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Management Commentary

President and CEO John H. Montgomery commented, "While 2024 presented many dynamic issues for banks, we finished the year strong, with a consistent net interest margin along with solid fourth quarter loan growth. Funding costs decreased at a more favorable rate than asset yields from the prior period, contributing to the stability of the net interest margin for the fourth quarter. In addition to softening deposit costs from the impact from the recent Federal Reserve rate cuts, we reduced our concentration of brokered time deposits during the quarter, which also helped lower our cost of funds. Our conservative balance sheet strategy and continued focus on high quality, relationship driven loan production continues to strengthen our bank.

Compared to a year ago, our loan portfolio decreased $17.8 million, or 1.6%, driven by decreases in the consumer loan portfolio of $41.1 million, in part due to the previously exited Indirect Lending Portfolio. On a quarter over quarter basis, the loan portfolio grew $26.5 million, with commercial real estate loans, construction loans and commercial and industrial loans posting the largest gains. We have made tremendous efforts in expanding our commercial lending team over the last year, which is contributing to this growth. In addition, our asset quality remained pristine at year-end, with nonperforming loans improving to 0.16% of total loans, from 0.20% of total loans a year ago.

Changes in our deposit mix continued during the quarter, with a shift from low interest-bearing accounts to higher-yielding deposit accounts. On a quarter over quarter basis, deposits decreased by $70.3 million, which was largely due to allowing $60.6 million of brokered time deposits to mature. This helped to reduce cash on the balance sheet and improve our net interest margin. For the year, total deposits increased modestly, primarily due to growth in our interest-bearing demand deposits and time deposits as well as an increase in brokered time deposits.

We are making forward progress in implementing our Specialty Treasury Payments & Services program as part of our long term strategic initiatives to drive revenue growth and enhance our core deposit base. This strategy includes development of a platform that will provide Treasury Management payments, products, and an exceptional client experience to our traditional Commercial Treasury Clients and Multiple Deposit Niche markets nationwide. Implementation of this strategy commenced during the second quarter of 2024, with full utilization expected during the third quarter of 2025. While costs associated with the full implementation of this strategy will impact our operating expenses in the near term, we believe that this investment in our franchise will ultimately benefit all stakeholders over time and anticipate this strategy contributing to revenue growth by the end of the year.

With our strong capital levels, pristine credit quality and ample liquidity, we have a great foundation to build upon as we transform the bank and take advantage of growth opportunities in the year ahead."

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 February 28, 2025, to stockholders of record as of the close of business on February 14, 2025.

2024 Fourth Quarter Financial Review

Net Interest and Dividend Income

• Net interest and dividend income increased $396,000, or 3.6%, to $11.5 million for the three months ended December 31, 2024 compared to $11.1 million for the three months ended December 31, 2023.

• Net Interest Margin (NIM) (GAAP) decreased to 3.12% for the three months ended December 31, 2024 compared to 3.19% for the three months ended December 31, 2023. Fully tax equivalent (FTE) NIM (Non-GAAP) decreased 8 basis points ("bps") to 3.13% for the three months ended December 31, 2024 compared to 3.21% for the three months ended December 31, 2023.

• Interest and dividend income increased $2.5 million, or 14.9%, to $19.4 million for the three months ended December 31, 2024 compared to $16.9 million for the three months ended December 31, 2023.

  • Interest income on loans increased $126,000, or 0.9%, to $14.9 million for the three months ended December 31, 2024 compared to $14.8 million for the three months ended December 31, 2023. The average yield on loans increased 23 bps to 5.59% compared to 5.36% resulting in a $624,000 increase in interest income on loans. The yield on loans was positively impacted as the Bank collected $313,000 of interest income related to the payoff of a loan previously on nonaccrual during the three months ended December 31, 2024. Additionally, the increase in loan yield has been driven by a reduction in lower yielding consumer loans due to the discontinuation of the indirect automobile loan product with the redeployment of those funds into higher yielding commercial loan products. The average balance of loans decreased $32.0 million to $1.07 billion from $1.10 billion, causing a $489,000 decrease in interest income on loans.

  • Interest income on taxable investment securities increased $1.9 million, or 166.0%, to $3.1 million for the three months ended December 31, 2024 compared to $1.2 million for the three months ended December 31, 2023 driven by a 211 bp increase in average yield coupled with a $77.3 million increase in average balances. The increase in the average yield was the result of the Bank implementing a balance sheet repositioning strategy of its portfolio of available-for-sale securities during the fourth quarter of 2023. The Bank sold $69.3 million in market value of its lower yielding U.S. government agency, mortgage-backed and municipal securities with an average yield of 1.89% and purchased $69.3 million of higher yielding mortgage-backed and collateralized mortgage obligation securities with an average yield of 5.49%. The increase in volume was driven by a $99.2 million increase in the average balance of collateralized loan obligation ("CLO") securities as the Bank executed a leverage strategy to purchase these assets funded with cash reserves and brokered certificates of deposits.

