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

2024 Second Quarter Financial Highlights

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

• Net income was $2.7 million, compared to $2.8 million. Results were impacted by the December 2023 sale of the Bank’s subsidiary insurance agency, Exchange Underwriters (“EU”), which drove decreases in noninterest income and noninterest expense.
  • Adjusted net income (Non-GAAP) was $2.7 million compared to $2.8 million.
  • Income before income tax expense was $3.2 million compared to $3.5 million.
  • Adjusted pre-provision net revenue (PPNR) (Non-GAAP) was $3.2 million compared to $4.0 million.
• Earnings per diluted common share (EPS) decreased to $0.51 from $0.54.
  • Adjusted earning per common share - diluted (Non-GAAP) was $0.52, compared to $0.55.
• Return on average assets (annualized) was 0.71%, compared to 0.79%.
  • Adjusted return on average assets (annualized) (Non-GAAP) was 0.72%, compared to 0.81%.
• Return on average equity (annualized) was 7.58%, compared to 9.38%.
  • Adjusted return on average equity (annualized) (Non-GAAP) was 7.65%, compared to 9.64%.
• Net interest margin (“NIM”) declined to 3.18% from 3.29%.
• Net interest and dividend income was $11.5 million, compared to $11.1 million.
• Noninterest income decreased to $688,000, compared to $2.3 million. The significant change in noninterest income was driven by a $1.5 million decrease in insurance commissions due to the sale of EU.
• Noninterest expense decreased to $9.0 million, compared to $9.5 million, due to decreases in compensation and benefits, intangible amortization and FDIC assessment expenses, partially offset by increases in data processing, occupancy and Pennsylvania shares tax expenses.

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

• Total assets increased $103.8 million, or 7.1%, to $1.6 billion from $1.5 billion.
• Total loans decreased $31.7 million, or 2.9%, to $1.08 billion compared to $1.11 billion, and included decreases in consumer, commercial real estate and residential real estate loans of $21.3 million, $8.4 million and $5.1 million, respectively, partially offset by increases in commercial and industrial loans, other loans and construction loans of $1.1 million, $1.1 million and $922,000, respectively. The consumer loan portfolio is primarily comprised of indirect automobile loans and decreased as a result of the discontinuation of that product as of June 30, 2023. Excluding the $21.6 million decrease in indirect automobile loans, total loans decreased $10.1 million, or 0.9%. In total, $62.3 million of loans have paid off since December 31, 2023.
• Nonperforming loans to total loans was 0.17% at June 30, 2024, compared to 0.20% at December 31, 2023.
• Total deposits were $1.35 billion, an increase of $82.6 million, compared to $1.27 billion.
• Book value per share was $27.79, compared to $27.53 as of March 31, 2024 and $27.32 as of December 31, 2023.
• Tangible book value per share (Non-GAAP) was $25.83, compared to $25.52 as of March 31, 2024 and $25.23 as of December 31, 2023. The year-to-date change was due to an increase in stockholders’ equity primarily related to current period net income of $6.8 million, partially offset by a $1.6 million increase in accumulated other comprehensive loss and the payment of $2.6 million in dividends since December 31, 2023.

Management Commentary

President and CEO John H. Montgomery commented, “The first half of the year has reflected ongoing trends of net interest margin pressure due to heightened funding costs that have been driven by prevailing market rates, however, our previously announced balance sheet strategies and continued commercial loan production are contributing to stabilization and improvement in this area.

While the yield on our loan portfolio continues to improve, total loans decreased $17.6 million, or 1.6%, from March 31, 2024. Runoff in the formerly exited indirect lending portfolio of $10.2 million was partially offset by a $9.1 million increase in more profitable commercial and industrial loans. Commercial and residential real estate loans declined $11.7 million and $4.2 million, respectively, with the former largely related to the Bank’s decision to exit certain relationships along with expected asset sales and the later related to our repositioning of our residential mortgage program. Notably, asset quality remains robust, with nonperforming loans declining to $1.9 million (0.17% of total loans) from $2.2 million (0.20% of total loans) in the prior quarter.

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

During the quarter, we continued progress on our strategic initiatives by implementing a new enterprise-wide loan origination system and a redesigned residential mortgage program. The loan origination system utilizes market leading technology which was carefully customized and enhanced to streamline and optimize our credit delivery process, increase transparency and communication with our clients - ensuring that we provide a best-in-class credit delivery process. Our residential mortgage program redesign was developed to provide expanded product offerings to our market, mitigate risk and generate additional sources of non-interest income through scalability.

