CB Financial Services, Inc. (CBFV)

Overview

The following discussion and analysis is presented to assist in the understanding and evaluation of our consolidated financial condition and results of operations. It is intended to complement the unaudited consolidated financial statements and notes thereto appearing elsewhere in this Form 10-Q and should be read in conjunction therewith. The detailed discussion focuses on our consolidated financial condition as of June 30, 2026, compared to the consolidated financial condition as of December 31, 2025 and the consolidated results of operations for the three and six months ended June 30, 2026 compared to the three and six months ended June 30, 2025.

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Our results of operations depend primarily on our net interest income. Net interest income is the difference between the interest income we earn on our interest-earning assets and the interest we pay on our interest-bearing liabilities. Our results of operations also are affected by our provision for credit losses, noninterest income and noninterest expense. Noninterest income consists primarily of fees and service charges on deposit accounts, income from bank-owned life insurance and other income. Noninterest expense consists primarily of expenses related to salaries and employee benefits, occupancy and equipment, data processing, contracted services, legal and professional fees, advertising, deposit and general insurance and other expenses.

Financial institutions like us, in general, are significantly affected by economic conditions, competition, and the monetary and fiscal policies of the federal government. Lending activities are influenced by the demand for and supply of housing, competition among lenders, interest rate conditions, and funds availability. Our operations and lending are principally concentrated in the southwestern Pennsylvania and Ohio Valley market areas.

Explanation of Use of Non-GAAP Financial Measures

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

The interest income on interest-earning assets, net interest rate spread and net interest margin are presented on a fully tax-equivalent (“FTE”) basis. The FTE basis adjusts for the tax benefit of income on certain tax-exempt loans and securities using the federal statutory income tax rate of 21.0%. We believe the presentation of net interest income on a FTE basis ensures comparability of net interest income arising from both taxable and tax-exempt sources and is consistent with industry practice.

The following table reconciles net interest income, net interest spread and net interest margin on a FTE basis for the periods indicated:

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Tangible book value per common share is a non-GAAP measure calculated based on tangible common equity divided by period-end common shares outstanding. We believe this non-GAAP measure serves as a useful tool to help evaluate the strength and discipline of the Company's capital management strategies and as an additional, conservative measure of the Company’s total value.

Consolidated Statements Of Financial Condition Analysis

Assets

Total assets increased $108.7 million, or 7.0%, to $1.66 billion at June 30, 2026 compared to $1.55 billion at December 31, 2025.

Cash and Securities

•Cash and due from banks increased $44.4 million, or 140.1%, to $76.1 million at June 30, 2026, compared to $31.7 million at December 31, 2025, driven by deposit growth.

•Securities increased $45.7 million, or 16.3%, to $325.6 million at June 30, 2026, compared to $279.9 million at December 31, 2025. This was primarily due to $84.9 million of security purchases, partially offset by $37.9 million of maturities and repayments on amortizing securities and a $1.9 million increase in unrealized losses on the portfolio.

Loans, Allowance for Credit Losses (ACL) and Credit Quality

•Total loans increased $17.5 million, or 1.5%, to $1.18 billion compared to $1.16 billion, and included increases in commercial real estate and construction loans of $19.6 million and $13.5 million, respectively, partially offset by decreases in consumer and residential real estate loans of $11.8 million and $2.2 million, respectively. The decrease in consumer loans resulted from the continued reduction in indirect automobile loan production since the discontinuation of this product offering as of June 30, 2023. This portfolio is expected to continue to decline as resources are allocated and production efforts are focused on higher yielding commercial products. Excluding the $11.1 million decrease in indirect automobile loans, total loans increased $28.5 million, or 2.5%. Loan production totaled $90.8 million while $64.8 million of loans were paid off since December 31, 2025.

•The allowance for credit losses (ACL) was $10.5 million at June 30, 2026 and $10.1 million at December 31, 2025. As a result, the ACL to total loans was 0.89% at June 30, 2026 and 0.87% at December 31, 2025. During the six months ended June 30, 2026, the Company recorded a net provision for credit losses of $259,000 including a provision for credit losses on loans of $385,000 and a recovery of provision for credit losses on unfunded commitments of $126,000.

•Net charge-offs for the six months ended June 30, 2026 were $50,000, or 0.01% of average loans on an annualized basis, compared to net charge-offs for the six months ended June 30, 2025 of $15,000.

