CNB FINANCIAL CORP/PA [CCNEP] Filings

10-Q 1 ccne-20240331.htm 10-Q ccne-20240331

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2024


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number 001-39472

CNB FINANCIAL CORPORATION

(Exact name of registrant as specified in its charter)


Pennsylvania						25-1450605
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification No.)

1 South Second Street

P.O. Box 42

Clearfield, Pennsylvania 16830

(Address of principal executive offices)

Registrant’s telephone number, including area code, (814) 765-9621

Securities registered pursuant to Section 12(b) of the Act:

Title of Class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, no par value

CCNE

The NASDAQ Stock Market LLC

Depositary Shares (each representing a 1/40th interest in a share of 7.125% Series A Non-Cumulative, perpetual preferred stock)

CCNEP

The NASDAQ Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ☒ Yes ☐ No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). ☒ Yes ☐ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer", "accelerated filer", "smaller reporting company", and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large Accelerated Filer

☐

Accelerated Filer

☒

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐ Yes ☒ No

The number of shares outstanding of the issuer’s common stock as of April 30, 2024:

COMMON STOCK, NO PAR VALUE PER SHARE: 21,003,568 SHARES

Table of Contents

INDEX

PART I.

FINANCIAL INFORMATION


			Page Number

ITEM 1 – Financial Statements

Condensed Consolidated Balance Sheets March 31, 202 4 (unaudited) and December 31, 202 3 (audited)			1

Condensed Consolidated Statements of Income – Three months ended March 31, 2024 and 2023 (unaudited)			2

Condensed Consolidated Statements of Comprehensive Income – Three months ended March 31, 202 4 and 202 3 (unaudited)			3

Condensed Consolidated Statements of Changes in Shareholders' Equity – Three months ended March 3 1 , 202 4 and 202 3 (unaudited)			4

Condensed Consolidated Statements of Cash Flows – Three months ended March 31, 2024 and 202 3 (unaudited)			5

Notes to Condensed Consolidated Financial Statements			7

ITEM 2 – Management’s Discussion and Analysis of Financial Condition and Results of Operations			44

ITEM 3 – Quantitative and Qualitative Disclosures about Market Risk			63

ITEM 4 – Controls and Procedures			64

PART II. OTHER INFORMATION

ITEM 1 – Legal Proceedings			65

ITEM 1A – Risk Factors			65

ITEM 2 – Unregistered Sales of Equity Securities and Use of Proceeds			65

ITEM 3 – Defaults Upon Senior Securities			66

ITEM 4 – Mine Safety Disclosures			66

ITEM 5 – Other Information			66

ITEM 6 – Exhibits			67

Signatures			68

Table of Contents

Forward-Looking Statements and Factors that Could Affect Future Results

The information below includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, with respect to the financial condition, liquidity, results of operations, future performance and business of CNB Financial Corporation (the "Corporation"). These forward-looking statements are intended to be covered by the safe harbor for "forward-looking statements" provided by the Private Securities Litigation Reform Act of 1995. Forward-looking statements are those that are not historical facts. Forward-looking statements include statements with respect to beliefs, plans, objectives, goals, expectations, anticipations, estimates and intentions that are subject to significant risks and uncertainties and are subject to change based on various factors (some of which are beyond the Corporation’s control). Forward-looking statements often include the words "believes," "expects," "anticipates," "estimates," "forecasts," "intends," "plans," "targets," "potentially," "probably," "projects," "outlook" or similar expressions or future conditional verbs such as "may," "will," "should," "would" and "could." The Corporation’s actual results may differ materially from those contemplated by the forward-looking statements, which are neither statements of historical fact nor guarantees or assurances of future performance.

Factors that could cause the actual results to differ materially from the statements, include, but are not limited to, (i) adverse changes or conditions in capital and financial markets, including actual or potential stresses in the banking industry; (ii) changes in the interest rate environment; (iii) the credit risks of lending activities, including our ability to estimate credit losses and the allowance for credit losses, as well as the effects of changes in the level of, and trends in, loan delinquencies and write-offs; (iv) effectiveness of our data security controls in the face of cyber attacks and any reputational risks following a cybersecurity incident; (v) the duration and scope of a pandemic and the local, national and global impact of a pandemic; (vi) changes in general business, industry or economic conditions or competition; (vii) changes in any applicable law, rule, regulation, policy, guideline or practice governing or affecting financial holding companies and their subsidiaries or with respect to tax or accounting principles or otherwise; (viii) higher than expected costs or other difficulties related to integration of combined or merged businesses; (ix) the effects of business combinations and other acquisition transactions, including the inability to realize our loan and investment portfolios; (x) changes in the quality or composition of our loan and investment portfolios; (xi) adequacy of loan loss reserves; (xii) increased competition; (xiii) loss of certain key officers; (xiv) deposit attrition; (xv) rapidly changing technology; (xvi) unanticipated regulatory or judicial proceedings and liabilities and other costs; (xvii) changes in the cost of funds, demand for loan products or demand for financial services; and (xviii) other economic, competitive, governmental or technological factors affecting our operations, markets, products, services and prices. Such developments could have an adverse impact on the Corporation's financial position and results of operations.

The forward-looking statements contained herein are based upon management’s beliefs and assumptions. Any forward-looking statement made herein speaks only as of the date on which it is made. Factors or events that could cause our actual results to differ may emerge from time to time, and it is not possible for us to predict all of them. The Corporation undertakes no obligation to publicly update or revise any forward-looking statements included in this Quarterly Report on Form 10-Q, whether as a result of new information, future events or otherwise, except to the extent required by law. In light of these risks, uncertainties and assumptions, the forward-looking events discussed might not occur and you should not put undue reliance on any forward-looking statements.

Table of Contents

Part I Financial Information

Item 1. Financial Statements

CONDENSED CONSOLIDATED BALANCE SHEETS

Dollars in thousands, except share data


	(unaudited)
	March 31, 2024		December 31, 2023
ASSETS
Cash and cash equivalents due from banks	$	38,953	$	54,789
Interest-bearing deposits with Federal Reserve	259,464		164,385
Interest-bearing deposits with other financial institutions	3,036		2,872
Total cash and cash equivalents	301,453		222,046
Debt securities available-for-sale, at fair value (amortized cost of $403,994 and $395,803, respectively)	348,565		341,955
Debt securities held-to-maturity, at amortized cost (fair value $352,138 and $360,570, respectively)	381,706		388,968
Equity securities	9,581		9,301
Loans held for sale	1,010		675
Loans receivable
PPP loans, net of deferred processing fees	39		48
Syndicated loans	78,685		108,710
Loans	4,352,674		4,359,718

Total loans receivable	4,431,398		4,468,476
Less: allowance for credit losses	(45,832)		(45,832)
Net loans receivable	4,385,566		4,422,644
FHLB and other restricted stock holdings and investments	31,017		30,011
Premises and equipment, net	74,712		73,700
Operating lease right-of-use assets	35,775		35,699
Bank owned life insurance	115,235		114,468
Mortgage servicing rights	1,499		1,554
Goodwill and other intangibles	43,874		43,874
Core deposit intangible, net	260		280
Accrued interest receivable and other assets	71,159		67,782
Total Assets	$	5,801,412	$	5,752,957
LIABILITIES AND SHAREHOLDERS’ EQUITY
Noninterest-bearing demand deposits	$	749,178	$	728,881
Interest-bearing demand deposits	719,781		803,093
Savings	3,035,823		2,960,282
Certificates of deposit	532,771		506,494
Total deposits	5,037,553		4,998,750
Short-term borrowings	—		—

Subordinated debentures	20,620		20,620
Subordinated notes, net of unamortized issuance costs	84,343		84,267
Operating lease liabilities	37,832		37,650
Accrued interest payable and other liabilities	42,424		40,423
Total liabilities	5,222,772		5,181,710
Commitments and contingent liabilities
Preferred stock, Series A non-cumulative perpetual, $0 par value; $1,000 liquidation preference; shares authorized 60,375; Shares issued 60,375 at March 31, 2024 and December 31, 2023	57,785		57,785
Common stock, no par value; 50,000,000 shares authorized; Shares issued 21,235,503 at March 31, 2024 and 21,235,503 at December 31, 2023	—		—
Additional paid in capital	218,224		220,495
Retained earnings	353,780		345,935
Treasury stock, at cost (210,808 shares at March 31, 2024 and 339,064 shares December 31, 2023)	(3,946)		(6,890)
Accumulated other comprehensive loss	(47,203)		(46,078)
Total shareholders’ equity	578,640		571,247
Total Liabilities and Shareholders’ Equity	$	5,801,412	$	5,752,957

See Notes to Condensed Consolidated Financial Statements

Table of Contents

CONDENSED CONSOLIDATED STATEMENTS OF INCOME (unaudited)

Dollars in thousands, except per share data


	Three Months Ended March 31,
	2024		2023
INTEREST AND DIVIDEND INCOME:
Loans receivable including fees
Interest and fees on loans receivable	$	71,513	$	62,327
Processing fees on PPP loans	—		1
Securities:
Taxable	6,136		4,030
Tax-exempt	167		197
Dividends	89		85
Total interest and dividend income	77,905		66,640
INTEREST EXPENSE:
Deposits	31,548		16,699
Borrowed funds and finance lease liabilities	3		1,263
Subordinated notes and debentures (includes $0 and $(45) accumulated other comprehensive income reclassification for change in fair value of interest rate swap agreements, respectively)	1,132		1,039
Total interest expense	32,683		19,001
NET INTEREST INCOME	45,222		47,639
PROVISION FOR CREDIT LOSS EXPENSE	1,320		1,290
NET INTEREST INCOME AFTER PROVISION FOR CREDIT LOSS EXPENSE	43,902		46,349
NON-INTEREST INCOME:
Service charges on deposit accounts	1,694		1,795
Other service charges and fees	695		631
Wealth and asset management fees	1,802		1,817
Net realized gains on available-for-sale securities (includes $0 and $22 accumulated other comprehensive income reclassifications for net realized gains on available-for-sale securities, respectively)	—		22
Net realized and unrealized gains (losses) on equity securities	191		(286)
Mortgage banking	196		168
Bank owned life insurance	767		764
Card processing and interchange income	2,016		2,059
Other non-interest income	1,594		1,072
Total non-interest income	8,955		8,042
NON-INTEREST EXPENSES:
Compensation and benefits	18,787		17,045
Net occupancy expense	3,640		3,566

Technology expense	5,072		4,258
State and local taxes	1,143		1,050
Legal, professional, and examination fees	1,172		845
Advertising	685		544
FDIC insurance premiums	990		873
Dues and subscriptions	542		506
Card processing and interchange expenses	1,179		1,490

Other non-interest expenses	4,214		3,813
Total non-interest expenses	37,424		33,990
INCOME BEFORE INCOME TAXES	15,433		20,401
INCOME TAX EXPENSE (includes $0 and $14 income tax expense from reclassification items, respectively)	2,833		3,912
NET INCOME	12,600		16,489
PREFERRED STOCK DIVIDENDS	1,075		1,075
NET INCOME AVAILABLE TO COMMON SHAREHOLDERS	$	11,525	$	15,414
AVERAGE COMMON SHARES OUTSTANDING:
Basic	20,823,766		21,042,579
Diluted	20,887,088		21,077,531
PER COMMON SHARE DATA:
Basic Earnings Per Common Share	$	0.55	$	0.73
Diluted Earnings Per Common Share	$	0.55	$	0.73

Cash Dividends Declared	$	0.175	$	0.175

See Notes to Condensed Consolidated Financial Statements

Table of Contents

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (unaudited)

Dollars in thousands


	Three Months Ended March 31,
	2024		2023
NET INCOME	$	12,600	$	16,489
Other comprehensive income (loss), net of tax:
Net change in fair value of derivative instruments:
Unrealized loss on interest rate swaps, net of tax $0 and $0, respectively	—		(1)
Reclassification adjustment for (gains) recognized in earnings, net of tax $0 and $9, respectively	—		(36)
	—		(37)
Net change in debt securities:
Unrealized holding gains (losses) on available-for-sale securities arising during the period, net of tax of $332 and $(1,531), respectively	(1,249)		5,760
Amortization of unrealized losses from held-to-maturity securities, net of tax of $(33) and $(35), respectively	124		133
Reclassification adjustment for realized (losses) included in net income, net of tax of $0 and $5, respectively	—		(17)
	(1,125)		5,876


Other comprehensive income (loss)	(1,125)		5,839
COMPREHENSIVE INCOME	$	11,475	$	22,328

See Notes to Condensed Consolidated Financial Statements

Table of Contents

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY (unaudited)

Dollars in thousands, except share and per share data


	Preferred Stock		Additional Paid-In Capital		Retained Earnings		Treasury Stock		Accumulated Other Comprehensive Income (Loss)		Total Share- holders’ Equity
Balance, January 1, 2024	$	57,785	$	220,495	$	345,935	$	(6,890)	$	(46,078)	$	571,247
Net income					12,600						12,600
Other comprehensive loss									(1,125)		(1,125)
Forfeiture of restricted stock award grants (2,443 shares)			50				(50)				—
Restricted stock award grants (130,857 shares)			(3,025)				3,025				—
Performance based restricted stock award grants (9,667 shares)			(179)				179				—
Stock-based compensation expense			883								883




Purchase of treasury stock for the purpose of tax withholding related to restricted stock award vesting (7,307 shares)							(156)				(156)
Purchase of treasury stock for the purpose of tax withholding related to performance based restricted stock award vesting (2,518 shares)							(54)				(54)


Preferred cash dividend declared					(1,075)						(1,075)
Cash dividends declared ($0.175 per common share)					(3,680)						(3,680)
Balance, March 31, 2024	$	57,785	$	218,224	$	353,780	$	(3,946)	$	(47,203)	$	578,640

Balance, January 1, 2023	$	57,785	$	221,553	$	306,911	$	(2,967)	$	(52,520)	$	530,762
Net income					16,489						16,489
Other comprehensive loss									5,839		5,839
Forfeiture of restricted stock award grants (2,061 shares)			50				(50)				—
Restricted stock award grants (97,859 shares)			(2,547)				2,547				—
Performance based restricted stock award grants (4,118 shares)			(111)				111				—
Stock-based compensation expense			616								616



Purchase of treasury stock (100,000 shares)							(2,405)				(2,405)
Purchase of treasury stock for the purpose of tax withholding related to restricted stock award vesting (3,750 shares)							(89)				(89)
Purchase of treasury stock for the purpose of tax withholding related to performance based restricted stock award vesting (584 shares)							(14)				(14)
Preferred cash dividend declared					(1,075)						(1,075)
Cash dividends declared ($0.175 per common share)					(3,696)						(3,696)
Balance, March 31, 2023	$	57,785	$	219,561	$	318,629	$	(2,867)	$	(46,681)	$	546,427

See Notes to Condensed Consolidated Financial Statements

Table of Contents

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)

Dollars in thousands


	Three Months Ended March 31,
	2024		2023
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	12,600	$	16,489
Adjustments to reconcile net income to net cash provided by operations:
Provision for credit loss expense	1,320		1,290
Depreciation and amortization of premises and equipment, operating leases assets, core deposit intangible, and mortgage servicing rights	1,898		1,923
Accretion of securities, deferred loan fees and costs, net yield and credit mark on acquired loans, and unearned income	(1,395)		(1,334)
Net amortization of deferred costs on borrowings	76		76
Accretion of deferred PPP processing fees	—		(1)
Net realized gains on sales of available-for-sale securities	—		(22)
Net realized and unrealized (gains) losses on equity securities	(191)		286
Gain on sale of loans held for sale	(153)		(92)
Net losses on dispositions of premises and equipment and foreclosed assets	45		—
Proceeds from sale of loans receivable	5,024		2,856
Origination of loans held for sale	(5,491)		(3,381)
Income on bank owned life insurance	(767)		(764)

Restricted stock compensation expense	883		616

Change in:
Accrued interest receivable and other assets	(3,453)		277
Accrued interest payable, lease liabilities, and other liabilities	2,064		(13,405)
NET CASH PROVIDED BY OPERATING ACTIVITIES	12,460		4,814
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from maturities, prepayments and calls of available-for-sale securities	9,227		10,820
Proceeds from sales of available-for-sale securities	—		9,659
Purchase of available-for-sale securities	(17,516)		(10,603)
Proceeds from maturities, prepayments and calls of held-to-maturity securities	7,495		2,698


Purchase of equity securities	(89)		(87)
Proceeds from sales of loans classified as portfolio loans	438		4,994
Net decrease (increase) in loans receivable	36,878		(30,101)



Purchase of FHLB, other equity, and restricted equity interests	(1,006)		(479)
Purchase of premises and equipment	(2,437)		(3,382)
Purchase of other intangible assets	—		(125)
Proceeds from the sale of premises and equipment and foreclosed assets	119		—
NET CASH PROVIDED (USED) BY INVESTING ACTIVITIES	33,109		(16,606)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase in checking, money market and savings accounts	12,526		36,306
Net increase in certificates of deposit	26,277		95,386

Purchase of treasury stock	(210)		(2,508)
Cash dividends paid, common stock	(3,680)		(3,696)
Cash dividends paid, preferred stock	(1,075)		(1,075)






Net change in short-term borrowings	—		(30,313)
NET CASH PROVIDED BY FINANCING ACTIVITIES	33,838		94,100
NET INCREASE IN CASH AND CASH EQUIVALENTS	79,407		82,308
CASH AND CASH EQUIVALENTS, Beginning	222,046		106,285
CASH AND CASH EQUIVALENTS, Ending	$	301,453	$	188,593

Table of Contents

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited) (continued)

Dollars in thousands


	Three Months Ended March 31,
	2024		2023
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest	$	30,919	$	17,990
Income taxes	493		444
SUPPLEMENTAL NONCASH DISCLOSURES:
Transfers to other real estate owned	$	88	$	161
Transfers from loans held for sale to loans held for investment	691		538
Transfers from loans held for investment to loans held for sale	438		166

Grant of restricted stock awards from treasury stock	3,025		2,547
Grant of performance based restricted stock awards from treasury stock	179		111
Restricted stock forfeiture	50		50

Lease liabilities arising from obtaining right-of-use assets	442		2,773

See Notes to Condensed Consolidated Financial Statements

Table of Contents

CNB FINANCIAL CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND DISCLOSURE RULES

Nature of Operations

CNB Financial Corporation (the "Corporation") is headquartered in Clearfield, Pennsylvania, and provides a full range of banking and related services through its wholly owned subsidiary, CNB Bank (the "Bank"). In addition, the Bank provides wealth and asset management services, including the administration of trusts and estates, retirement plans, and other employee benefit plans as well as a full range of wealth management services. The Bank serves individual and corporate customers and is subject to competition from other financial institutions and intermediaries with respect to these services. In addition to the Bank, the Corporation also operates a consumer discount loan and finance business through its wholly owned subsidiary, Holiday Financial Services Corporation ("Holiday"). The Corporation and its other subsidiaries are subject to examination by federal and state regulators. The Corporation’s market area is primarily concentrated in the Central and Northwest regions of the Commonwealth of Pennsylvania, the Central and Northeast regions of the State of Ohio, Western region of the State of New York and the Southwest region of the Commonwealth of Virginia.

Basis of Presentation

The accompanying condensed consolidated financial statements have been prepared pursuant to rules and regulations of the SEC and in compliance with U.S. generally accepted accounting principles ("GAAP"). Because this report is based on an interim period, certain information and footnote disclosures normally included in the consolidated financial statements prepared in accordance with GAAP have been condensed or omitted.

In the opinion of management of the registrant, the accompanying condensed consolidated financial statements as of March 31, 2024 and for the three months ended March 31, 2024 and 2023 include all adjustments, consisting of only normal recurring adjustments, necessary for a fair presentation of the financial condition and the results of operations for the periods presented. The financial performance reported for the Corporation for the three months ended March 31, 2024 is not necessarily indicative of the results to be expected for the full year.

This information should be read in conjunction with the Corporation’s Annual Report on Form 10-K for the year ended December 31, 2023 (the "2023 Form 10-K"). Certain amounts appearing in the condensed consolidated financial statements and notes thereto for prior periods may be reclassified to conform with the current presentation. If there are reclassifications, the reclassifications had no effect on net income or shareholders’ equity as previously reported. Dollar amounts in tables are stated in thousands, except for per share amounts.

Use of Estimates

To prepare financial statements in conformity with GAAP, management makes estimates and assumptions based on available information. These estimates and assumptions affect the amounts reported in the condensed consolidated financial statements and the disclosures provided and future results could differ.

Operating Segments

While the Corporation's Chief Operating Decision Maker ("CODM") monitors the revenue streams of the various products and services, operations are managed and financial performance is evaluated on a Corporation-wide basis, and operating divisions are aggregated into one as operating results for all segments are similar. Accordingly, all of the financial services operations are considered by management to be aggregated in one reportable operating segment.

Goodwill Assessment

The Corporation's policy is to test goodwill for impairment annually on November 30 or on an interim basis if an event triggering impairment may have occurred. Management evaluated current conditions and concluded there have been no significant changes in the economic environment or future projections since the annual goodwill impairment test performed as of November 30, 2023 and therefore, believes that there is no impairment as of March 31, 2024. Management will continue to evaluate the economic conditions at future reporting periods for applicable changes.

Table of Contents

2. RECENT ACCOUNTING PRONOUNCEMENTS

Accounting Standards Adopted in 2023

In October 2021, the FASB issued ASU 2021-08, "Business Combinations (Topic 805), Accounting for Contract Assets and Contract Liabilities from Contracts with Customers." This ASU requires that an acquirer recognize and measure contract assets and contract liabilities acquired in a business combination in accordance with Topic 606, "Revenue from Contracts with Customers." ASU 2021-08 was effective for the Corporation on January 1, 2023 and did not have a material impact on its condensed consolidated financial statements and related disclosures.

In March 2022, the FASB issued ASU 2022-01, "Derivatives and Hedging (Topic 815): Fair Value Hedging - Portfolio Layer Method." Under prior guidance, entities can apply the last-of-layer hedging method to hedge the exposure of a closed portfolio of prepayable financial assets to fair value changes due to changes in interest rates for a portion of the portfolio that is not expected to be affected by prepayments, defaults, and other events affecting the timing and amount of cash flows. ASU 2022-01 expands the last-of-layer method, which permits only one hedge layer, to allow multiple hedged layers of a single closed portfolio. To reflect that expansion, the last-of-layer method is renamed the portfolio layer method. ASU 2022-01 also (i) expands the scope of the portfolio layer method to include non-prepayable financial assets, (ii) specifies eligible hedging instruments in a single-layer hedge, (iii) provides additional guidance on the accounting for and disclosure of hedge basis adjustments under the portfolio layer method and (iv) specifies how hedge basis adjustments should be considered when determining credit losses for the assets included in the closed portfolio. ASU 2022-01 was effective for the Corporation on January 1, 2023 and did not have a material impact on its condensed consolidated financial statements and related disclosures.

In March 2022, the FASB issued ASU 2022-02, "Financial Instruments – Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures." This ASU eliminates the separate recognition and measurement guidance for Troubled Debt Restructurings ("TDRs") by creditors. The elimination of the TDRs guidance may be adopted prospectively for loan modifications after adoption or on a modified retrospective basis, which would also apply to loans previously modified, resulting in a cumulative effect adjustment to retained earnings in the period of adoption for changes in the allowance for credit losses. ASU 2022-02 was effective for the Corporation on January 1, 2023 and did not have a material impact on its condensed consolidated financial statements and related disclosures.

