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 September 30, 2023

or 

☐ 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 October 31, 2023:

COMMON STOCK, NO PAR VALUE PER SHARE: 20,897,806 SHARES

Table of Contents

INDEX

PART I.

FINANCIAL INFORMATION

	Page Number
ITEM 1 – Financial Statements
Condensed Consolidated Balance Sheets September 30, 2023 (unaudited) and December 31, 2022 (audited)	1
Condensed Consolidated Statements of Income – Three and nine months ended September 30, 2023 and 2022 (unaudited)	2
Condensed Consolidated Statements of Comprehensive Income – Three and nine months ended September 30, 2023 and 2022 (unaudited)	3
Condensed Consolidated Statements of Changes in Shareholders' Equity – Three and nine months ended September 30, 2023 and 2022 (unaudited)	4
Condensed Consolidated Statements of Cash Flows – Nine months ended September 30, 2023 and 2022 (unaudited)	6
Notes to Condensed Consolidated Financial Statements	8
ITEM 2 – Management’s Discussion and Analysis of Financial Condition and Results of Operations	47
ITEM 3 – Quantitative and Qualitative Disclosures about Market Risk	71
ITEM 4 – Controls and Procedures	72
PART II. OTHER INFORMATION
ITEM 1 – Legal Proceedings	73
ITEM 1A – Risk Factors	73
ITEM 2 – Unregistered Sales of Equity Securities and Use of Proceeds	73
ITEM 3 – Defaults Upon Senior Securities	73
ITEM 4 – Mine Safety Disclosures	73
ITEM 5 – Other Information	73
ITEM 6 – Exhibits	74
Signatures	75

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 (“CNB”). 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 CNB’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." CNB’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, including the lingering impacts of the COVID-19 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 CNB'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. CNB 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)
	September 30, 2023		December 31, 2022
ASSETS
Cash and cash equivalents due from banks	$	61,529	$	58,884
Interest-bearing deposits with Federal Reserve	117,632		43,401
Interest-bearing deposits with other financial institutions	3,424		4,000
Total cash and cash equivalents	182,585		106,285
Debt securities available-for-sale, at fair value (amortized cost of $404,688 and $432,992, respectively)	335,122		371,409
Debt securities held-to-maturity, at amortized cost (fair value $352,069 and $367,388, respectively)	391,301		404,765
Equity securities	8,948		9,615
Loans held for sale	464		231
Loans receivable
PPP loans, net of deferred processing fees	56		159
Syndicated loans	123,090		156,649
Loans	4,369,028		4,118,370
Total loans receivable	4,492,174		4,275,178
Less: allowance for credit losses	(45,832)		(43,436)
Net loans receivable	4,446,342		4,231,742
FHLB and other restricted stock holdings and investments	28,329		30,715
Premises and equipment, net	73,270		68,535
Operating lease right-of-use assets	36,065		32,307
Bank owned life insurance	113,734		111,523
Mortgage servicing rights	1,631		1,804
Goodwill and other intangibles	43,874		43,749
Core deposit intangible, net	299		364
Accrued interest receivable and other assets	69,944		62,135
Total Assets	$	5,731,908	$	5,475,179
LIABILITIES AND SHAREHOLDERS’ EQUITY
Noninterest-bearing demand deposits	$	782,996	$	898,437
Interest-bearing demand deposits	781,309		1,007,202
Savings	2,883,736		2,270,337
Certificates of deposit	554,740		446,461
Total deposits	5,002,781		4,622,437
Short-term borrowings	—		132,396
Subordinated debentures	20,620		20,620
Subordinated notes, net of unamortized issuance costs	84,191		83,964
Operating lease liabilities	37,998		33,726
Accrued interest payable and other liabilities	37,106		51,274
Total liabilities	5,182,696		4,944,417
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 September 30, 2023 and December 31, 2022	57,785		57,785
Common stock, no par value; 50,000,000 shares authorized; Shares issued 21,235,503 at September 30, 2023 and 21,235,503 at December 31, 2022	—		—
Additional paid in capital	220,100		221,553
Retained earnings	336,690		306,911
Treasury stock, at cost (339,869 shares at September 30, 2023 and 114,157 shares December 31, 2022)	(6,862)		(2,967)
Accumulated other comprehensive loss	(58,501)		(52,520)
Total shareholders’ equity	549,212		530,762
Total Liabilities and Shareholders’ Equity	$	5,731,908	$	5,475,179

See Notes to Condensed Consolidated Financial Statements

1

Table of Contents

CONDENSED CONSOLIDATED STATEMENTS OF INCOME (unaudited)

Dollars in thousands, except per share data

	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022
INTEREST AND DIVIDEND INCOME:
Loans receivable including fees
Interest and fees on loans receivable	$	70,980	$	50,552	$	200,206	$	136,368
Processing fees on PPP loans	—		74		3		1,870
Securities:
Taxable	4,247		4,413		13,360		12,281
Tax-exempt	176		219		553		665
Dividends	113		40		366		109
Total interest and dividend income	75,516		55,298		214,488		151,293
INTEREST EXPENSE:
Deposits	27,113		4,408		67,390		9,601
Borrowed funds and finance lease liabilities	91		5		1,799		15
Subordinated notes and debentures (includes $(55), $26, $(151), and $144 accumulated other comprehensive income reclassification for change in fair value of interest rate swap agreements, respectively)	1,076		977		3,164		2,851
Total interest expense	28,280		5,390		72,353		12,467
NET INTEREST INCOME	47,236		49,908		142,135		138,826
PROVISION FOR CREDIT LOSS EXPENSE	1,056		1,091		4,751		5,639
NET INTEREST INCOME AFTER PROVISION FOR CREDIT LOSS EXPENSE	46,180		48,817		137,384		133,187
NON-INTEREST INCOME:
Service charges on deposit accounts	1,861		1,872		5,569		5,400
Other service charges and fees	567		814		2,283		2,253
Wealth and asset management fees	1,833		1,870		5,567		5,456
Net realized gains on available-for-sale securities (includes $0, $0, $52, and $651 accumulated other comprehensive income reclassifications for net realized gains on available-for-sale securities, respectively)	—		—		52		651
Net realized and unrealized losses on equity securities	(400)		(398)		(930)		(1,433)
Mortgage banking	172		298		516		1,065
Bank owned life insurance	754		694		2,211		2,778
Card processing and interchange income	2,098		1,975		6,219		5,776
Other non-interest income	978		834		2,711		3,813
Total non-interest income	7,863		7,959		24,198		25,759
NON-INTEREST EXPENSES:
Compensation and benefits	17,758		18,901		51,862		52,660
Net occupancy expense	3,596		3,375		10,790		9,940
Technology expense	5,232		4,552		14,677		11,948
State and local taxes	1,028		1,036		3,108		3,121
Legal, professional, and examination fees	1,320		1,019		3,167		3,032
Advertising	840		709		2,085		1,866
FDIC insurance premiums	1,027		709		2,901		2,142
Dues and subscriptions	495		476		1,451		1,610
Card processing and interchange expenses	1,207		1,201		4,269		3,486
Other non-interest expenses	4,411		4,122		12,582		10,796
Total non-interest expenses	36,914		36,100		106,892		100,601
INCOME BEFORE INCOME TAXES	17,129		20,676		54,690		58,345
INCOME TAX EXPENSE (includes $12, $(7), $43 and $106 income tax expense from reclassification items, respectively)	3,402		4,051		10,647		11,037
NET INCOME	13,727		16,625		44,043		47,308
PREFERRED STOCK DIVIDENDS	1,076		1,076		3,226		3,226
NET INCOME AVAILABLE TO COMMON SHAREHOLDERS	$	12,651	$	15,549	$	40,817	$	44,082
AVERAGE COMMON SHARES OUTSTANDING:
Basic	20,859,872		17,254,389		20,939,102		16,950,577
Diluted	20,899,744		17,287,770		20,979,032		16,983,958
PER COMMON SHARE DATA:
Basic Earnings Per Common Share	$	0.60	$	0.90	$	1.94	$	2.59
Diluted Earnings Per Common Share	$	0.60	$	0.90	$	1.94	$	2.59
Cash Dividends Declared	$	0.175	$	0.175	$	0.525	$	0.525

See Notes to Condensed Consolidated Financial Statements

2

Table of Contents

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

Dollars in thousands

	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022
NET INCOME	$	13,727	$	16,625	$	44,043	$	47,308
Other comprehensive income (loss), net of tax:
Net change in fair value of derivative instruments:
Unrealized gain (loss) on interest rate swaps, net of tax $2, $(19), $0, and $(79), respectively	(8)		69		—		297
Reclassification adjustment for (gains) losses recognized in earnings, net of tax $12, $(7), $32, $(31), respectively	(43)		19		(119)		113
	(51)		88		(119)		410
Net change in debt securities:
Unrealized holding losses on available-for-sale securities arising during the period, net of tax of $2,135, $3,945, $1,666, and $14,881, respectively	(8,032)		(14,838)		(6,267)		(55,984)
Amortization of unrealized losses from held-to-maturity securities, net of tax of $(44), $(80), $(118), and $(178), respectively	167		300		446		671
Reclassification adjustment for realized losses included in net income, net of tax of $0, $0, $11, and $137, respectively	—		—		(41)		(514)
	(7,865)		(14,538)		(5,862)		(55,827)
Other comprehensive loss	(7,916)		(14,450)		(5,981)		(55,417)
COMPREHENSIVE INCOME (LOSS)	$	5,811	$	2,175	$	38,062	$	(8,109)

See Notes to Condensed Consolidated Financial Statements

3

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, July 1, 2023	$	57,785	$	219,723	$	327,707	$	(4,996)	$	(50,585)	$	549,634
Net income					13,727						13,727
Other comprehensive loss									(7,916)		(7,916)
Forfeiture of restricted stock award grants (1,393 shares)			27				(27)				—
Stock-based compensation expense			350								350
Purchase of treasury stock (100,000 shares)							(1,839)				(1,839)
Purchase of treasury stock for the purpose of tax withholding related to restricted stock award vesting (26 shares)							—				—
Preferred cash dividend declared					(1,076)						(1,076)
Cash dividends declared ($0.175 per common share)					(3,668)						(3,668)
Balance, September 30, 2023	$	57,785	$	220,100	$	336,690	$	(6,862)	$	(58,501)	$	549,212
Balance, July 1, 2022	$	57,785	$	126,986	$	283,204	$	(3,026)	$	(41,361)	$	423,588
Net income					16,625						16,625
Other comprehensive loss									(14,450)		(14,450)
Forfeiture of restricted stock award grants (112 shares)			3				(3)				—
Restricted stock award grants (664 shares)			(10)				10				—
Stock-based compensation expense			256								256
Contribution of treasury stock (3,000 shares)			(44)				44				—
Stock-based contribution expense			84								84
Issuance of common stock, net of issuance costs (4,257,446 shares)			94,051								94,051
Preferred cash dividend declared					(1,076)						(1,076)
Cash dividends declared ($0.175 per common share)					(2,950)						(2,950)
Balance, September 30, 2022	$	57,785	$	221,326	$	295,803	$	(2,975)	$	(55,811)	$	516,128

4

Table of Contents

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

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, 2023	$	57,785	$	221,553	$	306,911	$	(2,967)	$	(52,520)	$	530,762
Net income					44,043						44,043
Other comprehensive loss									(5,981)		(5,981)
Forfeiture of restricted stock award grants (4,196 shares)			90				(90)				—
Restricted stock award grants (105,185 shares)			(2,743)				2,743				—
Performance based restricted stock award grants (4,118 shares)			(111)				111				—
Stock-based compensation expense			1,311								1,311
Purchase of treasury stock (326,459 shares)							(6,556)				(6,556)
Purchase of treasury stock for the purpose of tax withholding related to restricted stock award vesting (3,776 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					(3,226)						(3,226)
Cash dividends declared ($0.525 per common share)					(11,038)						(11,038)
Balance, September 30, 2023	$	57,785	$	220,100	$	336,690	$	(6,862)	$	(58,501)	$	549,212
Balance, January 1, 2022	$	57,785	$	127,351	$	260,582	$	(2,477)	$	(394)	$	442,847
Net income					47,308						47,308
Other comprehensive loss									(55,417)		(55,417)
Forfeiture of restricted stock award grants (1,202 shares)			30				(30)				—
Restricted stock award grants (56,823 shares)			(986)				986				—
Performance based restricted stock award grants (11,895 shares)			(173)				173				—
Stock-based compensation expense			1,013								1,013
Contribution of treasury stock (3,000 shares)			(44)				44				—
Stock-based contribution expense			84								84
Issuance of common stock, net of issuance costs (4,257,446 shares)			94,051								94,051
Purchase of treasury stock (50,166 shares)							(1,342)				(1,342)
Purchase of treasury stock for the purpose of tax withholding related to restricted stock award vesting (7,568 shares)							(203)				(203)
Purchase of treasury stock for the purpose of tax withholding related to performance based restricted stock award vesting (4,706 shares)							(126)				(126)
Preferred cash dividend declared					(3,226)						(3,226)
Cash dividends declared ($0.525 per common share)					(8,861)						(8,861)
Balance, September 30, 2022	$	57,785	$	221,326	$	295,803	$	(2,975)	$	(55,811)	$	516,128

See Notes to Condensed Consolidated Financial Statements

5

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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)

Dollars in thousands

	Nine Months Ended September 30,
	2023		2022
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	44,043	$	47,308
Adjustments to reconcile net income to net cash provided by operations:
Provision for credit loss expense	4,751		5,639
Depreciation and amortization of premises and equipment, operating leases assets, core deposit intangible, and mortgage servicing rights	5,803		5,256
Accretion of securities, deferred loan fees and costs, net yield and credit mark on acquired loans, and unearned income	(2,968)		(2,246)
Net amortization of deferred costs on borrowings	227		227
Accretion of deferred PPP processing fees	(3)		(1,870)
Net realized gains on sales of available-for-sale securities	(52)		(651)
Net realized and unrealized losses on equity securities	930		1,433
Gain on sale of loans held for sale	(342)		(1,176)
Net losses on dispositions of premises and equipment and foreclosed assets	27		40
Proceeds from sale of loans receivable	12,390		25,435
Origination of loans held for sale	(13,730)		(30,838)
Income on bank owned life insurance	(2,211)		(1,895)
Gain on bank owned life insurance (death benefit proceeds in excess of cash surrender value)	—		(883)
Restricted stock compensation expense	1,311		1,013
Stock-based contribution expense	—		84
Change in:
Accrued interest receivable and other assets	(7,231)		(20,953)
Accrued interest payable, lease liabilities, and other liabilities	(13,640)		12,359
NET CASH PROVIDED BY OPERATING ACTIVITIES	29,305		38,282
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from maturities, prepayments and calls of available-for-sale securities	29,795		59,673
Proceeds from sales of available-for-sale securities	13,151		22,164
Purchase of available-for-sale securities	(15,103)		(48,383)
Proceeds from maturities, prepayments and calls of held-to-maturity securities	14,226		20,235
Purchases of held-to-maturity securities	—		(213,853)
Purchase of equity securities	(263)		(302)
Proceeds from loans classified as portfolio loans	4,994		—
Net increase in loans receivable	(220,188)		(380,348)
Purchase of bank owned life insurance	—		(2,750)
Proceeds from death benefit of bank owned life insurance policies	—		3,273
Redemption (purchase) of FHLB, other equity, and restricted equity interests	2,386		(647)
Purchase of premises and equipment	(8,955)		(8,278)
Purchase of other intangible assets	(125)		—
Proceeds from the sale of premises and equipment and foreclosed assets	52		47
NET CASH USED BY INVESTING ACTIVITIES	(180,030)		(549,169)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase (decrease) in checking, money market and savings accounts	272,065		(29,444)
Net increase (decrease) in certificates of deposit	108,279		(62,364)
Purchase of treasury stock	(6,659)		(1,671)
Cash dividends paid, common stock	(11,038)		(8,861)
Cash dividends paid, preferred stock	(3,226)		(3,226)
Proceeds from common stock offering, net of issuance costs	—		94,051
Net change in short-term borrowings	(132,396)		—
NET CASH PROVIDED (USED) BY FINANCING ACTIVITIES	227,025		(11,515)
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS	76,300		(522,402)
CASH AND CASH EQUIVALENTS, Beginning	106,285		732,198
CASH AND CASH EQUIVALENTS, Ending	$	182,585	$	209,796

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

Dollars in thousands

	Nine Months Ended September 30,
	2023		2022
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest	$	71,007	$	13,878
Income taxes	8,577		12,743
SUPPLEMENTAL NONCASH DISCLOSURES:
Transfers to other real estate owned	$	625	$	520
Transfers from loans held for sale to loans held for investment	1,513		6,352
Transfers from loans held for investment to loans held for sale	166		—
Transfers from available-for-sale to held-to-maturity	—		220,757
Grant of restricted stock awards from treasury stock	2,743		986
Grant of performance based restricted stock awards from treasury stock	111		173
Restricted stock forfeiture	90		30
Contribution of stock from treasury stock	—		44
Lease liabilities arising from obtaining right-of-use assets	5,001		9,066

See Notes to Condensed Consolidated Financial Statements

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CNB FINANCIAL CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

1.    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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 September 30, 2023 and for the three and nine months ended September 30, 2023 and 2022 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 and nine months ended September 30, 2023 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, 2022 (the "2022 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 makers monitor the revenue streams of the various products and services, operations are managed and financial performance is evaluated on a Corporation-wide basis, and operating segments 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.

