CB FINANCIAL SERVICES, INC. Management report and analysis of the financial situation and operating results. (Form 10-Q)

This discussion should be read in conjunction with the unaudited consolidated
financial statements, notes and tables included in this report. For further
information, refer to the audited consolidated financial statements and notes
included in the Company's Annual Report on Form 10-K for the year ended
December 31, 2021.

Forward-looking statements


This report contains certain "forward-looking statements" within the meaning of
the federal securities laws. These statements are not historical facts, but
rather statements based on the Company's current expectations regarding its
business strategies, intended results and future performance. Forward-looking
statements are preceded by terms such as "expects," "believes," "anticipates,"
"intends" and similar expressions. Management's ability to predict results or
the effect of future plans or strategies is inherently uncertain. Factors which
could affect actual results include, but are not limited to, the following:

•General and local economic conditions;


•The scope and duration of economic contraction as a result of the COVID-19
pandemic and its effects on the Company's business and that of the Company's
customers;

•Government action in response to the COVID-19 pandemic and its effects on the business of the Company and that of the Company’s customers;

•Our ability to realize anticipated cost savings and other efficiencies related to our branch optimization and operational efficiency initiatives;

•Changes in market interest rates, deposit flows, demand for loans, real estate values ​​and competition;

•Competitive products and prices;

•Our customers’ ability to make scheduled loan payments;

•Overdue loan rates and trends;

•Our ability to manage the risks associated with our business;

•Our ability to integrate the operations of the businesses we acquire;

•Our ability to control costs and expenses;

•Inflation, market and currency fluctuations;

• Changes in federal and state laws and regulations applicable to our business;

• Actions of our competitors; and

• Other factors disclosed in the Company’s periodic reports as filed with the
Security and Exchange Commission.


Many of these risks and uncertainties have been elevated by and may continue to
be elevated by the COVID-19 pandemic. The ability to predict the impact of the
ongoing COVID-19 pandemic on the Company's future operating results with any
precision is difficult and depends on many factors beyond our control.

These risks and uncertainties should be considered in evaluating forward-looking
statements and undue reliance should not be placed on such statements. The
Company assumes no obligation to update any forward-looking statements except as
may be required by applicable law or regulation.

General

CB Financial Services is a bank holding company created in 2006 and headquartered in Carmichaels, Pennsylvania. CB Financial the commercial activity is carried out mainly through its wholly-owned banking subsidiary, Community bank.


The Bank is a Pennsylvania-chartered commercial bank headquartered in
Carmichaels, Pennsylvania. The Bank operates from 11 branches in Greene,
Allegheny, Washington, Fayette and Westmoreland Counties in southwestern
Pennsylvania and three offices in Marshall and Ohio Counties in West Virginia.
The Bank also has a loan production office in Allegheny County, a corporate
center in Washington County and an operations center in Greene County, all of
which are in Pennsylvania. The Bank is a community-oriented institution offering
residential and commercial real estate loans, commercial and industrial loans,
and consumer loans as well as a variety of deposit products for individuals and
businesses in its market area. Property and casualty, commercial liability,
surety and other insurance products are offered through Exchange Underwriters,
Inc., the Bank's wholly owned subsidiary that is a full-service, independent
insurance agency located in Washington County.

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Overview

The following discussion and analysis is presented to assist in the
understanding and evaluation of our consolidated financial condition and results
of operations. It is intended to complement the unaudited consolidated financial
statements and notes thereto appearing elsewhere in this Form 10-Q and should be
read in conjunction therewith. The detailed discussion focuses on our
consolidated financial condition as of September 30, 2022, compared to the
consolidated financial condition as of December 31, 2021 and the consolidated
results of operations for the nine months ended September 30, 2022 compared to
the nine months ended September 30, 2021.

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

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

Explanation of the use of non-GAAP financial measures


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

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

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

                                               Three Months Ended       Nine Months Ended
                                                  September 30,           September 30,
                                                2022        2021        2022        2021
(Dollars in thousands)

Interest Income (GAAP)                       $ 12,287    $ 10,786    $ 33,861    $ 32,594
Adjustment to FTE Basis                            31          41         105         131
Interest Income (FTE) (Non-GAAP)               12,318      10,827      33,966      32,725
Interest Expense (GAAP)                         1,272         776       

2,792 2,673 Net interest income (ETP) (non-GAAP) $11,046 $10,051 $31,174 $30,052


Net Interest Rate Spread (GAAP)                  3.10  %     2.77  %     3.03  %     2.80  %
Adjustment to FTE Basis                          0.01        0.01        0.01        0.01
Net Interest Rate Spread (FTE) (Non-GAAP)        3.11        2.78        3.04        2.81

Net Interest Margin (GAAP)                       3.29  %     2.88  %     3.17  %     2.92  %
Adjustment to FTE Basis                          0.01        0.01        0.01        0.01
Net Interest Margin (FTE) (Non-GAAP)             3.30        2.89        

3.18 2.93



Allowance for loan losses to total loans, excluding PPP loans, is a non-GAAP
measure that serves as a useful measurement to evaluate the allowance for loan
losses without the impact of SBA guaranteed loans.