•Nonperforming loans, which include nonaccrual loans and accruing loans past due 90 days or more, were $3.4 million at June 30, 2026 and $5.3 million at December 31, 2025. Nonperforming loans to total loans ratio was 0.29% at June 30, 2026 and 0.46% at December 31, 2025. The decrease in nonperforming loans was due to the full repayment of a $2.0 million commercial real estate loan which was placed on nonaccrual status in the fourth quarter of 2025.

Liabilities

Total liabilities increased $104.2 million, or 7.5%, to $1.49 billion at June 30, 2026 compared to $1.39 billion at December 31, 2025.

Deposits

•Excluding brokered funding, deposits increased $105.1 million, or 8.5%, to $1.35 billion as of June 30, 2026 compared to $1.24 billion at December 31, 2025. Interest-bearing demand and money market deposits increased $103.1 million and

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$11.6 million, respectively, while noninterest deposits and time deposits decreased $5.1 million and $4.1 million, respectively. This growth has occurred as the Bank began onboarding Specialty Treasury clients during the first quarter of 2026. The Bank continues to focus on building core banking relationships while seeking opportunities to strategically reduce higher priced funding.

•Brokered deposits decreased $64.9 million, or 65.9%, to $33.6 million as of June 30, 2026 compared to $98.5 million at December 31, 2025, as the Bank elected to utilize lower cost FHLB borrowings instead. The remaining brokered deposits mature within three months and were utilized primarily to fund the purchase of floating rate CLO securities. At June 30, 2026, FDIC insured deposits totaled approximately 55.1% of total deposits while an additional 19.7% of total deposits were collateralized with investment securities.

Borrowed Funds

•Short-term borrowings increased $65.0 million to $65.0 million as of June 30, 2026 as the Bank replaced maturing brokered deposits with lower cost FHLB borrowings.

Stockholders’ Equity

Stockholders’ equity increased $4.6 million, or 2.9%, to $162.1 million at June 30, 2026, compared to $157.5 million at December 31, 2025. The key factors positively impacting stockholders’ equity were $8.2 million of net income for the current year and $551,000 of shares issued as a result of stock option exercises, partially offset by a $1.5 million increase in accumulated other comprehensive loss resulting from the securities market interest rate changes, the payment of $2.8 million in dividends and $306,000 of treasury shares purchased under the stock repurchase program since December 31, 2025.

Book value per common share (GAAP) was $31.91 at June 30, 2026 compared to $31.28 at December 31, 2025, an increase of $0.63. Tangible book value per common share (Non-GAAP) was $29.99 at June 30, 2026 compared to $29.35 at December 31, 2025, an increase of $0.64.

Consolidated Results of Operations for the Three Months Ended June 30, 2026 and 2025

Overview. Net income was $4.3 million for the three months ended June 30, 2026, an increase of $352,000 compared to net income of $3.9 million for the three months ended June 30, 2025.

Net Interest and Dividend Income. Net interest and dividend income increased $2.0 million, or 15.9%, to $14.5 million for the three months ended June 30, 2026 compared to $12.5 million for the three months ended June 30, 2025. Net interest margin (GAAP) increased 14 basis points (bps) to 3.68% for the three months ended June 30, 2026 compared to 3.54% for the three months ended June 30, 2025. Fully Tax Equivalent (FTE) net interest margin (Non-GAAP) increased 18 bps to 3.73% for the three months ended June 30, 2026 compared to 3.55% for the three months ended June 30, 2025.

Interest and Dividend Income

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ITEM 7.    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

This discussion and analysis reflects our consolidated financial statements and other relevant statistical data, and is intended to enhance your understanding of our financial condition and results of operations. The information in this section has been derived from the audited consolidated financial statements, which appear in this Report. You should read the information in this section in conjunction with the business and financial information the Company provided in this Report.

Cautionary Statement Concerning Forward-Looking Statements

See the first page of this Report for information regarding forward-looking statements.

Selected Financial Data

The following tables set forth selected historical financial and other data of the Company at and for the years ended December 31, 2025, 2024 and 2023. The information at December 31, 2025 and 2024, and for the years ended December 31, 2025 and 2024 is derived in part from, and should be read together with, the Company's audited consolidated financial statements and notes included in this Report and should be read together therewith. The information at December 31, 2023 and for the year ended December 31, 2023 is derived in part from audited financial statements that are not included in this Report.

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(1)Represents dividends per share divided by net income per share.

(2)Represents the difference between the weighted average yield on average interest-earning assets and the weighted average cost of average interest-bearing liabilities.