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Goodwill Assessment

The Corporation's policy is to test goodwill for impairment annually on December 31 or on an interim basis if an event triggering impairment may have occurred. During the nine months ended September 30, 2023, the economic uncertainty and market volatility resulting from the rising interest rate environment and the recent banking industry stresses resulted in a decrease in the Corporation's stock price and market capitalization. Management believed such a decrease was a triggering indicator requiring an interim goodwill impairment analysis. At September 30, 2023, the Corporation elected to perform a qualitative assessment to determine if it was more likely than not that the fair value exceeded its carrying value, including goodwill. The qualitative assessment indicated that it was more likely than not that the fair value exceeded its carrying value, resulting in no impairment. Management will continue to evaluate the economic conditions at future reporting periods for any potential applicable changes.

2.    RECENT ACCOUNTING PRONOUNCEMENTS

Accounting Standards Adopted in 2022

In December 2022, the Financial Accounting Standards Board (the “FASB”) issued ASU No. 2022-06 - Reference Rate Reform (Topic 848). ASU 2022-06 extends the period of time preparers can utilize the reference rate reform relief guidance provided by ASU 2020-04 and ASU 2021-01, which are discussed above. ASU 2022-06, which was effective upon issuance, defers the sunset date of this prior guidance from December 31, 2022 to December 31, 2024, after which entities will no longer be permitted to apply the relief guidance in Topic 848. ASU 2022-06 did not have a material impact on the Corporation's financial statements and related disclosures.

Accounting Standards Adopted in 2023

In October 2021, the FASB issued ASU No. 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 No. 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.

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In July 2023, FASB issued ASU No. 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 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 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. The updates were effective immediately. These updates did not have a material impact on the Corporation's consolidated financial statements and related disclosures.

Accounting Pronouncements Pending Adoption

In June 2022, FASB issued ASU No. 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 is effective for the Corporation on January 1, 2024, with early adoption permitted. The Corporation is evaluating the effect that ASU 2022-03 will have on its consolidated financial statements and related disclosures.

In March 2023, FASB issued ASU No. 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 with early adoption permitted. The Corporation is evaluating the effect that ASU 2023-01 will have on its consolidated financial statements and related disclosures.

In March 2023, FASB issued ASU No. 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 with early adoption permitted. The Corporation is evaluating the effect that ASU 2023-02 will have on its consolidated financial statements and related disclosures.

In August 2023, FASB issued ASU No. 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 consolidated financial statements and related disclosures.

In October 2023, FASB issued ASU No. 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 consolidated financial statements and related disclosures.

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3.    SECURITIES

Debt securities available-for-sale ("AFS") at September 30, 2023 and December 31, 2022 were as follows:

	September 30, 2023
	Amortized		Unrealized				Allowance For		Fair
	Cost		Gains		Losses		Credit Losses		Value
U.S. Government sponsored entities	$	3,887	$	—	$	(62)	$	—	$	3,825
State & political subdivisions	106,651		—		(18,215)		—		88,436
Residential & multi-family mortgage	233,464		—		(44,355)		—		189,109
Corporate notes & bonds	48,639		4		(5,737)		—		42,906
Pooled SBA	12,047		—		(1,201)		—		10,846
Total	$	404,688	$	4	$	(69,570)	$	—	$	335,122

	December 31, 2022
	Amortized		Unrealized				Allowance For		Fair
	Cost		Gains		Losses		Credit Losses		Value
U.S. Government sponsored entities	$	3,213	$	—	$	(84)	$	—	$	3,129
State & political subdivisions	112,734		24		(17,095)		—		95,663
Residential & multi-family mortgage	256,111		—		(38,564)		—		217,547
Corporate notes & bonds	47,111		—		(4,720)		—		42,391
Pooled SBA	13,823		—		(1,144)		—		12,679
Total	$	432,992	$	24	$	(61,607)	$	—	$	371,409

Debt securities held-to-maturity ("HTM") at September 30, 2023 and December 31, 2022 were as follows:

	September 30, 2023
	Amortized		Unrealized				Allowance For		Fair
	Cost		Gains		Losses		Credit Losses		Value
U.S. Government sponsored entities	$	302,871	$	—	$	(26,628)	$	—	$	276,243
Residential & multi-family mortgage	88,430		—		(12,604)		—		75,826
Total	$	391,301	$	—	$	(39,232)	$	—	$	352,069

	December 31, 2022
	Amortized		Unrealized				Allowance For		Fair
	Cost		Gains		Losses		Credit Losses		Value
U.S. Government sponsored entities	$	307,711	$	—	$	(27,276)	$	—	$	280,435
Residential & multi-family mortgage	97,054		—		(10,101)		—		86,953
Total	$	404,765	$	—	$	(37,377)	$	—	$	367,388

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.

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

	Proceeds		Gross Gains		Gross Losses
Three months ended September 30, 2023	$	—	$	—	$	—
Three months ended September 30, 2022	—		—		—
Nine months ended September 30, 2023	13,151		52		—
Nine months ended September 30, 2022	22,164		651		—

The tax provision related to these net realized gains was zero and $11 thousand for the three and nine months ended September 30, 2023 and zero and $137 thousand for the three and nine months ended September 30, 2022, respectively.

The table below illustrates the maturity distribution of debt securities at amortized cost and fair value as of September 30, 2023:

	Available-for-sale				Held-to-maturity
	Amortized Cost		Fair Value		Amortized Cost		Fair Value
1 year or less	$	10,533	$	10,388	$	53,827	$	52,288
1 year – 5 years	43,540		40,467		203,661		186,750
5 years – 10 years	82,397		68,505		45,383		37,205
After 10 years	22,707		15,807		—		—
	159,177		135,167		302,871		276,243
Residential & multi-family mortgage	233,464		189,109		88,430		75,826
Pooled SBA	12,047		10,846		—		—
Total debt securities	$	404,688	$	335,122	$	391,301	$	352,069

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 September 30, 2023 and December 31, 2022, securities carried at $470.9 million and $561.8 million, respectively, were pledged to secure public deposits and for other purposes as provided by law.

At September 30, 2023 and December 31, 2022, 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.

AFS debt securities with unrealized losses at September 30, 2023 and December 31, 2022, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position, were as follows:

September 30, 2023

	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	$	389	$	(5)	$	1,536	$	(57)	$	1,925	$	(62)
State & political subdivisions	2,944		(20)		85,246		(18,195)		88,190		(18,215)
Residential & multi-family mortgage	210		(6)		188,812		(44,349)		189,022		(44,355)
Corporate notes and bonds	1,770		(230)		40,477		(5,507)		42,247		(5,737)
Pooled SBA	—		—		10,754		(1,201)		10,754		(1,201)
	$	5,313	$	(261)	$	326,825	$	(69,309)	$	332,138	$	(69,570)

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December 31, 2022

	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	$	3,129	$	(84)	$	—	$	—	$	3,129	$	(84)
State & political subdivisions	34,667		(1,887)		54,546		(15,208)		89,213		(17,095)
Residential & multi-family mortgage	48,996		(3,122)		168,551		(35,442)		217,547		(38,564)
Corporate notes and bonds	31,730		(3,403)		10,661		(1,317)		42,391		(4,720)
Pooled SBA	5,107		(314)		7,572		(830)		12,679		(1,144)
	$	123,629	$	(8,810)	$	241,330	$	(52,797)	$	364,959	$	(61,607)

HTM debt securities with unrealized losses at September 30, 2023 and December 31, 2022, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position, were as follows:

September 30, 2023

	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	$	—	$	—	$	276,243	$	(26,628)	$	276,243	$	(26,628)
Residential & multi-family mortgage	—		—		75,826		(12,604)		75,826		(12,604)
	$	—	$	—	$	352,069	$	(39,232)	$	352,069	$	(39,232)

December 31, 2022

	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	$	143,556	$	(10,063)	$	136,879	$	(17,213)	$	280,435	$	(27,276)
Residential & multi-family mortgage	24,132		(2,253)		62,821		(7,848)		86,953		(10,101)
	$	167,688	$	(12,316)	$	199,700	$	(25,061)	$	367,388	$	(37,377)

At September 30, 2023 and December 31, 2022, 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 September 30, 2023 and December 31, 2022.

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 September 30, 2023 and December 31, 2022, 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.

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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 September 30, 2023 and December 31, 2022 were as follows:

	September 30, 2023		December 31, 2022
Corporate equity securities	$	5,327	$	6,973
Mutual funds	2,086		1,406
Money market funds	865		479
Corporate notes	670		757
Total	$	8,948	$	9,615

4.    LOANS RECEIVABLE AND ALLOWANCE FOR CREDIT LOSSES

Total net loans receivable at September 30, 2023 and December 31, 2022 are summarized as follows:

	September 30, 2023		Percentage of Total		December 31, 2022		Percentage of Total
Farmland	$	32,794	0.7	%	$	32,168	0.8	%
Owner-occupied, nonfarm nonresidential properties	494,526		11.0		468,493		11.0
Agricultural production and other loans to farmers	1,118		—		1,198		—
Commercial and Industrial	730,542		16.3		791,911		18.5
Obligations (other than securities and leases) of states and political subdivisions	153,722		3.4		145,345		3.4
Other loans	43,082		1.0		24,710		0.6
Other construction loans and all land development and other land loans	461,931		10.3		446,685		10.5
Multifamily (5 or more) residential properties	268,432		6.0		257,696		6.0
Non-owner occupied, nonfarm nonresidential properties	908,520		20.2		795,315		18.6
1-4 Family Construction	54,700		1.2		51,171		1.2
Home equity lines of credit	124,970		2.8		124,892		2.9
Residential Mortgages secured by first liens	992,562		22.1		942,531		22.0
Residential Mortgages secured by junior liens	91,250		2.0		74,638		1.7
Other revolving credit plans	44,476		1.0		36,372		0.9
Automobile	26,077		0.6		21,806		0.5
Other consumer	50,507		1.1		49,144		1.1
Credit cards	12,638		0.3		10,825		0.3
Overdrafts	327		—		278		—
Total loans receivable	$	4,492,174	100.0	%	$	4,275,178	100.0	%
Less: Allowance for credit losses	(45,832)				(43,436)
Loans receivable, net	$	4,446,342			$	4,231,742
Net deferred loan origination fees included in the above table	$	3,335			$	4,463

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 $123.1 million and $156.6 million as of September 30, 2023 and December 31, 2022, respectively.

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Transactions in the allowance for credit losses for the three months ended September 30, 2023 were as follows:

	Beginning Allowance		(Charge-offs)		Recoveries		Provision (Benefit) for Credit Losses on Loans Receivable(1)		Ending Allowance
Farmland	$	140	$	—	$	—	$	(15)	$	125
Owner-occupied, nonfarm nonresidential properties	3,151		—		8		789		3,948
Agricultural production and other loans to farmers	5		—		—		(1)		4
Commercial and Industrial	8,659		(80)		42		(1,142)		7,479
Obligations (other than securities and leases) of states and political subdivisions	2,306		—		—		321		2,627
Other loans	733		—		—		(214)		519
Other construction loans and all land development and other land loans	3,591		—		—		367		3,958
Multifamily (5 or more) residential properties	1,613		—		—		537		2,150
Non-owner occupied, nonfarm nonresidential properties	8,977		(88)		6		1,006		9,901
1-4 Family Construction	408		—		—		(11)		397
Home equity lines of credit	969		(10)		1		(156)		804
Residential Mortgages secured by first liens	9,250		(15)		—		(1,241)		7,994
Residential Mortgages secured by junior liens	1,578		—		—		(59)		1,519
Other revolving credit plans	931		(40)		4		97		992
Automobile	376		(23)		—		13		366
Other consumer	2,561		(423)		23		481		2,642
Credit cards	72		(23)		7		24		80
Overdrafts	221		(153)		32		227		327
Total	$	45,541	$	(855)	$	123	$	1,023	$	45,832

(1) Excludes provision for credit losses related to unfunded commitments. Note 9, "Off-Balance Sheet Commitments and Contingencies," in 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 nine months ended September 30, 2023 were as follows:

	Beginning Allowance		(Charge-offs)		Recoveries		Provision (Benefit) for Credit Losses on Loans Receivable(1)		Ending Allowance
Farmland	$	159	$	—	$	—	$	(34)	$	125
Owner-occupied, nonfarm nonresidential properties	2,905		(26)		23		1,046		3,948
Agricultural production and other loans to farmers	6		—		—		(2)		4
Commercial and Industrial	9,766		(126)		187		(2,348)		7,479
Obligations (other than securities and leases) of states and political subdivisions	1,863		—		—		764		2,627
Other loans	456		—		—		63		519
Other construction loans and all land development and other land loans	3,253		—		—		705		3,958
Multifamily (5 or more) residential properties	2,353		(65)		2		(140)		2,150
Non-owner occupied, nonfarm nonresidential properties	7,653		(336)		6		2,578		9,901
1-4 Family Construction	327		—		—		70		397
Home equity lines of credit	1,173		(10)		4		(363)		804
Residential Mortgages secured by first liens	8,484		(22)		3		(471)		7,994
Residential Mortgages secured by junior liens	1,035		—		—		484		1,519
Other revolving credit plans	722		(98)		21		347		992
Automobile	271		(33)		—		128		366
Other consumer	2,665		(1,405)		97		1,285		2,642
Credit cards	67		(103)		14		102		80
Overdrafts	278		(451)		111		389		327
Total	$	43,436	$	(2,675)	$	468	$	4,603	$	45,832

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

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Transactions in the allowance for credit losses for the three months ended September 30, 2022 were as follows:

	Beginning Allowance		(Charge-offs)		Recoveries		Provision (Benefit) for Credit Losses on Loans Receivable(1)		Ending Allowance
Farmland	$	191	$	—	$	—	$	(8)	$	183
Owner-occupied, nonfarm nonresidential properties	3,714		—		3		(272)		3,445
Agricultural production and other loans to farmers	7		—		—		(2)		5
Commercial and Industrial	9,555		—		32		(21)		9,566
Obligations (other than securities and leases) of states and political subdivisions	1,665		—		—		97		1,762
Other loans	167		—		—		(2)		165
Other construction loans and all land development and other land loans	2,328		—		—		208		2,536
Multifamily (5 or more) residential properties	2,277		—		—		(171)		2,106
Non-owner occupied, nonfarm nonresidential properties	6,748		(169)		336		215		7,130
1-4 Family Construction	236		—		—		(56)		180
Home equity lines of credit	1,353		—		1		26		1,380
Residential Mortgages secured by first liens	7,664		(4)		1		198		7,859
Residential Mortgages secured by junior liens	628		—		—		338		966
Other revolving credit plans	598		(28)		12		58		640
Automobile	242		(7)		2		27		264
Other consumer	2,704		(404)		22		437		2,759
Credit cards	110		(15)		25		(33)		87
Overdrafts	356		(152)		35		(3)		236
Total loans	$	40,543	$	(779)	$	469	$	1,036	$	41,269

(1) Excludes provision for credit losses related to unfunded commitments. Note 9, "Off-Balance Sheet Commitments and Contingencies," in 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 nine months ended September 30, 2022 were as follows:

	Beginning Allowance		(Charge-offs)		Recoveries		Provision (Benefit) for Credit Losses on Loans Receivable(1)		Ending Allowance
Farmland	$	151	$	—	$	—	$	32	$	183
Owner-occupied, nonfarm nonresidential properties	3,339		(21)		12		115		3,445
Agricultural production and other loans to farmers	9		—		—		(4)		5
Commercial and Industrial	8,837		(85)		123		691		9,566
Obligations (other than securities and leases) of states and political subdivisions	1,649		—		—		113		1,762
Other loans	149		—		—		16		165
Other construction loans and all land development and other land loans	2,198		—		—		338		2,536
Multifamily (5 or more) residential properties	2,289		—		—		(183)		2,106
Non-owner occupied, nonfarm nonresidential properties	6,481		(169)		336		482		7,130
1-4 Family Construction	158		—		—		22		180
Home equity lines of credit	1,169		—		11		200		1,380
Residential Mortgages secured by first liens	6,943		(51)		13		954		7,859
Residential Mortgages secured by junior liens	546		—		—		420		966
Other revolving credit plans	528		(73)		46		139		640
Automobile	263		(20)		2		19		264
Other consumer	2,546		(1,174)		63		1,324		2,759
Credit cards	92		(74)		33		36		87
Overdrafts	241		(398)		109		284		236
Total loans	$	37,588	$	(2,065)	$	748	$	4,998	$	41,269

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

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.

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For the three and nine months ended September 30, 2023, the allowance for credit losses increased due to the growth in the Corporation's loan portfolio, including growth in new market areas. This was partially offset by improvements in the Corporation's historical loss rates, as well as the impact of net charge-offs. There is still a significant amount of uncertainty related to 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 $1.1 million and $4.8 million for the three and nine months ended September 30, 2023, respectively, compared to $1.1 million and $5.6 million for the three and nine months ended September 30, 2022, respectively. Included in the provision for credit losses for the three and nine months ended September 30, 2023 was $33 thousand and $148 thousand, respectively, related to the allowance for unfunded commitments compared to $55 thousand and $641 thousand, provision towards the allowance for unfunded commitments for the three and nine months ended September 30, 2022, respectively.

