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Management Commentary

President and CEO John H. Montgomery commented, "Our first quarter operating results were a good start to the year, with an improvement in net interest margin along with solid first quarter loan production. The reduction in funding costs during the quarter more than offset the decline in asset yields, contributing to net interest margin growth for the first quarter compared to the prior quarter. In addition to softening deposit costs from the impact of the Federal Reserve rate cuts implemented during the second half of 2024, we reduced our concentration of time deposits during the quarter, which also helped lower our cost of funds. Impacting earnings for the quarter were $1.0 million in one-time non-recurring expenses associated with the previously announced reduction in staff earlier this year.

In a time of economic uncertainty and market volatility, we continue to focus our efforts on what we can control by managing a conservative balance sheet and mitigating risk, while focusing on core banking and our customers. The loan portfolio decreased $4.1 million on a quarter-over-quarter basis, due in part to the previously exited Indirect Lending Portfolio. Excluding this portfolio, total loans increased $4.2 million during the quarter, with commercial real estate and other loans posting the largest gains. In addition, our asset quality remained sound, with nonperforming loans at 0.22% of total loans at quarter-end.

Our focus on building core banking relationships while strategically reducing our reliance on time deposit only relationships is helping to favorably shift our deposit mix. Time and money market deposits decreased during the quarter, while interest-bearing demand, savings and noninterest-bearing demand deposits all increased. On a quarter-over-quarter basis, total deposits decreased by $2.4 million, with brokered time deposits remaining unchanged compared to the prior quarter end.

During the first quarter, we made forward progress in implementing our Specialty Treasury Payments & Services program as part of our long-term strategic initiative to drive revenue growth and enhance our core deposit base. Initial implementation of this strategy is expected near the end of 2025. While costs associated with this strategy will impact operating expenses over the next few quarters, we believe this investment in our franchise will benefit all stakeholders. With ample capital levels, an excellent deposit base, strong liquidity and sound credit quality, we are confident that we have the foundation to enter a period of growth and material revenue generation by the end of the year."

Dividend Declaration

The Company’s Board of Directors declared a $0.25 quarterly cash dividend per outstanding share of common stock, payable on or about May 30, 2025, to stockholders of record as of the close of business on May 16, 2025.

2025 First Quarter Financial Review

Net Interest and Dividend Income

Net interest and dividend income decreased $280,000, or 2.4%, to $11.3 million for the three months ended March 31, 2025 compared to $11.6 million for the three months ended March 31, 2024.

• Net Interest Margin (NIM) (GAAP) decreased to 3.27% for the three months ended March 31, 2025 compared to 3.36% for the three months ended March 31, 2024. Fully tax equivalent (FTE) NIM (Non-GAAP) decreased 9 basis points ("bps") to 3.28% for the three months ended March 31, 2025 compared to 3.37% for the three months ended March 31, 2024.

• Interest and dividend income decreased $139,000, or 0.8%, to $17.8 million for the three months ended March 31, 2025 compared to $18.0 million for the three months ended March 31, 2024.

  • Interest income on loans decreased $310,000, or 2.1%, to $14.5 million for the three months ended March 31, 2025 compared to $14.8 million for the three months ended March 31, 2024. The average balance of loans decreased $12.8 million to $1.08 billion from $1.09 billion, causing a $293,000 decrease in interest income on loans. The average yield on loans remained stable at 5.50% for both periods despite a 100bp reduction in the federal funds rate since September 2024. While this led to the downward repricing of variable and adjustable rate loans, the impact was negated by a reduction in lower yielding consumer loans due to the discontinuation of the indirect automobile loan product with the redeployment of those funds into higher yielding commercial loan products.

  • Interest income on taxable investment securities increased $474,000, or 20.6%, to $2.8 million for the three months ended March 31, 2025 compared to $2.3 million for the three months ended March 31, 2024 driven by a $42.6 million increase in average balances coupled with an 8 bp increase in average yield. The increase in volume was driven by a $56.2 million increase in the average balance of collateralized loan obligation ("CLO") securities as the Bank executed a leverage strategy during 2024 to purchase these assets funded with cash reserves and brokered certificates of deposits.

  • Interest income on interest-earning deposits at other banks decreased $274,000 to $459,000 for the three months ended March 31, 2025 compared to $733,000 for the three months ended March 31, 2024 driven by a 91 bp decrease in the average yield and a $13.8 million decrease in average balances. The decreased in the yield was directly related to the Federal Reserve’s recent reductions in the federal funds rate.