Additionally, we completed the construction and celebrated the opening of a state-of-the-art branch office serving as a regional service center in Rostraver, PA and added a news section to our upgraded website, www.cb.bank, to provide more timely communications to our market.

Last, in our continual focus on the client experience, we created a new retail support team staffed with experienced personnel to assist our bankers as they provide a higher level of personalized service to our clients.

We firmly believe that all stakeholders benefit from the continued investment in our franchise, our commitment to our long-term plan and our focus on delivering an exceptional client experience.”

Dividend Declaration

The Company’s Board of Directors declared a $0.25 quarterly cash dividend per outstanding share of common stock, payable on or about August 30, 2024, to stockholders of record as of the close of business on August 15, 2024.

2024 Second Quarter Financial Review

Net Interest and Dividend Income

Net interest and dividend income increased $350,000, or 3.1%, to $11.5 million for the three months ended June 30, 2024 compared to $11.1 million for the three months ended June 30, 2023.

• NIM (GAAP) decreased to 3.18% for the three months ended June 30, 2024 compared to 3.29% for the three months ended June 30, 2023. Fully tax equivalent (FTE) NIM (Non-GAAP) decreased 11 basis points (“bps”) to 3.19% for the three months ended June 30, 2024 compared to 3.30% for the three months ended June 30, 2023.
  • Interest and dividend income increased $3.7 million, or 24.6%, to $18.9 million for the three months ended June 30, 2024 compared to $15.2 million for the three months ended June 30, 2023.
  • Interest income on loans increased $1.2 million, or 9.3%, to $14.7 million for the three months ended June 30, 2024 compared to $13.4 million for the three months ended June 30, 2023. The average yield on loans increased 50 bps to 5.50% compared to 5.00% resulting in a $1.3 million increase in interest income on loans. The average balance of loans decreased $2.9 million to $1.076 billion from $1.079 billion, causing a $77,000 decrease in interest income on loans. The increase in loan yield has been driven by a reduction in lower yielding consumer loans due to the discontinuation of the indirect automobile loan product with the redeployment of those funds into higher yielding commercial loan products.
  • Interest income on taxable investment securities increased $1.9 million, or 199.4%, to $2.8 million for the three months ended June 30, 2024 compared to $950,000 for the three months ended June 30, 2023 driven by a 246 bp increase in average yield coupled with a $56.7 million increase in average balances. The increase in the average yield was the result of the Bank implementing a balance sheet repositioning strategy of its portfolio of available-for-sale securities during the fourth quarter of 2023. The Bank sold $69.3 million in market value of its lower yielding U.S. government agency, mortgage-backed and municipal securities with an average yield of 1.89% and purchased $69.3 million of higher yielding mortgage-backed and collateralized mortgage obligation securities with an average yield of 5.49%. The increase in volume was driven by a $74.3 million increase in the average balance of collateralized loan obligation (“CLO”) securities as the Bank executed a leverage strategy to purchase these assets funded with brokered certificates of deposits.
  • Interest income on interest-earning deposits at other banks increased $592,000, to $1.3 million for the three months ended June 30, 2024 compared to $721,000 for the three months ended June 30, 2023 driven by a $47.7 million increase in average balances, partially offset by a 19 bp decrease in the average yield. The volume increase was due in part to $30.5 million in cash received from the December 2023 sale of EU.
• Interest expense increased $3.4 million, or 82.9%, to $7.5 million for the three months ended June 30, 2024 compared to $4.1 million for the three months ended June 30, 2023.
  • Interest expense on deposits increased $3.2 million, or 83.9%, to $7.1 million for the three months ended June 30, 2024 compared to $3.8 million for the three months ended June 30, 2023. Rising market interest rates led to the repricing of interest-bearing demand and money market deposits and a shift in deposits from noninterest-bearing and interest-bearing demand deposits into money market and time deposits which resulted in a 109 bp, or 65.8%, increase in the average cost of interest-bearing deposits compared to the three months ended June 30, 2023. This accounted for a $2.8 million increase in interest expense. Additionally, interest-bearing deposit balances increased $103.6 million, or 11.1%, to $1.0 billion as of June 30, 2024 compared to $930.1 million as of June 30, 2023, accounting for a $462,000 increase in interest expense.
  • Interest expense on borrowed funds increased $163,000, or 67.6%, to $404,000 for the three months ended June 30, 2024 compared to $241,000 for the three months ended June 30, 2023. The average balance of borrowed funds increased $13.2 million due to $20.0 million of FHLB long-term advances added during the second quarter of 2023. The increase in the average balance accounted for a $158,000 increase in interest expense.

