CB Financial Services (NASDAQ: CBFV) grows loans, exits insurance arm
Filing Impact
Filing Sentiment
Form Type
10-K
Rhea-AI Filing Summary
CB Financial Services, Inc., parent of Community Bank, reports a community banking franchise with total assets of $1.55 billion, liabilities of $1.39 billion and stockholders’ equity of $157.5 million at December 31, 2025. The bank operates primarily in southwestern Pennsylvania and northern West Virginia, offering residential, commercial real estate, commercial and industrial, consumer, and municipal loans funded mainly by local deposits and access to FHLB and other borrowing lines.
Total loans rose to $1.16 billion, up 6.4% from year-end 2024, with commercial real estate at $552.2 million (47.5% of loans) and residential real estate at $329.2 million (28.3%). The company has been reshaping its business mix, including the sale of its insurance subsidiary Exchange Underwriters for $30.5 million cash plus earn-outs, generating a pre-tax gain of $24.6 million and additional earn-out gains in 2024 and 2025. Management emphasizes conservative underwriting, strong asset quality, cost efficiency, digital expansion and disciplined growth in the Pittsburgh region, while highlighting risks from real estate concentrations, commercial lending, interest rate volatility and credit losses.
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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
| ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |||||
For the fiscal year ended December 31 , 2025
OR
| 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
| (Exact name of registrant as specified in its charter) | ||||||||
| (State or other jurisdiction of incorporation or organization) | (IRS Employer Identification Number) | |||||||
| (Address of principal executive offices) | (Zip Code) | |||||||
Registrant’s telephone number, including area code: (724 ) 966-5041
Securities registered pursuant to Section 12(b) of the Act:
| (Title of each class) | (Trading symbol) | (Name of each exchange on which registered) | ||||||||||||
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Yes ☐ No ☒
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.
Yes ☐ No ☒
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, a 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 ☐ | ||||
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 has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report ☐
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to § 240.10D-1(b). ☐
Indicate by check mark whether the registrant is a shell company (as defined by Rule 12b-2 of the Act).Yes ☐ No ☒
The aggregate market value of the voting and non-voting common equity held by non-affiliates of the registrant, computed by reference to the last sale price on June 30, 2025, as reported by the Nasdaq Global Market, was approximately $129.8 million.
As of March 6, 2026, the number of shares outstanding of the Registrant’s Common Stock was 5,075,878 .
DOCUMENTS INCORPORATED BY REFERENCE
Proxy Statement for the 2026 Annual Meeting of Stockholders of the Registrant (Part III)
1
TABLE OF CONTENTS
Page
PART I | ||||||||
ITEM 1. Business | 3 | |||||||
ITEM 1A. Risk Factors | 20 | |||||||
ITEM 1B. Unresolved Staff Comments | 24 | |||||||
ITEM 1C. Cybersecurity | 25 | |||||||
ITEM 2. Properties | 26 | |||||||
ITEM 3. Legal Proceedings | 26 | |||||||
ITEM 4. Mine Safety Disclosures. | 26 | |||||||
PART II | ||||||||
ITEM 5. Market for Registrant’s Common Equity, Related Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities | 27 | |||||||
ITEM 6. [Reserved] | 27 | |||||||
ITEM 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations | 28 | |||||||
ITEM 7A. Quantitative and Qualitative Disclosures about Market Risk | 52 | |||||||
ITEM 8. Financial Statements and Supplementary Data | 53 | |||||||
ITEM 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure | 53 | |||||||
ITEM 9A. Controls and Procedures | 53 | |||||||
ITEM 9B. Other Information | 54 | |||||||
ITEM 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections | 54 | |||||||
PART III | ||||||||
ITEM 10. Directors, Executive Officers and Corporate Governance | 54 | |||||||
ITEM 11. Executive Compensation | 54 | |||||||
ITEM 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters | 54 | |||||||
ITEM 13. Certain Relationships and Related Transactions and Director Independence | 54 | |||||||
ITEM 14. Principal Accountant Fees and Services | 54 | |||||||
PART IV | ||||||||
ITEM 15. Exhibits and Financial Statement Schedules | 55 | |||||||
ITEM 16. Form 10-K Summary | 56 | |||||||
SIGNATURES | 57 | |||||||
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PART I
This Annual Report on Form 10-K (“Report”) contains forward-looking statements within the meaning of Sections 27A of the Securities Act of 1933, as amended, and 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), which can be identified by the use of words such as “estimate,” “project,” “believe,” “intend,” “anticipate,” “assume,” “plan,” “seek,” “expect,” “will,” “may,” “should,” “indicate,” “would,” “contemplate,” “continue,” “target” and words of similar meaning. These forward-looking statements include, but are not limited to statements of our goals, intentions and expectations; statements regarding our business plans, prospects, growth and operating strategies; statements regarding the asset quality of our loan and investment portfolios; and estimates of our risks and future costs and benefits. These forward-looking statements are based on our current beliefs and expectations, and are inherently subject to significant business, economic and competitive uncertainties and contingencies, many of which are beyond our control. In addition, these forward-looking statements are subject to assumptions with respect to future business strategies and decisions that are subject to change. We are under no duty to and do not take any obligation to update any forward-looking statements after the date of this Report. The following factors, among others, could cause actual results to differ materially from the anticipated results or other expectations expressed in the forward-looking statements:
•our ability to manage our operations under the current economic conditions nationally and in our market area;
•adverse changes in the financial industry, securities, credit, and national and local real estate markets (including real estate values);
•changes in consumer spending, borrowing and savings habits;
•inflation and changes in interest rates generally, including changes in the relative differences between short-term and long-term interest rates and in deposit interest rates, that may affect our net interest margin and funding sources and costs;
•significant increases in our credit losses, including our inability to resolve classified and nonperforming assets or reduce risks associated with our loans, and management’s assumptions in determining the adequacy of the allowance for credit losses;
•credit risks of lending activities, including changes in the level and trend of loan delinquencies and write-offs and in our allowance for credit losses and provision for credit losses;
•loan delinquencies and changes in the underlying cash flows of our borrowers;
•our success in increasing our commercial real estate and commercial business lending;
•our ability to maintain/improve our asset quality even as we increase our commercial real estate and commercial business lending;
•risks related to a high concentration of loans secured by real estate located in our market area;
•fluctuations in the demand for loans;
•competitive products and pricing among depository and other financial institutions;
•our ability to enter new markets successfully and capitalize on growth opportunities;
•our ability to attract and maintain deposits and our success in introducing new financial products;
•changes in our compensation and benefit plans, and our ability to attract and retain key members of our senior management team and to address staffing needs in response to product demand or to implement our strategic plans;
•our ability to control costs and expenses, particularly those associated with operating as a publicly traded company;
•technological changes that may be more difficult or expensive than expected;
•the failure or security breaches of computer systems on which we depend;
•the ability of preventing or detecting cybersecurity attacks on customer credentials, developing multiple layers of security controls that defend against malicious use of customer internet-based products and services of Community Bank, and our business continuity plan to recover from a malware or other cybersecurity attack;
•the ability of key third-party service providers to perform their obligations to us; and
•changes in laws or government regulations or policies affecting financial institutions, which could result in, among other things, increased deposit insurance premiums and assessments, capital requirements, regulatory fees and compliance costs, and the resources we have available to address such changes;
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•changes in accounting policies and practices, as may be adopted by the bank regulatory agencies, the Financial Accounting Standards Board, the Securities and Exchange Commission or the Public Company Accounting Oversight Board;
•exploration and drilling of natural gas reserves in our market area may be affected by federal, state and local laws and regulations affecting production, permitting, environmental protection and other matters, which could materially and adversely affect our customers, loan and deposit volume, and asset quality;
•our customers who depend on the exploration and drilling of natural gas reserves may be materially and adversely affected by decreases in the market prices for natural gas or by government regulation;
•other economic, competitive, governmental, regulatory and operational factors affecting our operations, pricing, products and services described elsewhere in this Report.
Because of these and a wide variety of other uncertainties, our actual future results may be materially different from the expected results indicated by these forward-looking statements.
In this Report, the terms “we,” “our,” and “us” refer to CB Financial Services, Inc., Community Bank and Exchange Underwriters, Inc., unless the context indicates another meaning. In addition, we sometimes refer to CB Financial Services, Inc., as “CB,” or the “Company” and to Community Bank as the “Bank.”
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ITEM 1. BUSINESS
CB Financial Services, Inc.
CB Financial Services, Inc. (the “Company”), a Pennsylvania corporation, is a bank holding company headquartered in Carmichaels, Pennsylvania. The Company’s common stock is traded on the Nasdaq Global Market under the symbol “CBFV.” The Company conducts its operations primarily through its wholly owned subsidiary, Community Bank, a Pennsylvania-chartered commercial bank. At December 31, 2025, the Company, on a consolidated basis, had total assets of $1.55 billion, total liabilities of $1.39 billion and stockholders’ equity of $157.5 million.
Copies of the Company's reports, proxy and information statements, and other information filed electronically with the Securities and Exchange Commission (the “SEC”) are available free of charge through the SEC’s website address at https://www.sec.gov and through the Bank’s website address at https://www.cb.bank.
Community Bank
Community Bank is a Pennsylvania-chartered commercial bank headquartered in Carmichaels, Pennsylvania. The Bank operates nine offices in Greene, Allegheny, Washington, Fayette and Westmoreland Counties in southwestern Pennsylvania and three offices in Marshall and Ohio Counties in West Virginia. The Bank also has a loan production office in Allegheny County, a loan production office and a corporate center in Washington County and an operations center in Greene County, 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.
The Bank was the sole shareholder of Exchange Underwriters, Inc. ("Exchange Underwriters" or “EU”), a wholly-owned subsidiary located in Washington County that was a full-service, independent insurance agency that offered property and casualty, commercial liability, surety and other insurance products. On December 1, 2023, the Company announced that the Bank and EU entered into an Asset Purchase Agreement with World Insurance Associates, LLC ("World") pursuant to which EU sold substantially all of its assets to World for a purchase price of $30.5 million cash plus possible additional earn-out payments. The sale of assets was completed on December 8, 2023 and resulted in an initial pre-tax gain of $24.6 million. During 2024, the Company recognized an additional gain of $138,000 following the final settlement of all liabilities and an earn-out payment of $708,000. During 2025, the Company recognized an earn-out payment of $759,000. Assets remaining in the EU subsidiary at December 31, 2025 consisted primarily of cash received from the sale of assets. Effective September 29, 2025, EU merged with and into the Bank, with the Bank as the surviving institution.
The Bank was originally chartered in 1901 as The First National Bank of Carmichaels. In 1987, the Bank changed its name to Community Bank, National Association. In December 2006, the Bank completed a charter conversion from a national bank to a Pennsylvania-chartered commercial bank wholly-owned by the Company. The Bank is a member of the Federal Home Loan Bank (“FHLB”) System. Its deposits are insured by the Federal Deposit Insurance Corporation (“FDIC”).
The principal executive office is located at 100 North Market Street, Carmichaels, Pennsylvania, and the telephone number at that address is (724) 966-5041. The website address is https://www.cb.bank. Information on this website is not and should not be considered to be a part of this Report.
Business Strategy
We intend to operate as a well-capitalized and profitable community bank dedicated to providing exceptional personal service to our customers. We believe that we have a competitive advantage in the markets we serve because of our knowledge of the local marketplace and our long-standing history of providing superior, relationship-based customer service. We will continue to grow and create value for our stockholders. Our employees will be treated fairly and given opportunities for personal growth. We will be closely involved in improving our communities. Our business strategies emphasize building on core strengths and are discussed below.
•Create a sales and service culture to build full relationships with our customers and utilize technology investments to enhance speed of process to improve our customer experience. We have successfully grown valuable core deposits (demand deposits, NOW accounts, money market accounts and savings accounts) that represent longer-term customer relationships and provide a lower cost of funding compared to certificates of deposit and borrowings. Empowering our experienced, high quality employees to provide superior customer service in all aspects of our business which is further supported by the use of technology and a wide array of modern financial products can lead to stronger customer relationships, enhance fee revenue and allow the Bank to be the bank of choice across our footprint for residents and small and medium sized businesses.
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•Evolve toward more electronic/digital products and processes driving greater efficiency and expand our brand awareness in our market. We intend to focus on building our mobile and online capabilities through an improved mobile banking platform and product offering, omnichannel experience that is consistent with quick results and interactive alerts.
•Enhance profitability and efficiency while continuing to invest for future growth. We view cost reduction as a key part of a company-wide efficiency effort. Short-term targeted cost reductions combined with long-term strategic initiatives will better position the Company for high performance. In addition, this strategy aligns with our efforts to simplify processes while utilizing technology to improve efficiency and build capabilities that supports future growth and high performance.
•Continue our track record of opportunistic growth in the robust Pittsburgh metropolitan area and across our footprint. We believe we have competed effectively by leveraging our branch network and a full assortment of banking products to facilitate deposit and loan growth in our core locations, including southwestern Pennsylvania, Ohio River Valley, and central West Virginia.
•Leverage our credit culture and strong loan underwriting to uphold our asset quality metrics. We have sought to maintain a high level of asset quality and moderate credit risk by using underwriting standards that we believe are conservative. Although we intend to continue our efforts to originate commercial real estate and commercial and industrial loans, we intend to continue our philosophy of managing loan exposures through our conservative, yet reasonable, approach to lending.
Human Capital
The Bank's culture is defined by our mission to partner with individuals, businesses, and communities to realize their dreams, protect their financial futures and improve their lives. Our Motto and Cornerstone are “Client Experience First”. To have a truly great client experience we must have a phenomenal employee experience. Our Team members need to have the tools, training, processes, and leadership to support their delivery of a truly exceptional client experience. Improving our operational efficiency empowers our employees to work smarter and enables us to be more responsive to our clients.
We value our employees by investing in a healthy work-life balance, competitive compensation and benefit packages and a vibrant, team-oriented environment centered on professional service and open communication. We strive to build and maintain a high-performing culture and be an “employer of choice” by creating a work environment that attracts and retains outstanding, engaged employees. The success of our business is highly dependent on our employees, who provide value to our clients and communities through their dedication to helping clients achieve the American dream of home ownership and financial security.
Demographics. As of December 31, 2025, we employed 169 full-time and 5 part-time employees primarily in Pennsylvania and West Virginia. None of these employees are represented by a collective bargaining agreement. During 2025, we hired 40 employees and our voluntary turnover rate was 12%.
Diversity and Inclusion. We strive toward having a powerful and diverse team of employees, knowing we are better together with our combined wisdom and intellect. With a commitment to equality, inclusion, and workplace diversity, we focus on understanding, accepting, and valuing the differences between people. We continued our commitment to equal employment opportunity through a robust affirmative action plan which includes annual compensation analyses and ongoing reviews of our selection and hiring practices alongside a continued focus on building and maintaining a diverse workforce.
Compensation and Benefits. We provide a competitive compensation and benefits program to help meet the needs of our employees. In addition to salaries, these programs include opportunity for annual bonuses, a 401(k) Plan with an employer matching contribution in addition to an employer annual contribution, an equity incentive plan, healthcare and insurance benefits, health savings accounts, paid time off, paid leave and an employee assistance program.
Learning and Development. We invest in the growth and development of our employees by providing a multi-dimensional approach to learning that empowers, intellectually grows, and professionally develops our colleagues. Our employees receive continuing education courses that are relevant to the banking industry and their job function within the Company. In addition, we have created learning paths for specific positions that are designed to encourage an employee’s advancement and growth within our organization. We support and encourage managers to hire from within. We also offer a peer mentor program, leadership, and customer service training. These resources provide employees with the skills they need to achieve their career goals, build management skills, and become leaders within our Company.
The safety, health and wellness of our employees is a top priority. We promote the health and wellness of our employees by strongly encouraging work-life balance, offering flexible work schedules, keeping the employee portion of health care premiums to a minimum and sponsoring various wellness programs.
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Market Area
The Company’s primary market area consists of Allegheny, Fayette, Greene, Washington and Westmoreland Counties in southwestern Pennsylvania. Greene County is a significantly more rural county compared to the counties in which we have our other branches. Our offices located in Allegheny, Washington, Fayette, and Westmoreland Counties are in the southern suburban area of metropolitan Pittsburgh. Our primary market area extends into Marshall and Ohio counties in West Virginia. While the majority of activities occur in this primary market, the Bank extends lending and depository services throughout Pennsylvania, West Virginia, Ohio, New York and beyond.
The following table sets forth certain economic statistics for our primary market area.
Population (1) | Unemployment Rate (%) (2) | Average Annual Wage (3) | |||||||||||||||
| Pennsylvania | 13,059,432 | 3.7 | $ | 70,928 | |||||||||||||
| Allegheny | 1,231,814 | 3.4 | 77,064 | ||||||||||||||
| Fayette | 123,941 | 4.9 | 52,260 | ||||||||||||||
| Greene | 33,960 | 4.0 | 68,796 | ||||||||||||||
| Washington | 210,434 | 3.6 | 67,028 | ||||||||||||||
| Westmoreland | 350,935 | 3.7 | 57,148 | ||||||||||||||
| West Virginia | 1,766,147 | 4.4 | 60,684 | ||||||||||||||
| Marshall | 29,354 | 4.4 | 68,900 | ||||||||||||||
| Ohio | 41,090 | 4.4 | 57,148 | ||||||||||||||
(1)Based on the latest data published by the U.S. Census Bureau (State - July 2025; County - July 2024)
(2)Based on the latest data published by the U.S. Bureau of Labor Statistics December 2025)
(3)Based on the latest data published by the U.S. Bureau of Labor Statistics (Second Quarter 2025)
The market area has been impacted by the energy industry through the extraction of untapped natural gas reserves in the Marcellus Shale and Utica Shale Formations. The Utica Shale formation lies beneath most of Ohio, West Virginia, Pennsylvania and New York, as well as Kentucky, Maryland, Tennessee, Virginia and a part of Canada. The Marcellus Shale Formation extends throughout much of the Appalachian Basin and most of Pennsylvania, West Virginia and Eastern Ohio. Both formations are located near high-demand markets along the East Coast. The proximity to these markets makes it an attractive target for energy development and has resulted in significant job creation through the development of gas wells and transportation of gas.
Competition
We encounter significant competition both in attracting deposits and in originating real estate and other loans. Our most direct competition for deposits historically has come from other commercial banks, savings banks, savings associations and credit unions in our market area, and we expect continued strong competition from such financial institutions in the foreseeable future. The Company faces additional competition for deposits from online financial institutions and non-depository competitors, such as the mutual fund industry, securities and brokerage firms, and insurance companies. We compete for deposits by offering depositors a high level of personal service and expertise together with a wide range of financial services. Our deposit sources are primarily concentrated in the communities surrounding our branch offices. As of June 30, 2025, our FDIC-insured deposit market share in the counties we serve was 0.65% out of 46 bank and thrift institutions. Our FDIC-insured deposit market share in the counties we serve, excluding Allegheny County, which is the second most populous county in Pennsylvania, but where the Bank's has limited presence with one branch, was 5.20% out of 31 bank and thrift institutions. Such data does not reflect deposits held by credit unions.
The competition for real estate and other loans comes principally from other commercial banks, mortgage banking companies, government-sponsored entities, savings banks and savings associations. This competition for loans has increased substantially in recent years. We compete for loans primarily through the interest rates, prepayment penalties, and loan fees we charge and the efficiency and quality of services we provide to borrowers. Factors that affect competition include general and local economic conditions, current interest rate levels and the volatility of the mortgage markets.
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Lending Activities
General. Our principal lending activity has been the origination in our local market area of residential one- to four-family, commercial real estate, construction, commercial and industrial, and consumer loans. At December 31, 2025, our total loans receivable, which excludes the allowance for credit losses, increased $69.6 million, or 6.4%, to $1.16 billion compared to $1.09 billion at December 31, 2024.
Residential Real Estate Loans. Residential real estate loans are comprised of loans secured by one- to four-family residential properties. Included in residential real estate loans are traditional one- to four-family mortgage loans, home equity installment loans, and home equity lines of credit. We generate loans through our marketing efforts, existing customers and referrals, real estate brokers, builders and local businesses. At December 31, 2025, $329.2 million, or 28.3%, of our total loan portfolio was invested in residential loans.
One- to Four-Family Mortgage Loans. One of our primary lending activities is the origination of fixed-rate, one- to four-family, owner-occupied, residential mortgage loans with terms up to 30 years secured by property located in our market area. At December 31, 2025, one- to four-family mortgage loans totaled $254.6 million. Our one- to four-family residential mortgage loans are generally conforming loans, underwritten according to secondary market guidelines. We generally originate mortgage loans in amounts up to the maximum conforming loan limits established by the Federal Housing Finance Agency, which, for 2025, is typically $806,500 for single-family homes, except in certain high-cost areas in the United States. Our mortgage loans amortize monthly with principal and interest due each month. These loans often remain outstanding for significantly shorter periods than their contractual terms because borrowers may refinance or prepay loans at their option without a prepayment penalty.
When underwriting one- to four-family mortgage loans, we review and verify each loan applicant’s income and credit history. Management believes that stability of income and past credit history are integral parts in the underwriting process. Written appraisals are generally required on real estate property offered to secure an applicant’s loan. We generally limit the loan-to-value ratios of one- to four-family residential mortgage loans to 80% of the purchase price or appraised value of the property, whichever is less. For one- to four-family real estate loans with loan-to-value ratios of over 80%, we generally require private mortgage insurance. We require fire and casualty insurance on all properties securing real estate loans. We require title insurance, or an attorney’s title opinion, as circumstances warrant.
Our one- to four-family mortgage loans customarily include due-on-sale clauses, which give us the right to declare a loan immediately due and payable in the event, among other things, that the borrower sells or otherwise disposes of the underlying real property serving as collateral for the loan.
Fixed-rate one- to four-family residential mortgage loans with terms of 15 years or more are originated for resale to the secondary market. During the year ended December 31, 2025, we originated $4.9 million of fixed-rate residential mortgage loans which were subsequently sold in the secondary mortgage market.
The origination of fixed-rate mortgage loans versus adjustable-rate mortgage loans is monitored on an ongoing basis and is affected significantly by the level of market interest rates, customer preference, our interest rate risk position and our competitors’ loan products. Adjustable-rate mortgage loans secured by one- to four-family residential real estate totaled $59.2 million at December 31, 2025. Adjustable-rate mortgage loans make our loan portfolio more interest rate sensitive. However, as the interest income earned on adjustable-rate mortgage loans varies with prevailing interest rates, such loans do not offer predictable cash flows in the same manner as long-term, fixed-rate loans. Adjustable-rate mortgage loans carry increased credit risk associated with potentially higher monthly payments by borrowers as general market interest rates increase. It is possible that during periods of rising interest rates that the risk of delinquencies and defaults on adjustable-rate mortgage loans may increase due to the upward adjustment of interest costs to the borrower, resulting in increased credit losses.
We do not offer an “interest only” mortgage loan product on one- to four-family residential properties (where the borrower pays interest for an initial period, after which the loan converts to a fully amortizing loan). We also do not offer loans that provide for negative amortization of principal, such as “Option ARM” loans, where the borrower can pay less than the interest owed on the loan, resulting in an increased principal balance during the life of the loan. We do not offer a “subprime loan” program (loans that generally target borrowers with weakened credit histories typically characterized by payment delinquencies, previous charge-offs, judgments, bankruptcies, or borrowers with questionable repayment capacity as evidenced by low credit scores or high debt-burden ratios) or Alt-A loans (traditionally defined as loans having less than full documentation). We may originate loans to consumers with a credit score below 660. This may be defined as subprime loans, however there are typically mitigating circumstances that according to FDIC guidance and our opinion would not designate such loans as “subprime.”
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Home Equity Loans. At December 31, 2025, home equity loans totaled $75.1 million. Our home equity loans and lines of credit are generally secured by a junior lien on the borrower’s principal residence. The maximum amount of a home equity loan or line of credit is generally 85% of the appraised value of a borrower’s real estate collateral less the amount of any prior mortgages or related liabilities. Home equity loans and lines of credit are approved with both fixed and adjustable interest rates, which we determine based upon market conditions. Such loans are fully amortized over the life of the loan. Generally, the maximum term for home equity loans is 20 years.
Our underwriting standards for home equity loans include a determination of the applicant’s credit history and an assessment of the applicant’s ability to meet existing obligations and payments on the proposed loan. The stability of the applicant’s monthly income may be determined by verification of gross monthly income from primary employment, and additionally from any verifiable secondary income. We also consider the length of employment with the borrower’s present employer. Creditworthiness of the applicant is of primary consideration; however, the underwriting process also includes a comparison of the value of the collateral in relation to the proposed loan amount.
We primarily originate home equity loans secured by first lien mortgages. Home equity loans in a junior lien position totaled $21.5 million at December 31, 2025 and entail greater risks than one- to four-family residential mortgage loans or home equity loans secured by first lien mortgages. In such cases, collateral repossessed after a default may not provide an adequate source of repayment of the outstanding loan balance because of damage or depreciation in the value of the property or loss of equity to the first lien position. Further, home equity loan payments are dependent on the borrower’s continuing financial stability, and therefore are more likely to be adversely affected by job loss, divorce, illness or personal bankruptcy. Finally, the application of various federal and state laws, including federal and state bankruptcy and insolvency laws, may limit the amount that can be recovered on such loans in the event of a default.
Commercial Real Estate Loans. We originate commercial real estate loans that are secured primarily by improved properties, such as retail facilities, office buildings and other non-residential buildings as well as multifamily properties. At December 31, 2025, $552.2 million, or 47.5% of our total loan portfolio, consisted of commercial real estate loans.
Our commercial real estate loans generally have adjustable interest rates with terms of up to 15 years and amortization periods up to 30 years. The adjustable rate loans are typically fixed for the first five years and adjust every five years thereafter. The maximum loan-to-value ratio of our commercial real estate loans is generally 75% to 80% of the lower of cost or appraised value of the property securing the loan.
We consider a number of factors in originating commercial real estate loans. We evaluate the qualifications and financial condition of the borrower, including project-level and global cash flows and debt service coverage, credit history and management expertise, as well as the value and condition of the property, securing the loan. When evaluating the qualifications of the borrower, we consider the financial resources of the borrower, the borrower’s experience in owning or managing similar property and the borrower’s payment history with the Bank and other financial institutions. In evaluating the property securing the loan, the factors considered include the net operating income of the mortgaged property before debt service and depreciation, and the ratio of the loan amount to the appraised value of the property. We generally will not lend to high volatility commercial real estate projects. All commercial real estate loans are appraised by outside independent state certified general appraisers. Personal guarantees are generally obtained from the principals of commercial real estate loan borrowers, although this requirement may be waived in limited circumstances depending upon the loan-to-value ratio and the debt-service ratio associated with the loan. The Bank requires property and casualty insurance and flood insurance if the property is in a flood zone area.
We underwrite commercial real estate loan participations to the same standards as loans originated by us. In addition, we consider the financial strength and reputation of the lead lender. We require the lead lender to provide a full closing package as well as annual financial statements for the borrower and related entities so that we can conduct an annual loan review for all loan participations. Loans secured by commercial real estate generally involve a greater degree of credit risk than residential mortgage loans and carry larger loan balances. This increased credit risk is a result of several factors, including the effects of general economic conditions on income producing properties and the successful operation or management of the properties securing the loans. Furthermore, the repayment of loans secured by commercial real estate is typically dependent upon the successful operation of the related business and real estate property. If the cash flow from the project is reduced, the borrower’s ability to repay the loan may be impaired.
Commercial real estate loans generally have higher credit risks compared to one- to four-family residential mortgage loans, as they typically involve larger loan balances concentrated with single borrowers or groups of related borrowers. In addition, payment experience on loans secured by income-producing properties typically depends on the successful operation of the related real estate project, and this may be subject, to a greater extent, to adverse conditions in the real estate market and in the general economy.
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Construction Loans. We originate construction loans to individuals to finance the construction of residential dwellings and also originate loans for the construction of commercial properties, including hotels, apartment buildings, housing developments, and owner-occupied properties used for businesses. At December 31, 2025, $45.4 million, or 3.9% of our total loan portfolio, consisted of construction loans. Our 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. Loans generally can be made with a maximum loan-to-value ratio of 80% on both residential and commercial construction. Before making a commitment to fund a construction loan, we require a pro forma appraisal of the property, as completed by an independent licensed appraiser. We also will require an inspection of the property before disbursement of funds during the term of the construction loan. We typically do not lend to developers unless they maintain a 15% cash equity position in the project.
Commercial and Industrial Loans. We originate commercial and industrial loans and lines of credit to borrowers located in our market area that are generally secured by collateral other than real estate, such as equipment, accounts receivable, inventory, and other business assets. At December 31, 2025, $161.1 million, or 13.9% of our total loan portfolio, consisted of commercial and industrial loans.
Commercial and industrial loans generally have terms of maturity from five to seven years with adjustable interest rates tied to the prime rate, Secured Overnight Financing Rate (SOFR) or the weekly average of the FHLB of Pittsburgh three- to ten-year fixed rates. We generally obtain personal guarantees from the borrower or a third party as a condition to originating the loan. On a limited basis, we will originate unsecured business loans in those instances where the applicant’s financial strength and creditworthiness has been established. Commercial business loans generally bear higher interest rates than residential loans, but they also may involve a higher risk of default because their repayment is generally dependent on the successful operation of the borrower’s business.
Our underwriting standards for commercial business loans include a determination of the applicant’s ability to meet existing obligations and payments on the proposed loan from normal cash flows generated in the applicant’s business. We assess the financial strength of each applicant through the review of financial statements and tax returns provided by the applicant. The creditworthiness of an applicant is derived from a review of credit reports as well as a search of public records. We periodically review business loans following origination. We request financial statements at least annually and review them for substantial deviations or changes that might affect repayment of the loan. Our loan officers may also visit the premises of borrowers to observe the business premises, facilities, and personnel and to inspect the pledged collateral. Lines of credit secured with accounts receivable and inventory typically require that the customer provide a monthly borrowing base certificate that is reviewed prior to each draw request. Underwriting standards for business loans are different for each type of loan depending on the financial strength of the applicant and the value of collateral offered as security. All commercial loans are assigned a risk rating, which is reviewed internally, as well as by independent loan review professionals, annually.
Commercial and industrial business loans involve a greater risk of default than one- to four-residential mortgage loans of like duration because their repayment generally depends on the successful operation of the borrower’s business and the sufficiency of collateral, if any.
Consumer Loans. We originate consumer loans that primarily consist of indirect auto loans and, to a lesser extent, secured and unsecured loans and lines of credit. As of December 31, 2025, consumer loans totaled $42.9 million, or 3.7%, of our total loan portfolio. Consumer loans are generally offered on a fixed-rate basis. Our underwriting standards for consumer loans include a determination of the applicant’s credit history and an assessment of the applicant’s ability to meet existing obligations and payments on the proposed loan. The stability of the applicant’s monthly income may be determined by verification of gross monthly income from primary employment, and additionally from any verifiable secondary income. We also consider the length of employment with the borrower’s present employer as well as the amount of time the borrower has lived in the local area. Creditworthiness of the applicant is of primary consideration; however, the underwriting process also includes a comparison of the value of the collateral in relation to the proposed loan amount.
The Bank discontinued offering indirect auto loans as of June 30, 2023, but still had an outstanding portfolio of $32.1 million as of December 31, 2025. Indirect auto loans are loans that are sold by auto dealerships to third parties, such as banks or other types of lenders. We previously worked with various auto dealers throughout our lending area. The dealer collected information from the applicant and transmitted it to us electronically for review, where we either accepted or rejected the applicant without ever meeting the applicant. If the Bank approved the applicant’s request for financing, the Bank purchased the dealership-originated installment sales contract and is known as the holder in due course that is entitled to receive principal and interest payments from a borrower. As compensation for generating the loan, a portion of the rate was advanced to the dealer and accrued in a prepaid dealer reserve account. As a result, the Bank’s yield is below the contractual interest rate because the Bank must wait for the stream of loan payments to be repaid. The Bank received a pro rata refund of the amount prepaid to the dealer only if the loan repaid within the first six months or if the collateral for the loan was repossessed. The Bank is responsible for pursuing repossession if the borrower defaults on payments.
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Consumer loans entail greater risks than one- to four-family residential mortgage loans, particularly consumer loans secured by rapidly depreciating assets, such as automobiles, or loans that are unsecured. In such cases, collateral repossessed after a default may not provide an adequate source of repayment of the outstanding loan balance because of damage, loss or depreciation. Further, consumer loan payments are dependent on the borrower’s continuing financial stability, and therefore are more likely to be adversely affected by job loss, divorce, illness or personal bankruptcy. Such events would increase our risk of loss on unsecured loans. Finally, the application of various federal and state laws, including federal and state bankruptcy and insolvency laws, may limit the amount that can be recovered on such loans in the event of a default.
Other Loans. We originate loans to municipal borrowers that are secured by improved properties, such as office buildings and other non-residential buildings or secured by collateral other than real estate, such as equipment, revenue receivable, and other business assets. As of December 31, 2025, other loans totaled $31.5 million, or 2.7%, of our total loan portfolio. These loans generally have terms consistent with other commercial real estate and commercial and industrial loans and are underwritten using the same standards as described above. However, these loans differ in that the primary source of repayment is typically from municipal tax collections.
Loan Approval Procedures and Authority
Our lending activities follow written, non-discriminatory underwriting standards and loan origination procedures established by the Board of Directors (the “Board”). In the approval process for residential loans, we assess the borrower’s ability to repay the loan and the value of the property securing the loan. To assess the borrower’s ability to repay, we review the borrower’s income and expenses and employment and credit history. In the case of commercial loans, we also review projected income, expenses and the viability of the project being financed. We generally require appraisals of all real property securing loans. Appraisals are performed by independent licensed appraisers. The Bank’s loan approval policies and limits are also established by its Board. All loans originated by the Bank are subject to its underwriting guidelines. Loan approval authorities vary based on loan size in the aggregate. Individual officer loan approval authority generally applies to loans of up to $1.0 million. Loans above that amount and up to 65% of the Bank’s legal lending limit may be approved by the Loan Committee. Loans in the aggregate over 65% of the Bank’s legal lending limit must be approved by the Board.
Delinquencies and Classified Assets
When a borrower fails to remit a required loan payment, a courtesy notice is sent to the borrower prior to the end of their appropriate grace period stressing the importance of paying the loan current. If a payment is not paid within the appropriate grace period, then a late notice is mailed. In addition, telephone calls are made and additional letters may be sent. Collection efforts continue until it is determined that the debt is uncollectible.
For loans secured by real estate, a Homeownership Counseling Notice is mailed when the loan is 45 days delinquent. In Pennsylvania, an Act 91 Notice is mailed to the borrower stating that they have 33 days to cure the default before foreclosure is initiated. In West Virginia, a Notice of Default is mailed and in Ohio, a demand letter is mailed when a loan is 60 days delinquent. When a loan becomes 90 or more days delinquent, it is forwarded to the Bank’s attorney to pursue other remedies. An official mortgage foreclosure complaint typically occurs at 120 days delinquent. In the event collection efforts have not succeeded, the property will proceed to a Sheriff Sale to be sold.
For commercial loans, the borrower is contacted in an attempt to reestablish the loan to current payment status and ensure timely payments continue. Collection efforts continue until the loan is 60 days past due, at which time demand payment, default, and/or foreclosure procedures are initiated. We may consider loan workout arrangements with certain borrowers under certain circumstances.
Investment Activities
General. The Company’s investment policy is established by its Board. The policy emphasizes safety of the investment, liquidity requirements, potential returns, cash flow targets, and consistency with the Company’s interest rate risk management strategy.
Our current investment policy permits us to invest in U.S. treasuries, U.S. government agency securities, mortgage-backed securities (MBS's), collateralized mortgage obligations (CMO's), investment grade corporate bonds, obligations of states and political subdivisions, short-term instruments, collateralized loan obligations (CLO's) and other securities. The investment policy also permits investments in certificates of deposit, securities purchased under an agreement to resell, banker’s acceptances, commercial paper and federal funds. Our current investment policy generally does not permit investment in stripped mortgage-backed securities, short sales, derivatives, or other high-risk securities. Federal and Pennsylvania state laws generally limit our investment activities to those permissible for a national bank.
The accounting rules require that, at the time of purchase, we designate a debt security as held to maturity, available-for-sale, or trading, depending on our ability and intent. Securities available-for-sale are reported at fair value, while securities held to maturity are reported at amortized cost. Our entire debt securities portfolio is designated as available-for-sale.
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The debt securities portfolio consists primarily of U.S. government agency securities, obligations of states and political subdivisions, MBS's and CMO's of government sponsored enterprises, CLO's and corporate bonds. We expect the composition of our debt securities portfolio to continue to change based on liquidity needs associated with loan origination activities. During the year ended December 31, 2025, we had no debt securities that were deemed to be impaired.
We also invest in equity securities, which consists exclusively of mutual funds. This portfolio is valued at fair value with changes in market price recognized through noninterest income.
We maintain a minimum amount of liquid assets that may be invested in specified short-term securities and certain other investments. Liquidity levels may be increased or decreased depending upon the yields on investment alternatives and upon management’s judgment as to the attractiveness of the yields then available in relation to other opportunities and its expectation of the level of yield that will be available in the future, as well as management’s projections as to the short-term demand for funds to be used in our loan originations and other activities.
U.S. Government Agency Securities. At December 31, 2025, we had no U.S. Government and agency securities compared to $3.9 million at December 31, 2024. While these securities generally provide lower yields than other investments, such as mortgage-backed securities, our current investment strategy is to invest in such instruments to the extent appropriate for liquidity and pledging purposes, as collateral for borrowings, and for prepayment protection.