                                                                    

September 30,

                                                                        2022              December 31, 2021

(in thousands of dollars)


Allowance for Loan Losses (Numerator)                              $     12,854          $          11,582

Total Loans                                                           1,042,942          $       1,020,796
PPP Loans                                                                  (768)                   (24,523)

Total loans, excluding PPP loans (non-GAAP) (denominator) $1,042,174 $996,273


Allowance for Loan Losses to Total Loans (GAAP)                            1.23  %                    1.13  %

Allowance for loan losses to total loans excluding PPP loans (non-GAAP)

                                                                 1.23  %                    1.16  %


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

                                                                     

September 30, the 31st of December,

                                                                         2022                  2021

(in thousands of dollars, except per share and per share data)


Stockholders' Equity (GAAP)                                        $      106,706          $  133,124
Goodwill and Other Intangible Assets, Net                                 (13,691)            (15,027)

Tangible common equity or tangible book value (non-GAAP) (numerator)

                                                        $       

93,015 $118,097


Common Shares Outstanding (Denominator)                                 5,096,672           5,260,672

Book Value per Common Share (GAAP)                                 $        

20.94 $25.31


Tangible Book Value per Common Share (Non-GAAP)                    $        

6:25 p.m. $22.45

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Consolidated Statements of Analysis of Financial Position

Assets

Total assets increased $441,000i.e. 0.03%, at $1.43 billion at a time
September 30, 2022 and December 31, 2021.

Cash and securities


•Cash and due from banks increased $3.1 million, or 2.6%, to $122.8 million at
September 30, 2022, compared to $119.7 million at December 31, 2021. The change
is primarily due to an increase in deposits as further described below in the
Liabilities section.

•Securities decreased $31.1 million, or 13.8%, to $193.8 million at
September 30, 2022, compared to $225.0 million at December 31, 2021. Current
period activity included $26.8 million of purchases, and $24.9 million of pay
downs. The purchases were made to earn a higher yield on excess cash. In
addition, there was a $32.8 million decrease in the market value of the debt
securities portfolio, primarily due to the increase in market interest rates,
and a $252,000 decline in market value in the equity securities portfolio, which
is primarily comprised of bank stocks.

Payroll Protection Program (“PPP”) Update

• PPP loans have declined $23.8 million at $768,000 at September 30, 2022 compared to
$24.5 million at December 31, 2021 following pardons and refunds.


•$27,000 of net PPP loan origination fees were unearned at September 30, 2022
compared to $678,000 at December 31, 2021. $117,000 of net PPP loan origination
fees were earned in the three months ended September 30, 2022 compared to
$130,000 for the three months ended June 30, 2022.


Loans, allowance for loan losses and credit quality


•Total loans held for investment increased $22.1 million, or 2.17%, to $1.04
billion at September 30, 2022 compared to $1.02 billion at December 31, 2021.
Excluding the net decline of $23.8 million in PPP loans in the current period,
loans increased $45.9 million.

•The allowance for loan losses was $12.9 million at September 30, 2022 and $11.6
million at December 31, 2021. As a result, the allowance for loan losses to
total loans was 1.23% at September 30, 2022 compared to 1.13% at December 31,
2021. The allowance for loan losses to total loans, excluding PPP loans, was
1.23% at September 30, 2022 compared to 1.16% at December 31, 2021. The change
in the allowance for loan losses was primarily due to adjustments to historical
loss factors and changes in qualitative factors in particular economic and
industry conditions since December 31, 2021.

•Net recoveries for the three months ended September 30, 2022 were $21,000, or
0.01% of average loans on an annualized basis. Net recoveries for the three
months ended September 30, 2021 were $37,000, or 0.01% of average loans on an
annualized basis. Net charge-offs for the nine months ended September 30, 2022
were $2.5 million, or 0.33% of average loans on an annualized basis. Net
recoveries for the nine months ended September 30, 2021 were $10,000, and has an
immaterial effect on ratios for the period.

•Nonperforming loans, which includes nonaccrual loans, accruing loans past due
90 days or more, and accruing loans that are considered troubled debt
restructurings, were $5.9 million at September 30, 2022 compared to $7.3 million
at December 31, 2021. Current nonperforming loans to total loans ratio was 0.56%
compared to 0.71% at December 31, 2021.


Other

• Intangible assets decreased $1.3 millioni.e. 24.6%, at $4.0 million at
September 30, 2022 compared to $5.3 million at December 31, 2021 primarily due to the amortization expense recorded during the period.


•Accrued interest receivable and other assets increased $8.8 million, or 68.4%;
to $21.7 million at September 30, 2022, compared to $12.9 million at
December 31, 2021. This change was primarily driven by deferred taxes as a
result of the increase in market interest rates conditions and the corresponding
decrease in the market value of the mostly fixed rate securities portfolio.

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Liabilities

Total liabilities increased $26.9 millioni.e. 2.1%, to $1.32 billion at
September 30, 2022 compared to $1.29 billion at December 31, 2021.

Deposits

•Total deposits increased $49.2 million to $1.28 billion as of September 30,
2022 compared to $1.23 billion at December 31, 2021, an annualized increase of
5.3%. Interest-bearing and non interest-bearing demand deposits increased $26.2
million and $15.8 million, respectively, partially offset by a decrease in time
deposits of $15.8 million. Average total deposits increased $15.4 million,
primarily in both interest-bearing and non interest -bearing demand deposits for
the three months ended September 30, 2022 compared to the three months ended
June 30, 2022.