The following tables presents the amortized cost basis of loans receivable on nonaccrual status and loans receivable past due over 89 days still accruing as of September 30, 2023 and December 31, 2022, respectively:

	September 30, 2023
	Nonaccrual		Nonaccrual With No Allowance for Credit Loss		Loans Receivable Past Due over 89 Days Still Accruing
Farmland	$	929	$	929	$	—
Owner-occupied, nonfarm nonresidential properties	2,983		1,798		—
Commercial and Industrial	5,152		4,705		—
Other construction loans and all land development and other land loans	1,613		64		—
Multifamily (5 or more) residential properties	305		305		—
Non-owner occupied, nonfarm nonresidential properties	9,855		7,232		—
Home equity lines of credit	566		566		—
Residential Mortgages secured by first liens	4,717		4,297		134
Residential Mortgages secured by junior liens	128		128		—
Other revolving credit plans	32		32		—
Automobile	22		22		—
Other consumer	763		763		—
Credit cards	—		—		97
Total	$	27,065	$	20,841	$	231

	December 31, 2022
	Nonaccrual		Nonaccrual With No Allowance for Credit Loss		Loans Receivable Past Due over 89 Days Still Accruing
Farmland	$	1,011	$	1,011	$	994
Owner-occupied, nonfarm nonresidential properties	2,055		1,987		—
Commercial and Industrial	5,485		2,366		71
Other construction loans and all land development and other land loans	567		567		—
Multifamily (5 or more) residential properties	1,066		423		—
Non-owner occupied, nonfarm nonresidential properties	5,081		2,665		—
Home equity lines of credit	475		475		—
Residential Mortgages secured by first liens	4,329		3,882		48
Residential Mortgages secured by junior liens	91		91		—
Other revolving credit plans	26		26		—
Automobile	19		19		—
Other consumer	781		781		—
Credit cards	—		—		8
Total	$	20,986	$	14,293	$	1,121

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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.

The following table presents the amortized cost basis of loans receivable that are individually evaluated and collateral-dependent by class of loans as of September 30, 2023:

	Real Estate Collateral		Non-Real Estate Collateral
Farmland	$	763	$	—
Owner-occupied, nonfarm nonresidential properties	6,898		4
Commercial and Industrial	5,488		1,681
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	8,858		—
Home equity lines of credit	317		—
Residential Mortgages secured by first liens	1,087		—
Total	$	25,265	$	1,685

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, 2022:

	Real Estate Collateral		Non-Real Estate Collateral
Farmland	$	829	$	—
Owner-occupied, nonfarm nonresidential properties	1,296		4
Commercial and Industrial	—		1,904
Other construction loans and all land development and other land loans	501		—
Multifamily (5 or more) residential properties	1,066		—
Non-owner occupied, nonfarm nonresidential properties	5,874		—
Home equity lines of credit	335		—
Residential Mortgages secured by first liens	1,150		—
Total	$	11,051	$	1,908

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The following table presents the aging of the amortized cost basis in past-due loans receivable as of September 30, 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	$	32,483	$	32,794
Owner-occupied, nonfarm nonresidential properties	642		623		1,463		2,728		491,798		494,526
Agricultural production and other loans to farmers	—		—		—		—		1,118		1,118
Commercial and Industrial	341		157		334		832		729,710		730,542
Obligations (other than securities and leases) of states and political subdivisions	—		—		—		—		153,722		153,722
Other loans	—		—		—		—		43,082		43,082
Other construction loans and all land development and other land loans	—		42		1,613		1,655		460,276		461,931
Multifamily (5 or more) residential properties	—		305		—		305		268,127		268,432
Non-owner occupied, nonfarm nonresidential properties	219		—		8,247		8,466		900,054		908,520
1-4 Family Construction	—		—		—		—		54,700		54,700
Home equity lines of credit	926		168		20		1,114		123,856		124,970
Residential Mortgages secured by first liens	2,382		1,271		1,641		5,294		987,268		992,562
Residential Mortgages secured by junior liens	47		—		90		137		91,113		91,250
Other revolving credit plans	29		39		7		75		44,401		44,476
Automobile	106		87		11		204		25,873		26,077
Other consumer	456		227		361		1,044		49,463		50,507
Credit cards	1,255		53		97		1,405		11,233		12,638
Overdrafts	—		—		—		—		327		327
Total	$	6,585	$	2,972	$	14,013	$	23,570	$	4,468,604	$	4,492,174

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The following table presents the aging of the amortized cost basis in past-due loans receivable as of December 31, 2022 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	$	—	$	—	$	1,136	$	1,136	$	31,032	$	32,168
Owner-occupied, nonfarm nonresidential properties	185		27		734		946		467,547		468,493
Agricultural production and other loans to farmers	—		—		—		—		1,198		1,198
Commercial and Industrial	246		93		611		950		790,961		791,911
Obligations (other than securities and leases) of states and political subdivisions	—		—		—		—		145,345		145,345
Other loans	—		—		—		—		24,710		24,710
Other construction loans and all land development and other land loans	1,522		—		501		2,023		444,662		446,685
Multifamily (5 or more) residential properties	706		—		90		796		256,900		257,696
Non-owner occupied, nonfarm nonresidential properties	113		60		879		1,052		794,263		795,315
1-4 Family Construction	—		—		—		—		51,171		51,171
Home equity lines of credit	203		10		49		262		124,630		124,892
Residential Mortgages secured by first liens	1,302		538		1,775		3,615		938,916		942,531
Residential Mortgages secured by junior liens	5		—		51		56		74,582		74,638
Other revolving credit plans	65		27		—		92		36,280		36,372
Automobile	36		—		—		36		21,770		21,806
Other consumer	361		188		473		1,022		48,122		49,144
Credit cards	196		18		8		222		10,603		10,825
Overdrafts	—		—		—		—		278		278
Total	$	4,940	$	961	$	6,307	$	12,208	$	4,262,970	$	4,275,178

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.

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The following table presents the amortized cost basis of loans at September 30, 2023 that were both experiencing financial difficulty and modified during the three months ended September 30, 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	$	—	$	760	$	—	$	—	$	—	0.2	%
Non-owner occupied, nonfarm nonresidential properties	—		6,215		—		—		785		0.8
Total	$	—	$	6,975	$	—	$	—	$	785	0.2	%

The following table presents the amortized cost basis of loans at September 30, 2023 that were both experiencing financial difficulty and modified during the nine months ended September 30, 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	$	—	$	6,010	$	—	$	—	$	—	1.2	%
Commercial and Industrial	—		7,870		554		333		113		1.2
Non-owner occupied, nonfarm nonresidential properties	—		6,215		—		—		785		0.8
Total	$	—	$	20,095	$	554	$	333	$	898	0.5	%

The Corporation has approximately $167 thousand in 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 three months ended September 30, 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	$	64	$	—	$	—	$	696	$	696
Non-owner occupied, nonfarm nonresidential properties	785		—		—		6,215		6,215
Total	$	849	$	—	$	—	$	6,911	$	6,911

The following table presents the performance of such loans that have been modified during the nine months ended September 30, 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	$	5,314	$	—	$	—	$	696	$	696
Commercial and Industrial	8,870		—		—		—		—
Non-owner occupied, nonfarm nonresidential properties	785		—		—		6,215		6,215
Total	$	14,969	$	—	$	—	$	6,911	$	6,911

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The following table presents the financial effect of the loan modifications presented above to borrowers experiencing financial difficulty for the three months ended September 30, 2023:

	Principal Forgiveness		Weighted Average Term Extension (in years)	Weighted Average Interest Rate Reduction
Non-owner occupied, nonfarm nonresidential properties	$	—	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 nine months ended September 30, 2023:

	Principal Forgiveness		Weighted Average Term Extension (in years)	Weighted Average Interest Rate Reduction
Commercial and Industrial	$	—	1.00	0.5	%
Non-owner occupied, nonfarm nonresidential properties	—		1.00	—
Total	$	—	1.00	0.5	%

The following table presents the amortized cost basis of loans that had a payment default during the nine months ended September 30, 2023 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
Other construction loans and all land development and other land loans	$	—	$	1,549	$	—	$	—	$	—
Non-owner occupied, nonfarm nonresidential properties	—		—		1,523		—		—
Total	$	—	$	1,549	$	1,523	$	—	$	—

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.

Troubled Debt Restructurings Prior to the Adoption of ASU 2022-02

As of December 31, 2022, the terms of certain loans were modified as TDRs. The modification of the terms of such loans included either or both of the following: a reduction of the stated interest rate of the loan; or an extension of the maturity date at a stated rate of interest lower than the current market rate for new debt with similar risk. The Corporation had an amortized cost in TDRs of $12.4 million as of December 31, 2022. The Corporation has allocated $2.2 million of allowance for those loans as of December 31, 2022.

There was one loan modified as a TDR during the three months ended September 30, 2022:

	Three Months Ended September 30, 2022
	Number of Loans	Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment		Type of Modification
Commercial and Industrial	1	$	96	$	96	Extend Amortization
Total	1	$	96	$	96

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There were two loans modified as a TDR during the nine months ended September 30, 2022:

	Nine Months Ended September 30, 2022
	Number of Loans	Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment		Type of Modification
Commercial and Industrial	1	$	96	$	96	Extend Amortization
Non-owner occupied, nonfarm nonresidential properties	1	1,784		1,784		Modify Rate and Extend Amortization
Total	2	$	1,880	$	1,880

The TDRs described above increased the allowance for credit losses by an immaterial amount for the three and nine months ended September 30, 2022.

A loan receivable is considered to be in payment default once it is 90 days contractually past due under the modified terms. There were no loans modified as TDRs for which there was a payment default within a twelve-month cycle following the modification during the three and nine months ended September 30, 2022. There were no principal balances forgiven in connection with the loans restructurings.

As discussed above, effective for January 1, 2023, the Corporation adopted prospectively Accounting Standard Update 2022-02, which eliminated the separate recognition and measurement guidance for TDRs by creditors.

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.

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.

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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.

	September 30, 2023
			Non-Pass Rated
	Pass		Special Mention		Substandard		Doubtful		Total Non-Pass		Total
Farmland	$	31,683	$	182	$	929	$	—	$	1,111	$	32,794
Owner-occupied, nonfarm nonresidential properties	461,070		21,846		11,610		—		33,456		494,526
Agricultural production and other loans to farmers	1,118		—		—		—		—		1,118
Commercial and Industrial	683,830		30,924		14,597		1,191		46,712		730,542
Obligations (other than securities and leases) of states and political subdivisions	140,389		13,333		—		—		13,333		153,722
Other loans	43,082		—		—		—		—		43,082
Other construction loans and all land development and other land loans	455,011		5,307		1,613		—		6,920		461,931
Multifamily (5 or more) residential properties	267,632		—		800		—		800		268,432
Non-owner occupied, nonfarm nonresidential properties	882,563		1,487		24,470		—		25,957		908,520
Total	$	2,966,378	$	73,079	$	54,019	$	1,191	$	128,289	$	3,094,667

	December 31, 2022
			Non-Pass Rated
	Pass		Special Mention		Substandard		Doubtful		Total Non-Pass		Total
Farmland	$	29,706	$	1,450	$	1,012	$	—	$	2,462	$	32,168
Owner-occupied, nonfarm nonresidential properties	433,467		27,796		7,230		—		35,026		468,493
Agricultural production and other loans to farmers	1,198		—		—		—		—		1,198
Commercial and Industrial	765,821		14,740		10,037		1,313		26,090		791,911
Obligations (other than securities and leases) of states and political subdivisions	145,345		—		—		—		—		145,345
Other loans	24,710		—		—		—		—		24,710
Other construction loans and all land development and other land loans	443,300		1,296		2,089		—		3,385		446,685
Multifamily (5 or more) residential properties	256,120		510		1,066		—		1,576		257,696
Non-owner occupied, nonfarm nonresidential properties	772,450		2,791		20,074		—		22,865		795,315
Total	$	2,872,117	$	48,583	$	41,508	$	1,313	$	91,404	$	2,963,521

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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 September 30, 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	$	3,088	$	11,601	$	7,321	$	1,474	$	831	$	6,928	$	440	$	—	$	31,683
Special mention	—		—		—		—		—		182		—		—		182
Substandard	—		—		306		—		—		623		—		—		929
Total	$	3,088	$	11,601	$	7,627	$	1,474	$	831	$	7,733	$	440	$	—	$	32,794
Current period gross write offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Owner-occupied, nonfarm nonresidential properties
Risk rating
Pass	$	54,399	$	121,809	$	105,563	$	45,267	$	46,542	$	77,245	$	10,245	$	—	$	461,070
Special mention	—		3,108		1,191		13,620		412		334		3,181		—		21,846
Substandard	—		—		696		308		6,816		3,620		170		—		11,610
Total	$	54,399	$	124,917	$	107,450	$	59,195	$	53,770	$	81,199	$	13,596	$	—	$	494,526
Current period gross write offs	$	—	$	—	$	—	$	—	$	—	$	26	$	—	$	—	$	26
Agricultural production and other loans to farmers
Risk rating
Pass	$	81	$	44	$	92	$	68	$	5	$	162	$	666	$	—	$	1,118
Special mention	—		—		—		—		—		—		—		—		—
Substandard	—		—		—		—		—		—		—		—		—
Total	$	81	$	44	$	92	$	68	$	5	$	162	$	666	$	—	$	1,118
Current period gross write offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Commercial and Industrial
Risk rating
Pass	$	68,653	$	147,302	$	160,124	$	37,836	$	7,759	$	18,437	$	243,719	$	—	$	683,830
Special mention	—		7,584		3,180		6,310		58		20		13,772		—		30,924
Substandard	—		253		2,828		614		3,497		2,318		5,087		—		14,597
Doubtful(1)	—		—		1,191		—		—		—		—		—		1,191
Total	$	68,653	$	155,139	$	167,323	$	44,760	$	11,314	$	20,775	$	262,578	$	—	$	730,542
Current period gross write offs	$	50	$	—	$	—	$	—	$	—	$	—	$	76	$	—	$	126
Obligations (other than securities and leases) of states and political subdivisions
Risk rating
Pass	$	23,561	$	16,969	$	32,123	$	12,556	$	4,276	$	46,460	$	4,444	$	—	$	140,389
Special mention	—		—		—		—		—		13,333		—		—		13,333
Substandard	—		—		—		—		—		—		—		—		—
Total	$	23,561	$	16,969	$	32,123	$	12,556	$	4,276	$	59,793	$	4,444	$	—	$	153,722
Current period gross write offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Other loans
Risk rating
Pass	$	3,065	$	12,099	$	5,307	$	1,925	$	296	$	—	$	20,390	$	—	$	43,082
Special mention	—		—		—		—		—		—		—		—		—
Substandard	—		—		—		—		—		—		—		—		—
Total	$	3,065	$	12,099	$	5,307	$	1,925	$	296	$	—	$	20,390	$	—	$	43,082
Current period gross write offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—

(1) Consists of one loan relationship originated in 2015 and modified in 2021. The modification met the requirements to disclose the loan relationship as a new loan during 2021.

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	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	$	81,675	$	240,639	$	97,364	$	20,642	$	6,378	$	1,380	$	6,933	$	—	$	455,011
Special mention	—		5,307		—		—		—		—		—		—		5,307
Substandard	—		—		—		—		1,549		—		64		—		1,613
Total	$	81,675	$	245,946	$	97,364	$	20,642	$	7,927	$	1,380	$	6,997	$	—	$	461,931
Current period gross write offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Multifamily (5 or more) residential properties
Risk rating
Pass	$	40,505	$	96,888	$	44,058	$	44,901	$	11,167	$	29,164	$	949	$	—	$	267,632
Special mention	—		—		—		—		—		—		—		—		—
Substandard	305		—		—		—		—		495		—		—		800
Total	$	40,810	$	96,888	$	44,058	$	44,901	$	11,167	$	29,659	$	949	$	—	$	268,432
Current period gross write offs	$	—	$	—	$	—	$	—	$	—	$	65	$	—	$	—	$	65
Non-owner occupied, nonfarm nonresidential properties
Risk rating
Pass	$	193,128	$	298,199	$	156,405	$	43,005	$	55,259	$	129,140	$	7,427	$	—	$	882,563
Special mention	—		351		—		—		—		700		436		—		1,487
Substandard	782		1,396		488		6,215		3,283		10,588		1,718		—		24,470
Total	$	193,910	$	299,946	$	156,893	$	49,220	$	58,542	$	140,428	$	9,581	$	—	$	908,520
Current period gross write offs	$	—	$	—	$	—	$	—	$	88	$	—	$	248	$	—	$	336

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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, 2022. Current period originations may include modifications.