In July 2023, FASB issued ASU 2023-03, "Presentation of Financial Statements (Topic 205), Income Statement - Reporting Comprehensive Income (Topic 220), Distinguishing Liabilities from Equity (Topic 480), Equity (Topic 505), and Compensation - Stock Compensation (Topic 718): Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 120, SEC Staff Announcement at the March 24, 2022 Emerging Issues Task Force ("EITF") Meeting, and Staff Accounting Bulletin Topic 6.B, Accounting Series Release 280 - General Revision of Regulation S-X: Income or Loss Applicable to Common Stock." This ASU amends the FASB Accounting Standards Codification for SEC updates pursuant to SEC Staff Accounting Bulletin No. 120; SEC Staff Announcement at the March 24, 2022 EITF Meeting; and Staff Accounting Bulletin Topic 6.B, Accounting Series Release 280 - General Revision of Regulation S-X: Income or Loss Applicable to Common Stock. The updates were effective immediately. These updates did not have a material impact on the Corporation's condensed consolidated financial statements and related disclosures.

Accounting Standards Adopted in 2024

In June 2022, FASB issued ASU 2022-03, "Fair Value Measurement (Topic 820): Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions." In this ASU, a contractual restriction on the sale of an equity security is not considered in measuring the security's fair value. The ASU also requires certain disclosures for equity securities that are subject to contractual restrictions. This guidance was effective for the Corporation on January 1, 2024. These updates did not have a material impact on the Corporation's condensed consolidated financial statements and related disclosures.

In March 2023, FASB issued ASU 2023-01, "Leases (Topic 842): Common Control Arrangements." This ASU requires the Corporation to amortize leasehold improvements associated with common control leases over the useful life to the common control group. This guidance is effective for the Corporation on January 1, 2024. These updates did not have a material impact on the Corporation's condensed consolidated financial statements and related disclosures.

In March 2023, FASB issued ASU 2023-02, "Investments—Equity Method and Joint Ventures (Topic 323): Accounting for Investments in Tax Credit Structures Using the Proportional Amortization Method." In this ASU, these amendments allow the Corporation to elect to account for qualifying tax equity investments using the proportional amortization method, regardless of the program giving rise to the related income tax credits. This guidance is effective for the Corporation on January 1, 2024.

Table of Contents

These updates did not have a material impact on the Corporation's condensed consolidated financial statements and related disclosures.

Accounting Pronouncements Pending Adoption

In August 2023, FASB issued ASU 2023-05, "Business Combinations - Joint Venture Formations (Subtopic 805-60): Recognition and Initial Measurement." ASU 2023-05 requires certain joint ventures to apply a new basis of accounting upon formation by recognizing and initially measuring most of their assets and liabilities at fair value. The objectives of the amendments are to provide decision-useful information to investors and other allocators of capital in a joint venture’s financial statements and also to reduce diversity in practice. ASU 2023-05 should be applied prospectively and is effective for all newly formed joint venture entities with a formation date on or after January 1, 2025. Early adoption is permitted, and joint ventures formed prior to the adoption date may elect to apply the new guidance retrospectively back to their original formation date. The Corporation is evaluating the effect that ASU 2023-05 will have on its condensed consolidated financial statements and related disclosures.

In October 2023, FASB issued ASU 2023-06, "Disclosure Improvements: Codification Amendments in Response to the SEC’s Disclosure Update and Simplification Initiative." The ASU amends the ASC to incorporate certain disclosure requirements from SEC Release No. 33-10532 - Disclosure Update and Simplification that was issued in 2018. The effective date for each amendment will be the date on which the SEC’s removal of that related disclosure from Regulation S-X or Regulation S-K becomes effective, with early adoption prohibited. The Corporation is evaluating the effect that ASU 2023-06 will have on its condensed consolidated financial statements and related disclosures.

In November 2023, FASB issued ASU 2023-07, "Improvements to Reportable Segment Disclosures (Topic 280)." This ASU updates reportable segment disclosure requirements by requiring disclosures of significant reportable segment expenses that are regularly provided to the CODM and included within each reported measure of a segment's profit or loss. This ASU also requires disclosure of the title and position of the individual identified as the CODM and an explanation of how the CODM uses the reported measures of a segment’s profit or loss in assessing segment performance and deciding how to allocate resources. The ASU is effective for annual periods beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. Adoption of the ASU should be applied retrospectively to all prior periods presented in the financial statements. Early adoption is also permitted. The Corporation is evaluating the effect that ASU 2023-07 will have on its condensed consolidated financial statements and related disclosures.

In December 2023, the FASB issued ASU 2023-09, "Improvements to Income Tax Disclosures (Topic 740)." The ASU requires disaggregated information about a reporting entity’s effective tax rate reconciliation as well as additional information on income taxes paid. The ASU is effective on a prospective basis for annual periods beginning after December 15, 2024. Early adoption is also permitted for annual financial statements that have not yet been issued or made available for issuance. The Corporation is evaluating the effect that ASU 2023-09 will have on its condensed consolidated financial statements and related disclosures.

In March 2024, the FASB issued ASU 2024-01, "Compensation - Stock Compensation (Topic 718)." The ASU adds an illustrative example to demonstrate how an entity should apply the scope guidance in paragraph 718-10-15-3 to determine whether profits interest and similar awards ("profits interest awards") should be accounted for in accordance with Topic 718, Compensation—Stock Compensation. The amendment in this ASU should be applied either (1) retrospectively to all prior periods presented in the financial statements or (2) prospectively to profits interest and similar awards granted or modified on or after the date at which the entity first applies the amendments. If the amendments are applied retrospectively, an entity is required to provide the disclosures in paragraphs 250-10-50-1 through 50-3 in the period of adoption. If the amendment is applied prospectively, an entity is required to disclose the nature of and reason for the change in accounting principle. The ASU is effective for annual periods beginning after December 15, 2024, and interim periods within those annual periods. Early adoption is also permitted for interim and annual financial statements that have not yet been issued or made available for issuance. If an entity adopts the amendments in an interim period, it should adopt the amendment as of the beginning of the annual period that includes that interim period. The Corporation is evaluating the effect that ASU 2024-01 will have on its condensed consolidated financial statements and related disclosures.

Table of Contents

In March 2024, the FASB issued ASU 2024-02, "Codification Improvements—Amendments to Remove References to the Concepts Statements." The ASU contains amendments to the FASB Accounting Standards Codification that remove references to various Concepts Statements. In most instances, the references are extraneous and not required to understand or apply the guidance. In other instances, the references were used in prior Concept Statements to provide guidance in certain topical areas. The amendment in this ASU should be applied using one of the following transition methods: (1) prospectively to all new transactions recognized on or after the date that the entity first applies the amendments; or (2) retrospectively to the beginning of the earliest comparative period presented in which the amendments were first applied. An entity should adjust the opening balance of retained earnings (or other appropriate components of equity or net assets in the statement of financial position) as of the beginning of the earliest comparative period presented. The ASU is effective for annual periods beginning after December 15, 2024, and interim periods within those annual periods. Early application of the amendment is permitted for any fiscal year or interim period for which financial statements have not yet been issued, or made available for issuance. If an entity adopts the amendment in an interim period, it must adopt the amendment as of the beginning of the fiscal year that includes that interim period. The Corporation is evaluating the effect that ASU 2024-02 will have on its condensed consolidated financial statements and related disclosures.

Securities and Exchange Commission ("SEC") Disclosure Rules

In March 2024, the SEC adopted its final rule under SEC Release no. 33-11275, The Enhancement and Standardization of Climate-Related Disclosures for Investors. In April 2024, the SEC stayed the final climate rule pending the completion of judicial review of an Eighth Circuit challenge seeking to vacate the rule. This rule would require registrants to disclose certain climate-related information in registration statements and annual reports. The disclosure requirements would apply to the Corporation’s fiscal year beginning January 1, 2026. The Corporation is currently evaluating the final rule to determine its impact on the Corporation’s disclosures.

3. SECURITIES

Debt securities available-for-sale ("AFS") at March 31, 2024 and December 31, 2023 were as follows:


	March 31, 2024
	Amortized		Unrealized				Allowance For		Fair
	Cost		Gains		Losses		Credit Losses		Value
U.S. Government sponsored entities	$	19,506	$	—	$	(31)	$	—	$	19,475
State & political subdivisions	104,979		6		(13,743)		—		91,242
Residential & multi-family mortgage	220,199		—		(35,417)		—		184,782
Corporate notes & bonds	48,281		3		(5,317)		—		42,967
Pooled SBA	11,029		—		(930)		—		10,099

Total	$	403,994	$	9	$	(55,438)	$	—	$	348,565


	December 31, 2023
	Amortized		Unrealized				Allowance For		Fair
	Cost		Gains		Losses		Credit Losses		Value
U.S. Government sponsored entities	$	5,024	$	—	$	(36)	$	—	$	4,988
State & political subdivisions	105,102		22		(13,315)		—		91,809
Residential & multi-family mortgage	225,871		1		(34,353)		—		191,519
Corporate notes & bonds	48,459		13		(5,333)		—		43,139
Pooled SBA	11,347		—		(847)		—		10,500

Total	$	395,803	$	36	$	(53,884)	$	—	$	341,955

Table of Contents

Debt securities held-to-maturity ("HTM") at March 31, 2024 and December 31, 2023 were as follows:


	March 31, 2024
	Amortized		Unrealized				Allowance For		Fair
	Cost		Gains		Losses		Credit Losses		Value
U.S. Government sponsored entities	$	298,024	$	—	$	(19,373)	$	—	$	278,651
Residential & multi-family mortgage	83,682		—		(10,195)		—		73,487





Total	$	381,706	$	—	$	(29,568)	$	—	$	352,138


	December 31, 2023
	Amortized		Unrealized				Allowance For		Fair
	Cost		Gains		Losses		Credit Losses		Value
U.S. Government sponsored entities	$	302,945	$	—	$	(19,038)	$	—	$	283,907
Residential & multi-family mortgage	86,023		—		(9,360)		—		76,663





Total	$	388,968	$	—	$	(28,398)	$	—	$	360,570

The Corporation elected to transfer 74 AFS securities with an aggregate fair value of $213.7 million to a classification of HTM during the twelve months ended December 31, 2022. In accordance with FASB ASC 320-10-55-24, the transfer from AFS to HTM must be recorded at the fair value of the AFS securities at the time of transfer. The net unrealized holding loss of $5.6 million, net of tax, at the date of transfer was retained in accumulated other comprehensive income (loss), with the associated pre-tax amount retained in the carrying value of the HTM securities. Such amounts will be amortized to comprehensive income over the remaining life of the securities.

Information pertaining to security sales on AFS securities is as follows:


	Proceeds		Gross Gains		Gross Losses


Three months ended March 31, 2024	$	—	$	—	$	—
Three months ended March 31, 2023	9,659		22		—

The tax provision related to these net realized gains was zero for the three months ended March 31, 2024 and $5 thousand for the three months ended March 31, 2023.

The table below illustrates the maturity distribution of debt securities at amortized cost and fair value as of March 31, 2024:


	Available-for-sale				Held-to-maturity
	Amortized Cost		Fair Value		Amortized Cost		Fair Value
1 year or less	$	18,688	$	18,582	$	87,559	$	85,994
1 year – 5 years	50,847		48,517		172,326		160,096
5 years – 10 years	81,804		70,462		38,139		32,561
After 10 years	21,427		16,123		—		—
	172,766		153,684		298,024		278,651
Residential & multi-family mortgage	220,199		184,782		83,682		73,487
Pooled SBA	11,029		10,099		—		—

Total debt securities	$	403,994	$	348,565	$	381,706	$	352,138

Mortgage securities and pooled SBA securities are not due at a single date; periodic payments are received based on the payment patterns of the underlying collateral.

On March 31, 2024 and December 31, 2023, securities carried at $492.4 million and $489.0 million, respectively, were pledged to secure public deposits and for other purposes as provided by law.

At March 31, 2024 and December 31, 2023, there were no holdings of securities of any one issuer, other than the U.S. Government sponsored entities, in an amount greater than 10% of shareholders’ equity. The Corporation’s residential and multi-family mortgage securities are issued by government sponsored entities.

Table of Contents

AFS debt securities with unrealized losses at March 31, 2024 and December 31, 2023, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position, were as follows:

March 31, 2024


	Less than 12 Months				12 Months or More				Total
Description of Securities	Fair Value		Unrealized Loss		Fair Value		Unrealized Loss		Fair Value		Unrealized Loss
U.S. Government sponsored entities	$	18,028	$	(7)	$	1,447	$	(24)	$	19,475	$	(31)
State & political subdivisions	5,266		(188)		81,595		(13,555)		86,861		(13,743)
Residential & multi-family mortgage	112		(3)		184,580		(35,414)		184,692		(35,417)
Corporate notes and bonds	986		(14)		41,314		(5,303)		42,300		(5,317)
Pooled SBA	84		(1)		9,924		(929)		10,008		(930)

	$	24,476	$	(213)	$	318,860	$	(55,225)	$	343,336	$	(55,438)

December 31, 2023


	Less than 12 Months				12 Months or More				Total
	Fair Value		Unrealized Loss		Fair Value		Unrealized Loss		Fair Value		Unrealized Loss
U.S. Government sponsored entities	$	2,487	$	(1)	$	1,956	$	(35)	$	4,443	$	(36)
State & political subdivisions	749		—		84,828		(13,315)		85,577		(13,315)
Residential & multi-family mortgage	—		—		191,436		(34,353)		191,436		(34,353)
Corporate notes and bonds	978		(22)		41,488		(5,311)		42,466		(5,333)
Pooled SBA	—		—		10,409		(847)		10,409		(847)

	$	4,214	$	(23)	$	330,117	$	(53,861)	$	334,331	$	(53,884)

HTM debt securities with unrealized losses at March 31, 2024 and December 31, 2023, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position, were as follows:

March 31, 2024


	Less than 12 Months				12 Months or More				Total
Description of Securities	Fair Value		Unrealized Loss		Fair Value		Unrealized Loss		Fair Value		Unrealized Loss
U.S. Government sponsored entities	$	—	$	—	$	278,651	$	(19,373)	$	278,651	$	(19,373)
Residential & multi-family mortgage	—		—		73,487		(10,195)		73,487		(10,195)





	$	—	$	—	$	352,138	$	(29,568)	$	352,138	$	(29,568)

December 31, 2023


	Less than 12 Months				12 Months or More				Total
	Fair Value		Unrealized Loss		Fair Value		Unrealized Loss		Fair Value		Unrealized Loss
U.S. Government sponsored entities	$	—	$	—	$	283,907	$	(19,038)	$	283,907	$	(19,038)
Residential & multi-family mortgage	—		—		76,663		(9,360)		76,663		(9,360)





	$	—	$	—	$	360,570	$	(28,398)	$	360,570	$	(28,398)

At March 31, 2024 and December 31, 2023, management performed an assessment for possible impairment related to credit losses of the Corporation’s debt securities, relying on information obtained from various sources, including publicly available financial data, ratings by external agencies, brokers and other sources. Based on the results of the assessment, management believes there is no credit related impairment of these debt securities at March 31, 2024 and December 31, 2023.

Table of Contents

For the securities that comprise corporate notes and bonds and the securities that are issued by state and political subdivisions, management monitors publicly available financial information, such as filings with the Securities and Exchange Commission, in order to evaluate the securities for potential credit impairment. For financial institution issuers, management monitors information from quarterly "call" report filings that are used to generate Uniform Bank Performance Reports. All other securities that were in an unrealized loss position at the balance sheet date were reviewed by management, and issuer-specific documents were reviewed as appropriate given the following considerations; the financial condition and near-term prospects of the issuer and whether downgrades by bond rating agencies have occurred, the length of time and extent to which fair value has been less than cost, and whether management does not have the intent to sell these securities and it is likely that it will not be required to sell the securities before their anticipated recovery.

As of March 31, 2024 and December 31, 2023, management concluded the debt securities described in the previous paragraphs were not impaired for reasons due to credit quality for the following reasons:

•There is no indication of any significant deterioration of the creditworthiness of the institutions that issued the securities.

•All contractual interest payments on the securities have been received as scheduled, and no information has come to management’s attention through the processes previously described which would lead to a conclusion that future contractual payments will not be timely received.

•The unrealized losses were deemed to be temporary changes in value related to market movements in interest yields.

The Corporation does not intend to sell and it is not more likely than not that it will be required to sell the securities in an unrealized loss position before recovery of its amortized cost basis.

Equity securities at March 31, 2024 and December 31, 2023 were as follows:


	March 31, 2024		December 31, 2023
Corporate equity securities	$	5,416	$	5,341
Mutual funds	2,278		2,223
Money market funds	1355		1,103
Corporate notes	532		634

Total	$	9,581	$	9,301

Table of Contents

4. LOANS RECEIVABLE AND ALLOWANCE FOR CREDIT LOSSES

Total net loans receivable at March 31, 2024 and December 31, 2023 are summarized as follows:


	March 31, 2024		Percentage of Total		December 31, 2023		Percentage of Total
Farmland	$	31,145	0.7	%	$	31,869	0.7	%
Owner-occupied, nonfarm nonresidential properties	511,219		11.5		493,064		11.0
Agricultural production and other loans to farmers	1,759		—		1,652		—
Commercial and Industrial	658,791		14.9		726,442		16.3
Obligations (other than securities and leases) of states and political subdivisions	151,139		3.4		152,201		3.4
Other loans	25,129		0.6		25,507		0.6
Other construction loans and all land development and other land loans	532,730		12.0		491,539		11.0
Multifamily (5 or more) residential properties	248,123		5.6		254,342		5.7
Non-owner occupied, nonfarm nonresidential properties	887,336		20.0		896,043		20.1
1-4 Family Construction	42,919		1.0		51,207		1.1
Home equity lines of credit	133,290		3.0		130,700		2.9
Residential Mortgages secured by first liens	989,544		22.3		990,986		22.2
Residential Mortgages secured by junior liens	92,614		2.1		91,063		2.0
Other revolving credit plans	38,318		0.9		42,877		1.0
Automobile	23,436		0.5		25,315		0.6
Other consumer	50,968		1.2		51,592		1.1
Credit cards	12,683		0.3		11,785		0.3
Overdrafts	255		—		292		—
Total loans receivable	$	4,431,398	100.0	%	$	4,468,476	100.0	%
Less: Allowance for credit losses	(45,832)				(45,832)
Loans receivable, net	$	4,385,566			$	4,422,644

Net deferred loan origination fees included in the above table	$	1,984			$	2,448

The Corporation’s outstanding loans receivable and related unfunded commitments are primarily concentrated within Central and Northwest Pennsylvania, Central and Northeast Ohio, Western New York and Southwest Virginia. The Bank attempts to limit concentrations within specific industries by utilizing dollar limitations to single industries or customers, and by entering into participation agreements with third parties. Collateral requirements are established based on management’s assessment of the customer. The Corporation maintains lending policies to control the quality of the loan portfolio. These policies delegate the authority to extend loans under specific guidelines and underwriting standards. These policies are prepared by the Corporation’s management and reviewed and approved annually by the Corporation’s Board of Directors.

Syndicated loans, net of deferred fees and costs, are included in the commercial and industrial classification and totaled $78.7 million and $108.7 million as of March 31, 2024 and December 31, 2023, respectively.

Table of Contents

Transactions in the allowance for credit losses for the three months ended March 31, 2024 were as follows:


	Beginning Allowance		(Charge-offs)		Recoveries		Provision (Benefit) for Credit Losses on Loans Receivable(1)		Ending Allowance
Farmland	$	126	$	—	$	—	$	9	$	135
Owner-occupied, nonfarm nonresidential properties	3,949		(596)		9		1,111		4,473
Agricultural production and other loans to farmers	7		—		—		1		8
Commercial and Industrial	9,433		(71)		29		(418)		8,973
Obligations (other than securities and leases) of states and political subdivisions	2,613		—		—		(76)		2,537
Other loans	387		—		—		(9)		378
Other construction loans and all land development and other land loans	4,033		—		—		222		4,255
Multifamily (5 or more) residential properties	1,030		—		—		37		1,067
Non-owner occupied, nonfarm nonresidential properties	9,170		—		—		(385)		8,785
1-4 Family Construction	356		—		—		(53)		303
Home equity lines of credit	831		—		1		65		897
Residential Mortgages secured by first liens	8,050		(64)		—		382		8,368
Residential Mortgages secured by junior liens	1,476		—		—		(45)		1,431
Other revolving credit plans	973		(15)		3		(107)		854
Automobile	358		(10)		3		(47)		304
Other consumer	2,653		(517)		27		548		2,711
Credit cards	95		(29)		5		27		98
Overdrafts	292		(144)		25		82		255
Total loans	$	45,832	$	(1,446)	$	102	$	1,344	$	45,832

(1) Excludes provision for credit losses related to unfunded commitments. Note 9, "Off-Balance Sheet Commitments and Contingencies," to the condensed consolidated financial statements provides more detail concerning the provision for credit losses related to unfunded commitments of the Corporation.

Transactions in the allowance for credit losses for the three months ended March 31, 2023 were as follows:


	Beginning Allowance		(Charge-offs)		Recoveries		Provision (Benefit) for Credit Losses on Loans Receivable(1)		Ending Allowance
Farmland	$	159	$	—	$	—	$	(30)	$	129
Owner-occupied, nonfarm nonresidential properties	2,905		(26)		8		(341)		2,546
Agricultural production and other loans to farmers	6		—		—		(3)		3
Commercial and Industrial	9,766		(46)		145		(922)		8,943
Obligations (other than securities and leases) of states and political subdivisions	1,863		—		—		(15)		1,848
Other loans	456		—		—		138		594
Other construction loans and all land development and other land loans	3,253		—		—		141		3,394
Multifamily (5 or more) residential properties	2,353		(65)		—		247		2,535
Non-owner occupied, nonfarm nonresidential properties	7,653		—		—		606		8,259
1-4 Family Construction	327		—		—		71		398
Home equity lines of credit	1,173		—		1		(16)		1,158
Residential Mortgages secured by first liens	8,484		(7)		—		374		8,851
Residential Mortgages secured by junior liens	1,035		—		—		240		1,275
Other revolving credit plans	722		(22)		5		125		830
Automobile	271		(5)		—		64		330
Other consumer	2,665		(540)		43		393		2,561
Credit cards	67		(62)		1		67		73
Overdrafts	278		(160)		44		92		254
Total loans	$	43,436	$	(933)	$	247	$	1,231	$	43,981

The Corporation's allowance for credit losses is influenced by loan volumes, risk rating migration, delinquency status and other conditions influencing loss expectations, such as reasonable and supportable forecasts of economic conditions.

Table of Contents

For the three months ended March 31, 2024, the allowance for credit losses remained unchanged. The growth in the Corporation's loan portfolio in new market areas was offset by improvements in the Corporation's historical loss rates, as well as the impact of net charge-offs. Significant uncertainty persists regarding the domestic and global economy, tightening credit conditions, persistent inflation, and higher interest rates. Management will continue to proactively evaluate its estimate of expected credit losses as new information becomes available.

Provision for credit losses was $1.3 million for the three months ended March 31, 2024, compared to $1.3 million for the three months ended March 31, 2023. Included in the provision for credit losses for the three months ended March 31, 2024 was a benefit of $24 thousand related to the allowance for unfunded commitments compared to $59 thousand provision towards the allowance for unfunded commitments for the three months ended March 31, 2023, respectively.