Borrowings

•Short-term borrowings decreased $21.2 million, or 53.9%, to $18.1 million at
September 30, 2022, compared to $39.3 million at December 31, 2021. At
September 30, 2022 and December 31, 2021, short-term borrowings were comprised
entirely of securities sold under agreements to repurchase, which are related to
business deposit customers whose funds, above designated target balances, are
transferred into an overnight interest-earning investment account by purchasing
securities from the Bank's investment portfolio under an agreement to
repurchase. A portion of this decrease is due to accounts that were being
transitioned into other deposit products and account for most of the
interest-bearing demand deposit increase.

Equity


Stockholders' equity decreased $26.4 million, or 19.8%, to $106.7 million at
September 30, 2022, compared to $133.1 million at December 31, 2021. On February
15, 2022, the Company completed its stock repurchase program that was
implemented on June 10, 2021. On April 21, 2022, a new $10 million repurchase
program was authorized, with the Company repurchasing 57,710 shares at an
average price of $22.51 per share since the inception of the plan.

• Net income was $7.1 million for the nine months ended September 30, 2022.


•Accumulated other comprehensive loss increased $25.7 million primarily due to
the effect of market interest rate increases on the fair value of the Company's
debt securities.

• In total, the Company bought back $4.7 million since December 31, 2021

• The company declared and paid $3.7 million in dividends to ordinary shareholders during the current period.


•Book value per share (GAAP) was $20.94 at September 30, 2022 compared to $25.31
at December 31, 2021, a decrease of $4.37. Tangible book value per share
(Non-GAAP) decreased $4.20, or 18.7%, to $18.25 compared to $22.45 at
December 31, 2021. Refer to Explanation of Use of Non-GAAP Financial Measures in
this Report.

Consolidated operating results for the three months ended September 30, 2022
and 2021


Overview. Net income was $3.9 million for the three months ended September 30,
2022, an increase of $1.9 million compared to net income of $2.0 million for the
three months ended September 30, 2021.

Net Interest and Dividend Income. Net interest and dividend income increased
$1.0 million, or 10.0%, to $11.0 million for the three months ended
September 30, 2022 compared to $10.0 million for the three months ended
September 30, 2021. Net interest margin (GAAP) increased to 3.29% for the three
months ended September 30, 2022 compared to 2.88% for the three months ended
September 30, 2021. Net interest margin (FTE) (Non-GAAP) increased 41 basis
points (bps) to 3.30% for the three months ended September 30, 2022 compared to
2.89% for the three months ended September 30, 2021.

Interest and Dividend Income
•Net interest margin (GAAP) increased to 3.29% for the three months ended
September 30, 2022 compared to 2.88% for the three months ended September 30,
2021. Fully Tax Equivalent ("FTE") Net interest margin (Non-GAAP) increased 41
bps to 3.30% for the three months ended September 30, 2022 compared to 2.89% for
the three months ended September 30, 2021.

• Interest and dividend income increased $1.5 millioni.e. 13.9%, at $12.3 million
for the three months ended September 30, 2022 compared to $10.8 million the three months have ended September 30, 2021.


•Interest income on loans increased $1.1 million, or 11.3%, to $10.8 million for
the three months ended September 30, 2022 compared to $9.7 million for the three
months ended September 30, 2021. The average balance of loans increased $19.9
million to $1.02 billion from $1.00 billion and the average yield increased 35
bps to 4.20% compared to 3.85%.

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•Interest and fee income on PPP loans was $123,000 for the three months ended
September 30, 2022 and contributed 4 bps to loan yield, compared to $484,000 for
the three months ended September 30, 2021, which contributed 4 bps to loan
yield.

•The impact of the accretion of the credit mark on acquired loan portfolios was
$47,000 for the three months ended September 30, 2022 compared to $94,000 for
the three months ended September 30, 2021, or 2 bps in the current period
compared to 4 bps in the prior period.

•Interest income on taxable investment securities increased $142,000, or 16.8%,
to $985,000 for the three months ended September 30, 2022 compared to $843,000
for the three months ended September 30, 2021 driven by a $24.3 million increase
in average balance coupled with a 6 bps increased in average yield.


Interest charges


•Interest expense increased $496,000, or 63.9%, to $1.3 million for the three
months ended September 30, 2022 compared to $776,000 for the three months ended
September 30, 2021.

•Interest expense on deposits increased $364,000, or 50.9%, to $1.1 million for
the three months ended September 30, 2022 compared to $715,000 for the three
months ended September 30, 2021. While average interest-earning deposit balances
decreased $51.7 million, or 5.8%, to $842.4 million as of September 30, 2022
compared to $894.0 million as of September 30, 2021 , rising interest rates led
to the repricing of higher-cost demand and money market deposits and resulted in
a 19 bps, or 59.9%, increase in average cost compared to the three months ended
September 30, 2021. In addition, the average balance of time deposits and the
related average cost decreased $45.2 million and 11 bps, respectively. These
decreases are partially offset by an increase in average other borrowings of
$11.6 million or 193.7% to $17.6 million as of September 30, 2022 compared to
$6.0 million as of September 30, 2021, which was driven by an increase in
subordinated debt balance.