	Term Loans Amortized Cost Basis by Origination Year
	2022		2021		2020		2019		2018		Prior		Revolving Loans Amortized Cost Basis		Revolving Loans Converted to Term		Total
Farmland
Risk rating
Pass	$	12,321	$	7,635	$	1,536	$	871	$	3,277	$	3,523	$	543	$	—	$	29,706
Special mention	—		—		—		—		—		1,450		—		—		1,450
Substandard	—		347		—		—		142		523		—		—		1,012
Total	$	12,321	$	7,982	$	1,536	$	871	$	3,419	$	5,496	$	543	$	—	$	32,168
Owner-occupied, nonfarm nonresidential properties
Risk rating
Pass	$	116,701	$	113,575	$	50,226	$	55,040	$	25,327	$	60,810	$	11,788	$	—	$	433,467
Special mention	3,402		—		15,613		872		4,097		814		2,998		—		27,796
Substandard	—		—		355		1,864		862		4,149		—		—		7,230
Total	$	120,103	$	113,575	$	66,194	$	57,776	$	30,286	$	65,773	$	14,786	$	—	$	468,493
Agricultural production and other loans to farmers
Risk rating
Pass	$	105	$	140	$	80	$	42	$	179	$	—	$	652	$	—	$	1,198
Special mention	—		—		—		—		—		—		—		—		—
Substandard	—		—		—		—		—		—		—		—		—
Total	$	105	$	140	$	80	$	42	$	179	$	—	$	652	$	—	$	1,198
Commercial and Industrial
Risk rating
Pass	$	195,955	$	213,433	$	51,695	$	16,730	$	9,051	$	19,116	$	259,841	$	—	$	765,821
Special mention	241		—		6,691		273		81		45		7,409		—		14,740
Substandard	299		1,809		689		379		324		913		5,624		—		10,037
Doubtful(1)	—		1,313		—		—		—		—		—		—		1,313
Total	$	196,495	$	216,555	$	59,075	$	17,382	$	9,456	$	20,074	$	272,874	$	—	$	791,911
Obligations (other than securities and leases) of states and political subdivisions
Risk rating
Pass	$	20,840	$	37,527	$	13,868	$	4,584	$	13,518	$	50,050	$	4,958	$	—	$	145,345
Special mention	—		—		—		—		—		—		—		—		—
Substandard	—		—		—		—		—		—		—		—		—
Total	$	20,840	$	37,527	$	13,868	$	4,584	$	13,518	$	50,050	$	4,958	$	—	$	145,345
Other loans
Risk rating
Pass	$	14,248	$	5,358	$	2,278	$	363	$	—	$	—	$	2,463	$	—	$	24,710
Special mention	—		—		—		—		—		—		—		—		—
Substandard	—		—		—		—		—		—		—		—		—
Total	$	14,248	$	5,358	$	2,278	$	363	$	—	$	—	$	2,463	$	—	$	24,710

(1) Consists of one loan relationship originated in 2015 and modified in 2021. The modification met the requirements to disclose the loan relationship as a new loan during 2021.

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	Term Loans Amortized Cost Basis by Origination Year
	2022		2021		2020		2019		2018		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	$	272,118	$	86,894	$	56,782	$	6,918	$	8,644	$	916	$	11,028	$	—	$	443,300
Special mention	1,296		—		—		—		—		—		—		—		1,296
Substandard	—		2,023		—		—		—		—		66		—		2,089
Total	$	273,414	$	88,917	$	56,782	$	6,918	$	8,644	$	916	$	11,094	$	—	$	446,685
Multifamily (5 or more) residential properties
Risk rating
Pass	$	114,454	$	49,794	$	46,784	$	11,854	$	6,764	$	23,841	$	2,629	$	—	$	256,120
Special mention	—		—		—		—		—		510		—		—		510
Substandard	643		—		—		—		333		90		—		—		1,066
Total	$	115,097	$	49,794	$	46,784	$	11,854	$	7,097	$	24,441	$	2,629	$	—	$	257,696
Non-owner occupied, nonfarm nonresidential properties
Risk rating
Pass	$	339,151	$	153,613	$	51,709	$	66,592	$	45,211	$	107,988	$	8,186	$	—	$	772,450
Special mention	—		488		—		273		498		1,068		464		—		2,791
Substandard	2,227		800		—		4,090		1,314		9,587		2,056		—		20,074
Total	$	341,378	$	154,901	$	51,709	$	70,955	$	47,023	$	118,643	$	10,706	$	—	$	795,315

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.

	September 30, 2023						December 31, 2022
	Performing		Nonperforming		Total		Performing		Nonperforming		Total
1-4 Family Construction	$	54,700	$	—	$	54,700	$	51,171	$	—	$	51,171
Home equity lines of credit	124,404		566		124,970		124,417		475		124,892
Residential Mortgages secured by first liens	987,711		4,851		992,562		938,154		4,377		942,531
Residential Mortgages secured by junior liens	91,122		128		91,250		74,547		91		74,638
Other revolving credit plans	44,444		32		44,476		36,346		26		36,372
Automobile	26,055		22		26,077		21,787		19		21,806
Other consumer	49,744		763		50,507		48,363		781		49,144
Total	$	1,378,180	$	6,362	$	1,384,542	$	1,294,785	$	5,769	$	1,300,554

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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 September 30, 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
1-4 Family Construction
Payment performance
Performing	$	18,085	$	23,345	$	10,499	$	1,209	$	705	$	59	$	798	$	—	$	54,700
Nonperforming	—		—		—		—		—		—		—		—		—
Total	$	18,085	$	23,345	$	10,499	$	1,209	$	705	$	59	$	798	$	—	$	54,700
Current period gross write offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Home equity lines of credit
Payment performance
Performing	$	15,085	$	34,068	$	12,757	$	9,826	$	7,537	$	33,347	$	7,025	$	4,759	$	124,404
Nonperforming	—		—		—		—		—		14		—		552		566
Total	$	15,085	$	34,068	$	12,757	$	9,826	$	7,537	$	33,361	$	7,025	$	5,311	$	124,970
Current period gross write offs	$	—	$	—	$	—	$	—	$	10	$	—	$	—	$	—	$	10
Residential mortgages secured by first lien
Payment performance
Performing	$	117,554	$	227,592	$	206,943	$	148,130	$	81,920	$	202,405	$	3,167	$	—	$	987,711
Nonperforming	86		41		1,042		230		536		2,723		193		—		4,851
Total	$	117,640	$	227,633	$	207,985	$	148,360	$	82,456	$	205,128	$	3,360	$	—	$	992,562
Current period gross write offs	$	—	$	—	$	—	$	—	$	—	$	22	$	—	$	—	$	22
Residential mortgages secured by junior liens
Payment performance
Performing	$	26,611	$	27,835	$	14,604	$	7,409	$	4,039	$	9,394	$	1,230	$	—	$	91,122
Nonperforming	—		39		—		—		—		46		43		—		128
Total	$	26,611	$	27,874	$	14,604	$	7,409	$	4,039	$	9,440	$	1,273	$	—	$	91,250
Current period gross write offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Other revolving credit plans
Payment performance
Performing	$	8,991	$	7,826	$	2,771	$	11,352	$	1,645	$	11,859	$	—	$	—	$	44,444
Nonperforming	—		—		—		—		5		27		—		—		32
Total	$	8,991	$	7,826	$	2,771	$	11,352	$	1,650	$	11,886	$	—	$	—	$	44,476
Current period gross write offs	$	—	$	—	$	50	$	4	$	11	$	33	$	—	$	—	$	98
Automobile
Payment performance
Performing	$	11,413	$	7,654	$	3,009	$	1,783	$	1,273	$	923	$	—	$	—	$	26,055
Nonperforming	—		7		—		7		8		—		—		—		22
Total	$	11,413	$	7,661	$	3,009	$	1,790	$	1,281	$	923	$	—	$	—	$	26,077
Current period gross write offs	$	—	$	18	$	—	$	8	$	7	$	—	$	—	$	—	$	33
Other consumer
Payment performance
Performing	$	20,983	$	15,172	$	6,925	$	3,472	$	1,584	$	1,608	$	—	$	—	$	49,744
Nonperforming	200		400		85		12		23		43		—		—		763
Total	$	21,183	$	15,572	$	7,010	$	3,484	$	1,607	$	1,651	$	—	$	—	$	50,507
Current period gross write offs	$	37	$	874	$	372	$	86	$	24	$	12	$	—	$	—	$	1,405

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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, 2022. Current period originations may include modifications.

	Term Loans Amortized Cost Basis by Origination Year
	2022		2021		2020		2019		2018		Prior		Revolving Loans Amortized Cost Basis		Revolving Loans Converted to Term		Total
1-4 Family Construction
Payment performance
Performing	$	30,451	$	16,360	$	2,577	$	752	$	62	$	—	$	969	$	—	$	51,171
Nonperforming	—		—		—		—		—		—		—		—		—
Total	$	30,451	$	16,360	$	2,577	$	752	$	62	$	—	$	969	$	—	$	51,171
Home equity lines of credit
Payment performance
Performing	$	34,738	$	13,654	$	12,903	$	8,587	$	7,924	$	38,127	$	8,484	$	—	$	124,417
Nonperforming	—		—		—		10		—		465		—		—		475
Total	$	34,738	$	13,654	$	12,903	$	8,597	$	7,924	$	38,592	$	8,484	$	—	$	124,892
Residential mortgages secured by first lien
Payment performance
Performing	$	229,842	$	222,522	$	159,651	$	91,238	$	49,587	$	181,939	$	3,375	$	—	$	938,154
Nonperforming	—		771		273		581		416		2,150		186		—		4,377
Total	$	229,842	$	223,293	$	159,924	$	91,819	$	50,003	$	184,089	$	3,561	$	—	$	942,531
Residential mortgages secured by junior liens
Payment performance
Performing	$	31,837	$	17,163	$	8,326	$	4,956	$	3,073	$	8,395	$	797	$	—	$	74,547
Nonperforming	—		—		—		—		—		47		44		—		91
Total	$	31,837	$	17,163	$	8,326	$	4,956	$	3,073	$	8,442	$	841	$	—	$	74,638
Other revolving credit plans
Payment performance
Performing	$	10,778	$	2,820	$	7,911	$	2,264	$	2,265	$	10,308	$	—	$	—	$	36,346
Nonperforming	—		—		—		4		14		8		—		—		26
Total	$	10,778	$	2,820	$	7,911	$	2,268	$	2,279	$	10,316	$	—	$	—	$	36,372
Automobile
Payment performance
Performing	$	10,146	$	4,637	$	2,945	$	2,349	$	1,117	$	593	$	—	$	—	$	21,787
Nonperforming	—		—		10		7		2		—		—		—		19
Total	$	10,146	$	4,637	$	2,955	$	2,356	$	1,119	$	593	$	—	$	—	$	21,806
Other consumer
Payment performance
Performing	$	26,699	$	12,120	$	5,333	$	2,176	$	776	$	1,259	$	—	$	—	$	48,363
Nonperforming	403		220		85		22		6		45		—		—		781
Total	$	27,102	$	12,340	$	5,418	$	2,198	$	782	$	1,304	$	—	$	—	$	49,144

	September 30, 2023		December 31, 2022
Credit card
Payment performance
Performing	$	12,541	$	10,817
Nonperforming	97		8
Total	$	12,638	$	10,825
Current period gross write offs	$	103

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Holiday’s loan portfolio, included in other consumer loans above, is summarized as follows at September 30, 2023 and December 31, 2022: 

	September 30, 2023		December 31, 2022
Gross other consumer	$	30,812	$	31,821
Less: other consumer unearned discounts	(5,667)		(5,972)
Total other consumer loans, net of unearned discounts	$	25,145	$	25,849

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	September 30, 2023		December 31, 2022
Assets:
Operating lease assets	Operating lease assets	$	36,065	$	32,307
Finance lease assets	Premises and equipment, net (1)	232		286
Total leased assets		$	36,297	$	32,593
Liabilities:
Operating lease liabilities	Operating lease liabilities	$	37,998	$	33,726
Finance lease liabilities	Accrued interest payable and other liabilities	316		383
Total leased liabilities		$	38,314	$	34,109

(1) Finance lease assets are recorded net of accumulated amortization of $984 thousand as of September 30, 2023 and $930 thousand as of December 31, 2022.

The components of the Corporation's net lease expense for the three and nine months ended September 30, 2023 and 2022, respectively, were as follows:

		Three Months Ended September 30,				Nine Months Ended September 30,
Lease Cost	Classification	2023		2022		2023		2022
Operating lease cost	Net occupancy expense	$	745	$	577	$	2,224	$	1,635
Variable lease cost	Net occupancy expense	27		14		71		44
Finance lease cost:
Amortization of leased assets	Net occupancy expense	18		18		54		54
Interest on lease liabilities	Interest expense - borrowed funds	4		5		12		15
Sublease income (1)	Net occupancy expense	(20)		(23)		(66)		(56)
Net lease cost		$	774	$	591	$	2,295	$	1,692

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

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The following table sets forth future minimum rental payments under noncancellable leases with initial terms in excess of one year as of September 30, 2023:

Maturity of Lease Liabilities as of September 30, 2023	Operating Leases (1)		Finance Leases		Total
2023	$	843	$	26	$	869
2024	2,554		105		2,659
2025	2,579		105		2,684
2026	2,567		105		2,672
2027	2,543		—		2,543
After 2027	50,239		—		50,239
Total lease payments	61,325		341		61,666
Less: Interest	23,327		25		23,352
Present value of lease liabilities	$	37,998	$	316	$	38,314

(1) Operating lease payments include payments related to options to extend lease terms that are reasonably certain of being exercised and exclude $4.8 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 September 30, 2023 and December 31, 2022 were as follows:

Lease Term and Discount Rate	September 30, 2023		December 31, 2022
Weighted-average remaining lease term (years)
Operating leases	23.2		23.9
Finance leases	3.3		4.0
Weighted-average discount rate
Operating leases	4.05	%	3.83	%
Finance leases	4.49	%	4.49	%

Other information related to the Corporation's lease liabilities as of September 30, 2023 and 2022, respectively, was as follows:

Other Information	September 30, 2023		September 30, 2022
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating leases	$	869	$	888

6.    DEPOSITS

The following table reflects time certificates of deposit accounts included in total deposits and their remaining maturities at September 30, 2023:

Time deposits maturing:
2023	$	82,668
2024	378,980
2025	73,075
2026	9,081
2027	6,616
Thereafter	4,320
	$	554,740

Certificates of deposits of $250 thousand or more totaled $101.2 million and $135.4 million at September 30, 2023 and December 31, 2022, respectively.

The Corporation had $265.8 million in brokered deposits as of September 30, 2023 compared to $24.1 million at December 31, 2022. In addition, the Corporation had $595.7 million and $4.6 million in reciprocal deposits at September 30, 2023 and December 31, 2022, respectively.

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7.    BORROWINGS

At September 30, 2023 and December 31, 2022, 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 September 30, 2023 and December 31, 2022.

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 receivable pledged to the FHLB at September 30, 2023, and December 31, 2022 were $1.8 billion and $1.6 billion, respectively. The Bank could obtain advances of up to approximately $988.5 million from the FHLB at September 30, 2023 and $757.8 million at December 31, 2022.

At September 30, 2023 and December 31, 2022, outstanding advances from the FHLB were as follows.

	September 30, 2023		December 31, 2022
Open Repo borrowing at an interest rate of 5.68% and 4.45% at September 30, 2023 and December 31, 2022, respectfully. The maximum amount of the Open Repo borrowing available is $250,000.	$	—	$	132,396
Total	$	—	$	132,396

At September 30, 2023 and December 31, 2022, municipal deposit letters of credit issued by the FHLB on behalf of the Bank naming applicable municipalities as beneficiaries were $155.5 million and $75.5 million, respectively. The letters of credit were utilized in place of securities pledged to the municipalities for their deposits maintained at the Bank.

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 September 30, 2023, the Bank had borrowing capacity through the Federal Reserve BIC program of $190.4 million. Borrowings under the BIC program are overnight advances with interest chargeable at the discount window (“primary credit”) borrowing rate. At September 30, 2023, the Bank has pledged certain qualifying loans with an unpaid principal balance of $291.7 million and securities with a carrying value of $10.0 million as collateral.

At September 30, 2023 and December 31, 2022, 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 September 30, 2023 and December 31, 2022, the Bank had no outstanding borrowings from unaffiliated institutions under overnight borrowing agreements.

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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 7.22% at September 30, 2023 and 6.32% at December 31, 2022. 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 $0.8 million and $1.0 million as of September 30, 2023 and December 31, 2022, respectively.

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 September 30, 2023 were as follows:

Beginning balance	$	40,519
New loans and advances	9
Effect of changes in composition of related parties	—
Repayments	(609)
Ending balance	$	39,919

Loans to principal officers, directors, and their affiliates during the nine months ended September 30, 2023 were as follows:

Beginning balance	$	44,998
New loans and advances	2,716
Effect of changes in composition of related parties	(491)
Repayments	(7,304)
Ending balance	$	39,919

Deposits from directors, executive officers, and their affiliates were $9.2 million and $13.7 million at September 30, 2023 and December 31, 2022, respectively.

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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 September 30, 2023 and December 31, 2022, 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 September 30, 2023 and December 31, 2022 were as follows:

	September 30, 2023				December 31, 2022
	Fixed Rate		Variable Rate		Fixed Rate		Variable Rate
Commitments to extended credit	$	117,790	$	429,686	$	126,594	$	441,008
Unused lines of credit	12,203		781,993		7,444		725,277
Standby letters of credit	17,429		1,963		16,124		1,603

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.

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The following table presents activity in the allowance for credit losses on unfunded loan commitments for the three and nine months ended September 30, 2023 and 2022, respectively:

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2023		2022		2023		2022
Beginning balance	$	718	$	586	$	603	$	0
Provision for credit losses on unfunded loan commitments (1)	33		55		148		641
Ending balance	$	751	$	641	$	751	$	641

(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 September 30, 2023 and December 31, 2022 were $20.0 million and $17.0 million, respectively. Unfunded capital commitments in investments in SBIC's and other limited partnerships totaled $5.5 million and $5.5 million as of September 30, 2023 and December 31, 2022, 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 consolidated balance sheet, as of September 30, 2023 and December 31, 2022 were $4.0 million and $4.5 million, respectively. The related amortization for the three and nine months ended September 30, 2023 was $185 thousand and $558 thousand, respectively, and for the three and nine months ended September 30, 2022 were $198 thousand and $593 thousand, respectively. Unfunded commitments, reported in accrued interest payable and other liabilities on the condensed consolidated balance sheets, as of September 30, 2023 and December 31, 2022 were $796 thousand and $1.0 million, 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.