The following tables present the amortized cost basis of loans receivable on nonaccrual status and loans receivable past due over 89 days still accruing as of March 31, 2024 and December 31, 2023, respectively:


	March 31, 2024
	Nonaccrual		Nonaccrual With No Allowance for Credit Loss		Loans Receivable Past Due over 89 Days Still Accruing
Farmland	$	734	$	734	$	—
Owner-occupied, nonfarm nonresidential properties	2,058		1,358		—

Commercial and Industrial	7,186		4,382		—


Other construction loans and all land development and other land loans	1,606		101		—
Multifamily (5 or more) residential properties	300		300		—
Non-owner occupied, nonfarm nonresidential properties	9,068		6,716		—

Home equity lines of credit	1,124		1,124		—
Residential Mortgages secured by first liens	5,551		5,152		—
Residential Mortgages secured by junior liens	236		236		—
Other revolving credit plans	127		127		—
Automobile	73		73		—
Other consumer	688		688		—
Credit cards	—		—		49

Total	$	28,751	$	20,991	$	49


	December 31, 2023
	Nonaccrual		Nonaccrual With No Allowance for Credit Loss		Loans Receivable Past Due over 89 Days Still Accruing
Farmland	$	1,083	$	1,083	$	—
Owner-occupied, nonfarm nonresidential properties	2,673		1,488		—

Commercial and Industrial	7,512		4,389		—


Other construction loans and all land development and other land loans	1,653		104		—
Multifamily (5 or more) residential properties	305		305		—
Non-owner occupied, nonfarm nonresidential properties	9,076		6,716		—

Home equity lines of credit	940		940		—
Residential Mortgages secured by first liens	5,316		4,902		23
Residential Mortgages secured by junior liens	123		123		—
Other revolving credit plans	81		81		—
Automobile	79		79		—
Other consumer	798		798		—
Credit cards	—		—		32

Total	$	29,639	$	21,008	$	55

All payments received while on nonaccrual status are applied against the principal balance of the loan. The Corporation does not recognize interest income while a loan is on nonaccrual status.

Table of Contents

The following table presents the amortized cost basis of loans receivable that are individually evaluated and collateral-dependent by class of loans as of March 31, 2024:


	Real Estate Collateral		Non-Real Estate Collateral
Farmland	$	430	$	—
Owner-occupied, nonfarm nonresidential properties	5,376		4

Commercial and Industrial	—		7,668


Other construction loans and all land development and other land loans	1,505		—
Multifamily (5 or more) residential properties	300		—
Non-owner occupied, nonfarm nonresidential properties	8,283		—

Home equity lines of credit	302		—
Residential Mortgages secured by first liens	1,050		—






Total	$	17,246	$	7,672

The following table presents the amortized cost basis of loans receivable that are individually evaluated and collateral-dependent by class of loans as of December 31, 2023:


	Real Estate Collateral		Non-Real Estate Collateral
Farmland	$	736	$	—
Owner-occupied, nonfarm nonresidential properties	6,890		4

Commercial and Industrial	5,489		4,291


Other construction loans and all land development and other land loans	1,549		—
Multifamily (5 or more) residential properties	305		—
Non-owner occupied, nonfarm nonresidential properties	8,291		—

Home equity lines of credit	308		—
Residential Mortgages secured by first liens	1,070		—






Total	$	24,638	$	4,295

Table of Contents

The following table presents the aging of the amortized cost basis in past-due loans receivable as of March 31, 2024 by class of loans:


	30 - 59 Days Past Due		60 - 89 Days Past Due		Greater Than 89 Days Past Due		Total Past Due		Loans Receivable Not Past Due		Total
Farmland	$	—	$	178	$	—	$	178	$	30,967	$	31,145
Owner-occupied, nonfarm nonresidential properties	746		4,568		803		6,117		505,102		511,219
Agricultural production and other loans to farmers	—		—		—		—		1,759		1,759
Commercial and Industrial	1,550		469		152		2,171		656,620		658,791
Obligations (other than securities and leases) of states and political subdivisions	—		—		—		—		151,139		151,139
Other loans	—		—		—		—		25,129		25,129
Other construction loans and all land development and other land loans	—		—		1,567		1,567		531,163		532,730
Multifamily (5 or more) residential properties	—		241		300		541		247,582		248,123
Non-owner occupied, nonfarm nonresidential properties	—		—		2,031		2,031		885,305		887,336
1-4 Family Construction	—		—		—		—		42,919		42,919
Home equity lines of credit	484		—		360		844		132,446		133,290
Residential Mortgages secured by first liens	1,236		1,208		1,706		4,150		985,394		989,544
Residential Mortgages secured by junior liens	—		19		144		163		92,451		92,614
Other revolving credit plans	29		—		65		94		38,224		38,318
Automobile	19		54		66		139		23,297		23,436
Other consumer	414		208		365		987		49,981		50,968
Credit cards	129		7		49		185		12,498		12,683
Overdrafts	—		—		—		—		255		255
Total	$	4,607	$	6,952	$	7,608	$	19,167	$	4,412,231	$	4,431,398

Table of Contents

The following table presents the aging of the amortized cost basis in past-due loans receivable as of December 31, 2023 by class of loans:


	30 - 59 Days Past Due		60 - 89 Days Past Due		Greater Than 89 Days Past Due		Total Past Due		Loans Receivable Not Past Due		Total
Farmland	$	—	$	182	$	129	$	311	$	31,558	$	31,869
Owner-occupied, nonfarm nonresidential properties	120		—		1,390		1,510		491,554		493,064
Agricultural production and other loans to farmers	—		—		—		—		1,652		1,652
Commercial and Industrial	64		379		314		757		725,685		726,442
Obligations (other than securities and leases) of states and political subdivisions	—		—		—		—		152,201		152,201
Other loans	—		—		—		—		25,507		25,507
Other construction loans and all land development and other land loans	—		41		1,612		1,653		489,886		491,539
Multifamily (5 or more) residential properties	—		—		305		305		254,037		254,342
Non-owner occupied, nonfarm nonresidential properties	95		299		2,031		2,425		893,618		896,043
1-4 Family Construction	—		—		—		—		51,207		51,207
Home equity lines of credit	582		682		339		1,603		129,097		130,700
Residential Mortgages secured by first liens	2,360		1,094		1,651		5,105		985,881		990,986
Residential Mortgages secured by junior liens	21		38		60		119		90,944		91,063
Other revolving credit plans	114		41		14		169		42,708		42,877
Automobile	62		5		67		134		25,181		25,315
Other consumer	452		453		354		1,259		50,333		51,592
Credit cards	110		17		32		159		11,626		11,785
Overdrafts	—		—		—		—		292		292
Total	$	3,980	$	3,231	$	8,298	$	15,509	$	4,452,967	$	4,468,476

Loan Modifications

The Corporation adopted ASU 2022-02, Financial Instruments - Credit Losses (Topic 326) Troubled Debt Restructurings and Vintage Disclosures effective January 1, 2023. The amendments in ASU 2022-02 eliminated the recognition and measure of troubled debt restructurings and enhanced disclosures for loan modifications to borrowers experiencing financial difficulty.

Occasionally, the Corporation modifies loans to borrowers in financial distress by providing principal forgiveness, term extension, an other-than-insignificant payment delay or interest rate reduction. When principal forgiveness is provided, the amount of forgiveness is charged-off against the allowance for credit losses.

In some cases, the Corporation provides multiple types of concessions on one loan. Typically, one type of concession, such as a term extension, is granted initially. If the borrower continues to experience financial difficulty, another concession, such as principal forgiveness, may be granted. For the loans included in the "combination" columns below, multiple types of modifications have been made on the same loan within the current reporting period. The combination is at least two of the following: a term extension, principal forgiveness, an other-than-insignificant payment delay and/or an interest rate reduction.

Table of Contents

The following table presents the amortized cost basis of loans at March 31, 2024 that were both experiencing financial difficulty and modified during the three months ended March 31, 2024, by class and by type of modification. The percentage of the amortized cost basis of loans that were modified to borrowers in financial distress as compared to the amortized cost basis of each class of financing receivable is also presented below:


	Principal Forgiveness		Payment Delay		Term Extension		Interest Rate Reduction		Combination Payment Delay and Term Extension		Total Class of Financing Receivable

Owner-occupied, nonfarm nonresidential properties	$	—	$	288	$	—	$	—	$	—	0.1	%

Commercial and Industrial	—		—		505		—		—		0.1














Total	$	—	$	288	$	505	$	—	$	—	—	%

The following table presents the amortized cost basis of loans at March 31, 2023 that were both experiencing financial difficulty and modified during the three months ended March 31, 2023, by class and by type of modification. The percentage of the amortized cost basis of loans that were modified to borrowers in financial distress as compared to the amortized cost basis of each class of financing receivable is also presented below:


	Principal Forgiveness		Payment Delay		Term Extension		Interest Rate Reduction		Combination Payment Delay and Term Extension		Total Class of Financing Receivable

Owner-occupied, nonfarm nonresidential properties	$	—	$	98	$	—	$	—	$	—	—	%

Commercial and Industrial	—		2,573		612		371		122		0.5


Other construction loans and all land development and other land loans	—		1,538		—		—		—		0.4

Non-owner occupied, nonfarm nonresidential properties	—		—		1,562		—		—		0.2









Total	$	—	$	4,209	$	2,174	$	371	$	122	0.2	%

The Corporation had no unfunded available credit to customers whose loan receivables are included in the previous tables.

The Corporation closely monitors the performance of loans that are modified to borrowers experiencing financial difficulty to understand the effectiveness of its modification efforts.

The following table presents the performance of such loans that have been modified during the twelve months ended March 31, 2024:


	Current		30 - 59 Days Past Due		60 - 89 Days Past Due		Greater Than 89 Days Past Due		Total Past Due

Owner-occupied, nonfarm nonresidential properties	$	696	$	288	$	—	$	—	$	288

Commercial and Industrial	3,705		321		—		—		321




Non-owner occupied, nonfarm nonresidential properties	6,696		—		—		—		—


Residential Mortgages secured by first liens	399		—		—		—		—
Residential Mortgages secured by junior liens	29		—		—		—		—





Total	$	11,525	$	609	$	—	$	—	$	609

Table of Contents

The following table presents the performance of such loans that have been modified during the three months ended March 31, 2023:


	Current		30 - 59 Days Past Due		60 - 89 Days Past Due		Greater Than 89 Days Past Due		Total Past Due

Owner-occupied, nonfarm nonresidential properties	$	—	$	98	$	—	$	—	$	98

Commercial and Industrial	3,678		—		—		—		—


Other construction loans and all land development and other land loans	—		—		1,538		—		1,538

Non-owner occupied, nonfarm nonresidential properties	1,562		—		—		—		—









Total	$	5,240	$	98	$	1,538	$	—	$	1,636

The following table presents the financial effect of the loan modifications presented above to borrowers experiencing financial difficulty for the three months ended March 31, 2024:


	Principal Forgiveness		Weighted Average Term Extension (in years)	Weighted Average Interest Rate Reduction



Commercial and Industrial	$	—	1.00	—	%














Total	$	—	1.00	—	%

The following table presents the financial effect of the loan modifications presented above to borrowers experiencing financial difficulty for the three months ended March 31, 2023:


	Principal Forgiveness		Weighted Average Term Extension (in years)	Weighted Average Interest Rate Reduction



Commercial and Industrial	$	—	0.97	0.5	%




Non-owner occupied, nonfarm nonresidential properties	—		0.50	—	%









Total	$	—	0.65	—	%

The following table presents the amortized cost basis of loans that had a payment default during the three months ended March 31, 2024 and were modified in the twelve months prior to that default to borrowers experiencing financial difficulty.


	Principal Forgiveness		Payment Delay		Term Extension		Interest Rate Reduction		Combination Payment Delay and Term Extension

Owner-occupied, nonfarm nonresidential properties	$	—	$	308	$	—	$	—	$	—

Commercial and Industrial	—		—		—		301		—














Total	$	—	$	308	$	—	$	301	$	—

There were no loans that had a payment default during the three months ended March 31, 2023 and were modified in the twelve months prior to that default to borrowers experiencing financial difficulty.

If the Corporation determines that a modified loan (or portion of a loan) has subsequently been deemed uncollectible, the loan (or a portion of the loan) is written off and the amortized cost basis of the loan is reduced by the uncollectible amount and the allowance for credit losses is adjusted by the same amount.

Credit Quality Indicators

The Corporation categorizes loans receivable into risk categories based on relevant information about the ability of borrowers to service their debt such as: current financial information, historical payment experience, credit documentation, public information, and current economic trends, among other factors. The Corporation analyzes loans individually to classify the loans as to credit risk.

Table of Contents

The Corporation uses the following definitions for risk ratings:

Special Mention: A loan classified as special mention has a potential weakness that deserves management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or of the Corporation’s credit position at some future date.

Substandard: A loan classified as substandard is inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any. The loan has a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. A substandard loan is characterized by the distinct possibility that the Corporation will sustain some loss if the deficiencies are not corrected.

Doubtful: A loan classified as doubtful has all the weaknesses inherent in those classified as substandard, with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable.

The following tables represent the Corporation's commercial credit risk profile by risk rating. Loans receivable not rated as special mention, substandard, or doubtful are considered to be pass rated loans.


	March 31, 2024
			Non-Pass Rated
	Pass		Special Mention		Substandard		Doubtful		Total Non-Pass		Total
Farmland	$	30,411	$	—	$	734	$	—	$	734	$	31,145
Owner-occupied, nonfarm nonresidential properties	485,535		1,936		23,748		—		25,684		511,219
Agricultural production and other loans to farmers	1,759		—		—		—		—		1,759
Commercial and Industrial	613,059		3,470		42,262		—		45,732		658,791
Obligations (other than securities and leases) of states and political subdivisions	138,098		—		13,041		—		13,041		151,139
Other loans	25,129		—		—		—		—		25,129
Other construction loans and all land development and other land loans	531,163		—		1,567		—		1,567		532,730
Multifamily (5 or more) residential properties	243,224		—		4,899		—		4,899		248,123
Non-owner occupied, nonfarm nonresidential properties	868,710		2,965		15,661		—		18,626		887,336









Total	$	2,937,088	$	8,371	$	101,912	$	—	$	110,283	$	3,047,371


	December 31, 2023
			Non-Pass Rated
	Pass		Special Mention		Substandard		Doubtful		Total Non-Pass		Total
Farmland	$	30,786	$	—	$	1,083	$	—	$	1,083	$	31,869
Owner-occupied, nonfarm nonresidential properties	461,554		20,177		11,333		—		31,510		493,064
Agricultural production and other loans to farmers	1,652		—		—		—		—		1,652
Commercial and Industrial	653,981		52,030		20,431		—		72,461		726,442
Obligations (other than securities and leases) of states and political subdivisions	139,014		13,187		—		—		13,187		152,201
Other loans	25,507		—		—		—		—		25,507
Other construction loans and all land development and other land loans	484,620		5,307		1,612		—		6,919		491,539
Multifamily (5 or more) residential properties	252,199		1,346		797		—		2,143		254,342
Non-owner occupied, nonfarm nonresidential properties	869,264		3,008		23,771		—		26,779		896,043









Total	$	2,918,577	$	95,055	$	59,027	$	—	$	154,082	$	3,072,659

Table of Contents

The following tables detail the amortized cost of loans receivable, by year of origination (for term loans) and by risk grade within each portfolio segment as of March 31, 2024. Current period originations may include modifications.


	Term Loans Amortized Cost Basis by Origination Year
	2024		2023		2022		2021		2020		Prior		Revolving Loans Amortized Cost Basis		Revolving Loans Converted to Term		Total
Farmland
Risk rating
Pass	$	100	$	3,178	$	11,134	$	6,753	$	1,459	$	7,396	$	391	$	—	$	30,411
Special mention	—		—		—		—		—		—		—		—		—
Substandard	—		—		—		—		—		734		—		—		734

Total	$	100	$	3,178	$	11,134	$	6,753	$	1,459	$	8,130	$	391	$	—	$	31,145
Current period gross write offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—

Owner-occupied, nonfarm nonresidential properties
Risk rating
Pass	$	29,488	$	63,525	$	114,581	$	102,559	$	43,393	$	115,634	$	16,355	$	—	$	485,535
Special mention	—		312		243		266		—		599		516		—		1,936
Substandard	86		846		4,856		696		13,902		3,200		162		—		23,748

Total	$	29,574	$	64,683	$	119,680	$	103,521	$	57,295	$	119,433	$	17,033	$	—	$	511,219
Current period gross write offs	$	—	$	—	$	—	$	—	$	—	$	596	$	—	$	—	$	596

Agricultural production and other loans to farmers
Risk rating
Pass	$	—	$	658	$	32	$	84	$	56	$	162	$	767	$	—	$	1,759
Special mention	—		—		—		—		—		—		—		—		—
Substandard	—		—		—		—		—		—		—		—		—

Total	$	—	$	658	$	32	$	84	$	56	$	162	$	767	$	—	$	1,759
Current period gross write offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—

Commercial and Industrial
Risk rating
Pass	$	26,414	$	65,309	$	140,056	$	109,566	$	30,645	$	18,931	$	222,138	$	—	$	613,059
Special mention	—		41		802		12		60		142		2,413		—		3,470
Substandard	321		1,825		404		4,300		59		3,051		32,302		—		42,262

Total	$	26,735	$	67,175	$	141,262	$	113,878	$	30,764	$	22,124	$	256,853	$	—	$	658,791
Current period gross write offs	$	—	$	—	$	50	$	—	$	—	$	21	$	—	$	—	$	71

Obligations (other than securities and leases) of states and political subdivisions
Risk rating
Pass	$	—	$	25,672	$	16,565	$	31,451	$	11,917	$	49,094	$	3,399	$	—	$	138,098
Special mention	—		—		—		—		—		—		—		—		—
Substandard	—		—		—		—		—		13,041		—		—		13,041

Total	$	—	$	25,672	$	16,565	$	31,451	$	11,917	$	62,135	$	3,399	$	—	$	151,139
Current period gross write offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—

Other loans
Risk rating
Pass	$	431	$	3,396	$	12,201	$	4,950	$	1,692	$	281	$	2,178	$	—	$	25,129
Special mention	—		—		—		—		—		—		—		—		—
Substandard	—		—		—		—		—		—		—		—		—

Total	$	431	$	3,396	$	12,201	$	4,950	$	1,692	$	281	$	2,178	$	—	$	25,129
Current period gross write offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—

Table of Contents


	Term Loans Amortized Cost Basis by Origination Year
	2024		2023		2022		2021		2020		Prior		Revolving Loans Amortized Cost Basis		Revolving Loans Converted to Term		Total
Other construction loans and all land development and other land loans
Risk rating
Pass	$	19,659	$	131,605	$	284,697	$	70,597	$	10,266	$	7,089	$	7,250	$	—	$	531,163
Special mention	—		—		—		—		—		—		—		—		—
Substandard	—		—		—		—		—		1,505		62		—		1,567

Total	$	19,659	$	131,605	$	284,697	$	70,597	$	10,266	$	8,594	$	7,312	$	—	$	532,730
Current period gross write offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—

Multifamily (5 or more) residential properties
Risk rating
Pass	$	573	$	37,297	$	90,986	$	62,477	$	21,574	$	29,817	$	500	$	—	$	243,224
Special mention	—		—		—		—		—		—		—		—		—
Substandard	—		2,140		—		—		2,759		—		—		—		4,899

Total	$	573	$	39,437	$	90,986	$	62,477	$	24,333	$	29,817	$	500	$	—	$	248,123
Current period gross write offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—

Non-owner occupied, nonfarm nonresidential properties
Risk rating
Pass	$	9,141	$	198,263	$	295,587	$	149,332	$	38,517	$	171,997	$	5,873	$	—	$	868,710
Special mention	—		—		—		—		1,859		676		430		—		2,965
Substandard	—		774		1,126		488		5,911		5,666		1,696		—		15,661

Total	$	9,141	$	199,037	$	296,713	$	149,820	$	46,287	$	178,339	$	7,999	$	—	$	887,336
Current period gross write offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—

Table of Contents

The following tables detail the amortized cost of loans receivable, by year of origination (for term loans) and by risk grade within each portfolio segment as of December 31, 2023. Current period originations may include modifications.


	Term Loans Amortized Cost Basis by Origination Year
	2023		2022		2021		2020		2019		Prior		Revolving Loans Amortized Cost Basis		Revolving Loans Converted to Term		Total
Farmland
Risk rating
Pass	$	3,153	$	11,393	$	6,845	$	1,465	$	815	$	6,813	$	302	$	—	$	30,786
Special mention	—		—		—		—		—		—		—		—		—
Substandard	—		—		306		—		—		777		—		—		1,083

Total	$	3,153	$	11,393	$	7,151	$	1,465	$	815	$	7,590	$	302	$	—	$	31,869
Current period gross write offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—

Owner-occupied, nonfarm nonresidential properties
Risk rating
Pass	$	62,529	$	121,722	$	103,698	$	44,286	$	45,749	$	73,649	$	9,921	$	—	$	461,554
Special mention	320		1,304		1,180		13,623		407		210		3,133		—		20,177
Substandard	848		—		696		292		6,738		2,593		166		—		11,333

Total	$	63,697	$	123,026	$	105,574	$	58,201	$	52,894	$	76,452	$	13,220	$	—	$	493,064
Current period gross write offs	$	—	$	—	$	—	$	—	$	—	$	26	$	—	$	—	$	26

Agricultural production and other loans to farmers
Risk rating
Pass	$	703	$	34	$	89	$	60	$	5	$	159	$	602	$	—	$	1,652
Special mention	—		—		—		—		—		—		—		—		—
Substandard	—		—		—		—		—		—		—		—		—

Total	$	703	$	34	$	89	$	60	$	5	$	159	$	602	$	—	$	1,652
Current period gross write offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—

Commercial and Industrial
Risk rating
Pass	$	78,325	$	140,178	$	141,439	$	33,475	$	6,662	$	14,709	$	239,193	$	—	$	653,981
Special mention	7,718		7,803		2,795		65		139		21		33,489		—		52,030
Substandard	—		385		4,281		396		3,476		1,655		10,238		—		20,431

Total	$	86,043	$	148,366	$	148,515	$	33,936	$	10,277	$	16,385	$	282,920	$	—	$	726,442
Current period gross write offs	$	50	$	—	$	—	$	191	$	—	$	—	$	151	$	—	$	392

Obligations (other than securities and leases) of states and political subdivisions
Risk rating
Pass	$	24,964	$	16,791	$	31,768	$	12,399	$	4,190	$	45,331	$	3,571	$	—	$	139,014
Special mention	—		—		—		—		—		13,187		—		—		13,187
Substandard	—		—		—		—		—		—		—		—		—

Total	$	24,964	$	16,791	$	31,768	$	12,399	$	4,190	$	58,518	$	3,571	$	—	$	152,201
Current period gross write offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—

Other loans
Risk rating
Pass	$	3,649	$	12,211	$	5,289	$	1,809	$	288	$	—	$	2,261	$	—	$	25,507
Special mention	—		—		—		—		—		—		—		—		—
Substandard	—		—		—		—		—		—		—		—		—

Total	$	3,649	$	12,211	$	5,289	$	1,809	$	288	$	—	$	2,261	$	—	$	25,507
Current period gross write offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—

Table of Contents


	Term Loans Amortized Cost Basis by Origination Year
	2023		2022		2021		2020		2019		Prior		Revolving Loans Amortized Cost Basis		Revolving Loans Converted to Term		Total
Other construction loans and all land development and other land loans
Risk rating
Pass	$	111,843	$	269,531	$	69,470	$	19,028	$	6,086	$	1,262	$	7,400	$	—	$	484,620
Special mention	—		5,307		—		—		—		—		—		—		5,307
Substandard	—		—		—		—		1,549		—		63		—		1,612

Total	$	111,843	$	274,838	$	69,470	$	19,028	$	7,635	$	1,262	$	7,463	$	—	$	491,539
Current period gross write offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—

Multifamily (5 or more) residential properties
Risk rating
Pass	$	37,366	$	95,635	$	63,203	$	24,527	$	10,928	$	19,786	$	754	$	—	$	252,199
Special mention	1,346		—		—		—		—		—		—		—		1,346
Substandard	797		—		—		—		—		—		—		—		797

Total	$	39,509	$	95,635	$	63,203	$	24,527	$	10,928	$	19,786	$	754	$	—	$	254,342
Current period gross write offs	$	—	$	—	$	—	$	—	$	—	$	65	$	—	$	—	$	65

Non-owner occupied, nonfarm nonresidential properties
Risk rating
Pass	$	192,826	$	297,394	$	151,365	$	39,585	$	54,388	$	125,532	$	8,174	$	—	$	869,264
Special mention	—		—		—		1,887		—		688		433		—		3,008
Substandard	778		1,134		488		5,911		3,266		10,484		1,710		—		23,771

Total	$	193,604	$	298,528	$	151,853	$	47,383	$	57,654	$	136,704	$	10,317	$	—	$	896,043
Current period gross write offs	$	—	$	358	$	—	$	—	$	88	$	—	$	248	$	—	$	694

The Corporation considers the performance of the loan portfolio and its impact on the allowance for credit losses. For 1-4 family construction, home equity lines of credit, residential mortgages secured by first liens, residential mortgages secured by junior liens, automobile, credit cards, other revolving credit plans and other consumer segments, the Corporation evaluates credit quality based on the performance status of the loan, which was previously presented, and by payment activity. Nonperforming loans include loans receivable on nonaccrual status and loans receivable past due over 89 days and still accruing interest.