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Average Balances and Yields. The following table presents information regarding
average balances of assets and liabilities, the total dollar amounts of interest
income and dividends from average interest-earning assets, the total dollar
amounts of interest expense on average interest-bearing liabilities, and the
resulting average yields and costs. Average balances are derived from daily
balances over the periods indicated. The yields set forth below include the
effect of deferred fees, discounts, and premiums that are amortized or accreted
to interest income or interest expense. FTE yield adjustments have been made for
tax exempt loan and securities interest income utilizing a marginal federal
income tax rate of 21.0% for the periods presented. As such, amounts will not
agree to income as reported in the consolidated financial statements. The yields
and costs for the periods indicated are derived by dividing annualized income or
expense by the average balances of assets or liabilities, respectively, for the
periods presented.

                                                                            

Three months completed September 30,

                                                                  2022                                              2021
                                                                Interest                                          Interest
                                                  Average         and          Yield/               Average         and          Yield/
                                                  Balance      Dividends      Cost (1)              Balance      Dividends      Cost (1)

(in thousands of dollars) (unaudited)

Assets:

Interest-Earning Assets:
Loans, Net (2)                                 $ 1,024,363    $  10,833            4.20  %       $ 1,004,474    $   9,740            3.85  %
Debt Securities
Taxable                                            222,110          985            1.77              197,763          843            1.71
Exempt From Federal Tax                              7,998           62            3.10               11,647           90            3.09
Equity Securities                                    2,693           21            3.12                2,655           19            2.86
Interest Bearing Deposits at Banks                  67,870          378            2.23              160,935           92            0.23
Other Interest-Earning Assets                        2,784           39            5.56                3,512           43            4.86
Total Interest-Earning Assets                    1,327,818       12,318            3.68            1,380,986       10,827            3.11
Noninterest-Earning Assets                          68,796                                            88,291
Total Assets                                   $ 1,396,614                                       $ 1,469,277

Liabilities and Stockholders' Equity:
Interest-Bearing Liabilities:
Interest-Bearing Demand Deposits (3)           $   278,412          393            0.56  %       $   275,411           48            0.07  %
Savings (3)                                        251,148           20            0.03              251,801           21            0.03
Money Market (3)                                   189,371          269            0.56              198,167           55            0.11
Time Deposits (3)                                  123,438          397            1.28              168,654          591            1.39
Total Interest-Bearing Deposits (3)                842,369        1,079            0.51              894,033          715            0.32
Short-Term Borrowings
Securities Sold Under Agreements to Repurchase      28,738           19            0.26               40,818           25            0.24
Other Borrowings                                    17,621          174            3.92                6,000           36            2.38
Total Interest-Bearing Liabilities                 888,728        1,272            0.57              940,851          776            0.33
Noninterest-Bearing Demand Deposits                390,658                                           387,746
Other Liabilities                                    2,636                                             8,019
Total Liabilities                                1,282,022                                         1,336,616
Stockholders' Equity                               114,592                                           132,661
Total Liabilities and Stockholders' Equity     $ 1,396,614                                       $ 1,469,277
Net Interest Income (FTE) (Non-GAAP) (4)                      $  11,046                                         $  10,051
Net Interest Rate Spread (FTE) (Non-GAAP)
(4)(6)                                                                             3.11  %                                           2.78  %
Net Interest-Earning Assets (5)                $   439,090                                       $   440,135
Net Interest Margin (GAAP) (7))                                                    3.29                                              2.88
Net Interest Margin (FTE) (Non-GAAP) (4)(7)                                        3.30                                              2.89
Return on Average Assets (1)                                                       1.12                                              0.54
Return on Average Equity (1)                                                      13.60                                              5.93
Average Equity to Average Assets                                                   8.20                                              9.03
Average Interest-Earning Assets to Average
Interest-Bearing Liabilities                                                     149.41                                            146.78
PPP Loans                                      $     2,424    $     123           20.13          $    40,313    $     484            4.76


(1)Annualized based on three months ended results.
(2)  Net of the allowance for loan losses and includes nonaccrual loans with a
zero yield and Loans Held for Sale if applicable.
(3)  Includes Deposits Held for Sale that were sold in December 2021.
(4)  Refer to Explanation and Use of Non-GAAP Financial Measures in this filing
for the calculation of the measure and reconciliation to the most comparable
GAAP measure.
(5)  Net interest-earning assets represent total interest-earning assets less
total interest-bearing liabilities.
(6)  Net interest rate spread represents the difference between the weighted
average yield on interest-earning assets and the weighted average cost of
interest-bearing liabilities.
(7)  Net interest margin represents annualized net interest income divided by
average total interest-earning assets.
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Rate/Volume Analysis. The following table presents the effects of changing rates
and volumes on our net interest income for the periods indicated. FTE yield
adjustments have been made for tax exempt loan and securities income utilizing a
marginal federal income tax rate of 21.0%. The volume column shows the effects
attributable to changes in volume (changes in volume multiplied by prior rate).
The rate column shows the effects attributable to changes in rate (changes in
rate multiplied by prior volume). For purposes of this table, changes
attributable to both rate and volume, which cannot be segregated, have been
allocated proportionately based on the changes due to rate and the changes due
to volume. The total column represents the sum of the prior columns.

