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, 2021

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 and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post 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 November 2, 2021:

COMMON STOCK, NO PAR VALUE PER SHARE: 16,892,537 SHARES

---

Table of Contents

INDEX

PART I.

FINANCIAL INFORMATION

 

			Page Number
ITEM 1 – Financial Statements
Consolidated Balance Sheets – September 30, 2021 (unaudited) and December 31, 2020 (audited)			1
Consolidated Statements of Income – Three and nine months ended September 30, 2021 and 2020 (unaudited)			2
Consolidated Statements of Comprehensive Income – Three and nine months ended September 30, 2021 and 2020 (unaudited)			3
Consolidated Statements of Cash Flows – Nine months ended September 30, 2021 and 2020 (unaudited)			4
Consolidated Statements of Changes in Shareholders' Equity - Three and nine months ended September 30, 2021 and 2020 (unaudited)			6
Notes to Consolidated Financial Statements			8
ITEM 2 – Management’s Discussion and Analysis of Financial Condition and Results of Operations			43
ITEM 3 – Quantitative and Qualitative Disclosures about Market Risk			64
ITEM 4 – Controls and Procedures			65
PART II. OTHER INFORMATION
ITEM 1 – Legal Proceedings			66
ITEM 1A – Risk Factors			66
ITEM 2 – Unregistered Sales of Equity Securities and Use of Proceeds			66
ITEM 3 – Defaults Upon Senior Securities			66
ITEM 4 – Mine Safety Disclosures			66
ITEM 5 – Other Information			66
ITEM 6 – Exhibits			67
Signatures			68

---

Table of Contents

Forward-Looking Statements

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 CNB’s financial condition, liquidity, results of operations, future performance and business. 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.

Currently, one of the most significant factors that could cause actual outcomes to differ materially from our forward-looking statements is the potential adverse effect of the current pandemic of the novel coronavirus, or COVID-19, on the financial condition, results of operations, cash flows and performance of the Corporation, our customers and the global economy and financial markets. The extent to which the COVID-19 pandemic impacts us will depend on future developments, which are highly uncertain and cannot be predicted with confidence, including the scope, severity and duration of the pandemic and its impact on our customers and demand for financial services, the actions governments, businesses and individuals take in response to the pandemic, the impact of the COVID-19 pandemic and actions taken in response to the pandemic on global and regional economies, national and local economic activity, the speed and effectiveness of vaccine and treatment developments and their deployment, including public adoption rates of COVID-19 vaccines, and the pace of recovery when the COVID-19 pandemic subsides, among others. Moreover, investors are cautioned to interpret many of the risks identified under the section entitled “Risk Factors” in our Form 10-K for the year ended December 31, 2020 as being heightened as a result of the ongoing and numerous adverse impacts of the COVID-19 pandemic.

Additional factors that could cause the actual results to differ materially from the statements, include, but are not limited to,(i) the duration and scope of the COVID-19 pandemic and the local, national and global impact of COVID-19; (ii) actions governments, businesses and individuals take in response to the pandemic; (iii) the speed and effectiveness of vaccine and treatment developments and deployment; (iv) variations of COVID-19, such as the Delta variant, and the response thereto, (v) the pace of recovery when the COVID-19 pandemic subsides; (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) adverse changes or conditions in capital and financial markets; (ix) changes in interest rates; (x) higher than expected costs or other difficulties related to integration of combined or merged businesses; (xi) the effects of business combinations and other acquisition transactions, including the inability to realize our loan and investment portfolios; (xii) changes in the quality or composition of our loan and investment portfolios; (xiii) adequacy of loan loss reserves; (xiv) increased competition; (xv) loss of certain key officers; (xvi) deposit attrition; (xvii) rapidly changing technology; (xviii) unanticipated regulatory or judicial proceedings and liabilities and other costs; (xix) changes in the cost of funds, demand for loan products or demand for financial services; and (xx) 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

CONSOLIDATED BALANCE SHEETS

Dollars in thousands, except share data

			(unaudited)						(audited)
			September 30, 2021						December 31, 2020
ASSETS
Cash and due from banks			$	49,897					$	44,368
Interest bearing deposits with other banks			687,153						488,326
Total cash and cash equivalents			737,050						532,694
Debt securities available for sale, at fair value (amortized cost of $727,205 and $565,493 as of September 30, 2021 and December 31, 2020, respectively)			732,793						584,908
Trading securities			9,941						6,649
Loans held for sale			3,415						8,514
Loans			3,511,125						3,371,789
Less: allowance for credit losses			(37,230)						(34,340)
Net loans			3,473,895						3,337,449
FHLB, other equity, and restricted equity interests			22,259						21,018
Premises and equipment, net			61,284						60,064
Operating lease assets			19,652						18,407
Bank owned life insurance			99,083						76,471
Mortgage servicing rights			1,661						1,527
Goodwill			43,749						43,749
Core deposit intangible			485						567
Accrued interest receivable and other assets			41,019						37,382
Total Assets			$	5,246,286					$	4,729,399
LIABILITIES AND SHAREHOLDERS’ EQUITY
Non-interest bearing demand deposits			$	774,851					$	627,114
Interest bearing demand deposits			1,031,488						951,903
Savings			2,350,266						2,126,183
Certificates of deposit			437,023						476,544
Total deposits			4,593,628						4,181,744
Subordinated notes and debentures			154,212						70,620
Operating lease liabilities			20,847						19,449
Accrued interest payable and other liabilities			39,910						41,449
Total liabilities			4,808,597						4,313,262
Preferred stock, Series A non-cumulative perpetual, $0 par value; $1,000 liquidation preference; authorized 60,375 shares; issued 60,375 shares at September 30, 2021 and December 31, 2020, respectively			57,785						57,785
Common stock, $0 par value; authorized 50,000,000 shares; issued 16,978,057 shares at September 30, 2021 and December 31, 2020, respectively			0						0
Additional paid in capital			127,124						127,518
Retained earnings			249,978						218,727
Treasury stock, at cost (88,363 and 145,049 shares for September 30, 2021 and December 31, 2020, respectively)			(1,535)						(2,967)
Accumulated other comprehensive income (loss)			4,337						15,074
Total shareholders’ equity			437,689						416,137
Total Liabilities and Shareholders’ Equity			$	5,246,286					$	4,729,399

See Notes to Consolidated Financial Statements

1

---

Table of Contents

CONSOLIDATED STATEMENTS OF INCOME (unaudited)

Dollars in thousands, except per share data

			Three Months Ended September 30,												Nine months ended September 30,
			2021						2020						2021						2020
INTEREST AND DIVIDEND INCOME:
Loans including fees			$	42,020					$	39,034					$	123,693					$	109,106
Securities:
Taxable			3,125						2,857						8,465						9,727
Tax-exempt			268						303						889						1,143
Dividends			35						162						224						543
Total interest and dividend income			45,448						42,356						133,271						120,519
INTEREST EXPENSE:
Deposits			3,433						5,578						11,785						19,418
Borrowed funds and finance lease liabilities			6						1,172						18						3,666
Subordinated notes and debentures (includes $73, $68, $204 and $154 accumulated other comprehensive income reclassification for change in fair value of interest rate swap agreements, respectively)			1,714						942						3,747						2,839
Total interest expense			5,153						7,692						15,550						25,923
NET INTEREST INCOME			40,295						34,664						117,721						94,596
PROVISION FOR CREDIT LOSS EXPENSE			1,100						3,306						5,189						12,065
NET INTEREST INCOME AFTER PROVISION FOR CREDIT LOSS EXPENSE			39,195						31,358						112,532						82,531
NON-INTEREST INCOME:
Service charges on deposit accounts			1,595						1,201						4,389						3,652
Other service charges and fees			614						652						1,705						1,848
Wealth and asset management fees			1,734						1,414						5,021						4,081
Net realized gains on available-for-sale securities (includes $0, $0, $0 and $2,190 accumulated other comprehensive income reclassifications for net realized gains on available-for-sale securities, respectively)			0						0						0						2,190
Net realized and unrealized gains (losses) on trading securities			7						202						477						(80)
Mortgage banking			844						1,089						2,615						2,090
Bank owned life insurance			558						425						2,002						1,290
Card processing and interchange income			1,958						1,606						5,871						4,059
Other			1,104						189						2,430						961
Total non-interest income			8,414						6,778						24,510						20,091
NON-INTEREST EXPENSES:
Salaries and benefits			15,351						12,508						43,442						34,578
Net occupancy expense			2,950						2,870						9,154						8,942
Amortization of core deposit intangible			26						26						82						178
Technology expense			2,894						1,475						8,452						4,024
State and local taxes			1,050						925						3,096						2,409
Legal, professional, and examination fees			735						602						2,785						1,927
Advertising			488						600						1,318						1,410
FDIC insurance premiums			647						726						1,820						1,966
Card processing and interchange expenses			728						804						2,816						2,192
Merger costs, prepayment penalties and branch closure costs			0						4,673						0						5,207
Other			4,330						3,159						11,003						9,476
Total non-interest expenses			29,199						28,368						83,968						72,309
INCOME BEFORE INCOME TAXES			18,410						9,768						53,074						30,313
INCOME TAX EXPENSE (includes $(15), $(14), $(43) and $428 income tax expense from reclassification items, respectively)			3,503						1,983						9,996						5,469
NET INCOME			14,907						7,785						43,078						24,844
PREFERRED STOCK DIVIDENDS			1,076						0						3,226						0
NET INCOME AVAILABLE TO COMMON STOCKHOLDERS			13,831						7,785						39,852						24,844
EARNINGS PER COMMON SHARE:
Basic			$	0.82					$	0.47					$	2.36					$	1.57
Diluted			$	0.82					$	0.47					$	2.36					$	1.57
DIVIDENDS PER COMMON SHARE:
Cash dividends per share			$	0.17					$	0.17					$	0.51					$	0.51

See Notes to Consolidated Financial Statements

2

---

Table of Contents

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (unaudited)

Dollars in thousands

			Three months ended September 30,												Nine months ended September 30,
			2021						2020						2021						2020
NET INCOME			$	14,907					$	7,785					$	43,078					$	24,844
Other comprehensive income (loss), net of tax:
Net change in fair value of interest rate swap agreements designated as cash flow hedges:
Unrealized gain (loss) on interest rate swaps, net of tax $1, $(1), $(7) and $105, respectively			(5)						2						26						(399)
Reclassification adjustment for losses recognized in earnings, net of tax $(15), $(14), $(43) and $(32), respectively			58						54						161						122
			53						56						187						(277)
Net change in unrealized gains on securities available for sale:
Unrealized holding gains (losses) arising during the period, net of tax of $970, $272, $2,903 and $(2,843), respectively			(3,660)						(1,015)						(10,924)						10,707
Reclassification adjustment for realized gains included in net income, net of tax of $0, $0, $0 and $460, respectively			0						0						0						(1,730)
			(3,660)						(1,015)						(10,924)						8,977
Other comprehensive income (loss)			(3,607)						(959)						(10,737)						8,700
COMPREHENSIVE INCOME			$	11,300					$	6,826					$	32,341					$	33,544

See Notes to Consolidated Financial Statements

3

---

Table of Contents

CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)

Dollars in thousands

			Nine months ended September 30,
			2021						2020
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income			$	43,078					$	24,844
Adjustments to reconcile net income to net cash provided by operations:
Provision for credit loss expense			5,189						12,065
Depreciation and amortization of premises and equipment, operating leases assets, core deposit intangible, and mortgage servicing rights			5,075						4,433
Amortization (accretion) of securities, deferred loan fees and costs, net yield and credit mark on acquired loans, and unearned income			(1,251)						(1,390)
Net amortization of deferred costs on borrowings			101						0
Accretion of deferred PPP processing fees			(6,817)						(683)
Net realized gains on sales of available-for-sale securities			0						(2,190)
Net realized and unrealized (gains) losses on trading securities			(477)						80
Gain on sale of loans			(2,315)						(1,801)
Net losses (gains) on dispositions of premises and equipment and foreclosed assets			245						1,101
Proceeds from sale of loans			67,739						63,517
Origination of loans held for sale			(69,311)						(64,447)
Income on bank owned life insurance			(1,548)						(1,290)
Gain on bank owned life insurance (death benefit proceeds in excess of cash surrender value)			(454)						0
Stock-based compensation expense			1,124						1,123
Stock-based contribution expense			75						0
Changes in:
Accrued interest receivable and other assets			(2,870)						(7,771)
Accrued interest payable, lease liabilities, and other liabilities			1,070						(8,182)
NET CASH PROVIDED BY OPERATING ACTIVITIES			38,653						19,409
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from maturities, prepayments and calls of available-for-sale securities			124,140						112,683
Proceeds from sales of available-for-sale securities			0						57,185
Purchase of available-for-sale securities			(290,130)						(170,571)
Proceeds from sale of trading securities			0						5,935
Purchase of trading securities			(292)						(2,370)
Proceeds from loans held for sale previously classified as portfolio loans			1,627						0
Loan origination and payments, net			(126,411)						(224,448)
Purchase of BOLI			(22,000)						0
Proceeds from death benefit of BOLI policies			1,390						0
Net cash from business combinations			0						72,852
Redemption (purchase) of FHLB, other equity, and restricted equity interests			(1,241)						1,471
Purchase of premises and equipment			(5,358)						(3,784)
Proceeds from the sale of premises and equipment and foreclosed assets			591						680
NET CASH USED BY INVESTING ACTIVITIES			(317,684)						(150,367)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net change in:
Checking, money market and savings accounts			451,405						540,588
Certificates of deposit			(39,521)						(39,686)
Purchase of treasury stock			(161)						(1,306)
Cash dividends paid, common stock			(8,601)						(8,108)
Cash dividends paid, preferred stock			(3,226)						0
Proceeds from common stock offering, net of issuance costs			0						3,257
Proceeds from preferred stock offering, net of issuance costs			0						57,760
Proceeds from issuance of subordinated notes, net of issuance costs			83,491						0
Repayment of long-term borrowings			0						(290,565)
Proceeds from long-term borrowings			0						231,985
NET CASH PROVIDED BY FINANCING ACTIVITIES			483,387						493,925
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS			204,356						362,967
CASH AND CASH EQUIVALENTS, Beginning			532,694						192,974
CASH AND CASH EQUIVALENTS, Ending			$	737,050					$	555,941

4

---

Table of Contents

CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited) (continued)

Dollars in thousands

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest			$	15,296					$	26,006
Income taxes			9,846						5,124
SUPPLEMENTAL NONCASH DISCLOSURES:
Transfers to other real estate owned			$	1,450					$	274
Transfers from loans held for sale to loans held for investment			9,335						0
Transfers from loans held for investment to loans held for sale			2,484						0
Grant of restricted stock awards from treasury stock			1,285						934
Grant of performance based restricted stock awards from treasury stock			262						217
Contribution of stock from treasury stock			81						0

See Notes to Consolidated Financial Statements

5

---

Table of Contents

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, 2021			$	57,785					$	126,875					$	239,017					$	(1,672)					$	7,944					$	429,949
Net income															14,907																		14,907
Other comprehensive loss																											(3,607)						(3,607)
Restricted stock award grants (2,203 shares)									(57)												57												0
Stock-based compensation expense									312																								312
Contribution of treasury stock (3,000 shares)									(81)												81												0
Stock-based contribution expense									75																								75
Purchase of treasury stock for the purpose of tax withholding related to restricted stock award vesting (28 shares)																					(1)												(1)
Preferred cash dividend declared															(1,076)																		(1,076)
Cash dividends declared ($0.17 per common share)															(2,870)																		(2,870)
Balance, September 30, 2021			$	57,785					$	127,124					$	249,978					$	(1,535)					$	4,337					$	437,689
Balance, July 1, 2020			$	0					$	102,374					$	213,327					$	(2,027)					$	16,598					$	330,272
Net income															7,785																		7,785
Other comprehensive loss																											(959)						(959)
Restricted stock award grants (1,808 shares)									(42)												42												0
Stock-based compensation expense									288																								288
Issuance of common stock, net of issuance costs (0 shares)									(56)																								(56)
Purchase of treasury stock (66,000 shares)																					(981)												(981)
Issuance of preferred equity, net of issuance costs			57,760																														57,760
Acquisition of Bank of Akron									24,667																								24,667
Cash dividends declared ($0.17 per common share)															(2,873)																		(2,873)
Balance, September 30, 2020			$	57,760					$	127,231					$	218,239					$	(2,966)					$	15,639					$	415,903

6

---

Table of Contents

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, 2021			$	57,785					$	127,518					$	218,727					$	(2,967)					$	15,074					$	416,137
Net income															43,078																		43,078
Other comprehensive loss																											(10,737)						(10,737)
Forfeiture of restricted stock award grants (1,578 shares)									35												(35)												0
Restricted stock award grants (52,309 shares)									(1,285)												1,285												0
Performance based restricted stock award grants (10,587 shares)									(262)												262												0
Stock-based compensation expense									1,124																								1,124
Contribution of treasury stock (3,000 shares)									(81)												81												0
Stock-based contribution expense									75																								75
Purchase of treasury stock for the purpose of tax withholding related to restricted stock award vesting (6,691 shares)																					(141)												(141)
Purchase of treasury stock for the purpose of tax withholding related to performance based restricted stock award vesting (941 shares)																					(20)												(20)
Preferred cash dividend declared															(3,226)																		(3,226)
Cash dividends declared ($0.51 per common share)															(8,601)																		(8,601)
Balance, September 30, 2021			$	57,785					$	127,124					$	249,978					$	(1,535)					$	4,337					$	437,689
Balance, January 1, 2020			$	0					$	99,335					$	201,503					$	(2,811)					$	6,939					$	304,966
Net income															24,844																		24,844
Other comprehensive income																											8,700						8,700
Restricted stock award grants (36,968 shares)									(934)												934												0
Performance based restricted stock award grants (8,351 shares)									(217)												217												0
Stock-based compensation expense									1,123																								1,123
Issuance of common stock, net of issuance costs (115,790 shares)									3,257																								3,257
Purchase of treasury stock (66,000 shares)																					(981)												(981)
Purchase of treasury stock for the purpose of tax withholding related to restricted stock award vesting (7,267 shares)																					(212)												(212)
Purchase of treasury stock for the purpose of tax withholding related to performance based restricted stock award vesting (3,458 shares)																					(113)												(113)
Issuance of preferred equity, net of issuance costs			57,760																														57,760
Acquisition of Bank of Akron									24,667																								24,667
Cash dividends declared ($0.51 per common share)															(8,108)																		(8,108)
Balance, September 30, 2020			$	57,760					$	127,231					$	218,239					$	(2,966)					$	15,639					$	415,903

See Notes to Consolidated Financial Statements

7

---

Table of Contents

CNB FINANCIAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

1.    BASIS OF PRESENTATION

The accompanying consolidated financial statements have been prepared pursuant to rules and regulations of the SEC and in compliance with accounting principles generally accepted in the United States of America ("GAAP"). Because this report is based on an interim period, certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted.

In the opinion of management of the registrant, the accompanying consolidated financial statements as of September 30, 2021 and for the three month period ended September 30, 2021 and 2020 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 CNB Financial Corporation (the "Corporation") for the three month and nine months ended September 30, 2021 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 period ended December 31, 2020 (the "2020 Form 10-K"). All dollar amounts are stated in thousands, except share and per share data and other amounts as indicated. Certain amounts appearing in the consolidated financial statements and notes thereto for prior periods have been reclassified to conform with the current presentation. The reclassifications had no effect on net income or shareholders’ equity as previously reported.

