CBFV 10-K & 10-Q changes, risk factors and insider trading
CB Financial Services, Inc. · Nasdaq · State Commercial Banks · CIK 1605301 · All filings on SEC.gov
At a glance
What changed in the latest 10-K
Risk Factors
Largest changes
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.see in full comparisonRecently, there have been market indicators of a pronounced rise in inflation and the FRB has raised certain benchmark interest rates in an effort to combat inflation.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.
A substantial portion of the Company’s loan portfolio consists of loans collateralized by real estate.see in full comparisonImproving economic conditions have shifted to an increase in demand for real estate, which has resulted in stabilization of some real estate values in the Company’s markets. Further disruptionsDisruptions 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 valuesdecline further,decline, it is likely that the Company would be required to increase its allowance forloancredit 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 forloancredit losses, it could materially reduce its profitability and adversely affect its financial condition.
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 securitiessee in full comparisonavailable for saleavailable-for-sale determined to be temporary in nature are reported as a separate component of equity. Decreases in the fair value of securitiesavailable for saleavailable-for-sale resulting from increases in interest rates therefore could have an adverse effect on the Company’s stockholders’ equity.
Full comparison: every changed paragraph (8)
A large percentage of the Company’s loans are collateralized by real estate, and further 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. Improving economic conditions have shifted to an increase in demand for real estate, which has resulted in stabilization of some real estate values in the Company’s markets. Further disruptionsDisruptions 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 further,decline, it is likely that the Company would be required to increase its allowance for loancredit 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 loancredit 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 continued downturns in the local real estate market or economy could adversely affect its earnings.
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 loancredit 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 loancredit losses is inadequate, we will have to increase the allowance accordingly.
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 judgementjudgment 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.
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 saleavailable-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 saleavailable-for-sale resulting from increases in interest rates therefore could have an adverse effect on the Company’s stockholders’ equity.
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. Further declinesDeclines in real estate values and sales volumes and continued 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 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. Recently, there have been market indicators of a pronounced rise in inflation and the FRB has raised certain benchmark interest rates in an effort to combat inflation. 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.
Management's Discussion & Analysis (MD&A)
Removed heading “ACL on Off-Balance Sheet Commitments”
Removed heading “ACL on Available-for-Sale Securities”
Largest changes
“Although we maintain our allowance for credit losses at a level that we consider to be adequate to provide for potential losses, 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. …”see in full comparison
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.see in full comparison
“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. …”see in full comparison
“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. …”see in full comparison
Full comparison: every changed paragraph (81)
Allowance for Credit Losses (ACL). On January 1, 2023, the Company adopted ASU 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which replaced the incurred loss methodology with an expected loss methodology that is referred to as the current expected credit loss methodology. The Company adopted ASU 2016-13 using a modified retrospective approach. Results for reporting periods beginning after January 1, 2023 are presented under Topic 326, while prior period amounts continue to be reported in accordance with previously applicable GAAP. The adoption resulted in a decrease of $3.4 million to the Company’s ACL related to loans receivable (ACL - Loans) and an increase of $718,000 in ACL for unfunded commitments (ACL - Unfunded Commitments). The net impact resulted in a $2.1 million increase to retained earnings, net of deferred taxes.
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 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.
The Company made an accounting policy election to exclude accrued interest receivable from the amortized cost basis of loans and available for saleavailable-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 $3.9$4.4 million at December 31, 20242025 and is excluded from the estimate of credit losses. Accrued interest receivable on available of saleavailable-for-sale securities, also a component of accrued interest receivable and other assets on the Consolidated Statement of Financial Condition, totaled $1.7$2.0 million, at December 31, 20242025 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 of fair value hierarchy prioritizes the inputs used to measure fair value:
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.
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 on October 31 or more frequently if triggering events occur or impairment indicators exist. The Company operates twoone segments – Community Banking segment and Insurance Brokerage Services segment.Banking. The Company has assigned 100% of the goodwill to the Community Banking segment.
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 mergersmerger and acquisitionsacquisition activity.
Cash and Due From Banks. Cash and due from banks decreased $18.7$17.9 million, or 27.3%,36.1%, to $31.7 million at December 31, 2025, compared to $49.6 million at December 31, 2024, compared to $68.2 million at December 31, 2023.2024. The change is primarily related to net funding of loans.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. Securities increased $55.1 million, or 26.6%, to $262.2 million at December 31, 2024, compared to $207.1 million at December 31, 2023. The securities balance was primarily impacted by the purchase of $69.8 million of collateralized loan obligation securities, partially offset by $15.4 million of repayments on amortizing securities.
Loans. Total loans decreasedincreased $17.8$69.6 million, or 1.6%,6.4%, to $1.16 billion at December 31, 2025 compared to $1.09 billion at December 31, 2024 compared to $1.11 billion at December 31, 2023.2024. The change was driven by decreases in consumer loans and residential mortgage loans of $41.1 million and $9.8 million, respectively, partially offset by increases in commercial real estate loans, construction real estate loans, other loans and commercial and industrial loans of $18.4 million, $11.6 million, $2.5$66.7 million and $769,000,$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 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. Excluding the $41.5$29.6 million decrease in indirect automobile loans, total loans increased $23.7$99.3 million, or 1.1%.9.6%. Average loans,net netloans for the year ended December 31, 20242025 decreasedincreased $3.3$34.7 million compared to the year ended December 31, 2023.2024.