                                                               Three Months Ended September 30, 2022
                                                                            Compared to
                                                               Three Months Ended September 30, 2021
                                                                     Increase (Decrease) Due to
                                                                Volume           Rate          Total
(Dollars in thousands) (Unaudited)

Interest and Dividend Income:
Loans, net                                                  $        192    $       901    $    1,093
Debt Securities:
Taxable                                                              111             31           142
Exempt From Federal Tax                                              (28)             -           (28)
Marketable Equity Securities                                           -              2             2
Cash at Other Banks                                                  (89)           375           286
Other Interest-Earning Assets                                        (10)             6            (4)
Total Interest-Earning Assets                                        176          1,315         1,491

Interest Expense:
Deposits                                                             (41)           405           364
Short-Term Borrowings:
Securities Sold Under Agreements to Repurchase                        (8)             2            (6)
Other Borrowings                                                     104             34           138
Total Interest-Bearing Liabilities                                    55            441           496
Change in Net Interest and Dividend Income                  $        121    

$874 $995

Allowance for loan losses. There was no provision for loan losses for the three months ended September 30, 2022 Where September 30, 2021.


Noninterest Income. Noninterest income increased $541,000, or 24.6%, to $2.7
million for the three months ended September 30, 2022, compared to $2.2 million
for the three months ended September 30, 2021. The increase was largely due to a
gain of $439,000 on the disposal of fixed assets during the three months ended
September 30, 2022 due to the sale of the land and buildings of the former
Pioneer and Bellaire bank branches. During the quarter, the Bank also recorded a
$174,000 increase in insurance commissions. The increase in insurance
commissions was primarily driven by contingency income which resulted from the
higher lock-in amounts received and core business including commercial and
personal insurance lines. In addition, net gain on sale of loans decreased
$49,000 as there were no loans sold during the three months ended September 30,
2022.

Noninterest Expense. Noninterest expense decreased $946,000, or 9.7%, to $8.8
million for the three months ended September 30, 2022 compared to $9.8 million
for the three months ended September 30, 2021. Salaries and benefits decreased
$48,000 and contracted services decreased $1.2 million to $288,000 for the three
months ended September 30, 2022 compared to $1.4 million for the three months
ended September 30, 2021. This was a result of branch optimization initiatives
completed in the prior year. These decreases were partially offset by an
increase in occupancy expenses of $153,000.

Income taxes. The income tax expense was $998,000 for the three months ended
September 30, 2022 compared to $452,000 for the three months ended September 30, 2021. This change is mainly due to an increase in pre-tax income of
$4.9 million for the three months ended September 30, 2022 compared to
$2.4 million for the three months ended September 30, 2021.

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Results of operations for the nine months ended September 30, 2022 and 2021


Overview. Net income was $7.1 million for the nine months ended September 30,
2022, an increase of $2.5 million compared to $4.6 million for the nine months
ended September 30, 2021.

Net Interest and Dividend Income. Net interest and dividend income increased
$1.1 million, or 3.8% to $31.1 million for the nine months ended September 30,
2022 compared to $29.9 million for the nine months ended September 30, 2021. Net
interest margin (Non-GAAP FTE) increased 25 bps to 3.18% for the nine months
ended September 30, 2022 compared to 2.93% the nine months ended September 30,
2021. Net interest margin (GAAP) increased to 3.17% for the nine months ended
September 30, 2022 compared to 2.92% for the nine months ended September 30,
2021.

Interest and Dividend Income
•Interest and dividend income increased $1.3 million, or 3.9%, to $33.9 million
for the nine months ended September 30, 2022 compared to $32.6 million for the
nine months ended September 30, 2021.

•Interest income on loans increased $298,000 or 1.0% to $30.1 million during the
nine months ended September 30, 2022 compared to $29.8 million for the nine
months ended September 30, 2021. Average loans decreased $3.8 million, while the
loan yield for the nine months ended September 30, 2022 increased 6 bps to 3.98%
compared to 3.92% for the nine months ended September 30, 2021.

•Interest and fee income on PPP loans was $712,000 for the nine months ended
September 30, 2022 and contributed 7 bps to loan yield, compared to $1.8 million
for the nine months ended September 30, 2021, which contributed loan yield 3 bps
in the prior period.

•The impact of the accretion of the credit mark on acquired loan portfolios was
$178,000 for the nine months ended September 30, 2022 compared to $385,000 for
the nine months ended September 30, 2021, or 2 bps in the current period
compared to 4 bps in the prior period.

•Interest income on taxable investment securities increased $754,000, or 35.5%,
to $2.9 million for the nine months ended September 30, 2022 compared to $2.1
million for the nine months ended September 30, 2021 driven by a $73.4 million
increased in average taxable investment securities balance and partially offset
by a 17 bps decrease in average yield.

Interest charges


•Interest expense increased $119,000, or 4.5%, to $2.8 million for the nine
months ended September 30, 2022 compared to $2.7 million for the nine months
ended September 30, 2021.

•Interest expense on deposits decreased $275,000, or 11.0%, to $2.2 million for
the nine months ended September 30, 2022 compared to $2.5 million for the nine
months ended September 30, 2021. While average interest-bearing deposits
decreased $55.0 million, rising interest rates led to the repricing of
higher-cost demand and money market deposits resulted in a 2 bps decrease in
average cost compared to the nine months ended September 30, 2021. In addition,
the average balance of time deposits and the related average cost decreased
$50.0 million and 22 bps, respectively. These decreases are partially offset by
an 18 bps increase in interest-bearing demand deposit average cost as well as an
increase in average other borrowings of $11.2 million or 175.4% to $17.6 million
as of September 30, 2022 compared to $6.4 million as of September 30, 2021,
which was driven by an increase in subordinated debt balance.