	March 31, 2024						December 31, 2023
	Performing		Nonperforming		Total		Performing		Nonperforming		Total









1-4 Family Construction	$	42,919	$	—	$	42,919	$	51,207	$	—	$	51,207
Home equity lines of credit	132,166		1,124		133,290		129,760		940		130,700
Residential Mortgages secured by first liens	983,993		5,551		989,544		985,647		5,339		990,986
Residential Mortgages secured by junior liens	92,378		236		92,614		90,940		123		91,063
Other revolving credit plans	38,191		127		38,318		42,796		81		42,877
Automobile	23,363		73		23,436		25,236		79		25,315
Other consumer	50,280		688		50,968		50,794		798		51,592


Total	$	1,363,290	$	7,799	$	1,371,089	$	1,376,380	$	7,360	$	1,383,740

Table of Contents

The following tables detail the amortized cost of loans receivable, by year of origination (for term loans) and by payment activity within each portfolio segment as of March 31, 2024. Current period originations may include modifications.


	Term Loans Amortized Cost Basis by Origination Year
	2024		2023		2022		2021		2020		Prior		Revolving Loans Amortized Cost Basis		Revolving Loans Converted to Term		Total
1-4 Family Construction
Payment performance
Performing	$	736	$	19,157	$	12,475	$	10,031	$	—	$	520	$	—	$	—	$	42,919
Nonperforming	—		—		—		—		—		—		—		—		—
Total	$	736	$	19,157	$	12,475	$	10,031	$	—	$	520	$	—	$	—	$	42,919
Current period gross write offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—

Home equity lines of credit
Payment performance
Performing	$	7,487	$	28,498	$	30,033	$	10,769	$	8,399	$	34,892	$	6,853	$	5,235	$	132,166
Nonperforming	—		—		—		—		—		13		—		1,111		1,124
Total	$	7,487	$	28,498	$	30,033	$	10,769	$	8,399	$	34,905	$	6,853	$	6,346	$	133,290
Current period gross write offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—

Residential mortgages secured by first lien
Payment performance
Performing	$	13,262	$	139,680	$	229,664	$	196,357	$	141,256	$	260,957	$	2,817	$	—	$	983,993
Nonperforming	—		478		450		882		604		3,100		37		—		5,551
Total	$	13,262	$	140,158	$	230,114	$	197,239	$	141,860	$	264,057	$	2,854	$	—	$	989,544
Current period gross write offs	$	—	$	—	$	—	$	—	$	—	$	64	$	—	$	—	$	64

Residential mortgages secured by junior liens
Payment performance
Performing	$	5,304	$	27,446	$	26,004	$	13,585	$	6,867	$	11,921	$	1,251	$	—	$	92,378
Nonperforming	—		19		137		—		—		37		43		—		236
Total	$	5,304	$	27,465	$	26,141	$	13,585	$	6,867	$	11,958	$	1,294	$	—	$	92,614
Current period gross write offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—

Other revolving credit plans
Payment performance
Performing	$	1,170	$	9,889	$	7,737	$	2,323	$	5,280	$	11,792	$	—	$	—	$	38,191
Nonperforming	—		—		28		39		—		60		—		—		127
Total	$	1,170	$	9,889	$	7,765	$	2,362	$	5,280	$	11,852	$	—	$	—	$	38,318
Current period gross write offs	$	—	$	—	$	—	$	—	$	—	$	15	$	—	$	—	$	15

Automobile
Payment performance
Performing	$	1,123	$	11,474	$	6,056	$	2,073	$	1,182	$	1,455	$	—	$	—	$	23,363
Nonperforming	—		—		49		4		16		4		—		—		73
Total	$	1,123	$	11,474	$	6,105	$	2,077	$	1,198	$	1,459	$	—	$	—	$	23,436
Current period gross write offs	$	—	$	7	$	—	$	3	$	—	$	—	$	—	$	—	$	10

Other consumer
Payment performance
Performing	$	7,086	$	23,040	$	10,206	$	4,319	$	2,845	$	2,784	$	—	$	—	$	50,280
Nonperforming	—		343		195		83		10		57		—		—		688
Total	$	7,086	$	23,383	$	10,401	$	4,402	$	2,855	$	2,841	$	—	$	—	$	50,968
Current period gross write offs	$	—	$	254	$	205	$	49	$	4	$	5	$	—	$	—	$	517

Table of Contents

The following tables detail the amortized cost of loans receivable, by year of origination (for term loans) and by payment activity within each portfolio segment as of December 31, 2023. The current period originations may include modifications, extensions and renewals.


	Term Loans Amortized Cost Basis by Origination Year
	2023		2022		2021		2020		2019		Prior		Revolving Loans Amortized Cost Basis		Revolving Loans Converted to Term		Total
1-4 Family Construction
Payment performance
Performing	$	23,465	$	14,915	$	10,079	$	1,206	$	685	$	58	$	799	$	—	$	51,207
Nonperforming	—		—		—		—		—		—		—		—		—
Total	$	23,465	$	14,915	$	10,079	$	1,206	$	685	$	58	$	799	$	—	$	51,207
Current period gross write offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—

Home equity lines of credit
Payment performance
Performing	$	27,110	$	32,027	$	11,437	$	9,844	$	6,781	$	30,467	$	7,479	$	4,615	$	129,760
Nonperforming	—		—		—		—		—		14		—		926		940
Total	$	27,110	$	32,027	$	11,437	$	9,844	$	6,781	$	30,481	$	7,479	$	5,541	$	130,700
Current period gross write offs	$	—	$	—	$	—	$	—	$	10	$	—	$	—	$	—	$	10

Residential mortgages secured by first lien
Payment performance
Performing	$	134,522	$	233,346	$	199,997	$	143,318	$	77,293	$	194,010	$	3,161	$	—	$	985,647
Nonperforming	497		174		787		615		492		2,736		38		—		5,339
Total	$	135,019	$	233,520	$	200,784	$	143,933	$	77,785	$	196,746	$	3,199	$	—	$	990,986
Current period gross write offs	$	—	$	—	$	—	$	—	$	—	$	22	$	95	$	—	$	117

Residential mortgages secured by junior liens
Payment performance
Performing	$	28,685	$	27,032	$	14,027	$	7,102	$	3,888	$	8,833	$	1,373	$	—	$	90,940
Nonperforming	—		38		—		—		—		42		43		—		123
Total	$	28,685	$	27,070	$	14,027	$	7,102	$	3,888	$	8,875	$	1,416	$	—	$	91,063
Current period gross write offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—

Other revolving credit plans
Payment performance
Performing	$	8,684	$	8,027	$	2,732	$	11,274	$	1,634	$	10,445	$	—	$	—	$	42,796
Nonperforming	—		29		5		—		—		47		—		—		81
Total	$	8,684	$	8,056	$	2,737	$	11,274	$	1,634	$	10,492	$	—	$	—	$	42,877
Current period gross write offs	$	—	$	—	$	50	$	4	$	16	$	49	$	—	$	—	$	119

Automobile
Payment performance
Performing	$	12,545	$	6,800	$	2,597	$	1,472	$	1,025	$	797	$	—	$	—	$	25,236
Nonperforming	16		51		—		7		5		—		—		—		79
Total	$	12,561	$	6,851	$	2,597	$	1,479	$	1,030	$	797	$	—	$	—	$	25,315
Current period gross write offs	$	18	$	23	$	—	$	8	$	7	$	—	$	—	$	—	$	56

Other consumer
Payment performance
Performing	$	27,202	$	12,261	$	5,255	$	3,107	$	1,471	$	1,498	$	—	$	—	$	50,794
Nonperforming	283		330		116		12		6		51		—		—		798
Total	$	27,485	$	12,591	$	5,371	$	3,119	$	1,477	$	1,549	$	—	$	—	$	51,592
Current period gross write offs	$	210	$	1,164	$	467	$	96	$	33	$	12	$	—	$	—	$	1,982

Table of Contents


	March 31, 2024		December 31, 2023

Credit card
Payment performance
Performing	$	12,634	$	11,753
Nonperforming	49		32
Total	$	12,683	$	11,785
Current period gross write offs	$	29	$	189

Holiday’s loan portfolio, included in other consumer loans above, is summarized as follows at March 31, 2024 and December 31, 2023:


	March 31, 2024		December 31, 2023
Gross other consumer	$	28,962	$	31,242
Less: other consumer unearned discounts	(5,086)		(5,696)
Total other consumer loans, net of unearned discounts	$	23,876	$	25,546

5. LEASES

Operating lease assets represent the Corporation's right to use an underlying asset during the lease term and operating lease liabilities represent the Corporation's obligation to make lease payments arising from the lease. Operating lease assets and liabilities are recognized at lease commencement based on the present value of the remaining lease payments using a discount rate that represents the Corporation's incremental borrowing rate at the lease commencement date. Operating lease cost, which is comprised of amortization of the operating lease asset and the implicit interest accreted on the operating lease liability, is recognized on a straight-line basis over the lease term, and is recorded in net occupancy expense in the condensed consolidated statements of income.

The Corporation leases certain full-service branch offices, land, and equipment. Leases with an initial term of twelve months or less are not recorded on the balance sheet. Most leases include one or more options to renew and the exercise of the lease renewal options are at the Corporation's sole discretion. The Corporation includes lease extension and termination options in the lease term if, after considering relevant economic factors, it is reasonably certain the Corporation will exercise the option. Certain lease agreements of the Corporation include rental payments adjusted periodically for changes in the consumer price index.


Leases	Classification	March 31, 2024		December 31, 2023
Assets:
Operating lease assets	Operating lease assets	$	35,775	$	35,699
Finance lease assets	Premises and equipment, net (1)	197		215
Total leased assets		$	35,972	$	35,914

Liabilities:
Operating lease liabilities	Operating lease liabilities	$	37,832	$	37,650
Finance lease liabilities	Accrued interest payable and other liabilities	271		294
Total leased liabilities		$	38,103	$	37,944

(1) Finance lease assets are recorded net of accumulated amortization of $1.0 million as of March 31, 2024 and $1.0 million as of December 31, 2023.

The components of the Corporation's net lease expense for the three months ended March 31, 2024 and 2023, respectively, were as follows:

Table of Contents


		Three Months Ended March 31,
Lease Cost	Classification	2024		2023
Operating lease cost	Net occupancy expense	$	742	$	697
Variable lease cost	Net occupancy expense	27		22
Finance lease cost:
Amortization of leased assets	Net occupancy expense	18		18
Interest on lease liabilities	Interest expense - borrowed funds	3		4
Sublease income (1)	Net occupancy expense	(24)		(23)
Net lease cost		$	766	$	718

(1) Sublease income excludes rental income from owned properties.

The following table sets forth future minimum rental payments under noncancellable leases with initial terms in excess of one year as of March 31, 2024:


Maturity of Lease Liabilities as of March 31, 2024	Operating Leases (1)		Finance Leases		Total
2024	$	1,922	$	78	$	2,000
2025	2,636		105		2,741
2026	2,627		105		2,732
2027	2,604		—		2,604
2028	2,625		—		2,625
After 2028	48,001		—		48,001
Total lease payments	60,415		288		60,703
Less: Interest	22,583		17		22,600
Present value of lease liabilities	$	37,832	$	271	$	38,103

(1) Operating lease payments include payments related to options to extend lease terms that are reasonably certain of being exercised and exclude $8.6 million of legally binding minimum lease payments for leases signed, but not yet commenced.

Lease terms and discount rates related to the Corporation's lease liabilities as of March 31, 2024 and December 31, 2023 were as follows:


Lease Term and Discount Rate	March 31, 2024		December 31, 2023
Weighted-average remaining lease term (years)
Operating leases	22.7		23.0
Finance leases	2.7		3.0

Weighted-average discount rate
Operating leases	4.06	%	4.05	%
Finance leases	4.49	%	4.49	%

Other information related to the Corporation's lease liabilities as of March 31, 2024 and 2023, respectively, was as follows:


Other Information	March 31, 2024		March 31, 2023

Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating leases	$	268	$	307

Table of Contents

6. DEPOSITS

The following table reflects time certificates of deposit accounts included in total deposits and their remaining maturities at March 31, 2024:



Time deposits maturing:
2024	$	373,105
2025	135,638
2026	12,805
2027	6,214
2028	2,925
Thereafter	2,084
	$	532,771

Certificates of deposits of $250 thousand or more totaled $104.2 million and $100.2 million at March 31, 2024 and December 31, 2023, respectively.

The Corporation had $206.8 million in brokered deposits as of March 31, 2024 compared to $208.3 million at December 31, 2023. In addition, the Corporation had $784.8 million and $739.3 million in reciprocal deposits at March 31, 2024 and December 31, 2023, respectively.

7. BORROWINGS

At March 31, 2024 and December 31, 2023, the Corporation had available one $10.0 million unsecured line of credit with an unaffiliated institution. Borrowings under the line of credit bear interest at a variable rate equal to the Secured Overnight Finance Rate ("SOFR") plus 2.85%. There were no borrowings under the line of credit at March 31, 2024 and December 31, 2023.

FHLB Borrowings

The Bank has the ability to borrow funds from the Federal Home Loan Bank ("FHLB"). The Bank maintains a $250.0 million line-of-credit (Open Repo Plus) with the FHLB which is a revolving term commitment available on an overnight basis. The term of this commitment may not exceed 364 days and it reprices daily at market rates. Under terms of a blanket collateral agreement with the FHLB, the line-of-credit and long term advances are secured by FHLB stock and the Bank pledges its single-family residential mortgage loan portfolio, certain commercial real estate loans, and certain agriculture real estate loans as security for any advances.

Total loans pledged to the FHLB at March 31, 2024, and December 31, 2023 were $1.8 billion and $1.8 billion, respectively. The Bank could obtain advances of up to approximately $995.1 million from the FHLB at March 31, 2024 and $993.8 million at December 31, 2023.

At March 31, 2024 and December 31, 2023, outstanding advances from the FHLB were as follows.

March 31, 2024

December 31, 2023

Open Repo borrowing at an interest rate of 5.67% and 5.68% at March 31, 2024 and December 31, 2023, respectfully. The maximum amount of the Open Repo borrowing available is $250,000.

—

Total

—

At March 31, 2024 and December 31, 2023, municipal deposit letters of credit issued by the FHLB on behalf of the Bank naming applicable municipalities as beneficiaries were $158.0 million and $155.7 million, respectively. The letters of credit were utilized in place of securities pledged to the municipalities for their deposits maintained at the Bank.

Table of Contents

Federal Reserve Borrowings

In June 2023, the Bank was approved by the Federal Reserve Bank of Philadelphia (the "Federal Reserve") for its Borrower-in-Custody ("BIC") program. At March 31, 2024, the Bank had borrowing capacity through the Federal Reserve BIC program of $242.9 million. Borrowings under the BIC program are overnight advances with interest chargeable at the discount window ("primary credit") borrowing rate. At March 31, 2024, the Bank has pledged certain qualifying loans with an unpaid principal balance of $258.6 million and securities with a carrying value of $78.4 million as collateral.

At March 31, 2024 and December 31, 2023, the Bank had no borrowings from the Federal Reserve BIC program, discount window and no borrowings under the Federal Reserve’s Bank Term Facility Program ("BTFP"), which opened March 12, 2023.

Other Borrowings

At March 31, 2024 and December 31, 2023, the Bank had no outstanding borrowings from unaffiliated institutions under overnight borrowing agreements.

Subordinated Debentures

In 2007, the Corporation issued two $10.0 million floating rate trust preferred securities as part of a pooled offering of such securities. The interest rate on each offering was determined quarterly and floated based upon three-month LIBOR plus 1.55%. Effective September 15, 2023, the interest rate calculation method was revised. The interest rate is now determined quarterly, and floats based on the three-month SOFR plus a credit spread adjustment of 0.26161% plus 1.55%. This change reflects the transition from LIBOR to SOFR as the reference rate. The all-in rate was 7.14% at March 31, 2024 and 7.20% at December 31, 2023. The Corporation issued subordinated debentures to the trusts in exchange for the proceeds of the offerings, which debentures represent the sole assets of the trusts. The subordinated debentures must be redeemed no later than 2037. The Corporation may redeem the debentures, in whole or in part, at face value at any time. The Corporation has the option to defer interest payments from time to time for a period not to exceed five consecutive years. Although the trusts are variable interest entities, the Corporation is not the primary beneficiary. As a result, because the trusts are not consolidated with the Corporation, the Corporation does not report the securities issued by the trusts as liabilities. Instead, the Corporation reports as liabilities the subordinated debentures issued by the Corporation and held by the trusts, since the liabilities are not eliminated in consolidation. The trust preferred securities were designated to qualify as Tier 1 capital under the Federal Reserve’s capital guidelines.

Subordinated Notes

In June 2021, the Corporation sold $85.0 million aggregate principal amount of its fixed-to-floating rate subordinated notes to eligible purchasers in a private offering in reliance on the exemption from the registration requirements of Section 4(a)(2) of the Securities Act and the provisions of Rule 506 of Regulation D thereunder. The notes will mature in June 2031, and initially bear interest at a fixed rate of 3.25% per annum, payable semi-annually in arrears, to, but excluding, June 15, 2026, and thereafter to, but excluding, the maturity date or earlier redemption, the interest rate will reset quarterly to an interest rate per annum equal to the then current three-month average SOFR plus 2.58%. The net proceeds from the sale were approximately $83.5 million, after deducting offering expenses. These subordinated notes were designed to qualify as Tier 2 capital under the Federal Reserve’s capital guidelines and were given an investment grade rating of BBB- by Kroll Bond Rating Agency. The unamortized debt issuance costs were $0.7 million and $0.7 million as of March 31, 2024 and December 31, 2023, respectively.

Table of Contents

8. RELATED PARTY TRANSACTIONS

Some of the Corporation's directors, executive officers, and their related interests had transactions with the Bank in the ordinary course of business. All loan and deposit transactions were made on substantially the same terms, such as interest rates and collateral, as those prevailing at the time for comparable transactions. In the opinion of management, these transactions do not involve more than the normal risk of collectability nor do they present other unfavorable features. It is anticipated that similar transactions will be entered into in the future.

Loans to principal officers, directors, and their affiliates during the three months ended March 31, 2024 were as follows:


Beginning balance	$	40,129
New loans and advances	67
Effect of changes in composition of related parties	119
Repayments	(5,163)
Ending balance	$	35,152

Deposits from directors, executive officers, and their affiliates were $9.9 million and $11.4 million at March 31, 2024 and December 31, 2023, respectively.

9. OFF-BALANCE SHEET COMMITMENTS AND CONTINGENCIES

Financial Instruments with Off-Balance Sheet Risk

The Corporation is a party to financial instruments with off-balance sheet risk in the normal course of business to meet the financial needs of its customers. These financial instruments include commitments to extend credit and standby letters of credit. Those instruments involve, to varying degrees, elements of credit and interest rate risk in excess of the amount recognized in the condensed consolidated balance sheets. The Corporation's exposure to credit loss in the event of nonperformance by the other party of the financial instrument for commitments to extend credit and standby letters of credit is represented by the contract or notional amount of those instruments. The Corporation uses the same credit policies for underwriting all loans, including these commitments and conditional obligations.

As of March 31, 2024 and December 31, 2023, the Corporation did not own or trade other financial instruments with significant off-balance sheet risk including derivatives such as futures, forwards, option contracts and the like, although such instruments may be appropriate to use in the future to manage interest rate risk. See Note 12, "Derivative Instruments," for a description of interest rate derivatives entered into by the Corporation.

Standby letters of credit are conditional commitments issued by the Corporation to guarantee the performance of a customer to a third party. The contract or notional amount of these instruments reflects the maximum amount of future payments that the Corporation could be required to pay under the guarantees if there were a total default by the guaranteed parties, without consideration for possible recoveries under recourse provisions or from collateral held or pledged. In addition, many of these commitments are expected to expire without being drawn upon; therefore, the total commitment amounts do not necessarily represent future cash requirements.

The Corporation's maximum obligation to extend credit for loan commitments (unfunded loans and unused lines of credit) and standby letters of credit outstanding as of March 31, 2024 and December 31, 2023 were as follows:


	March 31, 2024				December 31, 2023
	Fixed Rate		Variable Rate		Fixed Rate		Variable Rate
Commitments to extended credit	$	107,587	$	346,930	$	111,526	$	370,437
Unused lines of credit	22,066		803,451		11,219		789,534
Standby letters of credit	20,832		3,264		18,649		2,480

Table of Contents

Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Since many of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. The Corporation evaluates each customer’s creditworthiness on a case-by-case basis. The amount of collateral obtained, if deemed necessary by the Corporation upon extension of credit, is based on management’s credit evaluation of the counterparty. Collateral that is held varies but may include securities, accounts receivable, inventory, property, plant and equipment, and residential and income-producing commercial properties.

Allowance for Credit Losses on Unfunded Loan Commitments

The Corporation maintains an allowance for credit losses on unfunded commercial lending commitments and letters of credit to provide for the risk of loss inherent in these arrangements. The allowance is computed using a methodology similar to that used to determine the allowance for credit losses for loans receivable, modified to take into account the probability of a draw-down on the commitment. The provision for credit losses on unfunded loan commitments is included in the provision for credit losses on the Corporation's condensed consolidated statements of income. The allowance for unfunded commitments is included in other liabilities in the condensed consolidated balance sheets. Note 4, "Loans Receivable and Allowance for Credit Losses," in the condensed consolidated financial statements provides more detail concerning the provision for credit losses related to the loan portfolio of the Corporation.