  • Interest income on interest-earning deposits at other banks increased $530,000 to $1.3 million for the three months ended December 31, 2024 compared to $808,000 for the three months ended December 31, 2023 driven by a $46.8 million increase in average balances, partially offset by a 11 bp decrease in the average yield. The volume increase was due in part to $30.5 million in cash received from the December 2023 sale of EU.

• Interest expense increased $2.1 million, or 36.9%, to $7.9 million for the three months ended December 31, 2024 compared to $5.8 million for the three months ended December 31, 2023.

  • Interest expense on deposits increased $2.2 million, or 40.4%, to $7.5 million for the three months ended December 31, 2024 compared to $5.3 million for the three months ended December 31, 2023. Rising market interest rates led to the repricing of interest-bearing demand and money market deposits and a shift in deposits from noninterest-bearing and interest-bearing demand deposits into money market and time deposits which resulted in a 59 bp, or 26.8%, increase in the average cost of interest-bearing deposits compared to the three months ended December 31, 2023. This accounted for a $1.5 million increase in interest expense. Additionally, interest-bearing deposit balances increased $107.0 million, or 11.1%, to $1.1 billion as of December 31, 2024 compared to $961.0 million as of December 31, 2023, accounting for a $619,000 increase in interest expense.

Provision for Credit Losses

The provision for credit losses recorded for the three months ended December 31, 2024 was $683,000. The provision for credit losses - loans was $483,000 and was primarily due to loan growth, increases in the loss rate and qualitative adjustments on construction and land development loans and an increase in qualitative adjustments on residential real estate loans, partially offset by a payoff of an impaired loan. The provision for credit losses - unfunded commitments was $200,000 and was due to an increase in the loss rate on construction loans. This compared to a $1.4 million recovery for credit losses recorded for the three months ended December 31, 2023 and was primarily due to improvements in qualitative factors coupled with a decrease in historical loss rates.

Noninterest Income

Noninterest income decreased $14.9 million, or 90.0%, to $1.7 million for the three months ended December 31, 2024, compared to $16.5 million for the three months ended December 31, 2023. This decrease resulted primarily as prior period results included a $24.6 million pre-tax gain on the sale of EU, partially offset by a $9.8 million pre-tax loss on the sale of securities from the execution of a balance sheet repositioning strategy. Additionally, insurance commissions decreased $968,000 as no income was recognized for the three months ended December 31, 2024 due to the December 2023 sale of EU, compared to a full quarter of income recognized for the three months ended December 31, 2023. Other noninterest income increased $840,000 due to a $708,000 earn out payment related to the sale of EU recognized in December 2024.

Noninterest Expense

Noninterest expense decreased $1.3 million, or 12.2%, to $9.5 million for the three months ended December 31, 2024 compared to $10.8 million for the three months ended December 31, 2023. Salaries and benefits decreased $966,000, or 15.5%, to $5.3 million primarily due one-time non-recurring expenses associated with sale of the insurance subsidiary of $691,000 recognized during the three months ended December 31, 2023 and $561,000 of normal salary expense recognized for the three months ended December 31, 2023 compared to no expense related to EU recognized for the three months ended December 31, 2024 due to the December 2023 sale, partially offset by merit increases and revenue producing staff additions. Intangible amortization decreased $342,000 as a portion of the Bank’s core deposit intangible was fully amortized in February 2024 and EU intangible amortization of $42,000 was realized during the three months ended December 31, 2023. Legal and professional fees decreased $166,000 primarily due to timing differences related to internal audit and CECL model validation services. Occupancy expense decreased $158,000 due to $244,000 of non-recurring purchase accounting amortization related to a branch rebuild and $44,000 of EU occupancy expenses realized during the three months ended December 31, 2023, partially offset by increases in rent and depreciation expenses. Other noninterest expense decreased $140,000 primarily due to $116,000 of EU expenses realized during the three months ended December 31, 2023. Contracted services increased $223,000 due to costs associated with cybersecurity support, website administration, equity compensation management and treasury product consulting services. Data processing expense increased $106,000 due to costs associated with the implementation of a new loan origination system and financial dashboard platform. Pennsylvania shares tax expense increased $84,000 due to a higher taxable base due to the increase in equity resulting from the sale of EU.