Average Balances and Yields. The following table presents information regarding
average balances of assets and liabilities, the total dollar amounts of interest
income and dividends from average interest-earning assets, the total dollar
amounts of interest expense on average interest-bearing liabilities, and the
resulting average yields and costs. Average balances are derived from daily
balances over the periods indicated. The yields set forth below include the
effect of deferred fees, discounts, and premiums that are amortized or accreted
to interest income or interest expense. FTE yield adjustments have been made for
tax exempt loan and securities interest income utilizing a marginal federal
income tax rate of 21% for the periods presented. As such, amounts will not
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agree to income as reported in the consolidated financial statements. The yields
and costs for the periods indicated are derived by dividing annualized income or
expense by the average balances of assets or liabilities, respectively, for the
periods presented.
                                                                              Nine Months Ended September 30,
                                                                  2022                                              2021
                                                                Interest                                          Interest
                                                  Average         and          Yield/               Average         and          Yield/
                                                  Balance      Dividends      Cost (1)              Balance      Dividends      Cost (1)
(Dollars in thousands) (Unaudited)
Assets:
Interest-Earning Assets:
Loans, Net (2)                                 $ 1,013,871    $  30,157            3.98  %       $ 1,017,632    $  29,872            3.92  %
Debt Securities
Taxable                                            222,132        2,878            1.73              148,718        2,124            1.90
Tax Exempt                                           9,093          218            3.20               12,284          282            3.06
Marketable Equity Securities                         2,693           64            3.17                2,645           63            3.18
Interest Bearing Deposits at Other Banks            61,213          534            1.16              187,093          243            0.17
Other Interest-Earning Assets                        3,165          115            4.86                3,820          141            4.93
Total Interest-Earning Assets                    1,312,167       33,966            3.46            1,372,192       32,725            3.19
Noninterest-Earning Assets                          91,607                                            87,863
Total Assets                                   $ 1,403,774                                       $ 1,460,055
Liabilities and Stockholders' Equity:
Interest-Bearing Liabilities:
Interest-Bearing Demand Deposits (3)           $   271,897          554            0.27  %       $   270,136          181            0.09  %
Savings (3)                                        247,790           58            0.03              246,340           78            0.04
Money Market (3)                                   190,189          371            0.26              198,408          223            0.15
Time Deposits (3)                                  127,732        1,231            1.29              177,690        2,007            1.51
Total Interest-Bearing Deposits (3)                837,608        2,214            0.35              892,574        2,489            0.37
ST Borrowings
Securities Sold Under Agreements to Repurchase      33,553           56            0.22               43,745           72            0.22
Other Borrowings                                    17,612          522            3.96                6,396          112            2.34
Total Interest-Bearing Liabilities                 888,773        2,792            0.42              942,715        2,673            0.38
Noninterest-Bearing Demand Deposits                388,964                                           374,865
Other Liabilities                                    5,177                                             8,293
Total Liabilities                                1,282,914                                         1,325,873
Stockholders' Equity                               120,860                                           134,182
Total Liabilities and Stockholders' Equity     $ 1,403,774                                       $ 1,460,055
Net Interest Income (FTE) (Non-GAAP) (4)                      $  31,174                                         $  30,052
Net Interest Rate Spread (FTE) (Non-GAAP)
(4)(6)                                                                             3.04  %                                           2.81  %
Net Interest-Earning Assets (5)                $   423,394                                       $   429,477
Net Interest Margin (GAAP) (7)                                                     3.17                                              2.92
Net Interest Margin (FTE) (Non-GAAP) (4)(7)                                        3.18                                              2.93
Return on Average Assets (1)                                                       0.68                                              0.42
Return on Average Equity (1)                                                       7.85                                              4.59
Average Equity to Average Assets                                                   8.61                                              9.19
Average Interest-Earning Assets to Average
Interest-Bearing Liabilities                                                     147.64                                            145.56
PPP Loans                                      $     7,503    $     712           12.69          $    51,579    $   1,797            4.66


(1)Annualized based on nine months ended results.
(2)  Net of the allowance for loan losses and includes nonaccrual loans with a
zero yield and Loans Held for Sale if applicable.
(3)  Includes Deposits Held for Sale that were sold in December 2021.
(4)  Refer to Explanation and Use of Non-GAAP Financial Measures in this filing
for the calculation of the measure and reconciliation to the most comparable
GAAP measure.
(5)  Net interest-earning assets represent total interest-earning assets less
total interest-bearing liabilities.
(6)  Net interest rate spread represents the difference between the weighted
average yield on interest-earning assets and the weighted average cost of
interest-bearing liabilities.
(7)  Net interest margin represents annualized net interest income divided by
average total interest-earning assets.
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Rate Volume Analysis. The following table presents the effects of changing rates
and volumes on our net interest income for the periods indicated. FTE yield
adjustments have been made for tax exempt loan and securities income utilizing a
marginal federal income tax rate of 21%. The volume column shows the effects
attributable to changes in volume (changes in volume multiplied by prior rate).
The rate column shows the effects attributable to changes in rate (changes in
rate multiplied by prior volume). For purposes of this table, changes
attributable to both rate and volume, which cannot be segregated, have been
allocated proportionately based on the changes due to rate and the changes due
to volume. The total column represents the sum of the prior columns.