• Interest expense increased $141,000, or 2.2%, to $6.5 million for the three months ended March 31, 2025 compared to $6.4 million for the three months ended March 31, 2024.

  • Interest expense on deposits increased $120,000, or 2.0%, to $6.1 million for the three months ended March 31, 2025 compared to $6.0 million for the three months ended March 31, 2024. Interest-bearing deposit balances increased $27.5 million, or 2.8%, to $1.0 billion as of March 31, 2025 compared to $978.3 million as of March 31, 2024, accounting for a $120,000 increase in interest expense.

  • While interest expense increased compared to the same quarter in the prior year, it decreased $1.4 million, or 17.3%, to $6.5 million for the three months ended March 31, 2025 compared to $7.9 million for the three months ended December 31, 2024. Interest-bearing deposits decreased $62.2 million as the Bank strategically reduced brokered deposits and time deposit only relationships. Additionally, the cost of interest-bearing deposits declined from 2.79% for the three months ended December 31, 2024 compared to 2.46% for the three months ended March 31, 2025 due to the change in the deposit mix and the recent Federal Reserve federal funds rate decreases.

Provision for Credit Losses

A recovery for credit losses was recorded for the three months ended March 31, 2025 of $40,000. The provision for credit losses - loans was $68,000 and was primarily due to qualitative adjustments on economic factors. The provision for credit losses - unfunded commitments was a $108,000 recovery and was due to a decrease in unfunded commitments and a decrease in funding rates. This compared to a net recovery of $37,000 recorded for the three months ended March 31, 2024 as the provision for credit losses - loans was a recovery of $143,000 and was primarily due to a decrease in loan balances while the provision for credit losses - unfunded commitments was $106,000 and was due to an increase in qualitative factors.

Noninterest Income

Noninterest income decreased $1.1 million, or 58.9%, to $787,000 for the three months ended March 31, 2025, compared to $1.9 million for the three months ended March 31, 2024. This decrease resulted primarily as prior period results included a $915,000 gain on bank owned life insurance resulting from one death claim and a $274,000 gain on the disposal of premises and equipment from the sale on one branch office building.

Noninterest Expense

Noninterest expense increased $1.4 million, or 16.3%, to $9.8 million for the three months ended March 31, 2025 compared to $8.4 million for the three months ended March 31, 2024. Salaries and benefits increased $1.5 million, or 31.9%, to $6.0 million primarily due to $1.0 million of one-time non-recurring expenses recognized for the three months ended March 31, 2025 associated with the previously announced reduction in force, merit increases, revenue producing staff additions and higher insurance benefit costs. Data processing expense increased $105,000 due to costs associated with the implementation of a new loan origination system and financial dashboard platform during mid-2024. Equipment expense increased $66,000 due to higher depreciation expense associated with interactive teller machines, security system upgrades and other equipment placed into service in 2024. Legal and professional fees increased $50,000 primarily due to timing differences related to external audit and tax services. Contracted services increased $29,000 due to costs associated with website administration and equity compensation management added during mid-2024 and treasury product consulting services started in the current year. These increases were partially offset as intangible amortization decreased $341,000 as the Bank’s core deposit intangibles were fully amortized in 2024.

Statement of Financial Condition Review

Assets

Total assets increased $1.9 million, or 0.1%, to $1.483 billion at March 31, 2025, compared to $1.482 billion at December 31, 2024.

• Cash and due from banks increased $11.7 million, or 23.6%, to $61.3 million at March 31, 2025, compared to $49.6 million at December 31, 2024.

• Securities decreased $3.5 million, or 1.3%, to $258.7 million at March 31, 2025, compared to $262.2 million at December 31, 2024. The securities balance was primarily impacted by principal repayments on amortizing securities and the sale of equity securities, partially offset by an increase in the market value of the portfolio.