Obligations of States and Political Subdivisions. At December 31, 2025, we held available-for-sale municipal bonds with a fair value of $36.2 million compared to $3.3 million at December 31, 2024. Municipal bonds are issued by municipalities or school districts and may be general obligation of the issuer or secured by specific revenues. The majority of our municipal bonds are general obligation bonds, which are backed by the full faith and credit of the municipality, paid off with funds from taxes and other fees, and have ratings (when available) of A or above. We also invest in a limited amount of special revenue municipal bonds, which are used to fund projects that will eventually create revenue directly, such as a toll road or lease payments for a new building.
Mortgage-Backed Securities. We invest in MBS and CMO securities insured or guaranteed by the United States government or government-sponsored enterprises. These securities, which consist of MBS’s issued by Ginnie Mae, Fannie Mae and Freddie Mac, had a fair value of $108.7 million and $145.3 million at December 31, 2025 and 2024, respectively. In addition, the we invest in CMO securities that are non-agency sponsored. At December 31, 2025, these securities had a fair value of $10.5 million. We did not have any non-agency sponsored CMO's at December 31, 2024. At December 31, 2025, all MBS’s had fixed rates of interest.
MBS’s are created by pooling mortgages and issuing a security with an interest rate that is less than the interest rate on the underlying mortgages. CMO’s generally are a specific class of MBS’s that are divided based on risk assessments and maturity dates. These mortgage classes are pooled into a special purpose entity, where tranches are created and sold to investors. Investors in a CMO are purchasing bonds issued by the entity, and then receive payments based on the income derived from the pooled mortgages. The various pools are divided into tranches are then securitized and sold to the investor. MBS’s typically represent a participation interest in a pool of one- to four-family or multifamily mortgages, although we invest primarily in MBS’s backed by one- to four-family mortgages. The issuers of such securities pool and resell the participation interests in the form of securities to investors. Some security pools are guaranteed as to payment of principal and interest to investors. MBS’s generally yield less than the loans that underlie such securities because of the cost of payment guarantees and credit enhancements. However, MBS’s are more liquid than individual mortgage loans because there is an active trading market for such securities. In addition, MBS’s may be used to collateralize our specific liabilities and obligations. Finally, MBS’s are assigned lower risk-weightings for purposes of calculating our risk-based capital level.
Investments in MBS’s involve a risk that actual payments will be greater or less than the prepayment rate estimated at the time of purchase, which may result in adjustments to the amortization of any premium or acceleration of any discount relating to such interests, thereby affecting the net yield on our securities.
Collateralized Loan Obligation Securities. We invest in CLO securities issued by specialized financial institutions or investment banks. These floating-rate securities are backed by pools of high-quality commercial and industrial and commercial real estate loans, typically first-lien bank loans to corporations. Our CLO portfolio had a fair value of $101.2 million and $98.8 million at December 31, 2025 and 2024, respectively.
Corporate Debt. We invest in corporate debt issued by financial institutions which have fixed to floating-rate terms. Corporate debt are unsecured, medium or long term, interest-bearing bonds issued by financial institutions that are backed only by the general credit of the issuer. As such, investments in corporate debt involve default risk that the company may fail to make timely payments of interest or principal. We perform a credit analysis to verify the creditworthiness of the financial institution prior to purchase. At December 31, 2025, we held corporate debt securities with a fair value of $22.3 million, compared to $8.1 million at December 31, 2024.
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Sources of Funds
General. Deposits have traditionally been the Company’s primary source of funds for use in lending and investment activities. The Company also uses borrowings, primarily FHLB of Pittsburgh advances, to supplement cash flow needs, lengthen the maturities of liabilities for interest rate risk purposes and manage the cost of funds. In addition, funds are derived from scheduled loan payments, investment maturities, loan prepayments, loan sales, retained earnings and income on earning assets. While scheduled loan payments and income on earning assets are relatively stable sources of funds, deposit inflows and outflows can vary widely and are influenced by prevailing interest rates, market conditions and levels of competition.
Deposits. Deposits are generated primarily from residents within the Company’s market area. The Company offers a variety of deposit accounts. Deposit account terms vary, with the principal differences being the minimum balance required, the amount of time the funds must remain on deposit and the interest rate.
Interest rates paid, maturity terms, service fees and withdrawal penalties are established on a periodic basis. Deposit rates and terms are based primarily on current operating strategies and market rates, liquidity requirements, rates paid by competitors and growth goals.
The flow of deposits is influenced significantly by general economic conditions, changes in prevailing interest rates and competition. The variety of deposit accounts offered allows the Company to be competitive in obtaining funds and responding to changes in consumer demand. Based on experience, the Company believes that its deposits are relatively stable. However, the ability to attract and maintain deposits and the interest rates paid on these deposits has been and will continue to be significantly affected by market conditions.
Borrowings. Deposits are our primary source of funds for lending and investment activities. If the need arises, we may rely upon borrowings to supplement our supply of available funds and to fund deposit withdrawals. Our borrowings may consist of advances from the correspondent banks, subordinated debt, funds borrowed under repurchase agreements and federal funds purchased.
The FHLB functions as a central reserve bank providing credit for us and other member savings associations and financial institutions. As a member, we are required to own capital stock in the FHLB and are authorized to apply for advances on the security of such stock and certain mortgages, provided certain standards related to creditworthiness have been met. We typically secure advances from the FHLB with one- to four-family residential mortgage and commercial real estate loans. Advances are made pursuant to several different programs. Each credit program has its own interest rate and range of maturities. Depending on the program, limitations on the amount of advances are based either on a fixed percentage of a member institution’s stockholders’ equity or on the FHLB’s assessment of the institution’s creditworthiness. At December 31, 2025, we had a maximum borrowing capacity with the FHLB of up to $528.0 million and available borrowing capacity of $506.1 million. At December 31, 2025, we had $20.0 million FHLB advances outstanding. As an alternative to pledging securities, the facility is also used for standby letters of credit to collateralize public deposits in excess of the level insured by the FDIC. There were no standby letters of credit issued on our behalf by the FHLB to secure public deposits as of December 31, 2025 and December 31, 2024.
Securities sold under agreements to repurchase represent business deposit customers whose funds, above designated target balances, are transferred into an overnight interest-earning investment account by purchasing securities from the Bank’s investment portfolio under an agreement to repurchase. We may be required to provide additional collateral based on the fair value of the underlying securities. Short-term borrowings may also consist of federal funds purchased.
At December 31, 2025, the Bank maintained a Borrower-In-Custody of Collateral line of credit agreement with the FRB for $71.2 million that requires monthly certification of collateral, is subject to annual renewal, incurs no service charge and is secured by commercial and consumer indirect auto loans. The Bank also maintains multiple line of credit arrangements with various unaffiliated banks totaling $50.0 million. At December 31, 2025, we did not have any outstanding balances under any of these borrowing relationships.
In December 2021, the Company entered into a term loan in the principal amount of $15.0 million, evidenced by a term note which matures on December 15, 2031 ("2031 Note"). The 2031 Note is an unsecured subordinated obligation of the Company and may be repaid in whole or in part, without penalty, on any interest payment date on or after December 15, 2026 and at any time upon the occurrence of certain events. The 2031 Note initially bears a fixed interest rate of 3.875% per year to, but excluding, December 15, 2026 and thereafter at a floating rate equal to the then-current three-month term SOFR plus 280 basis points. The 2031 Note qualifies as Tier 2 capital under regulatory guidelines. At December 31, 2025, the principal balance and unamortized debt issuance costs for the 2031 Note were $15.0 million and $242,000, respectively.
Subsidiary Activities
Community Bank is the only subsidiary of the Company. The Bank has no subsidiaries.
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REGULATION AND SUPERVISION
General
CB Financial Services, Inc. is a bank holding company within the meaning of the Bank Holding Company Act of 1956, as amended. As such, it is registered with, subject to examination and supervision by, and otherwise required to comply with the rules and regulations of the Federal Reserve Board.
Community Bank is a Pennsylvania-chartered commercial bank subject to extensive regulation by the Pennsylvania Department of Banking and Securities and the FDIC. The Bank’s deposit accounts are insured up to applicable limits by the FDIC. The Bank must file reports with the Pennsylvania Department of Banking and Securities and the FDIC concerning its activities and financial condition, in addition to obtaining regulatory approvals prior to entering into certain transactions, such as mergers or acquisitions with other depository institutions. There are periodic examinations of the Bank by the Pennsylvania Department of Banking and Securities and the FDIC to review the Bank’s compliance with various regulatory requirements. The Bank is also subject to certain reserve requirements established by the Federal Reserve Board. This regulation and supervision establishes a comprehensive framework of activities in which a commercial bank can engage and is intended primarily for the protection of the FDIC and depositors. The regulatory structure also gives the regulatory authorities extensive discretion in connection with their supervisory and enforcement activities and examination policies, including policies with respect to the classification of assets and the establishment of adequate credit loss reserves for regulatory purposes. Any change in such regulation, whether by the Pennsylvania Department of Banking and Securities, the FDIC, the Federal Reserve Board or Congress could have a material impact on the operations of the Bank.
Set forth below is a brief description of material regulatory requirements that are or will be applicable to CB Financial Services, Inc., and Community Bank. The description is limited to certain material aspects of the statutes and regulations addressed, is not intended to be a complete description of such statutes and regulations and their effects on CB Financial Services, Inc. and Community Bank, and is qualified in its entirety by reference to the actual statutes and regulations involved.
Federal Legislation
The Dodd-Frank Act made significant changes to the regulatory structure for depository institutions and their holding companies. However, the Dodd-Frank Act’s changes go well beyond that and affect the lending, investments and other operations of all depository institutions. The Dodd-Frank Act requires the Federal Reserve to set minimum capital levels for bank holding companies that are as stringent as those required for the insured depository subsidiaries, and the components of Tier 1 capital for holding companies are restricted to capital instruments that are currently considered to be Tier 1 capital for insured depository institutions. The legislation also establishes a floor for capital of insured depository institutions that cannot be lower than the standards in effect upon passage, and directs the federal banking regulators to implement new leverage and capital requirements that take into account off-balance sheet activities and other risks, including risks relating to securitized products and derivatives.
The Dodd-Frank Act created a new Consumer Financial Protection Bureau with broad powers to supervise and enforce consumer protection laws. The Consumer Financial Protection Bureau has broad rule-making authority for a wide range of consumer protection laws that apply to all banks, such as the Bank, including the authority to prohibit “unfair, deceptive or abusive” acts and practices. The Consumer Financial Protection Bureau has examination and enforcement authority over all banks with more than $10 billion in assets. Banks with $10 billion or less in assets are still examined for compliance by their applicable bank regulators. The new legislation also gave state attorney generals the ability to enforce applicable federal consumer protection laws.
The Dodd-Frank Act broadened the base for FDIC insurance assessments. Assessments are now based on the average consolidated total assets less tangible equity capital of a financial institution. The legislation also increased the maximum amount of deposit insurance for banks to $250,000 per depositor. The Dodd-Frank Act increased shareholder influence over boards of directors by requiring companies to give stockholders a non-binding vote on executive compensation and so called “golden parachute” payments. The legislation also directs the Federal Reserve to promulgate rules prohibiting excessive compensation paid to bank holding company executives, regardless of whether the company is publicly traded or not. Further, the legislation requires that originators of securitized loans retain a percentage of the risk for transferred loans, directs the Federal Reserve to regulate pricing of certain debit card interchange fees and contains a number of reforms related to mortgage origination.
The Dodd Frank Act has resulted in an increased regulatory burden and compliance, operating and interest expense for the Company and the Bank.
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Bank Regulation
Business Activities. The Bank derives its lending and investment powers from the applicable Pennsylvania law, federal law and applicable state and federal regulations. Under these laws and regulations, The Bank may invest in mortgage loans secured by residential and commercial real estate, commercial business and consumer loans, certain types of debt securities and certain other assets, subject to applicable limits.
Capital Requirements. Federal regulations require federally-insured depository institutions, such as the Bank, to meet certain minimum capital standards: a common equity Tier 1 capital to risk-based assets ratio of 4.5%, a Tier 1 capital to risk-based assets ratio of 6.0%, a total capital to risk-based assets ratio of 8.0%, and a 4.0% Tier 1 capital to total assets leverage ratio.
In determining the amount of risk-weighted assets for calculating risk-based capital ratios, all assets, including certain off-balance sheet assets (e.g., recourse obligations, direct credit substitutes, residual interests) are multiplied by a risk-weight factor assigned by the regulations based on the risks believed inherent in the type of asset. Higher levels of capital are required for asset categories believed to present greater risk. Common equity Tier 1 capital is generally defined as common stockholders’ equity and related surplus and retained earnings. Tier 1 capital is generally defined as common equity Tier 1 and additional Tier 1 capital. Additional Tier 1 capital includes certain non-cumulative perpetual preferred stock and related surplus and minority interests in equity accounts of consolidated subsidiaries. Total capital includes Tier 1 capital (common equity Tier 1 capital plus additional Tier 1 capital) and Tier 2 capital. Tier 2 capital is comprised of capital instruments and related surplus, meeting specified requirements, and may include cumulative preferred stock and long-term perpetual preferred stock, mandatory convertible securities, intermediate preferred stock and subordinated debt. Also included in Tier 2 capital is the allowance for loan and lease losses limited to a maximum of 1.25% of risk-weighted assets. Calculation of all types of regulatory capital is subject to deductions and adjustments specified in the regulations. In assessing an institution’s capital adequacy, the FDIC considers not only these numeric factors, but qualitative factors as well, and has the authority to establish higher capital requirements for individual institutions where deemed necessary. In addition to establishing the minimum regulatory capital requirements, the regulations limit capital distributions and certain discretionary bonus payments to management if an institution does not hold a “capital conservation buffer” consisting of 2.5% of common equity Tier 1 capital to risk-weighted assets above the amount necessary to meet its minimum risk-based capital requirements. In assessing an institution’s capital adequacy, the FDIC takes into consideration not only these numeric factors, but qualitative factors as well and has the authority to establish higher capital requirements for individual associations where necessary.
At December 31, 2025, the Bank’s capital exceeded all applicable requirements.
The risk-based capital rule and the method for calculating risk-weighted assets by the FDIC and the other federal bank regulators are consistent with agreements that were reached by the Basel Committee on Banking Supervision and certain provisions of the Dodd-Frank Act. The rule applies to all depository institutions (such as the Bank) and top-tier bank holding companies with total consolidated assets of $3.0 billion or more. Among other things, the rule established a common equity Tier 1 minimum capital requirement (4.5% of risk-weighted assets), increases the minimum Tier 1 capital to risk-based assets requirement (from 4.0% to 6.0% of risk-weighted assets) and assigns a higher risk weight (150%) to exposures that are more than 90 days past due or are on nonaccrual status and to certain commercial real estate facilities that finance the acquisition, development or construction of real property. The rule also requires unrealized gains and losses on certain available-for-sale securities to be included for purposes of calculating regulatory capital requirements unless a one-time opt-in or opt-out is exercised. The Bank elected the one-time opt-out election for accumulated other comprehensive loss (“AOCL”) to be excluded from the regulatory capital calculation. The rule limits a banking organization’s capital distributions and certain discretionary bonus payments if the banking organization does not hold a capital conservation buffer consisting of 2.5% of common equity Tier 1 capital to risk-weighted assets in addition to the amount necessary to meet its minimum risk-based capital requirements.
Loans-to-One Borrower. Generally, a Pennsylvania-chartered commercial bank may not make a loan or extend credit to a single or related group of borrowers in excess of 15% of capital. An additional amount may be loaned, equal to 10% of unimpaired capital and surplus, if the loan is secured by readily marketable collateral, which generally does not include real estate. As of December 31, 2025, the Bank was in compliance with the loans-to-one borrower limitations.
Capital Distributions. The Pennsylvania Banking Code states, in part, that dividends may be declared and paid only out of accumulated net earnings and may not be declared or paid unless surplus is at least equal to capital. Dividends may not reduce surplus without the prior consent of the Pennsylvania Department of Banking and Securities. In addition, the Federal Deposit Insurance Act provides that an insured depository institution may not make any capital distribution if, after making such distribution, the institution would fail to meet any applicable regulatory capital requirement.
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Community Reinvestment Act and Fair Lending Laws. All insured institutions have a responsibility under the Community Reinvestment Act and related regulations to help meet the credit needs of their communities, including low- and moderate-income borrowers. The FDIC is required to assess the Bank’s record of compliance with the Community Reinvestment Act. Failure to comply with the provisions of the Community Reinvestment Act could, at a minimum, result in denial of certain corporate applications, such as branches or mergers, or in restrictions on its activities. In addition, the Equal Credit Opportunity Act and the Fair Housing Act prohibit lenders from discriminating in their lending practices on the basis of characteristics specified in those statutes. The failure to comply with the Equal Credit Opportunity Act and the Fair Housing Act could result in enforcement actions by the FDIC, as well as other federal regulatory agencies and the Department of Justice.
The Community Reinvestment Act requires all institutions insured by the FDIC to publicly disclose their rating. The Bank received a “satisfactory” rating in its most recent federal examination.
Transactions with Related Parties. A state-chartered bank’s authority to engage in transactions with its affiliates is limited by Sections 23A and 23B of the Federal Reserve Act and federal regulation. An affiliate is generally a company that controls or is under common control with an insured depository institution, such as the Bank. The Company is an affiliate of the Bank because of its control of the Bank. In general, transactions between an insured depository institution and its affiliates are subject to certain quantitative limits and collateral requirements. In addition, federal regulations prohibit a state-chartered bank from lending to any of its affiliates that are engaged in activities that are not permissible for bank holding companies and from purchasing the securities of any affiliate, other than a subsidiary. Finally, transactions with affiliates must be consistent with safe and sound banking practices, not involve the purchase of low-quality assets and be on terms that are as favorable to the institution as comparable transactions with non-affiliates.
The Bank’s authority to extend credit to its directors, executive officers and 10% stockholders, as well as to entities controlled by such persons, is currently governed by the requirements of Sections 22(g) and 22(h) of the Federal Reserve Act and Regulation O of the Federal Reserve. Among other things, these provisions generally require that extensions of credit to insiders be made on terms that are substantially the same as, and follow credit underwriting procedures that are not less stringent than, those prevailing for comparable transactions with unaffiliated persons and that do not involve more than the normal risk of repayment or present other unfavorable features; and not exceed certain limitations on the amount of credit extended to such persons, individually and in the aggregate, which limits are based, in part, on the amount of the Bank’s capital. In addition, extensions of credit in excess of certain limits must be approved by the Bank’s Board. Extensions of credit to executive officers are subject to additional limits based on the type of extension involved.
Standards for Safety and Soundness. Federal law requires each federal banking agency to prescribe certain standards for all insured depository institutions. These standards relate to, among other things, internal controls, information systems and audit systems, loan documentation, credit underwriting, interest rate risk exposure, asset growth, compensation, and other operational and managerial standards as the agency deems appropriate. Interagency guidelines set forth the safety and soundness standards that the federal banking agencies use to identify and address problems at insured depository institutions before capital becomes impaired. If the appropriate federal banking agency determines that an institution fails to meet any standard prescribed by the guidelines, the agency may require the institution to submit to the agency an acceptable plan to achieve compliance with the standard. If an institution fails to meet these standards, the appropriate federal banking agency may require the institution to implement an acceptable compliance plan. Failure to implement such a plan can result in further enforcement action, including the issuance of a cease and desist order or the imposition of civil money penalties.
Prompt Corrective Action Regulations. Under the Federal Prompt Corrective Action statute, the FDIC is required to take supervisory actions against undercapitalized state-chartered banks under its jurisdiction, the severity of which depends upon the institution’s level of capital. An institution that has total risk-based capital of less than 8% or a leverage ratio or a Tier 1 risk-based capital ratio that generally is less than 4% is considered to be “undercapitalized”. An institution that has total risk-based capital less than 6%, a Tier 1 core risk-based capital ratio of less than 3% or a leverage ratio that is less than 3% is considered to be “significantly undercapitalized.” An institution that has a tangible capital to assets ratio equal to or less than 2% is deemed to be “critically undercapitalized.”
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Generally, the Pennsylvania Department of Banking and Securities (the “Pennsylvania Department of Banking” or “PDBS”) is required to appoint a receiver or conservator for a state-chartered bank that is “critically undercapitalized” within specific time frames. The regulations also provide that a capital restoration plan must be filed with the FDIC within 45 days of the date that an institution is deemed to have received notice that it is “undercapitalized,” “significantly undercapitalized” or “critically undercapitalized.” Any bank holding company of an institution that is required to submit a capital restoration plan must guarantee performance under the plan in an amount of up to the lesser of 5% of the institution’s assets at the time it was deemed to be undercapitalized by the FDIC or the amount necessary to restore the institution to adequately capitalized status. This guarantee remains in place until the FDIC notifies the institution that it has maintained adequately capitalized status for each of four consecutive calendar quarters. Institutions that are undercapitalized become subject to certain mandatory measures, such as restrictions on capital distributions and asset growth. The PDBS may also take any one of a number of discretionary supervisory actions against undercapitalized institutions, including the issuance of a capital directive and the replacement of senior executive officers and directors.
At December 31, 2025, the Bank met the criteria for being considered “well capitalized.”
In addition, the final capital rule adopted in July 2013 revises the prompt corrective action categories to incorporate the revised minimum capital requirements of that rule.
Enforcement. The Pennsylvania Department of Banking maintains enforcement authority over the Bank, including the power to issue cease and desist orders and civil money penalties and to remove directors, officers or employees. It also has the power to appoint a conservator or receiver for a bank upon insolvency, imminent insolvency, unsafe or unsound condition or certain other situations. The FDIC has primary federal enforcement responsibility over non-Federal Reserve Bank (“FRB”)-member state banks and has authority to bring actions against the institution and all institution-affiliated parties, including stockholders, and any attorneys, appraisers and accountants who knowingly or recklessly participate in wrongful actions likely to have an adverse effect on the bank. Formal enforcement action may range from the issuance of a capital directive or cease and desist order to removal of officers and/or directors. Civil penalties cover a wide range of violations and can amount to $25,000 per day, or even $1 million per day in especially egregious cases. In general, regulatory enforcement actions occur with respect to situations involving unsafe or unsound practices or conditions, violations of law or regulation or breaches of fiduciary duty. Federal and Pennsylvania laws also establish criminal penalties for certain violations.
Insurance of Deposit Accounts. The Deposit Insurance Fund (“DIF”) of the FDIC insures deposits at FDIC-insured financial institutions, such as the Bank. Deposit accounts in the Bank are insured by the FDIC generally up to a maximum of $250,000 per separately insured depositor and up to a maximum of $250,000 for self-directed retirement accounts. The FDIC charges insured depository institutions premiums to maintain the DIF.
The Dodd-Frank Act increased the minimum target DIF ratio from 1.15% to 1.35% of estimated insured deposits. The Dodd-Frank Act eliminated the 1.5% maximum fund ratio, instead leaving it to the discretion of the FDIC to establish a maximum fund ratio. The FDIC has exercised that discretion by establishing a long-range fund ratio of 2%. The FDIC adopted a plan to restore the fund to the 1.35% ratio by September 30, 2028.
The FDIC has authority to increase insurance assessments. Any significant increases would have an adverse effect on the operating expenses and results of operations of the Bank. Management cannot predict what assessment rates will be in the future.
Insurance of deposits may be terminated by the FDIC upon a finding that an institution has engaged in unsafe or unsound practices, is in an unsafe or unsound condition to continue operations or has violated any applicable law, regulation, rule, order or condition imposed by the FDIC. The Bank does not currently know of any practice, condition or violation that may lead to termination of its deposit insurance.
Prohibitions Against Tying Arrangements. State-chartered banks are prohibited, subject to some exceptions, from extending credit to or offering any other service, or fixing or varying the consideration for such extension of credit or service, on the condition that the customer obtain some additional service from the institution or its affiliates or not obtain services of a competitor of the institution.
FHLB System. The Bank is a member of the FHLB System, which consists of 11 regional FHLBs. The FHLB System provides a central credit facility primarily for member institutions as well as other entities involved in home mortgage lending. As a member of the FHLB of Pittsburgh, The Bank is required to acquire and hold shares of capital stock in the FHLB. As of December 31, 2025, the Bank was in compliance with this requirement. The Bank also is able to borrow from the FHLB of Pittsburgh, which provides an additional source of liquidity for the Bank.
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Federal Reserve System. The FRB regulations historically required banks to maintain reserves against their transaction accounts (primarily Negotiable Order of Withdrawal, or NOW and regular checking accounts). However, effective March 26, 2020, the FRB reduced reserve requirement ratios on all net transaction accounts to 0%, eliminating reserve requirements for all depository institutions, in response to the COVID-19 pandemic. This change currently remains in place with no indication of reversal.
Other Regulations
Interest and other charges collected or contracted by the Bank are subject to state usury laws and federal laws concerning interest rates. The Bank’s operations are also subject to federal and state laws applicable to credit transactions, such as the:
•Truth-In-Lending Act, governing disclosures of credit terms to consumer borrowers;
•Home Mortgage Disclosure Act, requiring financial institutions to provide information to enable the public and public officials to determine whether a financial institution is fulfilling its obligation to help meet the housing needs of the community it serves;
•Equal Credit Opportunity Act, prohibiting discrimination on the basis of race, creed or other prohibited factors in extending credit;
•Fair Credit Reporting Act, governing the use and provision of information to credit reporting agencies;
•Fair Debt Collection Act, governing the manner in which consumer debts may be collected by collection agencies;
•Truth in Savings Act; and
•Rules and regulations of the various federal and state agencies charged with the responsibility of implementing such laws.
The operations of the Bank also are subject to the:
•Right to Financial Privacy Act, which imposes a duty to maintain confidentiality of consumer financial records and prescribes procedures for complying with administrative subpoenas of financial records;
•Electronic Funds Transfer Act and Regulation E promulgated thereunder, which govern automatic deposits to and withdrawals from deposit accounts and customers’ rights and liabilities arising from the use of automated teller machines and other electronic banking services;
•Check Clearing for the 21st Century Act (also known as “Check 21”), which gives “substitute checks,” such as digital check images and copies made from that image, the same legal standing as the original paper check;
•The USA PATRIOT Act, which requires banks operating to, among other things, establish broadened anti-money laundering compliance programs, due diligence policies and controls to ensure the detection and reporting of money laundering. Such required compliance programs are intended to supplement existing compliance requirements, also applicable to financial institutions, under the Bank Secrecy Act and the Office of Foreign Assets Control regulations; and
•The Gramm-Leach-Bliley Act, which places limitations on the sharing of consumer financial information by financial institutions with unaffiliated third parties. Specifically, the Gramm-Leach-Bliley Act requires all financial institutions offering financial products or services to retail customers to provide such customers with the financial institution’s privacy policy and provide such customers the opportunity to “opt out” of the sharing of certain personal financial information with unaffiliated third parties.
Holding Company Regulation
General. The Company is a bank holding company within the meaning of the Bank Holding Company Act of 1956, as amended. As such, the Company is registered with the Federal Reserve and is subject to regulations, examinations, supervision and reporting requirements applicable to bank holding companies. In addition, the Federal Reserve has enforcement authority over the Company and its non-bank subsidiaries. Among other things, this authority permits the Federal Reserve to restrict or prohibit activities that are determined to be a serious risk to the subsidiary banking institution.
Capital. The Dodd-Frank Act requires the Federal Reserve to establish for all depository institution holding companies minimum consolidated capital requirements that are as stringent as those required for the insured depository subsidiaries.
Source of Strength. The Dodd-Frank Act requires that all bank holding companies serve as a source of strength to their subsidiary depository institutions by providing capital, liquidity and other support in times of financial stress.
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Dividends. The Federal Reserve has issued a policy statement regarding the payment of dividends and the repurchase of shares of common stock by bank holding companies. In general, the policy provides that dividends should be paid only out of current earnings and only if the prospective rate of earnings retention by the holding company appears consistent with the organization’s capital needs, asset quality and overall financial condition. Regulatory guidance provides for prior regulatory consultation with respect to capital distributions in certain circumstances, such as where the company’s net income for the past four quarters, net of dividends previously paid over that period, is insufficient to fully fund the dividend or the company’s overall rate or earnings retention is inconsistent with the company’s capital needs and overall financial condition. The ability of a holding company to pay dividends may be restricted if a subsidiary depository institution becomes undercapitalized. The policy statement also states that a holding company should inform the Federal Reserve supervisory staff before redeeming or repurchasing common stock or perpetual preferred stock if the holding company is experiencing financial weaknesses or if the repurchase or redemption would result in a net reduction, as of the end of a quarter, in the amount of such equity instruments outstanding compared with the beginning of the quarter in which the redemption or repurchase occurred. These regulatory policies may affect the Company’s ability to pay dividends, repurchase shares of common stock or otherwise engage in capital distributions.
Acquisition. Under the Change in Bank Control Act, a federal statute, a notice must be submitted to the Federal Reserve if any person (including a company), or group acting in concert, seeks to acquire direct or indirect “control” of a bank holding company. Under certain circumstances, a change of control may occur, and prior notice is required, upon the acquisition of 10% or more of the company’s outstanding voting stock, unless the Federal Reserve has found that the acquisition will not result in control of the company. A change in control definitively occurs upon the acquisition of 25% or more of the company’s outstanding voting stock.
Under the Change in Bank Control Act, the Federal Reserve generally has 60 days from the filing of a complete notice to act, taking into consideration certain factors, including the financial and managerial resources of the acquirer and the competitive effects of the acquisition.
Federal Securities Laws. The Company’s common stock is registered with the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended. As a result, the Company is subject to the information, proxy solicitation, insider trading restrictions and other requirements under the Securities Exchange Act of 1934.
Sarbanes-Oxley Act of 2002. The Sarbanes-Oxley Act of 2002 is intended to improve corporate responsibility, to provide for enhanced penalties for accounting and auditing improprieties at publicly traded companies and to protect investors by improving the accuracy and reliability of corporate disclosures pursuant to the federal securities laws. The Company has policies, procedures and systems designed to comply with these regulations, and the Company reviews and documents these policies, procedures and systems to ensure continued compliance with these regulations.
TAXATION
General
The Company and the Bank are subject to federal income taxation in the same general manner as other corporations, with some exceptions discussed below. The following discussion of federal taxation is intended only to summarize certain pertinent federal income tax matters and is not a comprehensive description of the tax rules applicable to the Company and the Bank.
Method of Accounting
For federal income tax purposes, the Company currently reports its income and expenses on the accrual method of accounting and uses a tax year ending December 31 for filing its federal and state income tax returns.
Federal Taxation
The federal income tax laws apply to the Company in the same manner as to other corporations with some exceptions. The Company may exclude from income 100% of dividends received from the Bank as members of the same affiliated group of corporations. For federal income tax purposes, corporations may carryforward net operating losses indefinitely, but the deduction is limited to 80% of taxable income. For its 2025 and 2024 fiscal year, the Company’s maximum federal income tax rate was 21%.
State Taxation
The Bank is subject to the Pennsylvania Bank and Trust Company Shares Tax (“Shares Tax”) rate of 0.95%. The tax is imposed on the Bank’s adjusted equity. The Company and Exchange Underwriters are subject to the Pennsylvania Corporate Net Income Tax, otherwise known as “CNI tax.” The CNI tax rate in 2025 was 7.99% and in 2024 was 8.49%. The tax is imposed on income or loss from the federal income tax return on a separate-company basis for the Company and Exchange Underwriters. The federal return income or loss is adjusted for various items treated differently by the Pennsylvania Department of Revenue.
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The Company is subject to additional state tax filing requirements in West Virginia and Ohio. The West Virginia Corporation Net Income Tax imposes a state income tax at the rate 6.5% based on the Company's consolidated taxable federal net income or loss on the Company's federal tax return, adjusted for various items treated differently by the West Virginia State Tax Department. The State of Ohio imposes an equity-based tax similar to the PA Shares Tax called Financial Institutions Tax (“FIT”) at a minimum tax of $1,000 or a rate of 0.8% for the first $200 million of Ohio based-equity, and then a declining rate thereafter. All state taxation is apportioned to states where nexus exists based on different metrics of the Company's Consolidated Statements of Financial Condition and Consolidated Statements of Income.
ITEM 1A. RISK FACTORS
In addition to risks disclosed elsewhere in this Report, the following discussion sets forth the material risk factors that could affect the Company’s consolidated financial condition and results of operations. Readers should not consider any descriptions of these factors to be a complete set of all potential risks that could affect the Company. Any risk factor discussed below could by itself, or combined with other factors, materially and adversely affect the Company’s business, results of operations, financial condition, capital position, liquidity, competitive position or reputation, including by materially increasing expenses or decreasing revenues, which could result in material losses or a decrease in earnings.
Risks Related to Our Lending Activities
A large percentage of the Company’s loans are collateralized by real estate, and disruptions in the real estate market may result in losses and reduce the Company’s earnings.
A substantial portion of the Company’s loan portfolio consists of loans collateralized by real estate. Disruptions in the real estate market could significantly impair the value of the Company’s collateral and its ability to sell the collateral upon foreclosure. The real estate collateral in each case provides an alternate source of repayment in the event of default by the borrower and may deteriorate in value during the time the credit is extended. If real estate values decline, it is likely that the Company would be required to increase its allowance for credit losses. If, during a period of lower real estate values, the Company is required to liquidate the collateral securing a loan to satisfy debts or to increase its allowance for credit losses, it could materially reduce its profitability and adversely affect its financial condition.
Because the Company emphasizes commercial real estate and commercial loan originations, its credit risk profile is increased, and downturns in the local real estate market or economy could adversely affect its earnings.
Commercial real estate and commercial loans generally have more inherent risk than the residential real estate loans. Because the repayment of commercial real estate and commercial loans depends on the successful management and operation of the borrower’s properties or related businesses, repayment of such loans can be affected by adverse conditions in the local real estate market or economy. Commercial real estate and commercial loans also may involve relatively large loan balances to individual borrowers or groups of related borrowers. A downturn in the real estate market or the local economy could adversely affect the value of properties securing the loan or the revenues from the borrower’s business, thereby increasing the risk of nonperforming loans. As the Company’s commercial real estate and commercial loan portfolios increase, the corresponding risks and potential for losses from these loans may also increase. Furthermore, it may be difficult to assess the future performance of newly originated commercial loans, as such loans may have delinquency or charge-off levels above the Company’s historical experience, which could adversely affect the Company’s future performance.
If our nonperforming assets increase, our earnings will suffer.
Our nonperforming assets adversely affect our net income in various ways. We do not record interest income on nonaccrual loans or real estate owned. We must reserve for probable losses, which results in additional provisions for credit losses. As circumstances warrant, we must write down the value of properties in our other real estate owned portfolio to reflect changing market values. Additionally, we have legal fees associated with the resolution of problem assets as well as additional costs, such as taxes, insurance and maintenance related to our other real estate owned. The resolution of nonperforming assets also requires the active involvement of management, which can adversely affect the amount of time we devote to the income-producing activities of the Bank. If our estimate of the allowance for credit losses is inadequate, we will have to increase the allowance accordingly.
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If the Company’s allowance for credit losses is not sufficient to cover actual credit losses, the Company’s results of operations would be negatively affected.
We maintain an allowance for credit losses which represents management's best estimate of credit losses within the existing portfolio of loans. The allowance, in the judgment of management, is appropriate to reserve for estimated credit losses and risks inherent in the loan portfolio. The level of the allowance for credit losses reflects management's continuing evaluation of industry concentrations, specific credit risks, loan loss experience, current loan portfolio quality, present economic conditions and unidentified losses in the current loan portfolio. The determination of the appropriate level of the allowance for credit losses inherently involves a high degree of subjectivity and requires us to make significant estimates of current credit risks using existing qualitative and quantitative information, all of which may undergo material changes. Changes in economic conditions or forecasts, new information regarding existing loans, identification of additional problem loans and other factors, both within and outside of our control, may require an increase in the allowance for credit losses.
In addition, bank regulators periodically review the Company’s allowance for credit losses and may require it to increase the allowance for credit losses or recognize further loan charge-offs. Any increase in the allowance for credit losses or loan charge-offs as required by these regulatory authorities may have a material adverse effect on the Company’s financial condition and results of operations.
Risk Related to Changes in Market Interest Rates
Changes in interest rates may reduce the Company’s profits and impair asset values.
The Company’s earnings and cash flows depend primarily on its net interest income. Interest rates are highly sensitive to many factors that are beyond the Company’s control, including general economic conditions and the policies of various governmental and regulatory agencies, particularly the Federal Reserve. Changes in market interest rates could have an adverse effect on the Company’s financial condition and results of operations. If rates increase rapidly, the Company may have to increase the rates paid on deposits, particularly higher cost time deposits and borrowed funds, more quickly than any changes in interest rates earned on loans and investments, resulting in a negative effect on interest rate spreads and net interest income. Increases in interest rates may also make it more difficult for borrowers to repay adjustable rate loans. Conversely, should market interest rates fall below current levels, the Company’s net interest margin also could be negatively affected if competitive pressures keep it from further reducing rates on deposits, while the yields on the Company’s interest-earning assets decrease more rapidly through loan prepayments and interest rate adjustments. Decreases in interest rates often result in increased prepayments of loans and mortgage-related securities, as borrowers refinance their loans to reduce borrowings costs. Under these circumstances, the Company is subject to reinvestment risk to the extent it is unable to reinvest the cash received from such prepayments in loans or other investments that have interest rates that are comparable to the interest rates on existing loans and securities. Changes in interest rates also affect the value of the Company’s interest-earning assets, and in particular its securities portfolio. Generally, the value of fixed-rate securities fluctuates inversely with changes in interest rates. Unrealized gains and losses on securities available-for-sale determined to be temporary in nature are reported as a separate component of equity. Decreases in the fair value of securities available-for-sale resulting from increases in interest rates therefore could have an adverse effect on the Company’s stockholders’ equity.
Risks Related to Our Acquisition Activity
Impairment in the carrying value of goodwill could negatively affect our results of operations.