Provision for Credit Losses

The provision for credit losses recorded for the three months ended June 30, 2024 was a net recovery of $36,000. The provision for credit losses - loans was $12,000 and was primarily due to an increase in the required reserve for individually analyzed loans, partially offset by the impact of a decrease in loan balances while the provision for credit losses - unfunded commitments was a recovery of $48,000 and was due to a decrease in loss rates. This compared to a $432,000 provision for credit losses recorded for the three months ended June 30, 2023 and was required primarily due to loan growth coupled with a modeled slowdown in loan prepayment speeds.

Noninterest Income

Noninterest income decreased $1.6 million, or 69.7%, to $688,000 for the three months ended June 30, 2024, compared to $2.3 million for the three months ended June 30, 2023. This decrease resulted primarily from a $1.5 million decrease in insurance commissions as no income was recognized for the three months ended June 30, 2024 due to the December 2023 sale of EU, compared to a full quarter of income recognized for the three months ended June 30, 2023.

Noninterest Expense

Noninterest expense decreased $517,000, or 5.4%, to $9.0 million for the three months ended June 30, 2024 compared to $9.5 million for the three months ended June 30, 2023. Salaries and benefits decreased $806,000, or 15.4%, to $4.4 million primarily due to no expense related to EU recognized for the three months ended June 30, 2024 due to the December 2023 sale, compared to $823,000 of expense recognized for the three months ended June 30, 2023, partially offset by merit increases and revenue producing staff additions. Intangible amortization decreased $182,000 as a portion of the Bank’s core deposit intangible was fully amortized in February 2024 and EU intangible amortization of $47,000 was realized during the three months ended June 30, 2023. FDIC assessment expense decreased $63,000 due to a decrease in the assessment rate. Data processing expense increased $293,000 costs associated with the implementation of a new loan origination system and financial dashboard platform. Occupancy expenses increased $151,000 due to $192,000 of environmental remediation costs related to a construction project on one of the Bank’s office location, partially offset by $42,000 of EU occupancy expenses realized during the three months ended June 30, 2023. Pennsylvania shares tax expense increased $102,000 due to a higher taxable base due to the increase in equity resulting from the sale of EU.

Statement of Financial Condition Review

Assets

Total assets increased $103.8 million, or 7.1%, to $1.56 billion at June 30, 2024, compared to $1.46 billion at December 31, 2023.

• Cash and due from banks increased $74.4 million, or 109.0%, to $142.6 million at June 30, 2024, compared to $68.2 million at December 31, 2023.
• Securities increased $61.7 million, or 29.8%, to $268.8 million at June 30, 2024, compared to $207.1 million at December 31, 2023. The securities balance was primarily impacted by the purchase of $69.8 million of CLO securities, partially offset by $6.8 million of principal repayments on amortizing securities.

Loans and Credit Quality

• Total loans decreased $31.7 million, or 2.9%, to $1.08 billion at June 30, 2024 compared to $1.11 billion at December 31, 2023. This was driven by decreases in consumer, commercial real estate and residential real estate loans of $21.3 million, $8.4 million and $5.1 million, respectively, partially offset by increases in commercial and industrial loans, other loans and construction loans of $1.1 million, $1.1 million and $922,000, respectively. The decrease in consumer loans resulted from a reduction in indirect automobile loan production due to rising market interest rates and the discontinuation of this product offering as of June 30, 2023. This portfolio is expected to continue to decline as resources are allocated and production efforts are focused on more profitable commercial products. In total, $62.3 million of loans have paid off since December 31, 2023.
• The allowance for credit losses (ACL) was $9.5 million at June 30, 2024 and $9.7 million at December 31, 2023. As a result, the ACL to total loans was 0.88% at June 30, 2024 and 0.87% at December 31, 2023. During the current year, the Company recorded a net recovery of credit losses of $73,000.
• Net charge-offs for the three months ended June 30, 2024 were $67,000, or 0.02% of average loans on an annualized basis. Net charge-offs for the three months ended June 30, 2023 were $96,000, or 0.04% of average loans on an annualized basis. Net charge-offs for the six months ended June 30, 2024 were $50,000. Net recoveries for the six months ended June 30, 2023 were $660,000 primarily due to recoveries totaling $750,000 related to a prior year $2.7 million charged-off commercial and industrial loan.
• Nonperforming loans, which include nonaccrual loans and accruing loans past due 90 days or more, were $1.9 million at June 30, 2024 and $2.2 million at December 31, 2023. Nonperforming loans to total loans ratio was 0.17% at June 30, 2024 and 0.20% at December 31, 2023.