Risks and Uncertainties

The worldwide spread of COVID-19 has created significant uncertainty in the global economy. There have been no comparable recent events that provide guidance as to the effects the global COVID-19 pandemic may have, and, as a result, the ultimate impact of the COVID-19 pandemic and the extent to which the COVID-19 pandemic and the related government responses impact the Corporation’s business, results of operations and financial condition will depend on future developments, which are highly uncertain and difficult to predict.

Use of Estimates

To prepare financial statements in conformity with U.S. generally accepted accounting principles ("GAAP"), management makes estimates and assumptions based on available information. These estimates and assumptions affect the amounts reported in the financial statements and the disclosures provided and future results could differ.

The Corporation's business is dependent upon the willingness and ability of its employees and customers to conduct banking and other financial transactions. If the global response to contain the COVID-19 pandemic requires further restricted measures or is unsuccessful, the Corporation could experience a material adverse effect on its business, financial condition, results of operations and cash flows. Since the extent to which the COVID-19 pandemic impacts its operations will depend on future developments that are highly uncertain, the Corporation cannot estimate the impact on its business, financial condition or near or long-term financial or operational results with reasonable certainty. Accordingly, the Corporation is disclosing potentially material items of which it is aware.

Asset valuation: Currently, the Corporation does not expect the COVID-19 pandemic to affect its ability to account timely for the assets on its balance sheet; however, this could change in future periods due to any number of potential impacts from the COVID-19 pandemic.

The COVID-19 pandemic could cause a decline in the Corporation's stock price or the occurrence of what management would deem to be a triggering event that could, under certain circumstances, cause us to perform a goodwill impairment test, resulting in an impairment charge being recorded for that period. In the event that the Corporation concludes that all or a portion of its goodwill is impaired, a non-cash charge for the amount of such impairment would be recorded to earnings.

Credit: The Corporation is working with customers directly affected by the COVID-19 pandemic. The Corporation has offered assistance in accordance with regulator guidelines. As a result of the current economic slowdown related to the COVID-19 pandemic, the Corporation is engaging in more frequent communication with borrowers to better understand their situation and the challenges faced, allowing it to respond proactively as needs and issues arise.

8

---

Table of Contents

Determining the appropriateness of the allowance for credit losses on loans is complex and requires judgment by management about the effect of matters that are inherently uncertain. Subsequent evaluations of the then-existing loan portfolio, in light of the factors then prevailing, may result in significant changes in the allowance for credit losses on loans in those future periods. Should economic conditions worsen, the Corporation could experience further increases in its required allowance for credit losses and record additional provision expense. It is possible that the Corporation's asset quality measures could worsen at future measurement periods if the effects of the COVID-19 pandemic are prolonged.

2.    RECENT ACCOUNTING PRONOUNCEMENTS

Accounting Standards Adopted in 2021

In December 2019, the FASB issued ASU 2019-12 "Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes." These amendments remove specific exceptions to the general principles in Topic 740 in GAAP. It eliminates the need for an organization to analyze whether the following apply in a given period: exception to the incremental approach for intraperiod tax allocation; exceptions to accounting for basis differences where there are ownership changes in foreign investments; and exception in interim period income tax accounting for year-to-date losses that exceed anticipated losses. It also improves financial statement preparers' application of income tax- related guidance and simplifies GAAP for: franchise taxes that are partially based on income; transactions with a government that result in a step up in the tax basis of goodwill; separate financial statements of legal entities that are not subject to tax; and enacts changes in tax laws in interim periods. The guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020. ASU 2019-12 did not have a material impact on the Corporation's consolidated financial statements.

Accounting Pronouncements Pending Adoption

In March 2020, the FASB issued ASU No. 2020-04, "Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting." The amendments in this update provide optional guidance for a limited period of time to ease the potential burden in accounting for (or recognizing the effects of) reference rate reform on financial reporting. It provides optional expedients and exceptions for applying generally accepted accounting principles to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. The amendments in this update are effective for all entities as of March 12, 2020 through December 31, 2022. The Corporation is currently evaluating the impact of the reference rate reform on the Corporation's consolidated financial statements.

3.    BUSINESS COMBINATIONS

On July 17, 2020, the Corporation completed its previously announced acquisition of Bank of Akron, pursuant to the Merger Agreement. Under the terms of the Merger Agreement, Bank of Akron merged with and into CNB Bank (the "Merger"), with CNB Bank continuing as the surviving entity. Banking offices of Bank of Akron will operate under the trade name BankOnBuffalo, a division of CNB Bank.

Pursuant to the Merger Agreement, for each share of Bank of Akron common stock, Bank of Akron shareholders were entitled to elect to receive either (x) $215.00 in cash or (y) 6.6729 shares of the Corporation's common stock and also received cash in lieu of fractional shares. Elections were subject to proration procedures whereby at least 75% of the shares of Bank of Akron common stock were exchanged for shares of the Corporation's common stock. Based on the elections and proration procedures, the total consideration payable to Bank of Akron shareholders was approximately $40.8 million, comprised of approximately $16.1 million in cash and 1,501,321 shares of the Corporation's common stock, net of fractional shares, valued at approximately $24.7 million based on the July 17, 2020 closing price of $16.43 per share of the Corporation's common stock.

Bank of Akron's results of operations were included in the Corporation's results of operations beginning July 17, 2020. The Corporation incurred no merger-related expenses during the three and nine months ended September 30, 2021 and $3.4 million and $3.9 million of merger-related expenses during the three and nine months ended September 30, 2020, consisting largely of professional services of attorneys, accountants, investment bankers and other advisors.

9

---

Table of Contents

			July 17, 2020
Merger consideration
Value of stock consideration assigned to Akron common shares exchanged for stock paid to shareholders			$	24,667
Value of cash consideration for Akron common stock exchanged for cash			16,126
Total merger consideration			$	40,793

Core deposit intangible ("CDI") of $613 thousand and goodwill of $5.0 million were recognized as a result of the acquisition. Goodwill represents the future economic benefits arising from net assets acquired that are not individually identified and separately recognized and is attributable to synergies expected to be derived from the combination of the two entities. Goodwill recognized in this transaction is not deductible for income tax purposes.

			July 17, 2020
Identifiable net assets acquired, at fair value
Assets acquired
Cash and due from banks			$	78,830
Interest bearing deposits with other banks			10,148
Investment securities			29,407
Loans, net of allowance for credit losses on PCD loans			319,063
Premises and equipment, net			4,265
Core deposit intangible			613
Deferred tax assets			2,777
Bank owned life insurance			8,187
Accrued interest receivable and other assets			5,307
Total assets acquired			$	458,597
Liabilities assumed
Deposits			$	419,475
Accrued interest payable and other liabilities			3,348
Total liabilities assumed			422,823
Total fair value of identifiable net assets			35,774
Total merger consideration			40,793
Goodwill recognized			$	5,019

The Corporation accounted for this transaction under the acquisition method of accounting in accordance with ASC 805, Business Combinations, which requires purchased assets and liabilities assumed and consideration exchanged to be recorded at their respective estimated fair values at the date of acquisition. The determination of estimated fair values required management to make certain estimates about discount rates, future expected cash flows, market conditions at the time of the acquisition and other future events that are highly subjective in nature and subject to refinement for up to one year after the closing date of acquisition as additional information relative to the closing date fair values becomes available and such information is considered final, whichever is earlier.

The calculation of goodwill is subject to change for up to one year after the closing date of transaction as additional information relative to the closing date estimates and uncertainties becomes available. There were no adjustments recorded to goodwill or closing date fair values subsequent to December 31, 2020 and the measurement period closed in July 2021.

Financial assets acquired in a business combination after January 1, 2020 are recorded in accordance with ASC Topic 326, after which acquired assets are separated into two types. Purchased credit deteriorated ("PCD") assets are acquired assets that, as of the acquisition date, have experienced a more-than-insignificant deterioration in credit quality since origination. Non-PCD assets are acquired assets that have experienced no or insignificant deterioration in credit quality since origination. To distinguish between the two types of acquired assets, the Corporation evaluates risk characteristics that have been determined to be indicators of deteriorated credit quality. In the case of loans, the determining criteria may involve general characteristics, such as loan payment history or changes in creditworthiness since the loan was originated, while others are relevant to recent economic conditions, such as borrowers in industries impacted by the COVID-19 pandemic.

10

---

Table of Contents

Securities

The estimated fair values of the securities were calculated utilizing Level 2 inputs. The securities acquired are bought and sold in active markets. Prices for these instruments were obtained through security industry sources that actively participate in the buying and selling of securities.

Loans

Bank of Akron’s loan portfolio was recorded at fair value at the date of acquisition. A valuation of Bank of Akron’s loan portfolio was performed as of the acquisition date in accordance with ASC 820 to assess the fair value of the loan portfolio, considering adjustments for market discount rates, credit, and liquidity. The loan portfolio was segmented into two groups: non-PCD loans and PCD loans. The non-PCD loans were pooled based on similar characteristics, such as loan type, fixed or adjustable interest rates, payment type, index rate and caps/floors, and nonaccrual status. The PCD loans were valued on a pooled basis and at the loan level with similar characteristics noted above.

Premises and Equipment

Fair values are based upon appraisal values. In addition to owned properties, Bank of Akron operated one property subject to a lease agreement.

Core deposit intangible

The CDI on non-maturing deposits was determined by evaluating the underlying characteristics of the deposit relationships, including customer attrition, deposit interest rates and maintenance costs, fee income and costs of alternative funding using the discounted cash flow approach. The core deposit intangibles represent the costs saved by the Corporation between maintaining the existing deposits and obtaining alternative funds over the life of the deposit base.

Fixed maturity deposits

In determining the fair value of certificates of deposit, the cash flows of the contractual interest payments during the specific period of the certificates of deposit and scheduled principal payout were discounted to present value at market-based interest rates.

4.    SECURITIES

Securities available for sale at September 30, 2021 and December 31, 2020 are as follows:

			September 30, 2021																								December 31, 2020
			Amortized						Unrealized												Fair						Amortized						Unrealized												Fair
			Cost						Gains						Losses						Value						Cost						Gains						Losses						Value
U.S. Gov’t sponsored entities			$	147,445					$	4,301					$	(1,170)					$	150,576					$	150,404					$	6,698					$	(60)					$	157,042
State & political subdivisions			107,856						2,194						(1,219)						108,831						67,819						3,186						(122)						70,883
Residential & multi-family mortgage			427,675						5,765						(4,631)						428,809						306,054						9,276						(138)						315,192
Corporate notes & bonds			23,426						92						(279)						23,239						15,221						105						(400)						14,926
Pooled SBA			20,803						546						(11)						21,338						24,975						912						(1)						25,886
Other			0						0						0						0						1,020						0						(41)						979
Total			$	727,205					$	12,898					$	(7,310)					$	732,793					$	565,493					$	20,177					$	(762)					$	584,908

11

---

Table of Contents

The following is a schedule of the contractual maturity of securities available for sale at September 30, 2021:

			Amortized Cost						Fair Value
1 year or less			$	27,799					$	27,993
1 year – 5 years			101,918						104,449
5 years – 10 years			139,493						140,640
After 10 years			9,517						9,564
			278,727						282,646
Residential & multi-family mortgage			427,675						428,809
Pooled SBA			20,803						21,338
Total debt securities			$	727,205					$	732,793

Mortgage and asset backed 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.

Information pertaining to security sales on available for sale securities is as follows:

			Proceeds						Gross Gains						Gross Losses
Three months ended September 30, 2021			$	0					$	0					$	0
Three months ended September 30, 2020			$	0					$	0					$	0
Nine months ended September 30, 2021			$	0					$	0					$	0
Nine months ended September 30, 2020			$	57,185					$	2,257					$	67

The tax provision related to these net realized gains was $0 for the three and nine months ended September 30, 2021 and $0 and $460 during the three and nine months ended September 30, 2020, respectively.

On September 30, 2021 and December 31, 2020, securities carried at $437,547 and $453,407, respectively, were pledged to secure public deposits and for other purposes as provided by law.

At September 30, 2021 and December 31, 2020, 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.

Securities with unrealized losses at September 30, 2021 and December 31, 2020, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position, are as follows:

September 30, 2021

			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. Gov’t sponsored entities			$	42,009					$	(849)					$	19,722					$	(321)					$	61,731					$	(1,170)
State & political subdivisions			47,042						(1,102)						2,136						(117)						49,178						(1,219)
Residential & multi-family mortgage			231,371						(4,081)						19,024						(550)						250,395						(4,631)
Corporate notes & bonds			3,164						(102)						3,823						(177)						6,987						(279)
Pooled SBA			2,461						(11)						162						0						2,623						(11)
			$	326,047					$	(6,145)					$	44,867					$	(1,165)					$	370,914					$	(7,310)

12

---

Table of Contents

December 31, 2020

			Less than 12 Months												12 Months or More												Total
			Fair Value						Unrealized Loss						Fair Value						Unrealized Loss						Fair Value						Unrealized Loss
U.S. Gov’t sponsored entities			$	24,991					$	(60)					0						0						$	24,991					$	(60)
State & political subdivisions			3,854						(19)						164						(103)						4,018						(122)
Residential & multi-family mortgage			44,092						(119)						3,277						(19)						47,369						(138)
Corporate notes & bonds			0						0						4,545						(400)						4,545						(400)
Pooled SBA			525						(1)						0						0						525						(1)
Other			0						0						979						(41)						979						(41)
			$	73,462					$	(199)					$	8,965					$	(563)					$	82,427					$	(762)

The Corporation evaluates securities for other-than-temporary impairment on a quarterly basis, or more frequently when economic or market conditions warrant such an evaluation.

At September 30, 2021 and December 31, 2020, management performed an assessment for possible other-than-temporary impairment 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 impairment of these debt securities at September 30, 2021 and December 31, 2020 to be temporary.

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 other-than-temporary 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, 2021 and December 31, 2020, management concluded that the securities described in the previous paragraph were not other-than-temporarily impaired 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 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.

Trading securities at September 30, 2021 and December 31, 2020 are as follows:

			September 30, 2021						December 31, 2020
Corporate equity securities			$	6,451					$	4,343
Mutual funds			2,607						1,283
Certificates of deposit			296						404
Corporate notes and bonds			587						569
U.S. Government sponsored entities			0						50
Total			$	9,941					$	6,649

13

---

Table of Contents

5.    LOANS

Total net loans at September 30, 2021 and December 31, 2020 are summarized as follows:

			September 30, 2021						Percentage of Total						December 31, 2020						Percentage of Total
Farmland			$	23,417					0.7		%				$	23,316					0.7		%
Owner-occupied, nonfarm nonresidential properties			421,439						12.0		%				407,924						12.1		%
Agricultural production and other loans to farmers			1,387						0.0		%				2,664						0.1		%
Commercial and Industrial 1			663,769						18.9		%				663,550						19.7		%
Obligations (other than securities and leases) of states and political subdivisions			139,253						4.0		%				132,818						3.9		%
Other loans			12,087						0.3		%				11,961						0.4		%
Other construction loans and all land development and other land loans			280,262						8.0		%				205,734						6.1		%
Multifamily (5 or more) residential properties			213,906						6.1		%				212,815						6.3		%
Non-owner occupied, nonfarm nonresidential properties			645,951						18.4		%				640,945						19.0		%
1-4 Family Construction			31,775						0.9		%				27,768						0.8		%
Home equity lines of credit			107,225						3.1		%				109,444						3.2		%
Residential Mortgages secured by first liens			810,190						23.1		%				777,030						23.0		%
Residential Mortgages secured by junior liens			57,342						1.6		%				53,726						1.6		%
Other revolving credit plans			26,226						0.7		%				25,507						0.8		%
Automobile			22,311						0.6		%				25,344						0.8		%
Other consumer			45,003						1.3		%				42,792						1.3		%
Credit cards			9,313						0.3		%				8,115						0.2		%
Overdrafts			269						0.0		%				336						0.0		%
Total loans			$	3,511,125					100.0		%				$	3,371,789					100.0		%
Less: Allowance for credit losses			(37,230)												(34,340)
Loans, net			$	3,473,895											$	3,337,449
Net deferred loan origination fees (costs) included in the above loan table			$	7,872											$	8,789
1 PPP loans, net of deferred PPP processing fees, both those disbursed in 2020 and those disbursed in 2021, are included in the Commercial and Industrial classification.

The Corporation’s outstanding loans and related unfunded commitments are primarily concentrated within central and northwest Pennsylvania, central and northeast Ohio, and western New York. 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 ratified annually by the Corporation’s Board of Directors.

As a result of the adoption of ASC 326 effective January 1, 2020, there is a lack of comparability in both the allowance and provisions for credit losses for the periods presented. Beginning with the quarter ended December 31, 2020, the Corporation adopted ASC 326 and subsequent results are presented using the current expected credit losses (“CECL”) methodology. Prior to the quarter ended December 31, 2020, the results were reported in accordance with the incurred loss methodology and have not been restated.

PPP loans, both those disbursed in 2020 and those disbursed in 2021, are included in the commercial and industrial classification and, as the PPP loans are fully guaranteed by the Small Business Administration, no required allowance for credit losses was recorded against the PPP loans, net of deferred PPP processing fees, outstanding of $85,354 and $222,972 as of September 30, 2021 and 2020, respectively.

14

---

Table of Contents

Transactions in the allowance for credit losses for the three months ended September 30, 2021 were as follows:

			Beginning Allowance						(Charge-offs)						Recoveries						Provision (Benefit) for Credit Loss Expense						Ending Allowance
Farmland			$	124					$	0					$	0					$	(26)					$	98
Owner-occupied, nonfarm nonresidential properties			2,880						0						3						154						3,037
Agricultural production and other loans to farmers			12						0						0						(5)						7
Commercial and Industrial			7,312						(23)						52						989						8,330
Obligations (other than securities and leases) of states and political subdivisions			2,325						(157)						0						(289)						1,879
Other loans			117						0						0						(15)						102
Other construction loans and all land development and other land loans			2,364						(282)						0						287						2,369
Multifamily (5 or more) residential properties			2,314						0						0						(219)						2,095
Non-owner occupied, nonfarm nonresidential properties			10,162						(18)						0						(2,865)						7,279
1-4 Family Construction			110						0						0						116						226
Home equity lines of credit			1,029						(7)						1						197						1,220
Residential Mortgages secured by first liens			4,398						(5)						2						2,030						6,425
Residential Mortgages secured by junior liens			408						(3)						0						144						549
Other revolving credit plans			459						(5)						4						70						528
Automobile			241						(12)						0						49						278
Other consumer			2,402						(268)						25						331						2,490
Credit cards			68						(5)						6						43						112
Overdrafts			183						(127)						41						109						206
Total loans			$	36,908					$	(912)					$	134					$	1,100					$	37,230

Transactions in the allowance for credit losses for the nine months ended September 30, 2021 were as follows:

			Beginning Allowance						(Charge-offs)						Recoveries						Provision (Benefit) for Credit Loss Expense						Ending Allowance
Farmland			$	221					$	0					$	0					$	(123)					$	98
Owner-occupied, nonfarm nonresidential properties			3,700						(531)						8						(140)						3,037
Agricultural production and other loans to farmers			24						0						0						(17)						7
Commercial and Industrial			6,233						(93)						72						2,118						8,330
Obligations (other than securities and leases) of states and political subdivisions			998						(407)						0						1,288						1,879
Other loans			68						0						0						34						102
Other construction loans and all land development and other land loans			1,956						(282)						0						695						2,369
Multifamily (5 or more) residential properties			2,724						0						0						(629)						2,095
Non-owner occupied, nonfarm nonresidential properties			8,658						(18)						0						(1,361)						7,279
1-4 Family Construction			82						0						0						144						226
Home equity lines of credit			985						(7)						3						239						1,220
Residential Mortgages secured by first liens			4,539						(75)						34						1,927						6,425
Residential Mortgages secured by junior liens			241						(3)						0						311						549
Other revolving credit plans			507						(28)						9						40						528
Automobile			132						(17)						3						160						278
Other consumer			2,962						(829)						120						237						2,490
Credit cards			66						(77)						17						106						112
Overdrafts			244						(318)						120						160						206
Total loans			$	34,340					$	(2,685)					$	386					$	5,189					$	37,230

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. For the three and nine months ended September 30, 2021, the allowance for credit losses increased due to the growth in the Corporation's loan portfolio, changes in historical loss rates and quantitative inputs including the unemployment forecast and prepayment speeds, coupled with qualitative adjustments in the Corporation's residential and consumer loan portfolios, growth in new market areas, as well as continued uncertainty with the pandemic and economic environment, partially offset by the impact of net charge-offs and improvements or resolutions in the Corporation's individually evaluated loans.

