

•Amortization of intangible assets decreased $115,000 to $1.5 million for the nine months ended September 30, 2021 compared to $1.6 million for the nine months ended September 30, 2020 primarily due to current period impairment in core deposit intangible asset from the announcement of the branch sales, which reduced the remaining amount of intangible assets to amortize.

•Other noninterest expense decreased $147,000 to $2.8 million for the nine months ended September 30, 2021 compared to $3.0 million for the nine months ended September 30, 2020 due to a decrease in loan-related expenses from the increased volume of refinancing in the prior period.

~~Income Taxes.~~ Income tax expense increased $577,000 to $1.2 million for the nine months ended September 30, 2021 compared to $640,000 for the nine months ended September 30, 2020. This change was primarily due to an increase in pretax income in the current period. While the goodwill impairment charge in the prior period was non-tax deductible, income tax benefit for the three months ended September 30, 2020 was impacted by a $338,000 benefit related to the reversal of a deferred tax liability associated with goodwill. Due to goodwill being partially impaired, a proportional amount of the deferred tax liability was reversed.CARES Act.

Off-Balance Sheet Arrangements.

Other than loan commitments and standby and performance letters of credit, we do not have any off-balance sheet arrangements that have or are reasonably likely to have a significant current or future effect on our financial condition, revenues, expenses, results of operations, liquidity, capital expenditures, or capital resources that are material to investors. Refer to Note 107 in the Notes to Consolidated Financial Statements of this report for a summary of commitments outstanding as of ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020.~~2021.

Liquidity and Capital Management

Liquidity. Liquidity is the ability to meet current and future financial obligations of a short-term nature. The Company’s primary sources of funds consist of deposit inflows, loan repayments and maturities, calls and sales of securities. While maturities and scheduled amortization of loans and securities are typically predictable sources of funds, deposit flows and mortgage prepayments are greatly influenced by general interest rates, economic conditions and competition.

The Company regularly adjusts its investments in liquid assets based upon its assessment of expected loan demand, expected deposit flows, yields available on interest-earning deposits and securities, and the objectives of its asset/liability management program. Excess liquid assets are invested generally in interest-earning deposits with other banks and short- and intermediate-term securities. The Company believes that it had sufficient liquidity at ~~September 30, 2021~~March 31, 2022 to satisfy its short- and long-term liquidity needs.

The Company’s most liquid assets are cash and due from banks, which totaled ~~$173.5~~$123.6 million at ~~September 30, 2021.~~March 31, 2022. The levels of these assets depend on our operating, financing, lending and investing activities during any given period. Unpledged securities, which provide an additional source of liquidity, totaled ~~$37.0~~$83.7 million at ~~September 30, 2021.~~March 31, 2022. In addition, at ~~September 30, 2021,~~March 31, 2022, the Company had the ability to borrow up to ~~$420.4~~$430.9 million from the FHLB of Pittsburgh, of which ~~$351.3~~$347.8 million is available. The Company also has the ability to borrow up to ~~$82.8~~$102.7 million million from the FRB through its Borrower-In-Custody line of credit agreement and the Company also maintains multiple line of credit arrangements with various unaffiliated banks totaling $50.0 million as of both ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020.~~2021.

At ~~September 30, 2021, $68.2~~March 31, 2022, $72.2 million, or ~~42.0%~~55.9% of total time deposits mature within one year. If these time deposits do not remain with the Company, the Company will be required to seek other sources of funds. Depending on market conditions, the Company may be required to pay higher rates on such deposits or other borrowings than it currently pays on these time deposits. The Company believes, however, based on past experience that a significant portion of its time deposits will remain with it, either as

Table of Contents

time deposits or as other deposit products. The Company has the ability to attract and retain deposits by adjusting the interest rates offered.

We are committed to maintaining a strong liquidity position; therefore, we monitor our liquidity position on a daily basis. We anticipate that we will have sufficient funds to meet our current funding commitments. The marginal cost of new funding, however, whether from deposits or borrowings from the FHLB, will be carefully considered as we monitor our liquidity needs. Therefore, in order to minimize our cost of funds, we may consider additional borrowings from the FHLB in the future.