We have recorded goodwill in connection with our recently completed mergers. At December 31, 2025, we had $9.7 million of goodwill on our Consolidated Statements of Financial Condition after incurring goodwill impairment of $18.7 million in 2020. Any further impairment to goodwill could have a material adverse impact on the Company’s consolidated financial conditions and results of operations. 100% of the goodwill is assigned to the Community Banking reporting unit. Under GAAP, goodwill must be evaluated for impairment annually or on an interim basis when a triggering event occurs. If the carrying value of our reporting unit exceeds its current fair value as determined based on the value of the business, the goodwill is considered impaired and is reduced to fair value by a non-cash, non-tax-deductible charge to earnings. The impairment testing required by GAAP involves estimates and significant judgments by management. Although we believe our assumptions and estimates are reasonable and appropriate, any changes in key assumptions or other unanticipated events and circumstances may affect the accuracy or validity of such estimates. Events and conditions that could result in impairment in the value of our goodwill include worsening business conditions and economic factors, changes in the industries in which we operate, adverse changes in the regulatory environment, or other factors leading to reduction in expected long-term profitability and cash flows.
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Risk Related to Our Liquidity Position
If we are unable to borrow funds, we may not be able to meet the cash flow requirements of our depositors, creditors, and borrowers, or the operating cash needed to fund corporate expansion and other corporate activities.
Liquidity is the ability to meet cash flow needs on a timely basis at a reasonable cost. Our liquidity is used to make loans and to repay deposit liabilities as they become due or are demanded by customers. Liquidity policies and procedures are established by the board, with operating limits set based upon the ratio of loans to deposits and percentage of assets funded with non-core or wholesale funding. We regularly monitor our overall liquidity position to ensure various alternative strategies exist to cover unanticipated events that could affect liquidity. We also establish policies and monitor guidelines to diversify our wholesale funding sources to avoid concentrations in any one market source. Wholesale funding sources include federal funds purchased, securities sold under repurchase agreements, non-core deposits, and debt. The Bank is a member of the FHLB of Pittsburgh, which provides funding through advances to members that are collateralized with mortgage-related assets.
We maintain a portfolio of available-for-sale securities that can be used as a secondary source of liquidity. There are other sources of liquidity available to us should they be needed. These sources include the sale of loans, the ability to acquire national market, non-core deposits, issuance of additional collateralized borrowings such as FHLB advances and federal funds purchased, and the issuance of preferred or common securities.
Risks Related to Our Ability to Pay Dividends
The Company’s ability to pay dividends is subject to the ability of Community Bank to make capital distributions to the Company, and also may be limited by Federal Reserve policy.
The Company’s long-term ability to pay dividends to its stockholders depends primarily on the ability of the Bank to make capital distributions to the Company and on the availability of cash at the holding company level if the Bank’s earnings are not sufficient to pay dividends. In addition, the Federal Reserve has issued a policy statement regarding the payment of dividends by bank holding companies. In general, the policy provides that dividends should be paid only out of current earnings and only if the prospective rate of earnings retention by the holding company appears consistent with the organization’s capital needs, asset quality and overall financial condition. Regulatory guidance provides for prior regulatory consultation with respect to capital distributions in certain circumstances, such as where the holding company’s net income for the past four quarters, net of dividends paid over that period, is insufficient to fully fund the dividend or the holding company’s overall rate or earnings retention is inconsistent with its capital needs and overall financial condition. These regulatory policies may adversely affect the Company’s ability to pay dividends or otherwise engage in capital distributions.
Risks Related to Our Operations
Because the nature of the financial services business involves a high volume of transactions, the Company faces significant operational risks.
The Company operates in diverse markets and relies on the ability of its employees and systems to process a significant number of transactions. Operational risk is the risk of loss resulting from operations, including the risk of fraud by employees or persons outside a company, the execution of unauthorized transactions by employees, errors relating to transaction processing and technology, breaches of the internal control system and compliance requirements, and business continuation and disaster recovery. Insurance coverage may not be available for such losses, or where available, such losses may exceed insurance limits. This risk of loss also includes the potential legal actions that could arise as a result of an operational deficiency or as a result of noncompliance with applicable regulatory standards, adverse business decisions or their implementation, and customer attrition due to potential negative publicity. If a breakdown occurs in the internal controls system, improper operation of systems or improper employee actions, the Company could incur financial loss, face regulatory action and suffer damage to its reputation.
Risks associated with system failures, interruptions, breaches of security or cyber security could negatively affect the Company’s earnings.
Information technology systems are critical to the Company’s business. The Company uses various technology systems to manage customer relationships, general ledger, securities, deposits and loans. The Company has established policies and procedures to prevent or limit the effect of system failures, interruptions and security breaches, but such events may still occur or may not be adequately addressed if they do occur. In addition, any compromise of the Company’s systems could deter customers from using its products and services. Security systems may not protect systems from security breaches.
In addition, the Company outsources some of its data processing to certain third-party providers. If these third-party providers encounter difficulties, or if the Company has difficulty communicating with them, the Company’s ability to adequately process and account for transactions could be affected, and business operations could be adversely affected. Threats to information security also exist in the processing of customer information through various other vendors and their personnel.
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The occurrence of any system failures, interruption or breach of security could damage the Company’s reputation and result in a loss of customers and business thereby, subjecting it to additional regulatory scrutiny, or could expose it to litigation and possible financial liability. Although the Company has not experienced any system failures, interruption or breach of security to date, any of these events could have a material adverse effect on its financial condition and results of operations.
The Company is constantly relying upon the availability of technology, the Internet and telecommunication systems to enable financial transactions by clients, to record and monitor transactions and transmit and receive data to and from clients and third parties. Information security risks have increased significantly due to the use of online, telephone and mobile banking channels by clients and the increased sophistication and activities of organized crime, hackers, terrorists and other external parties. Our technologies, systems, networks and our clients’ devices have been subject to, and are likely to continue to be the target of, cyberattacks, computer viruses, malware, phishing attacks or information security breaches that could result in the unauthorized release, gathering, monitoring, misuse, loss or destruction of our or our clients’ confidential, proprietary and other information, the theft of client assets through fraudulent transactions or disruption of our or our clients’ or other third parties’ business operations. Any of the foregoing could have a material adverse effect on the Company’s business, financial condition and results of operations.
The Company’s risk management framework may not be effective in mitigating risk and reducing the potential for significant losses.
The Company’s risk management framework is designed to minimize risk and loss to the company. The Company seeks to identify, measure, monitor, report and control exposure to risk, including strategic, market, liquidity, compliance and operational risks. While the Company uses a broad and diversified set of risk monitoring and mitigation techniques, these techniques are inherently limited because they cannot anticipate the existence or future development of currently unanticipated or unknown risks. Economic conditions and heightened legislative and regulatory scrutiny of the financial services industry, among other developments, have increased the Company’s level of risk. Accordingly, the Company could suffer losses if it fails to properly anticipate and manage these risks.
We could be adversely affected by failure in our internal controls.
A failure in our internal controls could have a significant negative impact not only on our earnings, but also on the perception that customers, regulators and investors may have of us. We devote a significant amount of effort, time and resources to continually strengthening our controls and ensuring compliance with complex accounting standards and banking regulations. Compliance with increased or new standards and regulations applicable to our Company may entail management spending increased time addressing such standards and regulations. Further, the Company may be required to expend additional capital resources on professional advisors, which could increase operational expenses and therefore negatively impact our net income.
Risks Related to Accounting Matters
Changes in the Company’s accounting policies or in accounting standards could materially affect how the Company reports its financial condition and results of operations.
The Company’s accounting policies are essential to understanding its financial condition and results of operations. Some of these policies require the use of estimates and assumptions that may affect the value of the Company’s assets, liabilities, and financial results. Some of the Company’s accounting policies are critical because they require management to make difficult, subjective and complex judgments about matters that are inherently uncertain, and because it is likely that materially different amounts would be reported under different conditions or using different assumptions. If such estimates or assumptions underlying the Company’s financial statements are incorrect, it may experience material losses.
From time to time, the FASB and the Securities and Exchange Commission change the financial accounting and reporting standards or the interpretation of those standards that govern the preparation of the Company’s financial statements. These changes are beyond the Company’s control, can be difficult to predict, and could materially affect how the Company reports its financial condition and results of operations. The Company could also be required to apply a new or revised standard retroactively, resulting in restating prior period financial statements in material amounts.
The need to account for certain assets at estimated fair value, such as securities, may adversely affect the Company’s financial condition and results of operations.
The Company reports certain assets, such as securities, at estimated fair value. Generally, for assets that are reported at fair value, the Company uses quoted market prices or valuation models that utilize observable market inputs to estimate fair value. Because the Company carries these assets on its books at their estimated fair value, it may incur losses even if the asset in question presents minimal credit risk.
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Risks Related to Competitive Matters
Strong competition within the Company’s market area could adversely affect the Company’s earnings and slow growth.
The Company faces intense competition both in making loans and attracting deposits. Price competition for loans and deposits might result in the Company earning less on its loans and paying more on its deposits, which reduces net interest income. Some of the Company’s competitors have substantially greater resources than the Company has and may offer services that it does not provide. The Company expects competition to increase in the future as a result of legislative, regulatory and technological changes and the continuing consolidation in the financial services industry. The Company’s profitability will depend upon its continued ability to compete successfully in its market areas.
General Risk Factors
A worsening of economic conditions could adversely affect the Company’s financial condition and results of operations.
A worsening of economic conditions could significantly affect the markets in which the Company operates, the value of loans and investments, ongoing operations, costs and profitability. Declines in real estate values and sales volumes and elevated unemployment levels may result in higher than expected loan delinquencies, increases in nonperforming and criticized classified assets, and a decline in demand for the Company’s products and services. In addition, the volatility in natural gas prices, or if prices decline, may depress natural gas exploration and drilling activities in the Marcellus Shale Formation. Furthermore, exploration and drilling of natural gas reserves in our market area may be affected by federal, state and local laws and regulations affecting production, permitting, environmental protection and other matters. Any of these events may negatively affect our customers, and may cause the Company to incur losses, and may adversely affect its financial condition and results of operations.
Inflation can have an adverse impact on our business and on our customers.
Inflation risk is the risk that the value of assets or income from investments will be worth less in the future as inflation decreases the value of money. As inflation increases, the value of our investment securities, particularly those with longer maturities, would decrease, although this effect can be less pronounced for floating rate instruments. In addition, inflation increases the cost of goods and services we use in our business operations, such as electricity and other utilities, which increases our noninterest expenses. Furthermore, our customers are also affected by inflation and the rising costs of goods and services used in their households and businesses, which could have a negative impact on their ability to repay their loans with us.
Climate change and related legislative and regulatory initiatives may materially affect the Company’s financial condition and results of operations.
The effects of climate change continue to create a rising level of concern for the state of the global environment. As a result, businesses have increased their political and social awareness surrounding the issue, and the U.S. has entered into international agreements in an attempt to reduce global temperatures. In addition, the U.S. government, state legislatures and federal and state regulatory agencies continue to propose numerous initiatives to combat climate change. Other expansive initiatives are expected, including potentially increasing supervisory expectations with respect to banks’ risk management practices, accounting for the effects of climate change in stress testing scenarios and systemic risk assessments, revising expectations for credit portfolio concentrations based on climate-related factors and encouraging investment by banks in climate-related initiatives and lending to communities disproportionately impacted by the effects of climate change. The lack of empirical data surrounding the credit and other financial risks posed by climate change render it difficult to predict how climate change may impact our financial condition and results of operations; however, the physical effects of climate change may also directly impact us. Specifically, unpredictable and more frequent weather disasters may adversely impact the value of real property securing the loans in our portfolios. Additionally, if insurance obtained by our borrowers is insufficient to cover any losses sustained to the collateral, or if insurance coverage is otherwise unavailable to our borrowers, the collateral securing our loans may be negatively impacted by climate change, which could impact our financial condition and results of operations. Further, the effects of climate change may negatively impact regional and local economic activity, which could lead to an adverse effect on our customers and impact the communities in which we operate. Overall, the effects and resulting, unknown impact of climate change could have a material adverse effect on our financial condition and results of operations.
ITEM 1B UNRESOLVED STAFF COMMENTS
Not applicable
24 | ||
ITEM 1C CYBERSECURITY
Our objectives for managing cybersecurity risk is to greatly minimize the impacts of external threats. This includes, but is not limited to, efforts to penetrate, disrupt or misuse our systems or information. Our information security program is designed to comply with industry standards, such as the National Institute of Technology Cybersecurity Framework. We successfully leverage several associations, industry groups, audits and enhanced monitoring to promote the effectiveness of our program. We collaborate regularly with peer banks and other industry groups to identify and implement best practices. Our program is regularly reviewed in an effort to address emerging trends and threats.
We maintain a detailed Incident Response Plan which outlines the steps we would implement in the event of an actual or potential cybersecurity event. The Incident Response Plan includes timely notification of an escalation to the appropriate levels of management and Board of Directors. The Incident Response Plan is reviewed and updated at least annually and mandates coordination and collaboration across all levels of management and all areas of the Bank.
The Board of Directors reviews components of the information security program on annual basis including policies, procedures, risk assessments, table top testing results, attestations, budgets and strategies. These components are presented by Executive Management as part of the regular board meeting schedule and strategic planning process.
25 | ||
ITEM 2. PROPERTIES
At December 31, 2025, our premises and equipment had an aggregate net book value of approximately $19.6 million. We conduct our business through 12 branch offices. The branch offices are utilized by the community banking segment. In addition, the community banking segment has a corporate office, an operations center and two loan production offices. We believe that our office facilities are adequate to meet our present and immediately foreseeable needs.
The following table sets forth certain information concerning the main and each branch office at December 31, 2025.
| Location | Owned or Leased | |||||||
| PENNSYLVANIA | ||||||||
| Main Office (Greene County): | ||||||||
| 100 North Market Street, Carmichaels, PA 15320 | Branch | Owned | ||||||
| Barron P. "Pat" McCune, Jr. Corporate Center (Washington County): | ||||||||
| 2111 North Franklin Drive, Washington, PA 15301 | Corporate | Owned | ||||||
| Ralph J. Sommers, Jr. Operations Center (Greene County): | ||||||||
| 600 Evergreene Drive, Waynesburg, PA 15370 | Operations | Owned | ||||||
| Branch Offices (Greene County): | ||||||||
| 30 West Greene Street, Waynesburg, PA 15370 | Branch | Owned | ||||||
| 100 Miller Lane, Waynesburg, PA 15370 | Branch | Building Owned, Ground Lease | ||||||
| 1993 South Eighty Eight Road, Greensboro, PA 15338 | ITM | Owned | ||||||
| Branch Offices (Washington County): | ||||||||
| 65 West Chestnut Street, Washington, PA 15301 | Branch | Building Owned, Ground Lease | ||||||
| 4139 Washington Road, McMurray, PA 15317 | Branch | Leased | ||||||
| 200 Main Street, Claysville, PA 15232 | Branch | Owned | ||||||
| Branch Offices (Fayette County): | ||||||||
| 712 West Main Street, Uniontown, PA 15401 | Branch | Leased | ||||||
| 101 Independence Street, Perryopolis, PA 15473 | ITM | Owned | ||||||
| Branch Office (Westmoreland County): | ||||||||
| 1670 Broad Avenue, Belle Vernon, PA 15012 | Branch | Leased | ||||||
| Branch Office (Allegheny County): | ||||||||
| 714 Brookline Boulevard, Pittsburgh, PA 15226 | Branch | Owned | ||||||
| Northern Loan Production Office: | ||||||||
| 100 Pinewood Lane, Suite 101, Warrendale, PA 15086 | Loans | Leased | ||||||
| Southpointe Loan Production Office: | ||||||||
| 325 Southpointe Boulevard, Canonsburg, PA 15317 | Loans | Leased | ||||||
| WEST VIRGINIA | ||||||||
| Branch Offices (Ohio County): | ||||||||
| 1701 Warwood Avenue, Wheeling, WV 26003 | Branch | Owned | ||||||
| 875 National Road, Wheeling, WV 26003 | Branch | Owned | ||||||
| Branch Office (Marshall County): | ||||||||
| 809 Lafayette Avenue, Moundsville, WV 26041 | Branch | Owned | ||||||
ITEM 3. LEGAL PROCEEDINGS
At December 31, 2025, we were not involved in any pending legal proceedings other than routine legal proceedings occurring in the ordinary course of business which, in the aggregate, involve amounts that management believes are immaterial to our financial condition, results of operations and cash flows.
ITEM 4. MINE SAFETY DISCLOSURES
None.
26 | ||
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
The Company’s common stock is traded on the NASDAQ Global Market under the symbol “CBFV.” The approximate number of holders of record of the Company’s common stock as of March 6, 2026, was 563. Certain shares of Company common stock are held in “nominee” or “street” name and accordingly, the number of beneficial owners of such shares is not known or included in the foregoing number.
Equity Compensation Plans
The following table provides information at December 31, 2025, for compensation plans under which equity securities may be issued.
| Plan Category | Number of securities to be issued upon exercise of outstanding options warrants and rights | Weighted-average exercise price of outstanding options warrants and rights | Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (A)) | ||||||||||||||||||||||||||||||||
| (A) | (B) | (C) | |||||||||||||||||||||||||||||||||
| Equity compensation plans: | |||||||||||||||||||||||||||||||||||
| Approved by stockholders | 223,794 | (1) | $ | 24.13 | (1) | 262,265 | (2) | ||||||||||||||||||||||||||||
| Not approved by stockholders | — | — | — | ||||||||||||||||||||||||||||||||
| Total | 223,794 | $ | 24.13 | 262,265 | |||||||||||||||||||||||||||||||
(1)Represents stock options available to be exercised from Treasury Stock under the 2015 Equity Incentive Plan (the "2015 Plan") and stock options granted under the 2021 Equity Incentive Plan (the "2021 Plan") that can be issued from a reserve upon exercise. The 2015 and 2021 Plans shall remain in effect as long as any awards are outstanding, but as a result of the approval of the 2024 Equity Incentive Plan, no more awards can be granted under the 2015 and 2021 Plans.
(2)Represents 262,265 shares available under the 2024 Plan (the "Share Limit") that can be issued. At December 31, 2025, there have been 25,235 restricted shares granted under the 2024 Plan.
Issuer Purchases of Equity Securities
The Company did not repurchase any of its equity securities during the three months ended December 31, 2025.
ITEM 6. [RESERVED]
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
This discussion and analysis reflects our consolidated financial statements and other relevant statistical data, and is intended to enhance your understanding of our financial condition and results of operations. The information in this section has been derived from the audited consolidated financial statements, which appear in this Report. You should read the information in this section in conjunction with the business and financial information the Company provided in this Report.
Cautionary Statement Concerning Forward-Looking Statements
See the first page of this Report for information regarding forward-looking statements.
Selected Financial Data
The following tables set forth selected historical financial and other data of the Company at and for the years ended December 31, 2025, 2024 and 2023. The information at December 31, 2025 and 2024, and for the years ended December 31, 2025 and 2024 is derived in part from, and should be read together with, the Company's audited consolidated financial statements and notes included in this Report and should be read together therewith. The information at December 31, 2023 and for the year ended December 31, 2023 is derived in part from audited financial statements that are not included in this Report.
| December 31, | 2025 | 2024 | 2023 | ||||||||||||||
| (Dollars in Thousands) | |||||||||||||||||
| Selected Financial Condition Data: | |||||||||||||||||
| Assets | $ | 1,547,693 | $ | 1,481,564 | $ | 1,456,091 | |||||||||||
| Cash and Due From Banks | 31,693 | 49,572 | 68,223 | ||||||||||||||
| Securities | 279,895 | 262,153 | 207,095 | ||||||||||||||
| Loans, Net | 1,152,144 | 1,082,821 | 1,100,689 | ||||||||||||||
| Deposits | 1,339,805 | 1,283,517 | 1,267,159 | ||||||||||||||
| Other Borrowed Funds | 34,758 | 34,718 | 34,678 | ||||||||||||||
| Stockholders’ Equity | 157,537 | 147,378 | 139,834 | ||||||||||||||
| Year Ended December 31, | 2025 | 2024 | 2023 | ||||||||||||||
| (Dollars in Thousands) | |||||||||||||||||
| Selected Operating Data: | |||||||||||||||||
| Interest and Dividend Income | $ | 75,939 | $ | 76,131 | $ | 62,225 | |||||||||||
| Interest Expense | 25,164 | 30,063 | 17,672 | ||||||||||||||
| Net Interest and Dividend Income | 50,775 | 46,068 | 44,553 | ||||||||||||||
| Provision (Recovery) for Credit Losses - Loans | 534 | 379 | (284) | ||||||||||||||
| Provision (Recovery) for Credit Losses - Unfunded Commitments | 55 | 191 | (218) | ||||||||||||||
| Net Interest and Dividend Income After Net Provision (Recovery) for Credit Losses | 50,186 | 45,498 | 45,055 | ||||||||||||||
| Noninterest (Loss) Income | (7,230) | 5,494 | 24,012 | ||||||||||||||
| Noninterest Expense | 37,656 | 35,649 | 38,782 | ||||||||||||||
Income Before Income Tax Expense | 5,300 | 15,343 | 30,285 | ||||||||||||||
| Income Tax Expense | 397 | 2,749 | 7,735 | ||||||||||||||
| Net Income | $ | 4,903 | $ | 12,594 | $ | 22,550 | |||||||||||
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| At or For the Year Ended December 31, | 2025 | 2024 | 2023 | ||||||||||||||
| Per Common Share Data: | |||||||||||||||||
| Earnings Per Common Share - Basic | $ | 0.97 | $ | 2.45 | $ | 4.41 | |||||||||||
| Earnings Per Common Share - Diluted | 0.92 | 2.38 | 4.40 | ||||||||||||||
| Dividends Per Common Share | 1.02 | 1.00 | 1.00 | ||||||||||||||
Dividend Payout Ratio (1) | 110.87 | % | 42.02 | % | 22.73 | % | |||||||||||
| Book Value Per Common Share | $ | 31.28 | $ | 28.71 | $ | 27.32 | |||||||||||
| Common Shares Outstanding | 5,036,509 | 5,132,654 | 5,118,713 | ||||||||||||||
| At or For the Year Ended December 31, | 2025 | 2024 | 2023 | ||||||||||||||
| Selected Financial Ratios: | |||||||||||||||||
| Return on Average Assets | 0.33 | % | 0.84 | % | 1.60 | % | |||||||||||
| Return on Average Equity | 3.27 | 8.77 | 19.42 | ||||||||||||||
| Average Interest-Earning Assets to Average Interest-Bearing Liabilities | 134.62 | 134.78 | 141.85 | ||||||||||||||
| Average Equity to Average Assets | 9.97 | 9.56 | 8.25 | ||||||||||||||
Net Interest Rate Spread (2) | 2.95 | 2.47 | 2.73 | ||||||||||||||
Net Interest Rate Spread (Non-GAAP) (2)(4) | 2.97 | 2.48 | 2.74 | ||||||||||||||
Net Interest Margin (3) | 3.55 | 3.19 | 3.28 | ||||||||||||||
Net Interest Margin (Non-GAAP) (3)(4) | 3.58 | 3.20 | 3.29 | ||||||||||||||
| Net Charge-offs (Recoveries) to Average Loans | 0.02 | 0.03 | (0.05) | ||||||||||||||
| Noninterest Expense to Average Assets | 2.51 | 2.37 | 2.76 | ||||||||||||||
Efficiency Ratio (5) | 86.48 | 69.14 | 56.56 | ||||||||||||||
| Asset Quality Ratios: | |||||||||||||||||
| Allowance for Credit Losses to Total Loans | 0.87 | % | 0.90 | % | 0.87 | % | |||||||||||
| Allowance for Credit Losses to Nonperforming Loans | 190.51 | 548.07 | 433.35 | ||||||||||||||
| Delinquent and Nonaccrual Loans to Total Loans | 0.86 | 0.72 | 0.62 | ||||||||||||||
| Nonperforming Loans to Total Loans | 0.46 | 0.16 | 0.20 | ||||||||||||||
| Nonperforming Loans to Total Assets | 0.34 | 0.12 | 0.15 | ||||||||||||||
| Nonperforming Assets to Total Assets | 0.34 | 0.12 | 0.16 | ||||||||||||||
| Capital Ratios: | |||||||||||||||||
Common Equity Tier 1 Capital to Risk-Weighted Assets (6) | 13.92 | % | 14.78 | % | 13.64 | % | |||||||||||
Tier 1 Capital to Risk-Weighted Assets (6) | 13.92 | 14.78 | 13.64 | ||||||||||||||
Total Capital to Risk-Weighted Assets (6) | 14.89 | 15.79 | 14.61 | ||||||||||||||
Tier 1 Leverage Capital to Adjusted Total Assets (6) | 10.15 | 9.98 | 10.19 | ||||||||||||||
| Other: | |||||||||||||||||
| Number of Branch Offices | 12 | 12 | 13 | ||||||||||||||
| Number of Full-Time Equivalent Employees | 172 | 160 | 161 | ||||||||||||||
(1)Represents dividends per share divided by net income per share.
(2)Represents the difference between the weighted average yield on average interest-earning assets and the weighted average cost of average interest-bearing liabilities.
(3)Represents net interest income as a percentage of average interest-earning assets.
(4)Fully taxable-equivalent (FTE) yield adjustments have been made for tax exempt loan and securities income utilizing a marginal federal income tax rate of 21%. Refer to Explanation of Use of Non-GAAP Financial Measures in Item 7 of this Report for the calculation of the measure and reconciliation to the most comparable GAAP measure.
(5)Represents noninterest expense divided by the sum of net interest income and noninterest income.
(6)Capital ratios are for Community Bank only.
29 | ||
Critical Accounting Policies and Use of Critical Accounting Estimates
Critical accounting policies are those that involve significant judgments, estimates and assumptions by management and that have, or could have, a material impact on the Company’s income or the carrying value of its assets.
Allowance for Credit Losses (ACL). The ACL represents the estimated amount considered necessary to cover lifetime expected credit losses inherent in financial assets at the balance sheet date. The measurement of expected credit losses is applicable to loans receivable and securities measured at amortized cost. It also applies to off-balance sheet credit exposures such as loan commitments and unused lines of credit. The allowance is established through a provision for credit losses that is charged against income. The methodology for determining the allowance for credit losses is considered a critical accounting policy by management because of the high degree of judgment involved, the subjectivity of the assumptions used, and the potential for changes in the forecasted economic environment that could result in changes to the amount of the recorded ACL. The ACL is reported separately as a contra-asset on the Consolidated Statement of Financial Condition. The expected credit loss for unfunded loan commitments is reported on the Consolidated Statement of Financial Condition in other liabilities while the provision for credit losses related to unfunded commitments is reported in provision for credit losses - unfunded commitments in the Consolidated Statements of Income.
ACL on Loans Receivable
The ACL on loans is deducted from the amortized cost basis of the loan to present the net amount expected to be collected. Expected losses are evaluated and calculated on a collective, or pooled, basis for those loans which share similar risk characteristics. At each reporting period, the Company evaluates whether loans within a pool continue to exhibit similar risk characteristics. If the risk characteristics of a loan change, such that they are no longer similar to other loans in the pool, the Company will evaluate the loan with a different pool of loans that share similar risk characteristics. If the loan does not share risk characteristics with other loans, the Company will evaluate the loan on an individual basis. The Company evaluates the pooling methodology at least annually. Loans are charged off against the ACL when the Company believes the balances to be uncollectible. Expected recoveries do not exceed the aggregate of amounts previously charged off or expected to be charged off.
The Company has chosen to segment its portfolio consistent with the manner in which it manages credit risk. Such segments include residential mortgage, commercial real estate mortgages, construction, commercial business, consumer and other. For most segments, the Company calculates estimated credit losses using a probability of default and loss given default methodology, the results of which are applied to the aggregated discounted cash flow of each individual loan within the segment. The point in time probability of default and loss given default are then conditioned by macroeconomic scenarios to incorporate reasonable and supportable forecasts that affect the collectability of the reported amount.
The Company estimates the ACL on loans via a quantitative analysis which considers relevant available information from internal and external sources related to past events and current conditions, as well as the incorporation of reasonable and supportable forecasts. The Company evaluates a variety of factors including third party economic forecasts, industry trends and other available published economic information in arriving at its forecasts. After the reasonable and supportable forecast period, the Company reverts, on a straight-line basis, to average historical losses. Expected credit losses are estimated over the contractual term of the loans, adjusted for expected prepayments when appropriate. The contractual term excludes expected extensions, renewals, and modifications unless either of the following applies: management has a reasonable expectation at the reporting date that a restructuring will be executed with an individual borrower or the renewal option is included in the original or modified contract at the reporting date and are not unconditionally cancellable by the Company.
Also included in the ACL on loans are qualitative reserves to cover losses that are expected but, in the Company’s assessment, may not be adequately represented in the quantitative analysis or the forecasts described above. Factors that the Company considers include changes in lending policies and procedures, business conditions, the nature and size of the portfolio, portfolio concentrations, the volume and severity of past due loans and nonaccrual loans, and the effect of external factors such as competition, legal and regulatory requirements, among others. Furthermore, the Company considers the inherent uncertainty in quantitative models that are built upon historical data.
Individually Evaluated Loans
On a case-by-case basis, the Company may conclude that a loan should be evaluated on an individual basis based on its disparate risk characteristics. When the Company determines that a loan no longer shares similar risk characteristics with other loans in the portfolio, the allowance will be determined on an individual basis using the present value of expected cash flows or, for collateral-dependent loans, the fair value of the collateral as of the reporting date, less estimated selling costs, as applicable. If the fair value of the collateral is less than the amortized cost basis of the loan, the Company will charge off the difference between the fair value of the collateral, less estimated costs to sell at the reporting date, and the amortized cost basis of the loan.
30 | ||
Accrued Interest Receivable
The Company made an accounting policy election to exclude accrued interest receivable from the amortized cost basis of loans and available-for-sale securities. Accrued interest receivable on loans is reported as a component of accrued interest receivable and other assets on the Consolidated Statement of Financial Condition, totaled $4.4 million at December 31, 2025 and is excluded from the estimate of credit losses. Accrued interest receivable on available-for-sale securities, also a component of accrued interest receivable and other assets on the Consolidated Statement of Financial Condition, totaled $2.0 million, at December 31, 2025 and is excluded from the estimate of credit losses.
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. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. A three-level fair value hierarchy prioritizes the inputs used to measure fair value:
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 Company attempts to maximize observable inputs and limit the use of unobservable inputs when developing fair value measurements, Fair value measurements for assets where there exists limited or no observable market data and that are based primarily upon the Company’s or other third-party’s estimates, are often calculated based on the characteristics of the asset, the economic and competitive environment and other such factors. Therefore, the results cannot be determined with precision and may not be realized in an actual sale or immediate settlement of the asset. Additionally, there may be inherent weaknesses in any calculation technique where changes in the underlying assumptions used, including discount rates and estimates of future cash flows, could significantly affect the results of current or future valuations.
Goodwill. Goodwill represents the excess of the cost of an acquisition over the fair value of the net assets acquired. Deemed to have an indefinite life and not subject to amortization, goodwill is instead tested for impairment at the reporting unit level at least annually or more frequently if triggering events occur or impairment indicators exist. The Company operates one segments – Community Banking. The Company has assigned 100% of the goodwill to the Community Banking segment.
Determining the fair value of a reporting unit under the goodwill impairment test is judgmental and often involves the use of significant estimates and assumptions. The Company applies a one-step quantitative test and records the amount of goodwill impairment as the excess of a reporting unit's carrying amount over its fair value, not to exceed the total amount of goodwill allocated to the reporting unit. The Company has the option to first assess qualitative factors to determine whether the existence of events or circumstances leads to a determination that it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If, after assessing the totality of events or circumstances, an entity determines it is not more likely than not that the fair value of a reporting unit is less than its carrying amount, then performing a step one impairment test is unnecessary. An entity also has the option to bypass the qualitative assessment for any reporting unit and proceed directly to the first step of impairment testing.
Two basic approaches to determine the fair value of an entity are the income approach and market approach or a combination of the two. The income approach uses valuation techniques to convert future earnings or cash flows to present value to arrive at a value that is indicated by market expectations about future amounts. The market approach uses observable prices and other relevant information that is generated by market transactions involving identical or comparable assets or liabilities. The fair value measure is based on the value that those transactions indicate. These approaches involve significant estimates and assumptions.
31 | ||
In the application of the income approach, fair value of a reporting unit is determined using a discounted cash flow analysis. The income approach relies on Level 3 inputs along with a market-derived cost of capital when measuring fair value. Fair value is determined by converting anticipated benefits into a present single value. Once the benefit or benefits are selected, an appropriate discount or capitalization rate is applied to each benefit. These rates are calculated using the appropriate measure for the size and type of company, using financial models and market data as required. A discount rate may be derived based on a modified capital asset pricing model, which is comprised of a risk-free rate of return, an equity risk premium, a size premium and a factor covering the systemic market risk and a company specific risk premium. The values for the factors applied are determined primarily using external sources of information. The discounted cash flow model also uses prospective financial information. Estimating future earnings and capital requirements involves judgment and the consideration of past and current performance and overall macroeconomic and regulatory environments.
Under the market approach, Level 1 and 2 inputs are used when measuring fair value. In the application of the market approach, the Guideline Public Company method of appraisal is based on the premise that pricing multiples of publicly traded companies can be used as a tool to be applied in valuing a closely held entity. A value multiple or ratio relates a stock’s market price to the reported accounting data such as revenue, earnings, and book value. These ratios provide an objective basis for measuring the market’s perception of a stock’s fair value. Value ratios generally reflect the trends in growth, performance and stability of the financial results of operations. In this way, the business and financial risks exhibited by an industry or group of companies can be viewed in relation to market values. Value ratios also reflect the market’s outlook for the economy as a whole. Guideline companies provide a reasonable basis for comparison to the relative investment characteristics of the company being valued. The Company analyzes the relationships between the guideline companies' asset size, profitability, asset quality and capital ratios and applies a control premium to the selected guideline company multiples. The control premium is management's estimate of how much a market participant would be willing to pay over the fair market value in consideration of synergies and other benefits that flow from control of the entity. The Guideline Public Company method using trading activity of publicly traded companies that are most similar to the Company may also be considered when the banking industry has a sufficient level of merger and acquisition activity.
The results of the income and market approaches may be weighted to determine the concluded fair value of the reporting unit. The weighting is judgmental and is based on the perceived level of appropriateness of the valuation methodology. Estimating the fair value involves the use of estimates and significant judgments that are based on a number of factors including actual operating results. If current conditions change from those expected, it is reasonably possible that the judgments and estimates described above could change in future periods and require management to further evaluate goodwill for impairment.
If the Company determines a triggering event occurs in the future, changes in the judgments, assumptions and inputs noted above could result in additional goodwill impairment.
Deferred Taxes. Deferred income tax expense results from changes in deferred tax assets and liabilities between periods. Deferred tax assets and liabilities are the expected future tax amounts for the temporary differences between carrying amounts and tax bases of assets and liabilities, computed using enacted tax rates. A valuation allowance, if needed, reduces deferred tax assets to the amount expected to be realized. A tax position is recognized as a benefit only if it is "more likely than not" that the tax position would be sustained in a tax examination, with a tax examination being presumed to occur. The amount recognized is the largest amount of tax benefit that is greater than 50% likely of being realized on examination. For tax positions not meeting the "more likely than not" test, no tax benefit is recorded. The Company did not have a deferred tax asset valuation allowance as of December 31, 2025 and December 31, 2024.
Recent Accounting Pronouncements and Developments
New accounting pronouncements that were adopted in the current period or will be adopted in a future period are discussed in Note 1 – Summary of Significant Accounting Policies in the Notes to Consolidated Financial Statements, which is included in Part IV, Item 15 of this Report.
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Explanation of Use of Non-GAAP Financial Measures
In addition to traditional measures presented in accordance with generally accepted accounting principles (“GAAP”), we use, and this Report 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. Although we believe that these Non-GAAP financial measures enhance the understanding of our business and performance, these Non-GAAP financial measures 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. Refer to the "Reconciliations of Non-GAAP Financial Measures to GAAP" within this Item 7 for further information.
Comparison of Financial Condition at December 31, 2025 and 2024
Assets. Total assets increased $66.1 million, or 4.5%, to $1.55 billion at December 31, 2025, compared to $1.48 billion at December 31, 2024.
Cash and Due From Banks. Cash and due from banks decreased $17.9 million, or 36.1%, to $31.7 million at December 31, 2025, compared to $49.6 million at December 31, 2024. The change is primarily related to net funding of loans and securities.
Securities. Securities increased $17.7 million, or 6.8%, to $279.9 million at December 31, 2025, compared to $262.2 million at December 31, 2024. During the year, the Bank implemented a balance sheet repositioning strategy of its portfolio of available-for-sale investment securities, in which $129.6 million in book value of lower-yielding investment securities with an average yield of 2.87% were sold for an $11.8 million loss ($9.3 million after-tax). Investment securities sold included $121.1 million of mortgage-backed securities/collateralized mortgage obligations issued by the U.S. government-sponsored agencies, $5.0 million of U.S. government agency securities and $3.5 million of municipal securities. The Bank then purchased $117.8 million of higher-yielding mortgage-backed securities/collateralized mortgage obligations issued by U.S government-sponsored agencies, municipal securities, subordinated debt investments and non-agency guaranteed securitizations with an expected tax-equivalent yield of approximately 5.43%. This strategy is expected to add nearly 19 basis points to net interest margin and approximately $0.40 to annual earnings per share.
