CB Financial Services, Inc.

CB Financial Services, Inc. (the "Company") operates as a bank holding company primarily through its wholly-owned subsidiary, Community Bank, a Pennsylvania-chartered commercial bank. The Company's common stock is traded on the Nasdaq Global Market under the symbol "CBFV." Community Bank is a community-oriented institution offering residential and commercial real estate loans, commercial and industrial loans, and consumer loans, along with a variety of deposit products for individuals and businesses. The Bank operates nine offices in southwestern Pennsylvania (Greene, Allegheny, Washington, Fayette, and Westmoreland Counties) and three offices in West Virginia (Marshall and Ohio Counties), in addition to loan production offices and an operations center. The Company's primary market area is southwestern Pennsylvania, extending into Marshall and Ohio counties in West Virginia, with lending and depository services also provided throughout Pennsylvania, West Virginia, Ohio, and New York ¹.

The Company's business model is centered on traditional community banking services, generating revenue primarily through interest income on its loan and investment portfolios, complemented by noninterest income from service fees and other commissions. The mix of income is largely recurring from interest-earning assets and deposit services. Primary customer segments include individuals and businesses within its market area. The Company emphasizes building full relationships with customers, leveraging technology to enhance the customer experience, and focusing on core deposit growth ².

The Company's lending activities are diversified across several categories. Residential real estate loans, comprising traditional one-to-four-family mortgage loans, home equity installment loans, and home equity lines of credit, constituted 28.3% of the total loan portfolio at December 31, 2025, totaling $329.2 million ³. Commercial real estate loans, secured by improved properties such as retail facilities, office buildings, and multifamily properties, represented the largest portion at 47.5% of the total loan portfolio, amounting to $552.2 million ⁴. Construction loans, for both residential dwellings and commercial properties, made up 3.9% of the portfolio, or $45.4 million ⁵. Commercial and industrial loans, secured by collateral other than real estate, accounted for 13.9% of the portfolio, totaling $161.1 million ⁶. Consumer loans, primarily indirect auto loans, represented 3.7% of the portfolio, or $42.9 million ⁷. Other loans, mainly to municipal borrowers, comprised 2.7% of the portfolio, or $31.5 million ⁸.

The Company's investment portfolio primarily consists of available-for-sale debt securities and equity securities. At December 31, 2025, total securities were $279.9 million ⁹. This included $36.2 million in obligations of states and political subdivisions ¹⁰, $108.7 million in mortgage-backed securities (MBS) and collateralized mortgage obligations (CMO) ¹¹, $101.2 million in collateralized loan obligations (CLO) ¹², and $22.3 million in corporate debt ¹³. Equity securities, consisting exclusively of mutual funds, totaled $909,000 ¹⁴.

For the fiscal year ended December 31, 2025, the Company reported total assets of $1.55 billion ¹⁵, total liabilities of $1.39 billion ¹⁶, and stockholders' equity of $157.5 million ¹⁷. Net income was $4.903 million ¹⁸, resulting in basic earnings per common share of $0.97 ¹⁹ and diluted earnings per common share of $0.92 ²⁰. Total revenue, represented by total interest and dividend income, was $75.939 million ²¹. Net interest and dividend income was $50.775 million ²², with a net interest margin (GAAP) of 3.55% ²³. The provision for credit losses was $589,000 ²⁴. Noninterest loss was $7.230 million ²⁵, and noninterest expense totaled $37.656 million ²⁶. The efficiency ratio was 86.48% ²⁷. Cash and due from banks stood at $31.693 million ²⁸, and total deposits were $1.34 billion ²⁹. Other borrowed funds amounted to $34.758 million ³⁰.

Comparing 2025 to 2024, total assets increased by $66.1 million, or 4.5% ³¹. Total loans increased by $69.6 million, or 6.4% ³², driven by increases in commercial real estate loans of $66.7 million ³³ and commercial and industrial loans of $49.0 million ³⁴. This growth was partially offset by decreases in consumer loans of $27.6 million ³⁵, residential mortgage loans of $9.3 million ³⁶, and construction real estate loans of $8.8 million ³⁷. Net interest income increased by $4.7 million, or 10.2% ³⁸, and the net interest margin (GAAP) expanded from 3.19% in 2024 to 3.55% in 2025 ³⁹. Noninterest income shifted from a gain of $5.494 million in 2024 to a loss of $7.230 million in 2025 ⁴⁰, primarily due to an $11.8 million loss on investment securities from a balance sheet repositioning strategy ⁴¹. Noninterest expense increased by $2.0 million, or 5.6% ⁴², mainly due to a $3.4 million increase in salaries and employee benefits ⁴³.

During 2025, the Company implemented a balance sheet repositioning strategy for its available-for-sale investment securities portfolio. This involved selling $129.6 million in book value of lower-yielding investment securities with an average yield of 2.87% for an $11.8 million loss ($9.3 million after-tax) ⁴⁴. The proceeds were used to purchase $117.8 million of higher-yielding mortgage-backed securities/collateralized mortgage obligations, municipal securities, subordinated debt investments, and non-agency guaranteed securitizations with an expected tax-equivalent yield of approximately 5.43% ⁴⁵. The Bank also discontinued offering indirect auto loans as of June 30, 2023, leading to a decline in this portfolio ⁴⁶. Effective September 29, 2025, Exchange Underwriters, Inc., a wholly-owned subsidiary, merged with and into Community Bank ⁴⁷.