~~Table of Contents~~

CB Financial is a separate legal entity from the Bank and must provide for its own liquidity to pay any dividends to its shareholders and for other corporate purposes. Its primary source of liquidity is dividend payments it receives from the Bank. The Bank’s ability to pay dividends to CB Financial is subject to regulatory limitations. At ~~September 30, 2021,~~March 31, 2022, CB Financial (on an unconsolidated, stand-alone basis) had liquid assets of ~~$7.4~~$18.3 million. The ability to pay future dividends or conduct stock repurchases may be limited under applicable banking regulations and regulatory policies due to expected losses for future periods and/or the inability to upstream funds from the Bank to the Company as a result of lower income or regulatory capital levels.

Capital Management. The Bank is subject to various regulatory capital requirements administered by the federal banking agencies. Failure to meet minimum capital requirements can result in certain mandatory and possibly additional discretionary actions by regulators that, if undertaken, could have a direct material effect on the Company's consolidated financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, each must meet specific capital guidelines that involve quantitative measures of their assets, liabilities, and certain off-balance-sheet items as calculated under regulatory accounting practices. The capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings and other factors.

Under the Regulatory Capital Rules, in order to avoid limitations on capital distributions (including dividend payments and certain discretionary bonus payments to executive officers), a banking organization must hold a capital conservation buffer comprised of common equity Tier I capital above its minimum risk-based capital requirements in an amount greater than 2.5% of total risk-weighted assets.

At ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020,~~2021, the Bank was categorized as “well capitalized” under the regulatory framework for prompt corrective action. At ~~September 30, 2021,~~March 31, 2022, the Bank's capital ratios were not affected by loans modified in accordance with Section 4013 of the CARES Act. In addition, PPP loans received a zero-percent risk weight under the regulatory capital rules regardless of whether they were pledged as collateral to the Federal Reserve Bank's PPP lending facility, but were included in the Bank's leverage ratio requirement due to the Bank not pledging the loans as collateral to the PPP lending facility.

Table of Contents

The following table presents the Bank’s regulatory capital amounts and ratios, as well as the minimum amounts and ratios required to be well capitalized as of the dates indicated.


		September 30, 2021				December 31, 2020					March 31, 2022				December 31, 2021
		Amount		Ratio		Amount		Ratio			Amount		Ratio		Amount		Ratio
(Dollars in thousands)	(Dollars in thousands)									(Dollars in thousands)

Common Equity Tier 1 (to risk weighted assets)	Common Equity Tier 1 (to risk weighted assets)									Common Equity Tier 1 (to risk weighted assets)
Actual	Actual	$	107,277	11.53	%	$	108,950	11.79	%	Actual	$	115,291	11.99	%	$	113,086	11.95	%
For Capital Adequacy Purposes	For Capital Adequacy Purposes	41,870		4.50		41,598		4.50		For Capital Adequacy Purposes	43,264		4.50		42,571		4.50
To Be Well Capitalized	To Be Well Capitalized	60,479		6.50		60,086		6.50		To Be Well Capitalized	62,492		6.50		61,491		6.50

Tier 1 Capital (to risk weighted assets)	Tier 1 Capital (to risk weighted assets)									Tier 1 Capital (to risk weighted assets)
Actual	Actual	107,277		11.53		108,950		11.79		Actual	115,291		11.99		113,086		11.95
For Capital Adequacy Purposes	For Capital Adequacy Purposes	55,826		6.00		55,464		6.00		For Capital Adequacy Purposes	57,685		6.00		56,761		6.00
To Be Well Capitalized	To Be Well Capitalized	74,435		8.00		73,952		8.00		To Be Well Capitalized	76,914		8.00		75,682		8.00