Securities Portfolio. The following table sets forth the composition of our securities portfolio at the dates indicated.
| 2025 | 2024 | ||||||||||||||||||||||
| December 31, | Amortized Cost | Fair Value | Amortized Cost | Fair Value | |||||||||||||||||||
| (Dollars in Thousands) | |||||||||||||||||||||||
| Available-for-Sale Debt Securities: | |||||||||||||||||||||||
| U.S. Government Agencies | $ | — | $ | — | $ | 4,996 | $ | 3,945 | |||||||||||||||
| Obligations of States and Political Subdivisions | 35,227 | 36,224 | 3,496 | 3,347 | |||||||||||||||||||
| Mortgage-Backed Securities - Government-Sponsored Enterprises | 40,577 | 41,089 | 53,628 | 50,363 | |||||||||||||||||||
| Collateralized Mortgage Obligations - Government-Sponsored Enterprises | 72,266 | 67,575 | 111,076 | 94,957 | |||||||||||||||||||
| Collateralized Mortgage Obligations - Non-Agency | 10,671 | 10,547 | — | — | |||||||||||||||||||
| Collateralized Loan Obligations | 101,409 | 101,218 | 98,741 | 98,779 | |||||||||||||||||||
| Corporate Debt | 23,172 | 22,333 | 9,479 | 8,123 | |||||||||||||||||||
| Total Available-for-Sale Debt Securities | $ | 283,322 | $ | 278,986 | $ | 281,416 | $ | 259,514 | |||||||||||||||
| Equity Securities: | |||||||||||||||||||||||
| Mutual Funds | 909 | 879 | |||||||||||||||||||||
| Other | — | 1,760 | |||||||||||||||||||||
| Total Equity Securities | 909 | 2,639 | |||||||||||||||||||||
| Total Securities | $ | 279,895 | $ | 262,153 | |||||||||||||||||||
33 | ||
Securities Portfolio Maturities and Yields. The composition and maturities of the debt securities portfolio at December 31, 2025, are summarized in the following table. Maturities are based on the final contractual payment dates, and do not reflect the impact of prepayments or early redemptions that may occur. The weighted average yield for each security category is determined by the security's book yield and calculating the interest earned divided by the carrying value. For tax free obligations of states and political subdivision, the book yield is the tax free yield.
| One Year or Less | More than One Year Through Five Years | More than Five Years Through Ten Years | More than Ten Years | Total | ||||||||||||||||||||||||||||||||||||||||
| Fair Value | Weighted Average Yield | Fair Value | Weighted Average Yield | Fair Value | Weighted Average Yield | Fair Value | Weighted Average Yield | Fair Value | Weighted Average Yield | |||||||||||||||||||||||||||||||||||
| (Dollars in Thousands) | ||||||||||||||||||||||||||||||||||||||||||||
| Obligations of States and Political Subdivisions | — | — | — | — | — | — | 36,224 | 4.72 | 36,224 | 4.72 | ||||||||||||||||||||||||||||||||||
| Mortgage Backed Securities - Government-Sponsored Enterprises | — | — | 47 | 1.92 | — | — | 41,042 | 4.83 | 41,089 | 4.82 | ||||||||||||||||||||||||||||||||||
| Collateralized Mortgage Obligations - Government-Sponsored Enterprises | — | — | — | — | — | — | 67,575 | 3.80 | 67,575 | 3.80 | ||||||||||||||||||||||||||||||||||
| Collateralized Mortgage Obligations - Non-Agency | — | — | — | — | — | — | 10,547 | 5.45 | 10,547 | 5.45 | ||||||||||||||||||||||||||||||||||
| Collateralized Loan Obligations | — | — | — | — | 14,639 | 6.35 | 86,579 | 5.47 | 101,218 | 5.59 | ||||||||||||||||||||||||||||||||||
| Corporate Debt Securities | — | — | — | — | 22,333 | 6.24 | — | — | 22,333 | 6.24 | ||||||||||||||||||||||||||||||||||
| Total Debt Securities | $ | — | — | % | $ | 47 | 1.92 | % | $ | 36,972 | 6.28 | % | $ | 241,967 | 4.76 | % | $ | 278,986 | 4.96 | % | ||||||||||||||||||||||||
Loans. Total loans increased $69.6 million, or 6.4%, to $1.16 billion at December 31, 2025 compared to $1.09 billion at December 31, 2024. The change was driven by increases in commercial real estate loans and commercial and industrial loans of $66.7 million and $49.0 million, respectively, partially offset by decreases in consumer loans, residential mortgage loans, construction real estate loans and other loans of $27.6 million, $9.3 million, $8.8 million and $396,000, respectively. The decrease in consumer loans resulted from a reduction in indirect automobile loan production due to 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. Excluding the $29.6 million decrease in indirect automobile loans, total loans increased $99.3 million, or 9.6%. Average net loans for the year ended December 31, 2025 increased $34.7 million compared to the year ended December 31, 2024.
34 | ||
Loan Portfolio Composition. The following table sets forth the composition of the Company’s loan portfolio by type of loan at the dates indicated.
| 2025 | 2024 | ||||||||||||||||||||||
| December 31, | Amount | Percent | Amount | Percent | |||||||||||||||||||
| (Dollars in Thousands) | |||||||||||||||||||||||
| Real Estate: | |||||||||||||||||||||||
| Residential | $ | 329,237 | 28.3 | % | $ | 337,990 | 30.9 | % | |||||||||||||||
| Commercial | 552,180 | 47.5 | 485,513 | 44.4 | |||||||||||||||||||
| Construction | 45,419 | 3.9 | 54,705 | 5.0 | |||||||||||||||||||
| Commercial and Industrial | 161,081 | 13.9 | 112,047 | 10.3 | |||||||||||||||||||
| Consumer | 42,876 | 3.7 | 70,508 | 6.5 | |||||||||||||||||||
| Other | 31,467 | 2.7 | 31,863 | 2.9 | |||||||||||||||||||
| Total Loans | 1,162,260 | 100.0 | % | 1,092,626 | 100.0 | % | |||||||||||||||||
| Allowance for Credit Losses | (10,116) | (9,805) | |||||||||||||||||||||
| Loans, Net | $ | 1,152,144 | $ | 1,082,821 | |||||||||||||||||||
The Company's loan portfolio is a mix of consumer and commercial credits. Overall credit exposure and portfolio compensation is managed via a credit concentration policy. The policy designates specific loan types, collateral types and loan structures to be formally tracked and assigned maximum exposure limits as a percentage of capital. Commercial lending by asset class, specific limits for Commercial Real Estate ("CRE") project types, loans secured by residential real estate, large dollar exposures and designated high risk loan categories represent examples of specifically tracked components of our concentration management process. There are no identified concentrations that exceed the assigned exposure limits. Our concentration management policy is approved by the Company's Board of Directors and is used to ensure a high-quality, well diversified portfolio that is consistent with our overall objective of maintaining an acceptable level of risk.
The Company's CRE portfolio totaled $552.2 million at December 31, 2025, an increase of $66.7 million, or 13.7%, compared to December 31, 2024. CRE loans are concentrated in the Pittsburgh metropolitan area.
The tables below provide further detail of the composition of the CRE portfolio as of December 31, 2025:
| (Dollars in thousands) | CRE Nonowner Occupied Loans | |||||||||||||
| Outstanding Balance | Percent | Average Loan Size | Average LTV (1) | |||||||||||
| Retail Space | $ | 111,023 | 25.57 | % | $ | 1,500 | 61.56 | % | ||||||
| Multifamily | 101,591 | 23.40 | % | 986 | 61.89 | % | ||||||||
| Warehouse Space | 77,856 | 17.93 | % | 2,049 | 55.90 | % | ||||||||
| Office Space | 57,168 | 13.17 | % | 1,243 | 57.26 | % | ||||||||
| Manufacturing | 21,391 | 4.93 | % | 2,139 | 42.86 | % | ||||||||
| Medical Facilities | 18,103 | 4.17 | % | 1,207 | 55.74 | % | ||||||||
| Hotels | 13,445 | 3.10 | % | 1,921 | 58.94 | % | ||||||||
| Oil & Gas | 4,740 | 1.09 | % | 1,580 | 57.94 | % | ||||||||
| Senior Housing | 3,223 | 0.74 | % | 3,223 | 41.29 | % | ||||||||
| Other | 25,638 | 5.90 | % | 884 | 59.26 | % | ||||||||
| Total Nonowner Occupied CRE | $ | 434,178 | 100.00 | % | $ | 1,332 | 58.49 | % | ||||||
(1) Based on collateral value at the time of loan origination.
35 | ||
| (Dollars in Thousands) | CRE Owner Occupied Loans | |||||||||||||
| Outstanding Balance | Percent | Average Loan Size | Average LTV (1) | |||||||||||
| Retail Space | $ | 26,725 | 22.65 | % | $ | 668 | 52.20 | % | ||||||
| Warehouse Space | 20,558 | 17.42 | % | 791 | 42.23 | % | ||||||||
| Office Space | 9,000 | 7.63 | % | 429 | 72.60 | % | ||||||||
| Medical Facilities | 8,672 | 7.35 | % | 667 | 74.45 | % | ||||||||
| Senior Housing | 5,841 | 4.95 | % | 1,947 | 26.90 | % | ||||||||
| Oil & Gas | 4,616 | 3.91 | % | 659 | 65.96 | % | ||||||||
| Manufacturing | 2,928 | 2.48 | % | 325 | 58.44 | % | ||||||||
| Hotels | 1,993 | 1.69 | % | 1,993 | 74.73 | % | ||||||||
| Other | $ | 37,669 | 31.92 | % | $ | 477 | 53.02 | % | ||||||
| Total Owner Occupied CRE | $ | 118,002 | 100.00 | % | $ | 593 | 53.74 | % | ||||||
(1) Based on collateral value at the time of loan origination.
Loan Portfolio Maturities and Yields. The following table summarizes the scheduled repayments of our loan portfolio at December 31, 2025. Demand loans, loans having no stated repayment schedule or maturity, and overdraft loans are reported as being due in one year or less. For construction-to-permanent loans in the construction category, the maturity date is the date the loan matures once it is in permanent repayment status. Consumer loans consist primarily of indirect automobile loans whereby a portion of the rate is prepaid to the dealer and accrued in a prepaid dealer reserve account. Therefore, the true yield for the consumer loan portfolio is significantly less than the note rate disclosed below.
| Real Estate | |||||||||||||||||||||||||||||||||||||||||||||||
| Residential | Commercial | Construction | Commercial and Industrial | ||||||||||||||||||||||||||||||||||||||||||||
| Amount | Weighted Average Rate | Amount | Weighted Average Rate | Amount | Weighted Average Rate | Amount | Weighted Average Rate | ||||||||||||||||||||||||||||||||||||||||
| (Dollars in Thousands) | |||||||||||||||||||||||||||||||||||||||||||||||
| One Year or Less | $ | 23,839 | 6.39 | % | $ | 22,788 | 6.16 | % | $ | 809 | 9.48 | % | $ | 64,444 | 6.01 | % | |||||||||||||||||||||||||||||||
| After One Year Through Five Years | 17,195 | 5.53 | 196,290 | 6.07 | 40,012 | 6.18 | 58,604 | 6.29 | |||||||||||||||||||||||||||||||||||||||
| After Five Years Through 15 Years | 112,417 | 5.31 | 329,166 | 5.74 | 4,598 | 6.60 | 38,033 | 5.57 | |||||||||||||||||||||||||||||||||||||||
| After 15 Years | 175,786 | 4.13 | 3,936 | 3.86 | — | — | — | — | |||||||||||||||||||||||||||||||||||||||
| Total | $ | 329,237 | 4.77 | % | $ | 552,180 | 5.86 | % | $ | 45,419 | 6.28 | % | $ | 161,081 | 6.01 | % | |||||||||||||||||||||||||||||||
| Consumer | Other | Total | |||||||||||||||||||||||||||||||||
| Amount | Weighted Average Rate | Amount | Weighted Average Rate | Amount | Weighted Average Rate | ||||||||||||||||||||||||||||||
| (Dollars in Thousands) | |||||||||||||||||||||||||||||||||||
| One Year or Less | $ | 10,117 | 6.71 | % | $ | 1,162 | 6.08 | % | $ | 123,159 | 6.19 | % | |||||||||||||||||||||||
| After One Year Through Five Years | 31,625 | 5.44 | 860 | 3.70 | 344,586 | 6.03 | |||||||||||||||||||||||||||||
| After Five Years Through 15 Years | 82 | 4.54 | 21,283 | 4.37 | 505,579 | 5.58 | |||||||||||||||||||||||||||||
| After 15 Years | 1,052 | 8.75 | 8,162 | 3.31 | 188,936 | 4.09 | |||||||||||||||||||||||||||||
| Total | $ | 42,876 | 5.76 | % | $ | 31,467 | 4.14 | % | $ | 1,162,260 | 5.54 | % | |||||||||||||||||||||||
36 | ||
The following table sets forth at December 31, 2025, the dollar amount of all fixed-rate and adjustable-rate loans due after December 31, 2026.
Due After December 31, 2026 | Fixed | Adjustable | Total | ||||||||||||||
| (Dollars in Thousands) | |||||||||||||||||
| Real Estate: | |||||||||||||||||
| Residential | $ | 244,417 | $ | 60,981 | $ | 305,398 | |||||||||||
| Commercial | 318,729 | 210,663 | 529,392 | ||||||||||||||
| Construction | 42,471 | 2,139 | 44,610 | ||||||||||||||
| Commercial and Industrial | 88,398 | 8,239 | 96,637 | ||||||||||||||
| Consumer | 32,660 | 99 | 32,759 | ||||||||||||||
| Other | 27,891 | 2,414 | 30,305 | ||||||||||||||
| Total Loans | $ | 754,566 | $ | 284,535 | $ | 1,039,101 | |||||||||||
Liabilities. Total liabilities increased $56.0 million, or 4.2%, to $1.39 billion at December 31, 2025 compared to $1.33 billion at December 31, 2024.
Deposits. Total deposits increased $56.3 million, or 4.4%, to $1.34 billion as of December 31, 2025 compared to $1.28 billion at December 31, 2024. Interest-bearing demand deposits, non interest-bearing demand deposits and time deposits increased $40.4 million, $23.8 million and $15.6 million, respectively, while money market deposits and savings deposits decreased $22.3 million and $1.2 million respectively. This favorable change in the deposit mix occurred as the Bank continues to focus on building core banking relationships while strategically reducing higher priced funding. Brokered time deposits totaled $98.5 million as of December 31, 2025, compared to $39.0 million at December 31, 2024, all of which mature within three months and were utilized to fund the purchase of floating rate CLO securities. FDIC insured deposits totaled approximately 59.5% of total deposits while an additional 15.7% of deposits were collateralized with investment securities.
The following table sets forth the distribution of our average deposit accounts, by account type, for the years indicated.
| 2025 | 2024 | ||||||||||||||||||||||||||||||||||
| Year Ended December 31, | Average Balance | Percent | Weighted Average Rate | Average Balance | Percent | Weighted Average Rate | |||||||||||||||||||||||||||||
| (Dollars in Thousands) | |||||||||||||||||||||||||||||||||||
| Noninterest-Bearing Demand Accounts | $ | 273,295 | 21.1 | % | — | % | $ | 270,528 | 20.7 | % | — | % | |||||||||||||||||||||||
| Interest-Bearing Demand Accounts | 342,698 | 26.5 | 2.01 | 326,073 | 24.9 | 2.27 | |||||||||||||||||||||||||||||
| Money Market Accounts | 223,093 | 17.2 | 2.74 | 215,864 | 16.5 | 3.11 | |||||||||||||||||||||||||||||
| Savings Accounts | 171,594 | 13.2 | 0.10 | 180,647 | 13.8 | 0.11 | |||||||||||||||||||||||||||||
| Time Deposits | 284,727 | 22.0 | 3.61 | 314,510 | 24.1 | 4.49 | |||||||||||||||||||||||||||||
| Total Deposits | $ | 1,295,407 | 100.0 | % | 1.81 | % | $ | 1,307,622 | 100.0 | % | 2.17 | % | |||||||||||||||||||||||
37 | ||
The following table sets forth time deposits classified by interest rate as of the dates indicated.
| December 31, | 2025 | 2024 | |||||||||
| (Dollars in Thousands) | |||||||||||
| Less than 0.25% | $ | 510 | $ | 1,493 | |||||||
| 0.25% to 0.49% | 2,460 | 3,707 | |||||||||
| 0.50% to 0.99% | 402 | 2,489 | |||||||||
| 1.00% to 1.49% | 10,554 | 2,932 | |||||||||
| 1.50% to 1.99% | 8,289 | 6,001 | |||||||||
| 2.00% to 2.49% | 59,592 | 9,753 | |||||||||
| 2.49% to 2.99% | 1,989 | 1,056 | |||||||||
| 3.00% to 3.99% | 216,602 | 16,475 | |||||||||
| 4.00% to 4.99% | 12,051 | 224,230 | |||||||||
| 5.00% or Greater | 4 | 28,733 | |||||||||
| Total Time Deposits | $ | 312,453 | $ | 296,869 | |||||||
The following table sets forth, by interest rate ranges and scheduled maturity, information concerning our time deposits at the date indicated.
| Period to Maturity | |||||||||||||||||||||||||||||||||||||||||||||||
| December 31, 2025 | Less Than Or Equal to One Year | More Than One to Two Years | More Than Two to Three Years | More Than Three to Four Years | More Than Four to Five Years | More Than Five Years | Total | Percent of Total | |||||||||||||||||||||||||||||||||||||||
| (Dollars in Thousands) | |||||||||||||||||||||||||||||||||||||||||||||||
| Less than 0.25% | $ | 437 | $ | 51 | $ | 21 | $ | — | $ | 1 | $ | — | $ | 510 | 0.2 | % | |||||||||||||||||||||||||||||||
| 0.25% to 0.49% | 1,198 | 1,262 | — | — | — | — | 2,460 | 0.8 | |||||||||||||||||||||||||||||||||||||||
| 0.50% to 0.99% | 13 | 60 | 2 | 61 | 23 | 243 | 402 | 0.1 | |||||||||||||||||||||||||||||||||||||||
| 1.00% to 1.49% | 10,096 | 185 | — | — | 23 | 250 | 10,554 | 3.4 | |||||||||||||||||||||||||||||||||||||||
| 1.50% to 1.99% | 7,427 | 741 | 118 | — | 3 | — | 8,289 | 2.7 | |||||||||||||||||||||||||||||||||||||||
| 2.00% to 2.49% | 31,255 | 19,921 | 3,447 | 1,893 | 3,076 | — | 59,592 | 19.1 | |||||||||||||||||||||||||||||||||||||||
| 2.49% to 2.99% | 1,615 | 286 | — | 88 | — | — | 1,989 | 0.6 | |||||||||||||||||||||||||||||||||||||||
| 3.00% to 3.99% | 215,132 | 912 | 80 | — | 478 | — | 216,602 | 69.2 | |||||||||||||||||||||||||||||||||||||||
| 4.00% to 4.99% | 12,051 | — | — | — | — | — | 12,051 | 3.9 | |||||||||||||||||||||||||||||||||||||||
| 5.00% or Greater | 4 | — | — | — | — | — | 4 | — | |||||||||||||||||||||||||||||||||||||||
| Total | $ | 279,228 | $ | 23,418 | $ | 3,668 | $ | 2,042 | $ | 3,604 | $ | 493 | $ | 312,453 | 100.0 | % | |||||||||||||||||||||||||||||||
As of December 31, 2025 and 2024, the aggregate estimated amount of outstanding deposits in amounts uninsured by the FDIC, or that were not secured by the Bank through the pledging of securities, FHLB letters of credit or other means, was approximately $309.6 million and $272.0 million, respectively. The estimates are based on the same methodologies and assumptions used for the Bank's regulatory reporting requirements. Of the amount at December 31, 2025, an estimated $44.9 million are uninsured time deposits and the following table sets forth their maturity.
| December 31, | 2025 | ||||
| (Dollars in Thousands) | |||||
| Three Months or Less | $ | 28,041 | |||
| Over Three Months to Six Months | 9,771 | ||||
| Over Six Months to One Year | 5,057 | ||||
| Over One Year | 2,062 | ||||
| Total | $ | 44,931 | |||
38 | ||
Borrowed Funds
•Short-term borrowings. There were no short-term borrowings at December 31, 2025 or December 31, 2024.
•Other borrowed funds. Other borrowed funds increased $40,000 to $34.76 million at December 31, 2025, compared to $34.72 million at December 31, 2024. Borrowings for December 31, 2025 consisted of $20.0 million of FHLB advances entered into in June 2025 for a term of 24 months at 4.08%. Borrowings at December 31, 2024 consisted of $20.0 million of FHLB advances entered into in June 2023 for a term of 24 months at 4.92%. The proceeds of the FHLB borrowings were utilized to match fund originations within the Bank’s commercial and industrial loan portfolio. Borrowings at both period ends also included $14.7 million related to the Company's unsecured subordinated debt obligation.
Stockholders’ Equity. Stockholders’ equity increased $10.2 million, or 6.9%, to $157.5 million at December 31, 2025, compared to $147.4 million at December 31, 2024.
•Key factors positively impacting stockholders’ equity included a $13.8 million decrease in accumulated other comprehensive loss resulting from the securities repositioning strategy, $4.9 million of net income for the current period and $2.6 million of shares issued as a result of stock option exercises, partially offset by $6.8 million in treasury stock repurchases and the payment of $5.1 million in dividends since December 31, 2024.
•Book value per share was $31.28 at December 31, 2025 compared to $28.71 at December 31, 2024, an increase of $2.57. Tangible book value per share (Non-GAAP) increased $2.53, or 9.4%, to $29.35 at December 31, 2025 compared to $26.82 at December 31, 2024. Refer to “Explanation of Use of Non-GAAP Financial Measures” at the end of this section.
Comparison of Operating Results for the Years Ended December 31, 2025 and 2024
Overview. 2025 and 2024 Annual Results were impacted by the following significant item:
•During the third quarter of 2025, the Company implemented a balance sheet repositioning strategy of its portfolio of available-for-sale investment securities in which $129.6 million in book value of lower-yielding investment securities with an average yield of 2.87% were sold for an $11.8 million loss. Investment securities sold included $121.1 million of mortgage-backed securities/collateralized mortgage obligations issued by the U.S. government-sponsored agencies, $5.0 million of U.S. government agency securities and $3.5 million of municipal securities. The Bank then purchased $117.8 million of higher-yielding mortgage-backed securities/collateralized mortgage obligations issued by U.S government-sponsored agencies, municipal securities, subordinated debt investments and non-agency guaranteed securitizations with an expected tax-equivalent yield of approximately 5.43%.
Net Interest Income. Net interest income increased $4.7 million, or 10.2%, to $50.8 million for the year ended December 31, 2025 compared to $46.1 million for the year ended December 31, 2024. Net interest margin (Non-GAAP) increased 38 bps to 3.58% for the year ended December 31, 2025 compared to 3.20% the year ended December 31, 2024. Net interest margin (GAAP) increased to 3.55% for the year ended December 31, 2025 compared to 3.19% for the year ended December 31, 2024.
Interest and dividend income decreased $192,000, or 0.3%, to $75.9 million for the year ended December 31, 2025 compared to $76.1 million for the year ended December 31, 2024.
•Interest income on loans increased $2.7 million, or 4.5%, to $62.1 million for the year ended December 31, 2025 compared to $59.4 million for the year ended December 31, 2024. Average loans increased $34.7 million and the loan yield increased 7 bps to 5.62% for the year ended December 31, 2025 compared to 5.55% for the year ended December 31, 2024.
•Interest income on investment securities increased $548,000, or 4.8%, to $12.1 million for the year ended December 31, 2025 compared to $11.5 million for the year ended December 31, 2024. Average investment securities increased $9.2 million and there was a 11 bps increase in average yield. These changes were primarily due to the securites repositioning strategy.
•Interest from other interest-earning assets, which primarily consists of interest-earning cash, decreased $3.4 million, or 66.0%, to $1.7 million for the year ended December 31, 2025 compared to $5.1 million for the year ended December 31, 2024. Average interest bearing deposits at other banks decreased $59.1 million, primarily related to changes in deposits and loans, and there was a 108 bps decrease in average yield due to recent decreases in Fed interest rates.
Interest expense decreased $4.9 million, or 16.3%, to $25.2 million for the year ended December 31, 2025 compared to $30.1 million for the year ended December 31, 2024. This decrease was largely due to a 43 basis point decrease in the cost of interest-bearing liabilities to 2.37% for the year ended December 31, 2025 compared to 2.80% for the year ended December 31, 2024, causing a $4.7 million decrease in interest expense.
39 | ||
•Interest expense on deposits decreased $5.0 million, or 17.6%, to $23.4 million for the year ended December 31, 2025 compared to $28.4 million for the year ended December 31, 2024. The cost of interest-bearing deposits decreased 45 basis points to 2.29% for the year ended December 31, 2025 compared to 2.74% for the year ended December 31, 2024 causing a $4.6 million decrease in interest expense. Additionally, average interest-bearing deposits decreased $15.0 million, causing a $391,000 million decrease in interest expense. Declining market interest rates led to the repricing of interest-bearing demand and money market deposits and the deposit mix shifted from time deposits into noninterest-bearing and interest-bearing demand deposits as the Bank focused on building core banking relationships while strategically reducing higher priced time deposits.
•Interest expense on borrowed funds increased $97,000, or 6.0%, to $1.7 million for the year ended December 31, 2025 compared to $1.6 million for the year ended December 31, 2024 primarily due to a $4.2 million increase in average balances due to utilization of short-term borrowings to fund loan growth, partially offset by a 29 basis point decrease in the rate on other borrowings as a $20.0 million FHLB advance matured in June 2025 and was replaced at a lower cost.
Provision for Credit Losses. The provision for credit losses was $589,000 for the year ended December 31, 2025, compared to $570,000 for the year ended December 31, 2024. The provision for loan losses in 2025 was primarily due to growth in non-owner occupied commercial real estate and commercial and industrial loans. Net charge-offs for the year ended December 31, 2025 were $223,000 while net charge-offs for the year ended December 31, 2024 were $281,000 due to a decline in charge-offs for indirect auto loans, partially offset by current year increases in charge-offs for commercial and industrial and other consumer loans. Total recoveries remained constant year over year with an increase in recoveries on other consumer loans, mainly offset by a decline in recoveries on commercial and industrial loans.
Noninterest (Loss) Income. The breakdown of noninterest (loss) income for the year ended December 31, 2025 compared to year ended December 31, 2024 is as follows:
| Year Ended | ||||||||||||||
| December 31, | ||||||||||||||
| 2025 | 2024 | Dollar Change | Percent Change | |||||||||||
| (Dollars in Thousands) | ||||||||||||||
| Service Fees | $ | 2,180 | $ | 1,680 | $ | 500 | 29.8 | % | ||||||
| Insurance Commissions | 4 | 6 | (2) | (33.3) | % | |||||||||
| Other Commissions | 252 | 251 | 1 | 0.4 | % | |||||||||
| Net Gain on Sale of Loans | 105 | 52 | 53 | 101.9 | % | |||||||||
| Net (Loss) Gain on Investment Securities | (11,807) | 51 | (11,858) | (23251.0) | % | |||||||||
| Net Gain on Purchased Tax Credits | 14 | 49 | (35) | (71.4) | % | |||||||||
| Gain on Sale of Subsidiary | — | 138 | (138) | (100.0) | % | |||||||||
| Net Gain on Disposal of Premises and Equipment | 40 | 274 | (234) | (85.4) | % | |||||||||
| Income from Bank-Owned Life Insurance | 603 | 594 | 9 | 1.5 | % | |||||||||
| Net Gain from Bank-Owned Life Insurance Claims | — | 915 | (915) | (100.0) | % | |||||||||
| Other Income | 1,379 | 1,484 | (105) | (7.1) | % | |||||||||
| Total Noninterest (Loss) Income | $ | (7,230) | $ | 5,494 | $ | (12,724) | (231.6) | % | ||||||
Noninterest income decreased $12.7 million, or 231.6%, to a $7.2 million loss for the year ended December 31, 2025, compared to income of $5.5 million for the year ended December 31, 2024.
•Net (loss) gain on investment securities was an $11.8 million loss for the year ended December 31, 2025, compared to a gain of $51,000 for the year ended December 31, 2024. The loss recognized during 2025 was primarily attributable to the securities repositioning strategy implemented during the third quarter of the year.
•The Company recorded a $40,000 net gain on disposal of premises and equipment in the current year related to the sale of a corporate storage warehouse, compared to a $274,000 gain in the prior year related to the sale of one branch location.
40 | ||
•On December 1, 2023, the Company announced that the Bank and EU entered into an Asset Purchase Agreement with World pursuant to which EU sold substantially all of its assets to World for a purchase price of $30.5 million cash plus possible additional earn-out payments. The sale of assets was completed on December 8, 2023 at which time the Company recognized a $24.6 million pre-tax gain on the sale of EU assets. During 2024, the Company recognized an additional gain of $138,000 following the final settlement of all liabilities. In addition, other income for the year ended December 31, 2025 and 2024 includes a $750,000 and $708,000 earn-out payment related to the sale of EU, respectively.
•Service fees increased $500,000, or 27.2% to $2.2 million for the year ended December 31, 2025, compared to $1.7 million for the year ended December 31, 2024 primarily related to fees on corporate deposit and Individual Covered Health Reimbursement Arrangement accounts.
Noninterest Expense. The breakdown of noninterest expense for the year ended December 31, 2025 compared to the year ended December 31, 2024 is as follows:
| Year Ended | ||||||||||||||
| December 31, | ||||||||||||||
| 2025 | 2024 | Dollar Change | Percent Change | |||||||||||
| (Dollars in Thousands) | ||||||||||||||
| Salaries and Employee Benefits | $ | 22,213 | $ | 18,821 | $ | 3,392 | 18.0 | % | ||||||
| Occupancy | 2,513 | 3,096 | (583) | (18.8) | % | |||||||||
| Equipment | 1,452 | 1,155 | 297 | 25.7 | % | |||||||||
| Data Processing | 3,055 | 3,308 | (253) | (7.6) | % | |||||||||
| Federal Deposit Insurance Corporation Assessment | 724 | 639 | 85 | 13.3 | % | |||||||||
| Pennsylvania Shares Tax | 948 | 1,161 | (213) | (18.3) | % | |||||||||
| Contracted Services | 1,543 | 1,623 | (80) | (4.9) | % | |||||||||
| Legal and Professional Fees | 1,024 | 985 | 39 | 4.0 | % | |||||||||
| Advertising | 566 | 484 | 82 | 16.9 | % | |||||||||
| Other Real Estate Owned (Income) | 65 | 50 | 15 | 30.0 | % | |||||||||
| Amortization of Intangible Assets | — | 958 | (958) | (100.0) | % | |||||||||
| Other | 3,553 | 3,369 | 184 | 5.5 | % | |||||||||
| Total Noninterest Expense | $ | 37,656 | $ | 35,649 | $ | 2,007 | 5.6 | % | ||||||
Noninterest expense increased $2.0 million, or 5.6%, to $37.7 million for the year ended December 31, 2025 compared to $35.6 million for the year ended December 31, 2024.
•Salaries and employee benefits increased $3.4 million to $22.2 million for the year ended December 31, 2025 compared to $18.8 million for the year ended December 31, 2024. The increase was primarily due to higher salaries, insurance and retirement benefits and tax expense related to the addition of revenue producing staff in the Bank's Commercial Banking and Treasury divisions, merit increases and higher incentive compensation costs.
•Equipment expense increased $297,000 to $1.5 million for the year ended December 31, 2025 compared to $1.2 for the year ended December 31, 2024 due to higher depreciation and maintenance expenses associated with interactive teller machines, security system upgrades and other equipment placed into service in late 2024.
•Amortization of intangible assets decreased $958,000 as the Bank’s core deposit intangible was fully amortized in 2024 and there was no expense recorded for the year ended December 31, 2025.
•Occupancy expense decreased $583,000 to $2.5 million for the year ended December 31, 2025 compared to $3.1 million for the year ended December 31, 2024 due to certain property management cost savings initiatives implemented in 2025.
•Data processing expense decreased $253,000 to $3.1 million for the year ended December 31, 2025 compared to $3.3 million for the year ended December 31, 2024. The decrease was primarily related to the utilization of certain vendor credits in 2025 and higher costs in 2024 related to the implementation of a new loan origination system and a financial dashboard program.
•Pennsylvania shares tax expense decreased $213,000 to $948,000 for the year ended December 31, 2025 compared to $1.2 million for the year ended December 31, 2024 due to $242,000 of refunds received in 2025 on amended returns filed for prior years.
41 | ||
Income Tax Expense. Income tax expense decreased $2.4 million to $397,000 for the year ended December 31, 2025, compared to $2.7 million for the year ended December 31, 2024 and is primarily attributed to the decrease in pre-tax income.
Average Balances and Yields. The following table sets forth average balance sheets, average yields and costs, and certain other information for the years indicated. Tax-equivalent yield adjustments have been made for tax exempt loan and securities income utilizing a marginal federal income tax rate of 21%. All average balances are daily average balances. Nonaccrual loans are included in the computation of average balances only. 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.
| 2025 | 2024 | ||||||||||||||||||||||
Year Ended December 31, | Average Balance | Interest and Dividends | Yield/ Cost | Average Balance | Interest and Dividends | Yield/ Cost | |||||||||||||||||
| (Dollars in Thousands) | |||||||||||||||||||||||
| Assets: | |||||||||||||||||||||||
| Interest-Earning Assets: | |||||||||||||||||||||||
Loans, Net (1) | $ | 1,108,344 | $ | 62,313 | 5.62 | % | $ | 1,073,601 | $ | 59,544 | 5.55 | % | |||||||||||
| Securities | |||||||||||||||||||||||
| Taxable | 265,757 | 11,520 | 4.33 | 268,604 | 11,533 | 4.29 | |||||||||||||||||
| Tax Exempt | 12,024 | 710 | 5.90 | — | — | — | |||||||||||||||||
| Equity Securities | 1,413 | 51 | 3.61 | 2,693 | 110 | 4.08 | |||||||||||||||||
| Interest-Earning Deposits at Other Banks | 37,349 | 1,467 | 3.93 | 96,474 | 4,831 | 5.01 | |||||||||||||||||
| Other Interest-Earning Assets | 3,484 | 270 | 7.75 | 3,142 | 274 | 8.72 | |||||||||||||||||
| Total Interest-Earning Assets | 1,428,371 | 76,331 | 5.34 | 1,444,514 | 76,292 | 5.28 | |||||||||||||||||
| Noninterest-Earning Assets | 73,211 | 57,986 | |||||||||||||||||||||
| Total Assets | $ | 1,501,582 | $ | 1,502,500 | |||||||||||||||||||
| Liabilities and Stockholders' equity: | |||||||||||||||||||||||
| Interest-Bearing Liabilities: | |||||||||||||||||||||||
| Interest-Bearing Demand Deposits | $ | 342,698 | $ | 6,888 | 2.01 | % | $ | 326,073 | $ | 7,414 | 2.27 | % | |||||||||||
| Money Market | 223,093 | 6,107 | 2.74 | 215,864 | 6,706 | 3.11 | |||||||||||||||||
| Savings | 171,594 | 171 | 0.10 | 180,647 | 202 | 0.11 | |||||||||||||||||
| Time Deposits | 284,727 | 10,279 | 3.61 | 314,510 | 14,119 | 4.49 | |||||||||||||||||
| Total Interest-Bearing Deposits | 1,022,112 | 23,445 | 2.29 | 1,037,094 | 28,441 | 2.74 | |||||||||||||||||
| Short-term Borrowings | 4,199 | 199 | 4.74 | — | — | — | |||||||||||||||||
| Other Borrowed Funds | 34,738 | 1,520 | 4.38 | 34,697 | 1,622 | 4.67 | |||||||||||||||||
| Total Interest-Bearing Liabilities | 1,061,049 | 25,164 | 2.37 | 1,071,791 | 30,063 | 2.80 | |||||||||||||||||
| Noninterest-Bearing Demand Deposits | 273,295 | 270,528 | |||||||||||||||||||||
| Total Funding and Cost of Funds | 1,334,344 | 1.89 | 1,342,319 | 2.24 | |||||||||||||||||||
| Other Liabilities | 17,463 | 16,559 | |||||||||||||||||||||
| Total Liabilities | 1,351,807 | 1,358,878 | |||||||||||||||||||||
| Stockholders' Equity | 149,775 | 143,622 | |||||||||||||||||||||
| Total Liabilities and Stockholders' Equity | $ | 1,501,582 | $ | 1,502,500 | |||||||||||||||||||
Net Interest Income (Non-GAAP) (2) | $ | 51,167 | $ | 46,229 | |||||||||||||||||||
Net Interest Rate Spread (Non-GAAP) (2)(3) | 2.97 | 2.48 | |||||||||||||||||||||
Net Interest-Earning Assets (4) | $ | 367,322 | $ | 372,723 | |||||||||||||||||||
Net Interest Margin (Non-GAAP) (2)(5) | 3.58 | 3.20 | |||||||||||||||||||||
| Return on Average Assets | 0.33 | 0.84 | |||||||||||||||||||||
| Return on Average Equity | 3.27 | 8.77 | |||||||||||||||||||||
| Average Equity to Average Assets | 9.97 | 9.56 | |||||||||||||||||||||
| Average Interest-Earning Assets to Average Interest-Bearing Liabilities | 134.62 | 134.78 | |||||||||||||||||||||
(1)Net of the allowance for credit losses and includes nonaccrual loans with a zero yield
(2)Refer to Explanation of Use of Non-GAAP Financial Measures in this Report for the calculation of the measure and reconciliation to the most comparable GAAP measure.
(3)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. Net interest rate spread (GAAP) was 2.95% and 2.47% for the year ended December 31, 2025 and 2024, respectively.
(4)Net interest-earning assets represent total interest-earning assets less total interest-bearing liabilities.
(5)Net interest margin represents net interest income divided by average total interest-earning assets. Net interest margin (GAAP) was 3.55% and 3.19% for the year ended December 31, 2025 and 2024, respectively.
42 | ||
Rate/Volume Analysis
The following table presents the effects of changing rates and volumes on our net interest income for the years indicated. The rate column shows the effects attributable to changes in rate (changes in rate multiplied by prior volume). The volume column shows the effects attributable to changes in volume (changes in volume multiplied by prior rate). The total column represents the sum of the prior columns. 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.