The following table presents activity in the allowance for credit losses on unfunded loan commitments for the three months ended March 31, 2024 and 2023, respectively:


	Three Months Ended
	March 31,
	2024		2023
Beginning balance	$	759	$	603
Provision for credit losses on unfunded loan commitments (1)	(24)		59
Ending balance	$	735	$	662

(1) Excludes provision for credit losses related to the loan portfolio.

Other Off-Balance Sheet Commitments

The Corporation makes investments in limited partnerships, including certain small business investment corporations and low income housing partnerships. Capital contributions for investments in small business companies ("SBIC") and other limited partnerships, reported in FHLB and other restricted stock holdings and investments on the condensed consolidated balance sheet, as of March 31, 2024 and December 31, 2023 were $22.2 million and $21.7 million, respectively. Unfunded capital commitments in investments in SBIC's and other limited partnerships totaled $6.3 million and $6.8 million as of March 31, 2024 and December 31, 2023, respectively. These investments are accounted for under the equity method of accounting.

Qualified Affordable Housing Project Investments

The carrying value of investments in the low income housing partnerships, reported in FHLB and other restricted stock holdings and investments on the condensed consolidated balance sheet, as of March 31, 2024 and December 31, 2023 were $3.6 million and $3.8 million, respectively. The related amortization for the three months ended March 31, 2024 and 2023 was $178 thousand and $186 thousand, respectively. Unfunded commitments, reported in accrued interest payable and other liabilities on the condensed consolidated balance sheets, as of March 31, 2024 and December 31, 2023 were $529 thousand and $796 thousand, respectively.

Litigation

The Corporation is subject to claims and lawsuits that arise primarily in the ordinary course of business. It is the opinion of management the disposition or ultimate resolution of such claims and lawsuits will not have a material adverse effect on the consolidated financial position, results of operations and cash flows of the Corporation.

Table of Contents

10. STOCK COMPENSATION

The Corporation has a stock incentive plan, which is administered by a committee of the Board of Directors and which permits the Corporation to provide various types of stock-based compensation to its key employees, directors, and/or consultants, including time-based and performance-based shares of restricted stock. The Corporation previously maintained the CNB Financial Corporation 2009 Stock Incentive Plan, which terminated in accordance with its terms on February 10, 2019, and currently maintains the CNB Financial Corporation 2019 Omnibus Incentive Plan (the "2019 Stock Incentive Plan"), which was approved by the Corporation’s shareholders and became effective on April 16, 2019.

The 2019 Stock Incentive Plan provides for up to 507,671 shares of common stock to be awarded in the form of nonqualified options or restricted stock. For key employees, the vesting of time-based restricted stock is one-third, one-fourth, or one-fifth of the granted restricted shares per year, beginning one year after the grant date, with 100% vesting on the third, fourth or fifth anniversary of the grant date, respectively. Stock compensation received by non-employee directors vests immediately.

At March 31, 2024, there was no unrecognized compensation cost related to stock-based compensation awarded under this plan and, except for the time-based and performance-based restricted stock awards disclosed below and in previous filings, no other stock-based compensation was granted during the three months ended March 31, 2024 and 2023.

Compensation expense for the restricted stock awards is recognized over the requisite service period based on the fair value of the shares at the date of grant on a straight-line basis. Non-vested restricted stock awards are recorded as a reduction of additional paid-in-capital in shareholders’ equity until earned. Compensation expense resulting from time-based, performance-based and director restricted stock awards was $883 thousand for the three months ended March 31, 2024, and $616 thousand for the three months ended March 31, 2023, respectively. The total income tax benefit related to the recognized compensation cost of vested restricted stock awards was $185 thousand for the three months ended March 31, 2024, and $129 thousand for the three months ended March 31, 2023, respectively.

A summary of changes in time-based unvested restricted stock awards for the three months ended March 31, 2024 follows:


	Shares	Per Share Weighted Average Grant Date Fair Value
Unvested at beginning of period	124,934	$	24.09
Granted	112,828	21.26

Forfeited	(2,443)	22.76
Vested	(42,132)	24.22
Unvested at end of period	193,187	$	22.42

The above table excludes 18,029 shares in restricted stock awards that were granted to the Corporation's Board of Directors at a weighted average fair value of $21.35 and immediately vested. As of March 31, 2024 and December 31, 2023, there was $4.1 million and $2.1 million, respectively, of total unrecognized compensation cost related to non-vested shares granted under the 2019 Stock Incentive Plan. The fair value of shares vested was $1.4 million during the three months ended March 31, 2024, and $970 thousand during the three months ended March 31, 2023.

In addition to the time-based restricted stock disclosed above, the Corporation’s Board of Directors grants performance-based restricted stock awards ("PBRSAs") to key employees. The number of PBRSAs will depend on certain performance conditions earned over a three year period and are also subject to service-based vesting. In 2024, awards with a maximum of 29,992 shares in aggregate were granted to key employees. In 2023, awards with a maximum of 23,124 shares in aggregate were granted to key employees. In 2022, awards with a maximum of 13,761 shares in aggregate were granted to key employees.

In 2023, the 2021 PBRSAs were fully earned and in 2024, 9,667 shares were fully distributed. The fair value of the shares distributed in 2024 was $206 thousand.

Table of Contents

11. EARNINGS PER COMMON SHARE

Basic earnings per common share is computed by dividing net income available to common shareholders by the weighted average number of common shares outstanding during the applicable period, excluding outstanding participating securities. Diluted earnings per common share is computed using the weighted average number of common shares determined for the basic computation plus the dilutive effect of potential common shares issuable under certain stock compensation plans. For the three months ended March 31, 2024 and 2023, there were no outstanding stock options to include in the diluted earnings per common share calculations.

Unvested share-based payment awards that contain nonforfeitable rights to dividends or dividend equivalents (whether paid or unpaid) are participating securities and are included in the computation of earnings per common share pursuant to the two-class method. The Corporation has determined that its outstanding non-vested time-based restricted stock awards are participating securities.

The computation of basic and diluted earnings per common share is shown below:


	Three Months Ended March 31,
	2024		2023
Basic earnings per common share computation:
Net income per condensed consolidated statements of income	$	11,525	$	15,414
Net earnings allocated to participating securities	(92)		(78)
Net earnings allocated to common stock	$	11,433	$	15,336
Distributed earnings allocated to common stock	$	3,646	$	3,673
Undistributed earnings allocated to common stock	7,787		11,663
Net earnings allocated to common stock	$	11,433	$	15,336
Weighted average common shares outstanding, including shares considered participating securities	20,979		21,143
Less: Average participating securities	(155)		(100)
Weighted average shares	20,824		21,043
Basic earnings per common share	$	0.55	$	0.73
Diluted earnings per common share computation:
Net earnings allocated to common stock	$	11,433	$	15,336
Weighted average common shares outstanding for basic earnings per common share	20,824		21,043
Add: Dilutive effect of stock compensation	63		35
Weighted average shares and dilutive potential common shares	20,887		21,078
Diluted earnings per common share	$	0.55	$	0.73

12. DERIVATIVE INSTRUMENTS

On September 7, 2018, the Corporation executed an interest rate swap agreement with a 5-year term and an effective date of September 15, 2018 in order to hedge cash flows associated with $10.0 million of a subordinated trust preferred security that was issued by the Corporation during 2007 and elected cash flow hedge accounting for the agreement. The Corporation’s objective in using this derivative is to add stability to interest expense and to manage its exposure to interest rate risk. The interest rate swap involves the receipt of variable-rate amounts in exchange for fixed-rate payments from September 15, 2018 to September 15, 2023 without the exchange of the underlying notional amount. The swap expired on September 15, 2023 and was not renewed.

As of March 31, 2024 and December 31, 2023, no derivatives were designated as fair value hedges or hedges of net investments in foreign operations. Additionally, the Corporation does not use derivatives for trading or speculative purposes and currently does not have any derivatives that are not designated as hedges.

The following tables provide information about the amounts and locations of activity related to the interest rate swaps designated as cash flow hedges within the Corporation’s condensed consolidated statements of income for the three months ended March 31, 2024 and 2023:

Table of Contents


For the Three Months Ended March 31, 2024	(a)		(b)	(c)		(d)	(e)
Interest rate contracts	$	—	Interest expense – subordinated notes and debentures	$	—	Other income	$	—


For the Three Months Ended March 31, 2023	(a)		(b)	(c)		(d)	(e)
Interest rate contracts	$	(37)	Interest expense – subordinated notes and debentures	$	(45)	Other income	$	—

(a)Amount of Gain or (Loss) Recognized in Other Comprehensive Loss on Derivative (Effective Portion), net of tax

(b)Location of Gain or (Loss) Reclassified from Accumulated Other Comprehensive Loss into Income (Effective Portion)

(c)Amount of Gain or (Loss) Reclassified from Accumulated Other Comprehensive Loss into Income (Effective Portion)

(d)Location of Gain or (Loss) Recognized in Income on Derivative (Ineffective Portion and Amount Excluded from Effectiveness Testing)

(e)Amount of Gain or (Loss) Recognized in Income on Derivative (Ineffective Portion and Amount Excluded from Effectiveness Testing)

Derivatives on Behalf of Customers

The Corporation entered into certain interest rate swap contracts that are not designated as hedging instruments. These derivative contracts relate to transactions in which the Corporation enters into an interest rate swap with a customer while at the same time entering into an offsetting interest rate swap with another financial institution. In connection with each swap transaction, the Corporation agrees to pay interest to the customer on a notional amount at a variable interest rate and receive interest from the customer on a similar notional amount at a fixed interest rate. Concurrently, the Corporation agrees to pay another financial institution the same fixed interest rate on the same notional amount and receive the same variable interest rate on the same notional amount. The transaction allows the Corporation’s customers to effectively convert a variable rate loan to a fixed rate. Because the Corporation acts as an intermediary for its customer, changes in the fair value of the underlying derivative contracts offset each other and do not impact the Corporation’s results of operations.

The Corporation pledged cash collateral to another financial institution with a balance $483 thousand as of March 31, 2024 and $173 thousand as of December 31, 2023. This balance is included in cash and cash equivalents due from banks on the condensed consolidated balance sheets. The Corporation may require its customers to post cash or securities as collateral on its program of back-to-back swaps depending upon the specific facts and circumstances surrounding each loan and individual swap. In addition, certain language is included in the International Swaps and Derivatives Association agreement and loan documents where, in default situations, the Corporation is permitted to access collateral supporting the loan relationship to recover any losses suffered on the derivative asset or liability. The Corporation may be required to post additional collateral to swap counterparties in the future in proportion to potential increases in unrealized loss positions. Effective on September 30, 2023 the Corporation amended all of the back-to-back swap contracts to reference the 1-month SOFR plus a credit spread adjustment of 11.448 basis points "Fallback SOFR."

The following table provides information about the amounts and locations of activity related to the back-to-back interest rate swaps within the Corporation’s condensed consolidated balance sheet as of March 31, 2024 and December 31, 2023:


			Fair Value
	Notional Amount		Asset			Liability
March 31, 2024	$	59,171	$	1,560	(a)	$	1,560	(b)
December 31, 2023	$	21,302	$	1,013	(a)	$	1,013	(b)

(a)Reported in accrued interest receivable and other assets within the condensed consolidated balance sheets

(b)Reported in accrued interest payable and other liabilities within the condensed consolidated balance sheets

Risk Participation Agreements

The Corporation’s existing credit derivatives result from participations in or out of interest rate swaps provided by or to external lenders as part of loan participation arrangements, therefore, are not used to manage interest rate risk in the Corporation’s assets or liabilities. Derivatives not designated as hedges are not speculative and result from a service the Corporation provides to certain lenders which participate in loans.

The Corporation entered into Risk Participation Agreement ("RPA") swaps with other financial institutions related to loans in which the Corporation is a participant in. The RPA provides credit protection to the financial institution should the borrower fail to perform on its interest rate derivative contract with the financial institution. The notional amount of this contingent agreement is $21.6 million as of March 31, 2024 and $14.0 million as of December 31, 2023.

Table of Contents

The Corporation entered into RPA swaps with other financial institutions related to loans in which the Corporation is a participant out. The RPA provides credit protection to the Corporation should the borrower fail to perform on its interest rate derivative contract with the financial institution. The notional amount of this contingent agreement is $25.5 million as of March 31, 2024 and zero as of December 31, 2023.

The fair value of the RPAs swaps was $19 thousand and $49 thousand as of March 31, 2024 and December 31, 2023, respectively, and is reported in accrued interest payable and other liabilities within the condensed consolidated balance sheets.

13. FAIR VALUE

Fair Value Measurement

Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date.

The following three levels of inputs are used to measure fair value:

Level 1: Quoted prices (unadjusted) for identical assets or liabilities in active markets that the entity has the ability to access as of the measurement date.

Level 2: Significant other observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data.

Level 3: Significant unobservable inputs that reflect a company’s own assumptions about the assumptions that market participants would use in pricing an asset or liability.

The Corporation used the following methods and significant assumptions to estimate fair value:

Investment Securities: The fair values for investment securities are determined by quoted market prices, if available (Level 1). For securities where quoted prices are not available, fair values are calculated based on market prices of similar securities (Level 2), using matrix pricing. Matrix pricing is a mathematical technique commonly used to price debt securities that are not actively traded, values debt securities without relying exclusively on quoted prices for the specific securities but rather by relying on the securities’ relationship to other benchmark quoted securities (Level 2 inputs). For securities where quoted prices or market prices of similar securities are not available, fair values are calculated using discounted cash flows or other market indicators (Level 3).

Loans Held for Sale: Loans held for sale are carried at the lower of cost or fair value, which is evaluated on a loan-level basis. The fair value of loans held for sale is determined using quoted prices for similar assets, adjusted for specific attributes of that loan or other observable market data, such as outstanding commitments from third party investors (Level 2).

Derivatives: The fair values of derivatives are based on valuation models using observable market data as of the measurement date (Level 2). The Corporation's derivatives are traded in an over-the-counter market where quoted market prices are not always available. Therefore, the fair values of derivatives are determined using quantitative models that utilize multiple market inputs. The inputs will vary based on the type of derivative, but could include interest rates, prices, and indices to generate continuous yield or pricing curves, prepayment rates, and volatility factors to value the position. The majority of market inputs are actively quoted and can be validated through external sources, including brokers, market transactions, and third-party pricing services.

Table of Contents

Individually Evaluated Loans: The fair value of individually evaluated loans with specific allocations of the allowance for credit losses is generally based on recent real estate appraisals prepared by third-parties. These appraisals may utilize a single valuation approach or a combination of approaches including comparable sales and the income approach. Adjustments are routinely made in the appraisal process by the appraisers to adjust for differences between the comparable sales and income data available. Management also adjusts appraised values based on the length of time that has passed since the appraisal date and other factors. Such adjustments are usually significant and typically result in a Level 3 classification of the inputs for determining fair value. Non-real estate collateral may be valued using an appraisal, net book value per the borrower's financial statements, or aging reports, adjusted or discounted based on management's historical knowledge, changes in market conditions from the time of the valuation, and management's expertise and knowledge of the client and client's business, resulting in a Level 3 fair value classification. Individually evaluated loans are evaluated on a quarterly basis for additional impairment and adjusted in accordance with the allowance policy.

Assets and liabilities measured at fair value on a recurring basis are as follows at March 31, 2024 and December 31, 2023:


			Fair Value Measurements at March 31, 2024 Using:
			Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs
Description	Total		(Level 1)		(Level 2)		(Level 3)
Assets:
Securities Available-For-Sale:
U.S. Government sponsored entities	$	19,475	$	14,482	$	4,993	$	—
States and political subdivisions	91,242		—		91,242		—
Residential and multi-family mortgage	184,782		—		184,782		—
Corporate notes and bonds	42,967		—		42,967		—
Pooled SBA	10,099		—		10,099		—

Total Securities Available-For-Sale	$	348,565	$	14,482	$	334,083	$	—
Interest Rate swaps	$	1,560	$	—	$	1,560	$	—
Equity Securities:
Corporate equity securities	$	5,416	$	5,416	$	—	$	—
Mutual funds	2,278		2,278		—		—
Money market funds	1,355		1,355		—		—
Corporate notes	532		—		532		—

Total Equity Securities	$	9,581	$	9,049	$	532	$	—
Liabilities:
Interest Rate Swaps	$	(1,560)	$	—	$	(1,560)	$	—

Table of Contents

























			Fair Value Measurements at December 31, 2023 Using:
			Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs
Description	Total		(Level 1)		(Level 2)		(Level 3)
Assets:
Securities Available-For-Sale:
U.S. Government sponsored entities	$	4,988	$	4,988	$	—	$	—
States and political subdivisions	91,809		—		91,809		—
Residential and multi-family mortgage	191,519		—		191,519		—
Corporate notes and bonds	43,139		—		43,139		—
Pooled SBA	10,500		—		10,500		—

Total Securities Available-For-Sale	$	341,955	$	4,988	$	336,967	$	—
Interest Rate swaps	$	1,013	$	—	$	1,013	$	—
Equity Securities:
Corporate equity securities	$	5,341	$	5,341	$	—	$	—
Mutual funds	2,223		2,223		—		—
Money market funds	1,103		1,103		—		—
Corporate notes	634		—		634		—

Total Equity Securities	$	9,301	$	8,667	$	634	$	—
Liabilities:
Interest Rate Swaps	$	(1,013)	$	—	$	(1,013)	$	—

Assets and liabilities measured at fair value on a non-recurring basis are as follows at March 31, 2024 and December 31, 2023:


			Fair Value Measurements at March 31, 2024 Using
Description	Total		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets:
Collateral-dependent loans receivable:
Farmland	$	430	$	—	$	—	$	430
Owner-occupied, nonfarm nonresidential properties	4,080		—		—		4,080
Commercial and industrial	4,696		—		—		4,696
Other construction loans and all land development loans and other land loans	1,255		—		—		1,255
Multifamily (5 or more) residential properties	300		—		—		300
Non-owner occupied, nonfarm nonresidential	6,970		—		—		6,970
Home equity lines of credit	302		—		—		302
Residential Mortgages secured by first liens	839		—		—		839

Table of Contents


			Fair Value Measurements at December 31, 2023 Using
Description	Total		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets:
Collateral-dependent loans receivable:
Farmland	$	736	$	—	$	—	$	736
Owner-occupied, nonfarm nonresidential properties	5,589		—		—		5,589
Commercial and industrial	7,425		—		—		7,425
Other construction loans and all land development loans and other land loans	1,299		—		—		1,299
Multifamily (5 or more) residential properties	305		—		—		305
Non-owner occupied, nonfarm nonresidential	7,216		—		—		7,216
Home equity lines of credit	308		—		—		308
Residential mortgages secured by first liens	871		—		—		871

A loan is considered to be a collateral dependent loan when, based on current information and events, the Corporation expects repayment of the financial assets to be provided substantially through the operation or sale of the collateral and the Corporation has determined that the borrower is experiencing financial difficulty as of the measurement date. The allowance for credit losses is measured by estimating the fair value of the loan based on the present value of expected cash flows, the market price of the loan, or the underlying fair value of the loan’s collateral. For real estate loans, fair value of the loan’s collateral is determined by third-party appraisals, which are then adjusted for the estimated selling and closing costs related to liquidation of the collateral. For this asset class, the actual valuation methods (income, sales comparable, or cost) vary based on the status of the project or property. For example, land is generally based on the sales comparable method while construction is based on the income and/or sales comparable methods. The unobservable inputs may vary depending on the individual assets with no one of the three methods being the predominant approach. The Corporation reviews the third-party appraisal for appropriateness and may adjust the value downward to consider selling and closing costs. For non-real estate loans, fair value of the loan’s collateral may be determined using an appraisal, net book value per the borrower’s financial statements, or aging reports, adjusted or discounted based on management’s historical knowledge, changes in market conditions from the time of the valuation, and management’s expertise and knowledge of the client and client’s business.

Table of Contents

The following table presents quantitative information about Level 3 fair value measurements for financial instruments measured at fair value on a non-recurring basis at March 31, 2024:

Fair
value

Valuation
Technique

Unobservable Inputs

Range
(Weighted
Average)

Collateral-dependent loans receivable:

Farmland

430

Valuation of third party appraisal on underlying collateral

Loss severity rates

31% (31%)

Owner-occupied, nonfarm nonresidential properties

4,080

Valuation of third party appraisal on underlying collateral

Loss severity rates

0%-100% (31%)

Commercial and industrial

4,696

Valuation of third party appraisal on underlying collateral

Loss severity rates

4%-53% (20%)

Other construction loans and all land development loans and other land loans

1,255

Valuation of third party appraisal on underlying collateral

Loss severity rates

32% (32%)

Multifamily (5 or more) residential properties

300

Valuation of third party appraisal on underlying collateral

Loss severity rates

30% (30%)

Non-owner occupied, nonfarm nonresidential

6,970

Valuation of third party appraisal on underlying collateral

Loss severity rates

28%-49% (44%)

Home equity lines of credit

302

Valuation of third party appraisal on underlying collateral

Loss severity rates

17%-19% (17%)

Residential Mortgages secured by first liens

839

Valuation of third party appraisal on underlying collateral

Loss severity rates

19%-44% (33%)

The following table presents quantitative information about Level 3 fair value measurements for financial instruments measured at fair value on a non-recurring basis at December 31, 2023:

Fair
value

Valuation
Technique

Unobservable Inputs

Range
(Weighted
Average)

Collateral-dependent loans receivable:

Farmland

736

Valuation of third party appraisal on underlying collateral

Loss severity rates

29%-31% (30%)

Owner-occupied, nonfarm nonresidential properties

5,589

Valuation of third party appraisal on underlying collateral

Loss severity rates

9%-100% (14%)

Commercial and industrial

7,425

Valuation of third party appraisal on underlying collateral

Loss severity rates

8%-75% (31%)

Other construction loans and all land development loans and other land loans

1,299

Valuation of third party appraisal on underlying collateral

Loss severity rates

32% (32%)

Multifamily (5 or more) residential properties

305

Valuation of third party appraisal on underlying collateral

Loss severity rates

28% (28%)

Non-owner occupied, nonfarm nonresidential

7,216

Valuation of third party appraisal on underlying collateral

Loss severity rates

32%-48% (43%)

Home equity lines of credit

308

Valuation of third party appraisal on underlying collateral

Loss severity rates

15%-17% (15%)

Residential mortgages secured by first liens

871

Valuation of third party appraisal on underlying collateral

Loss severity rates

17%-42% (31%)

Table of Contents

Fair Value of Financial Instruments

The following table presents the carrying amount and fair value of financial instruments at March 31, 2024:


	Carrying		Fair Value Measurement Using:						Total
	Amount		Level 1		Level 2		Level 3		Fair Value
ASSETS
Cash and cash equivalents	$	301,453	$	301,453	$	—	$	—	$	301,453
Debt securities available-for-sale	348,565		14,482		334,083		—		348,565
Debt securities held-to-maturity	381,706		104,088		248,050		—		352,138
Equity securities	9,581		9,049		532		—		9,581
Loans held for sale	1,010		—		1,006		—		1,006
Net loans receivable	4,385,566		—		—		4,268,986		4,268,986
FHLB and other restricted stock holdings and investments	31,017		n/a		n/a		n/a		n/a
Interest rate swaps	1,560		—		1,560		—		1,560
Accrued interest receivable	24,978		503		2,350		22,125		24,978
LIABILITIES
Deposits	$	(5,037,553)	$	(4,504,782)	$	(535,525)	$	—	$	(5,040,307)

Subordinated notes and debentures	(104,963)		—		(135,210)		—		(135,210)
Interest rate swaps	(1,560)		—		(1,560)		—		(1,560)
Accrued interest payable	(5,314)		—		(5,314)		—		(5,314)

The following table presents the carrying amount and fair value of financial instruments at December 31, 2023:


	Carrying		Fair Value Measurement Using:						Total
	Amount		Level 1		Level 2		Level 3		Fair Value
ASSETS
Cash and cash equivalents	$	222,046	$	222,046	$	—	$	—	$	222,046
Debt securities available-for-sale	341,955		4,988		336,967		—		341,955
Debt securities held-to-maturity	388,968		104,141		256,429		—		360,570
Equity securities	9,301		8,667		634		—		9,301
Loans held for sale	675		—		677		—		677
Net loans receivable	4,422,644		—		—		4,323,476		4,323,476
FHLB and other restricted stock holdings and investments	30,011		n/a		n/a		n/a		n/a
Interest rate swaps	1,013		—		1,013		—		1,013
Accrued interest receivable	24,318		410		2,319		21,589		24,318
LIABILITIES
Deposits	$	(4,998,750)	$	(4,492,256)	$	(508,181)	$	—	$	(5,000,437)

Subordinated notes and debentures	(104,887)		—		(134,298)		—		(134,298)
Interest rate swaps	(1,013)		—		(1,013)		—		(1,013)
Accrued interest payable	(3,550)		—		(3,550)		—		(3,550)

While estimates of fair value are based on management’s judgment of the most appropriate factors as of the balance sheet dates, there is no assurance that the estimated fair values would have been realized if the assets had been disposed of or the liabilities settled at that date, since market values may differ depending on various circumstances. The estimated fair values would also not apply to subsequent dates. The fair value of other equity interests is based on the net asset values provided by the underlying investment partnership. ASU 2015-7 removes the requirement to categorize within the fair value hierarchy all investments measured using the net asset value per share practical expedient and related disclosures. In addition, other assets and liabilities that are not financial instruments, such as premises and equipment, are not included in the disclosures.