Total Capital (to risk weighted assets)	Total Capital (to risk weighted assets)									Total Capital (to risk weighted assets)
Actual	Actual	118,858		12.77		120,520		13.04		Actual	126,886		13.20		124,668		13.18
For Capital Adequacy Purposes	For Capital Adequacy Purposes	74,435		8.00		73,952		8.00		For Capital Adequacy Purposes	76,914		8.00		75,682		8.00
To Be Well Capitalized	To Be Well Capitalized	93,044		10.00		92,440		10.00		To Be Well Capitalized	96,142		10.00		94,602		10.00

Tier 1 Leverage (to adjusted total assets)	Tier 1 Leverage (to adjusted total assets)									Tier 1 Leverage (to adjusted total assets)
Actual	Actual	107,277		7.38		108,950		7.81		Actual	115,291		8.19		113,086		7.76
For Capital Adequacy Purposes	For Capital Adequacy Purposes	58,133		4.00		55,765		4.00		For Capital Adequacy Purposes	56,306		4.00		58,307		4.00
To Be Well Capitalized	To Be Well Capitalized	72,666		5.00		69,706		5.00		To Be Well Capitalized	70,383		5.00		72,884		5.00

Item 3. Quantitative and Qualitative Disclosure about Market Risk.

Management of Interest Rate Risk. The majority of the Company’s assets and liabilities are monetary in nature. Consequently, the Company’s most significant form of market risk is interest rate risk and a principal part of its business strategy is to manage interest rate risk by reducing the exposure of net interest income to changes in market interest rates. Accordingly, the Company’s Board has established an Asset/Liability Management Committee, which is responsible for evaluating the interest rate risk

~~Table of Contents~~

inherent in the Company’s assets and liabilities, for determining the level of risk that is appropriate given the Company’s business strategy, operating environment, capital, liquidity and performance objectives; and for managing this risk consistent with the guidelines approved by the Board. Senior management monitors the level of interest rate risk and the Asset/Liability Management Committee meets on a quarterly basis to review its asset/liability policies and position and interest rate risk position, and to discuss and implement interest rate risk strategies.

The Company monitors interest rate risk through the use of a simulation model. The quarterly reports developed in the simulation model assist the Company in identifying, measuring, monitoring and controlling interest rate risk to ensure compliance within the Company’s policy guidelines. This quantitative analysis measures interest rate risk from both a capital and earnings perspective. With regard to earnings, movements in interest rates and the shape of the yield curve significantly influence the amount of net interest income that is recognized. Movements in market interest rates significantly influence the spread between the interest earned on our interest-earning assets and the interest paid on our interest-bearing liabilities. Our internal interest rate risk analysis calculates the sensitivity of our projected net interest income over a one year period utilizing a static balance sheet assumption through which incoming and outgoing asset and liability cash flows are reinvested into similar instruments. Product pricing and earning asset prepayment speeds are adjusted for each rate scenario.

With regard to capital, our internal interest rate risk analysis calculates the sensitivity of our economic value of equity (“EVE”) ratio to movements in interest rates. EVE represents the present value of the expected cash flows from our assets less the present value of the expected cash flows arising from our liabilities. EVE attempts to quantify our economic value using a discounted cash flow methodology while the EVE ratio reflects that value as a form of capital ratio. The degree to which the EVE ratio changes for any hypothetical interest rate scenario from its base case measurement is a reflection of an institution’s sensitivity to interest rate risk.

For both net interest income and capital at risk, our interest rate risk analysis calculates a base case scenario that assumes no change in interest rates. The model then measures changes throughout a series of interest rate scenarios representing immediate

Table of Contents

and permanent, parallel shifts in the yield curve up and down 100, 200 and 300 basis points with additional scenarios modeled where appropriate. The model requires that interest rates remain positive for all points along the yield curve for each rate scenario which may preclude the modeling of certain falling rate scenarios during periods of lower market interest rates such as that experienced in the current rate environment at ~~September 30, 2021~~March 31, 2022.