Deposits. Total deposits increased $16.4$56.3 million, or 1.3%,4.4%, to $1.28$1.34 billion as of December 31, 20242025 compared to $1.27$1.28 billion at December 31, 2023.2024. Time deposits increased $66.2 million and money market deposits increased $30.4 million, while interest-bearingInterest-bearing demand deposits decreased $46.2 million, savings deposits decreased $24.2 million anddeposits, 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 $9.9$22.3 million.million Theand current$1.2 interestmillion raterespectively. environmentThis hasfavorable resultedchange in a shift inthe deposit productsmix occurred as the Bank continues to focus on building core banking relationships while strategically reducing higher priced money market and time deposits.funding. Brokered time deposits totaled $39.0$98.5 million as of December 31, 2024,2025, compared to $29.0$39.0 million at December 31, 2023,2024, all of which mature within three months and were utilized to fund the purchase of floating rate CLO securities. FDIC insured deposits totaled approximately 62.5%59.5% of total deposits while an additional 15.9%15.7% of deposits were collateralized with investment securities.
•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, 2024,2024. comparedBorrowings to $34.68 million atfor December 31, 2023. Borrowings for each period2025 consisted of $20.0 million of FHLB advances entered into duringin 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%,4.92%. theThe proceeds of whichthe FHLB borrowings were utilized to match fund originations within the Bank’s commercial and industrial loan portfolioportfolio. andBorrowings at both period ends also included $14.7 million related to the Company's unsecured subordinated debt obligation.
•Key factors positively impacting stockholders’ equity included $12.6a $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,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, 2023 and a $488,000 change in accumulated other comprehensive loss.2024.
Overview. 20242025 and 20232024 Annual Results were impacted by the following significant itemsitem:
•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 a 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 the fourththird quarter of 2023,2025, the BankCompany executedimplemented a balance sheet repositioning strategy of its portfolio of available-for-sale securities.investment Thesecurities Bankin soldwhich $69.3$129.6 million in marketbook value of its lower-yielding U.S government agency, mortgage-backed and municipalinvestment securities with an average yield of 1.89%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 $69.3$117.8 million of higher-yielding mortgage-backed and securities/collateralized mortgage obligationobligations securitiesissued by U.S government-sponsored agencies, municipal securities, subordinated debt investments and non-agency guaranteed securitizations with an averageexpected tax-equivalent yield of 5.49%,approximately resulting in a pre-tax loss of $10.1 million.5.43%.
•Provision for credit losses totaled $570,000 for 2024 and was primarily due to growth in construction and land development loans, while the Bank recorded a recovery for credit losses of $502,000 for 2023 as the Bank recovered $750,000 related to the prior year $2.7 million charged-off commercial and industrial loan.
Net Interest Income. Net interest income increased $1.5$4.7 million, or 3.4%,10.2%, to $50.8 million for the year ended December 31, 2025 compared to $46.1 million for the year ended December 31, 20242024. comparedNet interest margin (Non-GAAP) increased 38 bps to $44.6 million3.58% for the year ended December 31, 2023.2025 compared to 3.20% the year ended December 31, 2024. Net interest margin (Non-GAAPGAAP) decreased 9 bpsincreased to 3.20%3.55% for the year ended December 31, 20242025 compared to 3.29% the year ended December 31, 2023. Net interest margin (GAAP) decreased to 3.19% for the year ended December 31, 2024 compared to 3.28% for the year ended December 31, 2023.2024.
Interest and dividend income increased $13.9 million, or 22.3%, to $76.1 million for the year ended December 31, 2024 compared to $62.2 million for the year ended December 31, 2023. This increase was largely due to a 69 basis point increase in the yield on interest-earning assets to 5.28% for the year ended December 31, 2024 compared to 4.59% for the year ended December 31, 2023, contributing an additional $11.0 million to interest income.
•Interest income on loans increased $4.7 million, or 8.7%, to $59.4 million for the year ended December 31, 2024 compared to $54.7 million for the year ended December 31, 2023. Average loans decreased $3.3 million while the loan yield increased 46 bps to 5.55% for the year ended December 31, 2024 compared to 5.09% for the year ended December 31, 2023.
•Interest income on taxable investment securities increased $7.5 million, or 187.1%, to $11.5 million for the year ended December 31, 2024 compared to $4.0 million for the year ended December 31, 2023. Average investment securities increased $60.1 million and there was a 236 bps increase in average yield.
•Interest from other interest-earning assets, which primarily consists of interest-earning cash, increased $1.8 million, or 54.9%, to $5.1 million for the year ended December 31, 2024 compared to $3.3 million for the year ended December 31, 2023. Average interest bearing deposits at other banks increased $34.8 million, primarily related to changes in deposits and loans, and there was a 1 bps increase in average yield due to an increase in Fed interest rates.
Interest expense increased $12.4 million, or 70.1%, to $30.1 million for the year ended December 31, 2024 compared to $17.7 million for the year ended December 31, 2023. This increase was largely due to an 86 basis point increase in the cost of interest-bearing liabilities to 2.24% for the year ended December 31, 2024 compared to 1.38% for the year ended December 31, 2023, adding an additional $9.9 million to interest expense.
•Interest expense on deposits increased $12.0 million, or 73.1%, to $28.4 million for the year ended December 31, 2024 compared to $16.4 million for the year ended December 31, 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 and savings deposits to money market and time deposits resulted in a 97 bps increase in average cost compared to the year ended December 31, 2023., adding $9.9 million to interest expense. Additionally, average interest-bearing deposits increased $106.6 million, adding $2.1 million to interest expense.