Also, non-financial assets such as, among other things, the estimated earnings power of core deposits, the earnings potential of trust accounts, the trained workforce, and customer goodwill, which typically are not recognized on the balance sheet, may have value but are not included in the fair value disclosures.

Table of Contents

ITEM 2

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS

GENERAL OVERVIEW

The following discussion and analysis of the condensed consolidated financial statements of the Corporation is presented to provide insight into management’s assessment of financial results. The terms "we", "us" and "our" refer to CNB Financial Corporation and its subsidiaries. The financial condition and results of operations of the Corporation and its consolidated subsidiaries are not necessarily indicative of future performance.

The Corporation’s subsidiary, CNB Bank (the "Bank"), provides financial services to individuals and businesses. The Bank franchise's primary market areas are the Pennsylvania counties of Blair, Cambria, Centre, Clearfield, Elk, Indiana, Jefferson, and McKean. ERIEBANK, a division of the Bank, operates in the Pennsylvania counties of Crawford, Erie, and Warren and in the Ohio counties of Ashtabula, Cuyahoga, Geauga, Lake, and Lorain. FCBank, a division of the Bank, operates in the Ohio counties of Crawford, Delaware, Franklin, Knox, Marion, Morrow and Richland. BankOnBuffalo, a division of the Bank, operates in the New York counties of Erie and Niagara. Ridge View Bank, a division of the Bank, operates in the Virginia counties of Botetourt, Craig, Franklin, and Roanoke. Impressia Bank, a division of the Bank, operates in the Bank’s primary market areas. Although the Corporation’s strategies, through the Bank, are executed based on the divisions discussed above, the Bank is a single Pennsylvania-chartered bank whereby all divisions of the Bank conduct their business on a doing business as basis.

In addition to the Bank, the Corporation has four other subsidiaries. CNB Securities Corporation is incorporated in Delaware and currently maintains investments in debt and equity securities. CNB Insurance Agency, incorporated in Pennsylvania, provides for the sale of nonproprietary annuities and other insurance products. CNB Risk Management, Inc., incorporated in Delaware, is a captive insurance company that insures against certain risks unique to the operations of the Corporation and its subsidiaries and for which insurance may not be currently available or economically feasible in today's insurance marketplace. Holiday Financial Services Corporation, incorporated in Pennsylvania, offers small balance unsecured loans and secured loans, primarily collateralized by automobiles and equipment, to borrowers with higher risk characteristics.

The following discussion should be read in conjunction with the Corporation’s consolidated financial statements and notes thereto for the year ended December 31, 2023, included in its Annual Report on Form 10-K for the year ended December 31, 2023 (the "2023 Form 10-K"), and in conjunction with the condensed consolidated financial statements and notes thereto included in Item 1 of this report. Operating results for the three months ended March 31, 2024 are not necessarily indicative of the results for the full year ending December 31, 2024, or any future period.

NON-GAAP FINANCIAL INFORMATION

This report contains references to financial measures that are not defined in GAAP. Management uses non-GAAP financial information in its analysis of the Corporation’s performance. Management believes that these non-GAAP measures provide a greater understanding of ongoing operations, enhance comparability of results of operations with prior periods and show the effects of significant gains and charges in the periods presented. The Corporation’s management believes that investors may use these non-GAAP measures to analyze the Corporation’s financial performance without the impact of unusual items or events that may obscure trends in the Corporation’s underlying performance. This non-GAAP data should be considered in addition to results prepared in accordance with GAAP, and is not a substitute for, or superior to, GAAP results. Limitations associated with non-GAAP financial measures include the risks that persons might disagree as to the appropriateness of items included in these measures and that different companies might calculate these measures differently.

Non-GAAP measures reflected within the discussion below include:

•Tangible book value per share;

•Tangible common equity/tangible assets;

•Net interest margin (fully tax-equivalent basis);

•Efficiency ratio;

•Pre-provision net revenue ("PPNR");

•Return on average tangible common equity; and

•Non-interest income excluding realized gains on available-for-sale ("AFS") securities.

A reconciliation of these non-GAAP financial measures is provided below in the "Non-GAAP Financial Measures" section.

Table of Contents

PRIMARY FACTORS USED TO EVALUATE PERFORMANCE

Management considers return on average assets, return on average equity, return on average tangible common equity, earnings per common share, tangible book value per common share, asset quality, net interest margin, and other metrics as key measures of the financial performance of the Corporation. The interest rate environment will continue to play an important role in the future earnings of the Corporation. To address the challenging interest rate and competitive environments, the Corporation continues to evaluate, develop and implement strategies necessary to support its ongoing financial performance objectives and future growth goals. Additionally, management frequently evaluates the potential impact of economic and geopolitical events that may have an impact on the credit risk profile of its customers and develops proactive strategies to mitigate such potential impacts on the Corporation’s loan portfolio.

CASH AND CASH EQUIVALENTS

Cash and cash equivalents totaled $301.5 million at March 31, 2024, including additional excess liquidity of $259.5 million held at the Federal Reserve, compared to $222.0 million at December 31, 2023. These excess funds, when combined with $3.6 billion in (i) available borrowing capacity from the Federal Home Loan Bank of Pittsburgh ("FHLB") and the Federal Reserve, and (ii) available unused commitments from brokered deposit sources and other third-party funding channels, including previously established lines of credit from correspondent banks, result in the total on-hand and contingent liquidity sources for the Corporation to be approximately 4.3 times the estimated amount of adjusted uninsured deposit balances.

Management believes the liquidity needs of the Corporation are satisfied primarily by the current balance of cash and cash equivalents, customer and brokered deposits, FHLB financing, the portions of the securities and loan portfolios that mature within one year, and other third-party funding channels. The Corporation expects that these sources of funds will enable it to meet cash obligations and off-balance sheet commitments as they come due. In addition to the above noted liquidity sources, the Corporation maintains access to the Federal Reserve discount window.

SECURITIES

AFS debt securities and equity securities combined totaled $358.1 million and $351.3 million at March 31, 2024 and December 31, 2023, respectively. At March 31, 2024, the total balance of investments classified as held-to-maturity ("HTM") debt securities was $381.7 million compared to $389.0 million at December 31, 2023.

The Corporation’s objective is to maintain the investment securities portfolio at an appropriate level to balance the earnings and liquidity provided by the portfolio. Note 3, "Securities," to the condensed consolidated financial statements provides more detail concerning the composition of the Corporation’s securities portfolio and the process for evaluating securities for impairment.

The following table summarizes the maturity distribution schedule with corresponding weighted-average yields of AFS debt securities as of March 31, 2024. Weighted-average yields have been computed on a fully taxable-equivalent basis using a tax rate of 21%. Mortgage-backed securities are included in maturity categories based on their stated maturity date.


	March 31, 2024
	Within One Year				After One But Within Five Years				After Five But Within Ten Years				After Ten Years				Total
	$ Amt.		Yield		$ Amt.		Yield		$ Amt.		Yield		$ Amt.		Yield		$ Amt.		Yield
U.S. Government Sponsored Entities	$	9,602	4.63	%	$	9,873	5.29	%	$	—	—	%	$	—	—	%	$	19,475	4.96	%
State and Political Subdivisions	3,902		3.26		27,777		2.48		43,440		2.11		16,123		2.29		91,242		2.30
Residential and multi-family mortgage	11		5.65		16,110		3.07		19,162		1.83		149,499		1.60		184,782		1.75
Corporate notes and bonds	5,806		4.16		10,139		5.34		27,022		4.48		—		—		42,967		4.64
Pooled SBA	24		4.82		233		5.12		8,370		2.57		1,472		2.11		10,099		2.57
Total	$	19,345	4.21	%	$	64,132	3.52	%	$	97,994	2.75	%	$	167,094	1.67	%	$	348,565	2.45	%

Table of Contents

The following table summarizes the maturity distribution schedule with corresponding weighted-average yields of HTM debt securities as of March 31, 2024.


	March 31, 2024
	Within One Year				After One But Within Five Years				After Five But Within Ten Years				After Ten Years				Total
	$ Amt.		Yield		$ Amt.		Yield		$ Amt.		Yield		$ Amt.		Yield		$ Amt.		Yield
U.S. Government Sponsored Entities	$	87,559	1.59	%	$	172,326	1.56	%	$	38,139	1.81	%	$	—	—	%	$	298,024	1.60	%
Residential and multi-family mortgage	3,007		2.65		488		2.83		2,093		3.18		78,094		2.56		83,682		2.58
Total	$	90,566	1.63	%	$	172,814	1.56	%	$	40,232	1.88	%	$	78,094	2.56	%	$	381,706	1.81	%

The following table summarizes the weighted average modified duration of AFS securities as of March 31, 2024.


			Weighted Average Modified Duration (in Years)
U.S. Government Sponsored Entities			1.29
State and Political Subdivisions			5.60
Residential and multi-family mortgage			6.18
Corporate notes and bonds			4.17
Pooled SBA			2.46
Total			5.40

The following table summarizes the weighted average modified duration of securities HTM as of March 31, 2024.


			Weighted Average Modified Duration (in Years)
U.S. Government Sponsored Entities			2.35
Residential and multi-family mortgage			6.31
Total			3.22

The portfolio contains no holdings of a single issuer that exceeds 10% of shareholders’ equity other than U.S. government sponsored entities.

The Corporation generally purchases debt securities over time and does not attempt to "time" its transactions, which allows for more efficient management of fluctuations in the interest rate environment. The Corporation's strategy given the current environment is to focus on lower risk securities and shorter durations that complement the current portfolio investment ladder, coupled with consistent reinvestment of cash flows to replace lower earning assets.

The Corporation monitors the earnings performance and the effectiveness of the liquidity of the securities portfolio on a regular basis through meetings of the Asset/Liability Committee ("ALCO"). The ALCO also reviews and manages interest rate risk for the Corporation. Through active balance sheet management and analysis of the securities portfolio, a sufficient level of liquidity is maintained to satisfy depositor requirements and various credit needs of our customers.

LOANS RECEIVABLE

Note 4, "Loans Receivable and Allowance for Credit Losses," to the condensed consolidated financial statements provides more detail concerning the loan portfolio of the Corporation.

At March 31, 2024, loans, excluding the impact of (i) syndicated loans, and (ii) any remaining balance on Paycheck Protection Program ("PPP") loans, net of PPP-related fees (such loans being referred to as the "PPP-related loans"), totaled $4.4 billion, representing an decrease of $7.0 million, or 0.16% year to date decline (0.65% annualized), from December 31, 2023. The decrease in loans was primarily driven by an increase in early loan payoffs combined with the Corporation remaining strategically focused on both managing the concentration in its commercial real estate loan portfolio, and remaining disciplined with loan pricing in support of its net interest margin.

Table of Contents

At March 31, 2024, the Corporation's condensed consolidated balance sheet reflected a decrease in syndicated lending balances of $30.0 million compared to December 31, 2023, primarily resulting from scheduled paydowns or early payoffs of certain syndicated credits. The syndicated loan portfolio totaled $78.7 million, or 1.78% of total loans, at March 31, 2024, compared to $108.7 million, or 2.43% of total loans at December 31, 2023. The Corporation continues to de-emphasize syndicated loans as it focuses on prioritizing funding on organic loan growth from its customer relationships.

Loan Origination/Risk Management

The Corporation has certain lending policies and procedures in place that are designed to maximize loan income within an acceptable level of risk. Management reviews and approves these policies and procedures on a regular basis. A reporting system supplements the review process by providing management with frequent reports related to loan production, loan quality, concentrations of credit, loan delinquencies and nonperforming and potential problem loans. Diversification in the loan portfolio is a means of managing risk associated with fluctuations in economic conditions. The Corporation has not underwritten any hybrid loans, payment option loans, or low documentation/no documentation loans. Variable rate loans are generally underwritten at the fully indexed rate. Loan underwriting policies and procedures have not changed materially between any periods presented. As discussed more fully above, syndicated loan purchases are underwritten utilizing the same process as the Corporation’s originated loans.

The Corporation continues to explore the credit and reputational risks associated with climate change and their potential impact on the foregoing, while closely monitoring regulatory developments on climate risk. This includes, among other things, researching and developing a formalized approach to considering climate change related risks in the Corporation's underwriting processes. This approach will be impacted, in part, by the accessibility and reliability of both customer climate risk data and climate risk data in general. One of the objectives of these efforts is to enable the Corporation to better understand the climate change related risks associated with the Corporation's customers' business activities and to be able to monitor their response to those risks and their ultimate impact on the Corporation's customers.

Loan Portfolio Profile

As part of its lending policy and risk management activities, the Corporation tracks lending exposure by industry classification and type to determine potential risks associated with industry concentrations, and whether any risk issues could lead to additional credit loss exposure. In the current post-pandemic and inflationary economic environment, the Corporation has evaluated its exposure to the office, hospitality, and multifamily industries within its commercial real estate portfolio. Even given the Corporation’s historically sound underwriting protocols and high credit quality ratings for borrowers in these industries, the Corporation monitors numerous relevant sensitivity elements at both underwriting and through and beyond the funding period, including projects occupancy, loan-to-value, absorption and cap rates, debt service coverage and covenant compliance, and developer/lessor financial strength both in the project and globally. At March 31, 2024, the Corporation had the following key metrics related to its office, hospitality and multifamily portfolios:

•Commercial office loans

◦120 outstanding loans, totaling $114.3 million, or 2.58%, of the Corporation loans outstanding;

◦Nonaccrual commercial office loans (one customer relationship) totaled $508 thousand, or 0.44% of total office loans outstanding. One customer relationship had a related specific loss reserve of approximately $289 thousand, at March 31, 2024; and

◦The average outstanding balance per commercial office loan was $952 thousand.

•Commercial hospitality loans

◦171 outstanding loans, totaling $263.5 million, or 5.95%, of total Corporation loans outstanding;

◦There were no nonaccrual commercial hospitality loans at March 31, 2024; and

◦The average outstanding balance per commercial office loan was $1.5 million.

•Commercial multifamily loans

◦208 outstanding loans, totaling $213.8 million, or 4.82%, of total Corporation loans outstanding;

◦Nonaccrual commercial multifamily loans (one customer relationship) totaled $300 thousand, or 0.09% of total multifamily loans outstanding. The one customer relationship did not have a related specific loss reserve at March 31, 2024; and

◦The average outstanding balance per commercial office loan was $1.0 million.

Table of Contents

The following table summarize the geographic region (based upon metropolitan statistical areas) in which the commercial office, hospitality and multifamily loans were originated as of March 31, 2024:


	March 31, 2024
Commercial Office
Geographic Region:
Cleveland, OH	30.00	%
Buffalo, NY	26.90
Cincinnati, OH	9.80
Columbus, OH	8.90
All other geographical regions	24.40
Total Commercial Office	100.00	%

Commercial Hospitality
Geographic Region:
Buffalo, NY	20.20	%
Pittsburgh, PA	13.20
Columbus, OH	11.90
Erie & Meadville, PA	4.60
All other geographical regions	50.10
Total Commercial Hospitality	100.00	%

Commercial Multifamily
Geographic Region:
Cleveland, OH	24.70	%
Buffalo, NY	21.80
Columbus, OH	19.80
All other geographical regions	33.70
Total Commercial Multifamily	100.00	%

The Corporation had no commercial office, hospitality or multifamily loan relationships considered by the banking regulators to be a high volatility commercial real estate ("HVCRE") credit.

Table of Contents

Maturities and Sensitivities of Loans Receivable to Changes in Interest Rate

The following table presents the maturity distribution of the Corporation's loans receivable at March 31, 2024. The table also presents the portion of loans receivable that have fixed interest rates or variable interest rates that fluctuate over the life of the loans in accordance with changes in an interest rate index.


	March 31, 2024
	Due in One Year or Less		After One, but Within Five Years		After Five but Within Fifteen Years		After Fifteen Years		Total
Loans Receivable with Fixed Interest Rate
Farmland	$	—	$	1,756	$	7,581	$	—	$	9,337
Owner-occupied, nonfarm nonresidential properties	23,605		29,918		19,173		4,518		77,214
Agricultural production and other loans to farmers	15		123		—		—		138
Commercial and Industrial	21,943		224,217		28,264		94		274,518
Obligations (other than securities and leases) of states and political subdivisions	2,739		18,114		83,061		8,286		112,200
Other loans	263		249		535		12,752		13,799
Other construction loans and all land development and other land loans (1)	46,855		54,738		12,756		1,371		115,720
Multifamily (5 or more) residential properties	8,046		32,172		2,852		4,353		47,423
Non-owner occupied, nonfarm nonresidential properties	27,164		97,289		50,387		795		175,635
1-4 Family Construction (1)	237		—		178		603		1,018
Home equity lines of credit	2		57		467		258		784
Residential Mortgages secured by first liens	3,427		32,996		215,625		130,722		382,770
Residential Mortgages secured by junior liens	541		7,710		60,408		15,498		84,157
Other revolving credit plans	5		6		19		—		30
Automobile	397		16,979		6,060		—		23,436
Other consumer	4,804		33,321		7,508		5,118		50,751
Credit cards	—		—		—		—		—
Overdrafts	—		—		—		—		—
Total	$	140,043	$	549,645	$	494,874	$	184,368	$	1,368,930

Loans Receivable with Variable or Floating Interest Rate
Farmland	$	1,871	$	2,352	$	9,548	$	8,037	$	21,808
Owner-occupied, nonfarm nonresidential properties	24,834		69,950		281,678		57,543		434,005
Agricultural production and other loans to farmers	909		52		660		—		1,621
Commercial and Industrial	254,792		72,371		55,512		1,598		384,273
Obligations (other than securities and leases) of states and political subdivisions	—		3,337		14,555		21,047		38,939
Other loans	463		2,593		8,274		—		11,330
Other construction loans and all land development and other land loans (1)	80,614		175,139		150,363		10,894		417,010
Multifamily (5 or more) residential properties	24,301		17,182		154,397		4,820		200,700
Non-owner occupied, nonfarm nonresidential properties	48,395		252,877		349,636		60,793		711,701
1-4 Family Construction (1)	16,704		431		7,356		17,410		41,901
Home equity lines of credit	7,218		6,488		45,188		73,612		132,506
Residential Mortgages secured by first liens	9,888		31,772		139,176		425,938		606,774
Residential Mortgages secured by junior liens	2,221		534		4,960		742		8,457
Other revolving credit plans	4,740		2,938		29,214		1,396		38,288
Automobile	—		—		—		—		—
Other consumer	2		42		112		61		217
Credit cards	12,683		—		—		—		12,683
Overdrafts	255		—		—		—		255
Total	$	489,890	$	638,058	$	1,250,629	$	683,891	$	3,062,468
(1) 1-4 family construction loans and other construction loans and all land development and other land loans segments include loans that are construction to permanent loans in which the loan segment will change when the construction period has concluded.

Table of Contents

Loans Receivable Concentration

At March 31, 2024, no industry concentration existed which exceeded 10% of the total loan portfolio.

Loans Receivable Credit Quality

The following table presents information concerning the loan portfolio delinquency and other nonperforming assets at March 31, 2024 and December 31, 2023:


	March 31, 2024			December 31, 2023
Nonaccrual loans	$	28,751		$	29,639
Accrual loans greater than 90 days past due	49			55
Total nonperforming loans	28,800			29,694
Other real estate owned	1,864			2,111
Total nonperforming assets	$	30,664		$	31,805




Total loans receivable	$	4,431,398		$	4,468,476
Nonaccrual loans as a percentage of total loans receivable	0.65		%	0.66		%
Total assets	$	5,801,412		$	5,752,957
Nonperforming assets as a percentage of total assets	0.53		%	0.55		%
Allowance for credit losses on loans receivable	$	45,832		$	45,832
Allowance for credit losses / Total loans	1.03		%	1.03		%
Ratio of allowance for credit losses to nonaccrual loans	159.41		%	154.63		%

Total nonperforming assets were $30.7 million, or 0.53% of total assets, as of March 31, 2024, compared to $31.8 million, or 0.55% of total assets, as of December 31, 2023. In addition, the allowance for credit losses as a percentage of nonaccrual loans was 159.41% at March 31, 2024, compared to 154.63% at December 31, 2023. The decrease in nonperforming assets was due to paydowns and payoffs combined with a $596 thousand charge-down of one owner-occupied commercial real estate relationship (remaining balance of $308 thousand).

The Corporation has established written lending policies and procedures that require underwriting standards, loan documentation, and credit analysis standards to be met prior to funding a loan. Subsequent to the funding of a loan, ongoing review of credits is required. Credit reviews are performed quarterly by an outsourced loan review firm and cover approximately 65% of the commercial loan portfolio on an annual basis. In addition, the external independent loan review firm reviews past due loans and all significant classified assets and nonaccrual loans annually.

Potential problem loans consist of loans that are performing in accordance with contractual terms but for which management has concerns about the ability of a borrower to continue to comply with contractual repayment terms because of the borrower’s potential operating or financial difficulties. Management monitors these "watchlist" loans monthly to determine potential losses within the commercial loan portfolio. The "watchlist" is comprised of all credits risk rated special mention, substandard and doubtful.