                                                               Nine Months Ended September 30, 2022
                                                                            Compared to
                                                               Nine Months Ended September 30, 2021
                                                                    Increase (Decrease) Due to
                                                                Volume          Rate          Total
(Dollars in thousands) (Unaudited)

Interest and Dividend Income:
Loans, net                                                  $       (170)   $      455    $      285
Debt Securities:
Taxable                                                              958          (204)          754
Exempt From Federal Tax                                              (77)           13           (64)
Marketable Equity Securities                                           1             -             1
Cash at Other Banks                                                 (260)          551           291
Other Interest-Earning Assets                                        (24)           (2)          (26)
Total Interest-Earning Assets                                        428           813         1,241

Interest Expense:
Deposits                                                            (145)         (130)         (275)
Short-Term Borrowings:
Securities Sold Under Agreements to Repurchase                       (16)            -           (16)
Other Borrowings                                                     295           115           410
Total Interest-Bearing Liabilities                                   134           (15)          119
Change in Net Interest and Dividend Income                  $        294    

$828 $1,122



Provision for Loan Losses. The provision for loan losses was $3.8 million for
the nine months ended September 30, 2022, compared to a $1.2 million recovery
for the nine months ended September 30, 2021.The increased provision for loan
losses was primarily due to a provision for a single loan charge-off of $2.7
million (pre-tax) with respect to a commercial and industrial loan. As
previously reported, the charge-off relates to a borrower which is ceasing
operations and carried a $3.5 million revolving line of credit which had an
outstanding balance of $2.7 million. The remaining increase to the provision was
a result of adjustments made to historical loss factors and changes in
qualitative factors in particular economic and industry conditions.

Noninterest Income. Noninterest income decreased $132,000, or 1.7%, to $7.5
million for the nine months ended September 30, 2022, compared to $7.6 million
for the nine months ended September 30, 2021. The decrease was primarily due to
the net loss on equity securities of $252,000 for the nine months ended
September 30, 2022 compared to net gain of $482,000 for the nine months ended
September 30, 2021, which was largely due to a decline of $503,000 in the market
value of equity securities, comprised mainly of bank stocks. In addition, net
gain on sales of loans decreased $166,000 as there were no loans sold during for
the nine months ended September 30, 2022 compared to $166,000 for the nine
months ended September 30, 2021. These changes are partially offset by an
increase of $537,000, or 13.4%, in insurance commissions to $4.5 million for the
nine months ended September 30, 2022, compared to $4.0 million for the nine
months ended September 30, 2021 due to higher lock-in amounts received and core
business including commercial and personal insurance lines. During the quarter,
the Bank also recorded a $431,000 gain on the disposal of fixed assets during
the nine months ended September 30, 2022 due to the sale of the land and
buildings of the former Pioneer and Bellaire bank branches.

Noninterest Expense. Noninterest expense decreased $7.0 million, or 21.3%, to
$25.9 million for the nine months ended September 30, 2022 compared to $32.9
million for the nine months ended September 30, 2021. The primary drivers were
decreases of $1.2 million and $2.3 million as previously noted related to the
writedown of fixed assets and intangible impairment associated with branch
consolidation and sale initiatives in 2021, respectively. In addition, salaries
and benefits decreased

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$914,000 and occupancy decreased $119,000, primarily related to the reduction of
footprint and related headcount resulting from the consolidation and sale of
branches during 2021. Contracted services decreased $1.7 million to $1.2 million
for the nine months ended September 30, 2022 compared to $2.9 million for the
nine months ended September 30, 2021. This was a result of branch optimization
initiatives completed in the prior year.

Income Taxes. Income tax expense increased $540,000 to $1.76 million for the
nine months ended September 30, 2022 compared to $1.22 million for the nine
months ended September 30, 2021. The change between the periods is consistent
with the change in pre-tax income, as pre-tax income was $8.9 million for the
nine months ended September 30, 2022 compared to pre-tax income of $5.8 million
for the nine months ended September 30, 2021.

Off-balance sheet arrangements.


Other than loan commitments and standby and performance letters of credit, we do
not have any off-balance sheet arrangements that have or are reasonably likely
to have a significant current or future effect on our financial condition,
revenues, expenses, results of operations, liquidity, capital expenditures, or
capital resources that are material to investors. Refer to Note 7 in the Notes
to Consolidated Financial Statements of this report for a summary of commitments
outstanding as of September 30, 2022 and December 31, 2021.

Liquidity and capital management


Liquidity. Liquidity is the ability to meet current and future financial
obligations of a short-term nature. The Company's primary sources of funds
consist of deposit inflows, loan repayments and maturities, calls and sales of
securities. While maturities and scheduled amortization of loans and securities
are typically predictable sources of funds, deposit flows and mortgage
prepayments are greatly influenced by general interest rates, economic
conditions and competition.