The table below sets forth, as of ~~September 30, 2021,~~March 31, 2022, the estimated changes in EVE and net interest income at risk that would result from the designated instantaneous changes in market interest rates. Computations of prospective effects of hypothetical interest rate changes are based on numerous assumptions, including relative levels of market interest rates, loan prepayments and deposit decay, and should not be relied upon as indicative of actual results.


		EVE						EVE as a Percent of Portfolio Value of Assets				Net Interest Earnings at Risk							EVE						EVE as a Percent of Portfolio Value of Assets				Net Interest Earnings at Risk
Change in Interest Rates in Basis Points	Change in Interest Rates in Basis Points	Dollar Amount		Dollar Change		Percent Change		NPV Ratio		Basis Point Change		Dollar Amount		Dollar Change		Percent Change		Change in Interest Rates in Basis Points	Dollar Amount		Dollar Change		Percent Change		NPV Ratio		Basis Point Change		Dollar Amount		Dollar Change		Percent Change
(Dollars in thousands)	(Dollars in thousands)																	(Dollars in thousands)

+300	+300	$	146,125	$	1,077	0.7	%	10.76	%		89	$	44,525	$	6,718	17.8	%	+300	$	174,858	$	(10,610)	(5.7)	%	13.45	%		33	$	44,517	$	4,495	11.2	%
+200	+200	147,720		2,672		1.8		10.59			72	42,567		4,760		12.6		+200	179,104		(6,364)		(3.4)	%	13.40			28	43,219		3,197		8.0
+100	+100	147,515		2,467		1.7		10.29			42	39,872		2,065		5.5		+100	182,216		(3,252)		(1.8)	%	13.25			13	41,195		1,173		2.9
Flat	Flat	145,048		—		—		9.87			—	37,807		—		—		Flat	185,468		—		—	%	13.12			—	40,022		—		—
-100		139,214		(5,834)		(4.0)		9.33			(54)	34,900		(2,907)		(7.7)
(100)																		(100)	176,073		(9,395)		(5.1)	%	12.18			(94)	37,814		(2,208)		(5.5)

Certain shortcomings are inherent in the methodology used in the above interest rate risk measurement. Modeling changes in EVE and net interest income require making certain assumptions that may or may not reflect the manner in which actual yields and costs respond to changes in market interest rates. In this regard, the table presented assumes that the composition of the Company’s interest-sensitive assets and liabilities existing at the beginning of a period remains constant over the period being measured, and assumes that a particular change in interest rates is reflected uniformly across the yield curve regardless of the duration or repricing of specific assets and liabilities. Accordingly, although the table provides an indication of the Company’s interest rate risk exposure at a particular point in time, such measurements are not intended to and do not provide a precise forecast of the effect of changes in market interest rates on EVE and net interest income and will differ from actual results. EVE calculations also may not reflect the fair values of financial instruments. For example, changes in market interest rates can increase the fair values of the Company’s loans, deposits and borrowings.

~~Table of Contents~~

Item 4. Controls and Procedures.

(a)Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our Chief Executive Officer and our Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures as of ~~September 30, 2021.~~March 31, 2022. The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company’s management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure. Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost benefit relationship of possible controls and procedures.

Based upon their evaluation, the principal executive officer and principal financial officer concluded that, as of the end of the period covered by this report, our disclosure controls and procedures were effective for the purpose of ensuring that the information required to be disclosed in the reports that the Company files or submits under the Exchange Act with the SEC (1) is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and (2) is accumulated and communicated to our management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosures.

(b)Changes in Internal Control Over Financial Reporting

There have been no changes in our internal control over financial reporting during the quarter ended ~~September 30, 2021,~~March 31, 2022, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Table of Contents

PART II - OTHER INFORMATION

Item 1. Legal Proceedings.

Periodically, there have been various claims and lawsuits against us, such as claims to enforce liens, claims seeking damages for improper collection procedures or misrepresentations, condemnation proceedings on properties in which we hold security interests, claims involving the making and servicing of real property loans and other issues incident to our business. We are not a party to any other pending legal proceedings that we believe would have a material adverse effect on our consolidated financial condition, results of operations or cash flows.