ALLOWANCE FOR CREDIT LOSSES

The amount of each allowance for credit losses account represents management's best estimate of current expected credit losses on these financial instruments considering available information, from internal and external sources, relevant to assessing exposure to credit loss over the contractual term of the instrument. Relevant available information includes historical credit loss experience, current conditions, and reasonable and supportable forecasts. While historical credit loss experience provides the basis for the estimation of expected credit losses, adjustments to historical loss information may be made for differences in current portfolio-specific risk characteristics, environmental conditions or other relevant internal and external factors. While management utilizes its best judgment and information available, the ultimate adequacy of the Corporation's allowance for credit losses account is dependent upon a variety of factors beyond the Corporation's control, including the performance of the Corporation's loan portfolios, the economy, changes in interest rates, and the view of the regulatory authorities toward classification of assets. The adequacy of the allowance for credit losses is subject to a formal analysis by the Credit Administration and Finance Departments of the Corporation. For additional information regarding the Corporation's accounting policies related to credit losses, refer to Note 1, "Summary of Significant Accounting Policies" to the consolidated financial statements in the 2023 Form 10-K and Note 4, "Loans Receivable and Allowance for Credit Losses" to these condensed consolidated financial statements elsewhere in this report.

Table of Contents

The tables below provide an allocation of the allowance for credit losses on loans receivable by loan portfolio segment at March 31, 2024 and December 31, 2023; however, allocation of a portion of the allowance for credit losses to one segment does not preclude its availability to absorb losses in other segments.


	March 31, 2024
	Amount of Allowance Allocated		Percent of Loans in Each Category to Total Loans Receivable		Total Loans Receivable		Ratio of Allowance Allocated to Loans Receivable in Each Category
Farmland	$	135	0.7	%	$	31,145	0.43	%
Owner-occupied, nonfarm nonresidential properties	4,473		11.5		511,219		0.87
Agricultural production and other loans to farmers	8		—		1,759		0.45
Commercial and Industrial	8,973		14.9		658,791		1.36
Obligations (other than securities and leases) of states and political subdivisions	2,537		3.4		151,139		1.68
Other loans	378		0.6		25,129		1.50
Other construction loans and all land development and other land loans	4,255		12.0		532,730		0.80
Multifamily (5 or more) residential properties	1,067		5.6		248,123		0.43
Non-owner occupied, nonfarm nonresidential properties	8,785		20.0		887,336		0.99
1-4 Family Construction	303		1.0		42,919		0.71
Home equity lines of credit	897		3.0		133,290		0.67
Residential Mortgages secured by first liens	8,368		22.3		989,544		0.85
Residential Mortgages secured by junior liens	1,431		2.1		92,614		1.55
Other revolving credit plans	854		0.9		38,318		2.23
Automobile	304		0.5		23,436		1.30
Other consumer	2,711		1.2		50,968		5.32
Credit cards	98		0.3		12,683		0.77
Overdrafts	255		—		255		100.00
Total	$	45,832	100.0	%	$	4,431,398	1.03	%


	December 31, 2023
	Amount of Allowance Allocated		Percent of Loans in Each Category to Total Loans Receivable		Total Loans Receivable		Ratio of Allowance Allocated to Loans Receivable in Each Category
Farmland	$	126	0.7	%	$	31,869	0.40	%
Owner-occupied, nonfarm nonresidential properties	3,949		11.0		493,064		0.80
Agricultural production and other loans to farmers	7		—		1,652		0.42
Commercial and Industrial	9,433		16.3		726,442		1.30
Obligations (other than securities and leases) of states and political subdivisions	2,613		3.4		152,201		1.72
Other loans	387		0.6		25,507		1.52
Other construction loans and all land development and other land loans	4,033		11.0		491,539		0.82
Multifamily (5 or more) residential properties	1,030		5.7		254,342		0.40
Non-owner occupied, nonfarm nonresidential properties	9,170		20.1		896,043		1.02
1-4 Family Construction	356		1.1		51,207		0.70
Home equity lines of credit	831		2.9		130,700		0.64
Residential Mortgages secured by first liens	8,050		22.2		990,986		0.81
Residential Mortgages secured by junior liens	1,476		2.0		91,063		1.62
Other revolving credit plans	973		1.0		42,877		2.27
Automobile	358		0.6		25,315		1.41
Other consumer	2,653		1.1		51,592		5.14
Credit cards	95		0.3		11,785		0.81
Overdrafts	292		—		292		100.00
Total	$	45,832	100.0	%	$	4,468,476	1.03	%

Table of Contents

The allowance for credit losses measured as a percentage of total loans receivable was both 1.03% as of March 31, 2024 and December 31, 2023.

The Corporation's allowance for credit losses is influenced by loan volumes, risk rating migration, delinquency status and other internal and external conditions influencing loss expectations, such as reasonable and supportable forecasts of economic conditions and other external factors.

Note 4, "Loans Receivable and Allowance for Credit Losses," to the condensed consolidated financial statements provides further disclosure of loan balances by portfolio segment as of March 31, 2024 and December 31, 2023.

Additional information related to provision for credit loss expense and net charge-offs and recoveries for the three months ended March 31, 2024 and 2023 is presented in the tables below.


	Three Months Ended March 31, 2024
	Provision (Benefit) for Credit Losses on Loans Receivable (1)		Net (Charge-Offs) Recoveries		Average Loans Receivable		Ratio of Annualized Net (Charge-Offs) Recoveries to Average Loans Receivable
Farmland	$	9	$	—	$	32,243	—	%
Owner-occupied, nonfarm nonresidential properties	1,111		(587)		511,312		(0.46)
Agricultural production and other loans to farmers	1		—		1,685		—
Commercial and Industrial	(418)		(42)		704,491		(0.02)
Obligations (other than securities and leases) of states and political subdivisions	(76)		—		154,633		—
Other loans	(9)		—		25,354		—
Other construction loans and all land development and other land loans	222		—		496,852		—
Multifamily (5 or more) residential properties	37		—		246,482		—
Non-owner occupied, nonfarm nonresidential properties	(385)		—		865,378		—
1-4 Family Construction	(53)		—		48,023		—
Home equity lines of credit	65		1		131,950		—
Residential Mortgages secured by first liens	382		(64)		989,734		(0.03)
Residential Mortgages secured by junior liens	(45)		—		91,756		—
Other revolving credit plans	(107)		(12)		40,814		(0.12)
Automobile	(47)		(7)		24,302		(0.12)
Other consumer	548		(490)		50,572		(3.90)
Credit cards	27		(24)		12,912		(0.75)
Overdrafts	82		(119)		258		(185.51)
Total	$	1,344	$	(1,344)	$	4,428,751	(0.12)	%

Table of Contents


	Three Months Ended March 31, 2023
	Provision (Benefit) for Credit Losses on Loans Receivable (1)		Net (Charge-Offs) Recoveries		Average Loans Receivable		Ratio of Annualized Net (Charge-Offs) Recoveries to Average Loans Receivable
Farmland	$	(30)	$	—	$	34,946	—	%
Owner-occupied, nonfarm nonresidential properties	(341)		(18)		495,521		(0.01)
Agricultural production and other loans to farmers	(3)		—		1,150		—
Commercial and Industrial	(922)		99		805,712		0.05
Obligations (other than securities and leases) of states and political subdivisions	(15)		—		146,747		—
Other loans	138		—		24,508		—
Other construction loans and all land development and other land loans	141		—		405,839		—
Multifamily (5 or more) residential properties	247		(65)		249,872		(0.11)
Non-owner occupied, nonfarm nonresidential properties	606		—		780,020		—
1-4 Family Construction	71		—		54,052		—
Home equity lines of credit	(16)		1		124,307		—
Residential Mortgages secured by first liens	374		(7)		937,297		—
Residential Mortgages secured by junior liens	240		—		76,340		—
Other revolving credit plans	125		(17)		37,415		(0.18)
Automobile	64		(5)		22,737		(0.09)
Other consumer	393		(497)		47,947		(4.20)
Credit cards	67		(61)		12,323		(2.01)
Overdrafts	92		(116)		300		(156.81)
Total	$	1,231	$	(686)	$	4,257,033	(0.07)

Provision for credit losses remained stable at $1.3 million for the three months ended March 31, 2024 and for the three months ended March 31, 2023. Included in the provision for credit losses for the three months ended March 31, 2024 was a $24 thousand benefit related to the allowance for unfunded commitments compared to $59 thousand provision for the three months ended March 31, 2023.

DEPOSITS

The Corporation’s sources of funds are deposits, borrowings, amortization and repayment of loan principal, interest earned on or maturation of investment securities, and funds provided from operations. The Corporation considers deposits to be its primary source of funding in support of growth in assets.


	March 31, 2024		Percent of Deposits in Each Category to Total Deposits		December 31, 2023		Percent of Deposits in Each Category to Total Deposits		Percentage Change in Each Category 2024 vs. 2023
Demand, noninterest-bearing	$	749,178	14.8	%	$	728,881	14.6	%	2.8%
Demand, interest-bearing	719,781		14.3		803,093		16.1		(10.4)
Savings deposits	3,035,823		60.3		2,960,282		59.2		2.6
Time deposits	532,771		10.6		506,494		10.1		5.2
Total deposits	$	5,037,553	100.0	%	$	4,998,750	100.0	%	0.8%

At March 31, 2024, total deposits were $5.0 billion, reflecting an increase of $38.8 million, or 0.78%, from December 31, 2023. The increase in deposit balances was primarily attributable to an increase in municipal and retail deposits, partially offset by seasonal fluctuations in business deposits. In addition, the total number of deposit households increased by approximately 0.77% from December 31, 2023.

Table of Contents

The following table sets forth the average balances of and the average rates paid on deposits for the periods indicated.


	Three Months Ended March 31,
	2024				2023
	Average Amount		Annual Rate		Average Amount		Annual Rate
Demand, noninterest-bearing	$	736,965	—	%	$	837,734	—	%
Demand, interest-bearing	739,931		0.65		936,147		0.48
Savings deposits	2,965,279		3.47		2,343,188		2.21
Time deposits	523,925		3.64		490,815		2.36
Total	$	4,966,100			$	4,607,884

At March 31, 2024, the average deposit balance per account for the Bank was approximately $33 thousand. The Bank had increases in municipal deposits, as well as retail customer household deposits, including those added from the 2023 launches of (i) the Bank's "At Ease" account, a service for U.S. service member and veteran families, and (ii) the Corporation's women-focused banking division, Impressia Bank.

The following table presents additional information about our March 31, 2024 and December 31, 2023 deposits:


	March 31, 2024		December 31, 2023
Time deposits not covered by deposit insurance	$	45,709	$	44,665
Total deposits not covered by deposit insurance	1,423,606		1,438,944

At March 31, 2024, the total estimated uninsured deposits for the Bank were approximately $1.4 billion, or approximately 27.70% of total Bank deposits. However, when excluding $101.1 million of affiliate company deposits and $437.9 million of pledged-investment collateralized deposits, the adjusted amount and percentage of total estimated uninsured deposits was approximately $884.6 million, or approximately 17.21% of total Bank deposits as of March 31, 2024.

At December 31, 2023, the total estimated uninsured deposits for the Bank were approximately $1.4 billion, or approximately 28.2% of total Bank deposits. However, when excluding affiliate company deposits of $101.3 million and pledged-investment collateralized deposits of $400.5 million, the adjusted amount and percentage of total estimated uninsured deposits was approximately $937.1 million, or approximately 18.4% of total Bank deposits as of December 31, 2023.

Scheduled maturities of time deposits not covered by deposit insurance at March 31, 2024 were as follows:


	March 31, 2024
3 months or less	$	18,861
Over 3 through 6 months	10,929
Over 6 through 12 months	10,416
Over 12 months	5,503
Total	$	45,709

LIQUIDITY AND CAPITAL RESOURCES

Liquidity

Liquidity measures an organization’s ability to meet its cash obligations as they come due. The liquidity of a financial institution reflects its ability to meet loan requests, to accommodate possible outflows in deposits and to take advantage of interest rate market opportunities. The ability of a financial institution to meet its current financial obligations is a function of its balance sheet structure, its ability to liquidate assets and its access to alternative sources of funds.

The Corporation’s expected material cash requirements for the twelve months ended March 31, 2025 and thereafter consist of withdrawals by depositors, credit commitments to borrowers, shareholder dividends, share repurchases, operating expenses, and capital expenditures that are pursuant to the Corporation's strategic initiatives. The Corporation expects to satisfy these short-term and long-term cash requirements through deposit growth, principal and interest payments from loans and investment securities, maturing loans and investment securities, as well as by maintaining access to wholesale funding sources.

Table of Contents

The objective of the Corporation's liquidity management is to manage cash flow and liquidity reserves so that they are adequate to fund the Corporation's operations and to meet cash obligations and other commitments on a timely basis and at a reasonable cost. The Corporation seeks to achieve this objective and ensure that funding needs are met by maintaining an appropriate level of liquid funds through asset/liability management, which includes managing the mix and time to maturity of financial assets and financial liabilities on its balance sheet. The Corporation's liquidity position is enhanced by its ability to raise additional funds as needed in the wholesale markets.

Asset liquidity is provided by liquid assets which are readily marketable or pledgeable or which will mature in the near future. Liquid assets include cash, interest-bearing deposits in banks, including the Federal Reserve, and AFS debt securities. Liability liquidity is provided by access to funding sources which include core deposits, correspondent banks and other wholesale funding sources.

The Corporation's liquidity position is continuously monitored and adjustments are made to the balance between sources and uses of funds as deemed appropriate. Liquidity risk management is an important element in the Corporation's asset/liability management process. The Corporation regularly models liquidity stress scenarios to assess potential liquidity outflows or potential funding shortfalls resulting from economic disruptions, volatility in the financial markets, unexpected credit events or other significant occurrences deemed problematic by management. These scenarios are incorporated into the Corporation's contingency funding plan, which provides the basis for the identification of its liquidity needs.

At March 31, 2024, the Corporation’s cash and cash equivalents position was approximately $301.5 million, including liquidity of $259.5 million held at the Federal Reserve. These excess funds, when combined with $3.6 billion in (i) available borrowing capacity from the FHLB and the Federal Reserve, and (ii) available unused commitments from brokered deposit sources and other third-party funding channels, including previously established lines of credit from correspondent banks, result in the total on-hand and contingent liquidity sources for the Corporation to be approximately 4.3 times the estimated amount of adjusted uninsured deposit balances discussed above.

The following table summarizes the Corporation's net available liquidity and borrowing capacities as of March 31, 2024:


	Net Available
FHLB borrowing capacity (1)	$	995,073
Federal Reserve borrowing capacity (2)	434,070
Brokered deposits (3)	1,887,944
Other third-party funding channels (3) (4)	260,137
Total net available liquidity and borrowing capacity	$	3,577,224

(1) Availability contingent on the FHLB activity-based stock ownership requirement

(2) Includes access to discount window and BIC program

(3) Availability contingent on internal borrowing guidelines

(4) Availability contingent on correspondent bank approvals at time of borrowing

As of March 31, 2024, management is not aware of any events that are reasonably likely to have a material adverse effect on the Corporation's liquidity, capital resources or operations. In addition, management is not aware of any regulatory recommendations regarding liquidity that would have a material adverse effect on the Corporation.

In the ordinary course of business, the Corporation has entered into contractual obligations and have made other commitments to make future payments. Refer to the accompanying notes to condensed consolidated financial statements elsewhere in this report for the expected timing of such payments as of March 31, 2024. The Corporation’s material contractual obligations as of March 31, 2024 consist of (i) long-term borrowings - Note 7, "Borrowings," (ii) operating leases - Note 5, "Leases," (iii) time deposits with stated maturity dates - Note 6, "Deposits," and (iv) commitments to extend credit and standby letters of credit - Note 9, "Off-Balance Sheet Commitments and Contingencies."

Shareholders’ Equity, Capital Ratios and Metrics

As of March 31, 2024, the Corporation’s total shareholders’ equity was $578.6 million, representing an increase of $7.4 million, or 1.29%, from December 31, 2023, primarily due to an increase in the Corporation's retained earnings (quarterly net income, partially offset by the common and preferred dividends paid in the quarter).

Table of Contents

The Corporation has complied with the standards of capital adequacy mandated by government regulations. Bank regulators have established "risk-based" capital requirements designed to measure capital adequacy. Risk-based capital ratios reflect the relative risks of various assets banks hold in their portfolios. A weight category (0% for the lowest risk assets and increasing for each tier of higher risk assets) is assigned to each asset on the balance sheet.

As of March 31, 2024 all of the Corporation's capital ratios exceeded regulatory "well-capitalized" levels. The Corporation's capital ratios and book value per common share at March 31, 2024 and December 31, 2023 were as follows:


	March 31, 2024			December 31, 2023
Total risk-based ratio	16.27		%	15.99		%
Tier 1 risk-based ratio	13.43		%	13.20		%
Common equity tier 1 ratio	11.70		%	11.49		%
Tier 1 leverage ratio	10.64		%	10.54		%
Common shareholders' equity/total assets	8.98		%	8.93		%
Tangible common equity/tangible assets (1)	8.28		%	8.22		%
Book value per common share	$	24.77		$	24.57
Tangible book value per common share (1)	$	22.67		$	22.46

(1) Tangible common equity, tangible assets and tangible book value per common share are non-GAAP financial measures calculated using GAAP amounts. Tangible common equity is calculated by excluding the balance of goodwill and other intangible assets and preferred equity from the calculation of shareholders’ equity. Tangible assets is calculated by excluding the balance of goodwill and other intangible assets from the calculation of total assets. Tangible book value per common share is calculated by dividing tangible common equity by the number of shares outstanding. The Corporation believes that these non-GAAP financial measures provide information to investors that is useful in understanding its financial condition. Because not all companies use the same calculation of tangible common equity and tangible assets, this presentation may not be comparable to other similarly titled measures calculated by other companies. A reconciliation of these non-GAAP financial measures is provided in the "Non-GAAP Financial Measures" section in Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.

At March 31, 2024, the Corporation's pre-tax net unrealized losses on available-for-sale and held-to-maturity securities totaled approximately $85.0 million, or 14.69% of total shareholders' equity, compared to $82.2 million, or 14.40% of total shareholders' equity at December 31, 2023. The change is unrealized losses was primarily due to changes in the yield curve in the first quarter of 2024 compared to the fourth quarter of 2023, relative to the Corporation's scheduled bond maturities. Importantly, all regulatory capital ratios for the Corporation would exceed regulatory "well-capitalized" levels as of both March 31, 2024 and December 31, 2023 if the net unrealized losses were fully recognized. Additionally, the Corporation maintains $100.3 million of liquid funds at its holding company, which more than covers the $85.0 million in unrealized losses on investments held primarily in its wholly-owned banking subsidiary, as an immediately available source of contingent capital to be down-streamed to the Bank, if necessary.

Table of Contents

AVERAGE BALANCES, INTEREST RATES AND YIELDS

The loans receivable categories used to monitor and analyze interest income and yields are different than the portfolio segments used to determine the allowance for credit losses for loans receivable. The allowance for credit losses was calculated by pooling loans of similar credit risk characteristics and credit monitoring procedures. See Note 4, "Loans Receivable and Allowance for Credit Losses," for more information about pooling of loans receivable for the allowance for credit losses.

The following table presents average balances of certain measures of our financial condition and net interest margin for the three months ended March 31, 2024 and 2023:


	Average Balances, Income and Interest Rates on a Taxable Equivalent Basis
	For the Three Months Ended,
	March 31, 2024						March 31, 2023
	Average Balance		Annual Rate		Interest Inc./Exp.		Average Balance		Annual Rate		Interest Inc./Exp.
ASSETS:
Securities:
Taxable (1) (4)	$	696,851	1.96	%	$	3,651	$	748,171	1.90	%	$	3,766
Tax-exempt (1) (2) (4)	27,743		2.59		191		33,390		2.67		234
Equity securities (1) (2)	6,772		5.64		95		13,207		2.86		93
Total securities (4)	731,366		2.01		3,937		794,768		1.95		4,093
Loans receivable:
Commercial (2) (3)	1,429,718		6.90		24,519		1,508,584		6.29		23,388
Mortgage and loans held for sale (2) (3)	2,870,175		6.08		43,403		2,627,728		5.51		35,731
Consumer (3)	128,858		11.79		3,778		120,721		11.55		3,434
Total loans receivable (3)	4,428,751		6.51		71,700		4,257,033		5.96		62,553
Interest-bearing deposits with the Federal Reserve and other financial institutions	190,009		5.26		2,485		16,888		6.34		264
Total earning assets	5,350,126		5.81		$	78,122	5,068,689		5.29		$	66,910

Noninterest-bearing assets:
Cash and cash equivalents due from banks	53,523						52,323
Premises and equipment	110,038						102,821
Other assets	261,863						245,914
Allowance for credit losses	(45,771)						(43,427)
Total non interest-bearing assets	379,653						357,631
TOTAL ASSETS	$	5,729,779					$	5,426,320
LIABILITIES AND SHAREHOLDERS’ EQUITY:
Demand—interest-bearing	$	739,931	0.65	%	$	1,195	$	936,147	0.48	%	$	1,101
Savings	2,965,279		3.47		25,611		2,343,188		2.21		12,740
Time	523,925		3.64		4,742		490,815		2.36		2,858
Total interest-bearing deposits	4,229,135		3.00		31,548		3,770,150		1.80		16,699
Short-term borrowings	—		0.00		—		102,318		4.99		1,259
Finance lease liabilities	282		4.28		3		372		4.36		4
Subordinated notes and debentures	104,925		4.34		1,132		104,622		4.03		1,039
Total interest-bearing liabilities	4,334,342		3.03		$	32,683	3,977,462		1.94		$	19,001
Demand—noninterest-bearing	736,965						837,734
Other liabilities	81,944						80,318
Total liabilities	5,153,251						4,895,514
Shareholders’ equity	576,528						530,806
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	$	5,729,779					$	5,426,320
Interest income/Earning assets			5.81	%	$	78,122			5.29	%	$	66,910
Interest expense/Interest-bearing liabilities			3.03		32,683				1.94		19,001
Net interest spread			2.78	%	$	45,439			3.35	%	$	47,909
Interest income/Earning assets			5.81	%	78,122				5.29	%	66,910
Interest expense/Earning assets			2.43		32,683				1.50		19,001
Net interest margin (fully tax-equivalent)			3.38	%	$	45,439			3.79	%	$	47,909

(1) Includes unamortized discounts and premiums.

(2) Average yields are stated on a fully taxable equivalent basis (calculated using statutory rates of 21%) resulting from tax-free municipal securities in the investment portfolio and tax-free municipal loans in the commercial loan portfolio. The taxable equivalent adjustment to net interest income for the three months ended March 31, 2024 and 2023 was $217 thousand and $270 thousand, respectively.

Table of Contents

(3) Average loans receivable outstanding includes the average balance outstanding of all nonaccrual loans. Loans receivable consist of the average of total loans receivable less average unearned income. In addition, loans receivable interest income consists of loans receivable fees, including PPP deferred processing fees.

(4) Average balance is computed using the fair value of AFS securities and amortized cost of HTM securities. Average yield has been computed using amortized cost average balance for AFS and HTM securities. The adjustment to the average balance for securities in the calculation of average yield for the three months ended March 31, 2024 and 2023 was $(55.1) million and $(58.7) million, respectively.

