CB Financial Services, Inc. Announces Second Quarter and Year-to-Date 2023 Financial Results and Declares Quarterly Cash Dividend

CB Financial Services, Inc. (“CB” or the “Company”) (NASDAQGM: CBFV), the holding company of Community Bank (the “Bank”) and Exchange Underwriters, Inc. (“EU”), a wholly-owned insurance subsidiary of the Bank, today announced its second quarter and year-to-date 2023 financial results.

2023 Second Quarter Financial Highlights

(Comparisons to three months ended June 30, 2022 unless otherwise noted)

Net income was $2.8 million, compared to $118,000. Prior period results were negatively impacted by provision for credit losses expense of approximately $3.8 million due primarily to a single commercial loan charge-off of $2.7 million. Current period results were positively impacted by net interest margin (NIM) expansion coupled with a modest increase in noninterest income, partially offset by an increase in noninterest expense.
- Income before income tax expense (benefit) was $3.5 million compared to $74,000.
- Pre-provision net revenue (PPNR) (non-GAAP) was $3.95 million compared to $3.86 million.
Earnings per diluted common share (EPS) increased to $0.54 from $0.02.
Return on average assets (annualized) was 0.79%, compared to 0.03%.
Return on average equity (annualized) was 9.38%, compared to 0.40%.
NIM improved to 3.29% from 3.12%.
Net interest and dividend income was $11.1 million, compared to $10.2 million.
Noninterest income increased to $2.3 million, compared to $2.1 million. The most significant changes in noninterest income included an increase in insurance commissions of $142,000 and a decrease in net losses on securities of $99,000.
Noninterest expense increased to $9.5 million, compared to $8.4 million, primarily due to increases in compensation and benefits, equipment and data processing costs.

(Amounts at June 30, 2023; comparisons to December 31, 2022, unless otherwise noted)

Total assets increased to $1.43 billion from $1.41 billion.
Total loans increased $51.3 million, or 4.9%, to $1.10 billion compared to $1.05 billion, and included increases of $32.2 million, or 46.0%, in commercial and industrial loans, $21.8 million, or 5.0%, in commercial real estate loans, and $7.8 million, or 2.3%, in residential mortgage loans, partially offset by a decrease of $12.1 million, or 8.3%, in consumer loans, which is primarily comprised of indirect automobile loans.
Nonperforming loans to total loans was 0.37%, a decrease of 18 basis points (“bps”), compared to 0.55%.
Total deposits were $1.26 billion, a decrease of $5.2 million, compared to $1.27 billion.
Book value per share was $22.81, compared to $22.90 as of March 31, 2023 and $21.60 as of December 31, 2022.
Tangible book value per share (Non-GAAP) was $20.39, compared to $20.40 as of March 31, 2023 and $19.00 as of December 31, 2022. The year-to-date change was due to an increase in stockholders’ equity primarily related to current period net income of $6.9 million and a $2.1 million positive adjustment due to the Company’s January 1, 2023 adoption of CECL, partially offset by current period dividends paid to stockholders of $2.6 million.

Management Commentary

President and CEO John H. Montgomery stated, “Our second quarter results demonstrated the durability of both our franchise and the community bank model in general. While macro dislocations seen in the banking industry during the first quarter have abated, we continue to face headwinds resulting from a rising interest rate environment. First and foremost, we are focused on ensuring the bank maintains adequate liquidity and a strong capital position. In doing so, we are able to navigate challenging economic times from a position of strength which also allows us to maintain relationships with trusted customers and develop new ones, as evidenced by our continued loan growth during the quarter. The markets we serve in southwestern Pennsylvania, eastern Ohio and northern West Virginia have remained resilient despite continued interest rate increases by the Federal Reserve. In recent years, our markets have exhibited more stability than others in key areas such as real estate values and employment, allowing Community Bank to experience less volatility.”

Mr. Montgomery continued, “We have noted for several quarters that our funding costs have been rising, with net interest margin decreasing from first quarter levels while improving compared with the second quarter last year. As we highlighted last quarter, our deposit base is well-diversified, with a significant majority insured or collateralized. Within our deposit base, the most significant change during the second quarter was a shift to interest-bearing from noninterest-bearing deposits as our customers responded to the overall increase in market interest rates. The other half of our NIM calculation is our interest income, which has been supported by the repricing of variable rate loans and the addition of new, higher priced loans via the continued growth of our loan book during the second quarter, with C&I loans having been the biggest contributor, followed by commercial real estate loans. Moving forward, our NIM will also benefit as we reposition our loan book by reducing transactional indirect auto loans with higher yielding C&I and CRE loans ”

Mr. Montgomery concluded, “As I noted previously, our team here at Community Bank is focused on maintaining solid capital and liquidity positions. Success on those fronts provides a range of positive outcomes for our business that ultimately lead to long-term value creation which benefits all our constituents - shareholders, employees, customers, and our communities at large. While the near-term economic picture remains somewhat muddled, we are also committed to making proper investments in our franchise to position the bank for long-term growth. During the second quarter we added revenue producing members to our team while also continuing to make targeted technology investments necessary for our competitive positioning. We also declared and paid a $0.25 cash dividend during the quarter while allowing our previous share repurchase program to expire. I am proud of our entire team for all their hard work and look forward to our continued success.”