Item 1A. Risk Factors.

In addition to the other information set forth in this report, you should carefully consider the factors discussed in “Part I, Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, ~~2020,~~2021, which could materially affect our business, financial condition or future results. The risks described in such Annual Report on Form 10-K are not the only risks that we face. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially affect our business, financial condition and/or operating results.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

The Company made the following purchases of its common stock during the three months ended ~~September 30, 2021.~~March 31, 2022.

Period
Total Number of Shares Purchased (1)
Average Price Paid per Share Total Number of Shares Purchased as
Part of the Publicly Announced Program Approximate Dollar Value of Shares That
May Yet Be Purchased Under the Program
July 1-31, 2021 24,170 $ 22.84 24,170 $ 6,387,419
August 1-31, 2021 26,137 23.43 26,137 $ 5,775,101
September 1-30, 2021 31,369 23.16 31,369 $ 5,048,489
Total 81,676 $ 23.15 81,676



Period	Total Number of Shares Purchased (1)	Average Price Paid per Share		Total Number of Shares Purchased as Part of the Publicly Announced Program	Approximate Dollar Value of Shares That May Yet Be Purchased Under the Program
January 1-31, 2022	28,600	$	24.49	28,600	$	2,682,598
February 1-28, 2022	103,240	25.99		103,240	$	—
March 1-31, 2022	—	—		—	$	—
Total	131,840	$	25.66	131,840

~~Table of Contents~~

Item 3. Defaults Upon Senior Securities.

Not applicable.

Item 4. Mine Safety Disclosures.

Not applicable.

Item 5. Other Information.

None.

Item 6. Exhibits


			3.1			Amended and Restated Articles of Incorporation (incorporated by reference to Exhibit 3.1 to Registration Statement on Form S-4 filed on June 13, 2014 (File No. 333-196749))
			3.2			Bylaws, as amended (incorporated herein by reference to Exhibit 3.2 to the Company's Current Report on Form 8-K filed on May 20, 2020)
			31.1			Rule 13a-14(a) / 15d-14(a) Certification (Chief Executive Officer)
			31.2			Rule 13a-14(a) / 15d-14(a) Certification (Chief Financial Officer)
			32.1			Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
			101			The following materials for the quarter ended ~~September 30, 2021,~~March 31, 2022, formatted in XBRL (Extensible Business Reporting Language); the (i) Consolidated Statements of Financial Condition, (ii) Consolidated Statements of Income, ~~(Loss),~~ (iii) Consolidated Statements of Comprehensive (Loss) Income ~~(Loss)~~, (iv) Consolidated Statements of Stockholders’ Equity, (v) Consolidated Statements of Cash Flows and (vi) Notes to the Consolidated Financial Statements (Unaudited)
			104			Cover Page Interactive Data File (Embedded within Inline XBRL contained in Exhibit 101)

5540

Table of Contents

SIGNATURES

Pursuant to the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.


		CB FINANCIAL SERVICES, INC.
		(Registrant)

Date:	~~November 8, 2021~~May 11, 2022	/s/ John H. Montgomery
		John H. Montgomery
		President and Chief Executive Officer

Date:	~~November 8, 2021~~May 11, 2022	/s/ Jamie L. Prah
		Jamie L. Prah
		Executive Vice President and Chief Financial Officer
		(Principal Financial Officer and Chief Accounting Officer)

5641


Three Months Ended September 30, 2020	Shares Issued	Common Stock		Capital Surplus		Retained Earnings		Treasury Stock		Accumulated Other Comprehensive Income		Total Stockholders' Equity
(Dollars in thousands, except share and per share data)

June 30, 2020	5,680,993	$	2,367	$	83,327	$	68,039	$	(5,928)	$	4,587	$	152,392
Comprehensive Loss:
Net Loss	—	—		—		(17,395)		—		—		(17,395)
Other Comprehensive Loss	—	—		—		—		—		(516)		(516)

