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. 6, 2019 Cash and due from banks Interest bearing deposits with other banks Total cash and cash equivalents Securities available for sale Trading securities Loans held for sale Loans Less: unearned discount Less: allowance for loan losses Net loans FHLB, other equity, and restricted equity interests Premises and equipment, net Bank owned life insurance Mortgage servicing rights Goodwill Core deposit intangible Accrued interest receivable and other assets Total Assets Non-interest bearing deposits Interest bearing deposits Total deposits Short-term borrowings FHLB and other long term borrowings Subordinated debentures Accrued interest payable and other liabilities Total liabilities Common stock, $0 par value; authorized 50,000,000 shares; issued 15,308,378 shares at March 31, 2018 and December 31, 2017 Additional paid in capital Retained earnings Treasury stock, at cost (22,739 shares at March 31, 2018 and 43,638 shares at December 31, 2017) Accumulated other comprehensive loss Total shareholders’ equity Total Liabilities and Shareholders’ Equity INTEREST AND DIVIDEND INCOME: Loans including fees Securities: Taxable Tax-exempt Dividends Total interest and dividend income INTEREST EXPENSE: Deposits Borrowed funds Subordinated debentures (includes $58 and $76 accumulated other comprehensive income reclassification for change in fair value of interest rate swap agreements in 2018 and 2017, respectively) Total interest expense NET INTEREST INCOME PROVISION FOR LOAN LOSSES NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES NON-INTEREST INCOME: Service charges on deposit accounts Other service charges and fees Wealth and asset management fees Net realized gains onavailable-for-sale securities (includes $0 and $1,383 accumulated other comprehensive income reclassifications for net realized gains onavailable-for-sale securities in 2018 and 2017, respectively) Net realized and unrealized gains on trading securities Mortgage banking Bank owned life insurance Card processing and interchange income Other Totalnon-interest income NON-INTEREST EXPENSES: Salaries and benefits Net occupancy expense Amortization of core deposit intangible Data processing State and local taxes Legal, professional, and examination fees Advertising FDIC insurance premiums Card processing and interchange expenses Other Totalnon-interest expenses INCOME BEFORE INCOME TAXES INCOME TAX EXPENSE (includes $12 and $457 income tax expense from reclassification items in 2018 and 2017, respectively) NET INCOME EARNINGS PER SHARE: Basic Diluted DIVIDENDS PER SHARE: Cash dividends per share NET INCOME Other comprehensive income (loss), net of tax: Net change in fair value of interest rate swap agreements designated as cash flow hedges: Unrealized gain on interest rate swaps, net of tax of ($4) and ($3), respectively Reclassification adjustment for losses recognized in earnings, net of tax of ($12) and ($27), respectively Net change in unrealized gains on securities available for sale: Unrealized gains on other-than-temporarily impaired securities available for sale: Unrealized gains arising during the period, net of tax of $0 and ($47), respectively Reclassification adjustment for realized gains included in net income, net of tax of $0 and $484, respectively Unrealized gains on other securities available for sale: Unrealized (losses) gains arising during the period, net of tax of $1,053 and ($456), respectively Other comprehensive income (loss) COMPREHENSIVE INCOME CASH FLOWS FROM OPERATING ACTIVITIES: Net income Adjustments to reconcile net income to net cash provided by operations: Provision for loan losses Depreciation and amortization of premises and equipment, core deposit intangible, and mortgage servicing rights Amortization and accretion of securities premiums and discounts, deferred loan fees and costs, net yield and credit mark on acquired loans, and unearned income Net realized gains on sales ofavailable-for-sale securities Net realized and unrealized gains on trading securities Proceeds from sale of trading securities Purchase of trading securities Gain on sale of loans Net gains on dispositions of premises and equipment and foreclosed assets Proceeds from sale of loans Origination of loans held for sale Income on bank owned life insurance Stock-based compensation expense Changes in: Accrued interest receivable and other assets Accrued interest payable and other liabilities NET CASH PROVIDED BY OPERATING ACTIVITIES CASH FLOWS FROM INVESTING ACTIVITIES: Proceeds from maturities, prepayments and calls ofavailable-for-sale securities Proceeds from sales ofavailable-for-sale securities Purchase ofavailable-for-sale securities Loan origination and payments, net Purchase of FHLB, other equity, and restricted equity interests Purchase of premises and equipment Proceeds from the sale of premises and equipment and foreclosed assets NET CASH USED IN BY INVESTING ACTIVITIES CASH FLOWS FROM FINANCING ACTIVITIES: Net change in: Checking, money market and savings accounts Certificates of deposit Deposits held for sale Purchase of treasury stock Cash dividends paid Proceeds from stock offering, net of issuance costs Repayment of long-term borrowings Proceeds from long-term borrowings Net change in short-term borrowings NET CASH PROVIDED BY FINANCING ACTIVITIES NET DECREASE IN CASH AND CASH EQUIVALENTS CASH AND CASH EQUIVALENTS, Beginning CASH AND CASH EQUIVALENTS, Ending SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Cash paid during the period for: Interest Income taxes SUPPLEMENTAL NONCASH DISCLOSURES: Transfers to other real estate owned Grant of restricted stock awards from treasury stock 2018. Per Share Weighted Average Nonvested at beginning of period Granted Vested Nonvested at end of period Description Assets: Securities Available For Sale: U.S. Government sponsored entities States and political subdivisions Residential and multi-family mortgage Corporate notes and bonds Pooled SBA Other Total Securities Available For Sale Interest Rate swaps Trading Securities: Corporate equity securities Mutual funds Certificates of deposit Corporate notes and bonds U.S. Government sponsored entities Total Trading Securities Liabilities, Interest rate swaps Description Assets: Securities Available For Sale: U.S. Government sponsored entities States and political subdivisions Residential and multi-family mortgage Corporate notes and bonds Pooled SBA Other Total Securities Available For Sale Interest Rate swaps Trading Securities: Corporate equity securities Mutual funds Certificates of deposit Corporate notes and bonds U.S. Government sponsored entities Total Trading Securities Liabilities, Interest rate swaps Balance, January 1 Total gains: Included in other comprehensive income (unrealized) Sale ofavailable-for-sale securities Balance, March 31 2018: Description Assets: Impaired loans: Commercial mortgages Description Assets: Impaired loans: Commercial mortgages 2018: 2018. Valuation Technique Unobservable Inputs Impaired loans – commercial mortgages 2019: Impaired loans – commercial mortgages 2018: ASSETS Cash and cash equivalents Securities available for sale Trading securities Loans held for sale Net loans FHLB and other restricted interests Other equity interests Interest rate swaps Accrued interest receivable LIABILITIES Deposits FHLB and other borrowings Subordinated debentures Interest rate swaps Accrued interest payable 2019: ASSETS Cash and cash equivalents Securities available for sale Trading securities Loans held for sale Net loans FHLB and other restricted interests Other equity interests Interest rate swaps Accrued interest receivable LIABILITIES Deposits FHLB and other borrowings Subordinated debentures Interest rate swaps Accrued interest payable price may differ. U.S. Gov’t sponsored entities State & political subdivisions Residential & multi-family mortgage Corporate notes & bonds Pooled SBA Other Total Corporate equity securities Mutual funds Certificates of deposit Corporate notes and bonds U.S. Government sponsored entities Total Description of Securities U.S. Gov’t sponsored entities State & political subdivisions Residential & multi-family mortgage Corporate notes & bonds Pooled SBA Other 2019 U.S. Gov’t sponsored entities State & political subdivisions Residential and multi-family mortgage Corporate notes & bonds Pooled SBA Other 2018 Balance of credit losses on debt securities for which a portion of other-than-temporary impairment was recognized in earnings, beginning of period Credit losses previously recognized on securities sold during the period Additional credit loss for which other-than-temporary impairment was not previously recognized Additional credit loss for which other-than-temporary impairment was previously recognized Balance of credit losses on debt securities for which a portion of other-than-temporary impairment was recognized in earnings, end of period to be temporary. Three months ended March 31, 2018 Three months ended March 31, 2017 1 year or less 1 year – 5 years 5 years – 10 years After 10 years Residential and multi-family mortgage Pooled SBA Total debt securities 2019: Commercial, industrial, and agricultural Commercial mortgages Residential real estate Consumer Credit cards Overdrafts Less: unearned discount allowance for loan losses Loans, net both March 31, Allowance for loan losses, January 1, 2018 Charge-offs Recoveries Provision for loan losses Allowance for loan losses, March 31, 2018 Allowance for loan losses, January 1, 2017 Charge-offs Recoveries Provision (benefit) for loan losses Allowance for loan losses, March 31, 2017 Allowance for loan losses: Ending allowance balance attributable to loans: Individually evaluated for impairment Collectively evaluated for impairment Acquired with deteriorated credit quality Modified in a troubled debt restructuring Total ending allowance balance Loans: Individually evaluated for impairment Collectively evaluated for impairment Acquired with deteriorated credit quality Modified in a troubled debt restructuring Total ending loans balance 2019 Allowance for loan losses: Ending allowance balance attributable to loans: Individually evaluated for impairment Collectively evaluated for impairment Acquired with deteriorated credit quality Modified in a troubled debt restructuring Total ending allowance balance Loans: Individually evaluated for impairment Collectively evaluated for impairment Acquired with deteriorated credit quality Modified in a troubled debt restructuring Total ending loans balance 2018 2018: With an allowance recorded: Commercial, industrial, and agricultural Commercial mortgage Residential real estate With no related allowance recorded: Commercial, industrial, and agricultural Commercial mortgage Residential real estate Total 2019 With an allowance recorded: Commercial, industrial, and agricultural Commercial mortgage Residential real estate With no related allowance recorded: Commercial, industrial, and agricultural Commercial mortgage Residential real estate Total 2018 With an allowance recorded: Commercial, industrial, and agricultural Commercial mortgage Residential real estate With no related allowance recorded: Commercial, industrial, and agricultural Commercial mortgage Residential real estate Total With an allowance recorded: Commercial, industrial, and agricultural Commercial mortgage Residential real estate With no related allowance recorded: Commercial, industrial, and agricultural Commercial mortgage Residential real estate Total Commercial, industrial, and agricultural Commercial mortgages Residential real estate Consumer Credit cards Total 2018: Commercial, industrial, and agricultural Commercial mortgages Residential real estate Consumer Credit cards Overdrafts Total December 31, 2017 Commercial, industrial, and agricultural Commercial mortgages Residential real estate Consumer Credit cards Overdrafts Total Commercial, industrial, and agricultural Commercial mortgages Residential real estate Consumer Credit cards Total 2018. 