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 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 September 30, 2023, 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 and nine months ended September 30, 2023 and 2022.

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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 $350 thousand and $1.3 million for the three and nine months ended September 30, 2023, respectively, and $256 thousand and $1.0 million for the three and nine months ended September 30, 2022, respectively. The total income tax benefit related to the recognized compensation cost of vested restricted stock awards was $74 thousand and $275 thousand for the three and nine months ended September 30, 2023, respectively, and $54 thousand and $213 thousand for the three and nine months ended September 30, 2022, respectively.

A summary of changes in time-based unvested restricted stock awards for the three months ended September 30, 2023 follows:

	Shares	Per Share Weighted Average Grant Date Fair Value
Unvested at beginning of period	132,972	$	24.12
Granted	—	—
Forfeited	(1,393)	24.49
Vested	(1,362)	24.02
Unvested at end of period	130,217	$	24.11

A summary of changes in time-based unvested restricted stock awards for the nine months ended September 30, 2023 follows:

	Shares	Per Share Weighted Average Grant Date Fair Value
Unvested at beginning of period	69,746	$	25.21
Granted	90,675	23.63
Forfeited	(4,196)	24.35
Vested	(26,008)	25.30
Unvested at end of period	130,217	$	24.11

The above table excludes 14,510 shares in restricted stock awards that were granted at a weighted average fair value of $24.12 and immediately vested. As of September 30, 2023 and December 31, 2022, there was $2.4 million and $1.2 million of total unrecognized compensation cost related to unvested restricted stock awards, respectively. The fair value of shares vested was $25 thousand and $963 thousand during the three and nine months ended September 30, 2023, respectively, and $31 thousand and $1.0 million during the three and nine months ended September 30, 2022, respectively.

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 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 2021, awards with a maximum of 18,210 shares in aggregate were granted to key employees.

In 2022, the 2020 PBRSAs were fully earned and in 2023, 4,118 shares were fully distributed. The fair value of the shares distributed in 2023 was $99 thousand.

11.    EARNINGS PER COMMON SHARE

Basic earnings per common share is computed by dividing net income, excluding net earnings allocated to participating securities, by the weighted average number of shares outstanding during the applicable period, excluding outstanding participating securities. Diluted earnings per common share is computed using the weighted average number of shares determined for the basic computation plus the dilutive effect of potential common shares issuable under certain stock compensation plans. For the three and nine months ended September 30, 2023 and 2022, 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 unvested time-based stock awards are participating securities.

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

	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022
Basic earnings per common share computation:
Net income per condensed consolidated statements of income	$	12,651	$	15,549	$	40,817	$	44,082
Net earnings allocated to participating securities	(70)		(66)		(222)		(198)
Net earnings allocated to common stock	$	12,581	$	15,483	$	40,595	$	43,884
Distributed earnings allocated to common stock	$	3,645	$	2,936	$	10,969	$	8,815
Undistributed earnings allocated to common stock	8,936		12,547		29,626		35,069
Net earnings allocated to common stock	$	12,581	$	15,483	$	40,595	$	43,884
Weighted average common shares outstanding, including shares considered participating securities	20,969		17,324		21,048		17,024
Less: Average participating securities	(109)		(70)		(109)		(73)
Weighted average shares	20,860		17,254		20,939		16,951
Basic earnings per common share	$	0.60	$	0.90	$	1.94	$	2.59
Diluted earnings per common share computation:
Net earnings allocated to common stock	$	12,581	$	15,483	$	40,595	$	43,884
Weighted average common shares outstanding for basic earnings per common share	20,860		17,254		20,939		16,951
Add: Dilutive effect of stock compensation	40		34		40		33
Weighted average shares and dilutive potential common shares	20,900		17,288		20,979		16,984
Diluted earnings per common share	$	0.60	$	0.90	$	1.94	$	2.59

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 that expired on September 15, 2023 was not renewed.

As of September 30, 2023 and December 31, 2022, 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 balance sheets and statements of income as of September 30, 2023 and December 31, 2022 and for the three and nine months ended September 30, 2023 and 2022:

		Fair value as of
	Balance Sheet Location	September 30, 2023		December 31, 2022
Interest rate contracts	Accrued interest receivable (payable) and other assets ( liabilities)	$	—	$	150

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For the Three Months Ended September 30, 2023	(a)		(b)	(c)		(d)	(e)
Interest rate contracts	$	(51)	Interest expense – subordinated notes and debentures	$	(55)	Other income	$	—
For the Nine Months Ended September 30, 2023	(a)		(b)	(c)		(d)	(e)
Interest rate contracts	$	(119)	Interest expense – subordinated notes and debentures	$	(151)	Other income	$	—
For the Three Months Ended September 30, 2022	(a)		(b)	(c)		(d)	(e)
Interest rate contracts	$	88	Interest expense – subordinated notes and debentures	$	(26)	Other income	$	—
For the Nine Months Ended September 30, 2022	(a)		(b)	(c)		(d)	(e)
Interest rate contracts	$	410	Interest expense – subordinated notes and debentures	$	(144)	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)

As of September 30, 2023 and December 31, 2022, cash collateral balances in the amount of zero and $200 thousand were maintained, respectively, with a counterparty to the interest rate swaps. These balances are included in interest-bearing deposits with other banks on the condensed consolidated balance sheets.

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 $173 thousand as of September 30, 2023 and December 31, 2022. 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."

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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 September 30, 2023 and December 31, 2022:

	Notional Amount		Weighted Average Maturity (in years)	Weighted Average Fixed Rate		Weighted Average Variable Rate	Fair Value
September 30, 2023
3rd Party interest rate swaps	$	21,572	5.12	4.19	%	1 month Fallback SOFR + 1.79%	$	1,726	(a)
Customer interest rate swaps	(21,572)		5.12	4.19	%	1 month Fallback SOFR + 1.79%	(1,726)		(b)
December 31, 2022
3rd Party interest rate swaps	$	31,417	4.9	4.12	%	1 month LIBOR + 1.68%	$	1,700	(a)
Customer interest rate swaps	(31,417)		4.9	4.12	%	1 month LIBOR + 1.68%	(1,700)		(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 entered into a Risk Participation Agreement ("RPA") swap with another financial institution related to a loan in which the Corporation is a participant. 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 $14.0 million as of September 30, 2023 and zero as of December 31, 2022.

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).

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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.

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 September 30, 2023 and December 31, 2022:

			Fair Value Measurements at September 30, 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	$	3,825	$	—	$	3,825	$	—
States and political subdivisions	88,436		—		88,436		—
Residential and multi-family mortgage	189,109		—		189,109		—
Corporate notes and bonds	42,906		—		42,906		—
Pooled SBA	10,846		—		10,846		—
Total Securities Available-For-Sale	$	335,122	$	—	$	335,122	$	—
Interest Rate swaps	$	1,726	$	—	$	1,726	$	—
Equity Securities:
Corporate equity securities	$	5,327	$	5,327	$	—	$	—
Mutual funds	2,086		2,086		—		—
Money market funds	865		865		—		—
Corporate notes	670		—		670		—
Total Equity Securities	$	8,948	$	8,278	$	670	$	—
Liabilities:
Interest Rate Swaps	$	(1,726)	$	—	$	(1,726)	$	—

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			Fair Value Measurements at December 31, 2022 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	$	3,129	$	—	$	3,129	$	—
States and political subdivisions	95,663		—		95,663		—
Residential and multi-family mortgage	217,547		—		217,547		—
Corporate notes and bonds	42,391		—		42,391		—
Pooled SBA	12,679		—		12,679		—
Total Securities Available-For-Sale	$	371,409	$	—	$	371,409	$	—
Interest Rate swaps	$	1,850	$	—	$	1,850	$	—
Equity Securities:
Corporate equity securities	$	6,973	$	6,973	$	—	$	—
Mutual funds	1,406		1,406		—		—
Money market funds	479		479		—		—
Corporate notes	757		757		—		—
Total Equity Securities	$	9,615	$	9,615	$	—	$	—
Liabilities:
Interest Rate Swaps	$	(1,700)	$	—	$	(1,700)	$	—

Assets and liabilities measured at fair value on a non-recurring basis are as follows at September 30, 2023 and December 31, 2022:

			Fair Value Measurements at September 30, 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	$	763	$	—	$	—	$	763
Owner-occupied, nonfarm nonresidential properties	5,593		—		—		5,593
Commercial and industrial	6,457		—		—		6,457
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	7,279		—		—		7,279
Home equity lines of credit	317		—		—		317
Residential Mortgages secured by first liens	889		—		—		889

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			Fair Value Measurements at December 31, 2022 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	$	829	$	—	$	—	$	829
Owner-occupied, nonfarm nonresidential properties	1,071		—		—		1,071
Commercial and industrial	1,631		—		—		1,631
Other construction loans and all land development loans and other land loans	501		—		—		501
Multifamily (5 or more) residential properties	613		—		—		613
Non-owner occupied, nonfarm nonresidential	3,867		—		—		3,867
Home equity lines of credit	335		—		—		335
Residential mortgages secured by first liens	944		—		—		944

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.

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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 September 30, 2023:

	Fair value		Valuation Technique	Unobservable Inputs	Range (Weighted Average)
Collateral-dependent loans receivable:
Farmland	$	763	Valuation of third party appraisal on underlying collateral	Loss severity rates	27%-29% (28%)
Owner-occupied, nonfarm nonresidential properties	5,593		Valuation of third party appraisal on underlying collateral	Loss severity rates	9%-100% (13%)
Commercial and industrial	6,457		Valuation of third party appraisal on underlying collateral	Loss severity rates	3%-50% (14%)
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	26% (26%)
Non-owner occupied, nonfarm nonresidential	7,279		Valuation of third party appraisal on underlying collateral	Loss severity rates	32%-34% (33%)
Home equity lines of credit	317		Valuation of third party appraisal on underlying collateral	Loss severity rates	15% (15%)
Residential Mortgages secured by first liens	889		Valuation of third party appraisal on underlying collateral	Loss severity rates	15%-40% (29%)

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, 2022:

	Fair value		Valuation Technique	Unobservable Inputs	Range (Weighted Average)
Collateral-dependent loans receivable:
Farmland	$	829	Valuation of third party appraisal on underlying collateral	Loss severity rates	20% (20%)
Owner-occupied, nonfarm nonresidential properties	1,071		Valuation of third party appraisal on underlying collateral	Loss severity rates	25%-100% (29%)
Commercial and industrial	1,631		Valuation of third party appraisal on underlying collateral	Loss severity rates	3%-49% (23%)
Other construction loans and all land development loans and other land loans	501		Valuation of third party appraisal on underlying collateral	Loss severity rates	33% (33%)
Multifamily (5 or more) residential properties	613		Valuation of third party appraisal on underlying collateral	Loss severity rates	19%-25% (23%)
Non-owner occupied, nonfarm nonresidential	3,867		Valuation of third party appraisal on underlying collateral	Loss severity rates	15%-53% (35%)
Home equity lines of credit	335		Valuation of third party appraisal on underlying collateral	Loss severity rates	15% (15%)
Residential mortgages secured by first liens	944		Valuation of third party appraisal on underlying collateral	Loss severity rates	15%-27% (21%)

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Fair Value of Financial Instruments

The following table presents the carrying amount and fair value of financial instruments at September 30, 2023:

	Carrying		Fair Value Measurement Using:						Total
	Amount		Level 1		Level 2		Level 3		Fair Value
ASSETS
Cash and cash equivalents	$	182,585	$	182,585	$	—	$	—	$	182,585
Debt securities available-for-sale	335,122		—		335,122		—		335,122
Debt securities held-to-maturity	391,301		—		352,069		—		352,069
Equity securities	8,948		8,278		670		—		8,948
Loans held for sale	464		—		465		—		465
Net loans receivable	4,446,342		—		—		4,302,890		4,302,890
FHLB and other restricted stock holdings and investments	28,329		n/a		n/a		n/a		n/a
Interest rate swaps	1,726		—		1,726		—		1,726
Accrued interest receivable	22,329		—		2,778		19,551		22,329
LIABILITIES
Deposits	$	(5,002,781)	$	(4,448,041)	$	(555,737)	$	—	$	(5,003,778)
Subordinated notes and debentures	(104,811)		—		(128,112)		—		(128,112)
Interest rate swaps	(1,726)		—		(1,726)		—		(1,726)
Accrued interest payable	(3,185)		—		(3,185)		—		(3,185)

The following table presents the carrying amount and fair value of financial instruments at December 31, 2022:

	Carrying		Fair Value Measurement Using:						Total
	Amount		Level 1		Level 2		Level 3		Fair Value
ASSETS
Cash and cash equivalents	$	106,285	$	106,285	$	—	$	—	$	106,285
Debt securities available-for-sale	371,409		—		371,409		—		371,409
Debt securities held-to-maturity	404,765		—		367,388		—		367,388
Equity securities	9,615		9,615		—		—		9,615
Loans held for sale	231		—		231		—		231
Net loans receivable	4,231,742		—		—		4,157,843		4,157,843
FHLB and other restricted stock holdings and investments	30,715		n/a		n/a		n/a		n/a
Interest rate swaps	1,850		—		1,850		—		1,850
Accrued interest receivable	20,194		—		2,867		17,327		20,194
LIABILITIES
Deposits	$	(4,622,437)	$	(4,175,976)	$	(445,788)	$	—	$	(4,621,764)
Short-term borrowings	(132,396)		—		(132,396)		—		(132,396)
Subordinated notes and debentures	(104,584)		—		(117,378)		—		(117,378)
Interest rate swaps	(1,700)		—		(1,700)		—		(1,700)
Accrued interest payable	(1,839)		—		(1,839)		—		(1,839)

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.

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14.    REVENUE FROM CONTRACTS WITH CUSTOMERS

All of the Corporation’s revenue from contracts with customers in the scope of ASC 606 is recognized within Non-Interest Income. The following table presents the Corporation's Non-Interest Income by revenue stream and reportable segment for the three and nine months ended September 30, 2023 and 2022. Items outside the scope of ASC 606 are noted as such.

	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022
Non-interest Income
Service charges on deposit accounts	$	1,861	$	1,872	$	5,569	$	5,400
Wealth and asset management fees	1,833		1,870		5,567		5,456
Mortgage banking (1)	172		298		516		1,065
Card processing and interchange income	2,098		1,975		6,219		5,776
Net gains on sales of securities (1)	—		—		52		651
Other income	1,899		1,944		6,275		7,411
Total non-interest income	$	7,863	$	7,959	$	24,198	$	25,759

(1) Not within scope of ASU 2014-9

Management determined that the primary sources of revenue emanating from interest and dividend income on loans receivable and investment securities along with non-interest revenue resulting from security gains, loan servicing, gains on the sale of loans receivable, commitment fees, fees from financial guarantees, certain credit card fees, gains (losses) on sale of other real estate owned not financed by the Corporation, is not within the scope of ASU 2014-9.

The types of non-interest income within the scope of the standard that are material to the condensed consolidated financial statements are services charges on deposit accounts, wealth and asset management fee income, card processing and interchange income, and other income.

Service charges on deposit accounts: The Corporation earns fees from its deposit customers for transaction-based, account maintenance, and overdraft services. Transaction-based fees, which include services such as ATM use fees, stop payment charges, statement rendering, and ACH fees, are recognized at the time the transaction is executed, as that is the point in time the Corporation fulfills the customer’s request. Account maintenance fees, which relate primarily to monthly maintenance, are earned over the course of a month, representing the period over which the Corporation satisfies the performance obligation. Overdraft fees are recognized at the point in time that the overdraft occurs. Services charges on deposits are withdrawn from the customer’s account balance.

Wealth and asset management fees: The Corporation earns wealth and asset management fees from its contracts with trust and brokerage customers to manage assets for investment, and/or to transact on their accounts. These fees are primarily earned over time as the Corporation provides the contracted monthly or quarterly services and are generally assessed based on a tiered scale of the market value of assets under management at month end. Fees for these services are billed to customers on a monthly or quarterly basis and are recorded as revenue at the end of the period for which the wealth and asset management services have been performed. Other performance obligations, such as the delivery of account statements to customers, are generally considered immaterial to the overall transaction price.

Card processing and interchange income: The Corporation earns interchange fees from check card and credit card transactions conducted through the Visa payment network. Interchange fees from cardholder transactions represent a percentage of the underlying transaction value and are recognized daily, concurrently with the transaction processing services provided to the cardholder.

Other income: The Corporation's other income includes sources such as bank owned life insurance, changes in fair value and realized gains on sales of trading securities, certain service fees, gains (losses) on sales of fixed assets, and gains (losses) on sale of other real estate owned. The service fees are recognized in the same manner as the service charges mentioned above. While gains (losses) on the sale of other real estate owned are within the scope of ASU 2014-9 if financed by the Corporation, the Corporation does not finance the sale of transactions. The revenue on the sale is recorded upon the transfer of control of the property to the buyer and the other real estate owned asset is derecognized.

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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, the Bank, provides financial services to individuals and businesses primarily within its primary market area of the Pennsylvania counties of Blair, Cambria, Cameron, Centre, Clearfield, Crawford, 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, Niagara and Ontario. Ridge View Bank, a division of the Bank, operates in the Virginia counties of Franklin and Roanoke. Impressia Bank, a division of the Bank, operates in the Bank's primary market areas. Although the Corporation's strategies, through its Bank subsidiary, 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. The Bank is subject to regulation, supervision and examination by the Pennsylvania State Department of Banking as well as the FDIC.