Restricted Stock Awards Granted	—	—		(103)		—		103		—		—
Stock-Based Compensation Expense	—	—		114		—		—		—		114


Dividends Paid ($0.24 Per Share)	—	—		—		(1,296)		—		—		(1,296)
September 30, 2020	5,680,993	$	2,367	$	83,338	$	49,348	$	(5,825)	$	4,071	$	133,299


Nine Months Ended September 30, 2020	Shares Issued	Common Stock		Capital Surplus		Retained Earnings		Treasury Stock		Accumulated Other Comprehensive Income		Total Stockholders' Equity
(Dollars in thousands, except share and per share data)

December 31, 2019	5,680,993	$	2,367	$	82,971	$	66,955	$	(3,842)	$	2,646	$	151,097
Comprehensive Loss:
Net Loss	—	—		—		(13,719)		—		—		(13,719)
Other Comprehensive Income	—	—		—		—		—		1,425		1,425
Restricted Stock Awards Forfeited	—	—		96		—		(96)		—		—
Restricted Stock Awards Granted	—	—		(103)		—		103		—		—
Stock-Based Compensation Expense	—	—		370		—		—		—		370
Exercise of Stock Options	—	—		4		—		(82)		—		(78)
Treasury Stock Purchased, at cost (67,816 shares)	—	—		—		—		(1,908)		—		(1,908)
Dividends Paid ($0.72 Per Share)	—	—		—		(3,888)		—		—		(3,888)
September 30, 2020	5,680,993	$	2,367	$	83,338	$	49,348	$	(5,825)	$	4,071	$	133,299


Nine Months Ended September 30,	2021		2020
(Dollars in thousands)

OPERATING ACTIVITIES
Net Income (Loss)	$	4,605	$	(13,719)
Adjustments to Reconcile Net Income (Loss) to Net Cash Provided By Operating Activities
Amortization (Accretion) on Securities	38		(9)
Depreciation and Amortization	1,810		2,578
(Recovery) Provision for Loan Losses	(1,200)		4,000
Intangible Asset Impairment	1,178		—
Goodwill Impairment	—		18,693
Writedown on Fixed Assets	2,270		884
Lease Impairment	227		—
Gain on Securities	(482)		(20)
Gain on Purchased Tax Credits	(53)		(46)
Income from Bank-Owned Life Insurance	(411)		(417)
Proceeds From Mortgage Loans Sold	8,182		24,317
Originations of Mortgage Loans for Sale	(15,289)		(23,314)
Gain on Sale of Loans	(166)		(1,003)
(Gain) Loss on Sale of Other Real Estate Owned and Repossessed Assets	(76)		26
Noncash Expense for Stock-Based Compensation	415		370
Decrease (Increase) in Accrued Interest Receivable	517		(944)
Net Loss on Disposal of Fixed Assets	3		48
Increase (Decrease) in Taxes Payable	295		(253)
Payments on Operating Leases	(251)		(412)
Decrease in Accrued Interest Payable	(277)		(252)
Refund of Federal and State Income Taxes	1,311		—
Other, Net	(68)		(1,329)
NET CASH PROVIDED BY OPERATING ACTIVITIES	2,578		9,198
INVESTING ACTIVITIES
Investment Securities Available for Sale:
Proceeds From Principal Repayments and Maturities	29,563		91,219
Purchases of Securities	(119,924)		(68,851)
Proceeds from Sale of Securities	11,967		17,893
Net Decrease (Increase) in Loans	33,378		(100,436)
Purchase of Premises and Equipment	(2,275)		(184)
Proceeds from Disposal of Premises and Equipment	—		26

Proceeds From Sale of Other Real Estate Owned	285		99
Decrease (Increase) in Restricted Equity Securities	533		(305)