The Company regularly adjusts its investments in liquid assets based upon its
assessment of expected loan demand, expected deposit flows, yields available on
interest-earning deposits and securities, and the objectives of its
asset/liability management program. Excess liquid assets are invested generally
in interest-earning deposits with other banks and short- and intermediate-term
securities. The Company believes that it had sufficient liquidity at
September 30, 2022 to satisfy its short- and long-term liquidity needs.

The Company's most liquid assets are cash and due from banks, which totaled
$122.8 million at September 30, 2022. The levels of these assets depend on our
operating, financing, lending and investing activities during any given period.
Unpledged securities, which provide an additional source of liquidity, totaled
$14.2 million at September 30, 2022. In addition, at September 30, 2022, the
Company had the ability to borrow up to $440.8 million from the FHLB of
Pittsburgh, of which $429.1 million is available. The Company also has the
ability to borrow up to $105.5 million million from the FRB through its
Borrower-In-Custody line of credit agreement and the Company also maintains
multiple line of credit arrangements with various unaffiliated banks totaling
$50.0 million as of both September 30, 2022 and December 31, 2021.

At September 30, 2022, $76.9 million, or 63.6% of total time deposits mature
within one year. If these time deposits do not remain with the Company, the
Company will be required to seek other sources of funds. Depending on market
conditions, the Company may be required to pay higher rates on such deposits or
other borrowings than it currently pays on these time deposits. The Company
believes, however, based on past experience that a significant portion of its
time deposits will remain with it, either as time deposits or as other deposit
products. The Company has the ability to attract and retain deposits by
adjusting the interest rates offered.

We are committed to maintaining a strong liquidity position; therefore, we
monitor our liquidity position on a daily basis. We anticipate that we will have
sufficient funds to meet our current funding commitments. The marginal cost of
new funding, however, whether from deposits or borrowings from the FHLB, will be
carefully considered as we monitor our liquidity needs. Therefore, in order to
minimize our cost of funds, we may consider additional borrowings from the FHLB
in the future.

CB Financial is a separate legal entity from the Bank and must provide for its
own liquidity to pay any dividends to its shareholders and for other corporate
purposes. Its primary source of liquidity is dividend payments it receives from
the Bank. The Bank's ability to pay dividends to CB Financial is subject to
regulatory limitations. At September 30, 2022, CB Financial (on an
unconsolidated, stand-alone basis) had liquid assets of $16.6 million. The
ability to pay future dividends or conduct stock repurchases may be limited
under applicable banking regulations and regulatory policies due to expected
losses for future periods and/or the inability to upstream funds from the Bank
to the Company as a result of lower income or regulatory capital levels.

Capital Management. The Bank is subject to various regulatory capital
requirements administered by the federal banking agencies. Failure to meet
minimum capital requirements can result in certain mandatory and possibly
additional discretionary actions by regulators that, if undertaken, could have a
direct material effect on the Company's consolidated financial statements. Under
capital adequacy guidelines and the regulatory framework for prompt corrective
action, each must meet specific capital guidelines that involve quantitative
measures of their assets, liabilities, and certain off-balance-sheet items as
calculated under

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regulatory accounting practices. Capital amounts and classification are also subject to qualitative judgments by regulators on components, risk weightings and other factors.


Under the Regulatory Capital Rules, in order to avoid limitations on capital
distributions (including dividend payments and certain discretionary bonus
payments to executive officers), a banking organization must hold a capital
conservation buffer comprised of common equity Tier I capital above its minimum
risk-based capital requirements in an amount greater than 2.5% of total
risk-weighted assets.

At September 30, 2022 and December 31, 2021, the Bank was categorized as "well
capitalized" under the regulatory framework for prompt corrective action. At
September 30, 2022, the Bank's capital ratios were not affected by loans
modified in accordance with Section 4013 of the CARES Act. In addition, PPP
loans received a zero-percent risk weight under the regulatory capital rules
regardless of whether they were pledged as collateral to the Federal Reserve
Bank's PPP lending facility, but were included in the Bank's leverage ratio
requirement due to the Bank not pledging the loans as collateral to the PPP
lending facility.

The following table presents the Bank's regulatory capital amounts and ratios,
as well as the minimum amounts and ratios required to be well capitalized as of
the dates indicated.

                                                      September 30, 2022               December 31, 2021
                                                   Amount           Ratio          Amount           Ratio

(in thousands of dollars)


Common Equity Tier 1 (to risk weighted assets)
Actual                                          $  117,868             12.02  % $  113,086             11.95  %
For Capital Adequacy Purposes                       44,139              4.50        42,571              4.50
To Be Well Capitalized                              63,756              6.50        61,491              6.50

Tier 1 Capital (to risk weighted assets)
Actual                                             117,868             12.02       113,086             11.95
For Capital Adequacy Purposes                       58,852              6.00        56,761              6.00
To Be Well Capitalized                              78,469              8.00        75,682              8.00

Total Capital (to risk weighted assets)
Actual                                             130,136             13.27       124,668             13.18
For Capital Adequacy Purposes                       78,469              8.00        75,682              8.00
To Be Well Capitalized                              98,086             10.00        94,602             10.00

Tier 1 Leverage (to adjusted total assets)
Actual                                             117,868              8.51       113,086              7.76
For Capital Adequacy Purposes                       55,407              4.00        58,307              4.00
To Be Well Capitalized                              69,258              5.00        72,884              5.00

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