2018. Commercial, industrial, and agricultural Commercial mortgages Total 2019 Commercial, industrial, and agricultural Commercial mortgages Total 2018 Performing Nonperforming Total 2018: Consumer Less: unearned discount Total 2018: Checking,non-interest bearing Checking, interest bearing Savings accounts Certificates of deposit follows: Basic earnings per common share computation: Net income per consolidated statements of income Net earnings allocated to participating securities Net earnings allocated to common stock Distributed earnings allocated to common stock Undistributed earnings allocated to common stock Net earnings allocated to common stock Weighted average common shares outstanding, including shares considered participating securities Less: Average participating securities Weighted average shares Basic earnings per common share Diluted earnings per common share computation: Net earnings allocated to common stock Weighted average common shares outstanding for basic earnings per common share Add: Dilutive effects of assumed exercises of stock options Weighted average shares and dilutive potential common shares Diluted earnings per common share Interest rate contracts other liabilities For the Three Months Ended March 31, 2018 Interest rate contracts For the Three Months Ended March 31, 2017 Interest rate contracts☒ý QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 20182019☐¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Pennsylvania 25-1450605 765-9621☒ý Yes ☐¨ No☒ý Yes ☐¨ NoLarge accelerated filer ☐¨ Accelerated filer ☒ýNon-accelerated filer ☐Non-accelerated filer ¨ Smaller reporting company ☐¨Emerging growth company ¨ Emerging growth company ☐☐¨☐¨ Yes ☒ý NoSecurities 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 1, 2018 Page Number 1 2 3 4 5 6 5 28 25 37 33 38 34 PART II.OTHER INFORMATION39 35 39 35 39 39 39 39 40 35 41 36This quarterly report on form10-Qandof our 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 our 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.” Such known and unknown risks, uncertainties and other factors that could cause the actual results to differ materially from the statements, include, but are not limited to, (i) changes in general business, industry or economic conditions or competition; (ii) 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 principlesprincipals or otherwise; (iii) adverse changes or conditions in capital and financial markets; (iv) changes in interest rates; (v) higher than expected costs or other difficulties related to integration of combined or merged businesses; (vi) the inability to realize expected cost savings or achieve other anticipated benefits in connection with business combinations and other acquisitions; (vii) changes in the quality or composition of our loan and investment portfolios; (viii) adequacy of loan loss reserves; (ix) increased competition; (x) loss of certain key officers; (xi) continued relationships with major customers; (xii) deposit attrition; (xiii)(xii) rapidly changing technology; (xiv)(xiii) unanticipated regulatory or judicial proceedings and liabilities and other costs; (xv)(xiv) changes in the cost of funds, demand for loan products or demand for financial services; (xvi)and (xv) other economic, competitive, governmental or technological factors affecting our operations, markets, products, services and prices; and (xvii) our success at managing the foregoing items. Some of these and other factors are discussed in our annual and quarterly reports filed with the Securities and Exchange Commission (SEC).prices. Such factorsdevelopments could have an adverse impact on our financial position and our results of operations. (unaudited) March 31, December 31, 2018 2017 ASSETS $ 26,306 $ 33,146 2,298 2,199 28,604 35,345 418,299 409,709 7,256 7,150 1,460 852 2,279,753 2,149,848 (3,629 ) (3,889 ) (20,756 ) (19,693 ) 2,255,368 2,126,266 26,564 21,517 50,174 50,715 55,435 55,035 1,390 1,387 38,730 38,730 1,377 1,625 24,226 20,442 $ 2,908,883 $ 2,768,773 LIABILITIES AND SHAREHOLDERS’ EQUITY $ 311,052 $ 321,858 1,899,003 1,845,957 2,210,055 2,167,815 91,009 34,416 265,389 222,943 70,620 70,620 26,999 29,069 2,664,072 2,524,863 0 0 96,786 97,042 152,872 148,298 (602 ) (1,087 ) (4,245 ) (343 ) 244,811 243,910 $ 2,908,883 $ 2,768,773 (unaudited) March 31, 2019 December 31, 2018 ASSETS Cash and due from banks $ 52,833 $ 43,327 Interest bearing deposits with other banks 2,449 2,236 Total cash and cash equivalents 55,282 45,563 Securities available for sale 500,608 516,863 Trading securities 8,642 7,786 Loans held for sale 2,952 367 Loans 2,530,761 2,479,348 Less: unearned discount (4,671 ) (4,791 ) Less: allowance for loan losses (20,346 ) (19,704 ) Net loans 2,505,744 2,454,853 FHLB, other equity, and restricted equity interests 23,129 24,508 Premises and equipment, net 51,331 49,920 Operating lease assets 16,222 0 Bank owned life insurance 56,805 56,443 Mortgage servicing rights 1,498 1,495 Goodwill 38,730 38,730 Core deposit intangible 562 727 Accrued interest receivable and other assets 25,819 24,266 Total Assets $ 3,287,324 $ 3,221,521 LIABILITIES AND SHAREHOLDERS’ EQUITY Non-interest bearing deposits $ 345,386 $ 356,797 Interest bearing deposits 2,311,973 2,253,989 Total deposits 2,657,359 2,610,786 Short-term borrowings 0 0 FHLB and other long term borrowings 240,005 245,117 Subordinated debentures 70,620 70,620 Operating lease liabilities 17,109 0 Accrued interest payable and other liabilities 27,272 32,168 Total liabilities 3,012,365 2,958,691 Common stock, $0 par value; authorized 50,000,000 shares; issued 15,308,378 shares at March 31, 2019 and December 31, 2018 0 0 Additional paid in capital 97,139 97,602 Retained earnings 178,662 171,780 Treasury stock, at cost (69,007 shares at March 31, 2019 and 101,097 shares at December 31, 2018) (1,702 ) (2,556 ) Accumulated other comprehensive income (loss) 860 (3,996 ) Total shareholders’ equity 274,959 262,830 Total Liabilities and Shareholders’ Equity $ 3,287,324 $ 3,221,521 Three months ended March 31, 2018 2017 $ 26,457 $ 21,970 1,984 2,191 694 800 252 143 29,387 25,104 2,924 2,121 1,488 809 875 972 5,287 3,902 24,100 21,202 1,631 1,016 22,469 20,186 1,247 1,090 618 529 1,030 871 0 1,383 14 188 208 184 400 352 971 878 263 298 4,751 5,773 9,535 9,005 2,496 2,540 248 331 1,074 961 853 739 508 549 597 413 298 204 734 422 2,656 1,870 18,999 17,034 8,221 8,925 1,124 2,445 $ 7,097 $ 6,480 $ 0.46 $ 0.43 $ 0.46 $ 0.43 $ 0.165 $ 0.165 Three months ended
March 31, 2019 2018 INTEREST AND DIVIDEND INCOME: Loans including fees $ 32,824 $ 26,457 Securities: Taxable 2,978 1,984 Tax-exempt 697 694 Dividends 254 252 Total interest and dividend income 36,753 29,387 INTEREST EXPENSE: Deposits 6,587 2,924 Borrowed funds 1,410 1,488 Subordinated debentures (includes $6 and $58 accumulated other comprehensive income reclassification for change in fair value of interest rate swap agreements in 2019 and 2018, respectively) 998 875 Total interest expense 8,995 5,287 NET INTEREST INCOME 27,758 24,100 PROVISION FOR LOAN LOSSES 1,306 1,631 NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 26,452 22,469 NON-INTEREST INCOME: Service charges on deposit accounts 1,481 1,247 Other service charges and fees 646 618 Wealth and asset management fees 1,042 1,030 Net realized gains on available-for-sale securities (includes $148 and $0 accumulated other comprehensive income reclassifications for net realized gains on available-for-sale securities in 2019 and 2018, respectively) 148 0 Net realized and unrealized gains on trading securities 800 14 Mortgage banking 239 208 Bank owned life insurance 361 400 Card processing and interchange income 1,029 971 Other 407 263 Total non-interest income 6,153 4,751 NON-INTEREST EXPENSES: Salaries and benefits 10,900 9,535 Net occupancy expense 2,866 2,496 Amortization of core deposit intangible 165 248 Data processing 1,185 1,074 State and local taxes 768 853 Legal, professional, and examination fees 553 508 Advertising 411 597 FDIC insurance premiums 422 298 Card processing and interchange expenses 747 734 Other 3,158 2,656 Total non-interest expenses 21,175 18,999 INCOME BEFORE INCOME TAXES 11,430 8,221 INCOME TAX EXPENSE (includes $30 and ($12) income tax expense (benefit) from reclassification items in 2019 and 2018, respectively) 1,957 1,124 NET INCOME $ 9,473 $ 7,097 EARNINGS PER SHARE: Basic $ 0.62 $ 0.46 Diluted $ 0.62 $ 0.46 DIVIDENDS PER SHARE: Cash dividends per share $ 0.170 $ 0.165 Three months ended March 31, 2018 2017 $ 7,097 $ 6,480 16 6 46 49 62 55 0 87 0 (899 ) 0 (812 ) (3,964 ) 850 (3,902 ) 93 $ 3,195 $ 6,573 Three Months Ended March 31, 2019 2018 NET INCOME $ 9,473 $ 7,097 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 of $26 and ($4), respectively (100 ) 16 Reclassification adjustment for losses recognized in earnings, net of tax of ($1) and ($12), respectively 5 46 (95 ) 62 Net change in unrealized gains on securities available for sale: Unrealized holding gains (losses) arising during the period, net of tax of ($1,348) and $1,053, respectively 5,068 (3,964 ) Reclassification adjustment for realized gains included in net income, net of tax of $31 and $0, respectively (117 ) 0 4,951 (3,964 ) Other comprehensive income (loss) 4,856 (3,902 ) COMPREHENSIVE INCOME $ 14,329 $ 3,195 Three months ended March 31, 2018 2017 $ 7,097 $ 6,480 1,631 1,016 1,236 1,333 (427 ) 53 0 (1,383 ) (14 ) (188 ) 0 402 (92 ) (904 ) (105 ) (81 ) (4 ) (81 ) 4,270 3,197 (4,824 ) (4,376 ) (400 ) (352 ) 674 189 (4,134 ) (1,108 ) (766 ) (3,971 ) 4,142 226 7,780 21,546 0 2,183 (21,634 ) (2,268 ) (130,059 ) (35,616 ) (5,047 ) (999 ) (397 ) (1,877 ) 166 236 (149,191 ) (16,795 ) 30,391 24,999 11,849 (17,042 ) 0 57 (448 ) (1,103 ) (2,523 ) (2,525 ) 0 19,294 (7,554 ) (17,461 ) 50,000 0 56,593 9,536 138,308 15,755 (6,741 ) (814 ) 35,345 29,183 $ 28,604 $ 28,369 $ 5,203 $ 3,890 0 0 $ 0 $ 51 $ 933 $ 943 Three Months Ended March 31, 2019 2018 CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 9,473 $ 7,097 Adjustments to reconcile net income to net cash provided by operations: Provision for loan losses 1,306 1,631 Depreciation and amortization of premises and equipment, operating leases assets, core deposit intangible, and mortgage servicing rights 1,509 1,236 Amortization and accretion of securities premiums and discounts, deferred loan fees and costs, net yield and credit mark on acquired loans, and unearned income (409 ) (427 ) Net realized gains on sales of available-for-sale securities (148 ) 0 Net realized and unrealized gains on trading securities (800 ) (14 ) Proceeds from sale of trading securities 236 0 Purchase of trading securities (144 ) (92 ) Gain on sale of loans (84 ) (105 ) Net gains on dispositions of premises and equipment and foreclosed assets 0 (4 ) Proceeds from sale of loans 4,569 4,270 Origination of loans held for sale (7,118 ) (4,824 ) Income on bank owned life insurance (361 ) (400 ) Stock-based compensation expense 592 677 Changes in: Accrued interest receivable and other assets (707 ) (4,137 ) Accrued interest payable, lease liabilities, and other liabilities (6,520 ) (766 ) NET CASH PROVIDED BY OPERATING ACTIVITIES 1,394 4,142 CASH FLOWS FROM INVESTING ACTIVITIES: Proceeds from maturities, prepayments and calls of available-for-sale securities 20,152 7,780 Proceeds from sales of available-for-sale securities 11,403 0 Purchase of available-for-sale securities (9,252 ) (21,634 ) Loan origination and payments, net (51,635 ) (130,059 ) Redemption (purchase) of FHLB, other equity, and restricted equity interests 1,379 (5,047 ) Purchase of premises and equipment (2,399 ) (397 ) Proceeds from the sale of premises and equipment and foreclosed assets 8 166 NET CASH USED BY INVESTING ACTIVITIES (30,344 ) (149,191 ) CASH FLOWS FROM FINANCING ACTIVITIES: Net change in: Checking, money market and savings accounts 88,105 30,391 Certificates of deposit (41,532 ) 11,849 Purchase of treasury stock (201 ) (448 ) Cash dividends paid (2,591 ) (2,523 ) Repayment of long-term borrowings (5,112 ) (7,554 ) Proceeds from long-term borrowings 0 50,000 Net change in short-term borrowings 0 56,593 NET CASH PROVIDED BY FINANCING ACTIVITIES 38,669 138,308 NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 9,719 (6,741 ) CASH AND CASH EQUIVALENTS, Beginning 45,563 35,345 CASH AND CASH EQUIVALENTS, Ending $ 55,282 $ 28,604 SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Cash paid during the period for: Interest $ 8,942 $ 5,203 Income taxes 1,250 0 SUPPLEMENTAL NONCASH DISCLOSURES: Transfers to other real estate owned $ 66 $ 0 Grant of restricted stock awards from treasury stock $ 1,055 $ 933 Additional
