CNB Financial Corp/PA 2026 Q3 Earnings Call

Please go ahead. Hello, and welcome to the third quarter 2026 earnings call for CNB Financial Corporation.

I am Michael Peduzzi, the President and CEO of CNB Financial Corporation and its main operating entity, CNB Bank. Joining me today is our Chief Financial Officer, Tito Lima, our Chief Operating Officer, Michael Noah, and our Chief Credit Officer, Greg Dixon. Following the overview and presentation of our financial highlights, we will have time available for questions from those calling into today's presentation. Mike, Tito, Greg, thank you for joining me for today's discussion. We will start with some key highlights regarding our performance through the third quarter of 2026. Tito, as some of our comments may include discussions comparing our 2026 performance to that of similar periods in 2025, would you briefly discuss the financial statement recast we disclosed in our earnings release regarding our prior year results?

Sure, Mike. Good afternoon, everyone. In regards to the prior year recast, after we acquired ESSA in July of 2025, we adopted a GAAP standard numbered ASU 2025-08, entitled Financial Instruments—Credit Losses, Purchased Financial Assets. My apologies for the formality, but we want to be very clear in disclosing the applicable GAAP. The resulting recast from our adoption of this standard means that for our prior year or third quarter 2025 and nine months of 2025 results, we eliminated the recognition of the day one allowance for loan loss provision expense that had been previously reported after the July 2025 acquisition date. The adoption of this GAAP standard had no impact on the economics or cash flows of the acquired assets but affected the timing of credit loss expense recognition.

This change is not the result of an error, correction, or restatement of previously issued financial statements, but rather it ensures GAAP compliance comparability between current year periods and prior year periods. Accordingly, certain comparative amounts for 2025 presented in our earnings release, all which may be discussed here, may differ from those previously reported for these prior year periods. Thank you for giving me time to explain this, Mike.

Thanks for that, Tito. What is interesting is that our ESSA acquisition closed shortly before this GAAP standard became applicable in 2025, or we would not have had to deal with it. But the good news is it did not change our full year 2025 results, as it mostly affects the timing of loan loss provision transactions reported in the third and fourth quarters of last year that effectively fully offset each other to a net $0 impact by year-end. Importantly, none of this recast requires any changes to our reported results for any of the 2026 quarters or year to date. Let's get to the year to date and third quarter 2026 highlights.

Adding our third quarter diluted earnings per share of $0.91 to our results for the first half of 2026, our year-to-date earnings of $2.69 per diluted share for the first nine months of 2026 were a record for the corporation versus comparable first nine-month periods in any prior year. This record performance is anchored in several key elements: a sustained favorable net interest margin, sound levels of year-to-date loan growth, with reasonable production across C&I loans, commercial real estate loans, and consumer credits, primarily home equities. We experienced continued growth in our organic deposit base, particularly with our continued trend of new and expanded treasury management relationships, which have increased our non-interest-bearing deposit balances and have contributed to increased account activity fee income.

We increased wealth management income as we continue to transition to a new retail investment platform and continue to expand our private banking structure and outreach in our newer markets. Before I turn the conversation over to Michael Noah and Tito Lima for additional commentary and metrics, I want to note that despite the headwinds of yield curve changes contributing to an increased level of temporary after-tax unrealized losses on our available-for-sale investment portfolio, the results for this quarter and all the quarters since our ESSA acquisition reflect sustained earnings even after the payment of dividends to favorably accrete tangible book value. We strive to achieve an acceleration of the post-acquisition earn back period when compared to our pre-merger model projections. Additionally, we remain well-positioned from an interest rate risk management position to support our net interest income and net interest margin in the current changing interest rate environment.

With that, I'd like to turn it over to our Chief Operating Officer, Mike Noah, to provide some insights into our core banking growth.

And competitive dynamics we are seeing across our six banking divisions.

Mike? Thank you, Mike. The third quarter reflected some solid loan growth momentum as we were able to both achieve pull-through from our loan pipelines and see some slowdown in the volume of loan prepayments compared to earlier in the year.

Our originated loans, which exclude purchased syndicated credits, grew for the third quarter by over $76 million, or an annualized rate of 4.7%, compared to our second quarter ending levels. In the first half of 2026, C&I loan growth led the way. While in this third quarter, we saw more closings in the commercial real estate, consumer residential mortgage and home equity loans.

Though we have generally experienced loan growth across our four-state franchise, activity for this quarter was primarily driven by growth in the Ridge View Bank market in Virginia, our ERIEBANK division, which covers Erie, Pennsylvania, across to the Greater Cleveland, Ohio area, and our BankOnBuffalo market, which covers Western New York. Very notably, our Ridge View Bank division celebrates its five-year anniversary this year and has grown to over $500 million in earning assets. We continue to maintain a healthy pipeline as we enter the fourth quarter with the continued challenges of both strong competition and pricing dynamics given the recent Federal Reserve rate actions. Though the total deposits declined by $32.6 million compared to June 30, 2026, the third quarter of 2026 included the strategic exit of higher cost corporate deposits totaling approximately $76.1 million, with an average interest cost of 3.69%.

Excluding the impact of the corporate deposits exit, total deposits increased approximately $43.5 million or 2.4% annualized compared to the second quarter of 2026. We continue to experience both the benefits of expanded treasury management customer relationships, including an increase in non-interest bearing deposits for the quarter of $13.5 million or 4.7% annualized, and continue to pursue retail deposit growth and pricing strategies that seek to optimize the corporation's branch and market footprint following the ESSA acquisition. CEO, I think that provides a quick summary of some of our key loan and deposit growth measures. So I turn it over to you to share more details and insights in other critical financial measures.