15

---

Table of Contents

Transactions in the allowance for loan losses for the three months ended September 30, 2020 were as follows:

			Commercial, Industrial  and Agricultural						Commercial Mortgages						Residential Real Estate						Consumer						Credit Cards						Overdrafts						Total
Allowance for loan losses, July 1, 2020			$	9,802					$	9,628					$	2,676					$	2,140					$	114					$	169					$	24,529
Charge-offs			(62)						(522)						(69)						(305)						(48)						(102)						(1,108)
Recoveries			15						3						64						45						2						31						160
Provision for loan losses			(106)						2,052						941						329						75						15						3,306
Allowance for loan losses, September 30, 2020			$	9,649					$	11,161					$	3,612					$	2,209					$	143					$	113					$	26,887

Transactions in the allowance for loan losses for the nine months ended September 30, 2020 were as follows:

			Commercial, Industrial  and Agricultural						Commercial Mortgages						Residential Real Estate						Consumer						Credit Cards						Overdrafts						Total
Allowance for loan losses, January 1, 2020			$	8,287					$	6,952					$	1,499					$	2,411					$	84					$	240					$	19,473
Charge-offs			(2,710)						(522)						(231)						(1,310)						(120)						(316)						(5,209)
Recoveries			40						177						67						126						13						135						558
Provision for loan losses			4,032						4,554						2,277						982						166						54						12,065
Allowance for loan losses, September 30, 2020			$	9,649					$	11,161					$	3,612					$	2,209					$	143					$	113					$	26,887

The unpaid principal balance of impaired loans includes the Corporation’s recorded investment in the loan and amounts that have been recorded as charge-offs.

			Three months ended September 30, 2020																		Nine months ended September 30, 2020
			Average Recorded Investment						Interest Income Recognized						Cash Basis Interest Recognized						Average Recorded Investment						Interest Income Recognized						Cash Basis Interest Recognized
With an allowance recorded:
Commercial, industrial and agricultural			$	2,409					$	33					$	33					$	3,341					$	78					$	78
Commercial mortgage			$	4,002					$	0					$	0					4,166						41						41
Residential real estate			$	819					$	11					$	11					641						16						16
With no related allowance recorded:
Commercial, industrial and agricultural			$	5,623					$	51					$	51					6,392						142						142
Commercial mortgage			$	14,758					$	59					$	59					12,178						283						283
Residential real estate			$	112					$	4					$	4					56						6						6
Total			$	27,723					$	158					$	158					$	26,774					$	566					$	566

16

---

Table of Contents

The following tables presents the amortized cost basis of loans on nonaccrual status and loans past due over 89 days still accruing as of September 30, 2021 and December 31, 2020, respectively:

			September 30, 2021
			Nonaccrual						Nonaccrual With No Allowance for Credit Loss						Loans Past Due over 89 Days Still Accruing
Farmland			$	992					$	992					$	0
Owner-occupied, nonfarm nonresidential properties			1,344						1,244						0
Commercial and Industrial			5,796						1,249						0
Obligations (other than securities and leases) of states and political subdivisions			269						269						0
Other construction loans and all land development and other land loans			516						77						0
Multifamily (5 or more) residential properties			1,155						5						0
Non-owner occupied, nonfarm nonresidential properties			5,390						3,763						0
Home equity lines of credit			780						780						39
Residential Mortgages secured by first liens			3,098						3,098						652
Residential Mortgages secured by junior liens			157						157						0
Other revolving credit plans			9						9						0
Other consumer			498						498						0
Credit cards			0						0						33
Total loans			$	20,004					$	12,141					$	724

			December 31, 2020
			Nonaccrual						Nonaccrual With No Allowance for Credit Loss						Loans Past Due over 89 Days Still Accruing
Farmland			$	1,844					$	633					$	0
Owner-occupied, nonfarm nonresidential properties			1,781						967						0
Commercial and Industrial			6,657						959						0
Other construction loans and all land development and other land loans			2,349						77						0
Multifamily (5 or more) residential properties			288						0						0
Non-owner occupied, nonfarm nonresidential properties			11,932						9,466						0
Home equity lines of credit			685						685						0
Residential Mortgages secured by first liens			4,175						3,495						283
Residential Mortgages secured by junior liens			114						114						0
Other revolving credit plans			6						6						0
Automobile			32						32						0
Other consumer			496						496						8
Credit cards			0						0						34
Total loans			$	30,359					$	16,930					$	325

All payments received while on nonaccrual status are applied against the principal balance of the loan. The Corporation does not recognize interest income while loans are on nonaccrual status.

The following table presents the amortized cost basis of collateral-dependent loans by class of loans as of September 30, 2021:

			Real Estate Collateral						Non-Real Estate Collateral
Farmland			$	945					$	0
Owner-occupied, nonfarm nonresidential properties			218						17
Commercial and Industrial			0						2,415
Obligations (other than securities and leases) of states and political subdivisions			269						0
Other construction loans and all land development and other land loans			439						0
Multifamily (5 or more) residential properties			1,150						0
Non-owner occupied, nonfarm nonresidential properties			3,410						0
Residential Mortgages secured by first liens			441						0
Total loans			$	6,872					$	2,432

17

---

Table of Contents

The following table presents the amortized cost basis of collateral-dependent loans by class of loans as of December 31, 2020:

			Real Estate Collateral						Non-Real Estate Collateral
Farmland			$	1,793					$	0
Owner-occupied, nonfarm nonresidential properties			285						587
Commercial and Industrial			594						5,600
Other construction loans and all land development and other land loans			2,272						0
Multifamily (5 or more) residential properties			288						0
Non-owner occupied, nonfarm nonresidential properties			9,072						880
Residential Mortgages secured by first liens			1,135						0
Total loans			$	15,439					$	7,067

The following table presents the aging of the amortized cost basis in past-due loans as of September 30, 2021 by class of loans:

			30 - 59 Days Past Due						60 - 89 Days Past Due						Greater Than 89 Days Past Due						Total Past Due						Loans Not Past Due						Total
Farmland			$	163					$	388					$	0					$	551					$	22,866					$	23,417
Owner-occupied, nonfarm nonresidential properties			533						0						826						1,359						420,080						421,439
Agricultural production and other loans to farmers			0						0						0						0						1,387						1,387
Commercial and Industrial			370						25						212						607						663,162						663,769
Obligations (other than securities and leases) of states and political subdivisions			0						0						0						0						139,253						139,253
Other loans			0						0						0						0						12,087						12,087
Other construction loans and all land development and other land loans			0						0						77						77						280,185						280,262
Multifamily (5 or more) residential properties			0						0						209						209						213,697						213,906
Non-owner occupied, nonfarm nonresidential properties			0						0						1,827						1,827						644,124						645,951
1-4 Family Construction			0						0						0						0						31,775						31,775
Home equity lines of credit			385						38						152						575						106,650						107,225
Residential Mortgages secured by first liens			1,350						592						1,841						3,783						806,407						810,190
Residential Mortgages secured by junior liens			25						0						11						36						57,306						57,342
Other revolving credit plans			100						7						0						107						26,119						26,226
Automobile			24						5						0						29						22,282						22,311
Other consumer			290						163						217						670						44,333						45,003
Credit cards			55						1						33						89						9,224						9,313
Overdrafts			0						0						0						0						269						269
Total loans			$	3,295					$	1,219					$	5,405					$	9,919					$	3,501,206					$	3,511,125

18

---

Table of Contents

The following table presents the aging of the amortized cost basis in past-due loans as of December 31, 2020 by class of loans:

			30 - 59 Days Past Due						60 - 89 Days Past Due						Greater Than 89 Days Past Due						Total Past Due						Loans Not Past Due						Total
Farmland			$	195					$	0					$	1,211					$	1,406					$	21,910					$	23,316
Owner-occupied, nonfarm nonresidential properties			10						885						732						1,627						406,297						407,924
Agricultural production and other loans to farmers			0						0						0						0						2,664						2,664
Commercial and Industrial			476						335						3,887						4,698						658,852						663,550
Obligations (other than securities and leases) of states and political subdivisions			0						0						0						0						132,818						132,818
Other loans			0						0						0						0						11,961						11,961
Other construction loans and all land development and other land loans			0						0						1,917						1,917						203,817						205,734
Multifamily (5 or more) residential properties			0						0						0						0						212,815						212,815
Non-owner occupied, nonfarm nonresidential properties			314						156						10,184						10,654						630,291						640,945
1-4 Family Construction			0						0						0						0						27,768						27,768
Home equity lines of credit			166						235						486						887						108,557						109,444
Residential Mortgages secured by first liens			2,834						629						1,911						5,374						771,656						777,030
Residential Mortgages secured by junior liens			8						0						66						74						53,652						53,726
Other revolving credit plans			36						19						0						55						25,452						25,507
Automobile			73						0						9						82						25,262						25,344
Other consumer			246						132						245						623						42,169						42,792
Credit cards			72						39						34						145						7,970						8,115
Overdrafts			0						0						0						0						336						336
Total loans			$	4,430					$	2,430					$	20,682					$	27,542					$	3,344,247					$	3,371,789

Troubled Debt Restructurings

In order to determine whether a borrower is experiencing financial difficulty, an evaluation is performed of the probability that the borrower will be in payment default on any of its debt in the foreseeable future without a loan modification. This evaluation is performed using the Corporation’s internal underwriting policies. The Corporation has no further loan commitments to customers whose loans are classified as a troubled debt restructuring.

As of September 30, 2021 and December 31, 2020, the terms of certain loans were modified as troubled debt restructurings. 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 troubled debt restructurings of $15,302 and $15,088 as of September 30, 2021 and December 31, 2020, respectively. The Corporation has allocated $1,181 and $779 of allowance for those loans as of September 30, 2021 and December 31, 2020, respectively.

There were no loans modified as troubled debt restructurings during the three months ended September 30, 2021. There were three loans modified as troubled debt restructurings during the nine months ended September 30, 2021:

			Nine Months Ended September 30, 2021
			Number of Loans						Pre-Modification Outstanding Recorded Investment						Post-Modification Outstanding Recorded Investment
Commercial and Industrial			1						$	578					$	578
Multifamily (5 or more) residential properties			1						717						717
Non-owner occupied, nonfarm nonresidential properties			1						1,604						1,604
Total loans			3						$	2,899					$	2,899

19

---

Table of Contents

There was one loan modified as a troubled debt restructuring during the three months ended September 30, 2020.

			Three months ended September 30, 2020
			Number of Loans						Pre-Modification Outstanding Recorded Investment Balance						Post-Modification Outstanding Recorded Investment Reserve
Commercial mortgages			1						$	46					$	46
Total			1						$	46					$	46

There were ten loans modified as troubled debt restructurings during the nine months ended September 30, 2020.

			Nine months ended September 30, 2020
			Number of Loans						Pre-Modification Outstanding Recorded Investment Balance						Post-Modification Outstanding Recorded Investment Reserve
Commercial, industrial and agricultural			8						$	1,593					$	1,593
Commercial mortgages			1						46						46
Residential real estate			1						116						116
Total			10						$	1,755					$	1,755

The troubled debt restructurings described above increased the allowance for credit losses by an immaterial amount for the three and nine months ended September 30, 2021 and 2020, respectively.

A loan 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 troubled debt restructurings for which there was a payment default within a twelve-month cycle following the modification during the three and nine months ended September 30, 2021 and September 30, 2020. There were no principal balances forgiven in connection with the loan restructurings.

Generally, nonperforming troubled debt restructurings are restored to accrual status when the obligation is brought current, has performed in accordance with the contractual terms for a reasonable period of time (generally six months) and the ultimate collectability of the total contractual principal and interest is no longer in doubt.

Credit Quality Indicators

The Corporation categorizes loans 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: Loans classified as special mention have 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: Loans classified as substandard are inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any. Loans so classified have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that the Corporation will sustain some loss if the deficiencies are not corrected.

Doubtful: Loans classified as doubtful have 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.

20

---

Table of Contents

The following tables represent the Corporation's credit risk profile by risk rating. Loans not rated as special mention, substandard, or doubtful are considered to be pass rated loans.

			September 30, 2021
									Non-Pass Rated
			Pass						Special Mention						Substandard						Doubtful						Total Non-Pass						Total
Farmland			$	20,911					$	1,514					$	992					$	0					$	2,506					$	23,417
Owner-occupied, nonfarm nonresidential properties			404,770						6,574						10,095						0						16,669						421,439
Agricultural production and other loans to farmers			1,387						0						0						0						0						1,387
Commercial and Industrial			640,507						8,724						13,115						1,423						23,262						663,769
Obligations (other than securities and leases) of states and political subdivisions			138,984						0						269						0						269						139,253
Other loans			12,087						0						0						0						0						12,087
Other construction loans and all land development and other land loans			275,222						4,495						545						0						5,040						280,262
Multifamily (5 or more) residential properties			212,750						0						1,156						0						1,156						213,906
Non-owner occupied, nonfarm nonresidential properties			612,906						7,434						25,611						0						33,045						645,951
Total loans			$	2,319,524					$	28,741					$	51,783					$	1,423					$	81,947					$	2,401,471

			December 31, 2020
									Non-Pass Rated
			Pass						Special Mention						Substandard						Doubtful						Total Non-Pass						Total
Farmland			$	20,316					$	1,156					$	1,844					$	0					$	3,000					$	23,316
Owner-occupied, nonfarm nonresidential properties			391,899						2,826						13,199						0						16,025						407,924
Agricultural production and other loans to farmers			2,664						0						0						0						0						2,664
Commercial and Industrial			637,071						11,368						15,111						0						26,479						663,550
Obligations (other than securities and leases) of states and political subdivisions			132,110						0						708						0						708						132,818
Other loans			11,961						0						0						0						0						11,961
Other construction loans and all land development and other land loans			198,206						5,611						1,917						0						7,528						205,734
Multifamily (5 or more) residential properties			211,563						0						1,252						0						1,252						212,815
Non-owner occupied, nonfarm nonresidential properties			594,603						12,496						33,846						0						46,342						640,945
Total loans			$	2,200,393					$	33,457					$	67,877					$	0					$	101,334					$	2,301,727

21

---

Table of Contents

The following tables detail the amortized cost of loans, by year of origination (for term loans) and by risk grade within each portfolio segment as of September 30, 2021. The current period originations may include modifications, extensions and renewals.

			Term Loans Amortized Cost Basis by Origination Year
			2021						2020						2019						2018						2017						Prior						Revolving Loans Amortized Cost Basis						Revolving Loans Converted to Term						Total
Farmland
Risk rating
Pass			$	7,400					$	1,744					$	3,291					$	3,633					$	588					$	3,668					$	587					$	0					$	20,911
Special mention			0						0						0						0						394						1,120						0						0						1,514
Substandard			0						0						0						0						47						945						0						0						992
Doubtful			0						0						0						0						0						0						0						0						0
Total			$	7,400					$	1,744					$	3,291					$	3,633					$	1,029					$	5,733					$	587					$	0					$	23,417
Owner-occupied, nonfarm nonresidential properties
Risk rating
Pass			$	94,875					$	87,579					$	80,317					$	34,805					$	43,282					$	55,306					$	8,606					$	0					$	404,770
Special mention			0						0						911						4,332						139						1,182						10						0						6,574
Substandard			525						902						2,258						650						358						5,214						188						0						10,095
Doubtful			0						0						0						0						0						0						0						0						0
Total			$	95,400					$	88,481					$	83,486					$	39,787					$	43,779					$	61,702					$	8,804					$	0					$	421,439
Agricultural production and other loans to farmers
Risk rating
Pass			$	133					$	128					$	80					$	200					$	0					$	11					$	835					$	0					$	1,387
Special mention			0						0						0						0						0						0						0						0						0
Substandard			0						0						0						0						0						0						0						0						0
Doubtful			0						0						0						0						0						0						0						0						0
Total			$	133					$	128					$	80					$	200					$	0					$	11					$	835					$	0					$	1,387
Commercial and Industrial
Risk rating
Pass			$	279,839					$	91,409					$	38,688					$	17,815					$	13,268					$	6,183					$	193,305					$	0					$	640,507
Special mention			0						384						861						967						175						874						5,463						0						8,724
Substandard			621						810						1,907						472						102						3,632						5,571						0						13,115
Doubtful			0						0						0						0						0						1,423						0						0						1,423
Total			$	280,460					$	92,603					$	41,456					$	19,254					$	13,545					$	12,112					$	204,339					$	0					$	663,769
Obligations (other than securities and leases) of states and political subdivisions
Risk rating
Pass			$	27,893					$	16,938					$	8,910					$	22,504					$	20,303					$	37,882					$	4,554					$	0					$	138,984
Special mention			0						0						0						0						0						0						0						0						0
Substandard			0						269						0						0						0						0						0						0						269
Doubtful			0						0						0						0						0						0						0						0						0
Total			$	27,893					$	17,207					$	8,910					$	22,504					$	20,303					$	37,882					$	4,554					$	0					$	139,253
Other loans
Risk rating
Pass			$	594					$	7,456					$	596					$	2					$	0					$	0					$	3,439					$	0					$	12,087
Special mention			0						0						0						0						0						0						0						0						0
Substandard			0						0						0						0						0						0						0						0						0
Doubtful			0						0						0						0						0						0						0						0						0
Total			$	594					$	7,456					$	596					$	2					$	0					$	0					$	3,439					$	0					$	12,087

22

---

Table of Contents

			Term Loans Amortized Cost Basis by Origination Year
			2021						2020						2019						2018						2017						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			$	61,332					$	154,174					$	41,789					$	11,252					$	882					$	1,035					$	4,758					$	0					$	275,222
Special mention			1,500						0						656						0						2,339						0						0						0						4,495
Substandard			0						0						0						29						439						0						77						0						545
Doubtful			0						0						0						0						0						0						0						0						0
Total			$	62,832					$	154,174					$	42,445					$	11,281					$	3,660					$	1,035					$	4,835					$	0					$	280,262
Multifamily (5 or more) residential properties
Risk rating
Pass			$	59,809					$	58,167					$	32,515					$	8,303					$	38,416					$	13,188					$	2,352					$	0					$	212,750
Special mention			0						0						0						0						0						0						0						0						0
Substandard			0						6						693						253						204						0						0						0						1,156
Doubtful			0						0						0						0						0						0						0						0						0
Total			$	59,809					$	58,173					$	33,208					$	8,556					$	38,620					$	13,188					$	2,352					$	0					$	213,906
Non-owner occupied, nonfarm nonresidential properties
Risk rating
Pass			$	131,098					$	135,960					$	88,632					$	66,343					$	49,630					$	131,164					$	10,079					$	0					$	612,906
Special mention			0						0						433						1,017						191						5,343						450						0						7,434
Substandard			834						0						3,867						1,667						7,155						11,748						340						0						25,611
Doubtful			0						0						0						0						0						0						0						0						0
Total			$	131,932					$	135,960					$	92,932					$	69,027					$	56,976					$	148,255					$	10,869					$	0					$	645,951

23

---

Table of Contents

The following tables detail the amortized cost of loans, by year of origination (for term loans) and by risk grade within each portfolio segment as of December 31, 2020. The current period originations may include modifications, extensions and renewals.