Paid-In
Capital Retained
Earnings Treasury
Stock Accumulated
Other
Comprehensive
Income (Loss) Total
Share-
holders’
EquityBalance, January 1, 2019 $ 97,602 $ 171,780 $ (2,556 ) $ (3,996 ) $ 262,830 Net income 9,473 9,473 Other comprehensive income 4,856 4,856 Restricted stock award grants (39,790 shares) (1,055 ) 1,055 0 Stock-based compensation expense 592 592 Purchase of treasury stock for the purpose of tax withholding related to restricted stock award vesting (7,700 shares) (201 ) (201 ) Cash dividends declared ($0.17 per share) (2,591 ) (2,591 ) Balance, March 31, 2019 $ 97,139 $ 178,662 $ (1,702 ) $ 860 $ 274,959 Balance, January 1, 2018 $ 97,042 $ 148,298 $ (1,087 ) $ (343 ) $ 243,910 Net income 7,097 7,097 Other comprehensive loss (3,902 ) (3,902 ) Restricted stock award grants (37,708 shares) (933 ) 933 0 Stock-based compensation expense 677 677 Purchase of treasury stock (10,769 shares) (286 ) (286 ) Purchase of treasury stock for the purpose of tax withholding related to restricted stock award vesting (6,040 shares) (162 ) (162 ) Cash dividends declared ($0.165 per share) (2,523 ) (2,523 ) Balance, March 31, 2018 96,786 152,872 (602 ) (4,245 ) 244,811 1.BASIS OF PRESENTATION20182019 and for the three month periods ended March 31, 20182019 and 20172018 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 period ended March 31, 20182019 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 Form10-K for the period ended December 31, 20172018 (the “2017“2018 Form10-K”). All dollar amounts are stated in thousands, except share and per share data and other amounts as indicated. Certain prior period amounts have been reclassified to conform to the current period presentation.2.STOCK COMPENSATION stock incentive plan for key employees and independent directors. The stock incentive plan, which is administered by a committee of the Board of Directors provides for aggregate grantsand which permits the Corporation to provide various types of upstock-based compensation to 500,000its key employees, directors, and/or consultants, including time-based and performance-based shares of common stock in the form of nonqualified options or restricted stock. The Corporation previously maintained its 2009 Stock Incentive Plan, which terminated in accordance with its terms on February 10, 2019, and currently maintains its 2019 Stock Incentive Plan, which was approved by the Corporation’s shareholders and became effective on April 16, 2019. plan vesting of time-based restricted stock is either one-third, one-fourth, or one-fourthone-fifth of the granted options or restricted stockshares per year, beginning one year after the grant date, with 100% vesting on the third, fourth or fourthfifth anniversary of the grant date, respectively. Prior to 2018, for independentnon-employee directors, the vesting schedule isone-third of the granted options or restricted stockshares 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 independentnon-employee directors vests immediately. At March 31, 2018,2019, there was no unrecognized compensation cost related to nonvested stock options grantedstock-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 stock options wereother stock-based compensation was granted during the three month periods ended March 31, 20182019 and 2017.15,70215,657 shares in aggregate were granted to key employees. In 2017, an award with a maximum of 10,0007,109 shares was granted to a key employee.$674$592 and $189$677 for the three months ended March 31, 20182019 and 2017,2018, respectively. As of March 31, 2018,2019, there was $1,584$1,185 of total unrecognized compensation cost related to unvested restricted stock awards.20182019 follows: Shares Grant Date Fair Value 94,472 $ 20.79 22,108 26.92 (40,105 ) 19.69 76,475 $ 23.07 Shares Nonvested at beginning of period 75,889 $ 23.20 Granted 25,940 25.27 Vested (34,060 ) 21.58 Nonvested at end of period 67,769 $ 24.79 15,60013,850 shares in restricted stock awards that were granted at a weighted average fair value of $25.27 and immediately vested. Compensation expense resulting from the immediately vested shares was $385$350 for the three months ended March 31, 2018,2019, and is included in the previously disclosed $674$592 above.$1,462$1,227 and $917$1,462 during the three months ended March 31, 2019 and 2018, and 2017, respectively.3.FAIR VALUE20182019 and December 31, 2017: Fair Value Measurements at March 31, 2018 Using Quoted Prices in Significant Active Markets for Significant Other Unobservable Identical Assets Observable Inputs Inputs Total (Level 1) (Level 2) (Level 3) $ 111,921 $ 0 $ 111,921 $ 0 133,466 0 133,466 0 120,630 0 120,630 0 17,194 0 17,194 0 34,145 0 34,145 0 943 943 0 0 $ 418,299 $ 943 $ 417,356 $ 0 $ 146 $ 0 $ 146 $ 0 $ 5,172 $ 5,172 $ 0 $ 0 1,612 1,612 0 0 170 170 0 0 250 250 0 0 52 0 52 0 $ 7,256 $ 7,204 $ 52 $ 0 $ (229 ) $ 0 $ (229 ) $ 0 Fair Value Measurements at December 31, 2017 Using Quoted Prices in Significant Active Markets for Significant Other Unobservable Identical Assets Observable Inputs Inputs Total (Level 1) (Level 2) (Level 3) $ 108,148 $ 0 $ 108,148 $ 0 137,723 0 137,723 0 109,636 0 109,636 0 17,200 0 17,200 0 36,040 0 36,040 0 962 962 0 0 $ 409,709 $ 962 $ 408,747 $ 0 $ 149 $ 0 $ 149 $ 0 $ 5,125 $ 5,125 $ 0 $ 0 1,499 1,499 0 0 220 220 0 0 254 254 0 0 52 0 52 0 $ 7,150 $ 7,098 $ 52 $ 0 $ (310 ) $ 0 $ (310 ) $ 0 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 March 31, 2018 and 2017: 2018 2017 $ 0 $ 2,049 0 134 0 (2,183 ) $ 0 $ 0 Fair Value Measurements at March 31, 2019 Using: Quoted Prices in
Active Markets
for
Identical Assets Significant Other
Observable Inputs Significant
Unobservable
InputsDescription Total (Level 1) (Level 2) (Level 3) Assets: Securities Available For Sale: U.S. Government sponsored entities 130,375 0 130,375 0 States and political subdivisions 121,090 0 121,090 0 Residential and multi-family mortgage 207,491 0 207,491 0 Corporate notes and bonds 11,904 0 11,904 0 Pooled SBA 28,801 0 28,801 0 Other 947 947 0 0 Total Securities Available For Sale $ 500,608 $ 947 $ 499,661 $ 0 Interest Rate swaps $ 906 $ 0 $ 906 $ 0 Trading Securities: Corporate equity securities $ 6,947 $ 6,947 0 0 Mutual funds 871 871 0 0 Certificates of deposit 179 179 0 0 Corporate notes and bonds 594 594 0 0 U.S. Government sponsored entities 51 0 51 0 Total Trading Securities $ 8,642 $ 8,591 $ 51 $ 0 Liabilities: Interest rate swaps $ (1,227 ) $ 0 $ (1,227 ) $ 0 Fair Value Measurements at December 31, 2018 Using: Quoted Prices in Significant Significant Other Unobservable Identical Assets Observable Inputs Inputs Description Total (Level 1) (Level 2) (Level 3) Assets: Securities Available For Sale: U.S. Government sponsored entities $ 132,694 $ 0 $ 132,694 $ 0 States and political subdivisions 136,031 0 136,031 0 Residential and multi-family mortgage 206,053 0 206,053 0 Corporate notes and bonds 11,777 0 11,777 0 Pooled SBA 29,374 0 29,374 0 Other 934 934 0 0 Total Securities Available For Sale $ 516,863 $ 934 $ 515,929 $ 0 Interest Rate swaps $ 485 $ 0 $ 485 $ 0 Trading Securities: Corporate equity securities 5,828 5,828 0 0 Mutual funds 1,058 1,058 0 0 Certificates of deposit 268 268 0 0 Corporate notes and bonds 581 581 0 0 U.S. Government sponsored entities 51 0 51 0 Total Trading Securities $ 7,786 $ 7,735 51 0 Liabilities: Interest rate swaps $ (686 ) $ 0 $ (686 ) $ 0 20182019 and December 31, 2017: Fair Value Measurements at March 31, 2018 Using Quoted Prices in Significant Active Markets for Significant Other Unobservable Identical Assets Observable Inputs Inputs Total (Level 1) (Level 2) (Level 3) $ 60 0 0 $ 60 Fair Value Measurements at December 31, 2017 Using Quoted Prices in Significant Active Markets for Significant Other Unobservable Identical Assets Observable Inputs Inputs Total (Level 1) (Level 2) (Level 3) $ 11 0 0 $ 11 Fair Value Measurements at March 31, 2019 Using: Description Total (Level 1) (Level 2) (Level 3) Assets: Impaired loans: Commercial, industrial, and agricultural $ 540 0 0 $ 540 Commercial mortgages $ 1,166 0 0 $ 1,166 Fair Value Measurements at December 31, 2018 Using Quoted Prices in Significant Significant Other Unobservable Identical Assets Observable Inputs Inputs Description Total (Level 1) (Level 2) (Level 3) Assets: Impaired loans: Commercial, industrial, and agricultural $ 2,055 0 0 $ 2,055 Commercial mortgages $ 679 0 0 $ 679 $959$4,244 with a valuation allowance of $899$2,538 as of March 31, 2018,2019, resulting in a provision for loan losses of $264$777 for the corresponding three month period. Impaired loans had a recorded investment of $646$3,918 with a valuation allowance of $635$1,184 as of December 31, 2017.2018. Impaired loans carried at fair value resulted in a negative provision for loan losses of $(103)$272 for the three months ended March 31, 2017.2018: Fair
value Range
(Weighted Average) $ 60 Discounted cash flow method Discount used in discounted cash flow method 10% (10%) Valuation Technique Unobservable Inputs Impaired loans – commercial, industrial, and agricultural $540 Valuation of third party appraisal on underlying collateral Loss severity rates 39%-78% (63%) Impaired loans – commercial mortgages $1,166 Valuation of third party appraisal on underlying collateral Loss severity rates 15-90% (37%) 2017: Fair
value Valuation Technique Unobservable Inputs Range
