CB Financial Services, Inc. (“CB” or the “Company”) (NASDAQGM: CBFV), the holding company of Community Bank (the “Bank”), today announced its third quarter and year-to-date 2024 financial results.

2024 Third Quarter Financial Highlights

(Comparisons to three months ended September 30, 2023 unless otherwise noted)

• Net income was $3.2 million, compared to $2.7 million. Results were impacted by the December 2023 sale of the Bank’s subsidiary insurance agency, Exchange Underwriters (“EU”), which drove decreases in noninterest income and noninterest expense.
• Earnings per diluted common share (EPS) increased to $0.60 from $0.52.
• Return on average assets (annualized) was 0.84%, compared to 0.75%.
• Return on average equity (annualized) was 8.80%, compared to 9.03%.
• Net interest and dividend income was $11.5 million, compared to $10.7 million.
• Noninterest income decreased to $1.2 million, compared to $2.4 million. The significant decrease in noninterest income was driven by a $1.4 million decrease in insurance commissions due to the sale of EU.
• Noninterest expense decreased to $8.8 million, compared to $9.5 million, due to decreases in compensation and benefits and intangible amortization expenses also driven by the sale of EU, partially offset by increases in contracted services, data processing, occupancy and Pennsylvania shares tax expenses.

(Amounts at September 30, 2024; comparisons to December 31, 2023, unless otherwise noted)

• Total assets increased $105.7 million, or 7.3%, to $1.6 billion from $1.5 billion.
• Total loans decreased $44.6 million, or 4.0%, to $1.07 billion compared to $1.11 billion, and included decreases in consumer, residential real estate, commercial real estate and commercial and industrial loans of $31.6 million, $8.9 million, $2.8 million and $2.7 million, respectively. The consumer loan portfolio is primarily comprised of indirect automobile loans and decreased as a result of the discontinuation of that product as of June 30, 2023. Excluding the $31.8 million decrease in indirect automobile loans, total loans decreased $12.8 million, or 1.2%. In total, $95.5 million of loans have paid off since December 31, 2023.
• Nonperforming loans to total loans was 0.19% at September 30, 2024, compared to 0.20% at December 31, 2023.
• Total deposits were $1.35 billion, an increase of $86.7 million, compared to $1.27 billion.
• Book value per share was $29.07, compared to $27.79 as of June 30, 2024 and $27.32 as of December 31, 2023.
• Tangible book value per share (Non-GAAP) was $27.16, compared to $25.83 as of June 30, 2024 and $25.23 as of December 31, 2023. The year-to-date change was due to an increase in stockholders’ equity primarily related to current period net income of $10.1 million and a $2.8 million decrease in accumulated other comprehensive loss, partially offset by the payment of $3.9 million in dividends since December 31, 2023.

Management Commentary

President and CEO John H. Montgomery commented, “Funding costs continued to increase from the prior period, maintaining pressure on our net interest margin. However, relief from this ongoing trend appears to be on the horizon with prevailing market deposit costs beginning to soften. Our balance sheet strategies and continued focus on quality, relationship-driven loan production continue to strengthen the fundamentals of our bank.

During the quarter, our loan portfolio decreased $12.9 million, or 1.2%, with the previously exited Indirect Lending Portfolio declining $10.4 million. Commercial real estate loans increased $5.6 million, while residential real estate loans declined $3.8 million, results that are consistent with the purposeful repositioning of our loan portfolio. Notably, our asset quality remains robust, with nonperforming loans remaining stable at $2.0 million (0.19% of total loans) from $2.2 million (0.20% of total loans) at year end 2023.

Overall, deposit movements continued during the quarter, shifting from non-interest and low interest-bearing accounts to higher-cost time deposits. Total deposits remained relatively stable, with a slight increase, largely due to growth in our interest-bearing demand deposits and time deposits.

During the quarter, we continued progress on our strategic initiatives by implementing our Specialty Treasury Payments & Services strategy. This strategy includes development of a platform that will provide Treasury Management payments, products and an exceptional client experience to our traditional Commercial Treasury Clients and Multiple Deposit Niche markets. This targeted Specialized Treasury Management program will allow us to enter into new markets with a proven and differentiated approach, focusing on specific industries that are deposit rich, need high levels of service, and require access to highly efficient money movement systems.

Additionally, we completed the construction and celebrated the opening of a state-of-the-art branch office in Uniontown, PA, continuing the service we have provided to Fayette County for many decades.

We are confident that sustained investment in our franchise, unwavering commitment to our long-term strategy, and dedication to providing an exceptional client experience will benefit all stakeholders.”

Dividend Declaration

The Company’s Board of Directors declared a $0.25 quarterly cash dividend per outstanding share of common stock, payable on or about November 29, 2024, to stockholders of record as of the close of business on November 15, 2024.

2024 Third Quarter Financial Review

Net Interest and Dividend Income

Net interest and dividend income increased $757,000, or 7.1%, to $11.5 million for the three months ended September 30, 2024 compared to $10.7 million for the three months ended September 30, 2023.

