CB Financial Services(CBFV) - 2021 Q3 - Quarterly Report

PART I – FINANCIAL INFORMATION Financial Statements The unaudited consolidated financial statements for Q3 and nine months ended September 30, 2021, reflect a balance sheet shift and a net income recovery from a prior-year loss Consolidated Statements of Financial Condition Total assets increased to $1.47 billion, driven by cash and securities, while loans decreased and stockholders' equity slightly declined Consolidated Balance Sheet Highlights (in thousands) | Account | Sep 30, 2021 | Dec 31, 2020 | | :--- | :--- | :--- | | Assets | | | | Total Cash and Due From Banks | $173,523 | $160,911 | | Total Securities | $221,351 | $145,400 | | Loans, Net | $990,018 | $1,031,982 | | Total Assets | $1,474,818 | $1,416,720 | | Liabilities & Equity | | | | Total Deposits | $1,185,156 | $1,224,569 | | Deposits Held for Sale | $102,647 | $0 | | Total Borrowings | $48,623 | $49,055 | | Total Liabilities | $1,343,831 | $1,282,190 | | Total Stockholders' Equity | $130,987 | $134,530 | Consolidated Statements of Income (Loss) Q3 2021 net income was $2.0 million, a turnaround from a $17.4 million loss, with nine-month net income at $4.6 million due to reduced impairment and loan loss recovery Income Statement Summary (in thousands, except per share data) | Metric | Q3 2021 | Q3 2020 | Nine Months 2021 | Nine Months 2020 | | :--- | :--- | :--- | :--- | :--- | | Net Interest Income | $10,010 | $10,416 | $29,921 | $31,270 | | Provision (Recovery) For Loan Losses | $0 | $1,200 | ($1,200) | $4,000 | | Total Noninterest Income | $2,198 | $2,173 | $7,591 | $6,693 | | Total Noninterest Expense | $9,773 | $28,968 | $32,890 | $47,042 | | Net Income (Loss) | $1,983 | ($17,395) | $4,605 | ($13,719) | | Diluted EPS | $0.37 | ($3.22) | $0.85 | ($2.54) | Consolidated Statements of Comprehensive Income (Loss) Nine-month total comprehensive income was $2.3 million, comprising net income offset by other comprehensive loss, contrasting with a $12.3 million loss in 2020 Comprehensive Income (Loss) (in thousands) | Metric | Q3 2021 | Q3 2020 | Nine Months 2021 | Nine Months 2020 | | :--- | :--- | :--- | :--- | :--- | | Net Income (Loss) | $1,983 | ($17,395) | $4,605 | ($13,719) | | Other Comprehensive (Loss) Income, Net | ($575) | ($516) | ($2,268) | $1,425 | | Total Comprehensive Income (Loss) | $1,408 | ($17,911) | $2,337 | ($12,294) | Consolidated Statements of Changes in Stockholders' Equity Stockholders' equity decreased to $131.0 million, driven by dividends, treasury stock purchases, and other comprehensive loss, partially offset by net income - For the nine months ended September 30, 2021, key activities affecting stockholders' equity included net income of $4.6 million, dividends paid of $3.9 million, and treasury stock purchases of $2.5 million[15] Consolidated Statements of Cash Flows Nine-month net cash from operating activities was $2.6 million, investing used $46.5 million, and financing provided $56.5 million, leading to a $12.6 million net cash increase Cash Flow Summary (Nine Months Ended Sep 30, in thousands) | Activity | 2021 | 2020 | | :--- | :--- | :--- | | Net Cash from Operating Activities | $2,578 | $9,198 | | Net Cash from Investing Activities | ($46,473) | ($60,539) | | Net Cash from Financing Activities | $56,507 | $83,293 | | Net Increase in Cash | $12,612 | $31,952 | Notes to the Consolidated Financial Statements The notes detail accounting policies and financial statement items, including branch optimization, loan portfolio composition, and fair value measurements - The company implemented branch optimization and operational efficiency initiatives, resulting in the consolidation of six branches and an agreement to sell two others. This led to restructuring-related expenses of $6.3 million for the nine months ended September 30, 2021, including a $2.3 million writedown on fixed assets and a $1.2 million impairment of intangible assets[33] - As of September 30, 2021, assets held for sale related to the branch divestiture included $6.5 million in loans, $0.8 million in premises and equipment, and $102.6 