•Interest expense on other borrowed funds increased $415,000, or 34.4%, to $1.6 million for the year ended December 31, 2024 compared to $1.2 million for the year ended December 31, 2023 primarily due to an $8.4 million increase in average balances due to $20.0 million of FHLB long-term advances added during the second quarter of 2023.
Provision (Recovery) for Credit Losses. The provision for credit losses was $570,000 for the year ended December 31, 2024, compared to a $502,000 recovery for the year ended December 31, 2023. The provision for loan losses in 2024 was primarily due to growth in construction and land development loans. Net charge-offs for the year ended December 31, 2024 were $281,000 while net recoveries for the year ended December 31, 2023 were $557,000 primarily due to recoveries totaling $750,000 related to the prior year $2.7 million charged-off commercial and industrial loan.
Noninterest Income. The breakdown of noninterest income for the year ended December 31, 2024 compared to year ended December 31, 2023 is as follows:
NoninterestInterest and dividend income decreased $18.5 million,$192,000, or 77.1%,0.3%, to $5.5$75.9 million for the year ended December 31, 2024,2025 compared to $24.0$76.1 million for the year ended December 31, 2023.2024.
•The Company recorded a $24.6 million pre-tax gain on the sale of EU assets during the year ended December 31, 2023. 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. During 2024, the Company recognized an additional gain of $138,000 following the final settlement of all liabilities.
•Net gain on securities was $51,000 for the year ended December 31, 2024, compared to a loss of $10.2 million for the year ended December 31, 2023. During 2023, the Company sold $79.4 million in book 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%, resulting in a pre-tax loss of $10.1 million. The Company's equity securities, which are primarily comprised of bank stocks, reflected a gain in value of $51,000 for the current period compared to a loss of $110,000 in value in the prior period primarily from a change in market value of these securities.
•Insurance commissions decreased $5.8 million due to the sale of EU during the year ended December 31, 2023.
•Other income for the year ended December 31, 2024 includes a $708,000 earn-out payment related to EU.
•The Company recorded a $274,000 net gain on disposal of fixed assets in the current year related to the sale of one branch location, compared to a $11,000 gain in the prior year.
Noninterest Expense. The breakdown of noninterest expense for the year ended December 31, 2024 compared to the year ended December 31, 2023 is as follows:
Noninterest•Interest expenseincome decreasedon $3.1loans increased $2.7 million, or 8.1%,4.5%, to $35.6$62.1 million for the year ended December 31, 20242025 compared to $38.8$59.4 million for the year ended December 31, 2023.2024. 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.
•Salaries and employee benefits decreased $3.1 million to $18.8 million for the year ended December 31, 2024 compared to $21.9 million for the year ended December 31, 2023. The decrease was primarily due to no expense related to EU for the year ended December 31, 2024, compared to $3.1 million for year ended December 31, 2023.
•Amortization of intangible assets decreased $808,000 to $958,000 for the year ended December 31, 2024 compared to $1.8 million for the year ended December 31, 2023 as a component of the Bank’s core deposit intangible was fully amortized in February 2024 and there was no expense related to EU recognized for the year ended December 31, 2024 compared to $174,000 of expense recognized for the year ended December 31, 2023.
•Other noninterest expense decreased $366,000 to $3.4 million for the year ended December 31, 2024 compared to $3.7 million for the year ended December 31, 2023. The decrease was primarily due to no expense related to EU for the year ended December 31, 2024, compared to $422,000 for year ended December 31, 2023
•Contracted services increased $457,000 to $1.6 million for the year ended December 31, 2024 compared to $1.2 million for the year ended December 31, 2023 due primarily to costs associated with cybersecurity support, website administration, equity compensation management and product consulting.
•Data processing expense increased $294,000 to $3.3 million for the year ended December 31, 2024 compared to $3.0 million for the year ended December 31, 2023. The increase was primarily related to costs related to the implementation of a new loan origination system and a financial dashboard program.
•Pennsylvania shares tax expense increased $272,000 to $1.2 million for the year ended December 31, 2024 compared to $889,000 for the year ended December 31, 2023 due to an increase in the Bank's taxable base resulting from the increase in equity from the sale of EU.
Income•Interest Taxfrom Expense.other Incomeinterest-earning taxassets, expensewhich primarily consists of interest-earning cash, decreased $5.0$3.4 millionmillion, or 66.0%, to $2.7$1.7 million for the year ended December 31, 2024,2025 compared to $7.7$5.1 million for the year ended December 31, 20232024. Average interest bearing deposits at other banks decreased $59.1 million, primarily related to changes in deposits and isloans, primarilyand attributedthere towas thea 108 bps decrease in pre-taxaverage income.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.
•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:
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.
•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.
What changed in the latest 10-Q
Risk Factors
In addition to the other information set forth in this report, you should carefully consider the factors discussed in “Part I, Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2025, which could materially affect our business, financial condition or future results. The risks described in such Annual Report on Form 10-K are not the only risks that we face. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially affect our business, financial condition and/or operating results.
No wording changes found in this section.