			Term Loans Amortized Cost Basis by Origination Year
			2020						2019						2018						2017						2016						Prior						Revolving Loans Amortized Cost Basis						Revolving Loans Converted to Term						Total
Farmland
Risk rating
Pass			$	1,617					$	4,448					$	3,767					$	3,648					$	894					$	5,280					$	662					$	0					$	20,316
Special mention			1,156						0						0						0						0						0						0						0						1,156
Substandard			0						0						0						51						582						1,211						0						0						1,844
Doubtful			0						0						0						0						0						0						0						0						0
Total			$	2,773					$	4,448					$	3,767					$	3,699					$	1,476					$	6,491					$	662					$	0					$	23,316
Owner-occupied, nonfarm nonresidential properties
Risk rating
Pass			$	86,694					$	109,228					$	52,818					$	56,948					$	26,119					$	50,839					$	9,253					$	0					$	391,899
Special mention			0						452						74						541						318						1,310						131						0						2,826
Substandard			1,021						2,449						2,438						938						3,675						2,430						248						0						13,199
Doubtful			0						0						0						0						0						0						0						0						0
Total			$	87,715					$	112,129					$	55,330					$	58,427					$	30,112					$	54,579					$	9,632					$	0					$	407,924
Agricultural production and other loans to farmers
Risk rating
Pass			$	267					$	155					$	601					$	0					$	54					$	0					$	1,587					$	0					$	2,664
Special mention			0						0						0						0						0						0						0						0						0
Substandard			0						0						0						0						0						0						0						0						0
Doubtful			0						0						0						0						0						0						0						0						0
Total			$	267					$	155					$	601					$	0					$	54					$	0					$	1,587					$	0					$	2,664
Commercial and Industrial
Risk rating
Pass			$	318,323					$	54,620					$	46,854					$	32,426					$	7,197					$	7,265					$	170,386					$	0					$	637,071
Special mention			127						1,017						3,489						712						300						1,033						4,690						0						11,368
Substandard			801						1,916						1,212						112						37						4,858						6,175						0						15,111
Doubtful			0						0						0						0						0						0						0						0						0
Total			$	319,251					$	57,553					$	51,555					$	33,250					$	7,534					$	13,156					$	181,251					$	0					$	663,550
Obligations (other than securities and leases) of states and political subdivisions
Risk rating
Pass			$	10,722					$	12,279					$	35,176					$	20,891					$	19,365					$	24,789					$	8,888					$	0					$	132,110
Special mention			0						0						0						0						0						0						0						0						0
Substandard			708						0						0						0						0						0						0						0						708
Doubtful			0						0						0						0						0						0						0						0						0
Total			$	11,430					$	12,279					$	35,176					$	20,891					$	19,365					$	24,789					$	8,888					$	0					$	132,818
Other loans
Risk rating
Pass			$	7,268					$	1,237					$	386					$	0					$	0					$	0					$	3,070					$	0					$	11,961
Special mention			0						0						0						0						0						0						0						0						0
Substandard			0						0						0						0						0						0						0						0						0
Doubtful			0						0						0						0						0						0						0						0						0
Total			$	7,268					$	1,237					$	386					$	0					$	0					$	0					$	3,070					$	0					$	11,961

24

---

Table of Contents

			Term Loans Amortized Cost Basis by Origination Year
			2020						2019						2018						2017						2016						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			$	119,380					$	52,078					$	19,977					$	2,300					$	28					$	1,895					$	2,548					$	0					$	198,206
Special mention			1,417						672						29						3,303						0						190						0						0						5,611
Substandard			0						0						0						0						0						1,840						77						0						1,917
Doubtful			0						0						0						0						0						0						0						0						0
Total			$	120,797					$	52,750					$	20,006					$	5,603					$	28					$	3,925					$	2,625					$	0					$	205,734
Multifamily (5 or more) residential properties
Risk rating
Pass			$	73,572					$	39,633					$	26,230					$	49,178					$	4,086					$	16,957					$	1,907					$	0					$	211,563
Special mention			0						0						0						0						0						0						0						0						0
Substandard			6						753						288						205						0						0						0						0						1,252
Doubtful			0						0						0						0						0						0						0						0						0
Total			$	73,578					$	40,386					$	26,518					$	49,383					$	4,086					$	16,957					$	1,907					$	0					$	212,815
Non-owner occupied, nonfarm nonresidential properties
Risk rating
Pass			$	161,045					$	127,518					$	89,520					$	55,966					$	44,959					$	105,962					$	9,633					$	0					$	594,603
Special mention			99						895						2,111						3,969						835						4,137						450						0						12,496
Substandard			0						12,325						326						7,584						722						12,289						600						0						33,846
Doubtful			0						0						0						0						0						0						0						0						0
Total			$	161,144					$	140,738					$	91,957					$	67,519					$	46,516					$	122,388					$	10,683					$	0					$	640,945

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 on nonaccrual status and loans past due over 89 days and still accruing interest.

			September 30, 2021																		December 31, 2020
			Performing						Nonperforming						Total						Performing						Nonperforming						Total
1-4 Family Construction			$	31,775					$	0					$	31,775					$	27,768					$	0					$	27,768
Home equity lines of credit			106,445						780						107,225						108,759						685						109,444
Residential Mortgages secured by first liens			807,092						3,098						810,190						772,572						4,458						777,030
Residential Mortgages secured by junior liens			57,185						157						57,342						53,612						114						53,726
Other revolving credit plans			26,217						9						26,226						25,501						6						25,507
Automobile			22,311						0						22,311						25,312						32						25,344
Other consumer			44,505						498						45,003						42,288						504						42,792
Total loans			$	1,095,530					$	4,542					$	1,100,072					$	1,055,812					$	5,799					$	1,061,611

25

---

Table of Contents

The following tables detail the amortized cost of loans, by year of origination (for term loans) and by payment activity within each portfolio segment as of September 30, 2021. The current period originations may include modifications, extensions and renewals.

			Term Loans Amortized Cost Basis by Origination Year
			2021						2020						2019						2018						2017						Prior						Revolving Loans Amortized Cost Basis						Revolving Loans Converted to Term						Total
1-4 Family Construction
Payment performance
Performing			$	19,385					$	10,746					$	1,279					$	67					$	0					$	0					$	298					$	0					$	31,775
Nonperforming			0						0						0						0						0						0						0						0						0
Total			$	19,385					$	10,746					$	1,279					$	67					$	0					$	0					$	298					$	0					$	31,775
Home equity lines of credit
Payment performance
Performing			$	12,717					$	17,171					$	10,366					$	10,216					$	7,147					$	41,470					$	7,358					$	0					$	106,445
Nonperforming			0						0						0						0						385						395						0						0						780
Total			$	12,717					$	17,171					$	10,366					$	10,216					$	7,532					$	41,865					$	7,358					$	0					$	107,225
Residential mortgages secured by first lien
Payment performance
Performing			$	179,087					$	183,988					$	118,206					$	69,709					$	78,933					$	173,295					$	3,874					$	0					$	807,092
Nonperforming			0						149						155						31						193						2,529						41						0						3,098
Total			$	179,087					$	184,137					$	118,361					$	69,740					$	79,126					$	175,824					$	3,915					$	0					$	810,190
Residential mortgages secured by junior liens
Payment performance
Performing			$	16,814					$	12,542					$	8,181					$	4,828					$	4,128					$	9,983					$	709					$	0					$	57,185
Nonperforming			0						0						0						0						87						70						0						0						157
Total			$	16,814					$	12,542					$	8,181					$	4,828					$	4,215					$	10,053					$	709					$	0					$	57,342
Other revolving credit plans
Payment performance
Performing			$	3,372					$	3,538					$	3,963					$	3,062					$	3,007					$	9,275					$	0					$	0					$	26,217
Nonperforming			0						0						0						4						0						5						0						0						9
Total			$	3,372					$	3,538					$	3,963					$	3,066					$	3,007					$	9,280					$	0					$	0					$	26,226
Automobile
Payment performance
Performing			$	6,278					$	6,272					$	5,326					$	2,848					$	834					$	753					$	0					$	0					$	22,311
Nonperforming			0						0						0						0						0						0						0						0						0
Total			$	6,278					$	6,272					$	5,326					$	2,848					$	834					$	753					$	0					$	0					$	22,311
Other consumer
Payment performance
Performing			$	21,705					$	13,573					$	5,673					$	1,729					$	381					$	1,444					$	0					$	0					$	44,505
Nonperforming			86						162						134						42						12						62						0						0						498
Total			$	21,791					$	13,735					$	5,807					$	1,771					$	393					$	1,506					$	0					$	0					$	45,003

26

---

Table of Contents

The following tables detail the amortized cost of loans, by year of origination (for term loans) and by payment activity within each portfolio segment as of December 31, 2020. The current period originations may include modifications, extensions and renewals.

			Term Loans Amortized Cost Basis by Origination Year
			2020						2019						2018						2017						2016						Prior						Revolving Loans Amortized Cost Basis						Revolving Loans Converted to Term						Total
1-4 Family Construction
Payment performance
Performing			$	16,081					$	11,547					$	140					$	0					$	0					$	0					$	0					$	0					$	27,768
Nonperforming			0						0						0						0						0						0						0						0						0
Total			$	16,081					$	11,547					$	140					$	0					$	0					$	0					$	0					$	0					$	27,768
Home equity lines of credit
Payment performance
Performing			$	19,764					$	12,823					$	12,842					$	8,793					$	8,182					$	42,514					$	3,841					$	0					$	108,759
Nonperforming			0						0						0						302						33						350						0						0						685
Total			$	19,764					$	12,823					$	12,842					$	9,095					$	8,215					$	42,864					$	3,841					$	0					$	109,444
Residential mortgages secured by first lien
Payment performance
Performing			$	211,910					$	136,181					$	93,588					$	99,520					$	62,312					$	163,556					$	5,505					$	0					$	772,572
Nonperforming			0						84						887						143						61						3,261						22						0						4,458
Total			$	211,910					$	136,265					$	94,475					$	99,663					$	62,373					$	166,817					$	5,527					$	0					$	777,030
Residential mortgages secured by junior liens
Payment performance
Performing			$	14,552					$	12,255					$	7,031					$	5,660					$	3,347					$	10,389					$	378					$	0					$	53,612
Nonperforming			0						0						0						0						19						95						0						0						114
Total			$	14,552					$	12,255					$	7,031					$	5,660					$	3,366					$	10,484					$	378					$	0					$	53,726
Other revolving credit plans
Payment performance
Performing			$	4,088					$	4,516					$	3,320					$	3,149					$	1,301					$	9,127					$	0					$	0					$	25,501
Nonperforming			0						0						4						0						0						2						0						0						6
Total			$	4,088					$	4,516					$	3,324					$	3,149					$	1,301					$	9,129					$	0					$	0					$	25,507
Automobile
Payment performance
Performing			$	8,965					$	8,595					$	4,652					$	1,635					$	764					$	701					$	0					$	0					$	25,312
Nonperforming			0						4						0						6						0						22						0						0						32
Total			$	8,965					$	8,599					$	4,652					$	1,641					$	764					$	723					$	0					$	0					$	25,344
Other consumer
Payment performance
Performing			$	24,857					$	11,183					$	3,579					$	796					$	218					$	1,655					$	0					$	0					$	42,288
Nonperforming			82						264						75						13						0						70						0						0						504
Total			$	24,939					$	11,447					$	3,654					$	809					$	218					$	1,725					$	0					$	0					$	42,792

			September 30, 2021						December 31, 2020
Credit card
Payment performance
Performing			$	9,280					$	8,081
Nonperforming			33						34
Total			$	9,313					$	8,115

27

---

Table of Contents

Purchased Credit Deteriorated Loans

The Corporation has purchased loans, for which there was, at acquisition, evidence of more than insignificant deterioration of credit quality since origination. The carrying amount of those loans is as follows:

			July 17, 2020
Purchase price of loans at acquisition			$	21,768
Allowance for credit losses at acquisition			980
Non-credit discount / (premium) at acquisition			1,063
Par value of acquired loans at acquisition			$	23,811

The Corporation’s portfolio of residential real estate and consumer loans maintained within Holiday Financial Services Corporation are considered to be subprime loans. Holiday is a subsidiary that offers small balance unsecured and secured loans, primarily collateralized by automobiles and equipment, to borrowers with higher risk characteristics than are typical in the Bank’s consumer loan portfolio.

Holiday’s loan portfolio, included in other consumer loans above, is summarized as follows at September 30, 2021 and December 31, 2020: 

			September 30, 2021						December 31, 2020
Gross other consumer			$	27,588					$	27,998
Less: other consumer unearned discounts			(5,276)						(5,181)
Total automobile and other consumer loans, net of unearned discounts			$	22,312					$	22,817

6.    LEASES

Operating lease assets represent our right to use an underlying asset during the lease term and operating lease liabilities represent our 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 our 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 consolidated statements of income.

The Corporation leases certain full-serve 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, 2021						December 31, 2020
Assets:
Operating lease assets						Operating lease assets						$	19,652					$	18,407
Finance lease assets						Premises and equipment, net (1)						375						429
Total leased assets												$	20,027					$	18,836
Liabilities:
Operating lease liabilities						Operating lease liabilities						$	20,847					$	19,449
Finance lease liabilities						Accrued interest payable and other liabilities						489						550
Total leased liabilities												$	21,336					$	19,999

(1) Finance lease assets are recorded net of accumulated amortization of $841 as of September 30, 2021 and $787 as of December 31, 2020.

28

---

Table of Contents

The components of the Corporation's net lease expense for the three and nine months ended September 30, 2021 and 2020, respectively, were as follows:

												Three months ended September 30,												Nine months ended September 30,
Lease Cost						Classification						2021						2020						2021						2020
Operating lease cost						Net occupancy expense						$	451					$	435					$	1,328					$	1,349
Variable lease cost						Net occupancy expense						10						26						45						67
Finance lease cost:
Amortization of leased assets						Net occupancy expense						18						18						54						54
Interest on lease liabilities						Interest expense - borrowed funds						6						6						18						20
Sublease income (1)						Net occupancy expense						(17)						(25)						(55)						(67)
Net lease cost												$	468					$	460					$	1,390					$	1,423

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

The following table sets forth future minimum rental payments under noncancellable leases with terms in excess of one year as of September 30, 2021:

Maturity of Lease Liabilities as of September 30, 2021						Operating Leases (1)						Finance Leases						Total
2021						$	428					$	26					$	454
2022						1,766						105						1,871
2023						1,655						105						1,760
2024						1,621						105						1,726
2025						1,614						105						1,719
After 2025						21,528						105						21,633
Total lease payments						28,612						551						29,163
Less: Interest						7,765						62						7,827
Present value of lease liabilities						$	20,847					$	489					$	21,336

(1) Operating lease payments include payments related to options to extend lease terms that are reasonably certain of being exercised and exclude $6,587 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, 2021 and December 31, 2020 were as follows:

Lease Term and Discount Rate						September 30, 2021						December 31, 2020
Weighted-average remaining lease term (years)
Operating leases						18.8						19.0
Finance leases						5.3						6.0
Weighted-average discount rate
Operating leases						3.45		%				3.46		%
Finance leases						4.49		%				4.49		%

Other information related to the Corporation's lease liabilities as of September 30, 2021 and 2020 was as follows:

Other Information						September 30, 2021						September 30, 2020
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating leases						$	699					$	695

29

---

Table of Contents

7.    DEPOSITS

Total deposits at September 30, 2021 and December 31, 2020 are summarized as follows:

			September 30, 2021						December 31, 2020						Percentage Change
Non-interest bearing demand deposits			$	774,851					$	627,114					23.6		%
Interest bearing demand deposits			1,031,488						951,903						8.4		%
Savings			2,350,266						2,126,183						10.5		%
Certificates of deposit			437,023						476,544						(8.3)		%
Total			$	4,593,628					$	4,181,744					9.8		%

8.    BORROWINGS

At September 30, 2021 and December 31, 2020, the Corporation had available one $10,000 unsecured line of credit with an unaffiliated institution. Borrowings under the line of credit bear interest at a variable rate equal to three-month LIBOR plus 2.75%. There were no borrowings under the line of credit at September 30, 2021 and December 31, 2020.

FHLB Borrowings

At September 30, 2021, the Bank had a borrowing capacity with the FHLB of $879,246 secured by a pledge of certain loans with a balance of $1,245,840. At September 30, 2021 and December 31, 2020, the Bank had no advances from the FHLB. During 2020 the Corporation prepaid the entire balance of its borrowings from the FHLB, totaling $190,401.

At September 30, 2021 and December 31, 2020, municipal deposit letters of credit issued by the FHLB on behalf of the Bank naming applicable municipalities as beneficiaries were $27,750 and $57,250, respectively. The letters of credit were utilized in place of securities pledged to the municipalities for their deposits maintained at the Bank.

Other Borrowings

At September 30, 2021 and December 31, 2020, the Bank had no outstanding borrowings from unaffiliated institutions under overnight borrowing agreements.

Subordinated Debentures

In 2007, the Corporation issued two $10,000 floating rate trust preferred securities as part of a pooled offering of such securities. The interest rate on each offering is determined quarterly and floats based on the three-month LIBOR plus 1.55%. The all-in rate was 1.67% at September 30, 2021 and 1.80% at December 31, 2020. 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 September 2016, the Corporation sold $50,000 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 of 1933, as amended (the “Securities Act”), and the provisions of Rule 506 of Regulation D thereunder. The notes will mature in October 2026, and initially bear interest at a fixed rate of 5.75% per annum, payable semi-annually in arrears, to, but excluding, October 15, 2021, 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 LIBOR rate plus 4.55%. 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. As discussed in more detail in Note 14, subsequent to September 30, 2021, the Corporation redeemed all of the outstanding $50,000 aggregate principal amount.