Dividend Information

The Company’s Board of Directors declared a $0.25 quarterly cash dividend per outstanding share of common stock, payable on or about August 31, 2023, to stockholders of record as of the close of business on August 15, 2023.

Stock Repurchase Program

On April 21, 2022, CB announced a program to repurchase up to $10.0 million of the Company’s outstanding shares of common stock. The Company purchased a total of 74,656 shares of the Company’s common stock at an average price of $22.38 per share prior to the program expiration on May 1, 2023.

2023 Second Quarter Financial Review

Net Interest and Dividend Income

Net interest and dividend income increased $1.0 million, or 9.4%, to $11.1 million for the three months ended June 30, 2023 compared to $10.2 million for the three months ended June 30, 2022.

Net interest margin (GAAP) increased to 3.29% for the three months ended June 30, 2023 compared to 3.12% for the three months ended June 30, 2022. Fully tax equivalent (FTE) net interest margin (Non-GAAP) increased 17 bps to 3.30% for the three months ended June 30, 2023 compared to 3.13% for the three months ended June 30, 2022.
Interest and dividend income increased $4.2 million, or 38.7%, to $15.2 million for the three months ended June 30, 2023 compared to $11.0 million for the three months ended June 30, 2022.
- Interest income on loans increased $3.7 million, or 37.9%, to $13.4 million for the three months ended June 30, 2023 compared to $9.7 million for the three months ended June 30, 2022. The average balance of loans increased $71.5 million to $1.08 billion from $1.01 billion, generating $724,000 of additional interest income on loans. The average yield increased 112 bps to 5.00% compared to 3.88% causing a $3.0 million increase in interest income on loans.
- Interest income on interest-earning deposits at other banks increased $599,000, to $721,000 for the three months ended June 30, 2023 compared to $122,000 for the three months ended June 30, 2022 as the average yield increased 443 bps, partially offset by a $1.9 million decrease in average balances. The increase in the average yield was the result of the Federal Reserve Board’s interest rate increases.
Interest expense increased $3.3 million, or 413.6%, to $4.1 million for the three months ended June 30, 2023 compared to $795,000 for the three months ended June 30, 2022.
- Interest expense on deposits increased $3.2 million, or 536.1%, to $3.8 million for the three months ended June 30, 2023 compared to $604,000 for the three months ended June 30, 2022. Rising market interest rates led to the repricing of interest-bearing demand and money market deposits and a shift in deposits from non interest-bearing to interest-bearing demand and time deposits and resulted in a 137 bps, or 466.9%, increase in the average cost of interest-bearing deposits compared to the three months ended June 30, 2022. This accounted for a $3.2 million increase in interest expense. Additionally, interest-bearing deposit balances increased $104.5 million, or 12.7%, to $930.1 million as of June 30, 2023 compared to $825.6 million as of June 30, 2022, accounting for a $70,000 increase in interest expense.

Provision for Credit Losses

Effective January 1, 2023, the Company adopted ASU 2016-13, “Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments”, which replaced the incurred loss methodology with an expected loss methodology that is referred to as the current expected credit loss (CECL) methodology. The provision for credit losses recorded for the three months ended June 30, 2023 was $432,000 and was required primarily due to loan growth coupled with a modeled slowdown in loan prepayment speeds. This compared to $3.8 million in provision for credit losses recorded for the three months ended June 30, 2022, primarily due to the charge-off of a $2.7 million commercial and industrial loan to a borrower that ceased operations.

Noninterest income

Noninterest income increased $164,000, or 7.8%, to $2.3 million for the three months ended June 30, 2023, compared to $2.1 million for the three months ended June 30, 2022. This increase was primarily related to a $142,000 increase in commercial and personal insurance commissions and a decrease in net losses on securities of $99,000.

Noninterest Expense

Noninterest expense increased $1.1 million, or 13.0%, to $9.5 million for the three months ended June 30, 2023 compared to $8.4 million for the three months ended June 30, 2022. Salaries and benefits increased $692,000, or 15.2%, to $5.2 million primarily due to merit increases, revenue producing staff additions and associated $160,000 of recruiting costs, and $96,000 of severance costs related to the discontinuation of indirect automobile lending. Data processing expense increased $272,000, or 61.0%, to $718,000, due to increased ongoing costs related to the fourth quarter 2022 core conversion and equipment expense increased $101,000 or 55.5%, to $283,000, due to costs associated with the implementation of new interactive teller machines.

Statement of Financial Condition Review

Assets

Total assets increased $23.8 million, or 1.7%, to $1.43 billion at June 30, 2023, compared to $1.41 billion at December 31, 2022.