Statement of Financial Condition Review

Assets

Total assets increased $25.5 million, or 1.8%, to $1.48 billion at December 31, 2024, compared to $1.46 billion at December 31, 2023.

• Cash and due from banks decreased $18.7 million, or 27.3%, to $49.6 million at December 31, 2024, compared to $68.2 million at December 31, 2023.

• Securities increased $55.1 million, or 26.6%, to $262.2 million at December 31, 2024, compared to $207.1 million at December 31, 2023. The securities balance was primarily impacted by the purchase of $69.8 million of CLO securities, partially offset by $15.4 million of principal repayments on amortizing securities.

Loans and Credit Quality

• Total loans decreased $17.8 million, or 1.6%, to $1.09 billion compared to $1.11 billion, and included decreases in consumer and residential real estate loans of $41.1 million and $9.8 million, respectively, partially offset by increases in commercial real estate, construction real estate and other loans of $18.4 million, $11.6 million and $2.5 million, respectively. The decrease in consumer loans resulted from a reduction in indirect automobile loan production due to rising market interest rates and the discontinuation of this product offering as of June 30, 2023. This portfolio is expected to continue to decline as resources are allocated and production efforts are focused on more profitable commercial products. Total loans increased $26,871, or 2.5%, from September 30, 2024 due to strong commercial loan production during the quarter. Loan production totaled $148.2 million while $112.2 million of loans were paid off since December 31, 2023.

• The allowance for credit losses (ACL) was $9.8 million at December 31, 2024 and $9.7 million at December 31, 2023. As a result, the ACL to total loans was 0.90% at December 31, 2024 and 0.87% at December 31, 2023. During the current year, the Company recorded a net provision for credit losses of $570,000.

• Net charge-offs for the three months ended December 31, 2024 were $157,000, or 0.06% of average loans on an annualized basis. Net recoveries for the three months ended December 31, 2023 were $6,000, or 0.00% of average loans on an annualized basis. Net charge-offs for the year ended December 31, 2024 were $281,000. Net recoveries for the year ended December 31, 2023 were $557,000 primarily due to recoveries totaling $750,000 related to a prior year $2.7 million charged-off commercial and industrial loan.

• Nonperforming loans, which include nonaccrual loans and accruing loans past due 90 days or more, were $1.8 million at December 31, 2024 and $2.2 million at December 31, 2023. Nonperforming loans to total loans ratio was 0.16% at December 31, 2024 and 0.20% at December 31, 2023.

Other

• Accrued interest and other assets increased $7.2 million or 29.6%, to $31.5 million at December 31, 2024, compared to $24.3 million at December 31, 2023 due primarily to a $6.0 million investment in a low-income housing tax credit project.

Total liabilities increased $17.9 million, or 1.4%, to $1.33 billion at December 31, 2024 compared to $1.32 billion at December 31, 2023.

Deposits

• Total deposits increased $16.4 million to $1.28 billion as of December 31, 2024 compared to $1.27 billion at December 31, 2023. Time deposits increased $66.2 million and money market deposits increased $30.4 million while interest-bearing demand, savings and non interest-bearing demand deposits decreased $46.2 million, $24.2 million and $9.9 million, respectively. Deposit changes were primarily the result of the current interest rate environment causing a shift in deposit products to higher priced money market and time deposits. Additionally, the Bank added $10.0 million of brokered time deposits during the period. Brokered time deposits totaled $39.0 million as of December 31, 2024 compared to $29.0 million at December 31, 2023, all of which mature within three months and were utilized to fund the purchase of floating rate CLO securities. At December 31, 2024, FDIC insured deposits totaled approximately 62.5% of total deposits while an additional 15.9% of total deposits were collateralized with investment securities.

Accrued Interest Payable and Other Liabilities

• Accrued interest payable and other liabilities increased $1.5 million, or 10.4%, to $16.0 million at December 31, 2024, compared to $14.4 million at December 31, 2023 primarily due to a $5.0 million unfunded commitment related to a low-income housing tax credit project.

Stockholders’ Equity

Stockholders’ equity increased $7.5 million, or 5.4%, to $147.4 million at December 31, 2024, compared to $139.8 million at December 31, 2023. The key factor positively impacting stockholders’ equity was $12.6 million of net income for the current year partially offset by the payment of $5.1 million in dividends since December 31, 2023 and a $488,000 increase in accumulated other comprehensive loss.

Book value per share

Book value per common share was $28.71 at December 31, 2024 compared to $27.32 at December 31, 2023, an increase of $1.39.

Tangible book value per common share (Non-GAAP) was $26.82 at December 31, 2024, compared to $25.23 at December 31, 2023, an increase of $1.59.

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.