• Net Interest Margin (NIM) (GAAP) decreased to 3.11% for the three months ended September 30, 2024 compared to 3.13% for the three months ended September 30, 2023. Fully tax equivalent (FTE) NIM (Non-GAAP) decreased 2 basis points (“bps”) to 3.12% for the three months ended September 30, 2024 compared to 3.14% for the three months ended September 30, 2023.
• Interest and dividend income increased $3.9 million, or 24.6%, to $19.8 million for the three months ended September 30, 2024 compared to $15.9 million for the three months ended September 30, 2023.
  • Interest income on loans increased $896,000, or 6.4%, to $14.9 million for the three months ended September 30, 2024 compared to $14.0 million for the three months ended September 30, 2023. The average yield on loans increased 47 bps to 5.60% compared to 5.13% resulting in a $1.3 million increase in interest income on loans. The average balance of loans decreased $24.7 million to $1.06 billion from $1.09 billion, causing a $357,000 decrease in interest income on loans. The increase in loan yield has been driven by a reduction in lower yielding consumer loans due to the discontinuation of the indirect automobile loan product with the redeployment of those funds into higher yielding commercial loan products.
  • Interest income on taxable investment securities increased $2.3 million, or 249.9%, to $3.3 million for the three months ended September 30, 2024 compared to $940,000 for the three months ended September 30, 2023 driven by a 272 bp increase in average yield coupled with a $83.4 million increase in average balances. The increase in the average yield was the result of the Bank implementing a balance sheet repositioning strategy of its portfolio of available-for-sale securities during the fourth quarter of 2023. The Bank sold $69.3 million in market value of its lower yielding U.S. government agency, mortgage-backed and municipal securities with an average yield of 1.89% and purchased $69.3 million of higher yielding mortgage-backed and collateralized mortgage obligation securities with an average yield of 5.49%. The increase in volume was driven by a $99.9 million increase in the average balance of collateralized loan obligation (“CLO”) securities as the Bank executed a leverage strategy to purchase these assets funded with brokered certificates of deposits.
  • Interest income on interest-earning deposits at other banks increased $698,000 to $1.4 million for the three months ended September 30, 2024 compared to $750,000 for the three months ended September 30, 2023 driven by a $58.7 million increase in average balances, partially offset by a 51 bp decrease in the average yield. The volume increase was due in part to $30.5 million in cash received from the December 2023 sale of EU.
• Interest expense increased $3.1 million, or 60.9%, to $8.3 million for the three months ended September 30, 2024 compared to $5.2 million for the three months ended September 30, 2023.
  • Interest expense on deposits increased $3.1 million, or 66.1%, to $7.9 million for the three months ended September 30, 2024 compared to $4.8 million for the three months ended September 30, 2023. Rising market interest rates led to the repricing of interest-bearing demand and money market deposits and a shift in deposits from noninterest-bearing and interest-bearing demand deposits into money market and time deposits which resulted in a 93 bp, or 46.3%, increase in the average cost of interest-bearing deposits compared to the three months ended September 30, 2023. This accounted for a $2.4 million increase in interest expense. Additionally, interest-bearing deposit balances increased $130.0 million, or 13.9%, to $1.1 billion as of September 30, 2024 compared to $937.8 million as of September 30, 2023, accounting for a $716,000 increase in interest expense.

Provision for Credit Losses

The provision for credit losses recorded for the three months ended September 30, 2024 was a net recovery of $41,000. The provision for credit losses - loans was $25,000 and was primarily due to changes in qualitative factors partially offset by changes in loan portfolio concentrations and an improvement in loss rates. The provision for credit losses - unfunded commitments was a recovery of $66,000 and was due to a decrease in the unfunded commitments and in the loss rate on construction loans. This compared to a $406,000 provision for credit losses recorded for the three months ended September 30, 2023 and was required primarily due to loan growth coupled with a modeled slowdown in loan prepayment speeds.

Noninterest Income

Noninterest income decreased $1.2 million, or 48.9%, to $1.2 million for the three months ended September 30, 2024, compared to $2.4 million for the three months ended September 30, 2023. This decrease resulted primarily from a $1.4 million decrease in insurance commissions as no income was recognized for the three months ended September 30, 2024 due to the December 2023 sale of EU, compared to a full quarter of income recognized for the three months ended September 30, 2023.

Noninterest Expense

Noninterest expense decreased $705,000, or 7.4%, to $8.8 million for the three months ended September 30, 2024 compared to $9.5 million for the three months ended September 30, 2023. Salaries and benefits decreased $808,000, or 15.0%, to $4.6 million primarily due to no expense related to EU recognized for the three months ended September 30, 2024 due to the December 2023 sale, compared to $878,000 of expense recognized for the three months ended September 30, 2023, partially offset by merit increases and revenue producing staff additions. Intangible amortization decreased $181,000 as a portion of the Bank’s core deposit intangible was fully amortized in February 2024 and EU intangible amortization of $47,000 was realized during the three months ended September 30, 2023. Data processing expense increased $58,000 due to costs associated with the implementation of a new loan origination system and financial dashboard platform. Occupancy expense increased $57,000 due to $130,000 of environmental remediation costs related to a construction project on one of the Bank’s office locations, partially offset by $44,000 of EU occupancy expense realized during the three months ended September 30, 2023. Pennsylvania shares tax expense increased $48,000 due to a higher taxable base due to the increase in equity resulting from the sale of EU.