Year Ended December 31, 2025 Compared To Year Ended December 31, 2024 | |||||||||||||||||
| Increase (Decrease) Due to | |||||||||||||||||
| Volume | Rate | Total | |||||||||||||||
| (Dollars in Thousands) | |||||||||||||||||
| Interest and Dividend Income: | |||||||||||||||||
| Loans, net | $ | 2,010 | $ | 759 | $ | 2,769 | |||||||||||
| Securities: | |||||||||||||||||
| Taxable | (120) | 107 | (13) | ||||||||||||||
| Tax-Exempt | 710 | — | 710 | ||||||||||||||
| Equity Securities | (47) | (12) | (59) | ||||||||||||||
| Interest-Earning Deposits at Other Banks | (2,488) | (876) | (3,364) | ||||||||||||||
| Other Interest-Earning Assets | 27 | (31) | (4) | ||||||||||||||
| Total Interest-Earning Assets | 92 | (53) | 39 | ||||||||||||||
| Interest Expense: | |||||||||||||||||
| Deposits | (391) | (4,605) | (4,996) | ||||||||||||||
| Short-Term Borrowings | 199 | — | 199 | ||||||||||||||
| Other Borrowed Funds | (1) | (101) | (102) | ||||||||||||||
| Total Interest-Bearing Liabilities | (193) | (4,706) | (4,899) | ||||||||||||||
| Change in Net Interest Income | $ | 285 | $ | 4,653 | $ | 4,938 | |||||||||||
Asset Quality
Nonperforming Assets and Delinquent Loans. The Company reviews its loans on a regular basis and generally places loans on nonaccrual status when either principal or interest is 90 days or more past due. In addition, the Company places loans on nonaccrual status when we do not expect to receive full payment of interest, principal or both. Interest accrued and unpaid at the time a loan is placed on nonaccrual status is reversed from interest income. Loans that are 90 days or more past due may still accrue interest if they are well secured and in the process of collection. Payments received on nonaccrual loans are applied against principal. Loans are returned to accrual status when all the principal and interest amounts contractually due are brought current, and current and future payments are reasonably assured.
Management monitors all past due loans and nonperforming assets. Such loans are placed under close supervision, with consideration given to the need for additions to the allowance for credit losses and (if appropriate) partial or full charge-off.
Management believes the volume of nonperforming assets can be partially attributed to unique borrower circumstances as well as the economy in general. We have an experienced chief credit officer, collections and credit departments that monitor the loan portfolio and seek to prevent any deterioration of asset quality.
Real estate acquired through foreclosure or by deed-in-lieu of foreclosure is classified as real estate owned until such time as it is sold. When real estate owned is acquired, it is recorded at the lower of the unpaid principal balance of the related loan, or its fair market value, less estimated selling expenses. Any further write-down of real estate owned is charged against earnings.
43 | ||
Nonaccrual Loans and Nonperforming Assets. The following table sets forth the amounts and categories of our nonperforming assets as of the dates indicated.
December 31, 2025 | ||||||||||||||
| Nonaccrual With No ACL | Nonaccrual With ACL | Loans Past Due 90 Days Still Accruing | Total Nonperforming Assets | |||||||||||
| (Dollars in Thousands) | ||||||||||||||
| Nonaccrual Loans: | ||||||||||||||
| Real Estate: | ||||||||||||||
| Residential | $ | 2,210 | $ | 521 | $ | — | $ | 2,731 | ||||||
| Commercial | 2,057 | — | — | 2,057 | ||||||||||
| Construction | 131 | 284 | — | 415 | ||||||||||
| Consumer | 107 | — | — | 107 | ||||||||||
| Total Nonaccrual Loans | $ | 4,505 | $ | 805 | $ | — | 5,310 | |||||||
| Total Other Real Estate Owned | — | |||||||||||||
| Total Nonperforming Assets | $ | 5,310 | ||||||||||||
| December 31, 2024 | ||||||||||||||
| Nonaccrual With No ACL | Nonaccrual With ACL | Loans Past Due 90 Days Still Accruing | Total Nonperforming Assets | |||||||||||
| (Dollars in Thousands) | ||||||||||||||
| Nonaccrual Loans: | ||||||||||||||
| Real Estate: | ||||||||||||||
| Residential | $ | 1,388 | $ | — | $ | — | $ | 1,388 | ||||||
| Commercial | 188 | — | — | 188 | ||||||||||
| Consumer | 213 | — | — | 213 | ||||||||||
| Total Nonaccrual Loans | $ | 1,789 | $ | — | $ | — | 1,789 | |||||||
| Total Other Real Estate Owned | — | |||||||||||||
| Total Nonperforming Assets | $ | 1,789 | ||||||||||||
At December 31, 2025 and December 31, 2024, we had no loans 90 days or more past due that were still accruing interest. At December 31, 2025 and December 31, 2024, we had no loans that were not classified as nonaccrual or 90 days past due where known information about possible credit problems of borrowers caused management to have serious concerns as to the ability of the borrowers to comply with present loan repayment terms and that may result in disclosure as nonaccrual or 90 days past due.
Nonperforming loans increased $3.5 million to $5.3 million at December 31, 2025 compared to $1.8 million at December 31, 2024. The increase in was due to the addition of two loan relationships to nonaccrual status during the year. The first relationship consists of three residential real estate loans totaling $2.1 million which are well-secured with first liens on multiple rental properties. The Bank has executed assignments of rents and leases, is in the process of foreclosure on the properties and currently does not expect to incur losses on the loans. The second is a $2.0 million commercial real estate loan fully secured by an owner-occupied distribution warehouse, which is currently under a sales agreement, and other assets of the borrower. The Bank is currently working with the borrower to achieve a successful resolution and expects to be repaid in full in 2026.
44 | ||
The following table presents the components of the ratio of nonaccrual loans to total loans at the dates indicated.
| 2025 | 2024 | ||||||||||||||||||||||
| December 31, | Nonaccrual Loans | Total Loans | Nonaccrual Loans to Total Loans | Nonaccrual Loans | Total Loans | Nonaccrual Loans to Total Loans | |||||||||||||||||
| (Dollars in Thousands) | |||||||||||||||||||||||
| Real Estate: | |||||||||||||||||||||||
| Residential | $ | 2,731 | $ | 329,237 | 0.83 | % | $ | 1,388 | $ | 337,990 | 0.41 | % | |||||||||||
| Commercial | 2,057 | 552,180 | 0.37 | 188 | 485,513 | 0.04 | |||||||||||||||||
| Construction | 415 | 45,419 | 0.91 | — | 54,705 | — | |||||||||||||||||
| Commercial and Industrial | — | 161,081 | — | — | 112,047 | — | |||||||||||||||||
| Consumer | 107 | 42,876 | 0.25 | 213 | 70,508 | 0.30 | |||||||||||||||||
| Other | — | 31,467 | — | — | 31,863 | — | |||||||||||||||||
| Total | $ | 5,310 | $ | 1,162,260 | 0.46 | % | $ | 1,789 | $ | 1,092,626 | 0.16 | % | |||||||||||
Classified Assets. Federal regulations provide that loans and other assets of lesser quality should be classified as “substandard,” “doubtful” or “loss” assets. An asset is considered “substandard” if it is inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any. Substandard assets include those characterized by the “distinct possibility” that the Company will sustain “some loss” if the deficiencies are not corrected. Assets classified as “doubtful” have all of the weaknesses inherent in those classified “substandard,” with the added characteristic that the weaknesses present make “collection or liquidation in full,” on the basis of currently existing facts, conditions, and values, “highly questionable and improbable.” Assets classified as “loss” are those considered “uncollectible” and of such little value that their continuance as assets is not warranted. The Company designates an asset as “special mention” if the asset has a potential weakness that warrants management’s close attention.
The Company uses a nine-point internal risk rating system to monitor the credit quality of the overall loan portfolio. The first five categories are not considered criticized and are aggregated as one to four “pass” and five "pass-watch" 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 uncollectible and of such little value that continuance as an asset is not warranted.
As part of the periodic exams of the Bank by the FDIC and the Pennsylvania Department of Banking and Securities, the staff of such agencies reviews our classifications and determines whether such classifications are adequate. Such agencies have, in the past, and may in the future require us to classify certain assets which management has not otherwise classified or require a classification more severe than established by management. The following table shows the principal amount of special mention and classified loans at December 31, 2025 and 2024.
| December 31, | 2025 | 2024 | |||||||||
| (Dollars in Thousands) | |||||||||||
| Special Mention | $ | 20,199 | $ | 33,543 | |||||||
| Substandard | 5,649 | 6,854 | |||||||||
| Doubtful | — | — | |||||||||
| Loss | — | — | |||||||||
| Total | $ | 25,848 | $ | 40,397 | |||||||
45 | ||
The total amount of special mention and classified loans decreased $14.5 million, or 36.0%, to $25.8 million at December 31, 2025, compared to $40.4 million at December 31, 2024. The decrease of $13.3 million in the special mention category is primarily due to the upgrade of three credit relationships due to improved financial performance. The first relationship consisted loans to secure non-owner occupied commercial real estate and totaled $7.0 million; the second relationship consisted of commercial and industrial loans and totaled $5.9 million; and the third relationship consisted of loans to secure owner occupied commercial real estate and totaled $5.0 million. These improvements were partially offset by a downgrade of one credit relationship due to the non-receipt of updated financial information. This relationship consisted of loans to secure non-owner occupied commercial real estate which totaled $4.4 million.
Allowance for Credit Losses. The allowance for credit losses is maintained at a level considered adequate to provide for losses that can be reasonably anticipated. While management uses the best information available to make such evaluations, future adjustments to the allowance may be necessary if economic conditions differ substantially from the assumptions used in making evaluations. Additions are made to the allowance through periodic provisions charged to income and recovery of principal and interest on loans previously charged-off. Losses of principal are charged directly to the allowance when a loss occurs or when a determination is made that the specific loss is probable. This evaluation is inherently subjective as it requires estimates that are susceptible to significant revisions as more information becomes available. There can be no assurance that such losses will not exceed the estimated amounts or that we will not be required to make additions to the allowance for credit losses in the future. Future additions to our allowance for credit losses and changes in the related ratio of the allowance for credit losses to nonperforming loans are dependent upon the economy, changes in real estate values and interest rates, the view of the regulatory authorities toward adequate credit loss reserve levels, and inflation. Management will continue to periodically review the entire loan portfolio to determine the extent, if any, to which further additional credit loss provisions may be deemed necessary.
Analysis of the Allowance for Credit Losses. The following table summarizes changes in the allowance for credit losses by loan categories for each year indicated.
| Year Ended December 31, | 2025 | 2024 | |||||||||
| (Dollars in Thousands) | |||||||||||
| Balance at Beginning of Year | $ | 9,805 | $ | 9,707 | |||||||
| Provision for Credit Losses - Loans | 534 | 379 | |||||||||
| Charge-offs: | |||||||||||
| Real Estate: | |||||||||||
| Residential | (25) | (28) | |||||||||
| Commercial | (19) | (127) | |||||||||
| Commercial and Industrial | (223) | (12) | |||||||||
| Consumer | (302) | (485) | |||||||||
| Total Charge-offs | (569) | (652) | |||||||||
| Recoveries: | |||||||||||
| Real estate: | |||||||||||
| Residential | 10 | 14 | |||||||||
| Commercial and Industrial | 136 | 175 | |||||||||
| Consumer | 200 | 182 | |||||||||
| Total Recoveries | 346 | 371 | |||||||||
| Net Charge-offs | (223) | (281) | |||||||||
| Balance at End of Year | $ | 10,116 | $ | 9,805 | |||||||
| Allowance for Credit Losses to Total Loans | 0.87 | % | 0.90 | % | |||||||
| Allowance for Credit Losses to Nonperforming Loans | 190.51 | 548.07 | |||||||||
| Net Charge-offs to Average Loans | 0.02 | 0.03 | |||||||||
46 | ||
The allowance for credit losses increased $311,000, or 3.2%, to $10.1 million at December 31, 2025, compared to $9.8 million at December 31, 2024. Allowance for credit losses to total loans decreased three basis points to 0.87% at December 31, 2025 compared to 0.90% at December 31, 2024. The increase in the allowance for credit losses was mainly due to $2.1 million of allowance necessary for loan growth attributed primarily to non-owner occupied commercial real estate and commercial and industrial loan originations. Additionally, an increase of $495,000 in the allowance was related changes in qualitative factors primarily related to loan growth. This was mainly offset by declines in the allowance of $1.4 million due to changes in loan concentrations, $608,000 due to improvement in loss rate factors and $269,000 in specific reserves for individually analyzed loans.
The ratio of allowance for credit losses to nonaccrual loans ratio decreased to 190.51% at December 31, 2025, compared to 548.07% at December 31, 2024. Nonaccrual loans increased $3.5 million to $5.3 million at December 31, 2025 compared to $1.8 million at December 31, 2024. The increase in nonaccrual loans was due to the addition of two loan relationships to nonaccrual status during the year. The first relationship consists of three residential real estate loans totaling $2.1 million which are well-secured with first liens on multiple rental properties. The Bank has executed assignments of rents and leases, is in the process of foreclosure on the properties and currently does not expect to incur losses on the loans. The second is a $2.0 million commercial real estate loan fully secured by an owner-occupied distribution warehouse, which is currently under a sales agreement, and other assets of the borrower. The Bank is currently working with the borrower to achieve a successful resolution and expects to be repaid in full in 2026.
Net charge-offs for the year ended December 31, 2025 were $223,000 primarily due to charge-offs of $164,000 for consumer revolving lines of credit, $137,000 for consumer indirect automobile loans and $127,000 for commercial and industrial. This was partially offset by recoveries of $136,000 for commercial and industrial loans, $106,000 for consumer indirect automobile loans and $94,000 for consumer revolving lines of credit. Net charge-offs for the year ended December 31, 2024 were $281,000 primarily due to charge-offs of $357,000 for consumer indirect, $127,000 for CRE non-owner occupied and $114,000 for consumer revolving lines of credit. This was partially offset by recoveries of $175,000 for commercial and industrial and $133,000 for consumer indirect loans. The following table presents the ratio of net charge-offs as a percent of average loans for the periods indicated.
| Year Ended December 31, | 2025 | 2024 | ||||||
| Real Estate: | ||||||||
| Residential | — | % | — | % | ||||
| Commercial | — | 0.03 | ||||||
| Construction | — | — | ||||||
| Commercial and Industrial | 0.06 | (0.15) | ||||||
| Consumer | 0.19 | 0.35 | ||||||
| Other | — | — | ||||||
| Total Loans | 0.02 | % | 0.03 | % | ||||
47 | ||
Allocation of Allowance for Credit Losses. The following table sets forth the allocation of allowance for credit losses by loan category at the dates indicated. The table reflects the allowance for credit losses as a percentage of total loans. The allocation of the allowance by category is not necessarily indicative of future losses and does not restrict the use of the allowance to absorb losses in any category.
| 2025 | 2024 | ||||||||||||||||||||||
| December 31, | Amount | Percent of Total Loans | Amount | Percent of Total Loans | |||||||||||||||||||
| (Dollars in Thousands) | |||||||||||||||||||||||
| Real Estate: | |||||||||||||||||||||||
| Residential | $ | 2,526 | 28.3 | % | $ | 2,926 | 30.9 | % | |||||||||||||||
| Commercial | 3,153 | 47.5 | 3,103 | 44.4 | |||||||||||||||||||
| Construction | 1,205 | 3.9 | 1,264 | 5.0 | |||||||||||||||||||
| Commercial and Industrial | 2,562 | 13.9 | 1,584 | 10.3 | |||||||||||||||||||
| Consumer | 450 | 3.7 | 687 | 6.5 | |||||||||||||||||||
| Other | 220 | 2.7 | 241 | 2.9 | |||||||||||||||||||
| Total Allocated Allowance | 10,116 | 100.0 | 9,805 | 100.0 | |||||||||||||||||||
| Unallocated | — | — | — | — | |||||||||||||||||||
| Total Allowance for Credit Losses | $ | 10,116 | 100.0 | % | $ | 9,805 | 100.0 | % | |||||||||||||||
Reconciliations of Non-GAAP Financial Measures to GAAP
Reconciliations of Non-GAAP financial measures discussed in this Report to the most directly comparable GAAP financial measures are included in the following tables.
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 percent. 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. The following table reconciles net interest income, net interest spread and net interest margin on a FTE basis for the periods indicated:
| Year Ended December 31, | 2025 | 2024 | ||||||
| (Dollars in Thousands) | ||||||||
| Interest Income per Consolidated Statements of Income (GAAP) | $ | 75,939 | $ | 76,131 | ||||
| Adjustment to FTE Basis | 392 | 161 | ||||||
| Interest Income (Non-GAAP) | 76,331 | 76,292 | ||||||
| Interest Expense per Consolidated Statements of Income (GAAP) | 25,164 | 30,063 | ||||||
| Net Interest Income (Non-GAAP) | $ | 51,167 | $ | 46,229 | ||||
| Net Interest Income (GAAP) | $ | 50,775 | $ | 46,068 | ||||
| Divided by : Average Interest-Earning Assets | $ | 1,428,371 | $ | 1,444,514 | ||||
| Net Interest Margin (GAAP) | 3.55 | % | 3.19 | % | ||||
| Adjustment to FTE Basis | 0.03 | 0.01 | ||||||
| Net Interest Margin (Non-GAAP) | 3.58 | % | 3.20 | % | ||||
| Net Interest Rate Spread (GAAP) | 2.95 | % | 2.47 | % | ||||
| Adjustment to FTE Basis | 0.02 | 0.01 | ||||||
| Net Interest Rate Spread (Non-GAAP) | 2.97 | % | 2.48 | % | ||||
48 | ||
Tangible book value per common share is a Non-GAAP measure and is calculated based on tangible common equity divided by period-end common shares outstanding. Tangible common equity to tangible assets is a Non-GAAP measure and is calculated based on tangible common equity divided by tangible assets. We believe these Non-GAAP measures serve as useful tools 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.
| December 31, | 2025 | 2024 | |||||||||
| (Dollars in Thousands, Except Share and Per Share Data) | |||||||||||
| Assets (GAAP) | $ | 1,547,693 | $ | 1,481,564 | |||||||
| Goodwill and Other Intangible Assets, Net | (9,732) | (9,732) | |||||||||
| Tangible Assets (Non-GAAP) | $ | 1,537,961 | $ | 1,471,832 | |||||||
| Stockholders' Equity (GAAP) (Numerator) | $ | 157,537 | $ | 147,378 | |||||||
| Goodwill and Other Intangible Assets, Net | (9,732) | (9,732) | |||||||||
| Tangible Common Equity or Tangible Book Value (Non-GAAP) (Numerator) | $ | 147,805 | $ | 137,646 | |||||||
| Tangible Common Equity to Tangible Assets (Non-GAAP) | 9.6 | % | 9.4 | % | |||||||
| Common Shares Outstanding (Denominator) | 5,036,509 | 5,132,654 | |||||||||
| Book Value per Common Share (GAAP) | $ | 31.28 | $ | 28.71 | |||||||
| Tangible Book Value per Common Share (Non-GAAP) | $ | 29.35 | $ | 26.82 | |||||||
Liquidity
Liquidity is the ability to meet current and future financial obligations of a short-term nature. The Bank’s primary sources of funds consist of deposit inflows, loan repayments, and maturities and sales of securities. While maturities and scheduled amortization of loans and securities are predictable sources of funds, deposit flows and loan prepayments are greatly influenced by general interest rates, economic conditions and competition.
The Bank 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 Bank believes that it had sufficient liquidity at December 31, 2025, to satisfy its short- and long-term liquidity needs at that date.
The Bank’s most liquid assets are cash and due from banks, which totaled $31.7 million at December 31, 2025. Unpledged securities, which provide an additional source of liquidity, totaled $107.3 million. In addition, the Bank maintains a credit arrangement with the FHLB with a maximum borrowing limit of approximately $528.0 million and available borrowing capacity of $506.1 million as of December 31, 2025. At December 31, 2025, there were no standby letters of credit utilized to collateralize public deposits in excess of the level insured by the FDIC. This arrangement is subject to annual renewal, incurs no service charge, and is secured by a blanket security agreement on $747.7 million of residential and commercial mortgage loans and the Bank’s investment in FHLB stock. The Bank also maintains a Borrower-In-Custody of Collateral line of credit agreement with the FRB for $71.2 million that requires monthly certification of collateral, is subject to annual renewal, incurs no service charge and is secured by $86.6 million of commercial and consumer indirect auto loans. The Bank also maintains multiple line of credit arrangements with various unaffiliated banks totaling $50.0 million as of December 31, 2025.
At December 31, 2025, the Bank had funding commitments totaling $196.4 million, consisting primarily of commitments to originate loans, unused lines of credit and letters of credit.
At December 31, 2025, certificates of deposit due within one year of that date totaled $279.2 million, or 89.4% of total certificates of deposit. While liquidity levels at December 31, 2025 are currently sufficient, if these certificates of deposit do not remain with the Bank, the Bank may be required to seek other sources of funds. Depending on market conditions, the Bank may be required to pay higher rates on such deposits or other borrowings than it currently pays on these certificates of deposit. The Bank believes, however, based on past experience that a significant portion of its certificates of deposit will remain with it, either as certificates of deposit or as other deposit products. The Bank can attract and retain deposits by adjusting the interest rates offered.
The Bank’s primary investing activities are the origination of loans. For the year ended December 31, 2025, the Bank had net loan originations of $69.6 million.
49 | ||
The Company is a separate legal entity from the Bank and must provide for its own liquidity to pay dividends to stockholders, to pay principal and interest on its subordinated debt and for other corporate purposes. At December 31, 2025, the Company (on an unconsolidated basis) had liquid assets of $8.3 million.
We are committed to maintaining a strong liquidity position. We monitor our liquidity position daily and anticipate that we will have sufficient funds to meet our current funding commitments. Based on our deposit retention experience and current pricing strategy, we anticipate that a significant portion of maturing time deposits will be retained.
Commitments. As a financial services provider, the Company routinely is a party to various financial instruments with off-balance-sheet risks, such as commitments to extend credit, commitments under unused lines of credit, and commitments under letters of credit. While these contractual obligations represent potential future cash requirements, a significant portion of commitments to extend credit may expire without being drawn upon. Such commitments are subject to the same credit policies and approval process accorded to loans the Company makes. In addition, the Company enters into commitments to sell mortgage loans.
Contractual Obligations. In the ordinary course of its operations, the Company enters into certain contractual obligations. Such obligations include operating leases for premises and equipment, agreements with respect to borrowed funds and deposit liabilities and agreements with respect to investments.
The following tables present certain of our contractual obligations at December 31, 2025.
Payment Due by Period | Total | Less Than Or Equal to One Year | More Than One to Three Years | More Than Three to Five Years | More Than Five Years | ||||||||||||||||||||||||
| (Dollars in Thousands) | |||||||||||||||||||||||||||||
| Certificates of deposit | $ | 312,453 | $ | 279,228 | $ | 27,086 | $ | 5,646 | $ | 493 | |||||||||||||||||||
| Other Borrowed Funds | 34,758 | — | 20,000 | — | 14,758 | ||||||||||||||||||||||||
| Operating Lease Obligations | 3,353 | 471 | 787 | 554 | 1,541 | ||||||||||||||||||||||||
| Total | $ | 350,564 | $ | 279,699 | $ | 47,873 | $ | 6,200 | $ | 16,792 | |||||||||||||||||||
Capital Resources
At December 31, 2025 and 2024, respectively, the Bank was considered "well capitalized" under the regulatory framework for prompt corrective action.
50 | ||
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 at the dates indicated.
| 2025 | 2024 | ||||||||||||||||||||||
| December 31, | Amount | Ratio | Amount | Ratio | |||||||||||||||||||
| (Dollars in Thousands) | |||||||||||||||||||||||
| Common Equity Tier 1 Capital (to Risk-Weighted Assets) | |||||||||||||||||||||||
| Actual | $ | 156,459 | 13.92 | % | $ | 152,238 | 14.78 | % | |||||||||||||||
| For Capital Adequacy Purposes | 50,583 | 4.50 | 46,366 | 4.50 | |||||||||||||||||||
| To Be Well Capitalized | 73,064 | 6.50 | 66,973 | 6.50 | |||||||||||||||||||
| Tier I Capital (to Risk-Weighted Assets) | |||||||||||||||||||||||
| Actual | 156,459 | 13.92 | 152,238 | 14.78 | |||||||||||||||||||
| For Capital Adequacy Purposes | 67,444 | 6.00 | 61,821 | 6.00 | |||||||||||||||||||
| To Be Well Capitalized | 89,925 | 8.00 | 82,428 | 8.00 | |||||||||||||||||||
| Total Capital (to Risk-Weighted Assets) | |||||||||||||||||||||||
| Actual | 167,321 | 14.89 | 162,733 | 15.79 | |||||||||||||||||||
| For Capital Adequacy Purposes | 89,925 | 8.00 | 82,428 | 8.00 | |||||||||||||||||||
| To Be Well Capitalized | 112,407 | 10.00 | 103,035 | 10.00 | |||||||||||||||||||
| Tier I Leverage Capital (to Adjusted Total Assets) | |||||||||||||||||||||||
| Actual | 156,459 | 10.15 | 152,238 | 9.98 | |||||||||||||||||||
| For Capital Adequacy Purposes | 61,674 | 4.00 | 60,996 | 4.00 | |||||||||||||||||||
| To Be Well Capitalized | 77,093 | 5.00 | 76,245 | 5.00 | |||||||||||||||||||
Impact of Inflation and Changing Price
The consolidated financial statements and related notes of the Company have been prepared in accordance with GAAP. GAAP generally requires the measurement of financial position and operating results in terms of historical dollars without consideration of changes in the relative purchasing power of money over time due to inflation. The impact of inflation is reflected in the increased cost of the Company’s operations. Unlike industrial companies, the Company’s assets and liabilities are primarily monetary in nature. As a result, changes in market interest rates have a greater impact on performance than the effects of inflation.
51 | ||
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES 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 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 and permanent, parallel shifts in the yield curve up and down 100, 200, 300 and 400 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.
The table below sets forth, as of December 31, 2025, 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. The changes disclosed in the following table are within policy guidelines established by the Company's Board of Directors.
| EVE | EVE as a Percent of Portfolio Value of Assets | Net Interest Income at Risk | ||||||||||||||||||||||||||||||||||||||||||||||||
| 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) | ||||||||||||||||||||||||||||||||||||||||||||||||||
| +400 | $ | 193,357 | $ | (41,152) | (17.5) | % | 14.11 | % | (152) | $ | 60,325 | $ | 3,088 | 5.4 | % | |||||||||||||||||||||||||||||||||||
| +300 | 202,955 | (31,554) | (13.5) | 14.50 | (113) | 59,563 | 2,326 | 4.1 | ||||||||||||||||||||||||||||||||||||||||||
| +200 | 214,180 | (20,329) | (8.7) | 14.95 | (68) | 58,866 | 1,629 | 2.8 | ||||||||||||||||||||||||||||||||||||||||||
| +100 | 224,840 | (9,669) | (4.1) | 15.34 | (29) | 58,129 | 892 | 1.6 | ||||||||||||||||||||||||||||||||||||||||||
| Flat | 234,509 | — | — | 15.63 | — | 57,237 | — | — | ||||||||||||||||||||||||||||||||||||||||||
| -100 | 242,169 | 7,660 | 3.3 | 15.79 | 16 | 56,264 | (973) | (1.7) | ||||||||||||||||||||||||||||||||||||||||||
| -200 | 247,049 | 12,540 | 5.3 | 15.76 | 13 | 55,081 | (2,156) | (3.8) | ||||||||||||||||||||||||||||||||||||||||||
| -300 | 249,414 | 14,905 | 6.4 | 15.58 | (5) | 54,532 | (2,705) | (4.7) | ||||||||||||||||||||||||||||||||||||||||||
| -400 | 243,914 | 9,405 | 4.0 | 14.96 | (67) | 55,528 | (1,709) | (3.0) | ||||||||||||||||||||||||||||||||||||||||||
52 | ||
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.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The Financial Statements are included in Part IV, Item 15 of this Report.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURES
None.
ITEM 9A. 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 December 31, 2025. 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)Internal Control Over Financial Reporting
The Company’s management is responsible for establishing and maintaining adequate internal control over financial reporting. The internal control process has been designed under our supervision to provide reasonable assurance regarding the reliability of financial reporting and the preparation of the Company’s consolidated financial statements for external reporting purposes in accordance with accounting principles generally accepted in the United States of America.
Management conducted an assessment of the effectiveness of the Company’s internal control over financial reporting as of December 31, 2025, utilizing the framework established in the 2013 Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on management’s assessment, the Company concluded that the Company’s internal control over financial reporting was effective as of December 31, 2025, based on that framework.
(c)Changes to Internal Control Over Financial Reporting
There have been no changes in the Company’s internal control over financial reporting (as defined in Rules 13a-15(f) or 15d-15(f) of the Exchange Act) that occurred during the three months ended December 31, 2025 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
53 | ||
ITEM 9B. OTHER INFORMATION
During the three months ended December 31, 2025, none of the Company's directors or executive officers adopted terminated
ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS
Not Applicable.
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
Information required by this item is incorporated by reference in the Proxy Statement for the 2026 Annual Meeting.
The Company has adopted a policy regarding Insider Trading governing the purchase, sale and/or other dispositions of the Company's securities by its directors, officers and employees and by the Company itself. A copy of the policy is filed as an exhibit to the Annual Report on Form 10-K.
ITEM 11. EXECUTIVE COMPENSATION
Information required by this item is incorporated by reference in the Proxy Statement for the 2026 Annual Meeting.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
Information required by this item is incorporated by reference in the Proxy Statement for the 2026 Annual Meeting.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE
Information required by this item is incorporated by reference in the Proxy Statement for the 2026 Annual Meeting.
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
Our independent registered public accounting firm for 2025 is Forvis Mazars, LLP , Pittsburgh, Pennsylvania , Auditor Firm ID 686 .
Information required by this item is incorporated by reference in the Proxy Statement for the 2026 Annual Meeting.
54 | ||
PART IV
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
| (a)(1) | Financial Statements | |||||||
The financial statements filed as a part of this Form 10-K are: | ||||||||
| (A) | Report of Independent Registered Public Accounting Firm; | |||||||
| (B) | Consolidated Statements of Financial Condition at December 31, 2025 and 2024; | |||||||
| (C) | Consolidated Statements of Income for the Years Ended December 31, 2025 and 2024; | |||||||
| (D) | Consolidated Statements of Comprehensive Income for the Years Ended December 31, 2025 and 2024; | |||||||
| (E) | Consolidated Statements of Changes in Stockholders’ Equity for the Years Ended December 31, 2025 and 2024; | |||||||
| (F) | Consolidated Statements of Cash Flows for the Years Ended December 31, 2025 and 2024; and | |||||||
| (G) | Notes to Consolidated Financial Statements. | |||||||
| (a)(2) | Financial Statement Schedules | |||||||
All financial statement schedules have been omitted as the required information is inapplicable or has been included in the Notes to Consolidated Financial Statements. | ||||||||
| (a)(3) | Exhibits | |||||||
| 3.1 | Amended and Restated Articles of Incorporation of CB Financial Services, Inc. (1) | |||||||
| 3.2 | Bylaws of CB Financial Services, Inc. (2) | |||||||
| 4.1 | Form of Stock Certificate of CB Financial Services, Inc. (1) | |||||||
| 4.2 | Description of Registrant's Securities (3) | |||||||
| 10.1 | Employment Agreement by and between Community Bank and John H. Montgomery (4) | |||||||
| 10.2 | Executive Consultant Agreement by and between Community Bank and Ralph Burchianti (5) | |||||||
| 10.3 | Separation and Release Agreement by and between Community Bank and Jamie L. Prah (6) | |||||||
| 10.8 | Split Dollar Life Insurance Agreement by and between Community Bank and John H. Montgomery, dated November 2, 2020 (7) | |||||||
| 10.9 | Split Dollar Life Insurance Agreement by and between Community Bank and Ralph Burchianti dated April 1, 2005 (1) | |||||||
| 10.10 | Split Dollar Life Insurance Agreement dated as of June 1, 2002, by and between First Federal Savings Bank and Richard B. Boyer (8) | |||||||
| 10.11 | Amendment dated as of July 19, 2002, to the Life Insurance Endorsement Method Split Dollar Plan Agreement by and between First Federal Savings Bank and Richard B. Boyer (9) | |||||||
| 10.12 | Amendment dated as of September 13, 2005, to the Life Insurance Endorsement Method Split Dollar Plan Agreement by and between First Federal Savings Bank and Richard B. Boyer (10) | |||||||
| 10.14 | CB Financial Services, Inc., 2015 Equity Incentive Plan (11) | |||||||
| 10.15 | CB Financial Services, Inc., 2021 Equity Incentive Plan (12) | |||||||
| 10.16 | CB Financial Services, Inc., 2024 Equity Incentive Plan (16) | |||||||
| 10.17 | Subordinated Note Purchase Agreement (13) | |||||||
| 10.18 | Employment Agreement by and between Community Bank and Jennifer L. George (14) | |||||||
10.19 | Asset Purchase Agreement among World Insurance Associates, LLC, Exchange Underwriters, Inc. and Community Bank (15) | |||||||
| 19 | Registrant’s Policy Regarding Insider Trading | |||||||
| 21 | Subsidiaries | |||||||
| 23.1 | Consent of Forvis Mazars, LLP | |||||||
| 31.1 | Certification required pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | |||||||
| 31.2 | Certification required pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | |||||||
| 32.1 | Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | |||||||
97 | CB Financial Services, Inc., Clawback Policy(17) | |||||||
| 101.0 | The following materials for the year ended December 31, 2025, formatted in XBRL (Extensible Business Reporting Language): (i) the Consolidated Statements of Financial Condition, (ii) the Consolidated Statements of Income, (iii) the Consolidated Statements of Comprehensive (Loss) Income, (iv) the Consolidated Statements of Changes in Stockholders’ Equity, (v) the Consolidated Statements of Cash Flows and (vi) the Notes to the Audited Consolidated Financial Statements. | |||||||
| 104 | Cover Page Interactive Data File (embedded in Inline XBRL contained in Exhibit 101) | |||||||
(1) Incorporated herein by reference to the Exhibits to the Company’s Registration Statement on Form S-4 filed with the Securities and Exchange Commission on June 13, 2014 (File No. 333-196749).
(2) Incorporated herein by reference to Exhibit 3.2 to the Company's Current Report on Form 8-K filed with the Securities and Exchange Commission on May 20, 2021.
(3) Incorporated herein by reference to Exhibit 4.2 to the Company’s Form 10-K for the year ended December 31, 2020, filed on March 17, 2021.
(4) Incorporated herein by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed on August 14, 2020.
55 | ||
(5) Incorporated herein by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K , filed on February 21, 2023.
(6) Incorporated herein by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed on February 5, 2025.
(7) Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed on November 6, 2020.
(8) Incorporated herein by reference to Exhibit 10.11 to FedFirst Financial Corporation’s Registration Statement on Form SB-2, as amended (File No. 333-121405), initially filed on December 17, 2004.
(9) Incorporated herein by reference to Exhibit 10.2 to FedFirst Financial Corporation’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2008, filed on May 9, 2008.
(10) Incorporated herein by reference to Exhibit 10.4 to FedFirst Financial Corporation’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2008, filed on May 9, 2008.
(11) Incorporated herein by reference to Appendix A to the Company’s Definitive Proxy Statement, filed on April 16, 2015.
(12) Incorporated herein by reference to Appendix A to the Company’s Definitive Proxy Statement, filed on April 9, 2021.
(13) Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed on December 10, 2021.
(14) Incorporated by reference to Exhibit 10.18 to the Company's Form 10-K for the year ended December 31, 2022, filed on March 10, 2023.
(15) Incorporated herein by reference to Exhibit 2 to the Company's Current Report on Form 8-K, filed on December 1, 2023.
(16) Incorporated herein by reference to Appendix A to the Company’s Definitive Proxy Statement, filed on April 5, 2024.
(17) Incorporated by herein by reference to Exhibit 97 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2024, filed on March 19, 2025.
ITEM 16. FORM 10-K SUMMARY
Not applicable.
56 | ||
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized.
| CB FINANCIAL SERVICES, INC. | ||||||||
| Date: March 13, 2026 | By: | /s/ John H. Montgomery | ||||||
| John H. Montgomery | ||||||||
| President and Chief Executive Officer | ||||||||
| (Principal Executive Officer) | ||||||||
Pursuant to the requirements of the Securities Exchange of 1934, this Report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.
| By: | /s/ John H. Montgomery | By: | /s/ Amanda L. Engles | |||||||||||
| John H. Montgomery | Amanda L. Engles | |||||||||||||
| President and Chief Executive Officer and | Executive Vice President and Chief Financial Officer | |||||||||||||
| Director | (Principal Financial and Accounting Officer) | |||||||||||||
| Date: March 13, 2026 | Date: March 13, 2026 | |||||||||||||
| By: | /s/ Mark E. Fox | By: | /s/ Charles R. Guthrie | |||||||||||
| Mark E. Fox | Charles R. Guthrie, CPA | |||||||||||||
| Director (Chairman of the Board) | Director (Vice Chairman of the Board) | |||||||||||||
| Date: March 13, 2026 | Date: March 13, 2026 | |||||||||||||
| By: | /s/ Jonathan A. Bedway | By: | /s/ Ralph Burchianti | |||||||||||
| Jonathan A. Bedway | Ralph Burchianti | |||||||||||||
| Director | Executive Consultant and Director | |||||||||||||
| Date: March 13, 2026 | Date: March 13, 2026 | |||||||||||||
| By: | /s/ John J. LaCarte | By: | /s/ Roberta Robinson Olejasz | |||||||||||
| John J. LaCarte | Roberta Robinson Olejasz | |||||||||||||
| Director | Director | |||||||||||||
| Date: March 13, 2026 | Date: March 13, 2026 | |||||||||||||
| By: | /s/ David F. Pollock | By: | /s/ John M. Swiatek | |||||||||||
| David F. Pollock | John M. Swiatek | |||||||||||||
| Director | Director | |||||||||||||
| Date: March 13, 2026 | Date: March 13, 2026 | |||||||||||||
57 | ||
CONSOLIDATED FINANCIAL STATEMENTS
Contents
Page
Report of Independent Registered Public Accounting Firm | 59 | ||||
Consolidated Statements of Financial Condition at December 31, 2025 and 2024 | 61 | ||||
Consolidated Statements of Income for the Years Ended December 31, 2025 and 2024 | 62 | ||||
Consolidated Statements of Comprehensive Income for the Years Ended December 31, 2025 and 2024 | 63 | ||||
Consolidated Statements of Changes in Stockholders’ Equity for the Years Ended December 31, 2025 and 2024 | 64 | ||||
Consolidated Statements of Cash Flows for the Years Ended December 31, 2025 and 2024 | 65 | ||||
Notes to Consolidated Financial Statements | 67 | ||||
58 | ||
Report of Independent Registered Public Accounting Firm
To the Shareholders, Board of Directors, and Audit Committee
CB Financial Services, Inc.