Full comparison: every changed paragraph (0)
Management's Discussion & Analysis (MD&A)
New heading “Results of Operations for the Six Months Ended June 30, 2026 and 2025”
New heading “Interest and Dividend Income”
New heading “Interest Expense”
Removed heading “Subsequent Event”
Largest changes
“Results of Operations for the Six Months Ended June 30, 2026 and 2025”see in full comparison
“◦Interest expense on deposits decreased $661,000, or 5.6%, to $11.2 million for the six months ended June 30, 2026 compared to $11.8 million for the six months ended June 30, 2025. Declining market interest rates led to the repricing of interest-bearing demand, money market and time deposits and resulted in a 31 bp decrease in the average cost of interest-bearing deposits compared to the six months ended June 30, 2025. This accounted for a $1.6 million decrease in interest expense. …”see in full comparison
“As reported on the Company's Current Report on Form 8-K filed with the SEC on May 11, 2026, the Company became aware of an internal incident involving the disclosure of certain non-public customer information using an unauthorized artificial intelligence-based software application. Due to the volume and confidential nature of the information at issue, the event was determined to be material; however, the Company does not expect a material impact on its consolidated financial condition or results of operations.”see in full comparison
Full comparison: every changed paragraph (69)
The Bank is a Pennsylvania-chartered commercial bank headquartered in Carmichaels, Pennsylvania. The Bank operates from nine branches 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, all of which are in 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.
Subsequent Event
As reported on the Company's Current Report on Form 8-K filed with the SEC on May 11, 2026, the Company became aware of an internal incident involving the disclosure of certain non-public customer information using an unauthorized artificial intelligence-based software application. Due to the volume and confidential nature of the information at issue, the event was determined to be material; however, the Company does not expect a material impact on its consolidated financial condition or results of operations.
The following discussion and analysis is presented to assist in the understanding and evaluation of our consolidated financial condition and results of operations. It is intended to complement the unaudited consolidated financial statements and notes thereto appearing elsewhere in this Form 10-Q and should be read in conjunction therewith. The detailed discussion focuses on our consolidated financial condition as of MarchJune 31,30, 2026, compared to the consolidated financial condition as of December 31, 2025 and the consolidated results of operations for the three and six months ended MarchJune 31,30, 2026 compared to the three and six months ended MarchJune 31,30, 2025.
The interest income on interest-earning assets, net interest rate spread and net interest margin are presented on a fully tax-equivalent (“FTE”) basis. The FTE basis adjusts for the tax benefit of income on certain tax-exempt loans and securities using the federal statutory income tax rate of 21.0%. We believe the presentation of net interest income on a FTE basis ensures comparability of net interest income arising from both taxable and tax-exempt sources and is consistent with industry practice.
Total assets increased $35.6$108.7 million, or 2.3%,7.0%, to $1.58$1.66 billion at MarchJune 31,30, 2026 compared to $1.55 billion at December 31, 2025.
•Cash and due from banks increased $23.9$44.4 million, or 75.3%,140.1%, to $55.5$76.1 million at MarchJune 31,30, 2026, compared to $31.7 million at December 31, 2025.2025, driven by deposit growth.
•Securities increased $15.6$45.7 million, or 5.6%,16.3%, to $295.5$325.6 million at MarchJune 31,30, 2026, compared to $279.9 million at December 31, 2025. This was primarily due to $26.0$84.9 million of security purchases, partially offset by $8.8$37.9 million of maturities and repayments on amortizing securities and a $1.9 million increase in unrealized losses on the portfolio.
•Total loans decreasedincreased $4.4$17.5 million, or 0.4%,1.5%, to $1.158$1.18 billion compared to $1.162$1.16 billion, and included decreasesincreases in consumer, commercial and industrial, commercial real estate and otherconstruction loans of $6.2 million, $3.4 million, $2.2$19.6 million and $228,000,$13.5 million, respectively, partially offset by increasesdecreases in constructionconsumer and residential real estate loans of $6.0$11.8 million and $1.5$2.2 million, respectively. The decrease in consumer loans resulted from athe continued reduction in indirect automobile loan production due tosince 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 morehigher profitableyielding commercial products. Excluding the $5.8$11.1 million decrease in indirect automobile loans, total loans increased $1.4$28.5 million, or 0.1%.2.5%. Loan production totaled $30.5$90.8 million while $29.4$64.8 million of loans were paid off since December 31, 2025.
•The allowance for credit losses (ACL) was $10.3$10.5 million at MarchJune 31,30, 2026 and $10.1 million at December 31, 2025. As a result, the ACL to total loans was 0.89% at MarchJune 31,30, 2026 and 0.87% at December 31, 2025. During the threesix months ended MarchJune 31,30, 2026, the Company recorded a net provision for credit losses of $241,000$259,000 including a provision for credit losses on loans of $228,000$385,000 and a recovery of provision for credit losses on unfunded commitments of $13,000.$126,000.
•Net charge-offs for the threesix months ended MarchJune 31,30, 2026 were $41,000,$50,000, or 0.01% of average loans on an annualized basis.basis, Netcompared to net charge-offs for the threesix months ended MarchJune 31,30, 2025 were $54,000, or 0.02% of average loans on an annualized basis.$15,000.
•Nonperforming loans, which include nonaccrual loans and accruing loans past due 90 days or more, were $3.3$3.4 million at MarchJune 31,30, 2026 and $5.3 million at December 31, 2025. Nonperforming loans to total loans ratio was 0.29% at MarchJune 31,30, 2026 and 0.46% at December 31, 2025. The decrease in nonperforming loans was due to the full repayment of a $2.0 million commercial real estate loan which was placed on nonaccrual status in the fourth quarter of 2025.
Total liabilities increased $34.4$104.2 million, or 2.5%,7.5%, to $1.42$1.49 billion at MarchJune 31,30, 2026 compared to $1.39 billion at December 31, 2025.