Cash and due from banks decreased $25.6 million, or 24.7%, to $78.1 million at June 30, 2023, compared to $103.7 million at December 31, 2022, due to significant loan growth.
Securities decreased $8.6 million, or 4.5%, to $181.4 million at June 30, 2023, compared to $190.1 million at December 31, 2022. The securities balance was primarily impacted by $8.1 million of repayments on mortgage-backed and collateralized mortgage obligation securities and a $332,000 decrease in the market value in the equity securities portfolio, which is primarily comprised of bank stocks.

Loans and Credit Quality

Total loans increased $51.3 million, or 4.9%, to $1.10 billion at June 30, 2023 compared to $1.05 billion at December 31, 2022. Loan growth was driven by increases in commercial and industrial loans, commercial real estate loans and residential mortgage loans of $32.2 million, $21.8 million, and $7.8 million, respectively, partially offset by a decrease in consumer loans of $12.1 million. The decrease in consumer loans resulted from a reduction in indirect automobile loan production due to rising market interest rates. Further decreases in this portfolio is expected as the Bank discontinued this product offering at June 30, 2023 to allocate resources and focus production efforts on more profitable commercial products.
The allowance for credit losses (ACL) was $10.7 million at June 30, 2023 and $12.8 million at December 31, 2022. As a result, the ACL to total loans was 0.97% at June 30, 2023 compared to 1.22% at December 31, 2022. The change in the ACL was primarily due to the Company's aforementioned adoption of CECL. At adoption, the Company decreased its ACL by $3.4 million. Contributing to the change in ACL was a prior year charge-off of $2.7 million and qualitative factors that significantly impacted the incurred loss model driven by historical activity compared to the adopted CECL methodology that is centered around current expected credit loss (CECL) activity using a forecast approach.
Net charge-offs for the three months ended June 30, 2023 were $96,000, or 0.04% of average loans on an annualized basis. Net charge-offs for the three months ended June 30, 2022 were $2.5 million, or 1.01% of average loans on an annualized basis primarily due to the aforementioned $2.7 million charge-off of a commercial and industrial loan. Net recoveries for the six months ended June 30, 2023 were $660,000 primarily due to recoveries totaling $750,000 related to the prior year charged-off loan. Net charge-offs for the six months ended June 30, 2022 were $2.5 million.
Nonperforming loans, which includes nonaccrual loans and accruing loans past due 90 days or more, were $4.1 million at June 30, 2023 compared to $5.8 million at December 31, 2022. The decrease of $1.7 million was due to ten loans totaling $1.7 million being moved from nonaccrual to accrual status during the current period. Current nonperforming loans to total loans ratio was 0.37% compared to 0.55% at December 31, 2022.

Other

Intangible assets decreased $891,000, or 25.6%, to $2.6 million at June 30, 2023 compared to $3.5 million at December 31, 2022 due to amortization expense recognized during the period.
Accrued interest and other assets increased $5.6 million, or 26.8%, to $26.7 million at June 30, 2023, compared to $21.1 million at December 31, 2022 due to the sale of a $2.0 million syndicated loan which was sold but not yet settled at the end of the period, and increases in accounts receivable for EU, income taxes receivable and BOLI death benefit claims receivable $853,000, $761,000 and $664,000.

Total liabilities increased $17.4 million, or 1.3%, to $1.32 billion at June 30, 2023 compared to $1.30 billion at December 31, 2022.

Deposits

Total deposits decreased $5.2 million to $1.26 billion as of June 30, 2023 compared to $1.27 billion at December 31, 2022. Interest-bearing demand deposits increased $62.8 million and time deposits increased $60.4 million, while non interest-bearing demand deposits decreased $74.3 million, money market deposits decreased $23.3 million and savings deposits decreased $30.8 million. The increase in interest-bearing demand deposits is primarily the result of higher interest rates attracting more customers and additional deposits from existing customers while higher time deposits resulted from the offering of a higher-rate certificate of deposit product. FDIC insured deposits totaled approximately 61.1% of total deposits while an additional 16.5% of deposits were collateralized with investment securities.

Borrowed Funds

Long-term borrowings increased $20.0 million, or 136.6%, to $34.7 million at June 30, 2023, compared to $14.6 million at December 31, 2022. During the second quarter, the Bank entered into $20.0 million of FHLB advances for a term of 24 months at 4.92%, the proceeds of which were utilized to match fund originations within the Bank’s commercial and industrial loan portfolio.
Short-term borrowings decreased $8.1 million, or 100.0%, as there were no short-term borrowings at June 30, 2023, compared to $8.1 million at December 31, 2022. At December 31, 2022, short-term borrowings were comprised entirely of securities sold under agreements to repurchase. These accounts were transitioned into other deposit products and account for a portion of the interest-bearing demand deposit increase.

Accrued Interest Payable and Other Liabilities

Accrued interest payable and other liabilities increased $10.6 million, or 139.8%, to $18.2 million at June 30, 2023, compared to $7.6 million at December 31, 2022 primarily due to the purchase of $8.9 million of syndicated loans which were unfunded at the end of the period.