(Weighted Average) $ 11 Discounted cash flow method Discount used in discounted cash flow method 10% (10%) Valuation Technique Unobservable Inputs Impaired loans – commercial, industrial, and agricultural $2,055 Valuation of third party appraisal on underlying collateral Loss severity rates 20%-60% (34%) Impaired loans – commercial mortgages $679 Valuation of third party appraisal on underlying collateral Loss severity rates 15%-39% (33%) 2018: Carrying Fair Value Measurement Using: Total Amount Level 1 Level 2 Level 3 Fair Value $ 28,604 $ 28,604 $ 0 $ 0 $ 28,604 418,299 943 417,356 0 418,299 7,256 7,204 52 0 7,256 1,460 0 1,460 0 1,460 2,255,368 0 0 2,226,877 2,226,877 21,377 n/a n/a n/a n/a 5,187 5,187 146 0 146 0 146 9,853 7 3,117 6,729 9,853 $ (2,210,055 ) $ (1,833,235 ) $ (378,985 ) $ 0 $ (2,212,220 ) (356,398 ) 0 (351,547 ) 0 (351,547 ) (70,620 ) 0 (69,767 ) 0 (69,767 ) (229 ) 0 (229 ) 0 (229 ) (638 ) 0 (638 ) 0 (638 ) Carrying Fair Value Measurement Using: Total Amount Level 1 Level 2 Level 3 Fair Value ASSETS Cash and cash equivalents $ 55,282 $ 55,282 $ 0 $ 0 $ 55,282 Securities available for sale 500,608 947 499,661 0 500,608 Trading securities 8,642 8,591 51 0 8,642 Loans held for sale 2,952 0 2,957 0 2,957 Net loans 2,505,744 0 0 2,483,864 2,483,864 FHLB and other restricted interests 23,129 n/a n/a n/a n/a Interest rate swaps 906 0 906 0 906 Accrued interest receivable 11,862 7 3,567 8,288 11,862 LIABILITIES Deposits $ (2,657,359 ) $ (2,303,454 ) $ (354,791 ) $ 0 $ (2,658,245 ) FHLB and other borrowings (240,005 ) 0 (240,503 ) 0 (240,503 ) Subordinated debentures (70,620 ) 0 (65,325 ) 0 (65,325 ) Interest rate swaps (1,227 ) 0 (1,227 ) 0 (1,227 ) Accrued interest payable (916 ) 0 (916 ) 0 (916 ) 2017: Carrying Fair Value Measurement Using: Total Amount Level 1 Level 2 Level 3 Fair Value $ 35,345 $ 35,345 $ 0 $ 0 $ 35,345 409,709 962 408,747 0 409,709 7,150 7,098 52 0 7,150 852 0 853 0 853 2,126,266 0 0 2,126,824 2,126,824 17,035 n/a n/a n/a n/a 4,482 4,482 149 0 149 0 149 9,254 6 2,651 6,597 9,254 $ (2,167,815 ) $ (1,802,844 ) $ (362,756 ) $ 0 $ (2,165,600 ) (257,359 ) 0 (257,361 ) 0 (257,361 ) (70,620 ) 0 (63,575 ) 0 (63,575 ) (310 ) 0 (310 ) 0 (310 ) (554 ) 0 (554 ) (0 ) (554 ) The methods and assumptions, not otherwise presented, used to estimate fair values are described as follows:Cash and cash equivalents: The carrying amounts2018: Carrying Fair Value Measurement Using: Total Amount Level 1 Level 2 Level 3 Fair Value ASSETS Cash and cash equivalents $ 45,563 $ 45,563 $ 0 $ 0 $ 45,563 Securities available for sale 516,863 934 515,929 0 516,863 Trading securities 7,786 7,735 51 0 7,786 Loans held for sale 367 0 368 0 368 Net loans 2,454,853 0 0 2,433,417 2,433,417 FHLB and other restricted interests 24,508 n/a n/a n/a n/a Interest rate swaps 485 0 485 0 485 Accrued interest receivable 10,843 6 3,368 7,469 10,843 LIABILITIES Deposits $ (2,610,786 ) $ (2,215,349 ) $ (397,370 ) $ 0 $ (2,612,719 ) FHLB and other borrowings (245,117 ) 0 (242,592 ) 0 (242,592 ) Subordinated debentures (70,620 ) 0 (65,794 ) 0 (65,794 ) Interest rate swaps (686 ) 0 (686 ) 0 (686 ) Accrued interest payable (863 ) 0 (863 ) 0 (863 ) cash and cash equivalents approximate fair values and are classified as Level 1.Interest bearing time deposits with other banks: The fair value of interest bearing time deposits with other banks is estimated using a discounted cash flow calculation that applies interest rates currently being offered to a schedule of aggregated expected monthly maturities, resultingASU 2016-01 in a Level 2 classification.Loans held for sale: The fair value of loans held for sale is estimated based upon binding contracts and quotes from third party investors resulting in a Level 2 classification.Loans: As of March 31, 2018, fair values for loans are estimated by a third party firm using the income approach. This approach uses valuation techniques to convert future earnings or cash flows to present value to arrive at a value that is indicated by market expectation about future cash flow. The methods utilized to estimatemeasure the fair value of loansfinancial instruments at March 31, 2019 and December 31, 2018 represent an approximation of exit price. At December 31, 2017, the estimated fair value for loans were estimated using discounted cash flow analyses, using interest rates currently being offered for loans with similar terms to borrowers of similar credit quality. The methods utilized to estimate the fair value of loans do not necessarily representprice; however, an actual exit price.FHLB and other restricted equity interests:It is not practical to determine the fair value of Federal Home Loan Bank stock and other restricted interests due to restrictions placed on the transferability of these instruments.Other equity interests: The fair value is based on the net asset values provided by underlying investment partnership. ASU 2015-07 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.Accrued interest receivable: The carrying amount of accrued interest receivable approximates fair value resulting in a classification that is consistent with the asset with which it is associated.Deposits: The fair values disclosed for demand deposits are, by definition, equal to the amount payable on demand at the reporting date (i.e. their carrying amount), resulting in a Level 1 classification. Fair values for time deposits are estimated using a discounted cash flow calculation that applies interest rates currently being offered on certificates to a schedule of aggregated expected monthly maturities on time deposits, resulting in a Level 2 classification.FHLB and other borrowings: The fair values of the Corporation’s FHLB and other borrowings are estimated using discounted cash flow analyses based on the current borrowing rates for similar types of borrowing arrangements, resulting in a Level 2 classification.Subordinated debentures: The fair value of the Corporation’s subordinated debentures are estimated using discounted cash flow analyses based on the current borrowing rates for similar types of arrangements, resulting in a Level 2 classification.Accrued interest payable: The carrying amount of accrued interest payable approximates fair value resulting in a classification that is consistent with the liability with which it is associated.In The fair value of other equity interests is based on the net asset values provided by the underlying investment partnership. Accounting Standards Updated ("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.4.SECURITIES20182019 and December 31, 20172018 are as follows: March 31, 2018 December 31, 2017 Amortized Unrealized Fair Amortized Unrealized Fair Cost Gains Losses Value Cost Gains Losses Value $ 113,341 $ 334 $ (1,754 ) $ 111,921 $ 108,578 $ 478 $ (908 ) $ 108,148 131,608 2,616 (758 ) 133,466 134,428 3,609 (314 ) 137,723 123,995 104 (3,469 ) 120,630 111,214 304 (1,882 ) 109,636 17,608 45 (459 ) 17,194 17,610 52 (462 ) 17,200 35,145 113 (1,113 ) 34,145 36,260 355 (575 ) 36,040 1,020 0 (77 ) 943 1,020 0 (58 ) 962 $ 422,717 $ 3,212 $ (7,630 ) $ 418,299 $ 409,110 $ 4,798 $ (4,199 ) $ 409,709 March 31, 2019 December 31, 2018 Amortized Unrealized Fair Amortized Unrealized Fair Cost Gains Losses Value Cost Gains Losses Value U.S. Gov’t sponsored entities $ 129,993 $ 1,127 $ (745 ) $ 130,375 $ 134,010 $ 254 $ (1,570 ) $ 132,694 State & political subdivisions 118,673 2,595 (178 ) 121,090 134,662 1,942 (573 ) 136,031 Residential & multi-family mortgage 207,588 1,711 (1,808 ) 207,491 209,126 500 (3,573 ) 206,053 Corporate notes & bonds 12,354 26 (476 ) 11,904 12,356 22 (601 ) 11,777 Pooled SBA 29,186 196 (581 ) 28,801 30,163 135 (924 ) 29,374 Other 1,020 0 (73 ) 947 1,020 0 (86 ) 934 Total $ 498,814 $ 5,655 $ (3,861 ) $ 500,608 $ 521,337 $ 2,853 $ (7,327 ) $ 516,863 20182019 and December 31, 2017,2018, 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.20182019 and December 31, 20172018 are as follows: March 31,
2018 December 31,
2017 $ 5,172 $ 5,125 1,612 1,499 170 220 250 254 52 52 $ 7,256 $ 7,150 March 31, 2019 December 31, 2018 Corporate equity securities $ 6,947 $ 5,828 Mutual funds 871 1,058 Certificates of deposit 179 268 Corporate notes and bonds 594 581 U.S. Government sponsored entities 51 51 Total $ 8,642 $ 7,786 20182019 and December 31, 2017,2018, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position, are as follows:2018 Less than 12 Months 12 Months or More Total Fair
Value Unrealized
Loss Fair
Value Unrealized
Loss Fair
Value Unrealized
Loss $ 63,833 $ (1,262 ) $ 34,590 $ (492 ) $ 98,423 $ (1,754 ) 61,022 (456 ) 4,045 (302 ) 65,067 (758 ) 50,017 (913 ) 59,984 (2,556 ) 110,001 (3,469 ) 5,225 (38 ) 9,077 �� (421 ) 14,302 (459 ) 7,513 (67 ) 21,272 (1,046 ) 28,785 (1,113 ) 0 (0 ) 943 (77 ) 943 (77 ) $ 187,610 $ (2,736 ) $ 129,911 $ (4,894 ) $ 317,521 $ (7,630 ) Less than 12 Months 12 Months or More Total Description of Securities U.S. Gov’t sponsored entities $ 4,963 $ (2 ) $ 69,440 $ (743 ) $ 74,403 $ (745 ) State & political subdivisions 994 (13 ) 10,389 (165 ) 11,383 (178 ) Residential & multi-family mortgage 3,186 (10 ) 87,606 (1,798 ) 90,792 (1,808 ) Corporate notes & bonds 0 0 9,528 (476 ) 9,528 (476 ) Pooled SBA 0 0 19,035 (581 ) 19,035 (581 ) Other 0 0 947 (73 ) 947 (73 ) $ 9,143 $ (25 ) $ 196,945 $ (3,836 ) $ 206,088 $ (3,861 ) 2017 Less than 12 Months 12 Months or More Total Fair
Value Unrealized
Loss Fair
Value Unrealized
Loss Fair
Value Unrealized
Loss $ 55,696 $ (540 ) $ 34,754 $ (368 ) $ 90,450 $ (908 ) 15,890 (69 ) 4,104 (245 ) 19,994 (314 ) 30,144 (153 ) 63,699 (1,729 ) 93,843 (1,882 ) 5,005 (9 ) 9,042 (453 ) 14,047 (462 ) 0 (0 ) 22,270 (575 ) 22,270 (575 ) 0 (0 ) 962 (58 ) 962 (58 ) $ 106,735 $ (771 ) $ 134,831 $ (3,428 ) $ 241,566 $ (4,199 ) Less than 12 Months 12 Months or More Total U.S. Gov’t sponsored entities $ 14,786 $ (41 ) $ 70,676 $ (1,529 ) $ 86,462 $ (1,570 ) State & political subdivisions 13,834 (62 ) 21,080 (511 ) 34,914 (573 ) Residential & multi-family mortgage 69,015 (656 ) 87,286 (2,917 ) 156,301 (3,573 ) Corporate notes & bonds 0 0 9,759 (601 ) 9,759 (601 ) Pooled SBA 760 (7 ) 20,795 (917 ) 21,555 (924 ) Other 0 0 934 (86 ) 934 (86 ) $ 98,395 $ (766 ) $ 210,530 $ (6,561 ) $ 309,925 $ (7,327 ) A roll-forwardother-than-temporaryCorporation’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 amount related to credit losses for the three months endedof these debt securities at March 31, 2019 and December 31, 2018 and 2017 is as follows: 2018 2017 $ 0 $ 2,071 0 (2,071 ) 0 0 0 0 $ 0 $ 0 20182019 and December 31, 2017,2018, management concluded that the securities described in the previous paragraph were not other-than-temporarily impaired for the following reasons:20182019 and December 31, 2017,2018, securities carried at $274,883$269,591 and $319,575,$290,717, respectively, were pledged to secure public deposits and for other purposes as provided by law. Proceeds Gross
Gains Gross
Losses $ 0 $ 0 $ 0 $ 2,183 $ 1,383 $ 0 Proceeds Three months ended March 31, 2019 $ 11,403 $ 152 $ 4 Three months ended March 31, 2018 $ 0 $ 0 $ 0 and $484, respectively.2018: Amortized Fair Cost Value $ 58,820 $ 58,626 154,027 154,001 43,991 44,236 5,719 5,718 262,557 262,581 123,995 120,630 35,145 34,145 $ 421,697 $ 417,356 1 year or less $ 58,770 $ 58,412 1 year – 5 years 131,226 131,749 5 years – 10 years 65,503 67,547 After 10 years 5,521 5,661 261,020 263,369 Residential and multi-family mortgage 207,588 207,491 Pooled SBA 29,186 28,801 Other 1,020 947 Total debt securities $ 498,814 $ 500,608 5.LOANS20182019 and December 31, 20172018 are summarized as follows: March 31,
2018 December 31,
2017 $ 773,473 $ 749,138 694,517 600,065 725,683 713,347 77,981 80,193 6,965 6,753 1,134 352 (3,629 ) (3,889 ) (20,756 ) (19,693 ) $ 2,255,368 $ 2,126,266 3/31/2019 12/31/2018 Commercial, industrial, and agricultural $ 950,865 $ 916,297 Commercial mortgages 709,726 697,776 Residential real estate 775,599 771,309 Consumer 86,780 86,035 Credit cards 7,341 7,623 Overdrafts 450 308 Less: unearned discount (4,671 ) (4,791 ) allowance for loan losses (20,346 ) (19,704 ) Loans, net $ 2,505,744 $ 2,454,853 20182019 and December 31, 2017,2018, net unamortized loan fees of $3,211$3,158 and $2,574,$3,175, respectively, have been included in the carrying value of loans.Centralcentral and Westernnorthwest Pennsylvania, Centralcentral and Northeasternnortheast Ohio, and Westernwestern 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.34%38% and 35%37% of the Corporation’s total loan portfolio at March 31, 20182019 and December 31, 2017,2018, respectively. Commercial mortgage loans comprised 31% and 28% of the Corporation’s total loan portfolio at both March 31, 20182019 and December 31, 2017, respectively.2018. Management assigns a risk rating to all commercial loans at loan origination. Theloan-to-value policy guidelines for commercial, industrial, and agricultural loans are generally a maximum of 80% of the value of business equipment, a maximum of 75% of the value of accounts receivable, and a maximum of 60% of the value of business inventory at loan origination. Theloan-to-value policy guideline for commercial mortgage loans is generally a maximum of 85% of the appraised value of the real estate.32% and 33%31% of the Corporation’s total loan portfolio at both March 31, 20182019 and December 31, 2017, respectively.2018. Theloan-to-value policy guidelines for residential real estate loans