•TotalExcluding brokered funding, deposits increased $35.6$105.1 million, or 2.7%,8.5%, to $1.38$1.35 billion as of MarchJune 31,30, 2026 compared to $1.34$1.24 billion at December 31, 2025. Interest-bearing demand, non interest-bearing demand, savingsdemand and money market deposits increased $27.5 million, $9.3 million, $2.9$103.1 million and $92,000,$11.6 million, respectively, while noninterest deposits and time deposits decreased $5.1 million and $4.1 million.million, respectively. This favorablegrowth change in the deposit mixhas occurred as the Bank began onboarding Specialty Treasury clients during the threefirst monthsquarter ended March 31,of 2026. The Bank continues to focus on building core banking relationships while seeking opportunities to strategically reducingreduce higher priced funding. Brokered time deposits totaled $98.5 million as of March 31, 2026 and December 31, 2025, all of which mature within three months and were utilized to fund the purchase of floating rate CLO securities. At March 31, 2026, FDIC insured deposits totaled approximately 58.8% of total deposits while an additional 16.7% of total deposits were collateralized with investment securities.
•Brokered deposits decreased $64.9 million, or 65.9%, to $33.6 million as of June 30, 2026 compared to $98.5 million at December 31, 2025, as the Bank elected to utilize lower cost FHLB borrowings instead. The remaining brokered deposits mature within three months and were utilized primarily to fund the purchase of floating rate CLO securities. At June 30, 2026, FDIC insured deposits totaled approximately 55.1% of total deposits while an additional 19.7% of total deposits were collateralized with investment securities.
Borrowed Funds
•Short-term borrowings increased $65.0 million to $65.0 million as of June 30, 2026 as the Bank replaced maturing brokered deposits with lower cost FHLB borrowings.
Stockholders’ equity increased $1.2$4.6 million, or 0.8%,2.9%, to $158.8$162.1 million at MarchJune 31,30, 2026, compared to $157.5 million at December 31, 2025. The key factors positively impacting stockholders’ equity were $3.9$8.2 million of net income for the current year and $341,000$551,000 of shares issued as a result of stock option exercises, partially offset by a $1.5 million increase in accumulated other comprehensive loss resulting from the securities market interest rate changes, the payment of $1.4$2.8 million in dividends and $292,000$306,000 of treasury shares purchased under the stock repurchase program since December 31, 2025.
Book value per common share (GAAP) was $31.30$31.91 at MarchJune 31,30, 2026 compared to $31.28 at December 31, 2025, an increase of $0.02.$0.63. Tangible book value per common share (Non-GAAP) was $29.38$29.99 at MarchJune 31,30, 2026 compared to $29.35 at December 31, 2025, an increase of $0.03.$0.64.
Consolidated Results of Operations for the Three Months Ended MarchJune 31,30, 2026 and 2025
Overview. Net income was $4.3 million for the three months ended June 30, 2026, an increase of $352,000 compared to net income of $3.9 million for the three months ended June 30, 2025.
Overview. Net income was $3.9 million for the three months ended March 31, 2026, an increase of $2.0 million compared to net income of $1.9 million for the three months ended March 31, 2025.
Net Interest and Dividend Income. Net interest and dividend income increased $2.6$2.0 million, or 22.6%,15.9%, to $13.9$14.5 million for the three months ended MarchJune 31,30, 2026 compared to $11.3$12.5 million for the three months ended MarchJune 31,30, 2025. Net interest margin (GAAP) increased 5614 basis points (bps) to 3.83%3.68% for the three months ended MarchJune 31,30, 2026 compared to 3.27%3.54% for the three months ended MarchJune 31,30, 2025. Fully Tax Equivalent (FTE) net interest margin (Non-GAAP) increased 6018 bps to 3.88%3.73% for the three months ended MarchJune 31,30, 2026 compared to 3.28%3.55% for the three months ended MarchJune 31,30, 2025.
•Interest and dividend income increased $1.8$2.1 million, or 10.1%,11.4%, to $19.7$20.9 million for the three months ended MarchJune 31,30, 2026 compared to $17.8$18.8 million the three months ended MarchJune 31,30, 2025.
◦Interest income on loans increased $1.4 million,$685,000, or 9.8%,4.4%, to $16.0$16.2 million for the three months ended MarchJune 31,30, 2026 compared to $14.5$15.5 million for the three months ended MarchJune 31,30, 2025. The average balance of loans increased $76.9$54.6 million to $1.15 billion from $1.08$1.10 billion, causing a $1.1 million$768,000 increase in interest income on loans. Additionally,Partially offsetting this increase, the average yield on loans increaseddecreased 143 bps to 5.64%5.65% from 5.50%5.68% despite a 75 bp reduction in the federal funds target rate since September 2025. While this led to the downward repricing of variable and adjustable rate loans, the impact was partiallymostly negated 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. The increasedecrease in the average yield caused a $378,000$82,000 increasedecrease in interest income on loans.
◦Interest income on investment securities increased $638,000,$943,000, or 23.0%,33.0%, to $3.4$3.8 million for the three months ended MarchJune 31,30, 2026 compared to $2.8$2.9 million for the three months ended MarchJune 31,30, 2025 driven by aan 9680 bp increase in the average yield, coupled with a $6.8$41.0 million increase in average balances. The increase in yield was primarily due to the third quarter 2025 implementation of a balance sheet repositioning strategy of the Bank’s 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 after-tax realized loss of $9.3 million. 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%. The increase in the average balance resulted from current year purchases.