Carmichaels, Pennsylvania
Opinion on the Consolidated Financial Statements
We have audited the accompanying consolidated statements of financial condition of CB Financial Services, Inc. (the "Company") as of December 31, 2025 and 2024, the related consolidated statements of income, comprehensive income, changes in stockholders’ equity, and cash flows for each of the years in the two-year period ended December 31, 2025, and the related notes (collectively referred to as the “financial statements”). In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2025 and 2024, and the results of its operations and its cash flows for each of the years in the two-year period ended December 31, 2025, in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits.
We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures include examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matters
The critical audit matters communicated below are matters arising from the current-period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.
59 | ||
Allowance for Credit Losses (ACL) – Qualitative Adjustments
As presented in Note 4 to the consolidated financial statements the allowance for credit losses (ACL) balance was $10,116,000 at December 31, 2025. As described in Note 1 to the financial statements, the ACL is an estimate of current expected credit losses in the loan portfolio. The determination of the ACL requires significant judgment reflecting the Company’s estimate of expected future losses for the loan’s entire contractual term adjusted for expected payments when appropriate.
Estimates of expected credit losses are based on relevant information about current conditions, past events, and reasonable and supportable forward-looking forecasts regarding collectability of the reported amounts. The Company utilized a discounted cash-flow model derived from historical data to construct a loss rate for each identified loan segment. Due to the Company's loss history not being sufficient and relevant enough to predict future losses, the Company also utilized peer data from a peer group. The loss rates are then adjusted, for reasonable and supportable forecasts of relevant economic indicators as well as other environmental factors based on the risks present for each portfolio segment. The environmental factors (“qualitative adjustments”) include consideration of economic conditions and portfolio trends.
We have identified auditing the qualitative adjustments as a critical audit matter as management’s determination of the qualitative adjustments used in the ACL is subjective and involves significant management judgments; and our audit procedures related to the qualitative adjustments involved a high degree of auditor judgment and required significant audit effort, including the need to involve more experienced audit personnel.
How the Critical Audit Matter Was Addressed in the Audit
The primary procedures we performed to address this critical audit matter included:
•Substantively testing management's determination of the qualitative adjustments used in the ACL estimate, including:
◦Evaluated management’s process for developing the qualitative adjustments, which included assessing the relevance and reliability of data used to develop the qualitative adjustments, including evaluating their judgments and assumptions for reasonableness. Among other procedures, our evaluation considered evidence from internal and external sources.
◦Analytically evaluating the qualitative adjustments for directional consistency, testing for reasonableness, and obtaining evidence for significant changes.
◦Evaluated the mathematical accuracy of the qualitative adjustments applied to the loan segments in the ACL calculation.
We have served as the Company’s auditor since 2021.
Forvis Mazars, LLP
Pittsburgh, Pennsylvania
March 13, 2026
60 | ||
| ||
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
| December 31, | 2025 | 2024 | |||||||||
| (Dollars in Thousands, Except Per Share and Share Data) | |||||||||||
| ASSETS | |||||||||||
| Cash and Due From Banks: | |||||||||||
| Interest-Earning | $ | $ | |||||||||
| Noninterest-Earning | |||||||||||
| Total Cash and Due From Banks | |||||||||||
| Securities: | |||||||||||
| Available-for-Sale Debt Securities, at Fair Value | |||||||||||
| Equity Securities, at Fair Value | |||||||||||
| Total Securities | |||||||||||
| Loans Held for Sale | |||||||||||
Loans (Net of Allowance for Credit Losses of $ | |||||||||||
| Premises and Equipment, Net | |||||||||||
| Bank-Owned Life Insurance | |||||||||||
| Goodwill | |||||||||||
| Accrued Interest Receivable and Other Assets | |||||||||||
| TOTAL ASSETS | $ | $ | |||||||||
| LIABILITIES | |||||||||||
| Deposits: | |||||||||||
| Noninterest-Bearing Demand Accounts | $ | $ | |||||||||
| Interest-Bearing Demand Accounts | |||||||||||
| Money Market Accounts | |||||||||||
| Savings Accounts | |||||||||||
| Time Deposits | |||||||||||
| Total Deposits | |||||||||||
| Other Borrowed Funds | |||||||||||
| Accrued Interest Payable and Other Liabilities | |||||||||||
| TOTAL LIABILITIES | |||||||||||
| STOCKHOLDERS' EQUITY | |||||||||||
Common Stock, $ | |||||||||||
| Capital Surplus | |||||||||||
| Retained Earnings | |||||||||||
Treasury Stock, at Cost ( | ( | ( | |||||||||
| Accumulated Other Comprehensive Loss | ( | ( | |||||||||
| TOTAL STOCKHOLDERS' EQUITY | |||||||||||
| TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | $ | $ | |||||||||
The accompanying notes are an integral part of these consolidated financial statements
61 | ||
| ||
CONSOLIDATED STATEMENTS OF INCOME
| Year Ended December 31, | 2025 | 2024 | |||||||||
| (Dollars in Thousands, Except Per Share and Share Data) | |||||||||||
| INTEREST AND DIVIDEND INCOME | |||||||||||
| Loans, Including Fees | $ | $ | |||||||||
| Securities: | |||||||||||
| Taxable | |||||||||||
| Tax-Exempt | |||||||||||
| Dividends | |||||||||||
| Other Interest and Dividend Income | |||||||||||
| TOTAL INTEREST AND DIVIDEND INCOME | |||||||||||
| INTEREST EXPENSE | |||||||||||
| Deposits | |||||||||||
| Short-Term Borrowings | |||||||||||
| Other Borrowings | |||||||||||
| TOTAL INTEREST EXPENSE | |||||||||||
| NET INTEREST AND DIVIDEND INCOME | |||||||||||
| Provision for Credit Losses - Loans | |||||||||||
| Provision for Credit Losses - Unfunded Commitments | |||||||||||
| NET INTEREST AND DIVIDEND INCOME AFTER NET PROVISION FOR CREDIT LOSSES | |||||||||||
| NONINTEREST INCOME | |||||||||||
| Service Fees | |||||||||||
| Insurance Commissions | |||||||||||
| Other Commissions | |||||||||||
| Net Gain on Sale of Loans | |||||||||||
| Net (Loss) Gain on Investment Securities | ( | ||||||||||
| Net Gain on Purchased Tax Credits | |||||||||||
| Gain on Sale of Subsidiary | |||||||||||
| Net Gain on Disposal of Premises and Equipment | |||||||||||
| Income from Bank-Owned Life Insurance | |||||||||||
| Net Gain on Bank-Owned Life Insurance Claims | |||||||||||
| Other Income | |||||||||||
| TOTAL NONINTEREST INCOME (LOSS) | ( | ||||||||||
| NONINTEREST EXPENSE | |||||||||||
| Salaries and Employee Benefits | |||||||||||
| Occupancy | |||||||||||
| Equipment | |||||||||||
| Data Processing | |||||||||||
| Federal Deposit Insurance Corporation Assessment | |||||||||||
| Pennsylvania Shares Tax | |||||||||||
| Contracted Services | |||||||||||
| Legal and Professional Fees | |||||||||||
| Advertising | |||||||||||
| Other Real Estate Owned | |||||||||||
| Amortization of Intangible Assets | |||||||||||
| Other Expense | |||||||||||
| TOTAL NONINTEREST EXPENSE | |||||||||||
INCOME BEFORE INCOME TAX EXPENSE | |||||||||||
| Income Tax Expense | |||||||||||
| Net Income | $ | $ | |||||||||
| EARNINGS PER SHARE | |||||||||||
| Basic | $ | $ | |||||||||
| Diluted | |||||||||||
| WEIGHTED AVERAGE SHARES OUTSTANDING | |||||||||||
| Basic | |||||||||||
| Diluted | |||||||||||
The accompanying notes are an integral part of these consolidated financial statements
62 | ||
| ||
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
| Year Ended December 31, | 2025 | 2024 | |||||||||
| (Dollars in Thousands) | |||||||||||
| Net Income | $ | $ | |||||||||
| Other Comprehensive Income (Loss) | |||||||||||
| Change in Unrealized (Loss) Gain on Available-for-Sale Debt Securities | ( | ||||||||||
| Income Tax Effect | ( | ||||||||||
Reclassification Adjustment for Loss on Sale of Debt Securities Included in Net Income (1) | |||||||||||
Income Tax Effect (2) | ( | ||||||||||
Other Comprehensive Income (Loss), Net of Income Tax Effect | ( | ||||||||||
| Total Comprehensive Income | $ | $ | |||||||||
(1)Reported in Net (Loss) Gain on Investment Securities on the Consolidated Statements of Income.
(2)Reported in Income Tax Expense on the Consolidated Statements of Income.
The accompanying notes are an integral part of these consolidated financial statements
63 | ||
| ||
CONSOLIDATED STATEMENTS OF CHANGES
IN STOCKHOLDERS' EQUITY
| Shares Issued | Common Stock | Capital Surplus | Retained Earnings | Treasury Stock | Accumulated Other Comprehensive Loss | Total | |||||||||||||||||||||||||||||||||||
| (Dollars in Thousands, Except Per Share and Share Data) | |||||||||||||||||||||||||||||||||||||||||
| December 31, 2023 | $ | $ | $ | $ | ( | $ | ( | $ | |||||||||||||||||||||||||||||||||
| Net Income | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||
| Other Comprehensive Loss | — | — | — | — | — | ( | ( | ||||||||||||||||||||||||||||||||||
| Restricted Stock Awards Forfeited | ( | ( | — | ( | — | ||||||||||||||||||||||||||||||||||||
| Restricted Stock Awards Granted | ( | — | — | — | |||||||||||||||||||||||||||||||||||||
| Stock-Based Compensation Expense | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||
| Exercise of Stock Options | — | — | |||||||||||||||||||||||||||||||||||||||
Treasury Stock Purchased, at Cost ( | — | — | — | — | ( | — | ( | ||||||||||||||||||||||||||||||||||
Dividends Declared ($ | — | — | — | ( | — | — | ( | ||||||||||||||||||||||||||||||||||
| December 31, 2024 | $ | $ | $ | $ | ( | $ | ( | $ | |||||||||||||||||||||||||||||||||
| Net Income | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||
| Other Comprehensive Income | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||
| Restricted Stock Awards Forfeited | ( | — | — | ( | — | ||||||||||||||||||||||||||||||||||||
| Restricted Stock Awards Granted | ( | — | — | — | |||||||||||||||||||||||||||||||||||||
| Stock-Based Compensation Expense | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||
| Exercise of Stock Options | — | — | |||||||||||||||||||||||||||||||||||||||
Treasury Stock Purchased, at Cost ( | — | — | ( | — | ( | — | ( | ||||||||||||||||||||||||||||||||||
Dividends Declared ($ | — | — | — | ( | — | — | ( | ||||||||||||||||||||||||||||||||||
| December 31, 2025 | $ | $ | $ | $ | ( | $ | ( | $ | |||||||||||||||||||||||||||||||||
The accompanying notes are an integral part of these consolidated financial statements
64 | ||
| ||
CONSOLIDATED STATEMENTS OF CASH FLOWS
| Year Ended December 31, | 2025 | 2024 | |||||||||
| (Dollars in Thousands) | |||||||||||
| OPERATING ACTIVITIES | |||||||||||
| Net Income | $ | $ | |||||||||
| Adjustments to Reconcile Net Income to Net Cash Provided By Operating Activities: | |||||||||||
| Net Accretion on Securities | ( | ( | |||||||||
| Depreciation and Amortization | |||||||||||
| Provision for Credit Losses - Loans | |||||||||||
| Provision for Credit Losses - Unfunded Commitments | |||||||||||
| Net Loss on Sale of Debt Securities | |||||||||||
| Net Loss on Equity Securities | |||||||||||
| Net Unrealized Loss (Gain) Recognized on Equity Securities | ( | ||||||||||
| Gain on Sale of Subsidiary | ( | ||||||||||
| Gain on Purchased Tax Credits | ( | ( | |||||||||
| Income from Bank-Owned Life Insurance | ( | ( | |||||||||
| Gain on BOLI Death Benefit Claims | ( | ||||||||||
| Proceeds From Mortgage Loans Sold | |||||||||||
| Originations of Mortgage Loans for Sale | ( | ( | |||||||||
| Net Gain on Sale of Loans | ( | ( | |||||||||
| Loss (Gain) on Sales of Other Real Estate Owned | |||||||||||
| Noncash Expense for Stock-Based Compensation | |||||||||||
| Increase in Accrued Interest Receivable | ( | ( | |||||||||
| Net Gain on Disposal of Premises and Equipment | ( | ( | |||||||||
| (Benefit) Provision in Deferred Income Tax | ( | ||||||||||
| Decrease in Taxes Payable | ( | ( | |||||||||
| (Decrease) Increase in Accrued Interest Payable | ( | ||||||||||
| Other, Net | ( | ||||||||||
| Net Cash Provided by Operating Activities | |||||||||||
| INVESTING ACTIVITIES | |||||||||||
| Securities Available for Sale: | |||||||||||
| Proceeds From Principal Repayments and Maturities | |||||||||||
| Purchases of Securities | ( | ( | |||||||||
| Proceeds from Sales of Debt Securities | |||||||||||
| Proceeds from Sale of Equity Securities | |||||||||||
| Net (Increase) Decrease in Loans | ( | ||||||||||
| Purchase of Premises and Equipment | ( | ( | |||||||||
| Proceeds from Disposal of Premises and Equipment | |||||||||||
| Proceeds From a Claim on Bank-Owned Life Insurance | |||||||||||
| Investment in Low Income Housing Tax Credit | ( | ||||||||||
| Proceeds From Sales of Other Real Estate Owned | |||||||||||
| Purchase of Restricted Equity Securities | ( | ||||||||||
| Redemption of Restricted Equity Securities | |||||||||||
| Net Cash Used in Investing Activities | ( | ( | |||||||||
| FINANCING ACTIVITIES | |||||||||||
| Net Increase in Deposits | |||||||||||
| Principal Payments on Other Borrowed Funds | ( | ||||||||||
| Proceeds from Other Borrowed Funds | |||||||||||
| Cash Dividends Paid | ( | ( | |||||||||
| Treasury Stock, Purchases at Cost | ( | ( | |||||||||
| Exercise of Stock Options | |||||||||||
| Net Cash Provided by Financing Activities | |||||||||||
| Decrease in Cash and Due from Banks | ( | ( | |||||||||
| CASH AND DUE FROM BANKS AT BEGINNING OF THE YEAR | |||||||||||
| CASH AND DUE FROM BANKS AT END OF THE YEAR | $ | $ | |||||||||
The accompanying notes are an integral part of these consolidated financial statements
65 | ||
| ||
| Year Ended December 31, | 2025 | 2024 | |||||||||
| (Dollars in Thousands) | |||||||||||
| SUPPLEMENTAL CASH FLOW INFORMATION: | |||||||||||
| Cash Paid for: | |||||||||||
Interest on Deposits and Borrowings (Including Interest Credited to Deposit Accounts of $ | $ | $ | |||||||||
| Federal Income Taxes | |||||||||||
| State Income Taxes | |||||||||||
| Income Taxes Paid (Net of Refunds) exceeding 5% of Total Income Taxes Paid (Net of Refunds) in the following Jurisdictions: | |||||||||||
| Pennsylvania | * | ||||||||||
| * Jurisdiction below the threshold for the period presented | |||||||||||
| SUPPLEMENTAL NONCASH DISCLOSURE: | |||||||||||
| Transfer of Loans from Loans Held for Sale to Portfolio | $ | $ | |||||||||
| Other Real Estate Acquired in Settlement of Loans | |||||||||||
| Right of Use ("ROU") Asset Recognized | |||||||||||
| Unfunded Commitment in Low Income Housing Tax Credit | |||||||||||
The accompanying notes are an integral part of these consolidated financial statements
66 | ||
| ||
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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” or “EU”). CB Financial, the Bank and Exchange Underwriters are collectively referred to as the “Company.” Effective September 29, 2025, EU merged with and into the Bank, with the Bank as the surviving institution. All intercompany transactions and balances have been eliminated in consolidation.
Nature of Operations
The Company derives substantially all its income from banking and bank-related services which include interest income on commercial, commercial mortgage, residential real estate and consumer loan financing, interest and dividend income on securities, and fees generated from deposit services to its customers. The Company provides banking services through its subsidiary, Community Bank, a Pennsylvania-chartered commercial bank headquartered in 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. The Bank operates from nine offices in Greene, Allegheny, Washington, Fayette and Westmoreland Counties in southwestern Pennsylvania and three offices in Marshall and Ohio Counties in West Virginia.
On December 1, 2023, the Company announced that the Bank and EU entered into an Asset Purchase Agreement with World Insurance Associates, LLC ("World") pursuant to which EU sold substantially all of its assets to World for a purchase price of $30.5 million cash plus possible additional earn-out payments. The sale of assets was completed on December 8, 2023 and resulted in an initial pre-tax gain of $24.6 million. This transaction did not meet the criteria for discontinued operations reporting. During 2024, the Company recognized an additional gain of $138,000 following the final settlement of all liabilities and an earn-out payment of $708,000 . During 2025, the Company recognized an earn-out payment of $759,000 .
The Company has evaluated events and transactions occurring subsequent to the balance sheet date of December 31, 2025 through the date the consolidated financial statements are being issued for items that should potentially be recognized or disclosed in these consolidated financial statements.
Use of Estimates
The accompanying consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and with general practice within the banking industry. In preparing the financial statements, 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 period. Actual results could differ significantly from those estimates. Material estimates that are particularly susceptible to significant change in the near term relate to fair value of securities available for sale, determination of the allowance for credit losses, the valuation of real estate acquired in connection with foreclosures or in satisfaction of loans, impairment evaluations of securities, the valuation of deferred tax assets and the evaluation of goodwill and core deposit intangible impairment.
Revenue Recognition
Income on loans and securities is recognized as earned on the accrual method. Gains and losses on sales of mortgages are based on the difference between the selling price and the carrying value of the related mortgage sold.
The Company generally fully satisfies its performance obligations on its contracts with customers as services are rendered and the transaction prices are typically fixed; charged either on a periodic basis or based on activity. Because performance obligations are satisfied as services are rendered and the transaction prices are fixed, there is little judgment involved in applying Accounting Standards Codification ("ASC") Topic 606 that significantly affects the determination of the amount and timing of revenue from contracts with customers.
67 | ||
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| NOTES TO CONSOLIDATED FINANCIAL STATEMENTS | ||
The Company’s revenue from contracts with customers within the scope of ASC Topic 606 is recognized within Noninterest Income with the exception of Other Real Estate Owned (“OREO”) Income, which is accounted for in Noninterest Expense. The following narrative describes the Company’s revenue streams accounted for under the guidance of ASC Topic 606:
Service Fees: The Company earns fees from its deposit customers for transaction-based, account maintenance, and overdraft services. Transaction-based fees include services fees for ATM usage, stop payment charges, statement production, ACH and wire transfers, which are recognized into income at the occurrence of an executed transaction and the point in time the Company fulfills the customer’s request. Account maintenance fees, which are primarily based on monthly maintenance activities, are earned over the course of the month, and satisfy the Company’s performance obligation. Overdraft fees are recognized as the overdrafts on customer’s accounts are incurred. The services fees are automatically withdrawn from the customer’s account balance per their account agreement with the Company. In addition, the Company earns interchange fees from debit/credit cardholder transactions conducted through the applicable payment networks. Interchange fees from cardholder transactions represent a percentage of the underlying transaction value and are recognized daily, concurrently with the transaction processing services provided to the cardholder. The Company currently does not offer a cardholder rewards program.
Other Commissions: The Company earns other commissions, such as wealth management referral fees, check sales and safe deposit box rentals to customers. The wealth management referral fees are earned as a referral when a bank customer initiates a customer relationship with an associated wealth management firm. These fees fulfill the contract/agreement between the Company and the wealth management firm. Check sales are recognized as customers contact the Company for check supplies or the customer initiates the check order through the Company website to our third-party check company. These commissions are recognized as the third-party check company satisfies the contract of providing check stock to our customers. Safe deposit box rental income is recognized on a monthly basis, per each contract agreement with our customers. The safe deposit box income is automatically withdrawn from the customer’s deposit account on a monthly basis as this revenue is earned by the contract.
Gains (Losses) on Sales of OREO: The Company records a gain or loss from the sale of OREO when control of the property transfers to the buyer, which generally occurs at the time of an executed deed. It is not common policy that the Company will finance an OREO property with the buyer. It is the Company’s practice to sell loan collateral recognized as an OREO property to free the Company of any additional loss exposure.
Operating Segments
Cash and Due From Banks
The Company has defined cash and due from banks as cash on hand and those amounts due from depository institutions, interest-bearing deposits with other banks with original maturities of less than 90 days, and federal funds sold. The Company maintains cash deposits in other depository institutions that occasionally exceed the amount of deposit insurance available. Management periodically assesses the financial condition of these institutions and believes that the risk of any possible credit loss is minimal.
Generally, the Company is required to maintain average reserve balances in vault cash with the Federal Reserve Bank based upon outstanding balances of deposit transaction accounts. However, as announced on March 15, 2020, the Federal Reserve Board reduced reserve requirement ratios to zero percent, effective March 26, 2020, in light of the shift to an ample reserves regime. This action eliminates the need to maintain balances in accounts at the Federal Reserve Bank to satisfy reserve requirements, thereby freeing up liquidity in the banking system to support lending. Therefore, at December 31, 2025, and 2024, there were no reserve requirements with the Federal Reserve Bank.
Securities
Securities are classified at the time of purchase, based on management’s intentions and ability, as securities held to maturity or securities available-for-sale. Debt securities acquired with the intent and the ability to hold to maturity are stated at cost adjusted for amortization of premium and accretion of discount, which are computed using a level yield method and recognized as adjustments to interest income. Unrealized holding gains and losses for available-for-sale debt securities are reported as a separate component of stockholders’ equity, net of tax, until realized. Equity securities are measured at fair value with the change in fair value recognized in Net Gain (Loss) on Investment Securities within the noninterest income category in the Consolidated Statements of Income. Realized securities gains and losses, if any, are computed using the specific identification method. Interest and dividends on securities are recognized as income when earned.
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For available-for-sale securities in an unrealized loss position, the Company first assesses whether it intends to sell, or it is more likely than not that it will be required to sell the security before recovery of its amortized cost basis. If either of the criteria regarding intent or requirement to sell is met, the security’s amortized cost basis is written down to fair value through income. For securities available-for-sale that do not meet the above criteria, the Company evaluates whether the decline in fair value has resulted from credit losses or other factors. In making this assessment, the Company considers the extent to which fair value is less than amortized cost, any changes to the rating by a rating agency, and adverse conditions related to the security, among other factors. If this assessment indicates that a credit loss exists, the present value of cash flows expected to be collected from the security are compared to the amortized cost basis of the security. If the present value of the cash flows expected to be collected is less than the amortized cost basis, a credit loss exists and an allowance for credit loss ("ACL") is recorded for the credit loss, limited by the amount that the fair value is less than the amortized cost. Any impairment that has not been recorded through an ACL is recognized in other comprehensive income (loss), net of tax. The Company elected the practical expedient of zero loss estimates for securities issued by U.S. government entities and agencies. These securities are either explicitly or implicitly guaranteed by the U.S. government, are highly rated by major agencies and have a long history of no credit losses.
Changes in the ACL are recorded as provision for, or reversal of, credit loss expense. Losses are charged against the allowance when management believes the uncollectibility of an available for sale security is confirmed or when either of the criteria regarding intent or requirement to sell is met.
Common stock of the Federal Home Loan Bank (“FHLB”) and of Atlantic Community Bankers’ Bank (“ACBB”) represent ownership in organizations that are wholly owned by other financial institutions. These restricted equity securities are accounted for based on industry guidance in ASC Sub-Topic 325-20, which requires the investment to be carried at cost and evaluated for impairment based on the ultimate recoverability of the par value. Included in accrued interest receivable and other assets are FHLB stock of $2.9 million and $3.0 million at December 31, 2025 and 2024, respectively, and ACBB stock of $85,000
The Company periodically evaluates its FHLB restricted stock for possible impairment based on, among other things, the capital adequacy of the FHLB and its overall financial condition. The Company believes its holdings in the stock are ultimately recoverable at par value at December 31, 2025, and, therefore, determined that FHLB stock was not impaired. In addition, the Company has ample liquidity and does not require redemption of its FHLB stock in the foreseeable future.
Loans Receivables
The Company grants commercial, residential, and other consumer loans to customers at its branch locations throughout southwestern Pennsylvania in Greene, Washington, Allegheny, Fayette and Westmoreland Counties and in the panhandle of West Virginia in Marshall and Ohio Counties. Although the Company had a diversified loan portfolio at December 31, 2025 and 2024, a substantial portion of its debtors’ ability to honor their contracts is determined by the economic environment of these counties within the tri-state region footprint.
Loans receivable that management has the intent and ability to hold for the foreseeable future or until maturity or payoff are stated at the principal amount outstanding, net of deferred loan fees and the allowance for credit losses. The Company’s loan portfolio is segmented to enable management to monitor risk and performance. The real estate loans are further segregated into three classes. Residential mortgages include those secured by residential properties and include home equity loans, 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. Other loans primarily consist of municipal loans to local governments.
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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 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 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. 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, and accounts receivable, 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.
Accrual of interest on loans is generally discontinued when it is determined that a reasonable doubt exists as to the collectability of principal and interest or when a loan becomes contractually past due by 90 days or more with respect to principal or interest. When a loan is placed on nonaccrual status, any accrued but uncollected interest is reversed from current income. Payments received on nonaccrual loans are applied against principal. Loans are returned to accrual status when all the principal and interest amounts contractually due are brought current, and current and future payments are reasonably assured.
The Company uses a nine-point internal risk rating system to monitor the credit quality of the overall loan portfolio. The first five 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 uncollectible and of such little value that continuance as an asset is not warranted.
The performance and credit quality of the loan portfolio are also monitored by analyzing the age of the loans receivable as determined by the length of time a recorded payment is past due. The past due status of all classes of loans receivable is determined based on contractual due dates for loan payments.
For performing loans acquired in a merger, the excess of expected cash flows over the estimated fair value, at acquisition, is referred to as the accretable discount and is recognized into interest income over the remaining life of the loan. For performing loans acquired in a merger that have experienced more‑than‑insignificant deterioration in credit quality since origination (“purchased credit‑deteriorated” or “PCD” loans), the Company records the loans at fair value at acquisition and establishes an allowance for credit losses through a gross‑up of the loan’s amortized cost basis. As a result, the initial allowance for credit losses is recorded without a corresponding provision for credit losses at the acquisition date. The amortized cost basis of PCD loans includes the purchase price plus the allowance for credit losses at acquisition. The difference between the amortized cost basis and the unpaid principal balance represents a discount or premium, which is accreted or amortized into interest income over the remaining contractual life of the loan using the effective interest method. Subsequent changes in expected credit losses are recognized through the provision for credit losses. Changes in expected cash flows that are not related to credit are recognized prospectively as adjustments to yield. The evaluation of expected future cash flows is performed using methodologies consistent with those applied in determining the allowance for credit losses. Charge‑offs of principal on acquired loans are applied against the allowance for credit losses.
Loan origination and commitment fees as well as certain direct loan origination costs are deferred and the net amount either accreted or amortized as an adjustment to the related loan’s yield over the contractual lives of the related loans.
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Allowance for Credit Losses (ACL)
The ACL represents the estimated amount considered necessary to cover lifetime expected credit losses inherent in financial assets at the balance sheet date. The measurement of expected credit losses is applicable to loans receivable and securities measured at amortized cost. It also applies to off-balance sheet credit exposures such as loan commitments and unused lines of credit. The ACL is established through a provision for credit losses that is charged against income. The methodology for determining the ACL is considered a critical accounting policy by management because of the high degree of judgment involved, the subjectivity of the assumptions used, and the potential for changes in the forecasted economic environment that could result in changes to the amount of the recorded ACL. The ACL is reported separately as a contra-asset on the Consolidated Statement of Financial Condition. The expected credit loss for unfunded loan commitments is reported on the Consolidated Statement of Financial Condition in other liabilities while the provision for credit losses related to unfunded commitments is reported in provision for credit losses - unfunded commitments in the Consolidated Statements of Income.
ACL on Loans Receivable
The ACL on loans is deducted from the amortized cost basis of the loan to present the net amount expected to be collected. Expected losses are evaluated and calculated on a collective, or pooled, basis for those loans which share similar risk characteristics. At each reporting period, the Company evaluates whether loans within a pool continue to exhibit similar risk characteristics. If the risk characteristics of a loan change, such that they are no longer similar to other loans in the pool, the Company will evaluate the loan with a different pool of loans that share similar risk characteristics. If the loan does not share risk characteristics with other loans, the Company will evaluate the loan on an individual basis. The Company evaluates the pooling methodology at least annually. Loans are charged off against the ACL when the Company believes the balances to be uncollectible. Expected recoveries do not exceed the aggregate of amounts previously charged off or expected to be charged off.
The Company has chosen to segment its portfolio consistent with the manner in which it manages credit risk. Such segments include residential mortgage, commercial real estate mortgages, construction, commercial business, consumer and other. For most segments, the Company calculates estimated credit losses using a probability of default and loss given default methodology, the results of which are applied to the aggregated discounted cash flow of each individual loan within the segment. The point in time probability of default and loss given default are then conditioned by macroeconomic scenarios to incorporate reasonable and supportable forecasts that affect the collectability of the reported amount.
The Company estimates the ACL on loans via a quantitative analysis which considers relevant available information from internal and external sources related to past events and current conditions, as well as the incorporation of reasonable and supportable forecasts. The Company evaluates a variety of factors including third party economic forecasts, industry trends and other available published economic information in arriving at its forecasts. After the reasonable and supportable forecast period, the Company reverts, on a straight-line basis, to average historical losses. Expected credit losses are estimated over the contractual term of the loans, adjusted for expected prepayments when appropriate. The contractual term excludes expected extensions, renewals, and modifications unless either of the following applies: management has a reasonable expectation at the reporting date that a restructuring will be executed with an individual borrower or the renewal option is included in the original or modified contract at the reporting date and are not unconditionally cancellable by the Company.
Also included in the ACL on loans are qualitative reserves to cover losses that are expected but, in the Company’s assessment, may not be adequately represented in the quantitative analysis or the forecasts described above. Factors that the Company considers include changes in lending policies and procedures, business conditions, the nature and size of the portfolio, portfolio concentrations, the volume and severity of past due loans and nonaccrual loans, and the effect of external factors such as competition, legal and regulatory requirements, among others. Furthermore, the Company considers the inherent uncertainty in quantitative models that are built upon historical data.
Individually Evaluated Loans
On a case-by-case basis, the Company may conclude that a loan should be evaluated on an individual basis based on its disparate risk characteristics. When the Company determines that a loan no longer shares similar risk characteristics with other loans in the portfolio, the allowance will be determined on an individual basis using the present value of expected cash flows or, for collateral-dependent loans, the fair value of the collateral as of the reporting date, less estimated selling costs, as applicable. Impaired loans that are collateral dependent are written down to fair value through the establishment of specific reserves.
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ACL on Off-Balance Sheet Commitments
The Company is required to include unfunded commitments that are expected to be funded in the future within the allowance calculation, other than those that are unconditionally cancellable. To arrive at that reserve, the reserve percentage for each applicable segment is applied to the unused portion of the expected commitment balance and is multiplied by the expected funding rate. To determine the expected funding rate, the Company uses a historical utilization rate for each segment. As noted above, the ACL on unfunded loan commitments is included in other liabilities on the Consolidated Statement of Financial Condition and the related credit expense is recorded in provision for credit losses - unfunded commitments in the Consolidated Statements of Income.
ACL on Available-for-Sale Securities
For available-for-sale securities in an unrealized loss position, the Company first assesses whether it intends to sell, or it is more likely than not that it will be required to sell the security before recovery of its amortized cost basis. If either of the criteria regarding intent or requirement to sell is met, the security’s amortized cost basis is written down to fair value through income. For securities available-for-sale that do not meet the above criteria, the Company evaluates whether the decline in fair value has resulted from credit losses or other factors. In making this assessment, the Company considers the extent to which fair value is less than amortized cost, any changes to the rating by a rating agency, and adverse conditions related to the security, among other factors. If this assessment indicates that a credit loss exists, the present value of cash flows expected to be collected from the security are compared to the amortized cost basis of the security. If the present value of the cash flows expected to be collected is less than the amortized cost basis, a credit loss exists and an ACL is recorded for the credit loss, limited by the amount that the fair value is less than the amortized cost. Any impairment that has not been recorded through an ACL is recognized in other comprehensive income (loss), net of tax. The Company elected the practical expedient of zero loss estimates for securities issued by U.S. government entities and agencies. These securities are either explicitly or implicitly guaranteed by the U.S. government, are highly rated by major agencies and have a long history of no credit losses.
Changes in the ACL are recorded as provision for, or reversal of, credit loss expense. Losses are charged against the allowance when management believes the uncollectibility of an available-for-sale security is confirmed or when either of the criteria regarding intent or requirement to sell is met.
Accrued Interest Receivable
The Company made an accounting policy election to exclude accrued interest receivable from the amortized cost basis of loans and available-for-sale securities. Accrued interest receivable on loans is reported as a component of on the Consolidated Statement of Financial Condition, totaled $4.4 million at December 31, 2025 and is excluded from the estimate of credit losses. Accrued interest receivable on available-for-sale securities, also a component of on the Consolidated Statement of Financial Condition, totaled $2.0 million, at December 31, 2025 and is excluded from the estimate of credit losses.
Premises and Equipment
Premises and equipment are stated at cost, less accumulated depreciation. Depreciation is principally computed on the straight-line method over the estimated useful lives of the related assets, which range from to seven years for furniture, fixtures and equipment, and 27.5 to 40 years for building premises. Leasehold improvements are amortized over the shorter of their estimated useful lives or their respective lease terms, which range from to fifteen years . Expenditures for maintenance and repairs are charged to expense when incurred while costs of major additions and improvements are capitalized.
Bank-Owned Life Insurance
The Company is the owner and beneficiary of bank-owned life insurance (“BOLI”) policies on certain employees. The earnings from the BOLI policies are recognized as a component of noninterest income. The BOLI policies are an asset that can be liquidated, if necessary, with associated tax costs. However, the Company intends to hold these policies and, accordingly, the Company has not provided for deferred income taxes on the earnings from the increase in cash surrender value.
Real Estate Owned
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Income Taxes
The Company accounts for income taxes in accordance with income tax accounting guidance in ASC Topic 740, Income Taxes. The income tax accounting guidance results in two components of income tax expense: current and deferred. Current income tax expense reflects taxes to be paid or refunded for the current period by applying the provisions of the enacted tax law to the taxable income or excess of deductions over revenues. The Company determines deferred income taxes using the balance sheet method. Under this method, the net deferred tax asset or liability is based on the tax effects of the differences between book and tax basis of assets and liabilities, and enacted changes in tax rates and laws are recognized in the period in which they occur.
Deferred income tax expense results from changes in deferred tax assets and liabilities between periods. Deferred tax assets and liabilities are the expected future tax amounts for the temporary differences between carrying amounts and tax bases of assets and liabilities, computed using enacted tax rates. A valuation allowance, if needed, reduces deferred tax assets to the amount expected to be realized. A tax position that meets the more-likely-than-not recognition threshold is initially and subsequently measured as the largest amount of tax benefit that has a greater than 50% likelihood of being realized upon settlement with a taxing authority that has full knowledge of all relevant information. The determination of whether a tax position has met the more-likely-than-not recognition threshold considers the facts, circumstances and information available at the reporting date, and is subject to management’s judgment. Deferred tax assets are reduced by a valuation allowance if, based on the weight of evidence available, it is more likely than not that some portion or all of a deferred tax asset will not be realized.
Goodwill
Goodwill represents the excess of the cost of an acquisition over the fair value of the net assets acquired. Deemed to have an indefinite life and not subject to amortization, goodwill is instead tested for impairment at the reporting unit level at least annually or more frequently if triggering events occur or impairment indicators exist. The Company operates one segment – Community Banking Services. The Company has assigned 100 % of the goodwill to the Community Banking reporting unit.
In assessing the impairment, the Company has the the option to perform either a qualitative analysis to determine whether it is necessary to perform the goodwill impairment test, or the Company may elect to perform a quantitative goodwill impairment test. Under the qualitative assessment, the Company assesses the existence of events or circumstances to determine whether it is more-likely-than-not that the fair value of the reporting unit is less than its carrying amount, including, goodwill. If this is more likely than not, the goodwill impairment test is used to identify potential goodwill impairment and measure the amount of a goodwill impairment loss to be recognized, if any. The estimated fair value of the community banking reporting unit is compared to its carrying value, including goodwill. If the estimated fair value of the reporting unit exceeds its carrying amount, the goodwill of the reporting unit is not considered impaired, and no impairment loss is recognized. However, if the carrying amount of the reporting unit exceeds its fair value, an impairment loss is recognized based on the excess of the a reporting unit's carrying value over its fair value.