NET CASH USED IN INVESTING ACTIVITIES	(46,473)		(60,539)
FINANCING ACTIVITIES
Net Increase in Deposits	52,542		80,677
Net Increase in Short-Term Borrowings	12,260		11,490
Principal Payments on Other Borrowed Funds	(2,000)		(3,000)
Cash Dividends Paid	(3,898)		(3,888)
Treasury Stock, Purchases at Cost	(2,451)		(1,908)
Exercise of Stock Options	54		(78)
NET CASH PROVIDED BY FINANCING ACTIVITIES	56,507		83,293
INCREASE IN CASH AND CASH EQUIVALENTS	12,612		31,952
CASH AND DUE FROM BANKS AT BEGINNING OF YEAR	160,911		80,217
CASH AND DUE FROM BANKS AT END OF PERIOD	$	173,523	$	112,169


	September 30, 2021					December 31, 2020
	Number of Loans	Amount		% of Portfolio			Number of Loans	Amount		% of Portfolio
(Dollars in thousands)

Real Estate:
Residential	—	$	—	—	%		4	$	749	0.2	%
Commercial	—	—		—	%		8	19,818		5.3	%
Construction	—	—		—	%		1	1,958		2.7	%
Commercial and Industrial	—	—		—	%		5	1,219		1.0	%
Consumer	—	—		—	%		13	356		0.3	%

Total Loans in Forbearance	—	$	—	—	%		31	$	24,100	2.3	%


	Three Months Ended September 30, 2020
	Number of Contracts	Pre- Modification Outstanding Recorded Investment		Post- Modification Outstanding Recorded Investment		Related Allowance
(Dollars in thousands)

Real Estate:

Commercial	1	$	504	$	519	$	—
Commercial and Industrial	1	38		38		—
Total	2	$	542	557		$	—


	Nine Months Ended September 30, 2020
	Number of Contracts	Pre- Modification Outstanding Recorded Investment		Post- Modification Outstanding Recorded Investment		Related Allowance
(Dollars in thousands)

Real Estate:
Residential	1	$	234	$	234	$	—
Commercial	1	504		519		—
Commercial and Industrial	1	38		38		—
Total	3	$	776	$	791	$	—


September 30, 2021	Time Deposits		Time Deposits Held for Sale		Time Deposits, Net
(Dollars in thousands)

One Year or Less	$	68,228	$	8,560	$	59,668
Over One Through Two Years	58,693		4,346		54,347
Over Two Through Three Years	10,758		1,034		9,724
Over Three Through Four Years	11,362		2,415		8,947
Over Four Through Five Years	9,645		1,143		8,502
Over Five Years	3,735		196		3,539
Total	$	162,421	$	17,694	$	144,727


	Fair Value Hierarchy	September 30 2021		December 31 2020
(Dollars in thousands)

Securities:
Available-for-Sale Debt Securities
U.S. Government Agencies	Level 2	$	49,938	$	41,411
Obligations of States and Political Subdivisions	Level 2	19,420		21,993
Mortgage-Backed Securities - Government-Sponsored Enterprises	Level 2	141,690		79,493
Corporate Debt	Level 2	7,481		—
Total Available-for-Sale Debt Securities		218,529		142,897

Equity Securities
Mutual Funds	Level 1	999		1,019
Other	Level 1	1,823		1,484
Total Equity Securities		2,822		2,503
Total Securities		$	221,351	$	145,400


	September 30, 2021								December 31, 2020
	Gross Carrying Amount		Accumulated Amortization		Impairment		Net Carrying Value		Gross Carrying Amount		Accumulated Amortization		Net Carrying Value
(Dollars in thousands)

Core Deposit Intangible	$	14,103	$	(8,386)	$	(1,178)	$	4,539	$	14,103	$	(7,047)	$	7,056
Customer List	1,800		(599)		—		1,201		1,800		(457)		1,343
Total Intangible Assets	$	15,903	$	(8,985)	$	(1,178)	$	5,740	$	15,903	$	(7,504)	$	8,399


	Amount
(Dollars in thousands)

Remaining in 2021	$	445
2022	1,782
2023	1,782
2024	1,147
2025	189
2026 and Thereafter	395
Total Estimated Intangible Asset Amortization Expense	$	5,740