vary depending on the collateral position and the specific type of loan. Higherloan-to-value terms may be approved with the appropriate private mortgage insurance coverage. The Corporation also originates and prices loans for sale into the secondary market. Loans so originated are classified as loans held for sale and are excluded from residential real estate loans reported above. The rationale for these sales is to mitigate interest rate risk associated with holding lower rate, long-term residential mortgages in the loan portfolio and to generate fee revenue from sales and servicing the loan. The Corporation also offers a variety of unsecured and secured consumer loan and credit card products which represent less than 10%4% of the total loan portfolio at20182019 and December 31, 2017.2018. Terms and collateral requirements vary depending on the size and nature of the loan. Consumer Overdrafts Total Allowance for loan losses, January 1, 2019 $ 7,341 $ 7,490 $ 2,156 $ 2,377 $ 103 $ 237 $ 19,704 Charge-offs 0 (17 ) (98 ) (549 ) (26 ) (128 ) (818 ) Recoveries 4 — 65 46 5 34 154 Provision (benefit) for loan losses 442 1,373 (740 ) 166 23 42 1,306 Allowance for loan losses, March 31, 2019 $ 7,787 $ 8,846 $ 1,383 $ 2,040 $ 105 $ 185 $ 20,346 Commercial, Residential Industrial, and Commercial Real Credit Agricultural Mortgages Estate Consumer Cards Overdrafts Total $ 6,160 $ 9,007 $ 2,033 $ 2,179 $ 120 $ 194 $ 19,693 (31 ) 0 0 (590 ) (19 ) (86 ) (726 ) 68 0 3 49 7 31 158 85 1,013 16 427 15 75 1,631 $ 6,282 $ 10,020 $ 2,052 $ 2,065 $ 123 $ 214 $ 20,756 Transactions in the allowance for loan losses for the three months ended March 31, 2017 were as follows: Commercial, Residential Industrial, and Commercial Real Credit Agricultural Mortgages Estate Consumer Cards Overdrafts Total $ 5,428 $ 6,753 $ 1,653 $ 2,215 $ 93 $ 188 $ 16,330 (1 ) 0 (68 ) (735 ) (58 ) (69 ) (931 ) 12 2 71 2 11 33 131 (654 ) 602 366 607 59 36 1,016 $ 4,785 $ 7,357 $ 2,022 $ 2,089 $ 105 $ 188 $ 16,546 Consumer Overdrafts Total Allowance for loan losses, January 1, 2018 $ 6,160 $ 9,007 $ 2,033 $ 2,179 $ 120 $ 194 $ 19,693 Charge-offs (31 ) 0 0 (590 ) (19 ) (86 ) (726 ) Recoveries 68 0 3 49 7 31 158 Provision (benefit) for loan losses 85 1,013 16 427 15 75 1,631 Allowance for loan losses, March 31, 2018 $ 6,282 $ 10,020 $ 2,052 $ 2,065 $ 123 $ 214 $ 20,756 20182019 and December 31, 2017.2018. The recorded investment in loans excludes accrued interest and unearned discounts due to their insignificance.2018 Commercial,
Industrial, and
Agricultural Commercial
Mortgages Residential
Real
Estate Consumer Credit
Cards Overdrafts Total $ 20 $ 2 $ 0 $ 0 $ 0 $ 0 $ 22 5,984 3,850 2,052 2,065 123 214 14,288 0 0 0 0 0 0 0 278 6,168 0 0 0 0 6,446 $ 6,282 $ 10,020 $ 2,052 $ 2,065 $ 123 $ 214 $ 20,756 $ 1,418 $ 1,892 $ 0 $ 0 $ 0 $ 0 $ 3,310 766,905 679,271 725,683 77,981 6,965 1,134 2,257,939 0 1,144 0 0 0 0 1,144 5,150 12,210 0 0 0 0 17,360 $ 773,473 $ 694,517 $ 725,683 $ 77,981 $ 6,965 $ 1,134 $ 2,279,753 Consumer Overdrafts Total Allowance for loan losses: Ending allowance balance attributable to loans: Individually evaluated for impairment $ 330 $ 312 $ 0 $ 0 $ 0 $ 0 $ 642 Collectively evaluated for impairment 7,350 3,775 1,383 2,040 105 185 14,838 Acquired with deteriorated credit quality 0 0 0 0 0 0 0 Modified in a troubled debt restructuring 107 4,759 0 0 0 0 4,866 Total ending allowance balance $ 7,787 $ 8,846 $ 1,383 $ 2,040 $ 105 $ 185 $ 20,346 Loans: Individually evaluated for impairment $ 1,754 $ 1,468 $ 498 $ 0 $ 0 $ 0 $ 3,720 Collectively evaluated for impairment 945,710 698,004 775,101 86,780 7,341 450 2,513,386 Acquired with deteriorated credit quality 0 556 0 0 0 0 556 Modified in a troubled debt restructuring 3,401 9,698 0 0 0 0 13,099 Total ending loans balance $ 950,865 $ 709,726 $ 775,599 $ 86,780 $ 7,341 $ 450 $ 2,530,761 2017 Commercial,
Industrial, and
Agricultural Commercial
Mortgages Residential
Real
Estate Consumer Credit
Cards Overdrafts Total $ 47 $ 0 $ 0 $ 0 $ 0 $ 0 $ 47 5,868 3,563 2,033 2,179 120 194 13,957 0 0 0 0 0 0 0 245 5,444 0 0 0 0 5,689 $ 6,160 $ 9,007 $ 2,033 $ 2,179 $ 120 $ 194 $ 19,693 $ 1,187 $ 51 $ 0 $ 0 $ 0 $ 0 $ 1,238 742,738 586,845 713,347 80,193 6,753 352 2,130,228 0 1,079 0 0 0 0 1,079 5,213 12,090 0 0 0 0 17,303 $ 749,138 $ 600,065 $ 713,347 $ 80,193 $ 6,753 $ 352 $ 2,149,848 Consumer Overdrafts Total Allowance for loan losses: Ending allowance balance attributable to loans: Individually evaluated for impairment $ 54 $ 4 $ 100 $ 0 $ 0 $ 10 $ 168 Collectively evaluated for impairment 7,183 3,036 2,056 2,377 103 227 14,982 Acquired with deteriorated credit quality 0 0 0 0 0 0 0 Modified in a troubled debt restructuring 104 4,450 0 0 0 0 4,554 Total ending allowance balance $ 7,341 $ 7,490 $ 2,156 $ 2,377 $ 103 $ 237 $ 19,704 Loans: Individually evaluated for impairment $ 1,334 1,446 502 0 0 10 $ 3,292 Collectively evaluated for impairment 910,386 685,714 770,807 86,035 7,623 298 2,460,863 Acquired with deteriorated credit quality 0 567 0 0 0 0 567 Modified in a troubled debt restructuring 4,577 10,049 0 0 0 0 14,626 Total ending loans balance $ 916,297 697,776 771,309 86,035 7,623 308 $ 2,479,348 20182019 and December 31, 20172018 and for the three months ended March 31, 20182019 and 2017:2018 Unpaid Principal
Balance Recorded
Investment Allowance for Loan
Losses Allocated $ 1,861 $ 1,852 $ 298 9,290 9,007 6,170 0 0 0 5,478 4,716 0 6,054 5,095 0 0 0 0 $ 22,683 $ 20,670 $ 6,468 With an allowance recorded: Commercial, industrial, and agricultural $ 2,840 $ 1,278 $ 437 Commercial mortgage 8,205 7,824 5,071 Residential real estate 0 0 0 With no related allowance recorded: Commercial, industrial, and agricultural 4,556 3,877 0 Commercial mortgage 4,225 3,342 0 Residential real estate 498 498 0 Total $ 20,324 $ 16,819 $ 5,508 2017 Unpaid Principal
Balance Recorded
Investment Allowance for Loan
Losses Allocated $ 1,915 $ 1,915 $ 292 9,940 9,731 5,444 0 0 0 5,264 4,485 0 3,211 2,410 0 0 0 0 $ 20,330 $ 18,541 $ 5,736 With an allowance recorded: Commercial, industrial, and agricultural $ 3,053 $ 3,037 $ 158 Commercial mortgage 10,799 6,709 4,454 Residential real estate 502 502 100 Overdrafts 10 10 10 With no related allowance recorded: Commercial, industrial, and agricultural 3,684 2,874 0 Commercial mortgage 5,659 4,786 0 Residential real estate 0 0 0 Overdrafts 0 0 0 Total $ 23,707 $ 17,918 $ 4,722 Three Months Ended March 31, 2018 Average Interest Cash Basis Recorded Income Interest Investment Recognized Recognized $ 1,884 $ 22 $ 22 9,234 18 18 0 0 0 4,600 46 46 3,753 13 13 0 0 0 $ 19,491 $ 99 $ 99 Three Months Ended March 31, 2017 Average Interest Cash Basis Recorded Income Interest Investment Recognized Recognized $ 1,636 $ 18 $ 18 15,270 145 145 0 0 0 1,712 16 16 0 0 0 0 0 0 $ 18,618 $ 179 $ 179 Three Months Ended March 31, 2019 With an allowance recorded: Commercial, industrial, and agricultural $ 2,158 $ 38 $ 38 Commercial mortgage 7,267 40 40 Residential real estate 0 0 0 With no related allowance recorded: Commercial, industrial, and agricultural 3,376 54 54 Commercial mortgage 4,065 18 18 Residential real estate 500 7 7 Total $ 17,366 $ 157 $ 157 Three Months Ended March 31, 2018 With an allowance recorded: Commercial, industrial, and agricultural $ 1,884 $ 22 $ 22 Commercial mortgage 9,234 18 18 Residential real estate 0 0 0 With no related allowance recorded: Commercial, industrial, and agricultural 4,600 46 46 Commercial mortgage 3,753 13 13 Residential real estate 0 0 0 Total $ 19,491 $ 99 $ 99 20182019 and December 31, 2017: March 31, 2018 December 31, 2017 Nonaccrual Past Due
Over 90 Days
Still on Accrual Nonaccrual Past Due
Over 90 Days
Still on Accrual $ 2,737 $ 0 $ 1,869 $ 78 11,361 0 11,065 0 5,038 425 5,470 338 614 13 828 17 0 37 0 44 $ 19,750 $ 475 $ 19,232 $ 477 March 31, 2019 December 31, 2018 Nonaccrual Nonaccrual Commercial, industrial, and agricultural $ 3,414 $ 529 $ 2,839 $ 489 Commercial mortgages 7,724 0 7,694 53 Residential real estate 5,821 285 6,023 299 Consumer 491 24 683 44 Credit cards 0 28 0 5 Total $ 17,450 $ 866 $ 17,239 $ 890 20182019 and December 31, 20172018 by class of loans. Total Commercial, industrial, and agricultural $ 1,917 $ 310 $ 2,834 $ 5,061 $ 945,804 $ 950,865 Commercial mortgages 387 3,532 1,702 5,621 704,105 709,726 Residential real estate 1,453 1,039 3,546 6,038 769,561 775,599 Consumer 286 182 353 821 85,959 86,780 Credit cards 16 33 28 77 7,264 7,341 Overdrafts 0 0 0 0 450 450 Total $ 4,059 $ 5,096 $ 8,463 $ 17,618 $ 2,513,143 $ 2,530,761 30-59 Days
Past Due 60-89 Days
Past Due Greater Than
89 Days
Past Due Total
Past Due Loans Not
Past Due Total $ 2,371 $ 173 $ 935 $ 3,479 $ 769,994 $ 773,473 3 314 1,714 2,031 692,486 694,517 1,565 1,596 4,471 7,632 718,051 725,683 376 447 580 1,403 76,578 77,981 30 5 37 72 6,893 6,965 0 0 0 0 1,134 1,134 $ 4,345 $ 2,535 $ 7,737 $ 14,617 $ 2,265,136 $ 2,279,753 30-59 Days
Past Due 60-89 Days
Past Due Greater Than
89 Days
Past Due Total
Past Due Loans Not
Past Due Total $ 2,745 $ 646 $ 748 $ 4,139 $ 744,999 $ 749,138 233 0 292 525 599,540 600,065 2,290 1,494 4,655 8,439 704,908 713,347 454 307 812 1,573 78,620 80,193 31 10 44 85 6,668 6,753 0 0 0 0 352 352 $ 5,753 $ 2,457 $ 6,551 $ 14,761 $ 2,135,087 $ 2,149,848 Total Commercial, industrial, and agricultural $ 2,379 $ 16 $ 2,341 $ 4,736 $ 911,561 $ 916,297 Commercial mortgages 858 3,058 297 4,213 693,563 697,776 Residential real estate 4,064 1,319 4,494 9,877 761,432 771,309 Consumer 474 283 367 1,124 84,911 86,035 Credit cards 59 15 5 79 7,544 7,623 Overdrafts 0 0 0 0 308 308 Total $ 7,834 $ 4,691 $ 7,504 $ 20,029 $ 2,459,319 $ 2,479,348 20182019 and December 31, 2017. March 31, 2018 December 31, 2017 Number of
Loans Loan
Balance Specific
Reserve Number of
Loans Loan
Balance Specific
Reserve 10 $ 5,150 $ 278 10 $ 5,213 $ 245 9 12,210 6,168 9 12,090 5,444 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 19 $ 17,360 $ 6,446 19 $ 17,303 $ 5,689 March 31, 2019 December 31, 2018 Commercial, industrial, and agricultural 10 $ 3,401 $ 107 10 $ 4,577 $ 104 Commercial mortgages 15 9,698 4,759 15 10,049 4,450 Residential real estate 0 0 0 0 0 0 Consumer 0 0 0 0 0 0 Credit cards 0 0 0 0 0 0 Total 25 $ 13,099 $ 4,866 25 $ 14,626 $ 4,554 20182019 or March 31, 2017.20182019 and December 31, 20172018 and no principal balances were forgiven in connection with the loan restructurings.the Corporation performs an evaluation using its internal underwriting policiesis 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.non-performing 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. Loans with outstanding balances greater than $1 million are analyzed at least semiannually and loans with outstanding balances of less than $1 million are analyzed at least annually.2018 Pass Special
Mention Substandard Doubtful Total $ 740,558 $ 9,513 $ 23,402 $ 0 $ 773,473 676,688 2,771 15,058 0 694,517 $ 1,417,246 $ 12,284 $ 38,460 $ 0 $ 1,467,990 Pass Substandard Doubtful Total Commercial, industrial, and agricultural $ 922,618 $ 10,149 $ 18,098 $ 0 $ 950,865 Commercial mortgages 689,587 9,037 11,102 0 709,726 Total $ 1,612,205 $ 19,186 $ 29,200 $ 0 $ 1,660,591 2017 Pass Special
Mention Substandard Doubtful Total $ 713,102 $ 16,726 $ 19,310 $ 0 $ 749,138 581,631 4,419 14,015 0 600,065 $ 1,294,733 $ 21,145 $ 33,325 $ 0 $ 1,349,203 Pass Substandard Doubtful Total Commercial, industrial, and agricultural $ 889,547 $ 10,519 $ 16,231 $ 0 $ 916,297 Commercial mortgages 683,413 3,241 11,122 0 697,776 Total $ 1,572,960 $ 13,760 $ 27,353 $ 0 $ 1,614,073 20182019 and December 31, 2017: March 31, 2018 December 31, 2017 Residential Credit Residential Credit Real Estate Consumer Cards Real Estate Consumer Cards $ 720,220 $ 77,354 $ 6,928 $ 707,539 $ 79,348 $ 6,709 5,463 627 37 5,808 845 44 $ 725,683 $ 77,981 $ 6,965 $ 713,347 $ 80,193 $ 6,753 March 31, 2019 December 31, 2018 Consumer Consumer Performing $ 769,493 $ 86,265 $ 7,313 $ 764,987 $ 85,308 $ 7,618 Nonperforming 6,106 515 28 6,322 727 5 Total $ 775,599 $ 86,780 $ 7,341 $ 771,309 $ 86,035 $ 7,623 20182019 and December 31, 2017: March 31, December 31, 2018 2017 $ 21,892 $ 23,428 (3,629 ) (3,889 ) $ 18,263 $ 19,539 3/31/2019 12/31/2018 Consumer $ 25,897 $ 26,568 Less: unearned discount (4,671 ) (4,791 ) Total $ 21,226 $ 21,777 20182019 and December 31, 20172018 are summarized as follows (in thousands): Percentage