(3)Represents net interest income as a percentage of average interest-earning assets.

(4)Fully taxable-equivalent (FTE) yield adjustments have been made for tax exempt loan and securities income utilizing a marginal federal income tax rate of 21%. Refer to Explanation of Use of Non-GAAP Financial Measures in Item 7 of this Report for the calculation of the measure and reconciliation to the most comparable GAAP measure.

(5)Represents noninterest expense divided by the sum of net interest income and noninterest income.

(6)Capital ratios are for Community Bank only.

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Critical Accounting Policies and Use of Critical Accounting Estimates

Critical accounting policies are those that involve significant judgments, estimates and assumptions by management and that have, or could have, a material impact on the Company’s income or the carrying value of its assets.

Allowance for Credit Losses (ACL). The ACL represents the estimated amount considered necessary to cover lifetime expected credit losses inherent in financial assets at the balance sheet date. The measurement of expected credit losses is applicable to loans receivable and securities measured at amortized cost. It also applies to off-balance sheet credit exposures such as loan commitments and unused lines of credit. The allowance is established through a provision for credit losses that is charged against income. The methodology for determining the allowance for credit losses is considered a critical accounting policy by management because of the high degree of judgment involved, the subjectivity of the assumptions used, and the potential for changes in the forecasted economic environment that could result in changes to the amount of the recorded ACL. The ACL is reported separately as a contra-asset on the Consolidated Statement of Financial Condition. The expected credit loss for unfunded loan commitments is reported on the Consolidated Statement of Financial Condition in other liabilities while the provision for credit losses related to unfunded commitments is reported in provision for credit losses - unfunded commitments in the Consolidated Statements of Income.

ACL on Loans Receivable

The ACL on loans is deducted from the amortized cost basis of the loan to present the net amount expected to be collected. Expected losses are evaluated and calculated on a collective, or pooled, basis for those loans which share similar risk characteristics. At each reporting period, the Company evaluates whether loans within a pool continue to exhibit similar risk characteristics. If the risk characteristics of a loan change, such that they are no longer similar to other loans in the pool, the Company will evaluate the loan with a different pool of loans that share similar risk characteristics. If the loan does not share risk characteristics with other loans, the Company will evaluate the loan on an individual basis. The Company evaluates the pooling methodology at least annually. Loans are charged off against the ACL when the Company believes the balances to be uncollectible. Expected recoveries do not exceed the aggregate of amounts previously charged off or expected to be charged off.

The Company has chosen to segment its portfolio consistent with the manner in which it manages credit risk. Such segments include residential mortgage, commercial real estate mortgages, construction, commercial business, consumer and other. For most segments, the Company calculates estimated credit losses using a probability of default and loss given default methodology, the results of which are applied to the aggregated discounted cash flow of each individual loan within the segment. The point in time probability of default and loss given default are then conditioned by macroeconomic scenarios to incorporate reasonable and supportable forecasts that affect the collectability of the reported amount.

The Company estimates the ACL on loans via a quantitative analysis which considers relevant available information from internal and external sources related to past events and current conditions, as well as the incorporation of reasonable and supportable forecasts. The Company evaluates a variety of factors including third party economic forecasts, industry trends and other available published economic information in arriving at its forecasts. After the reasonable and supportable forecast period, the Company reverts, on a straight-line basis, to average historical losses. Expected credit losses are estimated over the contractual term of the loans, adjusted for expected prepayments when appropriate. The contractual term excludes expected extensions, renewals, and modifications unless either of the following applies: management has a reasonable expectation at the reporting date that a restructuring will be executed with an individual borrower or the renewal option is included in the original or modified contract at the reporting date and are not unconditionally cancellable by the Company.

Also included in the ACL on loans are qualitative reserves to cover losses that are expected but, in the Company’s assessment, may not be adequately represented in the quantitative analysis or the forecasts described above. Factors that the Company considers include changes in lending policies and procedures, business conditions, the nature and size of the portfolio, portfolio concentrations, the volume and severity of past due loans and nonaccrual loans, and the effect of external factors such as competition, legal and regulatory requirements, among others. Furthermore, the Company considers the inherent uncertainty in quantitative models that are built upon historical data.

Individually Evaluated Loans

On a case-by-case basis, the Company may conclude that a loan should be evaluated on an individual basis based on its disparate risk characteristics. When the Company determines that a loan no longer shares similar risk characteristics with other loans in the portfolio, the allowance will be determined on an individual basis using the present value of expe

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