30

---

Table of Contents

In June 2021, the Corporation sold $85,000 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 Secured Overnight Financing Rate (“SOFR”) plus 2.58%. The net proceeds from the sale were approximately $83,500, 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.

Maturity Schedule of All Borrowed Funds

The following is a schedule of maturities of all borrowed funds as of September 30, 2021:

2021			$	0
2022			0
2023			0
2024			0
2025			0
Thereafter			154,212
Total borrowed funds			$	154,212

9.    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 previously maintained the CNB Financial Corporation 2009 Stock Incentive Plan, which terminated in accordance with its terms on February 10, 2019, and currently 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.

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. Prior to 2018, for non-employee directors, the vesting schedule was one-third of the granted restricted shares per year, beginning one year after the grant date, with 100% vested on the third anniversary of the grant date. Beginning in 2018, stock compensation received by non-employee directors vests immediately. At September 30, 2021, 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 month period ended September 30, 2021 and 2020.

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 $312 and $1,124 for the three and nine months ended September 30, 2021, respectively, and $288 and 1,123 for the three and nine months ended September 30, 2020, respectively. The total income tax benefit related to the recognized compensation cost of vested restricted stock awards was $65 and $236 for the three and nine months ended September 30, 2021, respectively, and $60 and $235 for the three and nine months ended September 30, 2020, respectively.

A summary of changes in time-based unvested restricted stock awards for the three months ended September 30, 2021 follows:

			Shares						Per Share Weighted Average Grant Date Fair Value
Unvested at beginning of period			66,801						$	24.02
Granted			2,203						24.30
Vested			(361)						16.60
Unvested at end of period			68,643						$	24.07

31

---

Table of Contents

A summary of changes in time-based unvested restricted stock awards for the nine months ended September 30, 2021 follows:

			Shares						Per Share Weighted Average Grant Date Fair Value
Unvested at beginning of period			56,306						$	27.14
Granted			37,423						21.28
Forfeited			(1,578)						26.82
Vested			(23,508)						26.80
Unvested at end of period			68,643						$	24.07

The above table excludes 14,886 shares in restricted stock awards that were granted at a weighted average fair value of $21.03 and immediately vested. There was $1,258 and $1,055 of total unrecognized compensation cost related to unvested restricted stock awards, as of September 30, 2021 and December 31, 2020, respectively. The fair value of shares vested was $9 and $814 during the three and nine months ended September 30, 2021, respectively, and $3 and 1,109 during the three and nine months ended September 30, 2020, 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 2021, awards with a maximum of 18,210 shares in aggregate were granted to key employees. In 2020, awards with a maximum of 18,100 shares in aggregate were granted to key employees. In 2019, awards with a maximum of 16,681 shares in aggregate were granted to key employees.

In 2020, the 2018 PBRSAs were fully earned and in 2021, 10,587 shares were fully distributed. The fair value of the shares distributed in 2021 was $223.

10.    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, 2021 and 2020, there were no outstanding stock options to include in the diluted earnings per common share calculations and the impact of performance-based shares was immaterial.

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 stock awards are participating securities.

32

---

Table of Contents

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

			Three months ended September 30,												Nine months ended September 30,
			2021						2020						2021						2020
Basic earnings per common share computation:
Net income per consolidated statements of income			$	13,831					$	7,785					$	39,852					$	24,844
Net earnings allocated to participating securities			(47)						(24)						(139)						(82)
Net earnings allocated to common stock			$	13,784					$	7,761					$	39,713					$	24,762
Distributed earnings allocated to common stock			$	2,859					$	2,863					$	8,577					$	8,079
Undistributed earnings allocated to common stock			10,925						4,898						31,136						16,683
Net earnings allocated to common stock			$	13,784					$	7,761					$	39,713					$	24,762
Weighted average common shares outstanding, including shares considered participating securities			16,887						16,616						16,875						15,785
Less: Average participating securities			(54)						(47)						(56)						(50)
Weighted average shares			16,833						16,569						16,819						15,735
Basic earnings per common share			$	0.82					$	0.47					$	2.36					$	1.57
Diluted earnings per common share computation:
Net earnings allocated to common stock			$	13,784					$	7,761					$	39,713					$	24,762
Weighted average common shares outstanding for basic earnings per common share			16,833						16,569						16,819						15,735
Add: Dilutive effects of performance based-shares			0						0						0						0
Weighted average shares and dilutive potential common shares			16,833						16,569						16,819						15,735
Diluted earnings per common share			$	0.82					$	0.47					$	2.36					$	1.57

11.    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 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. At September 30, 2021, the variable rate on the subordinated trust preferred security was 1.67% (LIBOR plus 155 basis points) and the Corporation was paying 4.53% (2.98% fixed rate plus 155 basis points).

As of September 30, 2021 and December 31, 2020, 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 consolidated balance sheet and statement of income as of September 30, 2021 and December 31, 2020 and for the three and nine months ended September 30, 2021 and 2020:

									Fair value as of
			Balance Sheet Location						September 30, 2021						December 31, 2020
Interest rate contracts			Accrued interest and other liabilities						$	(532)					$	(768)

33

---

Table of Contents

For the Three Months Ended September 30, 2021			(a)						(b)						(c)						(d)						(e)
Interest rate contracts			$	53					Interest expense – subordinated notes and debentures						$	(73)					Other income						$	0
For the Nine Months Ended September 30, 2021			(a)						(b)						(c)						(d)						(e)
Interest rate contracts			$	187					Interest expense – subordinated notes and debentures						$	(204)					Other income						$	0
For the Three Months Ended September 30, 2020			(a)						(b)						(c)						(d)						(e)
Interest rate contracts			$	56					Interest expense – subordinated notes and debentures						$	(67)					Other income						$	0
For the Nine Months Ended September 30, 2020			(a)						(b)						(c)						(d)						(e)
Interest rate contracts			$	(277)					Interest expense – subordinated notes and debentures						$	(153)					Other income						$	0

 

(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)

Amounts reported in accumulated other comprehensive income (loss) related to the interest rate swap will be reclassified to interest expense as interest payments are made on the subordinated notes and debentures. Such amounts reclassified from accumulated other comprehensive income (loss) to interest expense in the next twelve months are expected to be $286.

As of September 30, 2021 and December 31, 2020, a cash collateral balance in the amount of $1,050 and $1,050, respectively, was maintained with a counterparty to the interest rate swaps. These balances are included in interest bearing deposits with other banks on the 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 $3,373 as of September 30, 2021 and $4,873 as of December 31, 2020. This balance is included in interest bearing deposits with other banks on the 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.

34

---

Table of Contents

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 consolidated balance sheet as of September 30, 2021 and December 31, 2020:

			Notional Amount						Weighted Average Maturity (in years)						Weighted Average Fixed Rate						Weighted Average Variable Rate						Fair Value
September 30, 2021
3rd Party interest rate swaps			$	33,101					6.0						4.12		%				1 month LIBOR + 2.27%						$	2,569					(a)
Customer interest rate swaps			(33,101)						6.0						4.12		%				1 month LIBOR + 2.27%						(2,569)						(b)
December 31, 2020
3rd Party interest rate swaps			$	34,089					6.7						4.13		%				1 month LIBOR + 2.27%						$	4,017					(a)
Customer interest rate swaps			(34,089)						6.7						4.13		%				1 month LIBOR + 2.27%						(4,017)						(b)

(a)Reported in accrued interest receivable and other assets within the consolidated balance sheets

(b)Reported in accrued interest payable and other liabilities within the consolidated balance sheets

12.    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 of most trading securities and debt securities available for sale are determined by obtaining quoted prices on nationally recognized securities exchanges (Level 1) or matrix pricing, which is a mathematical technique widely used in the industry to value debt securities without relying exclusively on quoted prices for the specific securities but rather relying on the securities’ relationship to other benchmark quoted securities (Level 2). These models utilize the market approach with standard inputs that include, but are not limited to benchmark yields, reported trades, broker/dealer quotes, issuer spreads, two-sided markets, benchmark securities, bids, offers and reference data. For certain securities that observable inputs about the specific issuer are not available, fair values are estimated using observable data from other securities presumed to be similar or other market data on other similar securities (Level 3).

Derivatives: The Corporation’s derivative instruments are interest rate swaps that are similar to those that trade in liquid markets. As such, significant fair value inputs can generally be verified and do not typically involve significant management judgments (Level 2).

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.

35

---

Table of Contents

Assets and liabilities measured at fair value on a recurring basis are as follows at September 30, 2021 and December 31, 2020:

									Fair Value Measurements at September 30, 2021 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			$	150,576					$	0					$	150,576					$	0
States and political subdivisions			108,831						0						108,831						0
Residential and multi-family mortgage			428,809						20,016						408,793						0
Corporate notes and bonds			23,239						0						23,239						0
Pooled SBA			21,338						0						21,338						0
Total Securities Available For Sale			$	732,793					$	20,016					$	712,777					$	0
Interest Rate swaps			$	2,569					$	0					$	2,569					$	0
Trading Securities:
Corporate equity securities			$	6,451					$	6,451					$	0					$	0
Mutual funds			2,607						2,607						0						0
Certificates of deposit			296						296						0						0
Corporate notes and bonds			587						587						0						0
Total Trading Securities			$	9,941					$	9,941					$	0					$	0
Liabilities:
Interest rate swaps			$	(3,101)					$	0					$	(3,101)					$	0

									Fair Value Measurements at December 31, 2020 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			$	157,042					$	0					$	157,042					$	0
States and political subdivisions			70,883						0						70,819						64
Residential and multi-family mortgage			315,192						15,039						300,153						0
Corporate notes and bonds			14,926						0						14,926						0
Pooled SBA			25,886						0						25,886						0
Other			979						979						0						0
Total Securities Available For Sale			$	584,908					$	16,018					$	568,826					$	64
Interest Rate swaps			$	4,017					$	0					$	4,017					$	0
Trading Securities:
Corporate equity securities			$	4,343					$	4,343					$	0					$	0
Mutual funds			1,283						1,283						0						0
Certificates of deposit			404						404						0						0
Corporate notes and bonds			569						569						0						0
U.S. Government sponsored entities			50						0						50						0
Total Trading Securities			$	6,649					$	6,599					$	50					$	0
Liabilities:
Interest rate swaps			$	(4,785)					$	0					$	(4,785)					$	0

36

---

Table of Contents

The table below presents a reconciliation of the fair value of securities available for sale measured on a recurring basis using significant unobservable inputs (Level 3) for the three months ended September 30, 2021:

			Corporate Notes and Bonds
Balance, July 1, 2021			$	9,826
Purchases			0
Total gains or (losses):
Included in other comprehensive income (loss)			(76)
Settlements			0
Transfers into Level 3			0
Transfers out of Level 3			$	(9,750)
Balance, September 30, 2021			$	0

The Corporation's corporate notes and bonds with a fair value of $9,750 for the three months ended September 30, 2021 were transferred out of Level 3 and into Level 2 because of available observable market data for these investments.

The table below presents a reconciliation of the fair value of securities available for sale measured on a recurring basis using significant unobservable inputs (Level 3) for the nine months ended September 30, 2021:

			States and Political Subdivisions						Corporate Notes and Bonds
Balance, January 1, 2021			$	64					$	0
Purchases			0						8,250
Total gains or (losses):
Included in other comprehensive income (loss)			0						0
Settlements			64						0
Transfers into Level 3			0
Transfers out of Level 3			0						$	(8,250)
Balance, September 30, 2021			$	0					$	0

The Corporation's corporate notes and bonds with a fair value of $8,250 for the nine months ended September 30, 2021 were transferred out of Level 3 and into Level 2 because of available observable market data for these investments.

37

---

Table of Contents

Assets and liabilities measured at fair value on a non-recurring basis are as follows at September 30, 2021 and December 31, 2020:

									Fair Value Measurements at September 30, 2021 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:
Farmland			$	591					0						0						$	591
Owner-occupied, nonfarm nonresidential properties			224						0						0						224
Commercial and industrial			1,547						0						0						1,547
Other construction loans and all land development loans and other land loans			225						0						0						225
Multifamily (5 or more) residential properties			646						0						0						646
Non-owner occupied, nonfarm nonresidential			2,971						0						0						2,971
Obligations (other than securities and leases) of states and political subdivisions			269						0						0						269

									Fair Value Measurements at December 31, 2020 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:
Farmland			$	659					0						0						$	659
Owner-occupied, nonfarm nonresidential properties			329						0						0						329
Commercial and industrial			3,680						0						0						3,680
Other construction loans and all land development loans and other land loans			1,790						0						0						1,790
Non-owner occupied, nonfarm nonresidential			9,622						0						0						9,622
Residential mortgages secured by first liens			659						0						0						659

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.

38

---

Table of Contents

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, 2021:

Fair value

Valuation Technique

Unobservable Inputs

Range (Weighted Average)

Collateral-dependent loans:

Farmland

$

591

Valuation of third party appraisal on underlying collateral

Loss severity rates

60% (60%)

Owner-occupied, nonfarm nonresidential properties

224

Valuation of third party appraisal on underlying collateral

Loss severity rates

0%-60% (56%)

Commercial and industrial

1,547

Valuation of third party appraisal on underlying collateral

Loss severity rates

0%-50% (35%)

Other construction loans and all land development loans and other land loans

225

Valuation of third party appraisal on underlying collateral

Loss severity rates

25%-25% (25%)

Multifamily (5 or more) residential properties

646

Valuation of third party appraisal on underlying collateral

Loss severity rates

0%-58% (22%)

Non-owner occupied, nonfarm nonresidential

2,971

Valuation of third party appraisal on underlying collateral

Loss severity rates

25%-60% (34%)

Obligations (other than securities and leases) of states and political subdivisions

269

Valuation of third party appraisal on underlying collateral

Loss severity rates

0% (0%)

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, 2020:

Fair value

Valuation Technique

Unobservable Inputs

Range (Weighted Average)

Collateral-dependent loans:

Farmland

$

659

Valuation of third party appraisal on underlying collateral

Loss severity rates

45%-54% (47%)

Owner-occupied, nonfarm nonresidential properties

329

Valuation of third party appraisal on underlying collateral

Loss severity rates

60%-90% (80%)

Commercial and industrial

3,680

Valuation of third party appraisal on underlying collateral

Loss severity rates

0%-100% (39%)

Other construction loans and all land development loans and other land loans

1,790

Valuation of third party appraisal on underlying collateral

Loss severity rates

25%-41% (28%)

Non-owner occupied, nonfarm nonresidential

9,622

Valuation of third party appraisal on underlying collateral

Loss severity rates

25%-100% (29%)

Residential mortgages secured by first liens

659

Valuation of third party appraisal on underlying collateral

Loss severity rates

31% (31%)

39

---

Table of Contents

Fair Value of Financial Instruments

The following table presents the carrying amount and fair value of financial instruments at September 30, 2021:

			Carrying						Fair Value Measurement Using:																		Total
			Amount						Level 1						Level 2						Level 3						Fair Value
ASSETS
Cash and cash equivalents			$	737,050					$	737,050					$	0					$	0					$	737,050
Securities available for sale			$	732,793					$	20,016					$	712,777					$	0					$	732,793
Trading securities			$	9,941					$	9,941					$	0					$	0					$	9,941
Loans held for sale			$	3,415					$	0					$	3,478					$	0					$	3,478
Net loans			$	3,473,895					$	0					$	0					$	3,497,209					$	3,497,209
FHLB and other restricted interests			$	22,259					n/a						n/a						n/a						n/a
Interest rate swaps			$	2,569					$	0					$	2,569					$	0					$	2,569
Accrued interest receivable			$	17,226					$	67					$	2,385					$	14,774					$	17,226
LIABILITIES
Deposits			$	(4,593,628)					$	(4,156,609)					$	(444,679)					$	0					$	(4,601,288)
Subordinated notes and debentures			$	(154,212)					$	0					$	(140,046)					$	0					$	(140,046)
Interest rate swaps			$	(3,101)					$	0					$	(3,101)					$	0					$	(3,101)
Accrued interest payable			$	(1,350)					$	0					$	(1,350)					$	0					$	(1,350)

The following table presents the carrying amount and fair value of financial instruments at December 31, 2020:

			Carrying						Fair Value Measurement Using:																		Total
			Amount						Level 1						Level 2						Level 3						Fair Value
ASSETS
Cash and cash equivalents			$	532,694					$	532,694					$	0					$	0					$	532,694
Securities available for sale			584,908						16,018						568,826						64						584,908
Trading securities			6,649						6,599						50						0						6,649
Loans held for sale			8,514						0						8,617						0						8,617
Net loans			3,337,449						0						0						3,339,482						3,339,482
FHLB and other restricted interests			21,018						n/a						n/a						n/a						n/a
Interest rate swaps			4,017						0						4,017						0						4,017
Accrued interest receivable			17,659						61						2,152						15,446						17,659
LIABILITIES
Deposits			$	(4,181,744)					$	(3,705,200)					$	(488,000)					$	0					$	(4,193,200)
Subordinated notes and debentures			(70,620)						0						(62,583)						0						(62,583)
Interest rate swaps			(4,785)						0						(4,785)						0						(4,785)
Accrued interest payable			(1,096)						0						(1,096)						0						(1,096)

While estimates of fair value are based on management’s judgment of the most appropriate factors as of the balance sheet date, 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.

40

---

Table of Contents

13.    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, 2021 and 2020. Items outside the scope of ASC 606 are noted as such.

			Three months ended September 30,												Nine months ended September 30,
			2021						2020						2021						2020
Non-interest Income
Service charges on deposit accounts			$	1,595					$	1,201					$	4,389					$	3,652
Wealth and asset management fees			1,734						1,414						5,021						4,081
Mortgage banking (1)			844						1,089						2,615						2,090
Card processing and interchange income			1,958						1,606						5,871						4,059
Net gains (losses) on sales of securities (1)			0						0						0						2,190
Other income			2,283						1,468						6,614						4,019
Total non-interest income			$	8,414					$	6,778					$	24,510					$	20,091

(1)Not within scope of ASU 2014-9

Management determined that the primary sources of revenue emanating from interest and dividend income on loans and investment securities along with non-interest revenue resulting from security gains, loan servicing, gains on the sale of loans, 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 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.

41

---

Table of Contents

14.    SUBSEQUENT EVENTS

On October 15, 2021, the Corporation completed its redemption of $50,000 aggregate principal amount of its 5.75% Fixed-to-Floating Rate Subordinated Notes due October 15, 2026 (the “2026 Notes”), representing all of the outstanding 2026 Notes. The 2026 Notes were redeemed pursuant to their terms at a price equal to 100% of the principal amount plus accrued and unpaid interest up to, but excluding, October 15, 2021. The total aggregate redemption price was $50,719, which amount included an accrued interest payment of $719. The Corporation financed the redemption with cash on hand, including the net proceeds from the issuance and sale of $85,000 aggregate principal amount of the Corporation’s 3.25% Fixed-to-Floating Rate Subordinated Notes due 2031.

42

---

Table of Contents

ITEM 2

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS

The following discussion and analysis of the 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 and Lake. FCBank, a division of the Bank, operates in the Ohio counties of Crawford, Richland, Ashland, Wayne, Marion, Morrow, Knox, Delaware and Franklin. BankOnBuffalo, a division of the Bank, operates in the New York counties of Erie and Niagara. Ridge View Bank, a division of the Bank, operates in Roanoke, Virginia. 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 is incorporated in Delaware and currently 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., incorporated in Delaware, is a captive insurance company that 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 Financial Services Corporation, 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, 2020, included in its Annual Report on Form 10-K for the year ended December 31, 2020, and in conjunction with the Consolidated Financial Statements and Notes thereto included in Item 1 of this report. Operating results for three and nine months ended September 30, 2021 are not necessarily indicative of the results for the full year ending December 31, 2021, or any future period.