million in deposits[36] - Nonperforming loans decreased to $10.9 million (1.09% of total loans) at September 30, 2021, from $14.5 million (1.39% of total loans) at December 31, 2020. All loans under COVID-19 forbearance programs had concluded by September 30, 2021[61][64] Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses financial condition and operations, highlighting branch optimization, 4.1% asset growth to $1.47 billion, Q3 net income of $2.0 million (up from a $17.4 million loss), and net interest margin compression - The company's branch optimization and operational efficiency initiatives are expected to incur $7.9 million in non-recurring expenses in 2021, with $6.3 million incurred as of September 30. These initiatives are anticipated to generate annual pre-tax cost savings of $3.0 million beginning in 2022, in addition to a $5.1 million estimated premium from the branch sale expected in Q4 2021[141] - Total assets increased by $58.1 million (4.1%) to $1.47 billion at September 30, 2021, from December 31, 2020, primarily due to a $76.0 million increase in securities and a $12.6 million increase in cash, while total loans decreased by $43.2 million[147] - Net income for Q3 2021 was $2.0 million, compared to a net loss of $17.4 million in Q3 2020. The prior-year period was negatively impacted by an $18.7 million goodwill impairment and an $884,000 writedown on fixed assets[160] Key Performance Ratios | Metric | Q3 2021 | Q3 2020 | | :--- | :--- | :--- | | Net Interest Margin (GAAP) | 2.88% | 3.19% | | Return on Average Assets | 0.54% | (4.90)% | | Return on Average Equity | 5.93% | (45.13)% | Quantitative and Qualitative Disclosure about Market Risk The company's primary market risk is interest rate risk, managed via simulation, showing EVE and Net Interest Income sensitivity to hypothetical rate shocks Interest Rate Risk Sensitivity Analysis (as of Sep 30, 2021) | Change in Interest Rates (bps) | EVE Percent Change | Net Interest Income Percent Change | | :--- | :--- | :--- | | +300 | +0.7% | +17.8% | | +200 | +1.8% | +12.6% | | +100 | +1.7% | +5.5% | | Flat | 0.0% | 0.0% | | -100 | (4.0)% | (7.7)% | Controls and Procedures Management concluded that disclosure controls and procedures were effective as of September 30, 2021, with no material changes to internal control over financial reporting during the quarter - The principal executive officer and principal financial officer concluded that as of September 30, 2021, the company's disclosure controls and procedures were effective[202] - No material changes to the internal control over financial reporting occurred during the quarter ended September 30, 2021[203] PART II - OTHER INFORMATION Legal Proceedings The company is not a party to any pending legal proceedings expected to materially adversely affect its financial condition or results - The company reports no material pending legal proceedings[204] Risk Factors No material changes to risk factors previously disclosed in the Annual Report on Form 10-K for the year ended December 31, 2020 - The report refers investors to the risk factors discussed in the Annual Report on Form 10-K for the year ended December 31, 2020[205] Unregistered Sales of Equity Securities and Use of Proceeds During Q3 2021, the company repurchased 81,676 shares of common stock at an average price of $23.15 per share under its repurchase program Common Stock Repurchases (Q3 2021) | Period | Total Shares Purchased | Average Price Paid per Share | | :--- | :--- | :--- | | July 2021 | 24,170 | $22.84 | | August 2021 | 26,137 | $23.43 | | September 2021 | 31,369 | $23.16 | | Total | 81,676 | $23.15 | Defaults Upon Senior Securities The company reports no defaults upon senior securities Mine Safety Disclosures Not applicable Other Information No other information was reported for the period Exhibits The report lists filed exhibits, including XBRL data files and CEO/CFO certifications under the Sarbanes-Oxley Act - Exhibits filed with the report include financial statements in XBRL format and CEO/CFO certifications under Sarbanes-Oxley Sections 302 and 906[212][213]