In addition to the Bank, the Corporation has four other subsidiaries. CNB Securities Corporation, incorporated in Delaware, 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., a Delaware-based captive insurance company, 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, 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, 2022, included in its Annual Report on Form 10-K for the year ended December 31, 2022, and in conjunction with the condensed consolidated financial statements and notes thereto included in Item 1 of this report. Operating results for the three and nine months ended September 30, 2023 are not necessarily indicative of the results for the full year ending December 31, 2023, 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 AFS securities.

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

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, 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.

While non-interest expenses are expected to increase with the growth of the Corporation, management’s growth strategies are also expected to result in an increase in earning assets as well as enhanced revenue, which is expected to more than offset increases in non-interest expenses in 2023 and beyond.

CASH AND CASH EQUIVALENTS

Cash and cash equivalents totaled $182.6 million at September 30, 2023, including additional excess liquidity of $117.6 million held at the Federal Reserve, compared to $43.4 million at December 31, 2022. These excess funds, when combined with (i) available borrowing capacity of approximately $3.6 billion from the Federal Home Loan Bank of Pittsburgh ("FHLB") and 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, the total on-hand and contingent liquidity sources for the Corporation represented 3.9 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

Securities AFS and equity securities combined totaled $344.1 million and $381.0 million at September 30, 2023 and December 31, 2022, respectively. At September 30, 2023, the total balance of investments classified as HTM securities was $391.3 million compared to $404.8 million at December 31, 2022.

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," in 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.

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The following table summarizes the maturity distribution schedule with corresponding weighted-average yields of securities AFS as of September 30, 2023. 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.

	September 30, 2023
	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	$	3,134	3.81	%	$	691	2.08	%	$	—	—	%	$	—	—	%	$	3,825	3.50	%
State and Political Subdivisions	4,042		3.08		26,868		2.56		41,719		2.11		15,807		2.27		88,436		2.32
Residential and multi-family mortgage	1,616		2.69		13,454		3.10		17,560		2.22		156,479		1.57		189,109		1.75
Corporate notes and bonds	3,212		2.91		12,909		5.30		26,785		4.48		—		—		42,906		4.61
Pooled SBA	—		—		229		5.29		9,097		2.59		1,520		2.07		10,846		2.57
Total	$	12,004	3.17	%	$	54,151	3.35	%	$	95,161	2.84	%	$	173,806	1.64	%	$	335,122	2.31	%

The following table summarizes the maturity distribution schedule with corresponding weighted-average yields of securities HTM as of September 30, 2023.

	September 30, 2023
	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	$	53,827	1.56	%	$	203,661	1.54	%	$	45,383	1.81	%	$	—	—	%	$	302,871	1.58	%
Residential and multi-family mortgage	—		—		3,628		2.71		2,419		3.19		82,383		2.72		88,430		2.73
Total	$	53,827	1.56	%	$	207,289	1.56	%	$	47,802	1.88	%	$	82,383	2.72	%	$	391,301	1.84	%

The following table summarizes the weighted average modified duration of securities AFS as of September 30, 2023.

	Weighted Average Modified Duration (in Years)
U.S. Government Sponsored Entities	0.45
State and Political Subdivisions	5.95
Residential and multi-family mortgage	5.70
Corporate notes and bonds	4.25
Pooled SBA	2.53
Total	5.42

The following table summarizes the weighted average modified duration of securities HTM as of September 30, 2023.

	Weighted Average Modified Duration (in Years)
U.S. Government Sponsored Entities	2.78
Residential and multi-family mortgage	5.49
Total	3.39

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

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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, shorter durations that complement the current portfolio investment ladder, and 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," in the condensed consolidated financial statements provides more detail concerning the loan portfolio of the Corporation.

At September 30, 2023, 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 increase of $250.7 million, or 6.1% year to date growth (8.1% annualized), from December 31, 2022. The loan growth was experienced primarily in the Corporation's recent expansion markets of Cleveland, Roanoke, and Buffalo combined with growth in the portfolio related to CNB Bank's Private Banking division.

For the nine months ended September 30, 2023, the Corporation's consolidated balance sheet reflected a decrease in syndicated lending balances of $33.5 million compared to December 31, 2022. The syndicated loan portfolio totaled $123.1 million, or 2.7% of total loans, excluding PPP-related loans, at September 30, 2023, compared to $156.6 million, or 3.7% of total loans, excluding PPP-related loans, at December 31, 2022.

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.

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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 September 30, 2023. 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.

	September 30, 2023
	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	$	—	$	2,174	$	7,954	$	—	$	10,128
Owner-occupied, nonfarm nonresidential properties	17,486		30,187		24,396		4,757		76,826
Agricultural production and other loans to farmers	5		144		—		—		149
Commercial and Industrial	7,507		266,066		41,704		699		315,976
Obligations (other than securities and leases) of states and political subdivisions	2,670		8,294		84,772		20,794		116,530
Other loans	59		609		553		12,306		13,527
Other construction loans and all land development and other land loans (1)	53,166		41,335		10,328		1,438		106,267
Multifamily (5 or more) residential properties	29,226		35,539		2,883		4,445		72,093
Non-owner occupied, nonfarm nonresidential properties	25,163		84,847		61,770		810		172,590
1-4 Family Construction (1)	395		—		401		1,220		2,016
Home equity lines of credit	5		62		611		270		948
Residential Mortgages secured by first liens	5,525		34,433		230,517		130,354		400,829
Residential Mortgages secured by junior liens	370		8,276		61,003		13,256		82,905
Other revolving credit plans	5		8		13		1		27
Automobile	429		18,057		7,591		—		26,077
Other consumer	4,398		34,671		7,791		3,455		50,315
Credit cards	—		—		—		—		—
Overdrafts	—		—		—		—		—
Total	$	146,409	$	564,702	$	542,287	$	193,805	$	1,447,203
Loans Receivable with Variable or Floating Interest Rate
Farmland	$	440	$	4,030	$	9,715	$	8,481	$	22,666
Owner-occupied, nonfarm nonresidential properties	14,296		56,467		285,412		61,525		417,700
Agricultural production and other loans to farmers	747		60		162		—		969
Commercial and Industrial	245,087		90,804		77,273		1,402		414,566
Obligations (other than securities and leases) of states and political subdivisions	—		4,194		11,478		21,520		37,192
Other loans	17,804		2,989		8,762		—		29,555
Other construction loans and all land development and other land loans (1)	118,823		116,234		110,692		9,915		355,664
Multifamily (5 or more) residential properties	11,588		16,998		159,547		8,206		196,339
Non-owner occupied, nonfarm nonresidential properties	48,006		248,530		376,744		62,650		735,930
1-4 Family Construction (1)	14,768		2,208		7,087		28,621		52,684
Home equity lines of credit	7,390		6,276		52,847		57,509		124,022
Residential Mortgages secured by first liens	8,642		29,390		154,491		399,210		591,733
Residential Mortgages secured by junior liens	1,955		363		5,209		818		8,345
Other revolving credit plans	7,442		2,469		33,161		1,377		44,449
Automobile	—		—		—		—		—
Other consumer	—		39		74		79		192
Credit cards	12,638		—		—		—		12,638
Overdrafts	327		—		—		—		327
Total	$	509,953	$	581,051	$	1,292,654	$	661,313	$	3,044,971
(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.

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Loans Receivable Concentration

At September 30, 2023, no industry concentration existed which exceeded 10% of the total loan portfolio.

Loan Portfolio Profile

As part of our 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 if any risk issues could lead to additional credit loss exposure. In the current post-pandemic economic environment, the Corporation has determined that office commercial real estate ("commercial office") inherently could pose a higher level of credit risk, even given the historical high credit quality applied to the deals when initially underwritten and funding or commitments made. The Corporation monitors numerous elements at both underwriting and through and beyond the funding period, including each project’s occupancy, updated appraisals and 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 September 30, 2023, the Corporation had the following key metrics related to its commercial office portfolio:

•Commercial office loans outstanding consisted of 120 loans, totaling $115.7 million, or 2.6%, of total loans outstanding;

•Nonaccrual commercial office loans (two customer relationships) totaled $1.1 million, or 1.0% of total office loans outstanding. The two customer relationships combined have a recorded specific loss reserve of approximately $817 thousand; and

•The average outstanding balance per commercial office loan was $964 thousand.

The Corporation had no commercial office loan relationships considered by the banking regulators to be a high volatility commercial real estate credit.

Loans Receivable Credit Quality

The following table presents information concerning the loan portfolio delinquency and other nonperforming assets at September 30, 2023 and December 31, 2022:

	September 30, 2023			December 31, 2022
Nonaccrual loans	$	27,065		$	20,986
Accrual loans greater than 90 days past due	231			1,121
Total nonperforming loans	27,296			22,107
Other real estate owned	2,039			1,439
Total nonperforming assets	$	29,335		$	23,546
Total loans receivable	$	4,492,174		$	4,275,178
Nonaccrual loans as a percentage of total loans receivable	0.60		%	0.49		%
Total assets	$	5,731,908		$	5,475,179
Nonperforming assets as a percentage of total assets	0.51		%	0.43		%
Allowance for credit losses on loans receivable	$	45,832		$	43,436
Allowance for credit losses / Total loans	1.02		%	1.02		%
Ratio of allowance for credit losses to nonaccrual loans	169.34		%	206.98		%

Total nonperforming assets were $29.3 million, or 0.51% of total assets, as of September 30, 2023, compared to $23.5 million, or 0.43% of total assets, as of December 31, 2022. In addition, the allowance for credit losses as a percentage of nonaccrual loans was 169.34% at September 30, 2023, compared to 206.98% at December 31, 2022. The increase in nonperforming assets was due to one commercial real estate relationship consisting of two loans totaling $6.9 million placed on nonaccrual during the three months ended September 30, 2023. The two loans combined have a recorded specific loss reserve of approximately $491 thousand at September 30, 2023. While this loan relationship was placed on non-accrual status during the third quarter of 2023, based on collateral value support coupled with the specific reserve recorded against this loan relationship, management does not believe there is risk of significant additional loss exposure related to this loan relationship.

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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 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" in the Corporation's 2022 Form 10-K and Note 4, "Loans" in these condensed consolidated financial statements.

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The tables below provide an allocation of the allowance for credit losses on loans receivable by loan portfolio segment at September 30, 2023 and December 31, 2022; 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.

	September 30, 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	$	125	0.7	%	$	32,794	0.38	%
Owner-occupied, nonfarm nonresidential properties	3,948		11.0		494,526		0.80
Agricultural production and other loans to farmers	4		—		1,118		0.36
Commercial and Industrial (1)	7,479		16.3		730,542		1.02
Obligations (other than securities and leases) of states and political subdivisions	2,627		3.4		153,722		1.71
Other loans	519		1.0		43,082		1.20
Other construction loans and all land development and other land loans	3,958		10.3		461,931		0.86
Multifamily (5 or more) residential properties	2,150		6.0		268,432		0.80
Non-owner occupied, nonfarm nonresidential properties	9,901		20.2		908,520		1.09
1-4 Family Construction	397		1.2		54,700		0.73
Home equity lines of credit	804		2.8		124,970		0.64
Residential Mortgages secured by first liens	7,994		22.1		992,562		0.81
Residential Mortgages secured by junior liens	1,519		2.0		91,250		1.66
Other revolving credit plans	992		1.0		44,476		2.23
Automobile	366		0.6		26,077		1.40
Other consumer	2,642		1.1		50,507		5.23
Credit cards	80		0.3		12,638		0.63
Overdrafts	327		—		327		100.00
Total	$	45,832	100.0	%	$	4,492,174	1.02	%
(1) PPP loans, net of deferred PPP processing fees, disbursed in 2021 are included in the Commercial and Industrial classification.

	December 31, 2022
	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	$	159	0.8	%	$	32,168	0.49	%
Owner-occupied, nonfarm nonresidential properties	2,905		11.0		468,493		0.62
Agricultural production and other loans to farmers	6		—		1,198		0.50
Commercial and Industrial (1)	9,766		18.5		791,911		1.23
Obligations (other than securities and leases) of states and political subdivisions	1,863		3.4		145,345		1.28
Other loans	456		0.6		24,710		1.85
Other construction loans and all land development and other land loans	3,253		10.5		446,685		0.73
Multifamily (5 or more) residential properties	2,353		6.0		257,696		0.91
Non-owner occupied, nonfarm nonresidential properties	7,653		18.6		795,315		0.96
1-4 Family Construction	327		1.2		51,171		0.64
Home equity lines of credit	1,173		2.9		124,892		0.94
Residential Mortgages secured by first liens	8,484		22.0		942,531		0.90
Residential Mortgages secured by junior liens	1,035		1.7		74,638		1.39
Other revolving credit plans	722		0.9		36,372		1.99
Automobile	271		0.5		21,806		1.24
Other consumer	2,665		1.1		49,144		5.42
Credit cards	67		0.3		10,825		0.62
Overdrafts	278		—		278		100.00
Total	$	43,436	100.0	%	$	4,275,178	1.02	%
(1) PPP loans, net of deferred PPP processing fees, disbursed in 2021 and 2020 are included in the Commercial and Industrial classification.

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The allowance for credit losses measured as a percentage of total loans receivable was 1.02% as of September 30, 2023 and December 31, 2022.

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.

For the nine months ended September 30, 2023, the allowance for credit losses increased due to the growth in the Corporation's loan portfolio, including growth in new market areas. This was partially offset by improvements in the Corporation's historical loss rates, as well as the impact of net charge-offs. There is still a significant amount of uncertainty related to 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.

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 September 30, 2023 and December 31, 2022.

Additional information related to provision for credit loss expense and net charge-offs and recoveries for the three and nine months ended September 30, 2023 and 2022 is presented in the tables below.

	Three Months Ended September 30, 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	$	(15)	$	—	$	34,444	—	%
Owner-occupied, nonfarm nonresidential properties	789		8		511,629		0.01
Agricultural production and other loans to farmers	(1)		—		1,156		—
Commercial and Industrial	(1,142)		(38)		774,088		(0.02)
Obligations (other than securities and leases) of states and political subdivisions	321		—		160,122		—
Other loans	(214)		—		35,503		—
Other construction loans and all land development and other land loans	367		—		442,559		—
Multifamily (5 or more) residential properties	537		—		265,546		—
Non-owner occupied, nonfarm nonresidential properties	1,006		(82)		873,860		(0.04)
1-4 Family Construction	(11)		—		56,731		—
Home equity lines of credit	(156)		(9)		123,373		(0.03)
Residential Mortgages secured by first liens	(1,241)		(15)		982,626		(0.01)
Residential Mortgages secured by junior liens	(59)		—		89,881		—
Other revolving credit plans	97		(36)		43,353		(0.33)
Automobile	13		(23)		26,541		(0.34)
Other consumer	481		(400)		50,270		(3.16)
Credit cards	24		(16)		13,019		(0.49)
Overdrafts	227		(121)		316		(151.92)
Total	$	1,023	$	(732)	$	4,485,017	(0.06)	%

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

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	Nine Months Ended September 30, 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	$	(34)	$	—	$	34,836	—	%
Owner-occupied, nonfarm nonresidential properties	1,046		(3)		502,779		—
Agricultural production and other loans to farmers	(2)		—		1,165		—
Commercial and Industrial	(2,348)		61		791,532		0.01
Obligations (other than securities and leases) of states and political subdivisions	764		—		153,463		—
Other loans	63		—		28,800		—
Other construction loans and all land development and other land loans	705		—		424,846		—
Multifamily (5 or more) residential properties	(140)		(63)		262,265		(0.03)
Non-owner occupied, nonfarm nonresidential properties	2,578		(330)		825,884		(0.05)
1-4 Family Construction	70		—		55,235		—
Home equity lines of credit	(363)		(6)		123,725		(0.01)
Residential Mortgages secured by first liens	(471)		(19)		958,526		—
Residential Mortgages secured by junior liens	484		—		82,943		—
Other revolving credit plans	347		(77)		40,678		(0.25)
Automobile	128		(33)		24,900		(0.18)
Other consumer	1,285		(1,308)		48,900		(3.58)
Credit cards	102		(89)		12,871		(0.92)
Overdrafts	389		(340)		300		(151.53)
Total	$	4,603	$	(2,207)	$	4,373,648	(0.07)	%

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

	Three Months Ended September 30, 2022
	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	$	(8)	$	—	$	32,184	—	%
Owner-occupied, nonfarm nonresidential properties	(272)		3		472,244		—
Agricultural production and other loans to farmers	(2)		—		1,149		—
Commercial and Industrial	(21)		32		775,872		0.02
Obligations (other than securities and leases) of states and political subdivisions	97		—		150,431		—
Other loans	(2)		—		14,392		—
Other construction loans and all land development and other land loans	208		—		335,534		—
Multifamily (5 or more) residential properties	(171)		—		224,777		—
Non-owner occupied, nonfarm nonresidential properties	215		167		715,044		0.09
1-4 Family Construction	(56)		—		39,889		—
Home equity lines of credit	26		1		120,086		—
Residential Mortgages secured by first liens	198		(3)		896,261		—
Residential Mortgages secured by junior liens	338		—		65,293		—
Other revolving credit plans	58		(16)		28,770		(0.22)
Automobile	27		(5)		20,544		(0.10)
Other consumer	437		(382)		51,709		(2.93)
Credit cards	(33)		10		11,572		0.34
Overdrafts	(3)		(117)		290		(160.06)
Total	$	1,036	$	(310)	$	3,956,041	(0.03)	%

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

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	Nine Months Ended September 30, 2022
	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	$	32	$	—	$	31,598	—	%
Owner-occupied, nonfarm nonresidential properties	115		(9)		463,433		—
Agricultural production and other loans to farmers	(4)		—		1,274		—
Commercial and Industrial	691		38		750,787		0.01
Obligations (other than securities and leases) of states and political subdivisions	113		—		148,246		—
Other loans	16		—		14,149		—
Other construction loans and all land development and other land loans	338		—		321,093		—
Multifamily (5 or more) residential properties	(183)		—		223,148		—
Non-owner occupied, nonfarm nonresidential properties	482		167		686,633		0.03
1-4 Family Construction	22		—		39,952		—
Home equity lines of credit	200		11		113,145		0.01
Residential Mortgages secured by first liens	954		(38)		857,308		(0.01)
Residential Mortgages secured by junior liens	420		—		60,552		—
Other revolving credit plans	139		(27)		27,533		(0.13)
Automobile	19		(18)		20,409		(0.12)
Other consumer	1,324		(1,111)		50,477		(2.94)
Credit cards	36		(41)		11,514		(0.48)
Overdrafts	284		(289)		265		(145.81)
Total	$	4,998	$	(1,317)	$	3,821,516	(0.05)	%

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

Provision for credit losses was $1.1 million and $4.8 million for the three and nine months ended September 30, 2023, respectively, compared to $1.1 million and $5.6 million for the three and nine months ended September 30, 2022. Included in the provision for credit losses for the three and nine months ended September 30, 2023 was $33 thousand and $148 thousand, respectively, related to the allowance for unfunded commitments compared to $55 thousand and $641 thousand accrual towards the allowance for unfunded commitments for the three and nine months ended September 30, 2022.