Stockholders’ Equity

Stockholders’ equity increased $6.4 million, or 5.8%, to $116.6 million at June 30, 2023, compared to $110.2 million at December 31, 2022. Key factors positively impacting stockholders’ equity included $6.9 million of net income for the current period and a $2.1 million positive adjustment, net of tax, due to the Company’s January 1, 2023 adoption of CECL as described above. These factors were partially offset by the payment of $2.6 million in dividends since December 31, 2022 and activity under share repurchase programs. On April 21, 2022, a $10.0 million repurchase program was authorized, with the Company repurchasing 74,656 shares at an average price of $22.38 per share since the inception of the plan. In total, the Company repurchased $274,000 of common stock since December 31, 2022. The plan expired on May 1, 2023.

Book value per share

Book value per common share was $22.81 at June 30, 2023 compared to $21.60 at December 31, 2022, an increase of $1.21.

Tangible book value per common share (Non-GAAP) was $20.39 at June 30, 2023, compared to $19.00 at December 31, 2022, an increase of $1.39.

Refer to “Explanation of Use of Non-GAAP Financial Measures” at the end of this Press Release.

About CB Financial Services, Inc.

CB Financial Services, Inc. is the bank holding company for Community Bank, a Pennsylvania-chartered commercial bank. Community Bank operates its branch network in southwestern Pennsylvania and West Virginia. Community Bank offers a broad array of retail and commercial lending and deposit services and provides commercial and personal insurance brokerage services through Exchange Underwriters, Inc., its wholly owned subsidiary.

For more information about CB Financial Services, Inc. and Community Bank, visit our website at www.communitybank.tv.

Statement About Forward-Looking Statements

Statements contained in this press release that are not historical facts may constitute forward-looking statements as that term is defined in the Private Securities Litigation Reform Act of 1995 and such forward-looking statements are subject to significant risks and uncertainties. The Company intends such forward-looking statements to be covered by the safe harbor provisions contained in the Act. The Company’s ability to predict results or the actual effect of future plans or strategies is inherently uncertain. Factors which could have a material adverse effect on the operations and future prospects of the Company and its subsidiaries include, but are not limited to, general and local economic conditions, 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 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 other factors that may be disclosed in the Company’s periodic reports as filed with the Securities and Exchange Commission. 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.

CB FINANCIAL SERVICES, INC.

SELECTED CONSOLIDATED FINANCIAL INFORMATION

(Dollars in thousands, except share and per share data) (Unaudited)

Selected Financial Condition Data

6/30/23

3/31/23

12/31/22

9/30/22

6/30/22

Assets

Cash and Due From Banks

78,093

103,545

103,700

122,801

81,121

Securities

181,427

189,025

190,058

193,846

213,505

Loans

Real Estate:

Residential

338,493

332,840

330,725

328,248

325,138

Commercial

458,614

452,770

436,805

432,516

426,105

Construction

44,523

39,522

44,923

49,502

41,277

Commercial and Industrial:

Commercial and Industrial

102,232

79,436

69,918

61,428

62,054

PPP

126

768

3,853

Consumer

134,788

146,081

146,927

150,615

148,921

Other

22,470

21,151

20,449

19,865

20,621

Total Loans

1,101,154

1,071,865

1,049,873

1,042,942

1,027,969

Allowance for Credit Losses

(10,666

)

(10,270

)

(12,819

)

(12,854

)

(12,833

)

Loans, Net

1,090,488

1,061,595

1,037,054

1,030,088

1,015,136

Premises and Equipment, Net

18,582

17,732

17,844

18,064

18,196

Bank-Owned Life Insurance

25,082

24,943

25,893

25,750

25,610

Goodwill

9,732

Intangible Assets, Net

2,622

3,068

3,513

3,959

4,404

Accrued Interest Receivable and Other Assets

26,707

21,068

21,144

21,680

18,757

Total Assets

1,432,733

1,430,708

1,408,938

1,425,920

1,386,461

Liabilities

Deposits

Noninterest-Bearing Demand Accounts

316,098

350,911

390,405

407,107

389,127

Interest-Bearing Demand Accounts

374,654

359,051

311,825

298,755

265,347

Money Market Accounts

185,814

206,174

209,125

198,715

185,308

Savings Accounts

217,267

234,935

248,022

250,378

250,226

Time Deposits

169,482

130,449

109,126

120,879

125,182

Total Deposits

1,263,315

1,281,520

1,268,503

1,275,834

1,215,190

Short-Term Borrowings

—

121

8,060

18,108

32,178

Other Borrowings

34,658

14,648

14,638

17,627

17,618

Accrued Interest Payable and Other Liabilities

18,171

17,224

7,582

7,645

7,703

Total Liabilities

1,316,144

1,313,513

1,298,783

1,319,214

1,272,689

Stockholders’ Equity

116,589

117,195

110,155

106,706

113,772

Total Liabilities and Stockholders’ Equity

1,432,733

1,430,708

1,408,938

1,425,920

1,386,461

(Dollars in thousands, except share and per share data) (Unaudited)

Three Months Ended

Six Months Ended

Selected Operating Data

6/30/23

3/31/23

12/31/22

9/30/22

6/30/22

6/30/23

6/30/22

Interest and Dividend Income:

Loans, Including Fees

13,426

12,371

11,835

10,815

9,733

25,797

19,284

Securities:

Taxable

950

964

974

985

988

1,914

1,893

Tax-Exempt

123

Dividends

Other Interest and Dividend Income

760

844

978

417

160

1,605

232

Total Interest and Dividend Income

15,203

14,244

13,855

12,287

10,958

29,448

21,574

Interest Expense:

Deposits

3,842

2,504

1,811

1,079

604

6,346

1,134

Short-Term Borrowings

Other Borrowings

238

155

171

174

173

393

347

Total Interest Expense

4,083

2,661

1,989

1,272

795

6,744

1,518

Net Interest and Dividend Income

11,120

11,583

11,866

11,015

10,163

22,704

20,056

Provision for Credit Losses - Loans

492

—

3,784

572

3,784

Recovery for Credit Losses - Unfunded Commitments

(60

)

—

(60

)

—

Net Interest and Dividend Income After Provision for Credit Losses

10,688

11,503

11,866

11,015

6,379

22,192

16,272

Noninterest Income:

Service Fees

448

445

530

544

559

892

1,085

Insurance Commissions

1,511

1,922

1,399

1,368

1,369

3,434

3,167

Other Commissions

224

144

157

244

179

368

268

Net (Loss) Gain on Sales of Loans

)

—

)

—

Net (Loss) Gain on Securities

(100

)

(232

)

(46

)

(199

)

(332

)

(206

)

Net Gain on Purchased Tax Credits

Net Gain (Loss) on Disposal of Fixed Assets

—

439

—

)

Income from Bank-Owned Life Insurance

139

140

143

140

142

280

278

Net Gain on Bank-Owned Life Insurance Claims

302

—

303

—

Other Income

113

106

Total Noninterest Income

2,269

2,810

2,360

2,739

2,105

5,080

4,718

Noninterest Expense:

Salaries and Employee Benefits

5,231

5,079

4,625

4,739

4,539

10,310

9,104

Occupancy

789

701

817

768

776

1,490

1,462

Equipment

283

218

178

170

182

501

392

Data Processing

718

857

681

540

446

1,575

931

FDIC Assessment

224

152

154

147

128

376

337

PA Shares Tax

195

260

258

240

455

480

Contracted Services

434

147

405

288

348

581

935

Legal and Professional Fees

246

182

362

334

389

428

541

Advertising

165

131

115

154

231

Other Real Estate Owned (Income)

(35

)

(37

)

(38

)

(38

)

(37

)

(72

)

(75

)

Amortization of Intangible Assets

446

445

446

445

446

891

Other

895

945

1,063

838

1,841

1,837

Total Noninterest Expense

9,501

9,028

8,998

8,827

8,410

18,530

17,066

Income Before Income Tax Expense (Benefit)

3,456

5,285

5,228

4,927

8,742

3,924

Income Tax Expense (Benefit)

699

1,129

1,076

998

(44

)

1,827

759

Net Income

2,757

4,156

4,152

3,929

118

6,915

3,165

Three Months Ended

Six Months Ended

Per Common Share Data

6/30/23

3/31/23

12/31/22

9/30/22

6/30/22

6/30/23

6/30/22

Dividends Per Common Share

0.25

0.24

0.50

0.48

Earnings Per Common Share - Basic

0.54

0.81

0.77

0.02

1.35

0.61

Earnings Per Common Share - Diluted

0.54

0.81

0.77

0.02

1.35

0.61

Weighted Average Common Shares Outstanding - Basic

5,111,987

5,109,597

5,095,237

5,106,861

5,147,846

5,110,799

5,172,881

Weighted Average Common Shares Outstanding - Diluted

5,116,134

5,115,705

5,104,254

5,118,627

5,156,975

5,118,396

5,189,144

6/30/23

3/31/23

12/31/22

9/30/22

6/30/22

Common Shares Outstanding

5,111,678

5,116,830

5,100,189

5,096,672

5,128,333

Book Value Per Common Share

22.81

22.90

21.60

20.94

22.18

Tangible Book Value per Common Share (1)

20.39

20.40

19.00

18.25

19.43

Stockholders’ Equity to Assets

8.1

8.2

7.8

7.5

8.2

Tangible Common Equity to Tangible Assets (1)

7.3

7.4

6.9

6.6

7.3

Three Months Ended

Six Months Ended

Selected Financial Ratios (2)

6/30/23

3/31/23

12/31/22

9/30/22

6/30/22

6/30/23

6/30/22

Return on Average Assets

0.79

1.21

1.16

1.12

0.03

1.00

0.45

Return on Average Equity

9.38

14.69

15.26

13.60

0.40

11.98

5.15

Average Interest-Earning Assets to Average Interest-Bearing Liabilities

142.37

147.53

149.04

149.41

149.03

144.88

146.74

Average Equity to Average Assets

8.38

8.27

7.63

8.20

8.49

8.33

8.81

Net Interest Rate Spread

2.78

3.12

3.17

3.10

3.00

2.95

3.00

Net Interest Rate Spread (FTE) (1)