GENERAL OVERVIEW

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 equity/tangible assets;

•Tangible common equity/tangible assets;

•Pre-provision net revenue ("PPNR");

•Non-interest income excluding realized gains on available for sale securities;

•Net interest margin (fully tax equivalent basis);

•Efficiency ratio;

•Return on average tangible equity; and

•Return on average tangible common equity

43

---

Table of Contents

In addition, non-GAAP evaluations on the impact of PPP-related loans (as defined below), merger costs, branch closure costs and FHLB prepayment penalties on various metrics of the Corporation’s financial performance include calculations related to return on average equity, return on average tangible equity, return on average tangible common equity, tangible equity/tangible assets, tangible common equity/tangible assets and allowance for credit losses/loans. A reconciliation of these non-GAAP financial measures is provided below in the "Non-GAAP Financial Measures" section (dollars in thousands, except per share data).

Management considers return on average equity, earnings per common share, asset quality, 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. In order 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.

In addition, the global outbreak of COVID-19 and the related public health measures undertaken, will continue to have, significant repercussions across regional and global economies and financial markets. The COVID-19 pandemic, its associated responsive measures and the resulting economic slowdown have disrupted our business and are expected to continue to have a significant impact on our business, financial performance and operating results. Since we cannot estimate when the COVID-19 pandemic and the associated responsive measures will end, we cannot estimate the ultimate operational and financial impact of COVID-19 on our business. However, management will continue to proactively implement strategies to mitigate the impact of the pandemic on the Corporation’s business, risk profile and financial performance.

To address the challenges arising as a result of the COVID-19 pandemic, and in order to continue to deliver essential services to the communities the Corporation serves while maintaining a high level of safety for customers and employees, the Corporation implemented its Pandemic Response Plan. Among other things, significant actions taken include:

•Implemented communication plans to ensure employees, customers and critical vendors are kept abreast of developments affecting the Corporation's operations. Communication protocols remain in place and management will continue to evaluate these protocols based on developments regarding the pandemic;

•Restricted all non-essential travel and instituted a mandatory quarantine period for anyone who has traveled to certain impacted areas. While non-essential business travel remains restricted, the Corporation continues to monitor and update its quarantine protocols based on governmental guidelines;

•Temporarily closed all branch lobbies to non-employees, except for certain limited cases by appointment only. Based on updated governmental guidelines, the Corporation re-opened its branch lobbies, while enforcing safe practices in order to serve its consumer and business customers. In addition, the Corporation continues to offer its customers alternatives through its drive-through capabilities, network of ATMs, internet banking, mobile application and telephone customer service capabilities;

•Expanded remote-access availability for the Corporation's workforce to work from home or other remote locations. The Corporation has taken appropriate efforts to ensure that activities are performed in accordance with the Corporation's compliance and information security policies, which are designed to ensure customer data and other information is properly safeguarded;

•Instituted mandatory social distancing policies for those employees not working remotely. Members of branch and operation teams were split into separate teams to provide a higher level of safety for employees and redundancy for key functions across the Corporation. Based upon updated governmental guidelines, the Corporation has reintegrated its branch teams and the majority of its operation teams, while enforcing safe practices for our employees; and

•To ensure the safety of its customers and employees, the Corporation continues to monitor the COVID-19 pandemic closely and update its response plan accordingly.

44

---

Table of Contents

While non-interest costs 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 2021 and beyond. Although the Corporation's discussion regarding its financial performance distinguishes between certain markets and Private Banking, it does not meet the criteria for discrete segment reporting of its operating results. Management's conclusion was based on the limited level of financial information available to segregate operating results, coupled with the fact that no operating results are available for the Corporation's Chief Operating Decision Maker to review on a regular basis.

CUSTOMER SUPPORT STRATEGIES AND LOAN PORTFOLIO PROFILE

The Corporation is participating in the Paycheck Protection Program (“PPP”) established under the Coronavirus Aid, Relief, and Economics Security Act of 2020 (the “CARES Act”) for loans provided under the auspices of the Small Business Administration (“SBA”). Under PPP, the Corporation provides loans primarily to its existing loan and/or deposit customers based on a pre-determined SBA-developed formula intended to incentivize small business owners to continue to employ their employees during the COVID-19 pandemic. Loans provided pursuant to PPP are subject to certain specified rates and processing fees, among other items. As of September 30, 2021, the Corporation had outstanding $89.2 million in PPP loans, or 869 PPP loan relationships, at a rate of 1.00% and deferred PPP processing fees of approximately $3.8 million. For the three and nine months ended September 30, 2021, the Corporation recognized $2.4 million and $6.8 million in deferred PPP processing fees ("PPP-related fees"), respectively. The outstanding balance of PPP loans at September 30, 2021 is (i) $522 thousand, comprised of 23 loans from the Corporation's participation in the PPP in 2020, and (ii) $88.6 million, or 846 loans, from the Corporation’s participation in the PPP in the first nine months of 2021.

The Corporation also deferred loan payments for its commercial and consumer customers, as determined on a case-by-case basis by the financial needs of each customer. As of September 30, 2021, loans with deferred loan payment arrangements, totaled $24.0 million, or 0.7% of total loans outstanding, consisting of 8 loans, totaling $23.9 million, for which principal and interest were deferred, and 1 loan, totaling $20 thousand, for which principal only was deferred. The Corporation believes that the majority of such loans to resume regular contractual payments by the end of 2021. Loan payment deferrals by loan type were as follows:

•Commercial and industrial loans – 3 loans, totaling $4.5 million;

•Commercial real estate loans – 2 loans, totaling $18.9 million;

•Residential mortgage loans – 3 loans, totaling $602 thousand; and

•Consumer loans - 1 loan, totaling $9 thousand.

The Corporation tracks lending exposure by industry classification to determine potential risk associated with industry concentrations, if any, that could lead to additional credit loss exposure. As a result of the COVID-19 pandemic, the Corporation has determined the Hotels/Motels and Restaurants/Fast Foods industries represent a potentially higher level of credit risk, as many of these customers have incurred a significant, negative impact to their businesses as a result of the pandemic. At September 30, 2021, the Corporation had loan concentrations for these industries as follows:

•Hotels/Motels – $199.7 million, or 5.8% of total loans outstanding, excluding PPP-related loans; and

•Restaurants/Fast Foods – $31.2 million, or 0.9% of total loans outstanding, excluding PPP-related loans.

CASH AND CASH EQUIVALENTS

Cash and cash equivalents totaled $737.1 million at September 30, 2021, including additional excess liquidity of $682.5 million held at the Federal Reserve. Cash and cash equivalents totaled $532.7 million at December 31, 2020. The increase in liquidity is primarily the result of the impact of government stimulus initiatives and organic growth in deposits.

Management believes the liquidity needs of the Corporation are satisfied primarily by the current balance of cash and cash equivalents, customer deposits, Federal Home Loan Bank ("FHLB") financing, and the portions of the securities and loan portfolios that mature within one year. 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.

45

---

Table of Contents

SECURITIES

Securities available for sale and trading securities totaled $742.7 million and $591.6 million at September 30, 2021 and December 31, 2020, respectively. The Corporation’s objective is to maintain the securities portfolio at an appropriate level to balance the earnings and liquidity provided by the portfolio. Note 4, "Securities," in the consolidated financial statements provides more detail concerning the composition of the Corporation’s securities portfolio and the process for evaluating securities for impairment.

The Corporation generally buys into the market over time and does not attempt to "time" its transactions. In doing this, the highs and lows of the market are averaged into the portfolio and the overall effect of different rate environments is minimized.

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 of the Corporation’s Board of Directors (the "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

The Corporation's total loan portfolio reached $3.5 billion as of September 30, 2021, including $85.4 million in PPP loans, net of PPP deferred processing fees (such loans, the "PPP-related loans"). Compared to December 31, 2020, total loans increased approximately $139.3 million.

Excluding the impact of PPP loans, net of PPP deferred processing fees (such loans, the "PPP-related loans"), the Corporation's loan portfolio had net growth of 6.5%, or 8.7% annualized, from December 31, 2020. The net organic growth for the first nine months of 2021 was $135.0 million, or 4.2% (5.6% annualized) primarily driven by the Corporation's continued expansion in the Cleveland, Buffalo and Ridge View regions, and Private Banking division. In addition, as part of the liquidity management strategies first implemented by the Corporation in 2020, the first nine months of 2021 reflect an increase in syndicated lending activities of $74.5 million. The syndicated loan portfolio totaled $96.6 million, or 2.8% of total loans, excluding PPP-related loans, at September 30, 2021.

Lending efforts consist principally of commercial and retail lending, which includes single family residential mortgages and other consumer loans. The Corporation views commercial lending as its competitive advantage and continues to focus on this area by hiring and retaining experienced loan officers and supporting them with robust credit analysis.

ALLOWANCE FOR CREDIT LOSSES

The allowance for credit losses on loans represents management’s estimate of expected credit losses over the estimated life of our existing portfolio of loans. The allowance for credit losses is a valuation account that is deducted from the loan's amortized cost basis to present the net amount expected to be collected on the loans.

The expense for credit loss recorded through earnings is the amount necessary to maintain the allowance for credit losses on loans at the amount of expected credit losses inherent within the loan portfolio. Loans are recorded as charge offs against the allowance when management confirms a loan balance is uncollectable. Management estimates the allowance balance using relevant available information, from internal and external sources, relating to past events, current conditions, and reasonable and supportable forecasts, as well as other significant quantitative and qualitative factors.

Historical credit loss experience provides the basis for the estimation of expected credit losses. Adjustments to historical loss information are made for differences in current loan-specific risk characteristics such as differences in underwriting standards, changes in environmental conditions, delinquency level, segment growth rates and changes in duration within new markets, or other relevant factors.

Beginning with the quarter ended December 31, 2020 the Corporation adopted ASU 2016-13, effective January 1, 2020. Although the Corporation's adoption of CECL was effective January 1, 2020, the results from quarters prior to the quarter ended December 31, 2020, were based on the incurred loss methodology and these results have not been restated to reflect the CECL methodology. Results for September 30, 2021 and December 31, 2020 (as reflected in the tables below) are presented based on the CECL methodology.

46

---

Table of Contents

The following table below presents activity within the allowance account for the nine months ended September 30, 2021:

			Beginning Allowance						(Charge-offs)						Recoveries						Net (Charge-Offs) Recoveries						Provision (Benefit) for Credit Loss Expense						Ending Allowance
Farmland			$	221					$	0					$	0					$	0					$	(123)					$	98
Owner-occupied, nonfarm nonresidential properties			3,700						(531)						8						(523)						(140)						3,037
Agricultural production and other loans to farmers			24						0						0						0						(17)						7
Commercial and Industrial			6,233						(93)						72						(21)						2,118						8,330
Obligations (other than securities and leases) of states and political subdivisions			998						(407)						0						(407)						1,288						1,879
Other loans			68						0						0						0						34						102
Other construction loans and all land development and other land loans			1,956						(282)						0						(282)						695						2,369
Multifamily (5 or more) residential properties			2,724						0						0						0						(629)						2,095
Non-owner occupied, nonfarm nonresidential properties			8,658						(18)						0						(18)						(1,361)						7,279
1-4 Family Construction			82						0						0						0						144						226
Home equity lines of credit			985						(7)						3						(4)						239						1,220
Residential Mortgages secured by first liens			4,539						(75)						34						(41)						1,927						6,425
Residential Mortgages secured by junior liens			241						(3)						0						(3)						311						549
Other revolving credit plans			507						(28)						9						(19)						40						528
Automobile			132						(17)						3						(14)						160						278
Other consumer			2,962						(829)						120						(709)						237						2,490
Credit cards			66						(77)						17						(60)						106						112
Overdrafts			244						(318)						120						(198)						160						206
Total loans			$	34,340					$	(2,685)					$	386					$	(2,299)					$	5,189					$	37,230
Loans																																	$	3,511,125
Allowance to loans																																	1.06		%
Allowance to loans, net of PPP-related loans (1)																																	1.09		%
Annualized percentage of net charge-offs during the period to average loans outstanding																																	0.09		%
Nonperforming assets																																	22,087
Nonperforming assets as a percentage of total assets																																	0.42		%

(1) A reconciliation of this non-GAAP financial measures is provided in the "Non-GAAP Financial Measures" section.

47

---

Table of Contents

The following table below presents activity within the allowance account for the twelve months ended December 31, 2020:

			Beginning Allowance (Before ASC 326 Adoption)						Impact of ASC 326 Adoption						Initial Allowance on Loans Purchased with Credit Deterioration						(Charge-offs)						Recoveries						Net (Charge-Offs) Recoveries						Provision (Benefit) for Credit Loss Expense						Ending Allowance (After ASC 326 Adoption)
Farmland			$	190					$	61					$	0					$	0					$	0					$	0					$	(30)					$	221
Owner-occupied, nonfarm nonresidential properties			2,390						(754)						82						(61)						12						(49)						2,031						3,700
Agricultural production and other loans to farmers			25						5						0						0						0						0						(6)						24
Commercial and Industrial			4,105						(631)						216						(2,779)						39						(2,740)						5,283						6,233
Obligations (other than securities and leases) of states and political subdivisions			1,022						(231)						0						0						0						0						207						998
Other loans			41						8						0						0						0						0						19						68
Other construction loans and all land development and other land loans			2,327						780						228						0						125						125						(1,504)						1,956
Multifamily (5 or more) residential properties			1,087						312						24						0						0						0						1,301						2,724
Non-owner occupied, nonfarm nonresidential properties			3,980						2,547						335						(1,522)						52						(1,470)						3,266						8,658
1-4 Family Construction			56						(35)						0						0						0						0						61						82
Home equity lines of credit			180						421						22						(6)						1						(5)						367						985
Residential Mortgages secured by first liens			1,220						1,100						73						(285)						65						(220)						2,366						4,539
Residential Mortgages secured by junior liens			114						135						0						(158)						2						(156)						148						241
Other revolving credit plans			296						378						0						(137)						21						(116)						(51)						507
Automobile			156						(96)						0						(29)						2						(27)						99						132
Other consumer			1,960						1,021						0						(1,513)						130						(1,383)						1,364						2,962
Credit cards			84						(58)						0						(153)						14						(139)						179						66
Overdrafts			240						0						0						(435)						185						(250)						254						244
Total loans			$	19,473					$	4,963					$	980					$	(7,078)					$	648					$	(6,430)					$	15,354					$	34,340
Loans																																													$	3,371,789
Allowance to loans																																													1.02		%
Allowance to loans, net of PPP-related loans (1)																																													1.07		%
Annualized percentage of net charge-offs during the period to average loans outstanding																																													0.21		%
Nonperforming assets																																													31,546
Nonperforming assets as a percentage of total assets																																													0.67		%

(1) A reconciliation of this non-GAAP financial measures is provided in the "Non-GAAP Financial Measures" section.

48

---

Table of Contents

The following table below presents activity within the allowance account for the nine months ended September 30, 2020:

			Nine months ending September 30, 2020
Balance at beginning of period			$	19,473
Charge-offs:
Commercial, industrial and agricultural			(2,710)
Commercial mortgages			(522)
Residential real estate			(231)
Consumer			(1,310)
Credit cards			(120)
Overdrafts			(316)
			(5,209)
Recoveries:
Commercial, industrial and agricultural			40
Commercial mortgages			177
Residential real estate			67
Consumer			126
Credit cards			13
Overdraft deposit accounts			135
			558
Net charge-offs			(4,651)
Provision for loan losses			12,065
Balance at end of period			$	26,887
Loans, net of unearned			$	3,345,810
Allowance to net loans			0.80		%
Allowance to loans, net of PPP-related loans (1)			0.86		%
Annualized percentage of net charge-offs during the period to average loans outstanding			0.20		%
Nonperforming assets			$	27,986
Nonperforming assets as a percentage of total assets			0.59		%

(1) A reconciliation of this non-GAAP financial measures is provided in the "Non-GAAP Financial Measures" section.

The allowance for credit losses measured as a percentage of loans as of September 30, 2021 was 1.06% compared to 1.02% as of December 31, 2020. Total loans at September 30, 2021 and December 31, 2020 include approximately $85.4 million and $155.5 million in PPP-related loans, respectively. Excluding PPP-related loans, which had no required allowance for credit losses allocated to the loan portfolio, the allowance for credit losses measured as a percentage of loans was 1.09% as of September 30, 2021 compared to 1.07% as of December 31, 2020.

The adequacy of the allowance for credit losses is subject to a formal analysis by the Corporation's Allowance for Credit Losses Committee, Credit Administration and Finance Departments of the Corporation. Management believes the provision for credit losses recorded during the nine months ended September 30, 2021, in conjunction with the resultant allowance for credit losses at September 30, 2021, were sufficient to support credit losses expected in its loan portfolio at September 30, 2021.

DEPOSITS

The Corporation considers deposits to be its primary source of funding in support of growth in assets. At September 30, 2021, deposits totaled approximately $4.6 billion, reflecting an increase of approximately $411.9 million, or 9.8%, from total deposits of $4.2 billion at December 31, 2020, primarily as a result of organic growth and the impact of government stimulus initiatives.

OTHER FUNDING SOURCES

The Corporation also considers other funding sources, such as short-term borrowings and term debt, when evaluating funding needs. As of September 30, 2021 and December 31, 2020 there were no borrowings from the FHLB. Additionally, at September 30, 2021, subordinated debt totaled $154.2 million comprised of $133.6 million in subordinated notes and $20.6 million in trust preferred securities. At December 31, 2020, subordinated debt totaled $70.6 million comprised of $50.0 million in subordinated notes and $20.6 million in trust preferred securities.

49

---

Table of Contents

During the second quarter of 2021, the Corporation sold $85.0 million aggregate principal amount of its 3.25% fixed-to-floating rate subordinated notes due 2031 (the “2031 Notes”) to certain 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 2031 Notes mature in June 2031 and will bear interest (i) at a fixed rate of 3.25% per annum from and including the original issue date to but excluding June 15, 2026 or the earlier redemption date, payable semi-annually in arrears, and (ii) from and excluding the maturity date or earlier redemption date, at the rate per year, reset quarterly, equal to the sum of the then current three-month average Secured Overnight Financing Rate (SOFR), determined on the determination date of the applicable interest period, plus 258 basis points, payable quarterly in arrears. The 2031 Notes were designed to qualify as Tier 2 capital under the Federal Reserve’s capital guidelines and received an investment grade rating of BBB- by Kroll Bond Rating Agency.

On October 15, 2021, the Corporation completed the redemption of $50 million aggregate principal amount of its 2026 Notes, representing all outstanding 2026 Notes. The 2026 Notes were redeemed pursuant to their terms at a price equal to 100% of the principal amount, plus accrued and unpaid interest up to, but excluding, October 15, 2021. The Corporation financed the redemption of the 2026 Notes with cash on hand, including net proceeds from the issuance and sale of $85.0 million aggregate principal amount of its 2031 Notes completed in June 2021.