Statement of Financial Condition Review

Assets

Total assets increased $105.7 million, or 7.3%, to $1.6 billion at September 30, 2024, compared to $1.5 billion at December 31, 2023.

• Cash and due from banks increased $79.1 million, or 115.9%, to $147.3 million at September 30, 2024, compared to $68.2 million at December 31, 2023.
• Securities increased $63.8 million, or 30.8%, to $270.9 million at September 30, 2024, compared to $207.1 million at December 31, 2023. The securities balance was primarily impacted by the purchase of $69.8 million of CLO securities, partially offset by $10.7 million of principal repayments on amortizing securities.

Loans and Credit Quality

• Total loans decreased $44.6 million, or 4.0%, to $1.07 billion at September 30, 2024 compared to $1.11 billion at December 31, 2023. This was driven by decreases in consumer, residential real estate, commercial real estate and commercial and industrial loans of $31.6 million, $8.9 million, $2.8 million and $2.7 million, respectively, partially offset by increases in other loans and construction loans of $1.0 million and $399,000, respectively. The decrease in consumer loans resulted from a reduction in indirect automobile loan production due to rising market interest rates and the discontinuation of this product offering as of June 30, 2023. This portfolio is expected to continue to decline as resources are allocated and production efforts are focused on more profitable commercial products. In total, $95.5 million of loans have paid off since December 31, 2023.
• The allowance for credit losses (ACL) was $9.5 million at September 30, 2024 and $9.7 million at December 31, 2023. As a result, the ACL to total loans was 0.89% at September 30, 2024 and 0.87% at December 31, 2023. During the current year, the Company recorded a net recovery of credit losses of $114,000.
• Net charge-offs for the three months ended September 30, 2024 were $73,000, or 0.03% of average loans on an annualized basis. Net charge-offs for the three months ended September 30, 2023 were $109,000, or 0.04% of average loans on an annualized basis. Net charge-offs for the nine months ended September 30, 2024 were $123,000. Net recoveries for the nine months ended September 30, 2023 were $551,000 primarily due to recoveries totaling $750,000 related to a prior year $2.7 million charged-off commercial and industrial loan.
• Nonperforming loans, which include nonaccrual loans and accruing loans past due 90 days or more, were $2.0 million at September 30, 2024 and $2.2 million at December 31, 2023. Nonperforming loans to total loans ratio was 0.19% at September 30, 2024 and 0.20% at December 31, 2023.

Other

• Accrued interest and other assets increased $7.8 million or 32.1%, to $32.1 million at September 30, 2024, compared to $24.3 million at December 31, 2023 due primarily to a $6.0 million investment in a low-income housing tax credit project.

Total liabilities increased $96.3 million, or 7.3%, to $1.4 billion at September 30, 2024 compared to $1.3 billion at December 31, 2023.

Deposits

• Total deposits increased $86.7 million to $1.35 billion as of September 30, 2024 compared to $1.27 billion at December 31, 2023. Time deposits increased $136.5 million and money market deposits increased $19.7 million while interest-bearing demand, savings and non interest-bearing demand deposits decreased $36.5 million, $22.3 million and $10.7 million, respectively. Deposit changes were primarily the result of the current interest rate environment causing a shift in deposit products to higher priced money market and time deposits. Additionally, the Bank added $70.6 million of brokered certificates of deposit during the period. Brokered certificates of deposit totaled $99.6 million as of September 30, 2024 compared to $29.0 million at December 31, 2023, all mature within three months and were utilized to fund the purchase of floating rate CLO securities. At September 30, 2024, FDIC insured deposits totaled approximately 62.4% of total deposits while an additional 15.9% of total deposits were collateralized with investment securities.

Accrued Interest Payable and Other Liabilities

• Accrued interest payable and other liabilities increased $9.7 million, or 67.3%, to $24.1 million at September 30, 2024, compared to $14.4 million at December 31, 2023 primarily due to the purchase of $6.0 million of syndicated loans which were unfunded at the end of the period and a $5.4 million unfunded commitment related to a low-income housing tax credit project.

Stockholders’ Equity

Stockholders’ equity increased $9.3 million, or 6.7%, to $149.1 million at September 30, 2024, compared to $139.8 million at December 31, 2023. The key factor positively impacting stockholders’ equity was $10.1 million of net income for the current period and a $2.8 million decrease in accumulated other comprehensive loss, partially offset by the payment of $3.9 million in dividends since December 31, 2023.

Book value per share

Book value per common share was $29.07 at September 30, 2024 compared to $27.32 at December 31, 2023, an increase of $1.75.

Tangible book value per common share (Non-GAAP) was $27.16 at September 30, 2024, compared to $25.23 at December 31, 2023, an increase of $1.93.

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.

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.