2.79

3.13

3.18

3.11

3.01

2.96

3.01

Net Interest Margin

3.29

3.51

3.45

3.29

3.12

3.40

3.10

Net Interest Margin (FTE) (1)

3.30

3.52

3.46

3.30

3.13

3.41

3.11

Net Charge-Offs (Recoveries) to Average Loans

0.04

(0.29

)

0.01

(0.01

)

1.01

(0.12

)

0.50

Efficiency Ratio

70.96

62.72

63.25

64.18

68.55

66.69

68.89

Asset Quality Ratios

6/30/23

3/31/23

12/31/22

9/30/22

6/30/22

Allowance for Credit Losses to Total Loans

0.97

0.96

1.22

1.23

1.25

Allowance for Credit Losses to Nonperforming Loans (3)

260.46

189.73

221.06

218.61

219.89

Allowance for Credit Losses to Noncurrent Loans (4)

260.46

189.73

320.64

318.96

329.47

Delinquent and Nonaccrual Loans to Total Loans (4) (5)

0.68

1.02

0.81

0.46

0.45

Nonperforming Loans to Total Loans (3)

0.37

0.51

0.55

0.56

0.57

Noncurrent Loans to Total Loans (4)

0.37

0.51

0.38

0.39

0.38

Nonperforming Assets to Total Assets (6)

0.30

0.40

0.41

0.42

Capital Ratios (7)

6/30/23

3/31/23

12/31/22

9/30/22

6/30/22

Common Equity Tier 1 Capital (to Risk Weighted Assets)

12.54

12.60

12.33

12.02

11.83

Tier 1 Capital (to Risk Weighted Assets)

12.54

12.60

12.33

12.02

11.83

Total Capital (to Risk Weighted Assets)

13.64

13.69

13.58

13.27

13.08

Tier 1 Leverage (to Adjusted Total Assets)

9.26

9.24

8.66

8.51

8.33

(1)

Refer to Explanation of Use of Non-GAAP Financial Measures in this Press Release for the calculation of the measure and reconciliation to the most comparable GAAP measure.

(2)

Interim period ratios are calculated on an annualized basis.

(3)

Nonperforming loans consist of all nonaccrual loans and accruing loans that are 90 days or more past due.

(4)

Noncurrent loans consist of nonaccrual loans and accruing loans that are 90 days or more past due.

(5)

Delinquent loans consist of accruing loans that are 30 days or more past due.

(6)

Nonperforming assets consist of nonperforming loans and other real estate owned.

(7)

Capital ratios are for Community Bank only.

Certain items previously reported may have been reclassified to conform with the current reporting period’s format.

AVERAGE BALANCES AND YIELDS

Three Months Ended

June 30, 2023

March 31, 2023

December 31, 2022

September 30, 2022

June 30, 2022

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)

Average

Balance

Interest

and

Dividends

Yield /

Cost (1)

(Dollars in thousands) (Unaudited)

Assets:

Interest-Earning Assets:

Loans, Net (2)

1,079,399

13,450

5.00

1,040,570

12,391

4.83

1,034,714

11,853

4.54

1,024,363

10,833

4.20

1,007,874

9,751

3.88

Debt Securities

Taxable

209,292

950

1.82

213,158

964

1.81

216,915

974

1.80

222,110

985

1.77

228,315

988

1.73

Exempt From Federal Tax

6,180

3.43

6,270

3.32

6,277

3.25

7,998

3.10

9,109

3.21

Equity Securities

2,693

3.71

2,693

3.56

2,693

4.16

2,693

3.12

2,693

2.97

Interest-Earning Deposits at Banks

54,466

721

5.30

74,555

805

4.32

99,108

939

3.79

67,870

378

2.23

56,379

122

0.87

Other Interest-Earning Assets

2,783

5.62

2,633

6.01

2,875

5.38

2,784

5.56

3,235

4.71

Total Interest-Earning Assets

1,354,813

15,238

4.51

1,339,879

14,275

4.32

1,362,582

13,884

4.04

1,327,818

12,318

3.68

1,307,605

10,992

3.37

Noninterest-Earning Assets

51,928

48,369

51,718

68,796

84,323

Total Assets

1,406,741

1,388,248

1,414,300

1,396,614

1,391,928

Liabilities and Stockholders' Equity:

Interest-Bearing Liabilities:

Interest-Bearing Demand Accounts

354,497

1,582

1.79

335,327

1,191

1.44

315,352

810

1.02

278,412

393

0.56

260,655

111

0.17

Savings Accounts

225,175

0.09

242,298

0.06

249,948

0.05

251,148

0.03

248,356

0.03

Money Market Accounts

194,565

1,033

2.13

213,443

939

1.78

206,192

604

1.16

189,371

269

0.56

188,804

0.13

Time Deposits

155,867

1,174

3.02

101,147

337

1.35

116,172

368

1.26

123,438

397

1.28

127,832

412

1.29

Total Interest-Bearing Deposits

930,104

3,842

1.66

892,215

2,504

1.14

887,664

1,811

0.81

842,369

1,079

0.51

825,647

604

0.29

Short-Term Borrowings

480

2.51

1,344

0.60

8,985

0.31

28,738

0.26

34,135

0.21

Other Borrowings

21,026

238

4.54

14,641

155

4.29

17,598

171

3.86

17,621

174

3.92

17,611

173

3.94

Total Interest-Bearing Liabilities

951,610

4,083

1.72

908,200

2,661

1.19

914,247

1,989

0.86

888,728

1,272

0.57

877,393

795

0.36

Noninterest-Bearing Demand Deposits

326,262

362,343

391,300

390,658

391,975

Other Liabilities

10,920

2,953

788

2,636

4,415

Total Liabilities

1,288,792

1,273,496

1,306,335

1,282,022

1,273,783

Stockholders' Equity

117,949

114,752

107,965

114,592

118,145

Total Liabilities and Stockholders' Equity

1,406,741

1,388,248

1,414,300

1,396,614

1,391,928

Net Interest Income (FTE)

(Non-GAAP) (3)

11,155

11,614

11,895

11,046

10,197

Net Interest-Earning Assets (4)

403,203

431,679

448,335

439,090

430,212

Net Interest Rate Spread (FTE)

(Non-GAAP) (3) (5)

2.79

3.13

3.18

3.11

3.01

Net Interest Margin (FTE)

(Non-GAAP) (3)(6)

3.30

3.52

3.46

3.30

3.13

PPP Loans

10.56

100

12.17

216

40.41

2,424

123

20.13

5,546

144

10.41

(1)

Annualized based on three months ended results.

(2)

Net of the allowance for credit losses and includes nonaccrual loans with a zero yield and Loans Held for Sale if applicable.

(3)

Refer to Explanation and Use of Non-GAAP Financial Measures in this Press Release for the calculation of the measure and reconciliation to the most comparable GAAP measure.

(4)

Net interest-earning assets represent total interest-earning assets less total interest-bearing liabilities.

(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 margin represents annualized net interest income divided by average total interest-earning assets.

AVERAGE BALANCES AND YIELDS

Six Months Ended

June 30, 2023

June 30, 2022

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)

1,060,092

25,840

4.92

1,008,539

19,322

3.86

Debt Securities

Taxable

211,213

1,914

1.81

222,144

1,893

1.70

Exempt From Federal Tax

6,225

105

3.37

9,649

156

3.23

Marketable Equity Securities

2,693

3.64

2,693

3.12

Interest-Earning Deposits at Banks

64,455

1,526

4.74

57,829

156

0.54

Other Interest-Earning Assets

2,709

5.88

3,358

4.56

Total Interest-Earning Assets

1,347,387

29,513

4.42

1,304,212

21,645

3.35

Noninterest-Earning Assets

50,159

103,201

Total Assets

1,397,546

1,407,413

Liabilities and Stockholders' Equity:

Interest-Bearing Liabilities:

Interest-Bearing Demand Accounts

344,965

2,773

1.62

268,585

160

0.12

Savings Accounts

233,689

0.08

246,084

0.03

Money Market Accounts

203,952

1,972

1.95

190,605

102

0.11

Time Deposits

128,659

1,511

2.37

129,914

834

1.29

Total Interest-Bearing Deposits

911,265

6,346

1.40

835,188

1,134

0.27

Short-Term Borrowings

910

1.11

36,000

0.21

Other Borrowings

17,850

393

4.44

17,608

347

3.97

Total Interest-Bearing Liabilities

930,025

6,744

1.46

888,796

1,518

0.34

Noninterest-Bearing Demand Deposits

344,203

388,103

Other Liabilities

6,959

6,468

Total Liabilities

1,281,187

1,283,367

Stockholders' Equity

116,359

124,046

Total Liabilities and Stockholders' Equity

1,397,546

1,407,413

Net Interest Income (FTE) (Non-GAAP) (3)

22,769

20,127

Net Interest-Earning Assets (4)

417,362

415,416

Net Interest Rate Spread (FTE) (Non-GAAP) (3)(5)

2.96

3.01

Net Interest Margin (FTE) (Non-GAAP) (3)(6)

3.41

3.11

PPP Loans

11.69

10,085

589

11.78

(1)

Annualized based on six months ended results

(2)

Net of the allowance for credit losses and includes nonaccrual loans with a zero yield and Loans Held for Sale if applicable.

(3)

Refer to Explanation and Use of Non-GAAP Financial Measures in this Press Release for the calculation of the measure and reconciliation to the most comparable GAAP measure.

(4)

Net interest-earning assets represent total interest-earning assets less total interest-bearing liabilities.

(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 margin represents annualized net interest income divided by average total interest-earning assets.

Explanation of Use of Non-GAAP Financial Measures

In addition to financial measures presented in accordance with generally accepted accounting principles (“GAAP”), we use, and this Press Release contains or references, 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 similar 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.