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.

	September 30, 2023		Percent of Deposits in Each Category to Total Deposits		December 31, 2022		Percent of Deposits in Each Category to Total Deposits		Percentage Change in Each Category 2023 vs. 2022
Demand, noninterest-bearing	$	782,996	15.7	%	$	898,437	19.4	%	(12.8)%
Demand, interest-bearing	781,309		15.6		1,007,202		21.8		(22.4)
Savings deposits	2,883,736		57.6		2,270,337		49.1		27.0
Time deposits	554,740		11.1		446,461		9.7		24.3
Total deposits	$	5,002,781	100.0	%	$	4,622,437	100.0	%	8.2%

At September 30, 2023, total deposits were $5.0 billion, reflecting an increase of $380.3 million, or 8.2%, from December 31, 2022. The increase in deposit balances was primarily the result of continued growth in the Corporation's treasury management customer base and resulting increases in municipal and institutional/corporate deposits, including new wealth and asset management deposit relationships resulting from participation in deposit insurance sharing programs. In addition, the total number of deposit households increased by approximately 1.4% from December 31, 2022.

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

	Three Months Ended September 30,
	2023				2022
	Average Amount		Annual Rate		Average Amount		Annual Rate
Demand, noninterest-bearing	$	792,193	—	%	$	880,990	—	%
Demand, interest-bearing	813,264		0.52		1,090,990		0.21
Savings deposits	2,788,499		3.13		2,349,978		0.49
Time deposits	507,597		3.16		303,445		1.19
Total	$	4,901,553			$	4,625,403

	Nine Months Ended September 30,
	2023				2022
	Average Amount		Annual Rate		Average Amount		Annual Rate
Demand, noninterest-bearing	$	805,513	—	%	$	841,661	—	%
Demand, interest-bearing	878,955		0.54		1,081,211		0.18
Savings deposits	2,581,604		2.75		2,414,377		0.28
Time deposits	516,261		2.79		328,892		1.23
Total	$	4,782,333			$	4,666,141

At September 30, 2023, the average deposit balance per account for CNB Bank was approximately $33 thousand.

The following table presents additional information about our September 30, 2023 and December 31, 2022 deposits:

	September 30, 2023		December 31, 2022
Time deposits not covered by deposit insurance	$	47,672	$	69,874
Total deposits not covered by deposit insurance	1,481,827		1,864,886

At September 30, 2023, the total estimated uninsured deposits for CNB Bank were approximately $1.5 billion, or approximately 29.0% of total CNB Bank deposits; however, when excluding $101.1 million of affiliate company deposits and $440.3 million of pledged-investment collateralized deposits, the adjusted amount and percentage of total estimated uninsured deposits was approximately $940.4 million, or approximately 18.4% of total CNB Bank deposits as of September 30, 2023.

At December 31, 2022, the total estimated uninsured deposits for CNB Bank were approximately $1.9 billion, or approximately 39.0% of total CNB Bank deposits. When excluding affiliate company deposits of $143.1 million and pledged-investment collateralized deposits of $396.2 million, the adjusted amount and percentage of total estimated uninsured deposits was approximately $1.3 billion, or approximately 27.8% of total CNB Bank deposits as of December 31, 2022.

Scheduled maturities of time deposits not covered by deposit insurance at September 30, 2023 were as follows:

	September 30, 2023
3 months or less	$	11,619
Over 3 through 6 months	5,682
Over 6 through 12 months	26,437
Over 12 months	3,934
Total	$	47,672

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.

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The Corporation’s expected material cash requirements for the twelve months ended December 31, 2023 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 on loans and investment securities, maturing loans, and investment securities, as well as by maintaining access to wholesale funding sources.

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 securities available for sale. Liability liquidity is provided by access to funding sources which include core deposits, correspondent banks, and other wholesale funding.

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 September 30, 2023, the Corporation’s cash and cash equivalents position was approximately $182.6 million, including liquidity of $117.6 million held at the Federal Reserve. These excess funds, when combined with (i) available borrowing capacity of approximately $3.6 billion from the Federal Home Loan Bank of Pittsburgh ("FHLB") and 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, the total on-hand and contingent liquidity sources for the Corporation represented 3.9 times the estimated amount of adjusted uninsured deposit balances discussed above.

The following table summarizes the Corporation's net available liquidity capacities as of September 30, 2023:

	Net Available
FHLB borrowing capacity (1)	$	988,471
Federal Reserve borrowing capacity (2)	418,916
Brokered deposits (3)	1,811,718
Other third-party funding channels (3) (4)	370,616
Total net available borrowing capacity	$	3,589,721

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

(2) Includes access to discount window, BIC program and Bank Term Funding Program

(3) Availability contingent on internal borrowing guidelines

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

As of September 30, 2023, 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 consolidated financial statements elsewhere in this report for the expected timing of such payments as of September 30, 2023. The Corporation’s material contractual obligations as of September 30, 2023 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."

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Shareholders’ Equity, Capital Ratios and Metrics

As of September 30, 2023, the Corporation’s total shareholders’ equity was $549.2 million, representing an increase of $18.5 million, or 3.5%, from December 31, 2022, primarily due to the increase in the Corporation's retained earnings (quarterly net income, partially offset by the common and preferred dividends paid in the quarter), and a decrease in accumulated other comprehensive loss during the quarter resulting primarily from the after-tax impact of the temporary unrealized reduction in the value of the available-for-sale investment portfolio.

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 September 30, 2023 all of the Corporation's capital ratios exceeded regulatory “well-capitalized” levels. The Corporation’s capital ratios and book value per common share at September 30, 2023 and December 31, 2022 were as follows:

	September 30, 2023			December 31, 2022
Total risk-based capital ratio	15.68		%	16.08		%
Tier 1 risk based ratio	12.92		%	13.24		%
Common equity tier 1 ratio	11.21		%	11.42		%
Tier 1 leverage ratio	10.50		%	10.74		%
Tangible common equity/tangible assets (1)	7.86		%	7.90		%
Book value per common share	$	23.52		$	22.39
Tangible book value per common share (1)	$	21.40		$	20.30

(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.

At September 30, 2023, the Corporation's pre-tax net unrealized losses on available-for-sale and held-to-maturity securities totaled approximately $108.8 million, or 19.8% of total shareholders' equity, compared to $99.0 million, or 18.6% of total shareholders' equity at December 31, 2022. Importantly, all regulatory capital ratios for the Corporation would exceed regulatory “well-capitalized” levels as of September 30, 2023 and December 31, 2022 if the net unrealized losses were fully recognized. Additionally, the Corporation maintains $100.4 million of funds at its holding company, which substantially covers the $108.8 in the unrealized losses on investments, as an immediately available source of contingent capital to be down-streamed to CNB Bank if necessary.

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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 September 30, 2023 and 2022:

	Average Balances, Income and Interest Rates on a Taxable Equivalent Basis
	For the Three Months Ended,
	September 30, 2023						September 30, 2022
	Average Balance		Annual Rate		Interest Inc./Exp.		Average Balance		Annual Rate		Interest Inc./Exp.
ASSETS:
Securities:
Taxable (1) (4)	$	711,299	1.89	%	$	3,674	$	777,824	1.81	%	$	3,750
Tax-exempt (1) (2) (4)	29,455		2.55		204		35,722		2.86		272
Equity securities (1) (2)	8,598		5.58		121		7,765		2.25		44
Total securities (4)	749,352		1.96		3,999		821,311		1.86		4,066
Loans receivable:
Commercial (2) (3)	1,516,942		6.72		25,693		1,446,272		5.15		18,790
Mortgage and loans held for sale (2) (3)	2,834,576		5.83		41,618		2,396,884		4.81		29,083
Consumer (3)	133,499		11.51		3,874		112,885		10.54		3,000
Total loans receivable (3)	4,485,017		6.30		71,185		3,956,041		5.10		50,873
Interest-bearing deposits with the Federal Reserve and other financial institutions	39,389		5.78		574		132,314		1.99		663
Total earning assets	5,273,758		5.63		$	75,758	4,909,666		4.45		$	55,602
Noninterest-bearing assets:
Cash and cash equivalents due from banks	55,502						52,446
Premises and equipment	109,854						90,570
Other assets	254,106						229,807
Allowance for credit losses	(45,729)						(41,017)
Total non interest-bearing assets	373,733						331,806
TOTAL ASSETS	$	5,647,491					$	5,241,472
LIABILITIES AND SHAREHOLDERS’ EQUITY:
Demand—interest-bearing	$	813,264	0.52	%	$	1,061	$	1,090,990	0.21	%	$	570
Savings	2,788,499		3.13		22,004		2,349,978		0.49		2,928
Time	507,597		3.16		4,048		303,445		1.19		910
Total interest-bearing deposits	4,109,360		2.62		27,113		3,744,413		0.47		4,408
Short-term borrowings	6,101		5.66		87		—		—		—
Finance lease liabilities	328		4.84		4		416		4.77		5
Subordinated notes and debentures	104,773		4.07		1,076		104,470		3.71		977
Total interest-bearing liabilities	4,220,562		2.66		$	28,280	3,849,299		0.56		$	5,390
Demand—noninterest-bearing	792,193						880,990
Other liabilities	79,272						70,524
Total liabilities	5,092,027						4,800,813
Shareholders’ equity	555,464						440,659
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	$	5,647,491					$	5,241,472
Interest income/Earning assets			5.63	%	$	75,758			4.45	%	$	55,602
Interest expense/Interest-bearing liabilities			2.66		28,280				0.56		5,390
Net interest spread			2.97	%	$	47,478			3.89	%	$	50,212
Interest income/Earning assets			5.63	%	75,758				4.45	%	55,602
Interest expense/Earning assets			2.10		28,280				0.43		5,390
Net interest margin (fully tax-equivalent)			3.53	%	$	47,478			4.02	%	$	50,212

(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 September 30, 2023 and 2022 was $242 thousand and $305 thousand, respectively.

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(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 September 30, 2023 and 2022 was $(61.1) million and $(45.6) million, respectively.

The following table presents average balances of certain measures of our financial condition and net interest margin for the nine months ended September 30, 2023 and 2022:

	Average Balances, Income and Interest Rates on a Taxable Equivalent Basis
	For the Nine Months Ended,
	September 30, 2023						September 30, 2022
	Average Balance		Annual Rate		Interest Inc./Exp.		Average Balance		Annual Rate		Interest Inc./Exp.
ASSETS:
Securities:
Taxable (1) (4)	$	729,787	1.89	%	$	11,140	$	777,070	1.78	%	$	10,774
Tax-exempt (1) (2) (4)	31,025		2.60		646		37,002		2.91		830
Equity securities (1) (2)	10,645		4.97		396		7,861		2.09		123
Total securities (4)	771,457		1.96		12,182		821,933		1.84		11,727
Loans receivable:
Commercial (2) (3)	1,512,575		6.49		73,423		1,409,487		4.84		51,044
Mortgage and loans held for sale (2) (3)	2,733,423		5.70		116,439		2,301,831		4.62		79,471
Consumer (3)	127,650		11.50		10,978		110,198		10.31		8,498
Total loans receivable (3)	4,373,648		6.14		200,840		3,821,516		4.86		139,013
Interest-bearing deposits with the Federal Reserve and other financial institutions	49,380		6.01		2,221		309,550		0.65		1,507
Total earning assets	5,194,485		5.48		$	215,243	4,952,999		4.08		$	152,247
Noninterest-bearing assets:
Cash and cash equivalents due from banks	54,494						50,599
Premises and equipment	107,016						87,614
Other assets	250,210						223,020
Allowance for credit losses	(44,556)						(39,279)
Total non interest-bearing assets	367,164						321,954
TOTAL ASSETS	$	5,561,649					$	5,274,953
LIABILITIES AND SHAREHOLDERS’ EQUITY:
Demand—interest-bearing	$	878,955	0.54	%	$	3,545	$	1,081,211	0.18	%	$	1,488
Savings	2,581,604		2.75		53,070		2,414,377		0.28		5,091
Time	516,261		2.79		10,775		328,892		1.23		3,022
Total interest-bearing deposits	3,976,820		2.27		67,390		3,824,480		0.34		9,601
Short-term borrowings	47,094		5.07		1,787		—		—		—
Finance lease liabilities	350		4.58		12		437		4.59		15
Subordinated notes and debentures	104,698		4.04		3,164		104,394		3.65		2,851
Total interest-bearing liabilities	4,128,962		2.34		$	72,353	3,929,311		0.42		$	12,467
Demand—noninterest-bearing	805,513						841,661
Other liabilities	79,140						67,780
Total liabilities	5,013,615						4,838,752
Shareholders’ equity	548,034						436,201
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	$	5,561,649					$	5,274,953
Interest income/Earning assets			5.48	%	$	215,243			4.08	%	$	152,247
Interest expense/Interest-bearing liabilities			2.34		72,353				0.42		12,467
Net interest spread			3.14	%	$	142,890			3.66	%	$	139,780
Interest income/Earning assets			5.48	%	215,243				4.08	%	152,247
Interest expense/Earning assets			1.84		72,353				0.33		12,467
Net interest margin (fully tax-equivalent)			3.64	%	$	142,890			3.75	%	$	139,780

(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 nine months ended September 30, 2023 and 2022 was $755 thousand and $954 thousand, respectively.

(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.

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(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 nine months ended September 30, 2023 and 2022 was $(58.6) million and $(31.3) 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 September 30, 2023 and 2022:

Net Interest Income Rate-Volume Variance	For Three Months Ended September 30, 2023 over (under) 2022 Due to Change In (1)
	Volume		Rate		Net
Assets
Securities:
Taxable	$	(219)	$	143	$	(76)
Tax-exempt (2)	(45)		(23)		(68)
Equity securities (2)	5		72		77
Total securities	(259)		192		(67)
Loans receivable:
Commercial (2)	900		6,003		6,903
Mortgage (2) (3)	5,247		7,288		12,535
Consumer	548		326		874
Total loans receivable	6,695		13,617		20,312
Other earning assets	(465)		376		(89)
Total Earning Assets	$	5,971	$	14,185	$	20,156
Liabilities and Shareholders’ Equity
Interest-Bearing Deposits
Demand – interest-bearing	$	(144)	$	635	$	491
Savings	521		18,555		19,076
Time	618		2,520		3,138
Total interest-bearing deposits	995		21,710		22,705
Short-Term Borrowings	—		87		87
Finance lease liabilities	(1)		—		(1)
Subordinated debentures	4		95		99
Total Interest-Bearing Liabilities	$	998	$	21,892	$	22,890
Change in Net Interest Income	$	4,973	$	(7,707)	$	(2,734)

(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 September 30, 2023 and September 30, 2022.

(3) Includes loans held for sale.

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The following table presents the change in net interest income for the nine months ended September 30, 2023 and 2022:

Net Interest Income Rate-Volume Variance	For Nine Months Ended September 30, 2023 over (under) 2022 Due to Change In (1)
	Volume		Rate		Net
Assets
Securities:
Taxable	$	(234)	$	600	$	366
Tax-exempt (2)	(112)		(72)		(184)
Equity securities (2)	44		229		273
Total securities	(302)		757		455
Loans receivable:
Commercial (2)	3,712		18,667		22,379
Mortgage (2) (3)	14,888		22,080		36,968
Consumer	1,344		1,136		2,480
Total loans receivable	19,944		41,883		61,827
Other earning assets	(1,266)		1,980		714
Total Earning Assets	$	18,376	$	44,620	$	62,996
Liabilities and Shareholders’ Equity
Interest-Bearing Deposits
Demand – interest-bearing	$	(310)	$	2,367	$	2,057
Savings	286		47,693		47,979
Time	1,729		6,024		7,753
Total interest-bearing deposits	1,705		56,084		57,789
Short-Term Borrowings	1		1,786		1,787
Finance lease liabilities	(3)		—		(3)
Subordinated debentures	8		305		313
Total Interest-Bearing Liabilities	$	1,711	$	58,175	$	59,886
Change in Net Interest Income	$	16,665	$	(13,555)	$	3,110

(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 nine months ended September 30, 2023 and September 30, 2022.