Total liabilities increased $100.7 million, or 7.7%, to $1.4 billion at June 30, 2024 compared to $1.3 billion at December 31, 2023.

Deposits

• Total deposits increased $82.6 million to $1.35 billion as of June 30, 2024 compared to $1.27 billion at December 31, 2023. Time deposits increased $115.4 million and money market deposits increased $28.9 million while interest-bearing demand, savings and non interest-bearing demand deposits decreased $38.3 million, $15.6 million and $7.8 million, respectively. Deposit changes were primarily the result of the current interest rate environment causing a shift in deposit products to higher priced money market and time deposits. Additionally, the Bank added $63.1 million of brokered certificates of deposit during the period. Brokered certificates of deposit totaled $92.1 million as of June 30, 2024 compared to $29.0 million at December 31, 2023, all mature within three months and were utilized to fund the purchase of floating rate CLO securities. At June 30, 2024, FDIC insured deposits totaled approximately 62.6% of total deposits while an additional 15.0% of deposits were collateralized with investment securities.

Accrued Interest Payable and Other Liabilities

• Accrued interest payable and other liabilities increased $18.1 million, or 125.5%, to $32.5 million at June 30, 2024, compared to $14.4 million at December 31, 2023 primarily due to the purchase of $14.7 million of syndicated loans and $7.6 million of securities which were unsettled at the end of the period.

Stockholders’ Equity

Stockholders’ equity increased $3.0 million, or 2.1%, to $142.9 million at June 30, 2024, compared to $139.8 million at December 31, 2023. The key factor positively impacting stockholders’ equity was $6.8 million of net income for the current period, partially offset by a $1.6 million increase in accumulated other comprehensive loss and the payment of $2.6 million in dividends since December 31, 2023.

Book value per share

Book value per common share was $27.79 at June 30, 2024 compared to $27.32 at December 31, 2023, an increase of $0.47.

Tangible book value per common share (Non-GAAP) was $25.83 at June 30, 2024, compared to $25.23 at December 31, 2023, an increase of $0.60.

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

About CB Financial Services, Inc.

CB Financial Services, Inc. is the bank holding company for Community Bank, a Pennsylvania-chartered commercial bank. Community Bank operates its branch network in southwestern Pennsylvania and West Virginia. Community Bank offers a broad array of retail and commercial lending and deposit services.

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

Statement About Forward-Looking Statements

Statements contained in this press release that are not historical facts may constitute forward-looking statements as that term is defined in the Private Securities Litigation Reform Act of 1995 and such forward-looking statements are subject to significant risks and uncertainties. The Company intends such forward-looking statements to be covered by the safe harbor provisions contained in the Act. The Company’s ability to predict results or the actual effect of future plans or strategies is inherently uncertain. Factors which could have a material adverse effect on the operations and future prospects of the Company and its subsidiaries include, but are not limited to, general and local economic conditions, changes in market interest rates, deposit flows, demand for loans, real estate values and competition, competitive products and pricing, the ability of our customers to make scheduled loan payments, loan delinquency rates and trends, our ability to manage the risks involved in our business, our ability to control costs and expenses, inflation, market and monetary fluctuations, changes in federal and state legislation and regulation applicable to our business, actions by our competitors, and other factors that may be disclosed in the Company’s periodic reports as filed with the Securities and Exchange Commission. These risks and uncertainties should be considered in evaluating forward-looking statements and undue reliance should not be placed on such statements. The Company assumes no obligation to update any forward-looking statements except as may be required by applicable law or regulation.