The Company did no
Mortgage Servicing Rights (“MSRs”)
The Company has agreements for the express purpose of selling loans in the secondary market. The Company maintains all servicing rights for these loans. MSRs are recognized when commitments are made to fund a loan to be sold and are recorded by allocating total costs incurred between the loan and servicing rights based on their relative fair values. MSRs are amortized in proportion to sold mortgages that are serviced and are included in Accrued Interest Receivable and Other Assets on the accompanying Consolidated Statements of Financial Condition.
Servicing fee income is recorded for fees earned for servicing loans. The fees are based on contractual percentage of the outstanding principal or a fixed amount per loan and are recorded as income when earned. The amortization of MSRs is netted against servicing fee income in Other Income within the noninterest income category in the Consolidated Statements of Income.
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Derivatives and Hedging Activities
The Company accounts for derivative instruments and hedging activities in accordance with FASB ASC Topic 815, Derivatives and Hedging. All derivatives are evaluated at inception as to whether or not they are hedging or non-hedging activities, and appropriate documentation is maintained to support the final determination. The Company recognizes all derivatives as either assets or liabilities on the Consolidated Statements of Financial Condition and measures those instruments at fair value. For derivatives designated as fair value hedges, changes in the fair value of the derivative and the hedged item related to the hedged risk are recognized in earnings. Any hedge ineffectiveness would be recognized in the income statement line item pertaining to the hedged item. For derivatives designated as cash flow hedges, changes in fair value of the effective portion of the cash flow hedges are reported in other comprehensive income (loss) ("OCI"). When the cash flows associated with the hedged items are realized, the gain or loss included in OCI is recognized in the Consolidated Statement of Income.
Treasury Stock
The purchase of the Company’s common stock is recorded at cost. At the date of subsequent reissue, the treasury stock account is reduced by the cost of such stock on the average cost basis, with any excess proceeds being credited to capital surplus.
Comprehensive Income (Loss)
Comprehensive income (loss) consists of net income and OCI. OCI is comprised of unrealized holding gains or losses and reclassification adjustment for gains or losses on sale of available-for-sale debt securities, net of tax.
Earnings Per Share
The Company provides dual presentation of basic and diluted earnings per share. Basic earnings per share is calculated utilizing the reported net income as the numerator and weighted average shares outstanding as the denominator. The computation of diluted earnings per share differs in that the denominator is adjusted for the dilutive effects of any options and convertible securities. Treasury shares are not deemed outstanding for earnings per share calculations.
Stock-Based Compensation
In 2024, the Company's stockholders approved the 2024 Equity Incentive Plan (the “2024 Plan”). The purpose of the 2024 Plan is to provide officers, employees and directors of the Company and the Bank with additional incentives to promote the growth and performance of the Company and to further align their interests with those of the Company’s stockholders through the ownership of additional common stock of the Company. In addition, the 2024 Plan provides the Company with flexibility to continue to attract and retain highly qualified officers and directors by offering a competitive compensation program that is linked to the performance of the Company's common stock. The effective date of the 2024 Plan was May 15, 2024, which was the date the 2024 Plan satisfied the applicable stockholder approval requirement. The 2024 Plan will remain in effect as long as any awards under it are outstanding; however, no awards may be granted under the 2024 Plan on or after the day immediately prior to the ten-year anniversary of the effective date of the 2024 Plan.
Awards may be granted under the 2024 Plan as restricted stock awards or restricted stock units. The maximum number of shares of Company common stock that may be delivered to participants under the 2024 Plan is equal to 262,265 shares of Company common stock (the “Share Limit”). If any award granted under the 2024 Plan is forfeited or canceled without being settled, shares of Company common stock subject to such award will be made available for future grant under the 2024 Plan. If any shares are withheld in payment for purposes of satisfying tax withholding obligations with respect to an award, those shares do not become available for re-issuance under the 2024 Plan.
In 2021, the Company’s stockholders approved the 2021 Equity Incentive Plan (the “2021 Plan”). The effective date of the 2021 Plan was May 19, 2021, which was the date the 2021 Plan satisfied the applicable stockholder approval requirement. The 2021 Plan will remain in effect as long as any awards under it are outstanding, but as a result of the approval of the 2024 Plan, no more awards can be granted under the 2021 Plan.
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Awards could be granted under the 2021 Plan as incentive and non-statutory stock options, restricted stock awards, restricted stock units or any combination thereof. The maximum number of shares of Company common stock that could be delivered to participants under the 2021 Plan was equal to 500,000 shares of Company common stock (the “Share Limit”). Shares of Company common stock subject to the Share Limit could be issued pursuant to grants of stock options, restricted stock awards or restricted stock units, provided, however that the Share Limit was reduced, on a one -for-one basis, for each share of common stock subject to a stock option grant, and on a two and one-half-for-one basis for each share of common stock issued pursuant to restricted stock awards or restricted stock unit awards. If any award granted under the 2021 Plan expired, terminated, was canceled or was forfeited without being settled or exercised or was settled without the issuance of shares of common stock, shares of Company common stock subject to such award was made available for future grant under the 2021 Plan. If any shares were surrendered or tendered to pay the exercise price of a stock option, such shares were not again available for grant under the 2021 Plan. In addition, shares of common stock withheld in payment for purposes of satisfying tax withholding obligations with respect to an award did not become available for re-issuance under the 2021 Plan. Employees and directors of the Company or its subsidiaries were eligible to receive awards under the 2021 Equity Incentive Plan, except that non-employees could not be granted incentive stock options.
In 2015, the Company’s stockholders approved the 2015 Equity Incentive Plan (the “2015 Plan”), which has similar characteristics to the 2021 Plan. The effective date of the 2015 Plan was May 20, 2015. The 2015 Plan shall remain in effect as long as any awards are outstanding, but as a result of the approval of the 2021 Plan, no more awards can be granted under the 2015 Plan. The 2015 Plan reserved an aggregate number of shares, of which two-thirds of the shares (271,431 ) could be issued as stock options and one-third of the shares (135,715 ) could be be issued as restricted stock awards or units.
ASC Topic 718, Compensation – Stock Compensation, requires recognizing the compensation cost in the financial statements for stock-based payment transactions. Stock option expense is measured based on the grant date fair value of the stock options issued. The per share fair value of stock options granted is calculated using the Black-Scholes-Merton option pricing model, using assumptions for expected life, expected dividend yield, risk-free interest rate and an expected volatility. The Company uses the simplified method to determine the expected term because it does not have sufficient historical exercise data to provide a reasonable basis upon which to estimate expected term. The stock option exercise price is equal to the market value on the date of grant. Restricted stock award expense is measured based on the market price of the Company’s common stock at the date of the grant. Unrecognized compensation expense is recognized ratably over the remaining service period, generally defined as the vesting period, for all nonvested restricted stock awards and stock options. Restricted stock awards and stock options are typically granted with a five year vesting period at a vesting rate of 20 % per year. The contractual life of stock options is typically 10 years from the date of grant.
Advertising Costs
Advertising costs are expensed as incurred.
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 fair value with the recognized impairment charges recorded in noninterest expense in the Consolidated Statements of Income.
Long-lived assets are tested for impairment individually or as part of an asset group. An asset group is the unit of 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.
Recent Accounting Standards
In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures. This ASU requires that public entities on an annual basis (1) disclose specific categories in the rate reconciliation and (2) provide additional information for reconciling items that meet a quantitative threshold. The ASU requires all entities to disclose on an annual basis (1) the amount of income taxes paid, disaggregated by federal, state and foreign taxes and (2) the amount of income taxes paid disaggregated by individual jurisdictions in which income taxes paid is equal to or greater than five percent of total income taxes paid. The ASU also requires that all entities disclose (1) income (loss) from continuing operations before income tax expense (or benefit) disaggregated between domestic or foreign and (2) income tax expense (or benefit) from continuing operations disaggregated by federal (national), state and foreign. This ASU became effective for public entities for annual periods beginning after December 15, 2024. The Company adopted this standard effective January 1, 2025 on a retrospective basis for all periods presented. Adoption impacted the presentation and disclosure of income tax information but did not have a material effect on the Company’s consolidated financial statements.
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| NOTES TO CONSOLIDATED FINANCIAL STATEMENTS | ||
In November 2024, the FASB issued ASU 2024-03, Disaggregation of Income Statement Expenses (DISE); this ASU was then superseded by ASU 2025-01, Clarifying the Effective Date, to clarify the effective date for interim reporting. Collectively, these ASU's require that public entities on an annual and interim basis disclose specific natural expenses contained within each relevant income statement expense caption. These specified natural expenses are: purchases of inventory, employee compensation, depreciation, intangible asset amortization, and depreciation, depletion and amortization recognized as part of oil- and gas- producing activities (DD&A). This ASU is effective for public entities for annual periods beginning after December 15, 2026 and interim reporting periods within annual reporting periods beginning after December 15, 2027. The Company does not expect the adoption of the ASU to have a material effect on its consolidated financial statements.
In November 2025, the FASB issued ASU 2025-08, Financial Instruments—Credit Losses (Topic 326):Purchased Loans. The update expands the population of acquired financial assets subject to the gross-up approach in Topic 326 to include acquired seasoned loans without credit deterioration (excluding credit cards). This ASU is effective for annual periods beginning after December 15, 2026, and interim reporting periods within those annual reporting periods with early adoption permitted. The amendments in this update are to be applied prospectively to loans that are acquired on or after the initial application date. The Company adopted this update January 1, 2026 and will implement the guidance upon the occurrence of a future acquisition transaction.
In November 2025, the FASB issued ASU 2025-09, Derivatives and Hedging (Topic 815): Hedge Accounting Improvements. The update clarifies hedge accounting guidance and addresses issues arising from the global reference rate reform initiative. There are five issues addressed: 1) expanding risks permitted to be aggregated for cash flow hedges to include those having a similar risk exposure; 2) provide cash flow accounting guidance on choose-your-rate debt instruments; 3) expand hedge accounting for forecasted purchases and sales of nonfinancial assets; 4) update guidance on net written options as hedging instruments; 5) refine foreign-currency-denominated debt instrument as hedging instrument and hedged item (dual hedge). This ASU is effective for annual periods beginning after December 15, 2026, and interim reporting periods within those annual reporting periods. The amendments in this update are to be applied on a prospective basis. The Company does not expect the adoption of the ASU to have a material effect on its consolidated financial statements.
In December 2025, the FASB issued ASU 2025-11, Interim Reporting (Topic 270): Narrow-Scope Improvements. The update provides a comprehensive list of interim disclosures that are required by GAAP to provide clarity about the current requirements. The update also includes a disclosure principle that requires entities to disclose events since the end of the last annual reporting period that have a material impact on the entity. This ASU is effective for interim reporting periods within annual reporting periods beginning after December 15, 2027. Early adoption is permitted. The amendments in this update can be applied prospectively or retrospectively. The Company does not expect the adoption of the ASU to have a material impact on its consolidated financial statements.
NOTE 2—EARNINGS PER SHARE
There are no
The following table sets forth the composition of the weighted-average common shares (denominator) used in the basic and diluted earnings per share computation.
| Year Ended December 31, | 2025 | 2024 | |||||||||
| (Dollars in Thousands, Except Share and Per Share Data) | |||||||||||
| Net Income | $ | $ | |||||||||
| Weighted-Average Basic Common Shares Outstanding | |||||||||||
| Dilutive Effect of Common Stock Equivalents (Stock Options and Restricted Stock) | |||||||||||
| Weighted-Average Diluted Common Shares and Common Stock Equivalents Outstanding | |||||||||||
| Earnings Per Share: | |||||||||||
| Basic | $ | $ | |||||||||
| Diluted | |||||||||||
76 | ||
| ||
| NOTES TO CONSOLIDATED FINANCIAL STATEMENTS | ||
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 as of 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.
| Year Ended December 31, | 2025 | 2024 | |||||||||
| Stock Options | |||||||||||
| Restricted Stock | |||||||||||
NOTE 3—SECURITIES
The amortized cost and fair value of securities available-for-sale as of the dates indicated are as follows:
| 2025 | |||||||||||||||||||||||
| December 31, | Amortized Cost | Gross Unrealized Gains | Gross Unrealized Losses | Fair Value | |||||||||||||||||||
| (Dollars in Thousands) | |||||||||||||||||||||||
| Available-for-Sale Debt Securities: | |||||||||||||||||||||||
| Obligations of States and Political Subdivisions | $ | $ | $ | $ | |||||||||||||||||||
| Mortgage-Backed Securities - Government-Sponsored Enterprises | |||||||||||||||||||||||
| Collateralized Mortgage Obligations - Government-Sponsored Enterprises | ( | ||||||||||||||||||||||
| Collateralized Mortgage Obligations - Non-Agency | ( | ||||||||||||||||||||||
| Collateralized Loan Obligations | ( | ||||||||||||||||||||||
| Corporate Debt | ( | ||||||||||||||||||||||
| Total Available-for-Sale Debt Securities | $ | $ | $ | ( | $ | ||||||||||||||||||
| Equity Securities: | |||||||||||||||||||||||
| Mutual Funds | |||||||||||||||||||||||
| Total Equity Securities | |||||||||||||||||||||||
| Total Securities | $ | ||||||||||||||||||||||
77 | ||
| ||
| NOTES TO CONSOLIDATED FINANCIAL STATEMENTS | ||
| 2024 | |||||||||||||||||||||||
| December 31, | Amortized Cost | Gross Unrealized Gains | Gross Unrealized Losses | Fair Value | |||||||||||||||||||
| (Dollars in Thousands) | |||||||||||||||||||||||
| Available-for-Sale Debt Securities: | |||||||||||||||||||||||
| U.S. Government Agencies | $ | $ | $ | ( | $ | ||||||||||||||||||
| Obligations of States and Political Subdivisions | ( | ||||||||||||||||||||||
| Mortgage-Backed Securities - Government-Sponsored Enterprises | ( | ||||||||||||||||||||||
| Collateralized Mortgage Obligations - Government-Sponsored Enterprises | ( | ||||||||||||||||||||||
| Collateralized Loan Obligations | ( | ||||||||||||||||||||||
| Corporate Debt | ( | ||||||||||||||||||||||
| Total Available-for-Sale Debt Securities | $ | $ | $ | ( | $ | ||||||||||||||||||
| Equity Securities: | |||||||||||||||||||||||
| Mutual Funds | |||||||||||||||||||||||
| Other | |||||||||||||||||||||||
| Total Equity Securities | |||||||||||||||||||||||
| Total Securities | $ | ||||||||||||||||||||||
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:
| 2025 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Less than 12 months | 12 Months or Greater | Total | |||||||||||||||||||||||||||||||||||||||||||||||||||
| December 31, | 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) | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Mortgage-Backed Securities - Government-Sponsored Enterprises | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||||
| Collateralized Mortgage Obligations - Government-Sponsored Enterprises | ( | ( | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Collateralized Mortgage Obligations - Non-Agency | ( | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Collateralized Loan Obligations | ( | ( | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Corporate Debt | ( | ( | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Total | $ | $ | ( | $ | $ | ( | $ | $ | ( | ||||||||||||||||||||||||||||||||||||||||||||
78 | ||
| ||
| NOTES TO CONSOLIDATED FINANCIAL STATEMENTS | ||
| 2024 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Less than 12 months | 12 Months or Greater | Total | |||||||||||||||||||||||||||||||||||||||||||||||||||
| December 31, | 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) | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| U.S. Government Agencies | $ | $ | $ | $ | ( | $ | $ | ( | |||||||||||||||||||||||||||||||||||||||||||||
| Obligations of States and Political Subdivisions | ( | ( | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Mortgage-Backed Securities - Government-Sponsored Enterprises | ( | ( | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Collateralized Mortgage Obligations - Government-Sponsored Enterprises | ( | ( | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Collateralized Loan Obligations | ( | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Corporate Debt | ( | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Total | $ | $ | ( | $ | $ | ( | $ | $ | ( | ||||||||||||||||||||||||||||||||||||||||||||
For debt securities, the Company does not believe that any individual unrealized loss as of December 31, 2025 or 2024 represents a credit related impairment. The unrealized losses on securities at December 31, 2025 and 2024 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.
Securities available-for-sale with a fair value of $172.6 million and $176.2 million at December 31, 2025 and 2024, respectively, are pledged to secure uninsured public deposits, borrowings or for other purposes as required or permitted by law.
The scheduled maturities of securities available-for-sale are summarized as follows. Actual maturities will differ from contractual maturities because borrowers may have the right to call or prepay debt obligations with or without prepayment penalties. Mortgage-backed securities, collateralized mortgage obligations and collateralized loan obligations are classified in the table below based on their contractual maturity date; however, regular principal payments and prepayments of principal are received on a monthly basis.
| 2025 | |||||||||||
| December 31, | Amortized Cost | Fair Value | |||||||||
| (Dollars in Thousands) | |||||||||||
| Due after One Year through Five Years | $ | $ | |||||||||
| Due after Five Years through Ten Years | |||||||||||
| Due after Ten Years | |||||||||||
| Total | $ | $ | |||||||||
79 | ||
| ||
| NOTES TO CONSOLIDATED FINANCIAL STATEMENTS | ||
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 (Loss) Gain on Investment Securities on the Consolidated Statements of Income.
| Year Ended December 31, | 2025 | 2024 | |||||||||
| (Dollars in Thousands) | |||||||||||
| Debt Securities | |||||||||||
| Gross Realized Gain | $ | $ | |||||||||
| Gross Realized Loss | ( | ||||||||||
| Net Loss on Debt Securities | $ | ( | $ | ||||||||
| Equity Securities | |||||||||||
| Net Unrealized (Loss) Gain Recognized on Securities Held | $ | ( | $ | ||||||||
| Net Realized Loss Recognized on Securities Sold | ( | ||||||||||
| Net (Loss) Gain on Equity Securities | $ | ( | $ | ||||||||
| Net (Loss) Gain on Investment Securities | $ | ( | $ | ||||||||
NOTE 4—LOANS AND RELATED ALLOWANCE FOR CREDIT 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, 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 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.
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 inventories, accounts receivable, and other business assets, 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.
80 | ||
| ||
| NOTES TO CONSOLIDATED FINANCIAL STATEMENTS | ||
The following table summarizes the major classifications of loans as of the dates indicated:
| December 31, | 2025 | 2024 | |||||||||
| (Dollars in Thousands) | |||||||||||
| Real Estate: | |||||||||||
| Residential | $ | $ | |||||||||
| Commercial | |||||||||||
| Construction | |||||||||||
| Commercial and Industrial | |||||||||||
| Consumer | |||||||||||
| Other | |||||||||||
| Total Loans | $ | $ | |||||||||
| Allowance for Credit Losses | ( | ( | |||||||||
| Loans, Net | $ | $ | |||||||||
Total unamortized net deferred loan fees were $830,000 and $846,000 at December 31, 2025 and 2024, respectively, are included in the table above.
The Company uses a nine-point internal risk rating system to monitor the credit quality of the overall loan portfolio. The first five 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 uncollectible and of such little value that continuance as an asset is not warranted.
The following tables present the Company's loans by year of origination, loan segmentation and risk indicator summarized by the aggregate Pass and the criticized categories of Special Mention and Substandard. The Company did not have an loans classified as Doubtful or Loss as of the dates indicated.
81 | ||
| ||
| NOTES TO CONSOLIDATED FINANCIAL STATEMENTS | ||
Classified Loans by Origination Year (at December 31, 2025) | ||||||||||||||||||||||||||
| (Dollars in Thousands) | 2025 | 2024 | 2023 | 2022 | 2021 | Prior | Revolving Loans Amortized Cost Basis | Total | ||||||||||||||||||
| Real Estate: | ||||||||||||||||||||||||||
| Residential | ||||||||||||||||||||||||||
| Pass | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
| Special Mention | ||||||||||||||||||||||||||
| Substandard | ||||||||||||||||||||||||||
| Total | ||||||||||||||||||||||||||
| Commercial | ||||||||||||||||||||||||||
| Pass | ||||||||||||||||||||||||||
| Special Mention | ||||||||||||||||||||||||||
| Substandard | ||||||||||||||||||||||||||
| Total | ||||||||||||||||||||||||||
| Construction | ||||||||||||||||||||||||||
| Pass | ||||||||||||||||||||||||||
| Special Mention | ||||||||||||||||||||||||||
| Substandard | ||||||||||||||||||||||||||
| Total | ||||||||||||||||||||||||||
| Commercial and Industrial | ||||||||||||||||||||||||||
| Pass | ||||||||||||||||||||||||||
| Special Mention | ||||||||||||||||||||||||||
| Substandard | ||||||||||||||||||||||||||
| Total | ||||||||||||||||||||||||||
| Consumer | ||||||||||||||||||||||||||
| Pass | ||||||||||||||||||||||||||
| Special Mention | ||||||||||||||||||||||||||
| Substandard | ||||||||||||||||||||||||||
| Total | ||||||||||||||||||||||||||
| Other | ||||||||||||||||||||||||||
| Pass | ||||||||||||||||||||||||||
| Special Mention | ||||||||||||||||||||||||||
| Substandard | ||||||||||||||||||||||||||
| Total | ||||||||||||||||||||||||||
| Total Loans | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
| Real Estate: | ||||||||||||||||||||||||||
| Residential | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
| Commercial | ||||||||||||||||||||||||||
| Construction | ||||||||||||||||||||||||||
| Total Real Estate | ||||||||||||||||||||||||||
| Commercial & Industrial | ||||||||||||||||||||||||||
| Consumer | ||||||||||||||||||||||||||
| Other | ||||||||||||||||||||||||||
| Total Gross Charge Offs | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
82 | ||
| ||
| NOTES TO CONSOLIDATED FINANCIAL STATEMENTS | ||
Classified Loans by Origination Year (at December 31, 2024) | ||||||||||||||||||||||||||
| (Dollars in Thousands) | 2024 | 2023 | 2022 | 2021 | 2020 | Prior | Revolving Loans Amortized Cost Basis | Total | ||||||||||||||||||
| Real Estate: | ||||||||||||||||||||||||||
| Residential | ||||||||||||||||||||||||||
| Pass | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
| Special Mention | ||||||||||||||||||||||||||
| Substandard | ||||||||||||||||||||||||||
| Total | ||||||||||||||||||||||||||
| Commercial | ||||||||||||||||||||||||||
| Pass | ||||||||||||||||||||||||||
| Special Mention | ||||||||||||||||||||||||||
| Substandard | ||||||||||||||||||||||||||
| Total | ||||||||||||||||||||||||||
| Construction | ||||||||||||||||||||||||||
| Pass | ||||||||||||||||||||||||||
| Special Mention | ||||||||||||||||||||||||||
| Substandard | ||||||||||||||||||||||||||
| Total | ||||||||||||||||||||||||||
| Commercial and Industrial | ||||||||||||||||||||||||||
| Pass | ||||||||||||||||||||||||||
| Special Mention | ||||||||||||||||||||||||||
| Substandard | ||||||||||||||||||||||||||
| Total | ||||||||||||||||||||||||||
| Consumer | ||||||||||||||||||||||||||
| Pass | ||||||||||||||||||||||||||
| Special Mention | ||||||||||||||||||||||||||
| Substandard | ||||||||||||||||||||||||||
| Total | ||||||||||||||||||||||||||
| Other | ||||||||||||||||||||||||||
| Pass | ||||||||||||||||||||||||||
| Special Mention | ||||||||||||||||||||||||||
| Substandard | ||||||||||||||||||||||||||
| Total | ||||||||||||||||||||||||||
| Total Loans | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
| Gross Charge Offs | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
83 | ||
| ||
| NOTES TO CONSOLIDATED FINANCIAL STATEMENTS | ||
The following tables present the classes of the loan portfolio summarized by the aging categories of performing loans and nonaccrual loans as of the dates indicated:
| 2025 | |||||||||||||||||||||||||||||||||||||||||
December 31, | 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 | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||||
| Commercial | |||||||||||||||||||||||||||||||||||||||||
| Construction | |||||||||||||||||||||||||||||||||||||||||
| Commercial and Industrial | |||||||||||||||||||||||||||||||||||||||||
| Consumer | |||||||||||||||||||||||||||||||||||||||||
| Other | |||||||||||||||||||||||||||||||||||||||||
| Total Loans | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||||
| 2024 | |||||||||||||||||||||||||||||||||||||||||
December 31, | 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 | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||||
| Commercial | |||||||||||||||||||||||||||||||||||||||||
| Construction | |||||||||||||||||||||||||||||||||||||||||
| Commercial and Industrial | |||||||||||||||||||||||||||||||||||||||||
| Consumer | |||||||||||||||||||||||||||||||||||||||||
| Other | |||||||||||||||||||||||||||||||||||||||||
| Total Loans | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||||
Additional interest income that would have been recorded if the loans that were nonaccrual at December 31, 2025 and 2024 were current was $160,000 and $21,000 for the years ended December 31, 2025 and 2024, respectively.
84 | ||
| ||
| NOTES TO CONSOLIDATED FINANCIAL STATEMENTS | ||
The following table sets forth the amounts for amortization cost basis of loans on nonaccrual status, loans past due 90 days still accruing, and categories of nonperforming assets at the dates indicated.
December 31, 2025 | ||||||||||||||
| Nonaccrual With No ACL | Nonaccrual With ACL | Loans Past Due 90 Days Still Accruing | Total Nonperforming Assets | |||||||||||
| (Dollars in Thousands) | ||||||||||||||
Nonaccrual Loans: | ||||||||||||||
Real Estate: | ||||||||||||||
Residential | $ | $ | $ | $ | ||||||||||
Commercial | ||||||||||||||
| Construction | ||||||||||||||
Consumer | ||||||||||||||
Total Nonaccrual Loans | $ | $ | $ | |||||||||||
| Total Other Real Estate Owned | ||||||||||||||
Total Nonperforming Assets | $ | |||||||||||||
| December 31, 2024 | ||||||||||||||
| Nonaccrual With No ACL | Nonaccrual With ACL | Loans Past Due 90 Days Still Accruing | Total Nonperforming Assets | |||||||||||
| (Dollars in Thousands) | ||||||||||||||
Nonaccrual Loans: | ||||||||||||||
Real Estate: | ||||||||||||||
Residential | $ | $ | $ | $ | ||||||||||
Commercial | ||||||||||||||
Consumer | ||||||||||||||
Total Nonaccrual Loans | $ | $ | $ | |||||||||||
| Total Other Real Estate Owned | ||||||||||||||
Total Nonperforming Assets | $ | |||||||||||||
Interest income of $67 ,000 and $339,000 was recognized on nonaccrual loans during the years ended December 31, 2025 and 2024, respectively.
All modifications and refinancing, including those with borrowers that are experiencing financial difficulty are subject to the modification guidance in ASC 310-20. Loan modifications could meet the definition of a new loan if certain terms of the loan are modified to the benefit of the lender and the modification to the terms of the loan are more than minor. Both of these criteria have to be met to define the modification as a new loan. If a loan modification meets the criteria of new loan, then the new loan should include the remaining net investment in the original loan, additional funds advanced, fees received, and direct loan origination costs with the refinancing or restructuring. Additionally, the effective interest rate should be recalculated based on the amortized cost basis of the new loan and reassess contractual cash flow.
85 | ||
| ||
| NOTES TO CONSOLIDATED FINANCIAL STATEMENTS | ||
Modifications to Borrowers Experiencing Financial Difficulty
The following table present the amortized cost of loans to borrowers experiencing financial difficulty by portfolio segment and type of modification at the dates presented:
| December 31, 2025 | ||||||||||||||||||||
| Term Extension | Payment Delay | Interest Rate Reduction | Term Extension and Interest Rate Reduction | Total | % of Portfolio Segment | |||||||||||||||
| dollars in thousands | ||||||||||||||||||||
| Real Estate: | ||||||||||||||||||||
| Residential | $ | $ | $ | $ | $ | % | ||||||||||||||
| Construction | % | |||||||||||||||||||
Total(1) | $ | $ | $ | $ | $ | % | ||||||||||||||
| December 31, 2024 | |||||||||||||||||
| Term Extension | Payment Delay | Interest Rate Reduction | Total | % of Portfolio Segment | |||||||||||||
| dollars in thousands | |||||||||||||||||
| Real Estate: | |||||||||||||||||
| Commercial | $ | $ | $ | $ | % | ||||||||||||
Total(1) | $ | $ | $ | $ | % | ||||||||||||
(1) Excludes loans that were fully paid off or fully charged-off by period end.
The following table describes the effect of loan modifications made to borrowers experiencing financial difficulty at the dates presented:
| December 31, 2025 | |||||||||||
| Weighted Average Term Extension (in months) | Weighted Average Payment Delay (in months) | Weighted Average Interest Rate Reduction | |||||||||
| Real Estate: | |||||||||||
| Residential | — | % | |||||||||
| Construction | — | — | % | ||||||||
| December 31, 2024 | |||||||||||
| Weighted Average Term Extension (in months) | Weighted Average Payment Delay (in months) | Weighted Average Interest Rate Reduction | |||||||||
| Real Estate: | |||||||||||
| Commercial | — | % | |||||||||
No modifications involved forgiveness of principal. There were $124 ,000 in commitments to lend additional funds to real estate construction borrowers experiencing difficulty whose terms have been restructured as of December 31, 2025 and none as of December 31, 2024.
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 $892,000 and $1.2 million at December 31, 2025 and 2024, respectively.
86 | ||
| ||
| NOTES TO CONSOLIDATED FINANCIAL STATEMENTS | ||
The activity in the ACL - Loans is summarized below by primary segments for the periods indicated:
| Real Estate Residential | Real Estate Commercial | Real Estate Construction | Commercial and Industrial | Consumer | Other | Total | |||||||||||||||||||||||||||||||||||
(Dollars in Thousands) | |||||||||||||||||||||||||||||||||||||||||
| December 31, 2024 | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||||
| Charge-offs | ( | ( | ( | ( | ( | ||||||||||||||||||||||||||||||||||||
| Recoveries | |||||||||||||||||||||||||||||||||||||||||
| Provision (Recovery) for Credit Losses - Loans | ( | ( | ( | ( | |||||||||||||||||||||||||||||||||||||
| December 31, 2025 | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||||
| Real Estate Residential | Real Estate Commercial | Real Estate Construction | Commercial and Industrial | Consumer | Other | Total | |||||||||||||||||||||||||||||||||||
(Dollars in Thousands) | |||||||||||||||||||||||||||||||||||||||||
| December 31, 2023 | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||||
| Charge-offs | ( | ( | ( | ( | ( | ||||||||||||||||||||||||||||||||||||
| Recoveries | |||||||||||||||||||||||||||||||||||||||||
| Provision (Recovery) for Credit Losses - Loans | ( | ( | ( | ( | |||||||||||||||||||||||||||||||||||||
| December 31, 2024 | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||||
The Company’s allowance for credit losses on unfunded commitments is recognized as a liability (accrued interest payable and other liabilities on the Consolidated Statement of Financial Condition), with adjustments to the reserve recognized in provision for credit losses - unfunded commitments on the Consolidated Statement of Income. The Company’s activity in the allowance for credit losses on unfunded commitments for the years indicated was as follows:
(Dollars in Thousands) | Allowance for Credit Losses | ||||
| Balance at December 31, 2024 | $ | ||||
| Provision for Credit Losses - Unfunded Commitments | |||||
| Balance at December 31, 2025 | $ | ||||
| (in thousands) | Allowance for Credit Losses | ||||
| Balance at December 31, 2023 | $ | ||||
| Provision for Credit Losses - Unfunded Commitments | |||||
| Balance at December 31, 2024 | $ | ||||
Loans that do not share risk characteristics are evaluated on an individual basis. For loans that are individually evaluated and collateral dependent, financial loans where the Company has determined that foreclosure of the collateral is probable, or where the borrower is experiencing financial difficulty and the Company expects repayment of the financial asset to be provided substantially through the operation or sale of the collateral, the ACL - Loans is measured based on the difference between the fair value of the collateral and the amortized cost basis of the asset as of the measurement date. During the year ended December 31, 2025 and 2024 there were $970,000 and $5.6 million of loans individually evaluated requiring specific allowance for credit losses of $165,000 and $398,000 , respectively.
87 | ||
| ||
| NOTES TO CONSOLIDATED FINANCIAL STATEMENTS | ||
The following table presents the amortized cost basis of individually evaluated loans for impairment by class of loans as of December 31, 2025.
| December 31, 2025 | |||||
| Real Estate Collateral | |||||
| Amortized Cost Basis | |||||
| (Dollars in thousands) | |||||
| Real Estate: | |||||
| Residential | $ | ||||
| Commercial | |||||
| Construction | |||||
| Commercial and Industrial | |||||
| Consumer | |||||
| Other | |||||
| Total Loans | $ | ||||
The following table presents changes in the accretable discount on the loans acquired at fair value for the dates indicated.
| Accretable Discount | |||||
| (Dollars in Thousands) | |||||
Balance at December 31, 2023 | $ | ||||
| Accretable Yield | ( | ||||
Balance at December 31, 2024 | |||||
| Accretable Yield | |||||
Balance at December 31, 2025 | $ | ||||
Certain directors and executive officers of the Company, including family members or companies in which they are principal owners, are loan customers of the Company. In management's opinion, such loans and other extensions of credit were made in the normal course of business and were made on the substantially the same terms (including interest rate and collateral) as those prevailing at the time for comparable transactions with other persons. Further, in management's opinion, these loans did not involve more than normal risk of collectability or present other unfavorable features. These loans and other extension of credit are summarized as follows:
| 2025 | 2024 | ||||||||||
| (Dollars in Thousands) | |||||||||||
| Balance, January 1 | $ | $ | |||||||||
| Additions | |||||||||||
| Payments | ( | ( | |||||||||
| Balance, December 31 | $ | $ | |||||||||
88 | ||
| ||
| NOTES TO CONSOLIDATED FINANCIAL STATEMENTS | ||
NOTE 5—PREMISES AND EQUIPMENT
Major classifications of premises and equipment are summarized as follows:
| 2025 | 2024 | ||||||||||
| (Dollars in Thousands) | |||||||||||
| Land and Land Improvements | $ | $ | |||||||||
| Building | |||||||||||
| Leasehold Improvements | |||||||||||
| Furniture, Fixtures, and Equipment | |||||||||||
| Fixed Assets in Process | |||||||||||
| Total Premises and Equipment | |||||||||||
| Less: Accumulated Depreciation and Amortization | ( | ( | |||||||||
| Premises and Equipment, Net | $ | $ | |||||||||
Depreciation and amortization expense on premises and equipment was $1.7 million and $1.6 million for the years ended December 31, 2025 and 2024, respectively.
NOTE 6—GOODWILL AND INTANGIBLE ASSETS
Goodwill
The Company's Consolidated Balance Sheets include goodwill of $9.7 million as of December 31, 2025 and 2024, respectively, all of which relates to the Community Banking segment.
Intangible Assets
The following table presents a summary of intangible assets subject to amortization at the dates indicated.
| 2025 | 2024 | ||||||||||||||||||||||
| December 31, | Gross Carrying Amount | Accumulated Amortization | Net Carrying Value | Gross Carrying Amount | Accumulated Amortization | Net Carrying Value | |||||||||||||||||
| (Dollars in Thousands) | |||||||||||||||||||||||
| Core Deposit Intangible | $ | $ | ( | $ | $ | $ | ( | $ | |||||||||||||||
| Total Intangible Assets | $ | $ | ( | $ | $ | $ | ( | $ | |||||||||||||||
Amortization of intangible assets totaled $1.0 million for the year ended December 31, 2024. All intangible assets were fully amortized as of December 31, 2024 and no further amortization expense is expected assuming there are no activities, such as acquisitions, which would result in additional amortizable intangible assets.
NOTE 7—DEPOSITS
The following table shows the maturities of time deposits for the next five years and beyond.
| December 31, | 2025 | ||||
| (Dollars in Thousands) | |||||
| One Year or Less | $ | ||||
| Over One Through Two Years | |||||
| Over Two Through Three Years | |||||
| Over Three Through Four Years | |||||
| Over Four Through Five Years | |||||
| Over Five Years | |||||
| Total | $ | ||||
89 | ||
| ||
| NOTES TO CONSOLIDATED FINANCIAL STATEMENTS | ||
The balance in time deposits that meet or exceed the FDIC insurance limit of $250,000 totaled $62.8 million and $64.7 million as of December 31, 2025 and 2024, respectively.
The aggregate amount of demand deposits that are overdrawn and have been reclassified as loans was $377,000 and $189,000 as of December 31, 2025 and 2024, respectively.
Certain directors and executive officers of the Company, including family members or companies in which they are principal owners, are deposit customers of the Company. The total deposits of directors and executive officers was $3.3 million and $4.7 million as of December 31, 2025 and 2024, respectively.
NOTE 8—SHORT-TERM BORROWINGS
Borrowings with original maturities of one year or less are classified as short-term and may consist of borrowings with the 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. U.S. government agencies, mortgage-backed securities, and collateralized mortgage obligations 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.