◦Interest income on interest-earning deposits at other banks decreasedincreased $259,000$514,000 to $200,000$845,000 for the three months ended MarchJune 31,30, 2026 compared to $459,000$331,000 for the three months ended MarchJune 31,30, 2025 driven by a 113$66.3 million increase in average balances, partially offset by a 56 bp decrease in the average yieldyield. andThe a $17.8 million decreaseincrease in averagethe balances.volume Thewas due to deposit growth while the decrease in the yield was primarily related to the Federal Reserve’s reductions in the target federal funds rate while the decrease in the volume was due to the funding of loans.rate.
•Interest expense decreasedincreased $757,000,$152,000, or 11.6%,2.4%, to $5.8$6.4 million for the three months ended MarchJune 31,30, 2026 compared to $6.5$6.2 million for the three months ended MarchJune 31,30, 2025.
◦Interest expense on deposits increased $219,000, or 3.8%, to $5.9 million for the three months ended June 30, 2026 compared to $5.7 million for the three months ended June 30, 2025. Average interest-bearing deposit balances increased $137.5 million, or 13.7%, to $1.14 billion as of June 30, 2026 compared to $1.01 billion as of June 30, 2025, primarily as the Bank grew core banking relationships and onboarded Specialty Treasury clients. The increase in average balances accounted for a $748,000 increase in interest expense. This was partially offset as the cost of interest-bearing deposits decreased 20 bps to 2.08% for the three months ended June 30, 2026 from 2.28% for the three months ended June 30, 2025 due to the Federal Reserve federal funds target rate decreases since September 2025. The decrease in the cost of interest-bearing deposits accounted for a $529,000 decrease in interest expense.
◦Interest expense on deposits decreased $879,000, or 14.4%, to $5.2 million for the three months ended March 31, 2026 compared to $6.1 million for the three months ended March 31, 2025. The cost of interest-bearing deposits declined 43 bps to 2.03% for the three months ended March 31, 2026 from 2.46% for the three months ended March 31, 2025 due to the change in the deposit mix and the recent Federal Reserve federal funds target rate decreases. The decrease in the cost of interest-bearing deposits accounted for a $1.1 million decrease in interest expense. This was partially offset as average interest-bearing deposit balances increased $39.4 million, or 3.9%, to $1.05 billion as of March 31, 2026 compared to $1.01 billion as of March 31, 2025, primarily as the Bank grew core banking relationships, onboarded Specialty Treasury clients and strategically reduced time deposit only relationships. The increase in average balances accounted for a $221,000 increase in interest expense.
Provision for Credit Losses. A provision for credit losses of $241,000$17,000 was recorded for the three months ended MarchJune 31,30, 2026. The provision for credit losses on loans was $228,000$157,000 and was primarily due toloan additionalgrowth. reservesThis requiredwas forpartially individuallyoffset assessedby loansa requiring$140,000 specificreversal reserves and charge-offs. Additionally, theof provision for credit losses on unfunded commitments was $13,000 and wasprimarily due to ana increasedecrease in unfunded commitments. This compared to a recoveryprovision for credit losses of $40,000$8,000 recorded for the three months ended MarchJune 31,30, 2025 as the provision for credit losses on loans was $68,000a $136,000 recovery primarily due to a reduction of reserves required for individually assessed loans and changes in loan concentrations, partially offset by additional reserve required for overall loan growth and a change in qualitative adjustmentsfactors onrelating to economic factors,conditions, and the provision for credit losses on unfunded commitments was $108,000$144,000 due to aan decreaseincrease in unfunded commitments and aan decreaseincrease in funding rates.
Noninterest Income. Noninterest income increased $175,000,$41,000, or 22.2%,4.4%, to $962,000$972,000 for the three months ended MarchJune 31,30, 2026, compared to $787,000$931,000 for the three months ended MarchJune 31,30, 2025 primarily due to a $92,000$23,000 increase in service fees related to new corporate deposit and Individual Covered Health Reimbursement Arrangement accounts and a $77,000$19,000 increase in net gain on securities due to net losses of $69,000 recognized for the three months ended March 31, 2025 related primarily to the sale of equity securities.loans.
Noninterest Expense. Noninterest expense increased $1.6 million, or 18.8%, to $10.4 million for the three months ended June 30, 2026 compared to $8.7 million for the three months ended June 30, 2025. Salaries and benefits increased $1.0 million primarily due to revenue producing treasury and commercial banking personnel additions, merit increases and higher benefit compensation costs. Data processing expense increased $379,000 due to the implementation of enhanced treasury and commercial banking platforms in late 2025 and early 2026. Pennsylvania shares tax increased $124,000 due to $179,000 of refunds received in 2025 on amended returns filed for prior years. Legal and professional fees increased $81,000 due to the timing of internal audit services and higher legal fees associated with treasury services. Contracted services increased $54,000 due to outsourced information security services.
Noninterest Expense. Noninterest expense increased $210,000, or 2.1%, to $10.0 million for the three months ended March 31, 2026 compared to $9.8 million for the three months ended March 31, 2025. Data processing expense increased $145,000 due to the implementation of enhanced treasury and commercial banking platforms in late 2025. Contracted services increased $95,000 due to outsourced information security services and robotic process automation projects. Other noninterest expense increased $76,000 due to increases in travel, meals and entertainment expenses related to sales activities and increases in dues and subscriptions and printing and office supplies expenses. Partially offsetting these increases, occupancy expense decreased $94,000 due to certain property management cost savings initiatives implemented in 2025 and salaries and benefits decreased $39,000. During the three months ended March 31, 2025, the Bank recorded $1.0 million of one-time non-recurring expenses related to a reduction in force. Excluding these one-time charges, salaries and benefits increased $1.0 million primarily due to revenue producing treasury and commercial banking personnel additions, merit increases and higher benefit compensation costs.