Change March 31,
2018 December 31,
2017 (3.4 %) $ 311,052 $ 321,858 4.7 % 592,075 565,399 1.6 % 930,108 915,587 3.2 % 376,820 364,971 1.9 % $ 2,210,055 $ 2,167,815 7.EARNINGS PER SHARE 3/31/2019 12/31/2018 Percentage
ChangeChecking, non-interest bearing $ 345,386 $ 356,797 (3.2 )% Checking, interest bearing 583,653 600,046 (2.7 )% Savings accounts 1,374,415 1,258,506 9.2 % Certificates of deposit 353,905 395,437 (10.5 )% $ 2,657,359 $ 2,610,786 1.8 % 20182019 and 2017,2018, there were no outstanding stock options to include in the diluted earnings per share calculations. Three months ended March 31, 2018 2017 $ 7,097 $ 6,480 (34 ) (39 ) $ 7,063 $ 6,441 $ 2,509 $ 2,508 4,554 3,933 $ 7,063 $ 6,441 15,273 14,979 (72 ) (86 ) 15,201 14,893 $ 0.46 $ 0.43 $ 7,063 $ 6,441 15,201 14,893 0 0 15,201 14,893 $ 0.46 $ 0.43 8.DERIVATIVE INSTRUMENTS Three months ended March 31, 2019 2018 Basic earnings per common share computation: Net income per consolidated statements of income $ 9,473 $ 7,097 Net earnings allocated to participating securities (39 ) (34 ) Net earnings allocated to common stock $ 9,434 $ 7,063 Distributed earnings allocated to common stock $ 2,579 $ 2,509 Undistributed earnings allocated to common stock 6,855 4,554 Net earnings allocated to common stock $ 9,434 $ 7,063 Weighted average common shares outstanding, including shares considered participating securities 15,229 15,273 Less: Average participating securities (62 ) (72 ) Weighted average shares 15,167 15,201 Basic earnings per common share $ 0.62 $ 0.46 Diluted earnings per common share computation: Net earnings allocated to common stock $ 9,434 $ 7,063 Weighted average common shares outstanding for basic earnings per common share 15,167 15,201 Add: Dilutive effects of assumed exercises of stock options 0 0 Weighted average shares and dilutive potential common shares 15,167 15,201 Diluted earnings per common share $ 0.62 $ 0.46 May 3, 2011,September 7, 2018, the Corporation executed an interest rate swap agreement with a 5 year5-year term and an effective date of September 15, 20132018 in order to hedge cash flows associated with $10 million of a subordinated note 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 March 31, 2019, the variable rate on the subordinated debt was 4.16% (LIBOR plus 155 basis points) and the Corporation was paying 4.53% (2.98% fixed rate plus 155 basis points). At March 31, 2018, the variable rate on the subordinated debt was 3.43% (LIBOR plus 155 basis points) and the Corporation was paying 5.57% (4.02% fixed rate plus 155 basis points).20182019 and December 31, 2017,2018, 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.20182019 and December 31, 20172018 and for the three months ended March 31, 20182019 and 2017: Fair value as of Balance Sheet March 31, December 31, Location 2018 2017 Accrued interest and $ (83 ) $ (161 ) (a) (b) (c) (d) (e) $ 62 Interest expense –
subordinated debentures $ (58 ) Other
income $ 0 (a) (b) (c) (d) (e) $ 55 Interest expense –
subordinated debentures $ (76 ) Other
income $ 0 Fair value as of 3/31/2019 12/31/2018 Interest rate contracts $ (321 ) $ (201 ) (a) (b) (c) (d) (e) Interest rate contracts $ (95 ) Interest expense –
subordinated debentures $ (6 ) Other
income $ 0 (a) (b) (c) (d) (e) Interest rate contracts $ 62 Interest expense –
subordinated debentures $ (58 ) 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) |
| Notional Amount | Weighted Average Maturity (in years) | Weighted Average Fixed Rate | Weighted Average Variable Rate | Fair Value | ||||||||||||||||
March 31, 2018 | ||||||||||||||||||||
3rd Party interest rate swaps | $ | 11,772 | 7.8 | 4.52 | % | 1 month LIBOR + 2.37% | $ | (146 | )(a) | |||||||||||
Customer interest rate swaps | (11,772 | ) | 7.8 | 4.52 | % | 1 month LIBOR + 2.37% | 146 | (b) | ||||||||||||
December 31, 2017 | ||||||||||||||||||||
3rd Party interest rate swaps | $ | 11,848 | 8.0 | 4.51 | % | 1 month LIBOR + 2.37% | $ | 149 | (a) | |||||||||||
Customer interest rate swaps | (11,848 | ) | 8.0 | 4.51 | % | 1 month LIBOR + 2.37% | (149 | )(b) | ||||||||||||
Notional Amount | Weighted Average Maturity (in years) | Weighted Average Fixed Rate | Weighted Average Variable Rate | Fair Value | ||||||||||||
| March 31, 2019 | ||||||||||||||||
| 3rd Party interest rate swaps | $ | 23,014 | 7.1 | 3.85 | % | 1 month LIBOR + 2.24% | $ | 906 | (a) | |||||||
| Customer interest rate swaps | (23,014 | ) | 7.1 | 3.85 | % | 1 month LIBOR + 2.24% | (906 | ) | (b) | |||||||
| December 31, 2018 | ||||||||||||||||
| 3rd Party interest rate swaps | $ | 23,152 | 7.2 | 3.85 | % | 1 month LIBOR + 2.24% | $ | 485 | (a) | |||||||
| Customer interest rate swaps | (23,152 | ) | 7.2 | 3.85 | % | 1 month LIBOR + 2.24 | (485 | ) | (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 |
| Three Months Ended March 31, 2019 | Three Months Ended March 31, 2018 | ||||||
| Non-interest Income | |||||||
| Service charges on deposit accounts | $ | 1,481 | $ | 1,247 | |||
| Wealth and asset management fees | 1,042 | 1,030 | |||||
Mortgage banking (1) | 239 | 208 | |||||
| Card processing and interchange income | 1,029 | 971 | |||||
Net gains (losses) on sales of securities (1) | 148 | 0 | |||||
| Other income | 2,214 | 1,295 | |||||
| Total non-interest income | $ | 6,153 | $ | 4,751 | |||
| (1) | Not within scope of ASU 2014-9 |
The Corporation adopted Accounting Standards Update (ASU)2014-09, “Revenue from Contracts with Customers (Topic 606)” using the modified retrospective method applied to all contracts not completed as of January 1, 2018. Results for reporting periods beginning after January 1, 2018 are presented under ASU2014-09 while prior period amounts continue to be reported in accordance with legacy GAAP. The adoption of ASU2014-09 did not result in a change to the accounting for any of thein-scope revenue streams; as such, no cumulative effect adjustment was recorded.
The following table depicts the disaggregation of revenue derived from contracts with customers to depict the nature, amount, timing, and uncertainty of revenue and cash flowsCorporation for the three months ended March 31, 2019 and 2018, and 2017.
| Three Months | Three Months | |||||||
| Ended | Ended | |||||||
| March 31, 2018 | March 31, 2017 | |||||||
Non-interest Income | ||||||||
Service charges on deposit accounts | $ | 1,247 | $ | 1,090 | ||||
Wealth and asset management fees | 1,030 | 871 | ||||||
Mortgage banking(1) | 208 | 184 | ||||||
Card processing and interchange income | 971 | 878 | ||||||
Net gains (losses) on sales of securities(1) | 0 | 1,383 | ||||||
Other income(1) | 1,295 | 1,367 | ||||||
|
|
|
| |||||
Totalnon-interest income | $ | 4,751 | $ | 5,773 | ||||
|
|
|
| |||||
respectively.
| Leases | Classification | March 31, 2019 | ||||
| Assets: | ||||||
| Operating lease assets | Operating lease assets | $ | 16,222 | |||
| Finance lease assets | Premises and equipment, net (1) | 554 | ||||
| Total leased assets | $ | 16,776 | ||||
| Liabilities: | ||||||
| Operating lease liabilities | Operating lease liabilities | $ | 17,109 | |||
| Finance lease liabilities | Accrued interest payable and other liabilities | 685 | ||||
| Total leased liabilities | $ | 17,794 | ||||
| Three Months Ended | ||||||
| Lease Cost | Classification | March 31, 2019 | ||||
| Operating lease cost | Net occupancy expense | $ | 405 | |||
| Variable lease cost | Net occupancy expense | 34 | ||||
| Finance lease cost: | ||||||
| Amortization of leased assets | Net occupancy expense | 18 | ||||
| Interest on lease liabilities | Interest expense - borrowed funds | 8 | ||||
Sublease income (1) | Net occupancy expense | (21 | ) | |||
| Net lease cost | $ | 444 | ||||
| Maturity of Lease Liabilities as of March 31, 2019 | Operating Leases (1) | Finance Leases | Total | |||||||||
| 2019 | $ | 1,309 | $ | 79 | $ | 1,388 | ||||||
| 2020 | 1,405 | 105 | 1,510 | |||||||||
| 2021 | 1,458 | 105 | 1,563 | |||||||||
| 2022 | 1,478 | 105 | 1,583 | |||||||||
| 2023 | 1,413 | 105 | 1,518 | |||||||||
| After 2023 | 16,623 | 315 | 16,938 | |||||||||
| Total lease payments | 23,686 | 814 | 24,500 | |||||||||
| Less: Interest | 6,577 | 129 | 6,706 | |||||||||
| Present value of lease liabilities | $ | 17,109 | $ | 685 | $ | 17,794 | ||||||
| Lease Term and Discount Rate | March 31, 2019 | ||
| Weighted-average remaining lease term (years) | |||
| Operating leases | 17.3 | ||
| Finance leases | 7.8 | ||
| Weighted-average discount rate | |||
| Operating leases | 3.66 | % | |
| Finance leases | 4.54 | % | |
| Other Information | March 31, 2019 | |||
| Cash paid for amounts included in the measurement of lease liabilities | ||||
| Operating cash flows from operating leases | $ | 192 | ||
| Leased assets obtained in exchange from new operating lease liabilities | 16,478 | |||
$1,163. $1,163. The notice of assessment covers the period from January 1, 2013 through July 31, 2016. The Corporation has evaluated the specific items on which sales tax has been assessed in conjunction with its legal counsel and has determined that it is probable that the Corporation has some liability based on a review of the Pennsylvania tax laws that apply to the assessed items. The Corporation’s reasonable estimate of this liability is $96, as of March 31, 2018, which has been accrued and previously reported in accrued interest payablestate and other liabilitieslocal tax expense in the accompanying consolidated balance sheet.statement of income during the year ended December 31, 2018. The remaining balance that has not been accrued relates primarily to sales tax assessments associated with data processing and banking equipment maintenance, which the corporation’sCorporation’s management and legal counsel have concluded were improperly assessed based on current Pennsylvania sales tax law. The Corporation appealed the notice of assessment to the Pennsylvania Board of Appeals and is awaiting a decision. The ultimate resolution of this matter, which may take in excess of one year, could result in an additional expense up to the total amount assessed.
In January 2016, the FASB issued Accounting Standards Updatestatements.
the fair value of financial instruments for disclosure purposes; 4) require separate presentation of both financial assets and liabilities by measurement category and form of financial asset on the balance sheet or accompanying notes to the financial statements. The update was effective on January 1, 2018, using a cumulative-effect adjustment to the balance sheet as of the beginning of the year, but resulted in the use of an exit price, rather than an entrance price, to determine fair value of loans not measured at fair value on anon-recurringOF basis. The adoption of ASU2016-01 O on January 1, 2018 did not have a material effect on the Corporation’s financial statements.
MANAGEMENT’S DISCUSSIONAND ANALYSISOF FINANCIAL CONDITION
AND RESULTSOF OPERATIONS
The Bank is subject to regulation, supervision and examination by the Pennsylvania State Department of Banking as well as the Federal Deposit Insurance Corporation. The financial condition and results of operations of
The financial condition and results of operations of the Corporation and its consolidated subsidiaries are not necessarily indicative of future performance.
strong net interest margin.
2019. All dollar amounts are stated in thousands, except share and per share data and other amounts as indicated.
2019.