Periodically, the Corporation utilizes borrowings from the FHLB and other lenders as a supplemental strategy to meet funding obligations or match fund certain assets. As part of the Corporation's liquidity management strategies, management continues to focus on maintaining a robust level of short-term and long-term borrowing capacity as an available source of liquidity.

SHAREHOLDERS’ EQUITY AND CAPITAL RATIOS AND METRICS

The Corporation’s capital continues to provide a source of strength for the Corporation's profitability and long-term growth strategies. Total shareholders’ equity was $437.7 million at September 30, 2021, reflecting an increase of $21.6 million, or 5.2%, from $416.1 million at December 31, 2020. This increase was the result of organic growth in earnings combined with a reduction in treasury stock, partially offset by decreases in additional paid in capital, accumulated other comprehensive income and payment of dividends to our common and preferred shareholders during the nine months ended September 30, 2021.

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, 2021, the Corporation’s ratio of tangible equity to tangible assets and tangible common equity to tangible assets of 7.56% and 6.45%, respectively, reflected the impact of approximately $85.4 million in PPP-related loans as well as the Corporation's significant excess liquidity. Excluding PPP-related loans and excess liquidity of $682.5 million at September 30, 2021, the Corporation’s adjusted ratio of tangible equity to tangible assets and tangible common equity to tangible assets of 8.87% and 7.57%, respectively, represent a decrease from the September 30, 2020 adjusted ratios of 9.36% and 7.90%, respectively, primarily as a result of the adoption of CECL and the decrease in accumulated other comprehensive income, partially offset by increases in retained earnings, net of dividends.

50

---

Table of Contents

			September 30, 2021						December 31, 2020
Total risk-based capital ratio			16.76		%				14.32		%
Tier 1 capital ratio			12.05		%				11.91		%
Common equity tier 1 ratio			9.80		%				9.50		%
Leverage ratio			8.11		%				8.11		%
Tangible equity/tangible assets (1)			7.56		%				7.94		%
Tangible equity/tangible assets, net of PPP-related loans and excess liquidity (1)			8.87		%				9.19		%
Tangible common equity/tangible assets (1)			6.45		%				6.70		%
Tangible common equity/tangible assets, net of PPP-related loans and excess liquidity (1)			7.57		%				7.76		%
Book value per common share			$	22.49					$	21.29
Tangible book value per common share (1)			$	19.87					$	18.66

(1) Tangible equity, tangible common equity, tangible assets and tangible book value per common share are non-GAAP financial measures calculated using GAAP amounts. Tangible equity is calculated by excluding the balance of goodwill and other intangible assets from the calculation of shareholders’ equity. 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.

LIQUIDITY

Liquidity measures an organization’s ability to meet its cash obligations as they come due. The consolidated statements of cash flows included in the accompanying financial statements provide analysis of the Corporation’s cash and cash equivalents and the sources and uses of cash. Additionally, the portion of the loan portfolio that matures within one year and securities with maturities within one year in the investment portfolio are considered part of the Corporation’s primary liquid assets. Liquidity is monitored by both management and the ALCO, which establishes and monitors ranges of acceptable liquidity. Management believes that the Corporation’s current liquidity position is acceptable and commensurate with the Corporation’s current and expected liquidity requirements.

At September 30, 2021, the Corporation’s cash position totaled approximately $737.1 million, including excess liquidity of $682.5 million held at the Federal Reserve, reflecting, in management's view, a strong liquidity level. In addition to its cash position, the Corporation’s borrowing capacity with the FHLB at September 30, 2021 was approximately $879.2 million.

OFF-BALANCE SHEET ACTIVITIES

Some financial instruments, such as loan commitments, credit lines, letters of credit, and overdraft protection, are issued to meet customer financing needs. These financial instruments are agreements to provide credit or to support the credit of others, as long as conditions established in the contract are met, and usually have expiration dates. Commitments may expire without being used. Off-balance sheet risk to credit loss exists up to the face amount of these instruments, although material losses are not anticipated. The same credit policies are used to make such commitments as are used for loans, including obtaining collateral at exercise of the commitment.

The contractual amount of financial instruments with off balance sheet risk was as follows at September 30, 2021 and December 31, 2020:

			September 30, 2021												December 31, 2020
			Fixed Rate						Variable Rate						Fixed Rate						Variable Rate
Commitments to make loans			$	50,110					$	281,412					$	52,073					$	266,336
Unused lines of credit			13,954						637,290						24,328						673,919
Standby letters of credit			15,485						1,706						15,301						1,597

51

---

Table of Contents

The fixed rate loan commitments at September 30, 2021 have interest rates ranging from 1.47% to 16.00% and maturities ranging from six months to approximately 42 years. The fixed rate loan commitments at December 31, 2020 have interest rates ranging from 1.24% to 18.00% and maturities ranging from four months to 35 years.

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 corporations, reported in FHLB and other equity interests on the consolidated balance sheet, as of September 30, 2021 and December 31, 2020 were $13,169 and $11,835, respectively. Unfunded capital commitments in investments in small business corporations totaled $9,331 and $3,665 as of September 30, 2021 and December 31, 2020, respectively.

The carrying value of investments in the low income housing partnerships, reported in FHLB and other equity interests on the consolidated balance sheet, as of September 30, 2021 and December 31, 2020 were $5,448 and $6,015, respectively. The related amortization for the three and nine months ended September 30, 2021 was $189 and $568, respectively, and the related amortization for the three and nine months ended September 30, 2020 was $135 and $475, respectively.

Unfunded commitments, reported in accrued interest payable and other liabilities on the consolidated balance sheet, as of September 30, 2021 and December 31, 2020 were $2,826 and $3,624, respectively.

52

---

Table of Contents

CONSOLIDATED YIELD COMPARISONS

AVERAGE BALANCES AND NET INTEREST MARGIN FOR THE THREE MONTHS ENDED

SEPTEMBER 30, 2021 AND 2020

The loan 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. The allowance for credit losses was calculated by pooling loans of similar credit risk characteristics and credit monitoring procedures.

						For the Three Months Ended,
						September 30, 2021																		September 30, 2020
						Average Balance						Annual Rate						Interest Inc./Exp.						Average Balance						Annual Rate						Interest Inc./Exp.
ASSETS:
Securities:
Taxable (1)						$	652,625					1.75		%				$	2,827					$	515,944					2.15		%				$	2,677
Tax-Exempt (1) (2)						43,929						3.15		%				334						47,984						3.26		%				375
Equity Securities (1) (2)						7,769						1.99		%				39						12,329						5.84		%				181
Total securities						704,323						1.83		%				3,200						576,257						2.32		%				3,233
Loans:
Commercial (2)						1,269,813						5.02		%				16,059						1,322,390						4.34		%				14,436
Mortgage (2)						2,108,339						4.44		%				23,600						1,863,421						4.79		%				22,417
Consumer						100,408						10.23		%				2,588						98,039						9.84		%				2,426
Total loans (3)						3,478,560						4.82		%				42,247						3,283,850						4.76		%				39,279
Other earning assets						706,891						0.17		%				298						581,219						0.12		%				180
Total earning assets						4,889,774						3.72		%				$	45,745					4,441,326						3.84		%				$	42,692
Non interest-bearing assets:
Cash and due from banks						48,200																		44,786
Premises and equipment						79,978																		77,176
Other assets						206,539																		177,120
Allowance for credit losses						(37,468)																		(25,249)
Total non interest-bearing assets						297,249																		273,833
TOTAL ASSETS						$	5,187,023																	$	4,715,159
LIABILITIES AND SHAREHOLDERS’ EQUITY:
Demand—interest-bearing						$	998,485					0.17		%				$	421					$	829,603					0.21		%				$	429
Savings						2,348,375						0.18		%				1,095						2,080,778						0.52		%				2,696
Time						442,989						1.72		%				1,917						468,166						2.08		%				2,453
Total interest-bearing deposits						3,789,849						0.36		%				3,433						3,378,547						0.66		%				5,578
Long-term borrowings and finance lease liabilities						496						4.80		%				6						246,321						1.89		%				1,172
Subordinated notes and debentures						154,187						4.41		%				1,714						70,620						5.31		%				942
Total interest-bearing liabilities						3,944,532						0.52		%				$	5,153					3,695,488						0.83		%				$	7,692
Demand—non interest-bearing						744,563																		587,405
Other liabilities						60,106																		58,175
Total liabilities						4,749,201																		4,341,068
Shareholders’ equity						437,822																		374,091
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY						$	5,187,023																	$	4,715,159
Interest income/Earning assets												3.72		%				$	45,745											3.84		%				$	42,692
Interest expense/Interest-bearing liabilities												0.52		%				5,153												0.83		%				7,692
Net interest spread												3.20		%				$	40,592											3.01		%				$	35,000
Interest income/Earning assets												3.72		%				45,745												3.84		%				42,692
Interest expense/Earning assets												0.42		%				5,153												0.69		%				7,692
Net interest margin												3.30		%				$	40,592											3.15		%				$	35,000

(1) Includes unamortized discounts and premiums. Average balance is computed using the fair value of securities. The average yield has been computed using the amortized cost average balance for available for sale securities.

(2) Average yields are stated on a fully taxable equivalent basis.

(3) Average outstanding includes the average balance outstanding of all nonaccrual loans. Loans consist of the average of total loans less average unearned income. The amount of loan fees included in the interest income on loans is not material.

53

---

Table of Contents

CONSOLIDATED YIELD COMPARISONS

AVERAGE BALANCES AND NET INTEREST MARGIN FOR THE NINE MONTHS ENDED

SEPTEMBER 30, 2021 AND 2020

The loan 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. The allowance for credit losses was calculated by pooling loans of similar credit risk characteristics and credit monitoring procedures.

						For the Nine Months Ended,
						September 30, 2021																		September 30, 2020
						Average Balance						Annual Rate						Interest Inc./Exp.						Average Balance						Annual Rate						Interest Inc./Exp.
ASSETS:
Securities:
Taxable (1)						$	602,485					1.72		%				$	7,618					$	498,475					2.50		%				$	9,030
Tax-Exempt (1) (2)						44,290						3.49		%				1,107						58,041						3.35		%				1,402
Equity Securities (1) (2)						7,573						4.43		%				251						13,267						6.09		%				605
Total securities						654,348						1.87		%				8,976						569,783						2.67		%				11,037
Loans:
Commercial (2)						1,277,670						4.96		%				47,382						1,210,359						4.48		%				40,567
Mortgage (2)						2,057,129						4.53		%				69,642						1,724,241						4.80		%				61,990
Consumer						99,164						9.91		%				7,352						100,390						9.66		%				7,260
Total loans (3)						3,433,963						4.84		%				124,376						3,034,990						4.88		%				109,817
Other earning assets						624,430						0.13		%				611						346,896						0.27		%				697
Total earning assets						4,712,741						3.81		%				$	133,963					3,951,669						4.13		%				$	121,551
Non interest-bearing assets:
Cash and due from banks						46,793																		40,412
Premises and equipment						78,949																		74,786
Other assets						194,893																		161,232
Allowance for credit losses						(36,432)																		(22,760)
Total non interest-bearing assets						284,203																		253,670
TOTAL ASSETS						$	4,996,944																	$	4,205,339
LIABILITIES AND SHAREHOLDERS’ EQUITY:
Demand—interest-bearing						$	960,383					0.19		%				$	1,342					$	718,408					0.25		%				$	1,368
Savings						2,284,358						0.24		%				4,037						1,854,490						0.78		%				10,876
Time						454,176						1.89		%				6,406						434,991						2.20		%				7,174
Total interest-bearing deposits						3,698,917						0.43		%				11,785						3,007,889						0.86		%				19,418
Long-term borrowings and finance lease liabilities						517						4.65		%				18						251,170						1.95		%				3,666
Subordinated notes and debentures						107,755						4.66		%				3,747						70,620						5.37		%				2,839
Total interest-bearing liabilities						3,807,189						0.55		%				$	15,550					3,329,679						1.04		%				$	25,923
Demand—non interest-bearing						703,777																		479,414
Other liabilities						58,059																		56,686
Total liabilities						4,569,025																		3,865,779
Shareholders’ equity						427,919																		339,560
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY						$	4,996,944																	$	4,205,339
Interest income/Earning assets												3.81		%				$	133,963											4.13		%				$	121,551
Interest expense/Interest-bearing liabilities												0.55		%				15,550												1.04		%				25,923
Net interest spread												3.26		%				$	118,413											3.09		%				$	95,628
Interest income/Earning assets												3.81		%				133,963												4.13		%				121,551
Interest expense/Earning assets												0.44		%				15,550												0.88		%				25,923
Net interest margin												3.37		%				$	118,413											3.25		%				$	95,628

(1) Includes unamortized discounts and premiums. Average balance is computed using the fair value of securities. The average yield has been computed using the historical amortized cost average balance for available for sale securities.

(2) Average yields are stated on a fully taxable equivalent basis.

(3) Average outstanding includes the average balance outstanding of all nonaccrual loans. Loans consist of the average of total loans less average unearned income. The amount of loan fees included in the interest income on loans is not material.

54

---

Table of Contents

RESULTS OF OPERATIONS

Three Months Ended September 30, 2021 and 2020

OVERVIEW

The Corporation’s operating results for the three months ended September 30, 2021 were impacted by the COVID-19 pandemic. In an effort to proactively support the U.S. economy, the Federal Reserve cut its interest rates by 150 basis points in March 2020, which had an impact on the Corporation’s net interest margin and net interest income.

Net income was $14.9 million, or $0.82 per diluted common share, for the quarter ended September 30, 2021, compared to $7.8 million, or $0.47 per diluted share, for the same period in 2020, reflecting increases of $7.1 million, or 91.5%, and $0.35 per diluted share, or 74.5%. Included in net income for the quarter ended September 30, 2020 was the after-tax impact of $3.8 million, or $0.23 per diluted share, in merger costs, prepayment penalties and branch closure costs.

Provision for credit losses was $1.1 million for the three months ended September 30, 2021 compared to $3.3 million for the three months ended September 30, 2020. The third quarter of 2021 provision for credit losses reflects a reserve requirement resulting from growth in the Corporation's loan portfolio, changes in historical loss rates and quantitative inputs including the unemployment forecast and prepayment speeds, coupled with qualitative adjustments in the Corporation's residential and consumer loan portfolios, growth in new market areas, as well as continued uncertainty with the pandemic and economic environment, and the impact of net charge-offs, partially offset by improvements or resolutions in the Corporation's individually evaluated loans.

PPNR income was $19.5 million for the three months ended September 30, 2021, compared to $13.1 million for the three months ended September 30, 2020, reflecting an increase of $6.4 million, or 49.2%. PPNR for the three months ended September 30, 2020 included $4.7 million in merger costs, prepayment penalties and branch closure costs.

Total revenue (comprised of net interest income plus non-interest income) was $48.7 million for the three months ended September 30, 2021, reflecting an increase of $7.3 million, or 17.5%, from the three months ended September 30, 2020, primarily as a result of growth in average earning assets of approximately $448.4 million, or 10.1%, coupled with an increase of 15 basis points in net interest margin during the same period.

Total non-interest expense was $29.2 million, reflecting an increase of $831 thousand, or 2.9%, from the three months ended September 30, 2020. Included in non-interest expense for the three months ended September 30, 2020 is $4.7 million in merger costs, prepayment penalties and branch closure costs. Salaries and benefits increased $2.8 million from the three months ended September 30, 2020 primarily as a result of hiring additional personnel in the Corporation's growth regions of Cleveland and Buffalo, as well as the Corporation's latest expansion in Roanoke, VA through its de novo brand, Ridge View Bank, merit increases for existing employees, higher incentive compensation and higher benefit costs. Additionally, technology expense increased $1.4 million from the three months ended September 30, 2020 as a result of increased investments in technology aimed at enhancing customer experience. Finally, other expenses increased $1.2 million from the three months ended September 30, 2020. There were no significant increases or decreases in the individual components of other expenses.

Annualized return on average equity was 13.51% for the three months ended September 30, 2021, compared to 8.28% for the three months ended September 30, 2020. Annualized return on average tangible equity was 15.03% for the three months ended September 30, 2021, compared to 9.39% for the three months ended September 30, 2020. Annualized return on average tangible common equity was 16.34% and 10.08% for the same periods in 2021 and 2020, respectively. Excluding after-tax merger costs, prepayment penalties and branch closure costs, annualized adjusted return on average equity, average tangible equity and average tangible common equity were 12.32%, 13.98% and 15.00% for the three months ended September 30, 2020. Efficiency ratio was 59.47% for the three months ended September 30, 2021, compared to 67.71% for the comparable period in 2020. Included in the efficiency ratio for the three months ended September 30, 2020 was $4.7 million in merger costs, prepayment penalties and branch closure costs. The increases in the Corporation’s performance metrics from September 30, 2020 to September 30, 2021 were primarily due to growth in average earning assets, an increase in net interest margin, and a well-controlled level of operating efficiency.

55

---

Table of Contents

NET INTEREST INCOME AND NET INTEREST MARGIN

Net interest income of $40.3 million for the three months ended September 30, 2021, an increase of $5.6 million, or 16.2%, from the three months ended September 30, 2020, primarily as a result of loan growth, various deposit pricing and liquidity strategies and PPP-related fees, which were approximately $2.4 million for the three months ended September 30, 2021, compared to $683 thousand for the three months ended September 30, 2020.

Net interest margin on a fully tax-equivalent basis was 3.30% and 3.15% for the three months ended September 30, 2021 and 2020, respectively. The yield on earning assets of 3.72% for the three months ended September 30, 2021 decreased 12 basis points from 3.84% for the three months ended September 30, 2020, primarily as a result of the lower interest rate environment and higher level of excess cash at the Federal Reserve. The cost of interest-bearing liabilities decreased 31 basis points from 0.83% for the three months ended September 30, 2020 to 0.52% for the three months ended September 30, 2021, primarily as a result of the Corporation’s targeted deposit rate reductions and the repayment of the Corporation's remaining FHLB borrowings in the fourth quarter of 2020.

NON-INTEREST INCOME

Total non-interest income was $8.4 million for the three months ended September 30, 2021, an increase of $1.6 million, or 24.1%, from the same period in 2020. During the three months ended September 30, 2021, Wealth and Asset Management fees increased $320 thousand, or 22.6%, compared to the three months ended September 30, 2020. Other significant improvements during the three months ended September 30, 2021 included increased income from investments in Small Business Investment Company ("SBIC") funds, charges on deposits and card processing and interchange income, resulting from increased business activity.

NON-INTEREST EXPENSES

For the three months ended September 30, 2021, total non-interest expense was $29.2 million, reflecting an increase of $831 thousand, or 2.9%, from the three months ended September 30, 2020. Included in non-interest expense for the three months ended September 30, 2020 is $4.7 million in merger costs, prepayment penalties and branch closure costs. Salaries and benefits increased $2.8 million from the three months ended September 30, 2020 primarily as a result of hiring additional personnel in the Corporation's growth regions of Cleveland and Buffalo, as well as the Corporation's latest expansion in Roanoke, VA through its de novo brand, Ridge View Bank, merit increases for existing employees, higher incentive compensation and higher benefit costs. Additionally, technology expense increased $1.4 million from the three months ended September 30, 2020 as a result of increased investments in technology aimed at enhancing customer experience. Finally, other expenses increased $1.2 million from the three months ended September 30, 2020. There were no significant increases or decreases in the individual components of other expenses. Accordingly, the efficiency ratio was 59.47% for the three months ended September 30, 2021, compared to 67.71% during the comparable period in 2020. Included in the efficiency ratio for the three months ended September 30, 2020 is $4.7 million in merger costs, prepayment penalties and branch closure costs.