Income Taxes. Income tax expense was $714,000$798,000 for the three months ended MarchJune 31,30, 2026 compared to $427,000$766,000 for the three months ended MarchJune 31,30, 2025. This change was primarily driven by an increase in pre-tax income to $4.6$5.1 million for the three months ended MarchJune 31,30, 2026 compared to $2.3$4.7 million of income for the three months ended MarchJune 31,30, 2025.
Results of Operations for the Six Months Ended June 30, 2026 and 2025
Overview. Net income was $8.2 million for the six months ended June 30, 2026, an increase of $2.3 million compared to $5.9 million for the six months ended June 30, 2025.
Net Interest and Dividend Income. Net interest and dividend income increased $4.6 million, or 19.1%, to $28.4 million for the six months ended June 30, 2026 compared to $23.9 million for the six months ended June 30, 2025. Net interest margin (GAAP) increased to 3.75% for the six months ended June 30, 2026 compared to 3.40% for the six months ended June 30, 2025. Net interest margin (FTE) (Non-GAAP) increased 38 bps to 3.80% for the six months ended June 30, 2026 compared to 3.42% the six months ended June 30, 2025.
Interest and Dividend Income
•Interest and dividend income increased $4.0 million, or 10.8%, to $40.6 million for the six months ended June 30, 2026 compared to $36.6 million for the six months ended June 30, 2025.
◦Interest income on loans increased $2.1 million, or 7.0%, to $32.1 million during the six months ended June 30, 2026 compared to $30.0 million for the six months ended June 30, 2025. The average balance of loans increased $65.7 million to $1.15 billion for the six months ended June 30, 2026 compared to $1.09 billion for the six months ended June 30, 2025 resulting in a $1.9 million increase in interest income on loans. Additionally, the average yield on loans increased 5 bps to 5.64% for the six months ended June 30, 2026 compared to 5.59% for the six months ended June 30, 2025 resulting in a $272,000 increase in interest income on loans. The increase in the loan yield is despite a 125bp reduction in the federal funds rate since September 2024. While this led to the downward repricing of variable and adjustable rate loans, the impact was partially negated 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 investment securities increased $1.6 million, or 28.1%, to $7.2 million during the six months ended June 30, 2026 compared to $5.6 million for the six months ended June 30, 2025 driven by a $24.0 million increase in average balances and a 87 bp increase in the average yield. The increase in yield was primarily due to the third quarter 2025 balance sheet repositioning strategy and resulted in a $976,000 increase in interest income while the increase in the volume resulted from current year purchases and resulted in a $837,000 increase in interest income.
◦Interest income on interest-earning deposits at other banks increased $257,000, to $1.0 million for the six months ended June 30, 2026 compared to $789,000 for the six months ended June 30, 2025 as average balances increased $24.5 million, partially offset as the average yield decreased 74 bps. The volume increased due to deposit growth while the average yield decrease resulted from reductions in the federal funds rate since September 2025.
Interest Expense
•Interest expense decreased $605,000, or 4.7%, to $12.2 million for the six months ended June 30, 2026 compared to $12.8 million for the six months ended June 30, 2025.
◦Interest expense on deposits decreased $661,000, or 5.6%, to $11.2 million for the six months ended June 30, 2026 compared to $11.8 million for the six months ended June 30, 2025. Declining market interest rates led to the repricing of interest-bearing demand, money market and time deposits and resulted in a 31 bp decrease in the average cost of interest-bearing deposits compared to the six months ended June 30, 2025. This accounted for a $1.6 million decrease in interest expense. Partially offsetting this decrease, the average balance of interest-bearing deposits increased $88.7 million resulting in a $967,000 increase in interest expense.
◦Interest expense on borrowed funds increased $56,000, or 6.1%, to $979,000 for the six months ended June 30, 2026 compared to $923,000 for the six months ended June 30, 2025. The average balance of borrowed funds increased $7.4 million due to FHLB short-term advances utilized during the six months ended June 30, 2026. The increase in the average balance accounted for a $151,000 increase in interest expense. Partially offsetting this increase, the average cost of borrowed funds decreased 49 bps as $20.0 million of long-term borrowings matured in June 2025 and were replaced at current market rates. The decrease in the cost accounted for a $95,000 decrease in interest expense.
Average Balances and Yields. The following table presents information regarding average balances of assets and liabilities, the total dollar amounts of interest income and dividends from average interest-earning assets, the total dollar amounts of interest expense on average interest-bearing liabilities, and the resulting average yields and costs. Average balances are derived from daily balances over the periods indicated. The yields set forth below include the effect of deferred fees, discounts, and premiums that are amortized or accreted to interest income or interest expense. FTE yield adjustments have been made for tax exempt loan and security interest income utilizing a marginal federal income tax rate of 21% for the periods presented. As such, amounts will not agree to income as reported in the consolidated financial statements. The yields and costs for the periods indicated are derived by dividing annualized income or expense by the average balances of assets or liabilities, respectively, for the periods presented.
(1)Annualized based on six months ended results.
(2) Net of the allowance for credit losses and includes nonaccrual loans with a zero yield and Loans Held for Sale if applicable.
(3) Refer to Explanation and Use of Non-GAAP Financial Measures in this filing for the calculation of the measure and reconciliation to the most comparable GAAP measure.
(4) Net interest-earning assets represent total interest-earning assets less total interest-bearing liabilities.