| Three months ending March 31, 2018 | Year ending December 31, 2017 | Three months ending March 31, 2017 | ||||||||||
Balance at beginning of period | $ | 19,693 | $ | 16,330 | $ | 16,330 | ||||||
|
|
|
|
|
| |||||||
Charge-offs: | ||||||||||||
Commercial, industrial, and agricultural | (31 | ) | (544 | ) | (1 | ) | ||||||
Commercial mortgages | 0 | (116 | ) | 0 | ||||||||
Residential real estate | 0 | (466 | ) | (68 | ) | |||||||
Consumer | (590 | ) | (2,555 | ) | (735 | ) | ||||||
Credit cards | (19 | ) | (144 | ) | (58 | ) | ||||||
Overdrafts | (86 | ) | (252 | ) | (69 | ) | ||||||
|
|
|
|
|
| |||||||
| (726 | ) | (4,077 | ) | (931 | ) | |||||||
|
|
|
|
|
| |||||||
Recoveries: | ||||||||||||
Commercial, industrial, and agricultural | 68 | 235 | 12 | |||||||||
Commercial mortgages | 0 | 197 | 2 | |||||||||
Residential real estate | 3 | 78 | 71 | |||||||||
Consumer | 49 | 161 | 2 | |||||||||
Credit cards | 7 | 27 | 11 | |||||||||
Overdraft deposit accounts | 31 | 87 | 33 | |||||||||
|
|
|
|
|
| |||||||
| 158 | 785 | 131 | ||||||||||
|
|
|
|
|
| |||||||
Net charge-offs | (568 | ) | (3,292 | ) | (800 | ) | ||||||
|
|
|
|
|
| |||||||
Provision for loan losses | 1,631 | 6,655 | 1,016 | |||||||||
|
|
|
|
|
| |||||||
Balance at end of period Loans, net of unearned Allowance to net loans Net charge-offs to average loans (annualized) Nonperforming assets Nonperforming % of total assets $ 20,756 $ 19,693 $ 16,546 $ 2,276,124 $ 2,145,959 $ 1,908,951 0.91 % 0.92 % 0.87 % 0.10 % 0.16 % 0.17 % $ 20,419 $ 20,427 $ 21,599 0.70 % 0.71 % 0.83 %
periods:
Three months ending March 31, 2019 | Year ending December 31, 2018 | Three months ending March 31, 2018 | |||||||||
| Balance at beginning of period | $ | 19,704 | $ | 19,693 | $ | 19,693 | |||||
| Charge-offs: | |||||||||||
| Commercial, industrial, and agricultural | 0 | (253 | ) | (31 | ) | ||||||
| Commercial mortgages | (17 | ) | (3,337 | ) | 0 | ||||||
| Residential real estate | (98 | ) | (315 | ) | 0 | ||||||
| Consumer | (549 | ) | (2,279 | ) | (590 | ) | |||||
| Credit cards | (26 | ) | (90 | ) | (19 | ) | |||||
| Overdrafts | (128 | ) | (319 | ) | (86 | ) | |||||
| (818 | ) | (6,593 | ) | (726 | ) | ||||||
| Recoveries: | |||||||||||
| Commercial, industrial, and agricultural | 4 | 171 | 68 | ||||||||
| Commercial mortgages | 0 | 30 | 0 | ||||||||
| Residential real estate | 65 | 67 | 3 | ||||||||
| Consumer | 46 | 141 | 49 | ||||||||
| Credit cards | 5 | 33 | 7 | ||||||||
| Overdraft deposit accounts | 34 | 90 | 31 | ||||||||
| 154 | 532 | 158 | |||||||||
| Net charge-offs | (664 | ) | (6,061 | ) | (568 | ) | |||||
| Provision for loan losses | 1,306 | 6,072 | 1,631 | ||||||||
| Balance at end of period | $ | 20,346 | $ | 19,704 | $ | 20,756 | |||||
| Loans, net of unearned | $ | 2,526,090 | $ | 2,474,557 | $ | 2,276,124 | |||||
| Allowance to net loans | 0.81 | % | 0.80 | % | 0.91 | % | |||||
| Net charge-offs to average loans (annualized) | 0.11 | % | 0.26 | % | 0.10 | % | |||||
| Nonperforming assets | $ | 18,790 | $ | 18,547 | $ | 20,419 | |||||
| Nonperforming % of total assets | 0.57 | % | 0.58 | % | 0.70 | % | |||||
In
trends.
2019.
2019.
| March 31, 2018 | December 31, 2017 | |||||||
Total risk-based capital ratio | 13.69 | % | 14.32 | % | ||||
Tier 1 capital ratio | 10.48 | % | 10.97 | % | ||||
Common equity tier 1 ratio | 9.58 | % | 10.00 | % | ||||
Leverage ratio | 8.28 | % | 8.45 | % | ||||
Tangible common equity/tangible assets (1) | 7.14 | % | 7.46 | % | ||||
Book value per share | $ | 16.02 | $ | 15.98 | ||||
Tangible book value per share (1) | $ | 13.39 | $ | 13.33 | ||||
| March 31, 2019 | December 31, 2018 | ||||||
| Total risk-based capital ratio | 13.18 | % | 13.21 | % | |||
| Tier 1 capital ratio | 10.35 | % | 10.33 | % | |||
| Common equity tier 1 ratio | 9.54 | % | 9.50 | % | |||
| Leverage ratio | 8.01 | % | 7.87 | % | |||
| Tangible common equity/tangible assets (1) | 7.26 | % | 7.02 | % | |||
| Book value per share | $ | 18.04 | $ | 17.28 | |||
| Tangible book value per share (1) | $ | 15.46 | $ | 14.69 | |||
| (1) | Tangible common equity, tangible assets and tangible book value per share arenon-GAAP financial measures calculated using GAAP amounts. Tangible common equity is calculated by excluding the balance of goodwill and |
| March 31, 2018 | December 31, 2017 | |||||||
Shareholders’ equity | $ | 244,811 | $ | 243,910 | ||||
Less goodwill | 38,730 | 38,730 | ||||||
Less core deposit intangible | 1,377 | 1,625 | ||||||
|
|
|
| |||||
Tangible common equity | $ | 204,704 | $ | 203,555 | ||||
|
|
|
| |||||
Total assets | $ | 2,908,883 | $ | 2,768,773 | ||||
Less goodwill | 38,730 | 38,730 | ||||||
Less core deposit intangible | 1,377 | 1,625 | ||||||
|
|
|
| |||||
Tangible assets | $ | 2,868,776 | $ | 2,728,418 | ||||
|
|
|
| |||||
Ending shares outstanding | 15,285,639 | 15,264,740 | ||||||
Tangible book value per share | $ | 13.39 | $ | 13.33 | ||||
Tangible common equity/tangible assets | 7.14 | % | 7.46 | % | ||||
| March 31, 2019 | December 31, 2018 | ||||||
| Shareholders’ equity | $ | 274,959 | $ | 262,830 | |||
| Less goodwill | 38,730 | 38,730 | |||||
| Less core deposit intangible | 562 | 727 | |||||
| Tangible common equity | $ | 235,667 | $ | 223,373 | |||
| Total assets | $ | 3,287,324 | $ | 3,221,521 | |||
| Less goodwill | 38,730 | 38,730 | |||||
| Less core deposit intangible | 562 | 727 | |||||
| Tangible assets | $ | 3,248,032 | $ | 3,182,064 | |||
| Ending shares outstanding | 15,239,371 | 15,207,281 | |||||
| Tangible book value per share | $ | 15.46 | $ | 14.69 | |||
| Tangible common equity/tangible assets | 7.26 | % | 7.02 | % | |||
OFF BALANCE
| March 31, 2018 | December 31, 2017 | |||||||||||||||
| Fixed Rate | Variable Rate | Fixed Rate | Variable Rate | |||||||||||||
Commitments to make loans | $ | 49,630 | $ | 306,968 | $ | 64,799 | $ | 210,987 | ||||||||
Unused lines of credit | 0 | 123,233 | 0 | 118,348 | ||||||||||||
Standby letters of credit | 0 | 14,349 | 0 | 14,985 | ||||||||||||
2018:
| March 31, 2019 | December 31, 2018 | ||||||||||||||
| Fixed Rate | Variable Rate | Fixed Rate | Variable Rate | ||||||||||||
| Commitments to make loans | $ | 47,597 | $ | 183,246 | $ | 46,265 | $ | 191,803 | |||||||
| Unused lines of credit | 15,956 | 426,752 | 14,390 | 429,456 | |||||||||||
| Standby letters of credit | 10,510 | 1,473 | 14,831 | 1,479 | |||||||||||
In October 2015, the
capital and funds borrowed at a low cost usingSBA-guaranteed securities to makemakes investments in qualifyinglimited partnerships, including certain small businessesbusiness investment corporations and similar enterprises as defined by SBA regulations.low income housing partnerships. As of March 31, 2019 and December 31, 2018, unfunded capital commitments totaled $3,445 and $3,905, respectively, for the Corporation has made $4.0 million ofsmall business investment corporations and $1,434 and $1,434, respectively, for the low income housing partnerships. At March 31, 2019 and December 31, 2018, capital contributions to Oxerthe small business investment corporations were $7,055 and $1.2 million of$6,595, respectively, and capital contributions to Tecum.
the low income housing partnerships were $4,566 and $4,566, respectively.
Dollars in thousands
| March 31, 2018 | March 31, 2017 | |||||||||||||||||||||||
| Average | Annual | Interest | Average | Annual | Interest | |||||||||||||||||||
| Balance | Rate | Inc./Exp. | Balance | Rate | Inc./Exp. | |||||||||||||||||||
ASSETS: | ||||||||||||||||||||||||
Securities: | ||||||||||||||||||||||||
Taxable (1) | $ | 292,450 | 2.69 | % | $ | 1,984 | $ | 346,627 | 2.53 | % | $ | 2,191 | ||||||||||||
Tax-Exempt (1,2) | 97,846 | 3.51 | % | 850 | 117,382 | 4.16 | % | 1,205 | ||||||||||||||||
Equity Securities (1,2) | 29,414 | 3.97 | % | 292 | 25,730 | 3.02 | % | 194 | ||||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||||||
Total securities | 419,710 | 2.96 | % | 3,126 | 489,739 | 2.95 | % | 3,590 | ||||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||||||
Loans: | ||||||||||||||||||||||||
Commercial (2) | 768,968 | 4.54 | % | 8,732 | 589,578 | 4.80 | % | 7,081 | ||||||||||||||||
Mortgage (2) | 1,356,569 | 4.69 | % | 15,901 | 1,237,639 | 4.34 | % | 13,419 | ||||||||||||||||
Consumer | 82,745 | 9.66 | % | 1,999 | 81,566 | 8.80 | % | 1,794 | ||||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||||||
Total loans (3) | 2,208,282 | 4.82 | % | 26,632 | 1,908,783 | 4.67 | % | 22,294 | ||||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||||||
Total earning assets | 2,627,992 | 4.53 | % | $ | 29,758 | 2,398,522 | 4.32 | % | $ | 25,884 | ||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||||||
Non interest-bearing assets: | ||||||||||||||||||||||||
Cash and due from banks | 26,142 | 24,981 | ||||||||||||||||||||||
Premises and equipment | 50,441 | 50,443 | ||||||||||||||||||||||
Other assets | 146,935 | 134,223 | ||||||||||||||||||||||
Allowance for loan losses | (20,175 | ) | (16,475 | ) | ||||||||||||||||||||
|
|
|
| |||||||||||||||||||||
Total non interest-bearing assets | 203,343 | 193,172 | ||||||||||||||||||||||
|
|
|
| |||||||||||||||||||||
TOTAL ASSETS | $ | 2,831,335 | $ | 2,591,694 | ||||||||||||||||||||
|
|
|
| |||||||||||||||||||||
LIABILITIES AND SHAREHOLDERS’ EQUITY: | ||||||||||||||||||||||||
Demand—interest-bearing | $ | 568,970 | 0.37 | % | $ | 523 | $ | 531,141 | 0.35 | % | $ | 469 | ||||||||||||
Savings | 917,385 | 0.51 | % | 1,171 | 966,838 | 0.46 | % | 1,107 | ||||||||||||||||
Time | 375,554 | 1.31 | % | 1,230 | 219,828 | 0.99 | % | 545 | ||||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||||||
Total interest-bearing deposits | 1,861,909 | 0.63 | % | 2,924 | 1,717,807 | 0.49 | % | 2,121 | ||||||||||||||||
Short-term borrowings | 74,112 | 1.68 | % | 311 | 172,556 | 0.84 | % | 361 | ||||||||||||||||
Long-term borrowings | 240,601 | 1.96 | % | 1,177 | 94,621 | 1.89 | % | 448 | ||||||||||||||||
Subordinated debentures | 70,620 | 4.96 | % | 875 | 70,620 | 5.51 | % | 972 | ||||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||||||
Total interest-bearing liabilities | 2,247,242 | 0.94 | % | $ | 5,287 | 2,055,604 | 0.76 | % | $ | 3,902 | ||||||||||||||
|
|
|
| |||||||||||||||||||||
Demand—non interest-bearing | 311,595 | 280,239 | ||||||||||||||||||||||
Other liabilities | 28,062 | 28,309 | ||||||||||||||||||||||
|
|
|
| |||||||||||||||||||||
Total liabilities | 2,586,899 | 2,364,152 | ||||||||||||||||||||||
Shareholders’ equity | 244,436 | 227,542 | ||||||||||||||||||||||
|
|
|
| |||||||||||||||||||||
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY | $ | 2,831,335 | $ | 2,591,694 | ||||||||||||||||||||
|
|
|
| |||||||||||||||||||||
Interest income/Earning assets | 4.53 | % | $ | 29,758 | 4.32 | % | $ | 25,884 | ||||||||||||||||
Interest expense/Interest-bearing liabilities | 0.94 | % | 5,287 | 0.76 | % | 3,902 | ||||||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||||||
Net interest spread | 3.59 | % | $ | 24,471 | 3.56 | % | $ | 21,982 | ||||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||||||
Interest income/Earning assets | 4.53 | % | 29,758 | 4.32 | % | 25,884 | ||||||||||||||||||
Interest expense/Earning assets | 0.80 | % | 5,287 | 0.65 | % | 3,902 | ||||||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||||||
Net interest margin | 3.72 | % | $ | 24,471 | 3.67 | % | $ | 21,982 | ||||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||||||
| March 31, 2019 | March 31, 2018 | |||||||||||||||||||||
Average Balance | Annual Rate | Interest Inc./Exp. | Average Balance | Annual Rate | Interest Inc./Exp. | |||||||||||||||||
| ASSETS: | ||||||||||||||||||||||
| Securities: | ||||||||||||||||||||||
| Taxable (1) | $ | 414,286 | 2.85 | % | $ | 2,978 | $ | 292,450 | 2.69 | % | $ | 1,984 | ||||||||||
| Tax-Exempt (1,2) | 98,588 | 3.46 | % | 841 | 97,846 | 3.51 | % | 850 | ||||||||||||||
| Equity Securities (1,2) | 18,603 | 6.02 | % | 280 | 29,414 | 3.97 | % | 292 | ||||||||||||||
| Total securities | 531,477 | 3.07 | % | 4,099 | 419,710 | 2.96 | % | 3,126 | ||||||||||||||
| Loans: | ||||||||||||||||||||||
| Commercial (2) | 932,819 | 5.29 | % | 12,329 | 768,968 | 4.54 | % | 8,732 | ||||||||||||||
| Mortgage (2) | 1,481,543 | 4.95 | % | 18,319 | 1,356,569 | 4.69 | % | 15,901 | ||||||||||||||
| Consumer | 87,745 | 10.92 | % | 2,395 | 82,745 | 9.66 | % | 1,999 | ||||||||||||||
| Total loans (3) | 2,502,107 | 5.28 | % | 33,043 | 2,208,282 | 4.82 | % | 26,632 | ||||||||||||||
| Total earning assets | 3,033,584 | 4.89 | % | $ | 37,142 | 2,627,992 | 4.53 | % | $ | 29,758 | ||||||||||||
| Non interest-bearing assets: | ||||||||||||||||||||||
| Cash and due from banks | 29,970 | 26,142 | ||||||||||||||||||||