INCOME TAX EXPENSE

Income tax expense was $3.5 million for the three months ended September 30, 2021 an increase of $1.5 million, or 76.7%, from the three months ended September 30, 2020. Our effective tax rate was 19.0% for the three months ended September 30, 2021, compared to 20.3% for the three months ended September 30, 2020. The decrease in the effective tax rate was primarily attributable to the change in mix of taxable and tax-exempt activities. The effective tax rates for the periods differed from the federal statutory rate of 21.0% at September 30, 2021 and 2020 primarily due to our tax-exempt income from securities and loans, as well as earnings from bank owned life insurance.

56

---

Table of Contents

RESULTS OF OPERATIONS

Nine Months Ended September 30, 2021 and 2020

OVERVIEW

The Corporation’s operating results for the nine months ended September 30, 2021 were impacted by the COVID-19 pandemic, as discussed in more detail above in "Results of Operations - Three Months Ended September 30, 2021 and 2020."

Net income was $43.1 million, or $2.36 per diluted common share, for the nine months ended September 30, 2021, compared to $24.8 million, or $1.57 per diluted share, for the same period in 2020, reflecting increases of $18.2 million, or 73.4%, and $0.79 per diluted share, or 50.3%. Included in net income for the nine months ended September 30, 2020 was the after-tax impact of $4.3 million, or $0.27 per diluted share, in merger costs, prepayment penalties and branch closure costs.

Provision for credit losses of $5.2 million for the first nine months of 2021 decreased $6.9 million, or 57.0%, from the comparable period in 2020. The provision for credit losses for the nine months ended September 30, 2020 included (i) a provision expense of approximately $2.6 million related to a specific loan loss reserve for a loan relationship moved to non-accrual at December 31, 2019, combined with (ii) a new qualitative factor specifically related to the ongoing COVID-19 pandemic of approximately $1.7 million, (iii) adjustments to the qualitative factors to reflect the Corporation's outlook on unemployment and the economy, partially offset by (iv) a lower allowance requirement as a result of lower growth in total loans compared to historical levels. The nine months ended September 30, 2021 provision for credit losses reflects a reserve requirement resulting from growth in the Corporation's loan portfolio, changes in historical loss rates and quantitative inputs including the unemployment forecast and prepayment speeds, coupled with qualitative adjustments in the Corporation's residential and consumer loan portfolios, growth in new market areas, as well as continued uncertainty with the pandemic and economic environment, and the impact of net charge-offs, partially offset by improvements or resolutions in the Corporation's individually evaluated loans.Net charge-offs in the first nine months of 2021 and 2020 were $2.3 million and $4.7 million, respectively. Net charge-offs of the Bank totaled $1.6 million and $3.6 million during the nine months ended September 30, 2021 and 2020, or 0.06% and 0.16%, respectively, of average Bank loans.

PPNR income was $58.3 million for the nine months ended September 30, 2021, as compared to $42.4 million for the nine months ended September 30, 2020, reflecting an increase of $15.9 million, or 37.5%. Included in PPNR for the nine months ended September 30, 2020 was $5.2 million in merger costs, prepayment penalties and branch closure costs.

Total revenue (comprised of net interest income plus non-interest income) was $142.2 million for the nine months ended September 30, 2021, an increase of $27.5 million, or 24.0%, from the nine months ended September 30, 2020, primarily as a result of growth in average earning assets of approximately $761.1 million or 19.3%, and an increase of 12 basis points in net interest margin during the same period.

Total non-interest expense was $84.0 million, for the nine months ended September 30, 2021, an increase of $11.7 million, or 16.1%, from the nine months ended September 30, 2020. Included in non-interest expense for the nine months ended September 30, 2020 was $5.2 million in merger costs, prepayment penalties and branch closure costs. Salaries and benefits increased $8.9 million from the nine months ended September 30, 2020 primarily as a result the acquisition of Bank of Akron, hiring additional personnel in the Corporation's growth regions of Cleveland and Buffalo, as well as the Corporation's latest expansion in Roanoke, VA through its de novo brand, Ridge View Bank, merit increases for existing employees, higher incentive compensation and higher benefit costs. Additionally, technology expense increased $4.4 million from the nine months ended September 30, 2020 as a result of increased investments in technology aimed at enhancing customer experience. Finally, other expenses increased $1.5 million from the nine months ended September 30, 2020 primarily as a result of market value appreciation in the Corporation’s deferred compensation plans.

Annualized return on average equity was 13.46% for the nine months ended September 30, 2021, compared to 9.77% for the nine months ended September 30, 2020. Annualized return on average tangible equity was 15.01% for the nine months ended September 30, 2021, compared to 11.10% for the nine months ended September 30, 2020. Annualized return on average tangible common equity was 16.35% and 11.39% for the same periods in 2021 and 2020, respectively. Excluding after-tax merger costs, prepayment penalties and branch closure costs, annualized adjusted return on average equity, average common equity and average tangible common equity were 11.47%, 13.03% and 13.37% for the nine months ended September 30, 2020 Efficiency ratio was 58.53% for the nine months ended September 30, 2021 compared to 62.15% for the comparable period in 2020. The efficiency ratio for the nine months ended September 30, 2020 included $5.2 million in merger costs, prepayment penalties and branch closure costs.

57

---

Table of Contents

NET INTEREST INCOME AND NET INTEREST MARGIN

Net interest income was $117.7 million for the nine months ended September 30, 2021, an increase of $23.1 million, or 24.4%, from the nine months ended September 30, 2020,primarily as a result of loan growth, various deposit pricing and liquidity strategies and PPP-related fees, which totaled for the nine months ended September 30, 2021 approximately $6.8 million, compared to $683 thousand for the nine months ended September 30, 2020.

Net interest margin on a fully tax-equivalent basis was 3.37% and 3.25% for the nine months ended September 30, 2021 and 2020, respectively. The yield on earning assets of 3.81% for the nine months ended September 30, 2021 decreased 32 basis points from 4.13% for the nine months ended September 30, 2020, primarily as a result of the lower interest rate environment and higher level of excess cash at the Federal Reserve. The cost of interest-bearing liabilities decreased 49 basis points from 1.04% for the nine months ended September 30, 2020 to 0.55% for the nine months ended September 30, 2021, primarily as a result of the Corporation’s targeted deposit rate reductions and the repayment of the Corporation's remaining FHLB borrowings in the fourth quarter of 2020.

NON-INTEREST INCOME

Total non-interest income was $24.5 million for the nine months ended September 30, 2021, an increase of $4.4 million, or 22.0%, from the same period in 2020. Included in non-interest income for the nine months ended September 30, 2020 was $2.2 million in net realized gains on available for sale securities. Excluding the impact of the realized gains on available for sale securities for the nine months ended September 30, 2020, total non-interest income for the nine months ended September 30, 2021, increased $6.6 million, or 36.9%, from the same period in 2020. The increase was partially driven by growth in Wealth and Asset Management fees, as assets under management increased by $94.4 million, or 8.2%, from September 30, 2020, to $1.2 billion as of September 30, 2021. Other significant factors that contributed to the increase included mortgage banking, income from investments in SBIC funds, card processing and interchange income from increased business activity as well as an increase in net realized and unrealized gains on trading securities.

NON-INTEREST EXPENSES

For the nine months ended September 30, 2021, total non-interest expense was $84.0 million, an increase of $11.7 million, or 16.1%, from the nine months ended September 30, 2020. Included in non-interest expense for the nine months ended September 30, 2020 is $5.2 million in merger costs, prepayment penalties and branch closure costs. Salaries and benefits increased $8.9 million from the nine months ended September 30, 2020 primarily as a result the acquisition of Bank of Akron, hiring additional personnel in the Corporation's growth regions of Cleveland and Buffalo, as well as the Corporation's latest expansion in Roanoke, VA through its de novo brand, Ridge View Bank, merit increases for existing employees, higher incentive compensation and higher benefit costs. Additionally, technology expense increased $4.4 million from the nine months ended September 30, 2020 as a result of increased investments in technology aimed at enhancing customer experience. Finally, other expenses increased $1.5 million from the nine months ended September 30, 2020 primarily as a result of market value appreciation in the Corporation’s deferred compensation plans.

INCOME TAX EXPENSE

Income tax expense was $10.0 million for the nine months ended September 30, 2021 an increase of $4.5 million, or 82.8%, from the nine months ended September 30, 2020. Our effective tax rate was 18.8% for the nine months ended September 30, 2021 compared to 18.0% for the nine months ended September 30, 2020. Included in the 18.0% effective tax rate for the nine month ended September 30, 2020 were merger costs, prepayment penalties and branch closure costs, which reduced the effective tax rate. The effective tax rates for the periods differed from the federal statutory rate of 21.0% at September 30, 2021 and 2020 primarily due to our tax-exempt income from securities and loans, as well as earnings from bank owned life insurance.

58

---

Table of Contents

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 fair value of securities are deemed critical since they involve the use of estimates and require significant management judgments. In addition, 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), Note 2 (Business Combinations) Note 3 (Securities) and Note 4 (Loans) of the 2020 Form 10-K provide additional detail with regard to the Corporation’s accounting for the allowance for credit losses, the fair value of securities, business combinations and loans. There have been no other significant changes in the application of accounting policies since December 31, 2020.

59

---

Table of Contents

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,
			2021			2020
Calculation of tangible book value per share and tangible common equity/tangible assets:
Shareholders' equity			$	437,689		$	416,137
Less: preferred equity			57,785			57,785
Less: goodwill			43,749			43,749
Less: core deposit intangible			485			567
Tangible common equity			$	335,670		$	314,036
Total assets			$	5,246,286		$	4,729,399
Less: goodwill			43,749			43,749
Less: core deposit intangible			485			567
Tangible assets			$	5,202,052		$	4,685,083
Ending shares outstanding			16,889,694			16,833,008
Tangible book value per common share			$	19.87		$	18.66
Tangible common equity/Tangible assets			6.45		%	6.70		%
Calculation of tangible equity/tangible assets:
Shareholders' equity			$	437,689		$	416,137
Less: goodwill			43,749			43,749
Less: core deposit intangible			485			567
Tangible equity			$	393,455		$	371,821
Tangible assets			$	5,202,052		$	4,685,083
Tangible equity/Tangible assets			7.56		%	7.94		%
Calculation of tangible common equity/tangible assets, net of PPP-related loans and excess liquidity at the Federal Reserve:
Tangible common equity			$	335,670		$	314,036
Tangible assets			$	5,202,052		$	4,685,083
Less: PPP-related loans			85,354			155,529
Less: Excess liquidity at the Federal Reserve			682,475			482,503
Adjusted tangible assets			$	4,434,223		$	4,047,051
Adjusted tangible common equity/tangible assets			7.57		%	7.76		%
Calculation of tangible equity/tangible assets, net of PPP-related loans and excess liquidity at the Federal Reserve:
Tangible equity			$	393,455		$	371,821
Adjusted tangible assets			$	4,434,223		$	4,047,051
Adjusted tangible equity/tangible assets			8.87		%	9.19		%

60

---

Table of Contents

			(unaudited)						(unaudited)
			September 30,			December 31,			September 30,
			2021			2020			2020
Calculation of allowance / loans, net of PPP-related loans:
Total allowance for credit losses (2)			$	37,230		$	34,340		$	26,887
Total loans net of unearned income			$	3,511,125		$	3,371,789		$	3,345,810
Less: PPP-related loans			85,354			155,529			222,972
Adjusted total loans, net of unearned income, PPP-related loans (non-GAAP)			$	3,425,771		$	3,216,260		$	3,122,838
Adjusted allowance / loans, net of PPP-related loans (non-GAAP) (2)			1.09		%	1.07		%	0.86		%

						(unaudited)									(unaudited)
						Three Months Ended									Nine Months Ended
						September 30,									September 30,
						2021			2020						2021			2020
Calculation of net interest margin (fully tax equivalent basis):
Interest income (fully tax equivalent basis) (non-GAAP)						$	45,745		$	42,692					$	133,963		$	121,551
Interest expense (fully tax equivalent basis) (non-GAAP)						5,153			7,692						15,550			25,923
Net interest income (fully tax equivalent basis) (non-GAAP)						$	40,592		$	35,000					$	118,413		$	95,628
Average total earning assets						$	4,889,774		$	4,441,326					$	4,712,741		$	3,951,669
Less: average mark to market adjustment on investments						10,029			21,859						10,879			18,589
Adjusted average total earning assets, net of mark to market (non-GAAP)						$	4,879,745		$	4,419,467					$	4,701,862		$	3,933,080
Net interest margin, fully tax equivalent basis (non-GAAP) (annualized)						3.30		%	3.15		%				3.37		%	3.25		%

						(unaudited)									(unaudited)
						Three Months Ended									Nine Months Ended
						September 30,									September 30,
						2021			2020						2021			2020
Calculation of efficiency ratio:
Non-interest expense						$	29,199		$	28,368					$	83,968		$	72,309
Less: core deposit intangible amortization						26			26						82			178
Adjusted non-interest expense (non-GAAP)						$	29,173		$	28,342					$	83,886		$	72,131
Non-interest income						$	8,414		$	6,778					$	24,510		$	20,091
Net interest income						$	40,295		$	34,664					$	117,721		$	94,596
Less: tax exempt investment and loan income, net of TEFRA (non-GAAP)						1,185			1,375						3,710			4,351
Add: tax exempt investment and loan income (non-GAAP) (tax-equivalent)						1,532			1,792						4,796			5,730
Adjusted net interest income (non-GAAP)						40,642			35,081						118,807			95,975
Adjusted net revenue (non-GAAP) (tax-equivalent)						$	49,056		$	41,859					$	143,317		$	116,066
Efficiency ratio						59.47		%	67.71		%				58.53		%	62.15		%

61

---

Table of Contents

						(unaudited)									(unaudited)
						Three Months Ended									Nine Months Ended
						September 30,									September 30,
						2021			2020						2021			2020
Calculation of PPNR:
Net interest income						$	40,295		$	34,664					$	117,721		$	94,596
Add: Non-interest income						8,414			6,778						24,510			20,091
Less: Non-interest expense						29,199			28,368						83,968			72,309
PPNR (non-GAAP)						$	19,510		$	13,074					$	58,263		$	42,378
(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,
						2021			2020						2021			2020
Calculation of adjusted return on average equity:
Net income						$	14,907		$	7,785					$	43,078		$	24,844
Add: merger costs, prepayment penalties and branch closure costs (net of tax)						0			3,803						0			4,322
Adjusted net income						$	14,907		$	11,588					$	43,078		$	29,166
Average shareholders' equity						$	437,822		$	374,091					$	427,919		$	339,560
Adjusted return on average equity						13.51		%	12.32		%				13.46		%	11.47		%

						(unaudited)									(unaudited)
						Three Months Ended									Nine Months Ended
						September 30,									September 30,
						2021			2020						2021			2020
Calculation of return on average tangible equity:
Net income						$	14,907		$	7,785					$	43,078		$	24,844
Average tangible shareholders' equity						393,571			329,859						383,641			298,922
Return on average tangible equity (non-GAAP) (annualized)						15.03		%	9.39		%				15.01		%	11.10		%
Calculation of adjusted return on average tangible equity:
Net income available to common stockholders						$	14,907		$	7,785					$	43,078		$	24,844
Add: merger costs, prepayment penalties and branch closure costs (net of tax)						0			3,803						0			4,322
Adjusted net income available to common stockholders						$	14,907		$	11,588					$	43,078		$	29,166
Average common shareholders' equity						393,571			329,859						383,641			298,922
Adjusted return on average common equity (non-GAAP) (annualized)						15.03		%	13.98		%				15.01		%	13.03		%

62

---

Table of Contents

						(unaudited)									(unaudited)
						Three Months Ended									Nine Months Ended
						September 30,									September 30,
						2021			2020						2021			2020
Calculation of return on average tangible common equity:
Net income available to common stockholders						$	13,831		$	7,785					$	39,852		$	24,844
Average tangible common shareholders' equity						335,786			307,257						325,856			291,333
Return on average tangible common equity (non-GAAP) (annualized)						16.34		%	10.08		%				16.35		%	11.39		%
Calculation of adjusted return on average tangible common equity:
Net income available to common stockholders						$	13,831		$	7,785					$	39,852		$	24,844
Add: merger costs, prepayment penalties and branch closure costs (net of tax)						0			3,803						0			4,322
Adjusted net income available to common stockholders						$	13,831		$	11,588					$	39,852		$	29,166
Average tangible common shareholders' equity						335,786			307,257						325,856			291,333
Adjusted return on average tangible common equity (non-GAAP) (annualized)						16.34		%	15.00		%				16.35		%	13.37		%

						(unaudited)									(unaudited)
						Three Months Ended									Nine Months Ended
						September 30,									September 30,
						2021			2020						2021			2020
Calculation of non-interest income excluding net realized gains on available-for-sale securities:
Non-interest income						$	8,414		$	6,778					$	24,510		$	20,091
Less: net realized gains on available-for-sale securities						0			0						0			2,190
Adjusted non-interest income						$	8,414		$	6,778					$	24,510		$	17,901

63

---

Table of Contents

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, 2021, 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 low interest rate environment, the 300 and 400 basis point declining interest rate scenarios have been excluded from the table.

September 30, 2021
Change in Basis Points						% Change in Net Interest Income
400						24.6%
300						18.0%
200						12.4%
100						6.3%
(100)						(6.3)%
(200)						(10.7)%

64

---

Table of Contents

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, 2021 that has materially affected, or that is reasonably likely to materially affect, our internal control over financial reporting.

65

---

Table of Contents

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 2020 Form 10-K.

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, 2021.

Period			Total Number of Shares Purchased						Average Price Paid per Common Share						Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs						Maximum Number (or approximate dollar value) of Shares that May Yet Be Purchased Under the Plans or Programs (1)
July 1 – 31, 2021			0						$	0					0						183,131
August 1 – 31, 2021			0						0						0						183,131
September 1 – 30, 2021			0						0						0						183,131

 

(1)The Corporation’s stock repurchase program, which was approved by the Corporation's Board of Directors on November 12, 2014, authorizes the repurchase of up to 500,000 shares of common stock. The program will remain in effect until fully utilized or until modified, suspended or terminated. As of September 30, 2021, there were 183,131 shares remaining in the program.

Additionally, during the quarter ended September 30, 2021, 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

None.

66

---

Table of Contents

ITEM 6. EXHIBITS

Exhibit No.						Description
10.1						Executive Employment Agreement, dated August 30, 2021, by and between CNB Financial Corporation, CNB Bank and Martin T. Griffith (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed on September 3, 2021)
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)

67

---

Table of Contents

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 4, 2021

/s/ Joseph B. Bower, Jr.

Joseph B. Bower, Jr.

President and Chief Executive Officer

(Principal Executive Officer)

DATE: November 4, 2021

/s/ Tito L. Lima

Tito L. Lima

Treasurer

(Principal Financial and Accounting Officer)

68