(3) Includes loans held for sale

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RESULTS OF OPERATIONS

Three Months Ended September 30, 2023 and 2022

OVERVIEW

Net income available to common shareholders ("earnings") was $12.7 million, or $0.60 per diluted share, for the three months ended September 30, 2023. The Corporation’s earnings for the three months ended September 30, 2022 were $15.5 million, or $0.90 per diluted share. The decrease in diluted earnings per share comparing the quarter ended September 30, 2023 to the quarter ended September 30, 2022 was primarily due to the year-over-year increase in deposit costs, as well as the dilutive effect of the Corporation's common stock offering completed in September 2022, resulting in the issuance of 4,257,446 shares of common stock or an increase of approximately 25% in total shares of common stock outstanding. In addition, during the three months ended September 30, 2023, the Corporation repurchased 100,000 shares of common stock at a weighted average price per share of $18.39 and there were no repurchases of common stock during the three months ended September 30, 2022.

Annualized return on average equity was 9.80% for the three months ended September 30, 2023, compared to 14.97% for the three months ended September 30, 2022. Annualized return on average tangible common equity, a non-GAAP measure, was 11.07% for the three months ended September 30, 2023, compared to 18.21% for the three months ended September 30, 2022.

The Corporation's efficiency ratio was 67.00% for the three months ended September 30, 2023, compared to 62.38% for the three months ended September 30, 2022. The efficiency ratio on a fully tax-equivalent basis, a non-GAAP ratio, was 66.26% for the three months ended September 30, 2023, compared to 61.95% for the three months ended September 30, 2022.

NET INTEREST INCOME

Net interest income was $47.2 million for the three months ended September 30, 2023, compared to $49.9 million, for the three months ended September 30, 2022. When comparing the third quarter of 2023 to the third quarter of 2022, the decrease in net interest income of $2.7 million, or 5.4%, 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 3.55% and 4.03% for the three months ended September 30, 2023 and September 30, 2022, respectively. Net interest margin on a fully tax-equivalent basis, a non-GAAP measure, was 3.53% and 4.02%, for the three months ended September 30, 2023 and September 30, 2022, respectively.

The yield on earning assets of 5.63% for the three months ended September 30, 2023 increased 118 basis points from September 30, 2022, primarily as a result of loan growth and 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 $1.1 million for the three months ended September 30, 2023 and September 30, 2022, respectively. Included in the provision for credit losses for the three months ended September 30, 2023 was a $33 thousand expense related to the allowance for unfunded commitments compared to $55 thousand for the three months ended September 30, 2022.

Management believes the charges to the provision for credit losses for the three months ended September 30, 2023 were appropriate and the allowance for credit losses was adequate to absorb current expected credit losses in the loan portfolio at September 30, 2023.

NON-INTEREST INCOME

Total non-interest income was $7.9 million for the three months ended September 30, 2023 compared to $8.0 million for the three months ended September 30, 2022. During the three months ended September 30, 2023, notable changes compared to the three months ended September 30, 2022, included a decrease in other service charges and fees, partially offset by higher other non-interest income driven by gains on recovery from acquired loans

NON-INTEREST EXPENSE

For the three months ended September 30, 2023, total non-interest expense was $36.9 million, compared to $36.1 million for the three months ended September 30, 2022.

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RESULTS OF OPERATIONS

Nine Months Ended September 30, 2023 and 2022

OVERVIEW

Net income available to common shareholders was $40.8 million, or $1.94 per diluted share, for the nine months ended September 30, 2023, compared to earnings of $44.1 million, or $2.59 per diluted share, for the nine months ended September 30, 2022. As previously noted, the decrease in diluted earnings per share comparing the nine months ended September 30, 2023 to the nine months ended September 30, 2022 was primarily due to both the rise in deposit costs year over year and to the dilutive effect of the Corporation's common stock offering. In addition, during the nine months ended September 30, 2023, the Corporation repurchased 326,459 shares of common stock at a weighted average price per share of $20.08, compared to 50,166 shares of common stock at a weighted average price per share of $26.75 during the nine months ended September 30, 2022.

Annualized return on average equity was 10.74% for the nine months ended September 30, 2023, compared to 14.50% for the nine months ended September 30, 2022. Annualized return on average tangible common equity, a non-GAAP measure, was 12.23% for the nine months ended September 30, 2023, compared to 17.63% for the nine months ended September 30, 2022.

The Corporation's efficiency ratio was 64.26% for the nine months ended September 30, 2023, compared to 61.12% for the nine months ended September 30, 2022. The efficiency ratio on a fully tax-equivalent basis, a non-GAAP ratio, was 63.60% for the nine months ended September 30, 2023, compared to 60.68% the nine months ended September 30, 2022.

NET INTEREST INCOME

Net interest income was $142.1 million for the nine months ended September 30, 2023, compared to $138.8 million for the nine months ended September 30, 2022. The increase of $3.3 million, or 2.4%, was due to loan growth and the benefits of the impact of rising interest rates resulting in greater income on variable-rate loans and new loan production, partially offset by an increase in the Corporation's interest expense as a result of both (i) targeted interest-bearing deposit rate increases to ensure both deposit growth and retention, and (ii) a year-over-year increase in the average balance of short-term borrowings through the FHLB.

Net interest margin was 3.66% and 3.75% for the nine months ended September 30, 2023 and 2022, respectively. Net interest margin on a fully tax-equivalent basis, a non-GAAP measure, was 3.64% and 3.75% for the nine months ended September 30, 2023 and 2022, respectively.

The yield on earning assets of 5.48% for the nine months ended September 30, 2023 increased 140 basis points from September 30, 2022, primarily as a result of loan growth and 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 $4.8 million for the nine months ended September 30, 2023, compared to $5.6 million for the nine months ended September 30, 2022. Included in the provision for credit losses for the nine months ended September 30, 2023 was $148 thousand expense related to the allowance for unfunded commitments compared to $641 thousand for the nine months ended September 30, 2022. The $888 thousand reduction in the provision expense for the first nine months of 2023 compared to the nine months ended September 30, 2022 was primarily a result of the relatively lower loan portfolio growth in the first nine months of 2023 compared to the first nine months of 2022.

Management believes the charges to the provision for credit losses for the nine months ended September 30, 2023 were appropriate and the allowance for credit losses was adequate to absorb current expected credit losses in the loan portfolio at September 30, 2023.

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NON-INTEREST INCOME

Total non-interest income was $24.2 million for the nine months ended September 30, 2023 compared to $25.8 million for the nine months ended September 30, 2022. During the nine months ended September 30, 2023, Wealth and Asset Management fees increased $111 thousand, or 2.0%, compared to the nine months ended September 30, 2022, as the Corporation benefited from an increased number of wealth management relationships. Other notable changes compared to the nine months ended September 30, 2022 included lower net realized gains on the sale of available-for-sale debt securities, lower mortgage banking income from reduced mortgage loan production volume in the higher-rate environment, lower level of bank owned life insurance income and pass-through income from small business investment companies, partially offset by an increase in card processing and interchange income and a favorable variance in unrealized losses on equity securities.

NON-INTEREST EXPENSE

For the nine months ended September 30, 2023, total non-interest expense was $106.9 million, compared to $100.6 million for the nine months ended September 30, 2022. The increase of $6.3 million, or 6.3%, from the nine months ended September 30, 2022 was primarily a result of higher technology expenses, combined with higher card processing and interchange expenses. In addition, other non-interest expenses increased primarily due to business generation related expenses and consulting fees.

INCOME TAX EXPENSE

Income tax expense was $10.6 million, representing a 19.5% effective tax rate, compared to $11.0 million, representing a 18.9% effective tax rate for the nine months ended September 30, 2023 and 2022, 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," in 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 2022 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, 2022.

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NON-GAAP FINANCIAL MEASURES

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

	(unaudited)
	September 30,			December 31,
	2023			2022
Calculation of tangible book value per common share and tangible common equity/tangible assets (non-GAAP):
Shareholders' equity	$	549,212		$	530,762
Less: preferred equity	57,785			57,785
Common shareholders' equity	491,427			472,977
Less: goodwill and other intangibles	43,874			43,749
Less: core deposit intangible	299			364
Tangible common equity (non-GAAP)	$	447,254		$	428,864
Total assets	$	5,731,908		$	5,475,179
Less: goodwill and other intangibles	43,874			43,749
Less: core deposit intangible	299			364
Tangible assets (non-GAAP)	$	5,687,735		$	5,431,066
Ending shares outstanding	20,895,634			21,121,346
Book value per common share (GAAP)	$	23.52		$	22.39
Tangible book value per common share (non-GAAP)	$	21.40		$	20.30
Common shareholders' equity / Total assets (GAAP)	8.57		%	8.64		%
Tangible common equity / Tangible assets (non-GAAP)	7.86		%	7.90		%

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NON-GAAP FINANCIAL MEASURES (continued)

	(unaudited)						(unaudited)
	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2023			2022			2023			2022
Calculation of efficiency ratio:
Non-interest expense	$	36,914		$	36,100		$	106,892		$	100,601
Non-interest income	$	7,863		$	7,959		$	24,198		$	25,759
Net interest income	47,236			49,908			142,135			138,826
Total revenue	$	55,099		$	57,867		$	166,333		$	164,585
Efficiency ratio	67.00		%	62.38		%	64.26		%	61.12		%
Calculation of efficiency ratio (fully tax equivalent basis) (non-GAAP):
Non-interest expense	$	36,914		$	36,100		$	106,892		$	100,601
Less: core deposit intangible amortization	20			23			65			73
Adjusted non-interest expense (non-GAAP)	$	36,894		$	36,077		$	106,827		$	100,528
Non-interest income	$	7,863		$	7,959		$	24,198		$	25,759
Net interest income	$	47,236		$	49,908		$	142,135		$	138,826
Less: tax exempt investment and loan income, net of TEFRA (non-GAAP)	1,376			1,232			4,043			3,767
Add: tax exempt investment and loan income (fully tax equivalent basis) (non-GAAP)	1,955			1,599			5,668			4,851
Adjusted net interest income (fully tax equivalent basis) (non-GAAP)	47,815			50,275			143,760			139,910
Adjusted net revenue (fully tax equivalent basis) (non-GAAP)	$	55,678		$	58,234		$	167,958		$	165,669
Efficiency ratio (fully tax equivalent basis) (non-GAAP)	66.26		%	61.95		%	63.60		%	60.68		%

	(unaudited)						(unaudited)
	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2023			2022			2023			2022
Calculation of net interest margin:
Interest income	$	75,516		$	55,298		$	214,488		$	151,293
Interest expense	28,280			5,390			72,353			12,467
Net interest income	$	47,236		$	49,908		$	142,135		$	138,826
Average total earning assets	$	5,273,758		$	4,909,666		$	5,194,485		$	4,952,999
Net interest margin (GAAP) (annualized)	3.55		%	4.03		%	3.66		%	3.75		%
Calculation of net interest margin (fully tax equivalent basis) (non-GAAP):
Interest income	$	75,516		$	55,298		$	214,488		$	151,293
Tax equivalent adjustment (non-GAAP)	242			305			755			954
Adjusted interest income (fully tax equivalent basis) (non-GAAP)	75,758			55,603			215,243			152,247
Interest expense	28,280			5,390			72,353			12,467
Net interest income (fully tax equivalent basis) (non-GAAP)	$	47,478		$	50,213		$	142,890		$	139,780
Average total earning assets	$	5,273,758		$	4,909,666		$	5,194,485		$	4,952,999
Less: average mark to market adjustment on investments (non-GAAP)	(61,103)			(45,559)			(58,577)			(31,330)
Adjusted average total earning assets, net of mark to market (non-GAAP)	$	5,334,861		$	4,955,225		$	5,253,062		$	4,984,329
Net interest margin, fully tax equivalent basis (non-GAAP) (annualized)	3.53		%	4.02		%	3.64		%	3.75		%

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NON-GAAP FINANCIAL MEASURES (continued)

	(unaudited)				(unaudited)
	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2023		2022		2023		2022
Calculation of PPNR (non-GAAP): (1)
Net interest income	$	47,236	$	49,908	$	142,135	$	138,826
Add: Non-interest income	7,863		7,959		24,198		25,759
Less: Non-interest expense	36,914		36,100		106,892		100,601
PPNR (non-GAAP)	$	18,185	$	21,767	$	59,441	$	63,984
(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)						(unaudited)
	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2023			2022			2023			2022
Calculation of return on average tangible common equity (non-GAAP):
Net income	$	13,727		$	16,625		$	44,043		$	47,308
Less: preferred stock dividends	1,076			1,076			3,226			3,226
Net income available to common shareholders	$	12,651		$	15,549		$	40,817		$	44,082
Average shareholders' equity	$	555,464		$	440,659		$	548,034		$	436,201
Less: average goodwill & intangibles	44,186			44,151			44,201			44,175
Less: average preferred equity	57,785			57,785			57,785			57,785
Tangible common shareholders' equity (non-GAAP)	$	453,493		$	338,723		$	446,048		$	334,241
Return on average equity (GAAP) (annualized)	9.80		%	14.97		%	10.74		%	14.50		%
Return on average common equity (GAAP) (annualized)	9.04		%	14.00		%	9.96		%	13.51		%
Return on average tangible common equity (non-GAAP) (annualized)	11.07		%	18.21		%	12.23		%	17.63		%

	(unaudited)				(unaudited)
	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2023		2022		2023		2022
Calculation of non-interest income excluding net realized gains on available-for-sale securities (non-GAAP):
Non-interest income	$	7,863	$	7,959	$	24,198	$	25,759
Less: net realized gains on available-for-sale securities	—		—		52		651
Adjusted non-interest income (non-GAAP)	$	7,863	$	7,959	$	24,146	$	25,108

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ITEM 3

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

As a financial institution, the Corporation’s primary source of market risk is interest rate risk, which is the exposure to fluctuations in the Corporation’s future earnings resulting from changes in interest rates. This exposure is correlated to the repricing characteristics of the Corporation’s portfolio of assets and liabilities. Each asset or liability reprices either at maturity or during the life of the instrument.

The principal purpose of asset/liability management is to maximize current and future net interest income within acceptable levels of interest rate risk while satisfying liquidity and capital requirements. Net interest income is enhanced by increasing the net interest margin and the growth in earning assets. As a result, the primary goal of interest rate risk management is to maintain a balance between risk and reward such that net interest income is maximized while risk is maintained at an acceptable level.

The Corporation uses an asset-liability management model to measure the effect of interest rate changes on its net interest income. The Corporation’s management also reviews asset-liability maturity gap and repricing analyses regularly. The Corporation does not always attempt to achieve a precise match between interest sensitive assets and liabilities because it believes that an actively managed amount of interest rate risk is inherent and appropriate in the management of the Corporation’s profitability.

Asset-liability modeling techniques and simulation involve assumptions and estimates that inherently cannot be measured with precision. Key assumptions in these analyses include maturity and repricing characteristics of assets and liabilities, prepayments on amortizing assets, non-maturing deposit sensitivity, and loan and deposit pricing. These assumptions are inherently uncertain due to the timing, magnitude, and frequency of rate changes and changes in market conditions and management strategies, among other factors. However, the analyses are useful in quantifying risk and provide a relative gauge of the Corporation’s interest rate risk position over time.

Management reviews interest rate risk on a quarterly basis and reports to the ALCO. This review includes earnings shock scenarios whereby interest rates are immediately increased and decreased by 100, 200, 300 and 400 basis points. These scenarios, detailed in the table below, indicate that there would not be a significant variance in net interest income over a one-year period due to interest rate changes; however, actual results could vary significantly. At September 30, 2023 and December 31, 2022, all interest rate risk levels according to the model were within the tolerance limits of ALCO-approved policy. In addition, the table does not take into consideration changes that management would make to realign its assets and liabilities in the event of an unexpected changing interest rate environment. Due to the current interest rate environment, the 400 basis point declining interest rate scenarios and 400 basis point increasing rate scenario have been excluded from the table.

	% Change in Net Interest Income
	September 30, 2023	December 31, 2022
+300 basis points	(0.8)%	4.9%
+200 basis points	1.5%	5.5%
+100 basis points	3.5%	5.8%
-100 basis points	(3.0)%	(1.7)%
-200 basis points	(6.0)%	(6.1)%
-300 basis points	(12.4)%	(12.5)%

At September 30, 2023, the Corporation has approximately $2.0 billion in outstanding loans receivable balances that are rate sensitive balances over the next twelve months.

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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-15(e) 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 September 30, 2023 that has materially affected, or that is reasonably likely to materially affect, our internal control over financial reporting.

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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 2022 Form 10-K and in Part II, Item 1A of the Corporation's Quarterly Report on Form 10-Q for the quarter ended June 30, 2023.

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 September 30, 2023.

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)
July 1 – 31, 2023	—	$	—	—	273,541
August 1 – 31, 2023	27,200	17.99		27,200	246,341
September 1 – 30, 2023	72,800	18.47		72,800	173,541
Total	100,000			100,000

 (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. As of September 30, 2023, 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 September 30, 2023, 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.

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 September 30, 2023, 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.”

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ITEM 6. EXHIBITS

Exhibit No.	Description
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.

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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: November 1, 2023	/s/ Michael D. Peduzzi
	Michael D. Peduzzi
	President and Chief Executive Officer
	(Principal Executive Officer)
DATE: November 1, 2023	/s/ Tito L. Lima
	Tito L. Lima
	Treasurer
	(Principal Financial and Accounting Officer)

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