| Premises and equipment | 66,376 | 50,441 | ||||||||||||||||||||
| Other assets | 135,995 | 146,935 | ||||||||||||||||||||
| Allowance for loan losses | (19,866 | ) | (20,175 | ) | ||||||||||||||||||
| Total non interest-bearing assets | 212,475 | 203,343 | ||||||||||||||||||||
| TOTAL ASSETS | $ | 3,246,059 | $ | 2,831,335 | ||||||||||||||||||
| LIABILITIES AND SHAREHOLDERS’ EQUITY: | ||||||||||||||||||||||
| Demand—interest-bearing | $ | 559,003 | 0.42 | % | $ | 582 | $ | 568,970 | 0.37 | % | $ | 523 | ||||||||||
| Savings | 1,325,893 | 1.29 | % | 4,290 | 917,385 | 0.51 | % | 1,171 | ||||||||||||||
| Time | 369,621 | 1.86 | % | 1,715 | 375,554 | 1.31 | % | 1,230 | ||||||||||||||
| Total interest-bearing deposits | 2,254,517 | 1.17 | % | 6,587 | 1,861,909 | 0.63 | % | 2,924 | ||||||||||||||
| Short-term borrowings | 20,462 | 2.91 | % | 149 | 74,112 | 1.68 | % | 311 | ||||||||||||||
| Long-term borrowings | 242,198 | 2.08 | % | 1,261 | 240,601 | 1.96 | % | 1,177 | ||||||||||||||
| Subordinated debentures | 70,620 | 5.65 | % | 998 | 70,620 | 4.96 | % | 875 | ||||||||||||||
| Total interest-bearing liabilities | 2,587,797 | 1.39 | % | $ | 8,995 | 2,247,242 | 0.94 | % | $ | 5,287 | ||||||||||||
| Demand—non interest-bearing | 345,688 | 311,595 | ||||||||||||||||||||
| Other liabilities | 46,401 | 28,062 | ||||||||||||||||||||
| Total liabilities | 2,979,886 | 2,586,899 | ||||||||||||||||||||
| Shareholders’ equity | 266,173 | 244,436 | ||||||||||||||||||||
| TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY | $ | 3,246,059 | $ | 2,831,335 | ||||||||||||||||||
| Interest income/Earning assets | 4.89 | % | $ | 37,142 | 4.53 | % | $ | 29,758 | ||||||||||||||
| Interest expense/Interest-bearing liabilities | 1.39 | % | 8,995 | 0.94 | % | 5,287 | ||||||||||||||||
| Net interest spread | 3.50 | % | $ | 28,147 | 3.59 | % | $ | 24,471 | ||||||||||||||
| Interest income/Earning assets | 4.89 | % | 37,142 | 4.53 | % | 29,758 | ||||||||||||||||
| Interest expense/Earning assets | 1.19 | % | 8,995 | 0.80 | % | 5,287 | ||||||||||||||||
| Net interest margin | 3.70 | % | $ | 28,147 | 3.72 | % | $ | 24,471 | ||||||||||||||
| (1) | Includes unamortized discounts and premiums. Average balance is computed using the |
| (2) | Average yields are stated on a fully taxable equivalent basis. |
| (3) | Average outstanding includes the average balance outstanding of allnon-accrual 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. |
2018 2018. The return on average assets and the return on average equity for first first quarter of 2019 were 1.17% and 14.24%, respectively, as compared to 1.00% and 11.61%, respectively, for the first quarter of 2018. 2018. 2019. 2018. 2018. Net income attributable to investments in Small Business Investment Companies was $91 thousand during the quarter ended March 31, 2019 compared to $12 thousand during the quarter ended March 31, 2018, which is reported as a component of other non-interest income. 9.8%. The ratio ofnon-interest expenses to average assets was 2018. The effective rates for the periods differed from the federal statutory rate of 21.0% at March 31, 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. December 31, 2017 Change in Basis Points % Change in Net Interest Income 400 300 100 (100) reporting20182019 and 201720182018. Net interest income increased $3.7 million, or 15.2%, and $6.5non-interest income increased $1.4 million, in the first quarter of 2017.or 29.5%. The provision for loan losses decreased by $325 thousand, or 19.9%, and non-interest expenses increased by $2.2 million, or 11.5%. The earnings per diluted share were $0.46 in the first quarter of 2018 and $0.43 in the first quarter of 2017. The annualized return on assets and return on equity$0.62 for the first quarter of 2018 are 1.00%2019 and 11.61% compared to 1.00% and 11.39%$0.46 for the first quarter of 2017.3.72%3.70% and 3.67%3.72% for the quarters ended March 31, 20182019 and 2017,2018, respectively. The yield on earning assets increased 2136 basis points to 4.89% for the quarter ended March 31, 2019, from 4.53% for the quarter ended March 31, 2018 from 4.32%2018. The cost of interest-bearing liabilities increased 45 basis points to 1.39% for the quarter ended March 31, 2017. The cost of interest-bearing liabilities increased 18 basis points to2019, from 0.94% for the quarter ended March 31, 2018 from 0.76% for the quarter ended March 31, 2017.Total interest and dividend income increased by 17.1% to $29.4 million for the quarter ended March 31, 2018 from $25.1 million for the quarter ended March 31, 2017. Net interest income increased by 13.7% to $24.1 million for the quarter ended March 31, 2018 from $21.2 million for the quarter ended March 31, 2017.2018,2019, the Corporation recorded a provision for loan losses of $1.6$1.3 million, as compared to a provision for loan losses of $1.0$1.6 million for the quarter ended March 31, 2017.2018. Net chargeoffs in the first quarter of 20182019 were $568$664 thousand, compared to net chargeoffs of $800$568 thousand in the first quarter of 2017. CNB2018. Net chargeoffs of the Bank net chargeoffs totaled $45$230 thousand and $111$45 thousand during the quarters ended March 31, 2019 and 2018, or 0.04% and 2017, or 0.01% and 0.02%, respectively, of average CNB Bank loans. Holiday Financial Services Corporation, is the Corporation’s consumer discount company, and recorded net chargeoffs totaling $523$434 thousand and $689$523 thousand during the quarters ended March 31, 2019 and 2018, and 2017, respectively.2018.$0$148 thousand during the quarter ended March 31, 2018, compared to $1.4 million during the quarter ended March 31, 2017.2019. Net realized and unrealized gains on trading securities were $800 thousand during the quarter ended March 31, 2019, compared to $14 thousand during the quarter ended March 31, 2018, compared to $188 thousand during2018. Excluding the effects of securities transactions, non-interest income was $5.2 million for the quarter ended March 31, 2017. Excluding the effects of securities transactions,non-interest income was2019, compared to $4.7 million for the quarter ended March 31, 2018, compared to $4.2 million for the quarter ended March 31, 2017. a result of the Corporation’s continued focus on growing its Private Client Solutions division, wealth and asset management revenues were $1.0 million during the quarter ended March 31, 2018, an increase of 18.3% from $871 thousand during the quarter ended March 31, 2017. In addition, as a result of its organic deposit growth, the Corporation experienced an increase in service charges in deposit accounts of $157$234 thousand, or 14.4%18.8%, in the first quarter of 20182019 compared to the first quarter of 2017.and $17.0 million duringfor the quarters ended March 31, 20182019 and 2017,2018, respectively. Salaries and benefits expense increased $530 thousand,$1.4 million, or 5.9%14.3%, during the quarter ended March 31, 20182019 compared to the quarter ended March 31, 2017. As2018, primarily as a result of March 31, 2018, the Corporation had 526 full-time equivalent staff, compared to 487 full-time equivalent staff asexpansion of March 31, 2017, an increase of 8.0%.staffing levels in several areas during the past twelve months, including business development, risk management, and customer service personnel. The remainder of the increase innon-interest expenses iswas primarily a result of the Corporation’sCorporation's continued growth and the servicing of a larger customer base, along with expenses totaling $698 thousand resulting from stock-based compensation having immediate vesting, the change in valuebase. Total households serviced at March 31, 2019 were 65,081, compared to 59,267 households at March 31, 2018, an increase of deferred compensation accounts, and a sales tax assessment.2.66%2.61% and 2.63%2.68% during the quarters ended March 31, 2019 and 2018, and 2017, respectively.As a result of the enactment of the Tax Cuts and Jobs Act in the fourth quarter of 2017, incomedecreased $1.3was $2.0 million or 54.0%, during the quarterthree months ended March 31, 2019 and $1.1 million during the three months ended March 31, 2018, compared toresulting in effective tax rates of 17.1% and 13.7% for the quarter ended March 31, 2017. The Corporation’speriods, respectively. This increase in the effective tax rate was 13.7%is primarily attributable to a higher percentage of pre-tax net income in the first quarter of 2018 compared to 27.4%2019 that is not tax-exempt than was recorded in the first quarter of 2017.20182019 and 35.0% at March 31, 20172018 principally as a result of tax exempt income from securities and loans as well as earnings from bank owned life insurance.20172018 Form10-K provide additional detail with regard to the Corporation’s accounting for the allowance for loan losses, the fair value of securities, business combinations and loans. There have been no significant changes in the application of accounting policies since December 31, 2017.by 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.Based on the most recent data available as of DecemberAt March 31, 2017,2019, all interest rate risk levels according to the model were within the tolerance limits of ALCO approvedALCO-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 change in thechanging interest rate environment. Due to the current low interest rate environment, the-300 300 and-400 400 basis point declining interest rate scenarios have been excluded from the table. 6.4% 5.1% 1.9% (2.4%) March 31, 2019 400 9.0% 300 7.0% 200 5.4% 100 5.2% (100) (3.1)% (200) (4.6)% As of the end of the period covered by this quarterly report, an evaluation was carried outmanagement, including the ChiefPrincipal Executive Officer and Principal Financial Officer, has carried out an evaluation of the design and effectiveness of our disclosure controls and procedures (as defined in Rules13a-15(e) or15d-15(e) under the Securities Exchange Act of 1934) (“Exchange Act”). Based on their evaluation, our Chief Executive Officer and Principal Financial Officer have concluded that the Corporation’s disclosure controls and procedures were effectiveas 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 quarterly reportreport. 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 ensureprovide reasonable assurance that all material information required to be disclosed byin reports the Corporation in reports that it files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported, within the time periods specified in SECthe Securities and Exchange Commission’s rules and forms. formswerewas no changessignificant change in the Corporation’s internal control over financial reporting that occurred during the period covered by this quarterly reportquarter ended March 31, 2019 that havehas materially affected, or arethat is reasonably likely to materially affect, the Corporation’sour internal control over financial reporting.ITEM 1.LEGAL PROCEEDINGS – NoneITEM 1A.RISK FACTORS – There have been no material changes to the risk factors disclosed in Part I, Item IA of the 2017Form 10-K.ITEM 2.ISSUER PURCHASES OF EQUITY SECURITIES
Period | Total Number of Shares Purchased | Average Price Paid per 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) | ||||||||||||
January 1 – 31, 2018 | 4,268 | $ | 26.55 | 4,268 | 376,361 | |||||||||||
February 1 – 28, 2018 | 6,501 | 26.55 | 6,501 | 369,860 | ||||||||||||
March 1 – 31, 2018 | — | — | — | 369,860 | ||||||||||||
| Period | Total Number of Shares Purchased | Average Price Paid per 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) | ||||||||
| January 1 – 31, 2019 | 0 | $ | 0 | 0 | 289,731 | |||||||
| February 1 – 28, 2019 | 0 | 0 | 0 | 289,731 | ||||||||
| March 1 – 31, 2019 | 0 | 0 | 0 | 289,731 | ||||||||
| (1) | The Corporation’s stock repurchase program, which was announced 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 March 31, |
| Exhibit No. | Description | |
3.1 | ||
| ||
| ||
| ||
| ||
| ||
31.2 | ||
| 32.1 | ||
| 32.2 | ||
| 101.INS | XBRL Instance Document | |
101.SCH | XBRL Taxonomy Extension Schema Document | |
101.CAL | XBRL Taxonomy Extension Calculation Linkbase Document | |
101.DEF | XBRL Taxonomy Extension Definitions Linkbase Document | |
101.LAB | XBRL Taxonomy Extension Label Linkbase Document | |
101.PRE | XBRL Taxonomy Extension Presentation Linkbase Document | |
CNB FINANCIAL CORPORATION | ||||||
(Registrant) | ||||||
| DATE: May | /s/ Joseph B. Bower, Jr. | |||||
Joseph B. Bower, Jr. | ||||||
President and | ||||||
(Principal Executive Officer) | ||||||
| DATE: May | /s/ Brian W. Wingard | |||||
Brian W. Wingard | ||||||
Treasurer | ||||||
(Principal Financial and Accounting Officer) | ||||||
36