(5) Net interest rate spread represents the difference between the weighted average yield on interest-earning assets and the weighted average cost of interest-bearing liabilities.
(6) Net interest margin represents annualized net interest income divided by average total interest-earning assets.
Rate Volume Analysis. The following table presents the effects of changing rates and volumes on our net interest income for the periods indicated. FTE yield adjustments have been made for tax exempt loan and security income utilizing a marginal federal income tax rate of 21%. The volume column shows the effects attributable to changes in volume (changes in volume multiplied by prior rate). The rate column shows the effects attributable to changes in rate (changes in rate multiplied by prior volume). For purposes of this table, changes attributable to both rate and volume, which cannot be segregated, have been allocated proportionately based on the changes due to rate and the changes due to volume. The total column represents the sum of the prior columns.
Provision for Credit Losses. The net provision for credit losses was $259,000 for the six months ended June 30, 2026. The provision for credit losses for loans was $385,000, partially offset by a recovery for credit losses for unfunded commitments of $126,000. The increase for provision for credit losses for loans was due to loan growth and individually analyzed loans that required specific provision, partially offset by changes in loan concentrations and a decrease in qualitative factors. The recovery for unfunded commitments was due to a decline in the unfunded commitment balance and calculated loss rates. This compared to a recovery for credit losses of $32,000 for the six months ended June 30, 2025 due to improvement of individually analyzed loans that required specific provision in prior periods, mainly offset by increases in loan balances. The prior period recovery for credit losses was comprised of a recovery of $68,000 for loans partially offset by a provision of $36,000 for unfunded commitments.
Noninterest Income. Noninterest income increased $218,000, or 12.7%, to $1.9 million for the six months ended June 30, 2026, compared to $1.7 million for the six months ended June 30, 2025. This increase was mainly due to a $115,000 increase in service fees related to corporate deposit and Individual Covered Health Reimbursement Arrangement accounts and a $59,000 decrease in net loss on securities. Net loss on securities was $10,000 for the six months ended June 30, 2026, compared to $69,000 for the six months ended June 30, 2025 due to changes in the market value of equity securities.
Noninterest Expense. Noninterest expense increased $1.9 million, or 10.0%, to $20.4 million for the six months ended June 30, 2026 compared to $18.5 million for the six months ended June 30, 2025. Salaries and benefits increased $993,000 primarily due to revenue producing treasury and commercial banking personnel additions, merit increases and higher benefit compensation costs, partially offset due to $1.0 million of one-time non-recurring expense recognized for the six months ended June 30, 2025 associated with the previously announced reduction in force. Additionally, data processing expense increased $523,000 due to the implementation of enhanced treasury and commercial banking platforms in late 2025 and early 2026, Pennsylvania shares tax expense increased $154,000 due to $242,000 of refunds received during the six months ended June 30, 2025 as a result of amended prior year returns and contracted services increased $149,000 due to costs associated with outsourced information technology services, treasury consulting and robotic process automation projects.
Income Taxes. Income tax expense increased $319,000, or 26.7%, to $1.5 million for the six months ended June 30, 2026 compared to $1.2 million for the six months ended June 30, 2025. The change between the periods was primarily driven by an increase in pre-tax income to $9.7 million for the six months ended June 30, 2026 compared to $7.1 million for the six months ended June 30, 2025.
Other than loan commitments and standby and performance letters of credit, we do not have any off-balance sheet arrangements that have or are reasonably likely to have a significant current or future effect on our financial condition, revenues, expenses, results of operations, liquidity, capital expenditures, or capital resources that are material to investors. Refer to Note 7 in the Notes to Consolidated Financial Statements of this report for a summary of commitments outstanding as of MarchJune 31,30, 2026 and December 31, 2025.
CBFV insider buying and selling (Form 4)
Since 2026-04-11, insiders reported open-market purchases in 0 Form 4 filings and open-market sales in 2 filings (2 insiders, 1 trade date, 2,500 shares, about $92.7K). Net open-market shares: -2,500 (purchases minus sales); net value about -$92.7K.Totals add up every open-market (code P and S) line in those filings, using the prices reported in the filings. Awards, option exercises, tax withholding and gifts are listed below but not counted.
| Trade date | Insider | Transaction | Shares | Price | Value |
|---|---|---|---|---|---|
| 2026-08-14 | Swiatek John |
Option exercise | 1,400 | $26.45 | $37.0K |
| 2026-08-14 | Swiatek John |
Open-market sale | 1,000 | $37.06 | $37.1K |
| 2026-08-14 | Cobain Stephen |
Open-market sale | 8 | $37.40 | $299 |
| 2026-08-14 | Cobain Stephen |
Open-market sale | 1,176 | $37.06 | $43.6K |
| 2026-08-14 | Cobain Stephen |
Option exercise | 1,500 | $22.48 | $33.7K |
| 2026-08-14 | Cobain Stephen |
Open-market sale | 316 | $37.25 | $11.8K |
| 2026-06-17 | Montgomery John Haines |
Option exercise | 3,500 | $18.60 | $65.1K |
Well-known investors holding CBFV (13F)
| Investor | Quarter | Shares | Reported value | % of their 13F | Change vs prior quarter |
|---|---|---|---|---|---|
| Renaissance Technologies | 2026-06-30 | 53,899 | $2.0M | 0.0% | Reduced 3% |
| Citadel Advisors (Ken Griffin) | 2026-06-30 | 8,155 | $309.1K | 0.0% | Added 33% |
| AQR Capital Management (Cliff Asness) | 2026-06-30 | 5,629 | $213.3K | 0.0% | New position |