6/30/23

3/31/23

12/31/22

9/30/22

6/30/22

(Dollars in thousands, except share and per share data) (Unaudited)

Assets (GAAP)

1,432,733

1,430,708

1,408,938

1,425,920

1,386,461

Goodwill and Intangible Assets, Net

(12,354

)

(12,800

)

(13,245

)

(13,691

)

(14,136

)

Tangible Assets (Non-GAAP) (Numerator)

1,420,379

1,417,908

1,395,693

1,412,229

1,372,325

Stockholders' Equity (GAAP)

116,589

117,195

110,155

106,706

113,772

Goodwill and Intangible Assets, Net

(12,354

)

(12,800

)

(13,245

)

(13,691

)

(14,136

)

Tangible Common Equity or Tangible Book Value (Non-GAAP) (Denominator)

104,235

104,395

96,910

93,015

99,636

Stockholders’ Equity to Assets (GAAP)

8.1

8.2

7.8

7.5

8.2

Tangible Common Equity to Tangible Assets (Non-GAAP)

7.3

7.4

6.9

6.6

7.3

Common Shares Outstanding (Denominator)

5,111,678

5,116,830

5,100,189

5,096,672

5,128,333

Book Value per Common Share (GAAP)

22.81

22.90

21.60

20.94

22.18

Tangible Book Value per Common Share (Non-GAAP)

20.39

20.40

19.00

18.25

19.43

Three Months Ended

Six Months Ended

6/30/23

3/31/23

12/31/22

9/30/22

6/30/22

6/30/23

6/30/22

(Dollars in thousands) (Unaudited)

Net Income (GAAP)

2,757

4,156

4,152

3,929

118

6,915

3,165

Amortization of Intangible Assets, Net

446

445

446

445

446

891

Adjusted Net Income (Non-GAAP) (Numerator)

3,203

4,601

4,598

4,374

564

7,806

4,056

Annualization Factor

4.01

4.06

3.97

4.01

2.02

Average Stockholders' Equity (GAAP)

117,949

114,752

107,965

114,592

118,145

116,359

124,046

Average Goodwill and Intangible Assets, Net

(12,626

)

(13,080

)

(13,534

)

(13,968

)

(14,414

)

(12,852

)

(14,641

)

Average Tangible Common Equity (Non-GAAP) (Denominator)

105,323

101,672

94,431

100,624

103,731

103,507

109,405

Return on Average Equity (GAAP)

9.38

14.69

15.26

13.60

0.40

11.98

5.15

Return on Average Tangible Common Equity (Non-GAAP)

12.20

18.35

19.32

17.25

2.18

15.21

7.48

Three Months Ended

Six Months Ended

6/30/23

3/31/23

12/31/22

9/30/22

6/30/22

6/30/23

6/30/22

(Dollars in thousands) (Unaudited)

Interest Income (GAAP)

15,203

14,244

13,855

12,287

10,958

29,448

21,574

Adjustment to FTE Basis

Interest Income (FTE) (Non-GAAP)

15,238

14,275

13,884

12,318

10,992

29,513

21,645

Interest Expense (GAAP)

4,083

2,661

1,989

1,272

795

6,744

1,518

Net Interest Income (FTE) (Non-GAAP)

11,155

11,614

11,895

11,046

10,197

22,769

20,127

Net Interest Rate Spread (GAAP)

2.78

3.12

3.17

3.10

3.00

2.95

3.00

Adjustment to FTE Basis

0.01

Net Interest Rate Spread (FTE) (Non-GAAP)

2.79

3.13

3.18

3.11

3.01

2.96

3.01

Net Interest Margin (GAAP)

3.29

3.51

3.45

3.29

3.12

3.40

3.10

Adjustment to FTE Basis

0.01

Net Interest Margin (FTE) (Non-GAAP)

3.30

3.52

3.46

3.30

3.13

3.41

3.11

Three Months Ended

Six Months Ended

6/30/23

3/31/23

12/31/22

9/30/22

6/30/22

6/30/23

6/30/22

(Dollars in thousands) (Unaudited)

Net Income Before Income Tax Expense (Benefit) (GAAP)

3,456

5,285

5,228

4,927

8,742

3,924

Provision for Credit Losses

492

—

3,784

572

3,784

PPNR (Non-GAAP) (Numerator)

3,948

5,365

5,228

4,927

3,858

9,314

7,708

Annualization Factor

4.01

4.06

3.97

4.01

2.02

Average Assets (Denominator)

1,406,741

1,388,248

1,414,300

1,396,614

1,391,928

1,397,546

1,407,413

PPNR Return on Average Assets (Non-GAAP)

1.13

1.57

1.47

1.40

1.11

1.34

1.10

View source version on businesswire.com: https://www.businesswire.com/news/home/20230728598887/en/

Company Contact: John H. Montgomery President and Chief Executive Officer Phone: (724) 225-2400

Investor Relations: Jeremy Hellman, Vice President The Equity Group Inc. Phone: (212) 836-9626 Email: jhellman@equityny.com

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