The following table sets forth the components of short-term borrowings for the years indicated.
| 2025 | 2024 | ||||||||||||||||||||||
| December 31, | Amount | Weighted Average Rate | Amount | Weighted Average Rate | |||||||||||||||||||
| (Dollars in Thousands) | |||||||||||||||||||||||
| Federal Funds Purchased: | |||||||||||||||||||||||
| Average Balance Outstanding During the Period | $ | % | $ | % | |||||||||||||||||||
| Maximum Amount Outstanding at any Month End | |||||||||||||||||||||||
| FHLB Borrowings: | |||||||||||||||||||||||
| Average Balance Outstanding During the Period | % | % | |||||||||||||||||||||
| Maximum Amount Outstanding at any Month End | |||||||||||||||||||||||
The Bank did no
NOTE 9—OTHER BORROWED FUNDS
FHLB, Federal Reserve Bank, and Fed Fund Borrowing Arrangements
The Bank maintained a credit arrangement with the FHLB with a maximum borrowing limit of approximately $528.0 million and $489.5 million as of December 31, 2025 and 2024, respectively, and available borrowing capacity of $506.1 million at December 31, 2025. This arrangement is subject to annual renewal and is secured by a blanket security agreement on $747.7 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 Fixed rate, long-term advances from the FHLB with remaining maturities are as follows at the dates indicated:
| 2025 | 2024 | ||||||||||||||||||||||
| December 31, | Amount | Weighted Average Rate | Amount | Weighted Average Rate | |||||||||||||||||||
| (Dollars in Thousands) | |||||||||||||||||||||||
| Due in One Year | $ | % | $ | % | |||||||||||||||||||
| Due After One Year to Two Years | % | % | |||||||||||||||||||||
| Total | $ | % | $ | % | |||||||||||||||||||
90 | ||
| ||
| NOTES TO CONSOLIDATED FINANCIAL STATEMENTS | ||
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. There were no
The Bank maintains a Borrower-In-Custody of Collateral line of credit agreement with the Federal Reserve Bank (“FRB”) for $71.2 million that requires monthly certification of collateral, is subject to annual renewal and is secured by $86.6 million of commercial and consumer indirect auto loans. The Bank also maintains multiple line of credit arrangements with various unaffiliated banks totaling $50.0 no
Subordinated Debt
In December 2021, the Company entered into a term loan in the principal amount of $15.0 million, evidenced by a term note which matures on December 15, 2031 ("2031 Note"). The 2031 Note is an unsecured subordinated obligation of the Company and may be repaid in whole or in part, without penalty, on any interest payment date on or after December 15, 2026 and at any time upon the occurrence of certain events. The 2031 Note initially bears a fixed interest rate of 3.875 % per year to, but excluding, December 15, 2026 and thereafter at a floating rate equal to the then-current three-month term SOFR plus 280 basis points. The 2031 Note qualifies as Tier 2 capital under regulatory guidelines. The 2031 Note is recorded on the Consolidated Statements of Financial Condition in Other Borrowed Funds, net of remaining debt issuance costs. At December 31, 2025 and 2024, the principal balance and unamortized debt issuance costs for the 2031 Note were $15.0 242,000 and $282 ,000, respectively.
NOTE 10—INCOME TAXES
Components of the income tax provision for the periods indicated are as follows:
| Year Ended December 31, | 2025 | 2024 | |||||||||
| (Dollars in Thousands) | |||||||||||
| Current Tax Provision: | |||||||||||
| Federal | $ | $ | |||||||||
| State | |||||||||||
| Total Current Tax Provision | $ | $ | |||||||||
| Deferred Tax Provision (Benefit): | |||||||||||
| Federal | $ | ( | $ | ||||||||
| State | ( | ||||||||||
| Total Deferred Tax Provision (Benefit) | $ | ( | $ | ||||||||
| Total Provision | $ | $ | |||||||||
The Company does not have pretax income from continuing foreign operations or foreign tax expense.
91 | ||
| ||
| NOTES TO CONSOLIDATED FINANCIAL STATEMENTS | ||
The tax effects of deductible and taxable temporary differences that gave rise to significant portions of the net deferred tax assets and liabilities are as follows:
| December 31, | 2025 | 2024 | |||||||||
| (Dollars in Thousands) | |||||||||||
| Deferred Tax Assets: | |||||||||||
| Allowance for Credit Losses | $ | $ | |||||||||
| Nonaccrual Loan Interest | |||||||||||
| Purchase Accounting Adjustments | |||||||||||
| Postretirement Benefits | |||||||||||
| Net Unrealized Loss on Debt Securities | |||||||||||
| Net Unrealized Loss on Equity Securities | |||||||||||
| Stock-Based Compensation Expense | |||||||||||
| Accrued Payroll | |||||||||||
| Lease Liability | |||||||||||
| Restructuring Costs | |||||||||||
| Other | |||||||||||
| Gross Deferred Tax Assets | |||||||||||
| Deferred Tax Liabilities: | |||||||||||
| Amortization of Intangibles | |||||||||||
| Deferred Origination Fees and Costs | |||||||||||
| Discount Accretion | |||||||||||
| Depreciation | |||||||||||
| Mortgage Servicing Rights | |||||||||||
| ROU Asset | |||||||||||
| Other | |||||||||||
| Gross Deferred Tax Liabilities | |||||||||||
| Net Deferred Tax Assets | $ | $ | |||||||||
Deferred taxes at December 31, 2025 and 2024, are included in Accrued Interest Receivable and Other Assets in the accompanying Consolidated Statements of Financial Condition.
Income tax payments were $300,000 and $4.1 million for federal and $1,000 and $2.3 million for state income taxes for the years ended December 31, 2025 and 2024, respectively.
92 | ||
| ||
| NOTES TO CONSOLIDATED FINANCIAL STATEMENTS | ||
A reconciliation of the federal income tax expense at statutory income tax rates and the actual income tax expense on income before taxes for the periods indicated is as follows:
| 2025 | 2024 | ||||||||||||||||||||||
| Year Ended December 31, | Amount | Percent of Pre-tax Income | Amount | Percent of Pre-tax Income | |||||||||||||||||||
| (Dollars in Thousands) | |||||||||||||||||||||||
| Provision at Statutory Rate | $ | % | $ | % | |||||||||||||||||||
State Taxes (Net of Federal Benefit)(1) | |||||||||||||||||||||||
| Tax Credits - Low Income Housing | ( | ( | ( | ( | |||||||||||||||||||
| Nontaxable or Nondeductible Items: | |||||||||||||||||||||||
| Tax-Exempt Interest Revenue | ( | ( | ( | ( | |||||||||||||||||||
| Bank-Owned Life Insurance | ( | ( | ( | ( | |||||||||||||||||||
| Losses from Tax Credit Partnerships | ( | ( | ( | ( | |||||||||||||||||||
| Nondeductible Interest Expense | |||||||||||||||||||||||
| Stock Options - ISO Disqualifying Dispositions | ( | ( | ( | ( | |||||||||||||||||||
| Excess Tax Benefits from Equity Awards | ( | ( | ( | ( | |||||||||||||||||||
| Other | |||||||||||||||||||||||
| Other Items: | |||||||||||||||||||||||
| Proportional Amortization of Tax Credit Investments | |||||||||||||||||||||||
| Actual Tax Expense and Effective Rate | $ | % | $ | % | |||||||||||||||||||
(1) State taxes in West Virginia and Pennsylvania comprised the majority (greater than 50%) of the tax effect in this category in 2025 and 2024, respectively
The Company’s federal, Pennsylvania and West Virginia income tax returns are no longer subject to examination by applicable tax authorities for years before 2022. As of December 31, 2025 and 2024, there were no no
NOTE 11—EMPLOYEE BENEFITS
Savings and Profit Sharing Plan
The Company maintains a Cash or Deferred Profit-sharing Section 401(k) Plan with contributions matching those by eligible employees for the first 4 % of an employee’s contribution at the rate of $0.25 on the dollar. All employees who are over the age of 18 are eligible to participate in the plan on the first day of the calendar month after the start of employment. The Company made contributions of $239,000 and $168,000 for the years ended December 31, 2025 and 2024, respectively, to this plan. The 401(k) Plan includes a “safe harbor” provision and a discretionary retirement contribution. The Company made contributions of $560,000 and $461,000 for the “safe harbor” provision and discretionary retirement contribution for the years ended December 31, 2025 and 2024, respectively.
93 | ||
| ||
| NOTES TO CONSOLIDATED FINANCIAL STATEMENTS | ||
Equity Incentive Plan
Details of the restricted stock award and stock option grants under the 2024 and 2021 Equity Incentive Plans are summarized for the years ended December 31, 2025 and 2024 as follows.
| 2025 | 2024 | ||||||||||
| Number of Restricted Shares Granted | |||||||||||
| Weighted Average Grant Date Common Stock Price | $ | $ | |||||||||
| Restricted Shares Market Value Before Tax | $ | $ | |||||||||
| Number of Stock Options Granted | |||||||||||
| Stock Options Market Value Before Tax | $ | $ | |||||||||
| Summary of Significant Assumptions for Newly Issued Stock Options | |||||||||||
| Expected Life in Years | |||||||||||
| Expected Dividend Yield | |||||||||||
| Risk-free Interest Rate | |||||||||||
| Expected Volatility | |||||||||||
| Weighted Average Grant Date Fair Value | $ | $ | |||||||||
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 $796,000 and $812,000 for the years ended December 31, 2025 and 2024, respectively. As of December 31, 2025 and 2024, total unrecognized compensation expense was $397 ,000 and $701 ,000, respectively, related to stock options, and $1.3 million and $1.2 million, respectively, related to restricted stock awards for December 31, 2025 and 2024. At December 31, 2025, the unrecognized compensation expense related to stock options and restricted stock is expected to be recognized over the weighted average remaining vesting period of 2.44 years. In conjunction with non-qualified stock options, the Company recognized a tax benefit of $25,000 due to exercises of non-qualified stock options for the year ended December 31, 2025, compared to $18,000 tax benefit recognized for the year ended December 31, 2024.
Intrinsic value represents the amount by which the fair value of the underlying stock at December 31, 2025 and 2024, exceeds the exercise price of the stock options. The intrinsic value of outstanding stock options was $2.4 million and $1.9 million at December 31, 2025 and 2024, respectively.
At December 31, 2025, there were 262,265 shares of common stock available and reserved under the 2024 Plan to be issued as restricted stock awards or units based on the terms of the terms of the Plan. At December 31, 2025, there were 25,235 restricted shares granted under the 2024 Plan. The 2021 and 2015 Plans shall remain in effect as long as any awards are outstanding, but as a result of the approval of the 2024 Plan, no more awards can be granted under the 2015 or 2021 Plans.
The following table presents stock option data for the years indicated:
| 2025 | 2024 | ||||||||||||||||||||||||||||||||||
| Number of Shares | Weighted Average Exercise Price | Weighted Average Remaining Contractual Life in Years | Number of Shares | Weighted Average Exercise Price | Weighted Average Remaining Contractual Life in Years | ||||||||||||||||||||||||||||||
| Outstanding Options at Beginning of Year | $ | $ | |||||||||||||||||||||||||||||||||
| Granted | |||||||||||||||||||||||||||||||||||
| Exercised | ( | ( | |||||||||||||||||||||||||||||||||
| Forfeited | ( | ( | |||||||||||||||||||||||||||||||||
| Outstanding Options at End of Year | |||||||||||||||||||||||||||||||||||
| Exercisable Options at End of Year | $ | $ | |||||||||||||||||||||||||||||||||
94 | ||
| ||
| NOTES TO CONSOLIDATED FINANCIAL STATEMENTS | ||
| Number of Shares | Weighted Average Exercise Price | Weighted Average Remaining Service Period in Years | |||||||||||||||
Nonvested Options December 31, 2023 | $ | ||||||||||||||||
| Granted | |||||||||||||||||
| Vested | ( | ||||||||||||||||
| Forfeited | ( | ||||||||||||||||
| Nonvested Options December 31, 2024 | $ | ||||||||||||||||
| Granted | |||||||||||||||||
| Vested | ( | ||||||||||||||||
| Forfeited | ( | ||||||||||||||||
| Nonvested Options at December 31, 2025 | $ | ||||||||||||||||
The following table presents restricted stock award data for the period indicated.
| Number of Shares | Weighted Average Grant Date Fair Value Price | Weighted Average Remaining Service Period in Years | |||||||||||||||
| Nonvested Restricted Stock at December 31, 2023 | $ | ||||||||||||||||
| Granted | |||||||||||||||||
| Vested | ( | ||||||||||||||||
| Forfeited | ( | ||||||||||||||||
| Nonvested Restricted Stock at December 31, 2024 | $ | ||||||||||||||||
| Granted | |||||||||||||||||
| Vested | ( | ||||||||||||||||
| Forfeited | ( | ||||||||||||||||
| Nonvested Restricted Stock at December 31, 2025 | $ | ||||||||||||||||
95 | ||
| ||
| NOTES TO CONSOLIDATED FINANCIAL STATEMENTS | ||
NOTE 12—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 those instruments. The Company uses the same credit policies in making commitments and conditional obligations as it does for on-balance-sheet instruments.
The Company maintains an ACL on unfunded commitments to provide for the risk of loss inherent in these arrangements. The Company is required to include unfunded commitments that are expected to be funded in the future within the allowance calculation, other than those that are unconditionally cancellable. To arrive at that reserve, the reserve percentage for each applicable segment is applied to the unused portion of the expected commitment balance and is multiplied by the expected funding rate. To determine the expected funding rate, the Company uses a historical utilization rate for each segment. The ACL on unfunded loan commitments is included in other liabilities on the Consolidated Statement of Financial Condition and the related expense is recorded in provision for credit losses - unfunded commitments in the Consolidated Statement of Income.
The unused and available credit balances of financial instruments whose contracts represent credit risk are as follows:
| December 31, | 2025 | 2024 | |||||||||
| (Dollars in Thousands) | |||||||||||
| Standby Letters of Credit | $ | $ | |||||||||
| Performance Letters of Credit | |||||||||||
| Construction Mortgages | |||||||||||
| Personal Lines of Credit | |||||||||||
| Overdraft Protection Lines | |||||||||||
| Home Equity Lines of Credit | |||||||||||
| Commercial Lines of Credit | |||||||||||
| Total | $ | $ | |||||||||
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. 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. The Company recorded no
96 | ||
| ||
| NOTES TO CONSOLIDATED FINANCIAL STATEMENTS | ||
NOTE 13—VARIABLE INTEREST ENTITIES
The Company has an investment in the following non-consolidated entity that meets the definition of a variable interest entity ("VIE").
Low Income Housing Tax Credit Investments
The Company makes equity investments in an entity that sponsors affordable housing and other community development projects that qualify for the Low Income Housing Tax Credit ("LIHTC") program pursuant to Section 42 of the Internal Revenue Code. The purpose of this investment is not only to assist the Bank in meeting its responsibilities under the Community Reinvestment Act, but also to provide an investment return, primarily through the realization of tax benefits. The LIHTC partnership is managed by unrelated general partners that have the power to direct the activities which most significantly affect the performance of the partnership. The Company is therefore not the primary beneficiary of the LIHTC partnership and accordingly, does not consolidate this VIE.
The Company's funding requirements are limited to its invested capital and any additional unfunded commitments for future equity contributions. The Company's maximum exposure to loss as a result of its involvement is limited to the carrying amounts of the investments, including the unfunded commitments. The investment in the LIHTC partnership is included in Accrued Interest Receivable and Other Assets and unfunded commitments are included in Accrued Interest Payable and Other Liabilities on the Consolidated Statements of Financial Condition. The Company currently expects to fund these commitments by the end of 2035.
The following table presents the balance of the Company's LIHTC investment and related unfunded commitments:
| December 31, 2025 | December 31, 2024 | |||||||
| (dollars in thousands) | ||||||||
| Low Income Housing Tax Credit Investments | $ | $ | ||||||
| Less: Amortization | ( | ( | ||||||
| $ | $ | |||||||
| Unfunded Commitments | $ | $ | ||||||
The Company accounts for qualifying LIHTC investments under the proportional amortization method. Under this method an entity amortizes the initial cost of the investment in proportion to the tax credits and other tax benefits received and recognizes the net investment performance as a component of income tax expense.
The following table presents other information relating to the Bank's low income housing tax credit investments:
| Year Ended December 31, | ||||||||
| 2025 | 2024 | |||||||
| (dollars in thousands) | ||||||||
| $ | $ | |||||||
| $ | $ | |||||||
NOTE 14—STOCKHOLDERS' EQUITY AND REGULATORY CAPITAL
On July 22, 2024, the Company announced that the Board had approved a program commencing on July 25, 2024 to repurchase up to 5 % of the Company's then outstanding common stock. This repurchase program expired on July 25, 2025. In connection with the program, the Company had purchased a total of 257,145 shares of the Company's common stock at an average price of $28.70 per share.
On September 4, 2025, the Company announced that the Board had approved a program commencing on September 4, 2025 to repurchase up to $5.0 million of the Company's outstanding common stock. This repurchase program is set to expire on September 30, 2025. As of December 31, 2025, there were no share repurchased under this plan.
On January 27, 2026, the Company's Board of Directors declared a cash dividend of $0.28
97 | ||
| ||
| NOTES TO CONSOLIDATED FINANCIAL STATEMENTS | ||
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.
As of December 31, 2025 and 2024, the Bank was considered "well capitalized" under the regulatory framework for prompt corrective action.
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 at the dates indicated.
| 2025 | 2024 | ||||||||||||||||||||||
| December 31, | Amount | Ratio | Amount | Ratio | |||||||||||||||||||
| (Dollars in Thousands) | |||||||||||||||||||||||
| Common Equity Tier 1 Capital (to Risk-Weighted Assets) | |||||||||||||||||||||||
| Actual | $ | % | $ | % | |||||||||||||||||||
| For Capital Adequacy Purposes | |||||||||||||||||||||||
| To Be Well Capitalized | |||||||||||||||||||||||
| Tier I Capital (to Risk-Weighted Assets) | |||||||||||||||||||||||
| Actual | |||||||||||||||||||||||
| For Capital Adequacy Purposes | |||||||||||||||||||||||
| To Be Well Capitalized | |||||||||||||||||||||||
| Total Capital (to Risk-Weighted Assets) | |||||||||||||||||||||||
| Actual | |||||||||||||||||||||||
| For Capital Adequacy Purposes | |||||||||||||||||||||||
| To Be Well Capitalized | |||||||||||||||||||||||
| Tier I Leverage Capital (to Adjusted Total Assets) | |||||||||||||||||||||||
| Actual | |||||||||||||||||||||||
| For Capital Adequacy Purposes | |||||||||||||||||||||||
| To Be Well Capitalized | |||||||||||||||||||||||
NOTE 15—OPERATING LEASES
The Company evaluates all contracts at commencement to determine if a lease is present. In accordance with ASC Topic 842, leases are defined as either operating or finance leases. The Company's lease contracts are classified as operating leases and create operating 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 and the related lease liabilities in on the Consolidated Statements of Financial Condition.
98 | ||
| ||
| NOTES TO CONSOLIDATED FINANCIAL STATEMENTS | ||
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.
| Year Ended December 31, | 2025 | 2024 | ||||||
| (Dollars in Thousands) | ||||||||
| Operating | $ | $ | ||||||
| Variable | ||||||||
| Total Lease Expense | $ | $ | ||||||
| December 31, | 2025 | 2024 | ||||||
| (Dollars in Thousands) | ||||||||
| Operating Leases: | ||||||||
| ROU Assets | $ | $ | ||||||
| Weighted Average Lease Term in Years | ||||||||
| Weighted Average Discount Rate | % | % | ||||||
| December 31, | 2025 | ||||
| (Dollars in Thousands) | |||||
| Maturity Analysis: | |||||
| Due in One Year | $ | ||||
| Due After One Year to Two Years | |||||
| Due After Two Years to Three Years | |||||
| Due After Three Years to Four Years | |||||
| Due After Four to Five Years | |||||
| Due After Five Years | |||||
| Total | $ | ||||
| Less: Present Value Discount | |||||
| Lease Liabilities | $ | ||||
NOTE 16—MORTGAGE SERVICING RIGHTS
The following table presents MSR activity and net carrying values for the years indicated.
| Servicing Rights | Valuation Allowance | Net Carrying Value | |||||||||||||||
| (Dollars in Thousands) | |||||||||||||||||
| December 31, 2023 | $ | $ | $ | ||||||||||||||
| Additions | — | ||||||||||||||||
| Amortization | ( | — | ( | ||||||||||||||
| Valuation Allowance Adjustment | — | ||||||||||||||||
| December 31, 2024 | $ | $ | $ | ||||||||||||||
| Additions | — | ||||||||||||||||
| Amortization | ( | — | ( | ||||||||||||||
| Valuation Allowance Adjustment | — | ||||||||||||||||
| December 31, 2025 | $ | $ | $ | ||||||||||||||
Amortization of MSRs and the period change in the valuation allowance are reported in Other Income on the Consolidated Statements of Income.
99 | ||
| ||
| NOTES TO CONSOLIDATED FINANCIAL STATEMENTS | ||
Real estate loans serviced for others, which are not included in the Consolidated Statements of Financial Condition, totaled $64.4 million and $69.7 million at December 31, 2025 and 2024, respectively.
NOTE 17—DERIVATIVES AND HEDGING ACTIVITIES
Derivatives Not Designated as Hedging Instruments
Interest Rate Swaps. The Company enters into interest rate swap agreements to meet the financing and interest rate management needs of qualifying commercial loan customers. The Company simultaneously enters into interest rate swaps with dealer counterparties, with identical notional amounts and terms. The net result of the offsetting customer and dealer counterparty swap agreements is that the customer pays a fixed rate of interest and the Company receives a floating rate. The credit risk associated with derivatives executed with customers is essentially the same as that involved in extending loans and is subject to normal credit policies and monitoring. Swap derivative transactions with customers are not subject to enforceable master netting arrangements and are generally secured by rights to non-financial collateral, such as real and personal property.
Risk Participation Agreements. The Company has five risk participation agreements with financial institution counterparties for interest rate swaps related to loans in which we are a participant. The risk participation agreements provide credit protection to the financial institution should the borrower fail to perform on its interest rate derivative contract with the financial institution.
Derivatives Designated as Hedging Instruments
In October 2023, the Company entered into an interest rate swap contract that is designated as a fair value hedge to mitigate the risk of interest rate increases and the subsequent impact on the associated fixed rate mortgages. This contract matures on October 17, 2026, has a notional amount of $75.0 million and is benchmarked to SOFR. The Company expects the hedge to remain effective during the remaining term of the swap.
The following table depicts the credit value and fair value adjustments recorded related to the notional amount of derivatives outstanding and risk participation agreements with other financial institutions. These adjustments are included in Accrued Interest and Other Liabilities on the Company's Consolidated Statement of Financial Condition.
| December 31, 2025 | ||||||||||||||
| Derivative Assets | Derivative Liabilities | |||||||||||||
| Notional Amount | Fair Value | Notional Amount | Fair Value | |||||||||||
| Derivatives Designated as Hedging Instruments | ||||||||||||||
| Interest Rate Swap Contracts | $ | $ | $ | $ | ||||||||||
| Total Derivatives Designated as Hedging Instruments | ||||||||||||||
| Derivatives Not Designated as Hedging Instruments | ||||||||||||||
| Interest Rate Swap Contracts - Commercial Loans | ||||||||||||||
| Risk Participation Agreements | ||||||||||||||
| Total Derivatives Not Designated as Hedging Instruments | ||||||||||||||
| Total Derivatives | $ | $ | $ | $ | ||||||||||
| December 31, 2024 | ||||||||||||||
| Derivative Assets | Derivative Liabilities | |||||||||||||
| Notional Amount | Fair Value | Notional Amount | Fair Value | |||||||||||
| Derivatives Designated as Hedging Instruments | ||||||||||||||
| Interest Rate Swap Contracts | $ | $ | $ | $ | ||||||||||
| Total Derivatives Designated as Hedging Instruments | ||||||||||||||
| Derivatives Not Designated as Hedging Instruments | ||||||||||||||
| Interest Rate Swap Contracts - Commercial Loans | ||||||||||||||
| Risk Participation Agreements | ||||||||||||||
| Total Derivatives Not Designated as Hedging Instruments | ||||||||||||||
| Total Derivatives | $ | $ | $ | $ | ||||||||||
100 | ||
| ||
| NOTES TO CONSOLIDATED FINANCIAL STATEMENTS | ||
NOTE 18—FAIR VALUE DISCLOSURE
ASC Topic 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.
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 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.
The Company uses derivative instruments, including interest rate swaps and risk participation agreements, and the fair value of such instruments are calculated using accepted valuation techniques, including discounted cash flow analysis on the expected cash flows of each derivative, considering the contractual terms of each derivative, and uses observable market-based inputs, such as interest rate curves and implied volatilities. Credit valuation adjustments are incorporated to appropriately reflect nonperformance risk and the respective counterparties' nonperformance risk in calculating fair value measurements. These instruments are classified as Level 2.
There were no transfers from Level 1 to Level 2 and no transfers into or out of Level 3 during the years ended December 31, 2025 and 2024, respectively.
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.
101 | ||
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| NOTES TO CONSOLIDATED FINANCIAL STATEMENTS | ||
| December 31, | Fair Value Hierarchy | 2025 | 2024 | ||||||||||||||
| (Dollars in Thousands) | |||||||||||||||||
ASSETS | |||||||||||||||||
| Available-for-Sale Debt Securities | |||||||||||||||||
| U.S. Government Agencies | Level 2 | $ | $ | ||||||||||||||
| Obligations of States and Political Subdivisions | Level 2 | ||||||||||||||||
| Mortgage-Backed Securities - Government-Sponsored Enterprises | Level 2 | ||||||||||||||||
| Collateralized Mortgage Obligations - Government-Sponsored Enterprises | Level 2 | ||||||||||||||||
| Collateralized Mortgage Obligations - Non-Agency | Level 2 | ||||||||||||||||
| Collateralized Loan Obligations | Level 2 | ||||||||||||||||
| Corporate Debt | Level 2 | ||||||||||||||||
| Total Available-for-Sale Debt Securities | |||||||||||||||||
| Equity Securities | |||||||||||||||||
| Mutual Funds | Level 1 | ||||||||||||||||
| Other | Level 1 | ||||||||||||||||
| Total Equity Securities | |||||||||||||||||
| Total Securities | $ | $ | |||||||||||||||
| Derivative Financial Assets | |||||||||||||||||
| Interest Rate Swaps - Commercial Loans | Level 2 | ||||||||||||||||
| Total Assets | $ | $ | |||||||||||||||
| LIABILITIES | |||||||||||||||||
Derivative Financial Liabilities | |||||||||||||||||
| Interest Rate Swaps | Level 2 | $ | $ | ||||||||||||||
| Interest Rate Swaps - Commercial Loans | Level 2 | ||||||||||||||||
| Risk Participation Agreements | Level 2 | ||||||||||||||||
| Total Liabilities | $ | $ | |||||||||||||||
102 | ||
| ||
| NOTES TO CONSOLIDATED FINANCIAL STATEMENTS | ||
The following table presents the financial assets measured at fair value on a nonrecurring basis on the Consolidated Statements of Financial Condition as of the dates indicated by level within the fair value hierarchy. The table also presents the significant unobservable inputs used in the fair value measurements. Impaired loans that are collateral dependent are written down to fair value through the establishment of specific reserves. Techniques used to value the collateral that secure the impaired loans include quoted market prices for identical assets classified as Level 1 inputs or observable inputs, employed by certified appraisers, for similar assets classified as Level 2 inputs. In cases where valuation techniques included inputs that are unobservable and are based on estimates and assumptions developed by management based on the best information available under each circumstance, the asset valuation is classified as Level 3 inputs.
| Financial Asset | Fair Value Hierarchy | December 31, 2025 | Valuation Technique | Significant Unobservable Inputs | Range | Weighted Average | ||||||||||||||||||||
| (Dollars in Thousands) | ||||||||||||||||||||||||||
| Collateral-Dependent Loans Individually Assessed | Level 3 | $ | Appraisal of Collateral (1) | Appraisal Adjustments (2) | to | |||||||||||||||||||||
| Financial Asset | Fair Value Hierarchy | December 31, 2024 | Valuation Technique | Significant Unobservable Inputs | Range | Weighted Average | ||||||||||||||||||||
| (Dollars in Thousands) | ||||||||||||||||||||||||||
| Collateral-Dependent Loans Individually Assessed | Level 3 | $ | Appraisal of Collateral (1) | Appraisal Adjustments (2) | to | |||||||||||||||||||||
(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.
Collateral-dependent loans are evaluated and valued at the time the loan is identified as collateral-dependent, at the lower of cost or fair value. Fair value is measured based on the value of the collateral securing the loans and is classified as Level 3 in the fair value hierarchy. At December 31, 2025, the fair value of collateral-dependent loans consists of loan balances of $1.0 million less specific valuation allowances of $165,000 . At December 31, 2024, the fair value of collateral-dependent loans consists of loan balances of $5.6 million less specific valuation allowances of $398,000 .
The fair value of 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 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. At December 31, 2025 and 2024, the Company did not have any MSRs that would be required to be remeasured.
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. At December 31, 2025 and 2024, the Company did not have any OREO that would be required to be remeasured.
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 that 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.
103 | ||
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| NOTES TO CONSOLIDATED FINANCIAL STATEMENTS | ||
The estimated fair values of the Company’s financial instruments at the dates indicated are as follows:
| 2025 | 2024 | ||||||||||||||||||||||||||||
| December 31, | Fair Value Hierarchy | Carrying Value | Fair Value | Carrying Value | Fair Value | ||||||||||||||||||||||||
| (Dollars in Thousands) | |||||||||||||||||||||||||||||
| Financial Assets: | |||||||||||||||||||||||||||||
Cash and Due From Banks: | |||||||||||||||||||||||||||||
Interest-Earning | Level 1 | $ | $ | $ | $ | ||||||||||||||||||||||||
Noninterest-Earning | Level 1 | ||||||||||||||||||||||||||||
Securities | See Above | ||||||||||||||||||||||||||||
Loans Held for Sale | Level 2 | ||||||||||||||||||||||||||||
Loans, Net | Level 3 | ||||||||||||||||||||||||||||
Restricted Stock | Level 2 | ||||||||||||||||||||||||||||
Mortgage Servicing Rights | Level 3 | ||||||||||||||||||||||||||||
| Level 2 | |||||||||||||||||||||||||||||
Accrued Interest Receivable | Level 2 | ||||||||||||||||||||||||||||
| Financial Liabilities: | |||||||||||||||||||||||||||||
Deposits | Level 2 | ||||||||||||||||||||||||||||
Other Borrowed Funds | |||||||||||||||||||||||||||||
FHLB Borrowings | Level 2 | ||||||||||||||||||||||||||||
Subordinated Debt | Level 2 | ||||||||||||||||||||||||||||
| Level 2 | |||||||||||||||||||||||||||||
Accrued Interest Payable | Level 2 | ||||||||||||||||||||||||||||
NOTE 19—OTHER NONINTEREST EXPENSE
The details for other noninterest expense for the Company’s Consolidated Statements of Income are as follows:
| Year Ended December 31, | 2025 | 2024 | |||||||||
| (Dollars in Thousands) | |||||||||||
| Non-Employee Compensation | $ | $ | |||||||||
| Telephone | |||||||||||
| Insurance | |||||||||||
| Travel | |||||||||||
| Postage | |||||||||||
| Loan Expenses | |||||||||||
| Dues and Subscriptions | |||||||||||
| Bank Assessment | |||||||||||
| Meals and Entertainment | |||||||||||
| Printing and Supplies | |||||||||||
| Charitable Contributions | |||||||||||
| Training | |||||||||||
| Miscellaneous | |||||||||||
| TOTAL OTHER NONINTEREST EXPENSE | $ | $ | |||||||||
104 | ||
| ||
| NOTES TO CONSOLIDATED FINANCIAL STATEMENTS | ||
NOTE 20—CONDENSED FINANCIAL STATEMENTS OF PARENT COMPANY
Financial information pertaining only to CB Financial Services, Inc., is as follows:
Statements of Financial Condition
| December 31, | 2025 | 2024 | |||||||||
| (Dollars in Thousands) | |||||||||||
| ASSETS | |||||||||||
| Cash and Due From Banks | $ | $ | |||||||||
| Equity Securities, at Fair Value | |||||||||||
| Investment in Community Bank | |||||||||||
| Other Assets | |||||||||||
| TOTAL ASSETS | $ | $ | |||||||||
| LIABILITIES AND STOCKHOLDERS' EQUITY | |||||||||||
| Other Borrowings | $ | $ | |||||||||
| Other Liabilities | |||||||||||
| Stockholders' Equity | |||||||||||
| TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | $ | $ | |||||||||
Statements of Income
| Year Ended December 31, | 2025 | 2024 | |||||||||
| (Dollars in Thousands) | |||||||||||
| Interest and Dividend Income | $ | $ | |||||||||
| Dividend from Bank Subsidiary | |||||||||||
| Interest Expense | |||||||||||
| Net Interest and Dividend Income | |||||||||||
| Net (Loss) Gain on Securities | ( | ||||||||||
| Noninterest Expense | |||||||||||
| Income Before Undistributed Net Income of Subsidiary and Income Tax Benefit | |||||||||||
| Undistributed Net Income of Subsidiary | |||||||||||
| Income Before Income Tax Benefit | |||||||||||
| Income Tax Benefit | ( | ( | |||||||||
| NET INCOME | $ | $ | |||||||||
105 | ||
| ||
| NOTES TO CONSOLIDATED FINANCIAL STATEMENTS | ||
Statements of Cash Flows
| Year Ended December 31, | 2025 | 2024 | |||||||||
| (Dollars in Thousands) | |||||||||||
| OPERATING ACTIVITIES | |||||||||||
| Net Income | $ | $ | |||||||||
| Adjustments to Reconcile Net Income to Net Cash Provided By Operating Activities: | |||||||||||
| Undistributed Net Income of Subsidiary | ( | ( | |||||||||
| Amortization of Subordinated Debt Deferred Costs | |||||||||||
| Noncash Expense for Stock-Based Compensation | |||||||||||
| Loss (Gain) on Equity Securities | ( | ||||||||||
| Other, net | ( | ||||||||||
| NET CASH PROVIDED BY OPERATING ACTIVITIES | |||||||||||
| INVESTING ACTIVITIES | |||||||||||
| Proceeds from Sales of Equity Securities | |||||||||||
| NET CASH PROVIDED BY INVESTING ACTIVITIES | |||||||||||
| FINANCING ACTIVITIES | |||||||||||
| Cash Dividends Paid | ( | ( | |||||||||
| Treasury Stock, Purchases at Cost | ( | ( | |||||||||
| Exercise of Stock Options | |||||||||||
| NET CASH USED IN FINANCING ACTIVITIES | ( | ( | |||||||||
| (DECREASE) INCREASE IN CASH AND DUE FROM BANKS | ( | ||||||||||
| CASH AND DUE FROM BANKS AT BEGINNING OF THE YEAR | |||||||||||
| CASH AND DUE FROM BANKS AT END OF THE YEAR | $ | $ | |||||||||
The Parent Company's Statements of Comprehensive Income and Statements of Changes in Stockholders' Equity are identical to the Consolidated Statements of Comprehensive Income and the Consolidated Statements of Changes in Stockholders' Equity and are not presented.
NOTE 21—SEGMENT REPORTING AND RELATED INFORMATION
Operating segments are components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision maker (CODM) in deciding how to allocate resources and in assessing performance. The Company's President and Chief Executive Officer functions as its CODM. At December 31, 2025 and 2024, the Company had one reportable segment, community banking services, upon which the CODM makes decisions regarding how to allocate resources and assess performance. Individual bank branches offer a group of similar services, including commercial, real estate and consumer loans, time deposits, checking and savings accounts all with similar operating and economic characteristics. While the CODM monitors the revenue streams of the various products and services, operations are managed and financial performance is evaluated on a Company-wide basis.
The CODM uses net interest income and net income to evaluate income generated from segment assets in deciding whether to reinvest profits into the Company, pursue acquisitions or pay out dividends. Net income is used to monitor budget versus actual results. These metrics and the Company's significant expense categories are disclosed on the Company's Consolidated Statements of Income.
106 | ||
FAQ
What is CB Financial Services (CBFV)’s size and capital position as of December 31, 2025?
CB Financial Services reported total assets of $1.55 billion, total liabilities of $1.39 billion and stockholders’ equity of $157.5 million at December 31, 2025. This reflects a traditionally capitalized community bank focused on regional lending and deposit activities.
How is CBFV’s loan portfolio composed at year-end 2025?
At December 31, 2025, CBFV had total loans of $1.16 billion, up 6.4% from 2024. Commercial real estate loans were $552.2 million (47.5% of loans) and residential real estate loans were $329.2 million (28.3%), with additional exposure in commercial, consumer and municipal loans.
What major business transaction did CBFV complete involving Exchange Underwriters?
CBFV’s bank subsidiary sold substantially all assets of Exchange Underwriters to World Insurance Associates for $30.5 million cash plus potential earn-outs. The sale closed in December 2023, producing an initial pre-tax gain of $24.6 million and subsequent earn-out gains in 2024 and 2025.
In which markets does CB Financial Services (CBFV) primarily operate?
CBFV operates Community Bank branches in Greene, Allegheny, Washington, Fayette and Westmoreland counties in southwestern Pennsylvania and in Marshall and Ohio counties in West Virginia. It extends lending and depository services more broadly across Pennsylvania, West Virginia, Ohio, New York and other areas.
What are the key strategic priorities for CBFV’s Community Bank?
CBFV focuses on being a well-capitalized, profitable community bank emphasizing relationship-based service, growth of core deposits, digital banking enhancements, cost efficiency, and opportunistic expansion in the Pittsburgh metropolitan area, while maintaining conservative underwriting to support asset quality in its loan portfolio.
How does CBFV fund its balance sheet and manage liquidity and borrowings?
CBFV primarily funds assets through local deposits, supplemented by FHLB advances, federal funds lines and other bank credit facilities. At December 31, 2025, it had $20.0 million in FHLB advances outstanding and substantial unused borrowing capacity for liquidity and collateral needs.
What key risks does CB Financial Services (CBFV) highlight for investors?
CBFV notes risks from real estate-concentrated lending, growth in commercial real estate and commercial loans, potential credit losses, interest rate changes affecting margins and borrower performance, competition for deposits and loans, technology and cybersecurity issues, and evolving regulatory and economic conditions in its markets.