The Company's business strategies emphasize building on core strengths, including creating a sales and service culture to foster full customer relationships and utilizing technology investments to enhance process speed and improve customer experience. The goal is to grow valuable core deposits, which represent longer-term customer relationships and provide a lower cost of funding compared to certificates of deposit and borrowings. Empowering experienced employees with superior customer service, supported by technology and modern financial products, is expected to lead to stronger customer relationships, enhanced fee revenue, and position the Bank as a preferred choice for residents and small and medium-sized businesses across its footprint ⁴⁸.

A key growth area involves evolving toward more electronic/digital products and processes to drive greater efficiency and expand brand awareness. The Company intends to focus on building mobile and online capabilities through an improved mobile banking platform and product offering, as well as an omnichannel experience consistent with quick results and interactive alerts ⁴⁹.

Another strategic growth vector is the continuation of opportunistic growth in the robust Pittsburgh metropolitan area and across the Company's footprint. The Company believes it has competed effectively by leveraging its branch network and a full assortment of banking products to facilitate deposit and loan growth in its core locations, including southwestern Pennsylvania, Ohio River Valley, and central West Virginia ⁵⁰.

Operationally, the Company aims to enhance profitability and efficiency while continuing to invest for future growth. Cost reduction is viewed as a key part of a company-wide efficiency effort. Short-term targeted cost reductions combined with long-term strategic initiatives are expected to better position the Company for high performance. This strategy aligns with efforts to simplify processes, utilize technology to improve efficiency, and build capabilities that support future growth and high performance ⁵¹. The Company also plans to leverage its credit culture and strong loan underwriting to uphold asset quality metrics, maintaining a high level of asset quality and moderate credit risk through conservative underwriting standards. While efforts to originate commercial real estate and commercial and industrial loans will continue, the philosophy of managing loan exposures through a conservative, yet reasonable, approach to lending will be maintained ⁵².

Planned capital allocation includes a focus on share repurchases. On September 4, 2025, the Board approved a program to repurchase up to $5.0 million of the Company's outstanding common stock, which was set to expire on September 30, 2025 ⁵³. As of December 31, 2025, no shares had been repurchased under this specific plan ⁵⁴. The Company's ability to pay dividends is subject to the ability of Community Bank to make capital distributions and Federal Reserve policy ⁵⁵.

Management explicitly flagged several structural headwinds and execution risks. These include the ability to manage operations under current national and market area economic conditions, adverse changes in financial industry, securities, credit, and real estate markets, and changes in consumer spending, borrowing, and savings habits ⁵⁶. Inflation and changes in interest rates, particularly in the relative differences between short-term and long-term rates and deposit rates, may affect net interest margin and funding costs ⁵⁷. Significant increases in credit losses, including the inability to resolve classified and nonperforming assets, and management's assumptions in determining the adequacy of the allowance for credit losses, are also noted ⁵⁸. Risks related to a high concentration of loans secured by real estate in the market area and fluctuations in loan demand are also present ⁵⁹.

Geographic, regulatory, and macro factors identified as constraints include changes in laws or government regulations or policies affecting financial institutions, which could result in increased deposit insurance premiums, capital requirements, regulatory fees, and compliance costs ⁶⁰. Exploration and drilling of natural gas reserves in the market area may be affected by federal, state, and local laws and regulations, which could adversely affect customers, loan and deposit volume, and asset quality ⁶¹. Customers dependent on natural gas exploration and drilling may also be adversely affected by decreases in market prices for natural gas or government regulation ⁶².

The Company faces material risks across several categories. Macroeconomic risks include adverse changes in national and local economic conditions, real estate markets, and interest rates, which could reduce profitability and impair asset values. Specifically, a rapid increase in interest rates could force the Company to raise deposit rates faster than loan yields, negatively impacting net interest margin, while a decrease could lead to increased loan prepayments and reinvestment risk. Inflation also poses a risk by decreasing the value of investment securities, increasing noninterest expenses, and potentially impairing customers' ability to repay loans. Competitive risks are significant, with intense competition for both loans and deposits from other financial institutions, online entities, and non-depository competitors, potentially leading to reduced net interest income. Operational risks stem from the high volume of transactions, reliance on technology systems, and potential for system failures, security breaches, or cybersecurity attacks, which could damage reputation, lead to customer loss, and incur litigation or financial liability. The Company's risk management framework, while diversified, may not anticipate all unknown risks, potentially leading to significant losses. Regulatory risks include changes in laws or government regulations, such as increased capital requirements or compliance costs, and the potential for regulators to require higher allowance for credit losses. Geopolitical and environmental factors, such as the volatility in natural gas prices affecting the Marcellus and Utica Shale formations in the Company's market area, or the physical effects of climate change impacting real property values and regional economic activity, could also materially affect financial condition and results of operations.

Management's message to shareholders conveys a commitment to operating as a well-capitalized and profitable community bank, emphasizing exceptional personal service and continued value creation for stockholders. They highlight a focus on building core strengths, including fostering full customer relationships and leveraging technology to enhance the customer experience. A key strategic priority is to evolve towards more electronic and digital products and processes to drive greater efficiency and expand brand awareness. Management also prioritizes enhancing profitability and efficiency through cost reduction initiatives and long-term strategic investments, while maintaining a conservative credit culture and strong loan underwriting to uphold asset quality. The Company's Board approved a share repurchase program on September 4, 2025, authorizing the repurchase of up to $5.0 million of outstanding common stock, set to expire on September 30, 2025 ⁶³. Additionally, the Board declared a cash dividend of $0.28 per outstanding share of common stock on January 27, 2026, which was paid on February 27, 2026 ⁶⁴.