Loans and Credit Quality

• Total loans decreased $4.1 million, or 0.4%, to $1.088 billion compared to $1.093 billion, and included decreases in consumer, commercial and industrial and residential real estate loans of $8.7 million, $4.6 million and $3.2 million, respectively, partially offset by increases in commercial real estate and other loans of $11.8 million and $701,000, respectively. The decrease in consumer loans resulted from a reduction in indirect automobile loan production due to the discontinuation of this product offering as of June 30, 2023. This portfolio is expected to continue to decline as resources are allocated and production efforts are focused on more profitable commercial products. Excluding the $8.3 million decrease in indirect automobile loans, total loans increased $4.2 million, or 0.4%. Loan production totaled $28.6 million while $15.6 million of loans were paid off since December 31, 2024.

• The allowance for credit losses (ACL) was $9.82 million at March 31, 2025 and $9.81 million at December 31, 2024. As a result, the ACL to total loans was 0.90% at March 31, 2025 and 0.90% at December 31, 2024. During the current year, the Company recorded a net recovery for credit losses of $40,000.

• Net charge-offs for the three months ended March 31, 2025 were $54,000, or 0.02% of average loans on an annualized basis. Net recoveries for the three months ended March 31, 2024 were $18,000, or 0.01% of average loans on an annualized basis.

• Nonperforming loans, which include nonaccrual loans and accruing loans past due 90 days or more, were $2.4 million at March 31, 2025 and $1.8 million at December 31, 2024. Nonperforming loans to total loans ratio was 0.22% at March 31, 2025 and 0.16% at December 31, 2024.

Total liabilities increased $1.0 million, or 0.1%, to $1.34 billion at March 31, 2025 compared to $1.33 billion at December 31, 2024.

Deposits

• Total deposits decreased $2.4 million to $1.281 billion as of March 31, 2025 compared to $1.284 billion at December 31, 2024. Time deposits decreased $29.1 million and money market deposits decreased $3.5 million while interest-bearing demand, savings and non interest-bearing demand deposits increased $24.4 million, $6.2 million and $504,000, respectively. This favorable change in the deposit mix was the result of an increased focus on building core banking relationships while strategically reducing time deposit only relationships. Brokered time deposits totaled $39.0 million as of March 31, 2025 and December 31, 2024, all of which mature within three months and were utilized to fund the purchase of floating rate CLO securities. At March 31, 2025, FDIC insured deposits totaled approximately 62.3% of total deposits while an additional 15.2% of total deposits were collateralized with investment securities.

Accrued Interest Payable and Other Liabilities

• Accrued interest payable and other liabilities increased $3.4 million, or 21.3%, to $19.3 million at March 31, 2025, compared to $16.0 million at December 31, 2024 primarily due to a $3.0 million syndicated national credit not yet settled.

Stockholders’ Equity

Stockholders’ equity increased $911,000, or 0.6%, to $148.3 million at March 31, 2025, compared to $147.4 million at December 31, 2024. The key factors positively impacting stockholders’ equity was $1.9 million of net income for the current year and a $1.9 million decrease in accumulated other comprehensive loss, partially offset by $2.4 million of treasury shares purchased under the stock repurchase program and the payment of $1.3 million in dividends since December 31, 2024.

Book value per share

Book value per common share was $29.08 at March 31, 2025 compared to $28.71 at December 31, 2024, an increase of $0.37.

Tangible book value per common share (Non-GAAP) was $27.17 at March 31, 2025, compared to $26.82 at December 31, 2024, an increase of $0.35.

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

About CB Financial Services, Inc.

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

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

Statement About Forward-Looking Statements

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

Explanation of Use of Non-GAAP Financial Measures

In addition to financial measures presented in accordance with generally accepted accounting principles ("GAAP"), we use, and this Press Release contains or references, certain Non-GAAP financial measures. We believe these Non-GAAP financial measures provide useful information in understanding our underlying results of operations or financial position and our business and performance trends as they facilitate comparisons with the performance of other companies in the financial services industry. Non-GAAP adjusted items impacting the Company's financial performance are identified to assist investors in providing a complete understanding of factors and trends affecting the Company’s business and in analyzing the Company’s operating results on the same basis as that applied by management. Although we believe that these Non-GAAP financial measures enhance the understanding of our business and performance, they should not be considered an alternative to GAAP or considered to be more important than financial results determined in accordance with GAAP, nor are they necessarily comparable with similar Non-GAAP measures which may be presented by other companies. Where Non-GAAP financial measures are used, the comparable GAAP financial measure, as well as the reconciliation to the comparable GAAP financial measure, can be found herein.

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Contacts

John H. Montgomery
President and Chief Executive Officer
Phone: (724) 223-8317