VOLUME ANALYSIS OF CHANGES IN NET INTEREST INCOME

The following table presents the change in net interest income for the three months ended March 31, 2024 and 2023:


Net Interest Income Rate-Volume Variance	For Three Months Ended March 31, 2024 over (under) 2023 Due to Change In (1)
	Volume		Rate		Net
Assets
Securities:
Taxable	$	(219)	$	104	$	(115)
Tax-exempt (2)	(37)		(6)		(43)
Equity securities (2)	(45)		47		2
Total securities	(301)		145		(156)
Loans receivable:
Commercial (2)	(1,037)		2,168		1,131
Mortgage (2) (3)	3,604		4,068		7,672
Consumer	267		77		344
Total loans receivable	2,834		6,313		9,147
Other earning assets	2,731		(510)		2,221
Total Earning Assets	$	5,264	$	5,948	$	11,212

Liabilities and Shareholders’ Equity
Interest-Bearing Deposits
Demand – interest-bearing	$	(219)	$	313	$	94
Savings	3,581		9,290		12,871
Time	217		1,667		1,884
Total interest-bearing deposits	3,579		11,270		14,849
Short-Term Borrowings	(1,259)		—		(1,259)
Finance lease liabilities	(1)		—		(1)
Subordinated debentures	12		81		93
Total Interest-Bearing Liabilities	$	2,331	$	11,351	$	13,682

Change in Net Interest Income	$	2,933	$	(5,403)	$	(2,470)

(1) Changes in interest income or expense not arising solely as a result of volume or rate variances are allocated to volume changes.

(2) Changes in interest income on tax-exempt securities and loans receivable are presented on a fully taxable-equivalent basis, using the Corporation’s marginal federal income tax rate of 21% for the three months ended March 31, 2024 and March 31, 2023.

(3) Includes loans held for sale.

Table of Contents

RESULTS OF OPERATIONS

Three Months Ended March 31, 2024 and 2023

OVERVIEW

Net income available to common shareholders ("earnings") was $11.5 million, or $0.55 per diluted share, for the three months ended March 31, 2024. The Corporation’s earnings for the three months ended March 31, 2023 were $15.4 million, or $0.73 per diluted share. The decrease in diluted earnings per share comparing the quarter ended March 31, 2024 to the quarter ended March 31, 2023 was primarily due to the significant year-over-year increase in deposit costs primarily resulting from Federal Reserve rate increases throughout 2023 and the resulting market impact to the Corporation's deposit base.

Annualized return on average equity was 8.79% for the three months ended March 31, 2024, compared to 12.60% for the three months ended March 31, 2023. Annualized return on average tangible common equity, a non-GAAP measure, was 9.77% for the three months ended March 31, 2024, compared to 14.58% for the three months ended March 31, 2023.

The Corporation's efficiency ratio was 69.08% for the three months ended March 31, 2024, compared to 61.04% for the three months ended March 31, 2023. The efficiency ratio on a fully tax-equivalent basis, a non-GAAP ratio, was 68.29% for the three months ended March 31, 2024, compared to 60.47% for the three months ended March 31, 2023.

NET INTEREST INCOME

Net interest income was $45.2 million for the three months ended March 31, 2024, compared to $47.6 million, for the three months ended March 31, 2023. When comparing the first quarter of 2024 to the first quarter of 2023, the decrease in net interest income of $2.4 million, or 5.07%, was primarily due to an increase in the Corporation's interest expense as a result of targeted interest-bearing deposit rate increases to ensure both deposit relationship retention, and new deposit growth in recently entered expansion markets.

Net interest margin was 3.40% and 3.81% for the three months ended March 31, 2024 and March 31, 2023, respectively. Net interest margin on a fully tax-equivalent basis, a non-GAAP measure, was 3.38% and 3.79%, for the three months ended March 31, 2024 and March 31, 2023, respectively.

The yield on earning assets of 5.81% for the three months ended March 31, 2024 increased 52 basis points from March 31, 2023, primarily as a result of the net benefit of higher interest rates on both variable-rate loans and new loan production.

PROVISION FOR CREDIT LOSSES

The provision for credit losses was $1.3 million for the three months ended March 31, 2024 and March 31, 2023, respectively. Included in the provision for credit losses for the three months ended March 31, 2024 was $24 thousand income related to the allowance for unfunded commitments compared to $59 thousand expense for the three months ended March 31, 2023.

Management believes the charges to the provision for credit losses for the three months ended March 31, 2024 were appropriate and the allowance for credit losses was adequate to absorb current expected credit losses in the loan portfolio at March 31, 2024.

NON-INTEREST INCOME

Total non-interest income was $9.0 million for the three months ended March 31, 2024 compared to $8.0 million for the three months ended March 31, 2023. During the three months ended March 31, 2024, notable changes compared to the three months ended March 31, 2023, included higher pass-through income from small business investment companies coupled with an increase in net realized and unrealized gains on equity securities.

NON-INTEREST EXPENSE

For the three months ended March 31, 2024, total non-interest expense was $37.4 million, compared to $34.0 million for the three months ended March 31, 2023. The increase of $3.4 million, or 10.1%, from the three months ended March 31, 2023 was primarily a result of higher salaries and benefits driven by an increase in personnel costs related to merit increases and growth in the Corporation's staff and new offices in its expansion markets, coupled with year-over-year investments in technology applications aimed at enhancing both customer online banking capabilities, customer call center communications and in-branch technology delivery channels. In addition, card processing and interchange expense for the first quarter of 2024 was $1.2 million, or 58.45% of card processing and interchange income, compared to $1.5 million, or 72.37% of card processing and interchange income for the first quarter of 2023.

Table of Contents

INCOME TAX EXPENSE

Income tax expense was $2.8 million, representing a 18.36% effective tax rate, compared to $3.9 million, representing a 19.18% effective tax rate for the three months ended March 31, 2024 and 2023, respectively.

OFF-BALANCE SHEET ARRANGEMENTS

In the normal course of business, the Corporation enters into various transactions, which, in accordance with GAAP, are not included in its condensed consolidated balance sheets. The Corporation enters into these transactions to meet the financing needs of its customers. These transactions include commitments to extend credit and standby and commercial letters of credit, which involve, to varying degrees, elements of credit risk and interest rate risk in excess of the amounts recognized in the condensed consolidated balance sheets. For further information, see Note 9, "Off-Balance Sheet Commitments and Contingencies," to the condensed consolidated financial statements.

CRITICAL ACCOUNTING POLICIES

The Corporation’s accounting and reporting policies are in accordance with GAAP and conform to general practices within the financial services industry. Accounting and reporting practices for the allowance for credit losses and the fair value of assets acquired and liabilities assumed in connection with business combinations, including the associated goodwill and intangibles that was recorded, required the use of material estimates. Application of assumptions different than those used by management could result in material changes in the Corporation’s financial position or results of operations. Note 1 (Summary of Significant Accounting Policies) and Note 4 (Loans) of the 2023 Form 10-K provide additional detail with regard to the Corporation’s accounting for the allowance for credit losses and loans receivable. There have been no other significant changes in the application of accounting policies since December 31, 2023.

NON-GAAP FINANCIAL MEASURES

The following tables reconcile the non-GAAP financial measures to their most directly comparable measures under GAAP.



	(unaudited)
	March 31,			December 31,
	2024			2023
Calculation of tangible book value per common share and tangible common equity/tangible assets (non-GAAP):
Shareholders' equity	$	578,640		$	571,247
Less: preferred equity	57,785			57,785
Common shareholders' equity	520,855			513,462
Less: goodwill and other intangibles	43,874			43,874
Less: core deposit intangible	260			280
Tangible common equity (non-GAAP)	$	476,721		$	469,308

Total assets	$	5,801,412		$	5,752,957
Less: goodwill and other intangibles	43,874			43,874
Less: core deposit intangible	260			280
Tangible assets (non-GAAP)	$	5,757,278		$	5,708,803

Ending shares outstanding	21,024,695			20,896,439

Book value per common share (GAAP)	$	24.77		$	24.57
Tangible book value per common share (non-GAAP)	$	22.67		$	22.46

Common shareholders' equity / Total assets (GAAP)	8.98		%	8.93		%
Tangible common equity / Tangible assets (non-GAAP)	8.28		%	8.22		%

Table of Contents

NON-GAAP FINANCIAL MEASURES (continued)


	(unaudited)
	Three Months Ended
	March 31,

	2024			2023
Calculation of efficiency ratio:
Non-interest expense	$	37,424		$	33,990

Non-interest income	$	8,955		$	8,042
Net interest income	45,222			47,639
Total revenue	$	54,177		$	55,681
Efficiency ratio	69.08		%	61.04		%

Calculation of efficiency ratio (fully tax equivalent basis) (non-GAAP):
Non-interest expense	$	37,424		$	33,990
Less: core deposit intangible amortization	20			22
Adjusted non-interest expense (non-GAAP)	$	37,404		$	33,968

Non-interest income	$	8,955		$	8,042

Net interest income	$	45,222		$	47,639
Less: tax exempt investment and loan income, net of TEFRA (non-GAAP)	1,337			1,318
Add: tax exempt investment and loan income (fully tax equivalent basis) (non-GAAP)	1,932			1,806
Adjusted net interest income (fully tax equivalent basis) (non-GAAP)	45,817			48,127
Adjusted net revenue (fully tax equivalent basis) (non-GAAP)	$	54,772		$	56,169

Efficiency ratio (fully tax equivalent basis) (non-GAAP)	68.29		%	60.47		%


	(unaudited)
	Three Months Ended
	March 31,

	2024			2023
Calculation of net interest margin:
Interest income	$	77,905		$	66,640
Interest expense	32,683			19,001
Net interest income	$	45,222		$	47,639

Average total earning assets	$	5,350,126		$	5,068,689

Net interest margin (GAAP) (annualized)	3.40		%	3.81		%

Calculation of net interest margin (fully tax equivalent basis) (non-GAAP):
Interest income	$	77,905		$	66,640
Tax equivalent adjustment (non-GAAP)	217			270
Adjusted interest income (fully tax equivalent basis) (non-GAAP)	78,122			66,910
Interest expense	32,683			19,001
Net interest income (fully tax equivalent basis) (non-GAAP)	$	45,439		$	47,909

Average total earning assets	$	5,350,126		$	5,068,689
Less: average mark to market adjustment on investments (non-GAAP)	(55,146)			(58,664)
Adjusted average total earning assets, net of mark to market (non-GAAP)	$	5,405,272		$	5,127,353

Net interest margin, fully tax equivalent basis (non-GAAP) (annualized)	3.38		%	3.79		%

Table of Contents

NON-GAAP FINANCIAL MEASURES (continued)


	(unaudited)
	Three Months Ended
	March 31,

	2024		2023












Calculation of PPNR (non-GAAP): (1)
Net interest income	$	45,222	$	47,639
Add: Non-interest income	8,955		8,042
Less: Non-interest expense	37,424		33,990
PPNR (non-GAAP)	$	16,753	$	21,691

(1) Management believes that this is an important metric as it illustrates the underlying performance of the Corporation, it enables investors and others to assess the Corporation's ability to generate capital to cover credit losses through the credit cycle and provides consistent reporting with a key metric used by bank regulatory agencies.


	(unaudited)
	Three Months Ended
	March 31,

	2024			2023
Calculation of return on average tangible common equity (non-GAAP):
Net income	$	12,600		$	16,489
Less: preferred stock dividends	1,075			1,075
Net income available to common shareholders	$	11,525		$	15,414

Average shareholders' equity	$	576,528		$	530,806
Less: average goodwill & intangibles	44,147			44,208
Less: average preferred equity	57,785			57,785
Tangible common shareholders' equity (non-GAAP)	$	474,596		$	428,813

Return on average equity (GAAP) (annualized)	8.79		%	12.60		%
Return on average common equity (GAAP) (annualized)	8.04		%	11.78		%
Return on average tangible common equity (non-GAAP) (annualized)	9.77		%	14.58		%




	(unaudited)
	Three Months Ended
	March 31,

	2024		2023
Calculation of non-interest income excluding net realized gains on available-for-sale securities (non-GAAP):
Non-interest income	$	8,955	$	8,042
Less: net realized gains on available-for-sale securities	—		22
Adjusted non-interest income (non-GAAP)	$	8,955	$	8,020

Table of Contents

ITEM 3

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The disclosures set forth in this item are qualified by Item 1A. Risk Factors and the section captioned "Forward-Looking Statements and Factors that Could Affect Future Results" included in this report, and other cautionary statements set forth elsewhere in this report.

As a financial institution, the Corporation's primary source of market risk exposure is interest rate risk, which influences fluctuations in the Corporation's future earnings due to changes in interest rates. This risk is closely correlated to the repricing characteristics of the Corporation's portfolio of assets and liabilities, with each asset or liability repricing either at maturity or during the instrument's life cycle.

The Corporation’s interest rate risk measurement philosophy focuses on maintaining an appropriate balance between the theoretical and the practical, especially given that the primary objective of the Corporation’s overall asset/liability management process is to assess the level of interest rate risk in the Corporation’s balance sheet. Therefore, the Corporation models a set of interest rate scenarios capturing the financial effects of a range of plausible rate scenarios. The collective impact of these scenarios is designed to enable the Corporation to understand the nature and extent of its sensitivity to interest rate changes. Doing so necessitates an assessment of rate changes over varying time horizons and of varying/sufficient degrees such that the impact of embedded options within the balance sheet are sufficiently examined.

The Corporation has designed its interest rate risk measurement activities to include the following core elements: (i) interest rate ramps and shocks, (ii) parallel and non-parallel yield curve shifts, and (iii) a set of alternative rate scenarios, the nature of which change based upon prevailing market conditions.

The Corporation’s primary tools in managing Interest Rate Risk ("IRR") are income simulation models. The income simulation models are utilized to quantify the potential impact of changing interest rates on earnings and to identify expected earnings trends given longer-term rate cycles. Standard gap reports are also utilized to provide supporting detailed information.

The Corporation also recognizes that a sustained environment of higher/lower interest rates will affect the underlying value of the Corporation’s assets, liabilities and off-balance sheet instruments since the present value of their future cash flows (and the cash flows themselves) change when interest rates change. In order to monitor the long-term structural and economic position of the balance sheet, the ALCO reviews the Economic Value of Equity measure on a quarterly basis.

IRR considerations include inherent assumptions and estimates, including the maturity and repricing characteristics of assets and liabilities, prepayments on amortizing assets, non-maturing deposit sensitivity, and loan and deposit pricing. These assumptions are subject to uncertainty due to the timing, magnitude, and frequency of rate changes, market conditions, and management strategies.

The following table demonstrates the annualized result of an interest rate simulation and the estimated effect that a parallel interest rate shift, or "shock," in the yield curve and subjective adjustments in deposit pricing might have on the Corporation’s projected net interest income over the next 12 months. This simulation assumes that there is no growth in interest-earning assets or interest-bearing liabilities over the next 12 months. The changes to net interest income shown below are in compliance with the Corporation’s policy guidelines.


	% Change in Net Interest Income
	March 31, 2024	December 31, 2023
+300 basis points	2.7%	2.6%
+200 basis points	4.2%	3.8%
+100 basis points	5.6%	4.6%
-100 basis points	(0.1)%	(3.8)%
-200 basis points	(2.0)%	(6.5)%
-300 basis points	(3.0)%	(12.8)%

At March 31, 2024, the Corporation has approximately $2.0 billion in outstanding loans receivable balances that are rate sensitive balances over the next twelve months.

Table of Contents

ITEM 4

CONTROLS AND PROCEDURES

The Corporation’s management, under the supervision of and with the participation of the Corporation’s Principal Executive Officer and Principal Financial Officer, has carried out an evaluation of the design and effectiveness of the Corporation’s disclosure controls and procedures as defined in Rule 13a-15I and Rule 15d-15(e) of the Securities Exchange Act of 1934 as of the end of the period covered by this report. Based upon that evaluation, management, including the Principal Executive Officer and Principal Financial Officer, have concluded that, as of the end of such period, the Corporation’s disclosure controls and procedures are effective to provide reasonable assurance that all material information required to be disclosed in reports the Corporation files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission’s rules and forms.

There was no significant change in the Corporation’s internal control over financial reporting that occurred during the quarter ended March 31, 2024 that has materially affected, or that is reasonably likely to materially affect, our internal control over financial reporting.

Table of Contents

PART II

OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

There are no pending legal proceedings to which the Corporation or any of its subsidiaries is a party, or of which any of their properties is the subject, except ordinary routine proceedings which are incidental to the business.

ITEM 1A. RISK FACTORS

There have been no material changes to the risk factors disclosed in Part I, Item 1A of the 2023 Form 10-K.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

The following table provides information with respect to any purchase of shares of the Corporation’s common stock made by or on behalf of the Corporation for the three months ended March 31, 2024.


Period	Total Number of Shares Purchased	Average Price Paid per Common Share (2)		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs (1)
January 1 – 31, 2024	—	$	—	—	173,541
February 1 – 29, 2024	—	—		—	173,541
March 1 – 31, 2024	—	—		—	173,541

(1) On May 17, 2022, the Corporation's Board of Directors authorized a common stock repurchase plan (the "Repurchase Plan") pursuant to which the Corporation is authorized to repurchase up to 500,000 shares of common stock, provided that the aggregate purchase price of shares of common stock repurchased does not exceed $15 million. The repurchases of common stock, if any, were originally authorized to be made during the period beginning on June 2, 2022 (the date on which the Company received acknowledgement of the repurchase program from the Federal Reserve Bank) through and including May 17, 2023. On May 9, 2023, the Corporation's Board of Directors amended the Repurchase Plan to extend its duration to May 17, 2024. Common stock repurchases under the Repurchase Plan may be conducted through open market purchases or, privately negotiated transactions. Depending on market conditions and other factors, these repurchases may be commenced or suspended without prior notice. As of March 31, 2024, there were 173,541 shares remaining for repurchase under the program.

(2) The aggregate purchase price and weighted average price per share does not include the effect of excise tax expense incurred on net stock repurchases.

Additionally, during the quarter ended March 31, 2024, certain employees surrendered shares of common stock owned by them to satisfy their statutory minimum U.S. federal and state tax obligations associated with the vesting of shares of restricted common stock issued under the CNB Financial Corporation 2019 Omnibus Incentive Plan.

Dividend Restrictions

The Corporation is a legal entity separate and distinct from the Bank. Declaration and payment of cash dividends by the Corporation depends upon cash dividend payments to the Corporation by the Bank, which is our primary source of revenue and cash flow.

As a Pennsylvania state-chartered bank, the Bank is subject to regulatory restrictions on the payment and amounts of dividends under the Pennsylvania Banking Code. Further, the ability of banking subsidiaries to pay dividends is also subject to their profitability, financial condition, capital expenditures and other cash flow requirements.

The payment of dividends by the Bank and the Corporation may also be affected by other factors, such as the requirement to maintain adequate capital above regulatory requirements. The federal banking agencies have indicated that paying dividends that deplete a depository institution’s capital base to an inadequate level would be an unsafe and unsound banking practice. A depository institution may not pay any dividend if payment would cause it to become undercapitalized or if it already is undercapitalized. Moreover, the federal banking agencies have issued policy statements that provide that bank holding companies and insured banks should generally only pay dividends out of current operating earnings. Federal banking regulators have the authority to prohibit banks and bank holding companies from paying a dividend if the regulators deem such payment to be an unsafe or unsound practice.

The amount and timing of dividends is subject to the discretion of the Board of Directors and depends upon business conditions and regulatory requirements. The Board of Directors has the discretion to change the dividend at any time for any reason. The Board of Directors presently intends to continue the policy of paying quarterly cash dividends. The amount of any future dividends will depend on economic and market conditions, the Corporation's financial condition and operating results and other factors, including applicable government regulations and policies.

Table of Contents

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5. OTHER INFORMATION

Rule 10b5-1 Trading Plans

During the quarter ended March 31, 2024, none of the Corporation’s directors or executive officers adopted or terminated any contract, instruction or written plan for the purchase or sale of Corporation securities that was intended to satisfy the affirmative defense conditions of Rule 10b5-1(c) or any "non-Rule 10b5-1 trading arrangement."

Table of Contents

ITEM 6. EXHIBITS


Exhibit No.						Description

3.1						Third Amended and Restated Articles of Incorporation of CNB Financial Corporation (incorporated by reference to Exhibit 3.1 to the Corporation’s Current Report on Form 8-K filed on April 18, 2024)

3.2						Third Amended and Restated Bylaws of CNB Financial Corporation (incorporated by reference to Exhibit 3.2 to the Corporation’s Current Report on Form 8-K filed on April 18, 2024)

10.1(1)						Amendment No. 1 to Defined Contribution Plan for Tito L. Lima (incorporated by reference to Exhibit 10.2 to the Corporation’s Current Report on Form 8-K filed on October 2, 2023)

10.2(1)						Amendment No. 1 to Defined Contribution Plan for Leanne Kassab (incorporated by reference to Exhibit 10.4 to the Corporation’s Current Report on Form 8-K filed on October 2, 2023)

10.3(1)						Amendment No. 1 to Supplemental Executive Retirement Plan (incorporated by reference to Exhibit 10.6 to the Corporation’s Current Report on Form 8-K filed on October 2, 2023)

10.4(1)						Schedule A to Supplemental Executive Retirement Plan for Michael D. Peduzzi (incorporated by reference to Exhibit 10.7 to the Corporation’s Current Report on Form 8-K filed on October 2, 2023)

10.5(1)						Schedule A to Supplemental Executive Retirement Plan for Tito L. Lima (incorporated by reference to Exhibit 10.8 to the Corporation’s Current Report on Form 8-K filed on October 2, 2023)

10.6(1)						Schedule A to Supplemental Executive Retirement Plan for Leanne Kassab (incorporated by reference to Exhibit 10.9 to the Corporation’s Current Report on Form 8-K filed on October 2, 2023)

10.7(1)						Schedule A to Supplemental Executive Retirement Plan for Martin Griffith (incorporated by reference to Exhibit 10.10 to the Corporation’s Current Report on Form 8-K filed on October 2, 2023)

10.8(1)						Amendment No. 1 to Executive Salary Continuation Plan Agreement for Richard L. Greslick (incorporated by reference to Exhibit 10.12 to the Corporation’s Current Report on Form 8-K filed on October 2, 2023)

31.1						Certification of Chief Executive Officer pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934, as amended, adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.2						Certification of Chief Financial Officer pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934, as amended, adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

32.1						Certification of Chief Executive Officer pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

32.2						Certification of Chief Financial Officer pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

101.INS						Inline XBRL Instance Document

101.SCH						Inline XBRL Taxonomy Extension Schema Document

101.CAL						Inline XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF						Inline XBRL Taxonomy Extension Definitions Linkbase Document

101.LAB						Inline XBRL Taxonomy Extension Label Linkbase Document

101.PRE						Inline XBRL Taxonomy Extension Presentation Linkbase Document

104						Cover Page Interactive Data File (formatted as Inline XBRL and included in Exhibit 101)

(1) Indicates a management contract or compensatory plan.

Table of Contents

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

CNB FINANCIAL CORPORATION

(Registrant)

DATE: May 1, 2024

/s/ Michael D. Peduzzi

Michael D. Peduzzi

President and Chief Executive Officer

(Principal Executive Officer)

DATE: May 1, 2024

/s/ Tito L. Lima

Tito L. Lima

Treasurer

(Principal Financial and Accounting Officer)

CNB FINANCIAL CORP/PA [CCNEP] Filings

CNB FINANCIAL CORP/PA [CCNE] Filings